Supreme Court Clarifies Currency Conversion in Arbitration Award Between NPCCL and RCCPL

The Supreme Court of India has delivered a crucial ruling in the case of National Projects Construction Corporation Limited (NPCCL) v. Royal Construction Company Private Limited (RCCPL), resolving a long-standing dispute over the currency conversion of an arbitration award. The judgment provides clarity on how foreign currency awards should be executed and upholds the sanctity of arbitration agreements.

Background of the Case

The dispute originates from a construction contract executed between NPCCL and RCCPL in 1982. Under the contract, RCCPL was engaged to carry out earthwork in Iraq, with payments to be made partly in Iraqi Dinars (ID) and partly in US Dollars (USD). The contract explicitly stipulated an exchange rate of 1 Iraqi Dinar = 3.37778 US Dollars, which was to remain fixed throughout the contract period.

Due to disagreements regarding payment, RCCPL initiated arbitration in 1988. The arbitrator, in an award dated August 10, 2002, directed NPCCL to pay ID 223,777.14 along with 12% annual interest, and an additional amount of Rs. 20,00,000 (Indian Rupees) towards encashment of a bank guarantee.

Legal Issues in the Case

What should be the conversion date for Iraqi Dinars to US Dollars?
Should the awarded amount be converted into Indian Rupees?
Whether courts can alter the terms of an arbitration agreement in execution proceedings?

Arguments by NPCCL

NPCCL, the appellant, contended:

The awarded amount in Iraqi Dinars should be converted into Indian Rupees instead of US Dollars.
The execution court should fix an appropriate date for the conversion of foreign currency to INR.
The Division Bench of the Delhi High Court erred in failing to provide a specific conversion date.

Arguments by RCCPL

RCCPL, the respondent, countered these claims, stating:

The original arbitration agreement explicitly fixed the exchange rate and mandated payment in US Dollars.
The arbitrator’s award had been upheld in previous judicial proceedings, including a Supreme Court judgment in 2015.
Any alteration of the conversion terms would violate the principle of party autonomy in arbitration.

Supreme Court’s Observations

The Supreme Court analyzed the arbitration agreement, previous rulings, and execution proceedings before concluding:

On Adhering to Contractual Terms

The Court reaffirmed that the exchange rate mentioned in the agreement must be followed:

“The contract clearly stipulates that payments will be made in Iraqi Dinars and US Dollars. The agreed exchange rate of 1 Iraqi Dinar = 3.37778 USD remains binding on the parties.”

On the Execution of the Award

The Court emphasized that execution courts cannot alter an arbitral award:

“Execution proceedings are meant to enforce the award, not modify it. The execution court erred in contemplating conversion to Indian Rupees when the award specifically mandated payments in foreign currency.”

On the Date of Conversion

The Court held that the exchange rate and date specified in the original contract must be used:

“The date of conversion shall be as per the agreement dated June 29, 1982. The Division Bench of the High Court erred in not specifying the date for conversion.”

Final Judgment

The Supreme Court ruled:

The awarded amount shall be paid in Iraqi Dinars and converted into US Dollars at the agreed exchange rate of 1 ID = 3.37778 USD.
The amount in US Dollars shall not be converted into Indian Rupees unless mutually agreed upon by the parties.
The execution court shall enforce the award as per its original terms without modification.

Impact of the Judgment

This ruling sets a precedent for the execution of foreign currency awards in India, reinforcing that:

Arbitration agreements must be strictly adhered to in execution proceedings.
Conversion terms agreed by parties cannot be unilaterally altered by courts.
Execution courts do not have the jurisdiction to modify the terms of an arbitral award.

Conclusion

The Supreme Court’s decision upholds the integrity of contractual agreements and strengthens India’s arbitration regime. By ensuring that foreign currency awards are enforced as per their original terms, the judgment reinforces India’s commitment to respecting international arbitration standards.

Petitioner Name: National Projects Construction Corporation Limited (NPCCL).
Respondent Name: Royal Construction Company Private Limited (RCCPL).
Judgment By: Justice Aniruddha Bose, Justice Vikram Nath.
Place Of Incident: Iraq (contract execution site).
Judgment Date: 10-10-2023.

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