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National Projects Construction Corporation Limited vs Royal Construction Company Private Ltd.

Civil Appeal · 2023 INSC 899Decided 10 Oct 2023
Civil Appeal No. 2528 of 2019
Aniruddha Bose · Vikram Nath

Background

Under a 1982 agreement, Royal Construction Company (RCCPL) carried out earthwork for National Projects Construction Corporation (NPCCL) in Iraq, with payment fixed in Iraqi Dinars and convertible to US Dollars at an agreed fixed rate. An arbitral award (later upheld by the Supreme Court in 2015) directed NPCCL to pay RCCPL amounts in Iraqi Dinars (with interest) plus Rs. 20 lakh relating to an encashed bank guarantee. Both sides later disagreed on how the Dinar-denominated award should actually be paid, and the Delhi High Court certified a question to the Supreme Court: on what date should the awarded sum be converted from US Dollars into Indian Rupees?

Decision Breakdown

The Supreme Court held that neither the original agreement, the arbitral award, nor its own 2015 judgment ever contemplated conversion of the award into Indian Rupees at all: the only permissible conversion was from Iraqi Dinars into US Dollars, at the rate fixed in the 1982 agreement, and the only rupee amount payable was the separate Rs. 20 lakh bank-guarantee sum. Since there was no basis for converting the Dinar/Dollar amount into rupees in the first place, the very question referred by the High Court (about the date for INR conversion) did not arise. The Court left the parties free to pay/accept the sum in Indian currency by mutual agreement at whatever rate they chose, but declined to fix or interfere with the currency terms itself, and allowed RCCPL to proceed with execution of the award.

Lesson Learnt

Courts will enforce an arbitration award and the underlying contract strictly as written on payment currency. If an agreement and award specify a foreign currency and a fixed conversion rate to another foreign currency only, a party cannot ask a court to invent a new conversion mechanism into Indian Rupees that the contract and award never provided for.

Official source (sci.gov.in)View Judgment (PDF)

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