w w w . L a w y e r S e r v i c e s . i n

Sea Stream Navigation Ltd v/s LMJ International Ltd

    G.A. Nos. 3333 of 2011 & 2430 of 2012 & E.C. No. 28 of 2003
    Decided On, 05 February 2013
    At, High Court of Judicature at Calcutta
    For the Petitioner: Ratnanko Banerjee, K.K. Thakkar, S. Dey, Advocates. For the Respondent: D. N. Sharma, Advocate.

Judgment Text
I.P. Mukerji, J.

A controversy in this case arises out of a foreign award.

The petitioner award holder is a company registered in Malta. It owns vessels and lets them out. One of such vessels was 'M.V. GALINA – II'. On or about 21st January, 2000, the Respondent judgment debtor entered into a charter party agreement with them. They hired the above vessel to carry soyabean meal in bags from the port of Kandla in India to a safe port in Libya. The Charter party was in Gencon form. It contained an arbitration clause. A dispute arose about demurrage payable by the chaterer to the owner, as is usual in such agreements. On 8th August, 2000, Mr. Patrick O’Donovan was appointed as the Arbitrator. By a letter dated 9th February, 2001, the learned arbitrator forwarded a copy of the award to the parties. The award was made on 17th January, 2001.

Under the Award the charterer had to pay to the owner a sum of US $ 42, 890.86 together with interest on the said sum @ 8.50% per annum or prorata compounded at quarterly rests from 5th April, 2000 until the date of the award and thereafter, @ 8.25% per annum or prorata compounded on the same basis until the date of payment. A provision was made in the award to make a subsequent award of taxed costs after the learned arbitrator held that the Charterer would bear their own as well as the owner’s costs. However, costs towards the final award were assessed at sterling 1590 payable by the charterer, together with interest @ 8% per annum or prorate compounded at quarterly rests if the costs had been paid by the owner, until the date of reimbursement.

The owners put the above foreign award into execution in our country. They filed an execution application in this Court. It was numbered as EC No. 28 of 2003. The charterer resisted the award. They, inter alia, said that it was un-executable. The execution application became contested.

This court pronounced a judgment and order on 17th September, 2003 holding that the award was executable. From that order, the charterer preferred an appeal before a Division Bench of this Court. This bench admitted the appeal by an order made on 19th September, 2003. At that stage it passed an order directing the charterer to deposit a sum of Rs. 29 lacs with their Advocates-on-Record, M/s. Sandersons & Morgans as a condition for stay of the order dated 17th September, 2003. They were directed to keep this amount in a short term deposit with United Bank of India, High Court Branch. That was done and the award kept in abeyance. From an earlier order of the Division Bench made on 8th May, 2007, rejecting the owner’s plea of non-maintainability of the Appeal, they preferred a Special Leave Petition before the Hon’ble Supreme Court. They contended that the order of the learned trial judge was not appeal able before the Division Bench. The Supreme Court accepted this contention and allowed the appeal on 8th July, 2011.

Then came the turn of the charterer to file a Special Leave Petition before the Supreme Court against the order dated 17th September, 2003. This Special Leave Petition was heard as an appeal. It was disposed of by the Supreme Court on 30th September, 2011 partly allowing the appeal by modifying the rate of interest to 8.25% per annum simple interest uniform. The charterer was directed to continue to keep the amount in deposit with the bank. As a matter of course the Appeal of 2003 before the Division Bench of this Court was dismissed on 17th November, 2011. The stay was lifted.

The petitioner award holder made an application (G.A. 3333 of 2001) in aid of the execution application (EC. NO. 28 of 2003). They prayed for the following reliefs:

'a. M/s Sandersons & Morgans Advocates be directed to make over USD 84,008.18/- and U.K. Str Pound 3728.62/- along with future interest from 15th November 2011 from the amount deposited with it by the respondent to the petitioner towards satisfaction of the petitioner towards satisfaction of the petitioner’s decreetal dues;

b. Order of injunction restraining the respondent from withdrawing the deposit made with M/s Sandersons & Morgans:

c. Interim orders in terms of prayers above;

d. Ad-interim orders in terms of prayers above;

e. Costs of and incidental to this application be borne by the respondent/Judgment Debtor.'

That application came up for hearing before me on 16th August, 2012. The judgment debtor did not put up an appearance before the Court on that date.

In the circumstances on 16th August, 2012, I passed an interim order in that application

(G.A. No. 3333 of 2011) to the following effect:

'At the moment, I appoint Mr. Subir Majumder, Advocate of M/s. Bose & Mitra, Advocates-on- Record for the decree-holder as Receiver to immediately take custody of the said sum of Rs.29 lakhs lying with United Bank of India, High Court Branch. M/s. Sandersons & Morgans and the concerned bank will comply with all formalities so that the said amount is transferred into an account to be opened by the Receiver with the same bank. By the amount I mean, the amount together with the interest accrued thereon. The Receiver or the bank will not operate the account without the leave of this Court for the time being. The Receiver will enquire about all steps to be taken with the Reserve Bank of India and other authorities, if required, for conversion of this money into USD for its remittance out of this country to the account of the decree-holder in a foreign bank.

As the details of the assets of the judgment-debtor are not available, their registered office as mentioned in the cause title at 30, Jawahar Lal Nehru Road, Kolkata – 700 016 shall stand attached to the extent of the balance claim of the award/decree.

I make this application returnable on 4th September, 2012 as 'New Chamber Application'.'


On or about 3rd September, 2012, an application (G.A. No. 2430 of 2012) was made asking for the following reliefs:

'(a) Order dated August 16, 2012 passed in G.A. No. 333 of 2011; E.C. No 28 of 2003 (Sea Stream Navigation Ltd. Vs. LMJ International Ltd.) may be recalled and/or set aside;

(b) Till disposal of the present application, the order dated August 16, 2012 passed in G.A. No. 3333 of 2011; E.C. No. 28 of 2003 may be stayed;

(c) Ad-interim orders in terms of prayers above;

(d) Costs of and/or incidental to this application be borne by the decree holder;

(e) Such further or other order or orders be passed and/or direction or directions be given as this Hon’ble Court may deem fit and proper.'

For an application to set-aside an ex parte decree or order, the merits of the disputes between the parties are not important. What is important is whether there was 'sufficient cause' which prevented the absent party from attending Court. There is tremendous emphasis on the merits of the dispute between the parties, in the application to set aside the ex parte order dated 16th August, 2012. The only explanation which is forthcoming is in paragraph 14 of the application. It says that the learned counsel could not attend the Court on that date. Furthermore, the Advocates-on-Record for the judgment debtor 'could not reach' the courtroom.

But I insisted that the original application (G.A. No. 3333 of 2011) should also be gone into, so that in case the application to set aside the order dated 16th August, 2012 succeeded, the Court could pronounce its verdict in the other application, in order to save time.

I am of the opinion that there was sufficient cause for the non-appearance of the judgment-debtor the day of the order dated 16th August, 2012 was passed. The said order is hereby set-aside. G.A. No. 2430 of 2012 is allowed.


Now, that the award has become final and binding and all challenge to it has failed, the objection now Is very procedural with a view to reduce the judgment debt.

It was, first submitted that the award became enforceable as a decree on the date of the Supreme Court order, i.e., the 30th September, 2011.

The next dispute related to the date of conversion of the award into Indian Currency.

Learned Counsel cited Forasol Vs. Oil and Natural Gas Commission reported in 1984 Supreme Court 241. This is a most significant case. It, inter alia, tells us the date on which the foreign currency awarded should be converted into domestic currency or Indian Rupees. In this case, we are only concerned with this issue. The decision opines that the date of conversion should be the date of the decree as opposed to the date of the award. In this connection I read paragraphs 53, 54, 56 65 and 68 of the judgment.

'53. This then leaves us with only three dates from which to make our selection, namely, the date when the amount became payable, the date of the filing of the suit and the date of the judgment, that is, the date of passing the decree. It would be fairer to both the parties for the court to take the latest of these dates, namely, the date of passing the decree, that is, the date of the judgment.

54. The learned single Judge of the Delhi High Court also reached the same conclusion. He, however, did so relying upon the Miliangos case (1976 AC 443) under an erroneous belief that when in that case it was held that the proper date should be the date when the judgment becomes enforceable what was meant was the date when the judgment was given, that is, when the decree was passed. The learned single Judge was in error in so reading the judgment of the House of Lords. When the majority in the Miliangos case spoke of the date when the court gives leave to enforce the judgment, what they were referring to was not the date of the judgment but the date on which the court gives leave to execute the judgment. In Halsbury’s Laws of England (4th ed., Vol. 17, para 401) the word ‘execution’ is defined as follows:

'The word ‘execution in its widest sense signifies the enforcement of or giving effect to the judgments or orders of courts of justice. In a narrower sense, it means the enforcement of those judgments or orders by a public officer under the writs of fiery fascias, possession, delivery, sequestration; fieri facias de bonis ecclesiastics, etc.'

(The emphasis has been supplied by us.)

56. Does the fact that the decree sought to be executed is one passed in terms of an award which directs payment of a sum of money in a foreign currency make any difference to the date of conversion to be selected by the court? According to the Division Bench of the Delhi High Court it does because, relying upon the Jugoslavenska case (1973 (3) All ER 498), it held that in such a case the proper date for conversion of the foreign currency sum awarded would be the date of the award inasmuch as there was no difference between the relevant provisions of the English Arbitration Act, 1950 (14 Geo 6, c. 27); and our Arbitration Act, 1940 (X of 1940), particularly Section 26(1) of the English Act and Section 17 of our Act. For reasons which we will presently set out, the Division Bench of the Delhi High Court erred in reaching this conclusion.

65. It is pertinent to note that the judgment, which the court pronounces under Section 17, is to be 'according to the award'. Where the award directs a certain sum of money to be paid and the court, in a case where it has not modified or corrected the award under Section 15, pronounces judgment for a different sum, the judgment cannot be said to be 'according to the award'. In the same way, where an award directs payment of a sum of money in a foreign currency and the court while pronouncing judgment provides for its rupee equivalent at the rate of exchange prevailing on the date of the award, the court will not be pronouncing judgment 'according to the award' if in the meantime the rate of exchange has varied, because at the date of the judgment the foreign currency equivalent of the amount in rupees provided in the judgment would be different from the foreign currency sum directed to be paid by the award. The judgment, therefore, can only be said to be 'according to the award' if it directs payment of the rupee equivalent at the rate of exchange prevailing on the date of pronouncing the judgment which date is the same as the date of the passing of the decree. For this purpose, the applicant must satisfy the court, either on affidavit or otherwise, as to the rate of exchange prevailing on the date of the judgment or on the date nearest or most nearly preceding the date of the judgment.

68. It was also submitted on behalf of ONGC that an award, unless it is set aside by the court, is a final adjudication of the rights and liabilities of the parties in respect of the mattes referred to arbitration and therefore, Forasol could not claim to convert the French Franc part of the said award into Indian rupees at the rate of exchange prevailing on the date of the decree but can only do so at the rate of exchange prevailing on the date of the award. We find this submission wholly untenable. Undoubtedly, the said award, not having been set aside or modified by the court, is final and binding on the parties and, in respect of the matters referred to arbitration, Forasol cannot claim any amount from ONGC other than that awarded by the Umpire. Forasol is, however, not making any such claim. It is claiming only the sum in French Francs which it has become entitled to receive from ONGC under the said award. All that Forasol wants is that ONGC should pay to it the sum of FF. 5,89,727.51 due to it under the said award or its rupee equivalent as at the date when the court pronounced judgment according to the said award and passed the decree in terms thereof. This is very different thing from making a claim dehors the said award. The claim made by Forasol is actually one under the said award for if the sum awarded to it in French Francs was not paid or could not be paid by ONGC, Forasol would be entitled o receive its rupee equivalent. On the decree being passed in terms of the said award the said award became merged in the said decree and the sum of FF. 5,89,727.51 payable to Forasol under the said award became a judgment debt payable to Forasol under the said decree and, as pointed out above, at the time of passing the decree the court would have to direct the payment of the rupee equivalent of this foreign currency debt only at the rate of exchange prevailing on the date of the decree.'

Now, following the above dictum of the Supreme Court and the under mentioned provisions of the Indian Arbitration and Conciliation Act, 1996, when did the award in question be deemed to be a decree of the Court for the purpose of its conversion into Indian Currency?

Since that decision of the Supreme Court the Arbitration and Conciliation Act, 1996 has been enacted Part II deals with enforcement of a foreign award. If we examine Sections 46, 48 and 49 of the Act, we form the opinion that a foreign award per se is not binding. It would only be binding if it passed the standards of enforceability set down in Section 48. It stipulates the conditions when enforcement of a foreign award would be refused. However, the title to the section states the positive: the conditions for enforcement of foreign awards. Section 49 further strengthens the intention of Section 48 when it says that if and when the Court is satisfied that the award is enforceable, which simply means that the award satisfies the tests mention in Section 48, the award would be deemed to be a decree of the Court. Therefore, on my understanding of these sections a foreign award becomes binding and enforceable as a decree when objections are raised by the award debtor and after hearing the objections, the Court upholds the award. Or the Court suo motu examines the award and attains satisfaction (Section 49) that it is enforceable. The provision for suo motu satisfaction of the Court is ingrained in Section 49 of the Act.

The award was challenged before this High Court, by the judgment debtor. The learned Trial Judge upheld the award. An appeal from this order was preferred before a Division Bench of this Court. It ordered, at the time of admission of the appeal, that security is to be provided by the judgment debtor, as stated by me before. From an earlier order made by the Division Bench on the question of maintainability of the Appeal, a Special Leave Petition, later admitted and heard as an appeal, was preferred by the award holder to the Supreme Court saying that no appeal lay to the Division Bench of this High Court. That appeal was allowed. Another Special Leave Petition was preferred, this time by the judgment debtor challenging the order of the learned Trial Judge upholding the award. It was by its judgment and order dated 30th September, 2011 that the Supreme Court finally upheld the validity of the award substantially, by making a very minor modification in it, by lowering the interest rate from 8.50% – 8.25%.

In my opinion on that date the award was declared by the Court to be binding. Hence, it had to be treated as a decree on that date. This is so because an appeal is a continuation of the trial court proceedings and unless the appeal is concluded, there is no finality of the proceedings.

Following the dictum of the Supreme Court in the case of Forasol Vs. Oil and Natural Gas Commission reported in 1984 Supreme Court 241 (Supra) that is also the date for conversion of the currency awarded into Indian currency.

Now, the next question which arises as raised by the judgment debtor is whether the interest on the awarded sum stopped running when the sum of Rs.29 lakhs was deposited by the judgment-debtor with their Advocates-on-Record?

Reference was made by the learned Counsel for the judgment debtor to Order XXI Rule 1

(1) (c) and Order XXI Rule 1(1) (4). I set out these subsections below:

'XXI, R1. Modes of paying money under decree. –

(1) All money, payable under a decree shall be paid as follows, namely:-

(a) by deposit into the Court whose duty is to execute the decree, or sent to that Court by postal money order or through a bank; or

(b) out of Court, to the decree-holder by postal money order or through a bank or by any other mode wherein payment is evidence in writing; or

(c) Otherwise, as the Court which made the decree, directs.


(4) On any amount paid under clause (a) or clause (c) of sub-rule (1), interest, if any, shall cease to run from the date of service of the notice referred to in sub-rule (2).'

It was contended that the above deposit was made according to the direction of the Court under Order XXI Rule 1 (1) (c) and therefore interest could not run after the date of the deposit. I was referred to paragraphs 25, 26 and 49 of the judgment in the case of Gurpreet Singh Vs. Union of India reported in 2006 (8) SCC 457.

I read those three paragraphs:

'25. In the Objects and Reasons for amendment of Order 21 Rule 1, it was set out as follows:

'The Committee notes that there is no provision in the Code in relation to cessation of interest on the money paid under a decree, out of court, to a decree-holder, by postal money order or through a bank or by any other mode wherein payment is evidenced in writing. The Committee is of the view that, in such a case, the interest should cease to fun from the date of such payment. In case the decree-holder refuses to accept the postal money order or payment through a bank, interest should cease to run from the date on which the money was tendered to him in ordinary course of business of the postal authorities or the bank. Sub-rule (5) in Rule 1 Order 21 has been inserted accordingly.'

The legislative intent in enacting sub-rules (4) and (5) is therefore clear and it is that interest should cease on the deposit being made and notice given or on the amount being tendered outside the court in the manner provided. Mulla in his Commentary on the Code of Civil Procedure, 15th Edn., Vol. II at p. 1583 has set out the effect of the rules as follows:

'Normal rule with respect to money decree is (i) the appropriation of payments towards satisfaction of interest in the first instance, and (ii) then towards principal amount. But this became inoperative, after the amendment of Rule 1 Order 21 CPC. Section 60 of the Contract Act cannot be invoked for the application of the aforesaid normal rule.

26. Thus, in cases of execution of money decrees or award-decrees, or rather, decrees other than mortgage decrees, interest ceases to run on the amount deposited, to the extent of the deposit. It is true that if the amount falls short, the decree holder may be entitled to apply the rule of appropriation by appropriating the amount first towards the interest, then towards the costs and then towards the principal amount due under the decree. But the fact remains that to the extent of the deposit, no further interest is p0ayable thereon to the decree-holder and there is no question of the decree-holder claiming a reappropriation when it is found that more amounts are due to him and the same is also deposited by the judgment-debtor. In other words, the scheme does not contemplate a reopening of the satisfaction to the extent it has occurred by the deposit. No further interest would run on the sum appropriated towards the principal.

49. Though, a decree-holder may have the right to appropriate the payments made by the judgment-debtor, it could only be as provided in the decree if there is provision in that behalf in the decree or, as contemplated by Order 21 Rule 1 of the Code as explained by us above. The Code or the general rules do not contemplate payment of further interest by a general rules do not contemplate payment of further interest by a judgment-debtor on the portion of the principal he has already paid. His obligation is only to pay interest on the balance principal remaining unpaid as adjudged either by the court of first instance or in the court of appeal. On the pretext that the amount adjudged by the appellate court is the real amount due, the decree-holder cannot claim interest on that part of the principal already paid to him. Of course, as indicated, out of what is paid he can adjust the interest and costs first and the balance towards the principal, if there is a shortfall in deposit. But, beyond that, the decree-holder cannot seek to reopen the entire transaction and proceed to recalculate the interest on the whole amount and seek a reappropriation as a whole in the light of the appellate decree.'

First, the above statutory provisions are under Order XXI which is entitled 'Execution of decrees and orders'. Secondly the subtitle to Rule 1 which is of great significance says that the provisions related to payment being made under a decree. This is also recognized in paragraph 15 of the above judgment in the case of Gurpreet Singh Vs. Union of India reported in 2006 (8) SCC 457 (Supra).

Certainly the deposit was made under orders of this Court. A mere deposit made under an order of Court, does not in my opinion qualify for the above exemption with regard to running of interest. The payment has to be made to the judgment-debtor according to 1 (i) (b) or deposited in Court 1(i) (a) or paid to him according to orders of Court. It has also to be payment under the decree. It should be unconditional to the credit of the decree. The judgment-debtor should not be left with any present right to claim back the amount. Take for instance this example. The appellant, suffering a money decree deposits with the Appeal Court the decretal amount, under orders of the Appeal Court and the Court grants a stay of the decree. This does not mean that the payment was made under the decree or that the money stopped earning interest. This is so because if the appellant succeeds in the Appeal, he will get back his money deposited in Court. In this case the deposit was made, similarly, as security, for the awarded amount, pending decision in the appeal. If the judgment-debtor succeeded, the money would go back to them. This can in no way be equated with payment under the decree (See the case of P.S.L. Ramanathan Chettiar and others Vs. O.R.M.P.R.M. Ramanathan Chettiar reported in AIR 1968 SC 1047 per Mitter J. paragraph 12 and 13).

I reject this contention a

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nd hold that the awarded sum from the date of the award continued and continues to earn interest @ 8.25% per annum from 5th April, 2000 till realization. The date on which the Supreme Court passed its order on 30th September, 2011 was a bank holiday. The next day on which the rate of currency is available is 3rd October, 2011 when the value of U.S. Dollar in Indian Currency was Rs.49.4240. The previous day on which such value is available was 29th September, 2011 when it was Rs.48.9253 In my opinion the date for the purpose of conversion should be taken as 3rd October, 2011. The value on such day was Rs.49.4240. As far as the award of costs, it is very conditional. No evidence was laid before me to show that the costs of the final award of sterling1590 were paid by the owners at or before the award. No date for payment has been mentioned. Interest is only to be allowed under the award if the costs were paid by the owner, from the date of such payment. In the absence of this evidence, I am unable to allow any interest on costs. Therefore, the owners will be entitled to US $ 42,890.86 converted into Indian Currency at the rate of exchange going on 3rd October, 2011 that is Rs.49.4240 per $ together with interest @ 8.25% simple interest on the said sum from 5th April, 2000 till the date of payment. The principal sum works out to be Rs.21,19,795.30. The annual interest is Rs.1,74,883.11 The owners will also be entitled to costs of sterling 1590 converted into Indian Currency on 3rd October, 2011. As the pound to rupee conversion rate was not furnished by the parties, the Court is unable to declare the rate. Hence the sum payable on the Award is much more than the sum of Rs.29 lacs initially deposited by the judgment debtor. I direct that within 28th February, 2013, the entire sum including interest held by M/s. Sandersons & Morgans in United Bank of India, High Court Branch be transferred into a new bank account in a nationalised bank to be opened by Mr. Subir Majumder, Advocate of M/s. Bose and Mitra, Advocates-on-Record for the decree holder. Mr. Majumder will immediately pay Rs.35 lacs to the judgment debtor after conversion into any foreign currency of his client’s choice. He will hold the balance sum in a term deposit as Receiver subject to further directions by this Court. The application being G.A. No. 3333 of 2011 is disposed of by directing the decree-holder to make a fresh execution application for the balance sum due under the Award in accordance with the observations made above. No order as to costs. Urgent certified photocopy of this judgment/order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.