Payment Must Be Made in Foreign Currency (USD) : Currency Conversion Terms: Supreme Court
In a significant ruling, the Supreme Court of India settled a long-standing dispute over the date for converting an awarded sum from US Dollars to Indian Rupees in a contract dated June 29, 1982. The judgment, delivered on October 10, 2023, clarified that the payment must be made in foreign currency (USD), with parties having the flexibility to agree on the rate of conversion.
The dispute between the National Projects Construction Corporation Limited (NPCCL) and Royal Construction Company Private Ltd. (RCCPL) centered on the terms of the agreement, an award, and previous court decisions. The High Court referred the question to the Supreme Court, highlighting the importance of the issue.
The Supreme Court’s judgment emphasized the absence of any provision for payment in Indian Rupees in the agreement. The award specifically directed payment in Iraqi Dinars to be convertible into US Dollars as per the original agreement. This ruling means there is no requirement to determine a specific date for conversion into Indian Rupees.
In a statement, the Supreme Court stated, “Perusal of the material does not permit payment of the awarded amount in Indian currency except the amount of Rs. 20 lakhs with admissible interest against the encashment of a bank guarantee. As a necessary corollary, there would be no question of the amount awarded in Iraqi Dinars to be converted into Indian currency. The only conversion permissible was in US Dollars.”
This landmark judgment provides clarity on currency conversion terms in contracts, ensuring adherence to the original agreement’s specifications. It underscores the significance of clear and precise language in contracts to avoid disputes in commercial transactions.
The Supreme Court’s decision allows the parties involved to proceed with execution proceedings while maintaining the integrity of the original agreement.
Date of Decision: October 10, 2023
NATIONAL PROJECTS CONSTRUCTION CORPORATION LIMITED vs ROYAL CONSTRUCTION COMPANY PRIVATE LTD.
