Indian Potash Ltd. Vs. M/s Emmsons Gulf DMCC – Delhi High Court

I. Case Reference Case Citation : (2023) ibclaw.in 540 HC Case Name : Indian Potash Ltd. Vs. M/s Emmsons Gulf […]

PDFPrint

I. Case Reference

Case Citation : (2023) ibclaw.in 540 HC
Case Name : Indian Potash Ltd. Vs. M/s Emmsons Gulf DMCC
Appeal No. : FAO(OS) (Comm) 262/2018 (Neutral Citation No.2023:DHC:4586-DB)
Judgment Date : 07-Jul-23
Court/Bench : High Court of Delhi
Present for Petitioner(s) : Mr. Dhruv Mehta and Mr. Arvind Minocha, Sr. Advocates with Mr. Prashant Sivarajan, Mr. Ankur Das, Mr. Tushar Saigal, Mr. Rohan Mandal and Mr. Anubhav Ray, Advocates.
Present for Respondent(s) : Mr. Rajshekhar Rao, Senior Advocate with Ms. Pragya Puri, Mr. Aditya Chhibber and Mr. Harshil Wason, Advocates.
Coram : Mr. Justice Najmi Waziri and Mr. Justice Vikas Mahajan
Original Judgment : Download

II. Full text of the judgment

J U D G M E N T

NAJMI WAZIRI, J.

1. The present appeal under section 37 of the Arbitration & Conciliation Act, 1996 (‘the Act’) impugns the order dated 25.09.2018 passed by the learned Single Judge which dismissed the appellant’s petition under section 34 of the Act challenging the Arbitral Award (‘Majority Award’) dated 30.11.2017 awarding a sum of Rs.11,74,39,806/- to the respondent-supplier, alongwith interest @ 12% per annum from 08.12.2011 to 30.11.2017 and if the awarded sum is not paid within one month from the date of the Award, then the appellant would be liable to pay interest @ 18% per annum from the date of the Award till the date of payment.

2. Under Contract dated 30.08.2011, the respondent-supplier, a trader in fertilizers and other goods, had agreed to supply a quantity of 1,90,000 MTs (+/-) 10% (shipping tolerance) Prilled/Granular Urea (in bulk) to the appellant-a state trading enterprise and canalizing agency. The last installment of approximately 30,000 MTs (+/-) 10% Urea was to arrive at the Indian Discharge Port by 07.11.2011. There was default in supply by the said date, amounting to breach of the Contract by the respondent-supplier. On 21.11.2011, through an e-mail, the respondent requested for extension of time till 30.11.2011 from the load port and informed the appellant about nominating a Vessel for shipping. The parties mutually executed Addendum No. 2 to the aforesaid Contract, which reads as under:-

“Clause II of the subject contract is amended to read as under;

“At the request of the seller the last date of shipment under Clause II (Shipment Schedule) of Contract No. IPl/BMMSONS/UREA/2011-12/27 DATED August 30, 2011, is being revised as under:

Shipment from load port latest by 30th November 2011. ,

The same is subject to terms & conditions under Clause XN and other provisions of the subject contract.

All other terms conditions shall remain unchanged.”

3. The last consignment from the Port of Iran was loaded with a laycan on 23rd-26th November, 2011. The goods did not sail by the agreed date, i.e 30.11.2011, instead, the goods sailed only on 09.12.2011 and this was intimated to the appellant by the respondent-supplier by communication received at 4.30 p.m. on 09.12.2011, which was a Friday. The appellant, working as an Agent on behalf of the Department of Fertilizers, Government of India, forwarded the same later that very evening for clearance from the Government of India. The latter sent a reply on Monday, i.e. 12.12.2011, when governtment offices were reopened and rejected the cargo because of i) the abnormal delay in shipment and ii) steep downfall in international market prices of Prilled/Granular Urea. In the circumstances, the appellant offered to accept the shipment at reduced USD 444.50 PMT, which according to it, was the prevailing international bulk price of the material. The goods were accepted by the appellant at the reduced price of USD 444.50 PMT. By communication dated 23.12.2011, the respondent-supplier conceded to the Nomination Message but under protest. The relevant portion, inter alia, reads as under:-

“We have always fulfilled our commitments with IPL in the past in spite of suffering huge losses due to market fluctuations and expected a fair treatment from IPL. However, unilateral alteration in the contracted price from US$520.00 to US$444.50 as stated in the Nomination message is a big injustice to us and against the terms of our contract. The contract stipulates recovery of liquidated damages on 2% of the contract value. However, we had requested you to condone the delay.

The unilateral alteration in the contract price is neither as per contract terms nor justified under the facts and circumstances of the case.

However, in view of the fact that the vessel has already reached India and Urea being a canalized item can’t be diverted to any other customer and the fact that the vessel has been incurring huge demurrage, we have no option but to accept the nomination.

Therefore, we convey our acceptance of the nomination message under protest and reserve our rights to take necessary steps to protect our interest.”

4. In this background, the respondent-supplier served a notice dated 07.06.2012 on the appellant. Arbitration proceedings ensued. The supplier claimed the balance amount as per the original contract alongwith damages etc. It resulted in the Majority Award as noted hereinabove.

5. The appellant contends that the tenure of completion of the shipment was long over, the extension of time was granted only on the condition that the consignment should have been shipped from load port by 30th November; there was default by the supplier; the goods were accepted at a mutually agreed reduced rate of USD444.50 PMT, therefore the original price was no more relevant. It was always open to the supplier not to agree to the reduced price, albeit, the latter accepted the condition of reduced price with protest; there cannot be part acceptance. The goods were received by the appellant on the understanding that the counter offer of USD444.50 PMT has been accepted in entirety. In support of this contention, the appellant refers to the dicta of the Supreme Court in Food Corporation of India & Another vs. Ram Kesh Yadav & Another (2007) 9 SCC 531, which records inter alia as under:-

“11. But on facts, this case is different. The second respondent’s application dated 26-4-1999 was a composite application for conditional voluntary retirement on medical grounds, subject to appointment of his son in his place. The application specifically stated that he desired to go on retirement on medical grounds if his son was provided with employment in his place. The second respondent had thus clearly indicated that if employment on compassionate ground was not provided to his son, he was not interested in pursuing his request for retirement on medical grounds. FCI ought to have informed the employee that he could not make such a conditional offer of retirement contrary to the scheme. But for reasons best known to itself, FCI did not choose to reject the conditional offer, but conditionally accepted the conditional offer. There lies the catch.

12. When an offer is conditional, the offeree has the choice of either accepting the conditional offer, or rejecting the conditional offer, or making a counteroffer. But what the offeree cannot do, when an offer is conditional, is to accept a part of the offer which results in performance by the offeror and then reject the condition subject to which the offer is made.

…..

14. When FCI accepted the offer unconditionally and retired the second respondent from service by office order dated 29-7-2000, it was implied that it accepted the conditional offer in entirety, that is the offer made (voluntary retirement) as also the condition subject to which the offer was made (appointment of his dependant son on compassionate grounds). In his application, the second respondent made it clear that he desired to retire voluntarily on medical grounds only if his son (the first respondent herein) was provided with employment. If FCI felt that such a conditional application was contrary to the scheme or not warranted, it ought to have rejected the application. Alternatively, it ought to have informed the employee that the compassionate appointment could not be given to his son because he (the employee) had already completed 55 years of age and that it will consider his request for retirement on medical grounds delinking the said issue of retirement, from the request for compassionate appointment. In that event, the employee would have had the option to withdraw his offer itself. Having denied him the opportunity to withdraw the offer, and having retired him by accepting the conditional offer, FCI cannot refuse to comply with the condition subject to which the offer was made.

…..

17. The question is this case is not whether the request of the respondents was contrary to the scheme. Nor is it the question, whether the scheme would be violated if the first respondent is appointed on compassionate grounds. The limited question is whether FCI, having accepted the offer and accepted performance of the offer by the second respondent, can refuse to perform or comply with the condition subject to which such offer was made. The answer is obviously in the negative. Having accepted the offer, FCI cannot avoid performance of the condition subject to which the offer was made. As noticed earlier, nothing prevented FCI from rejecting the application of the employee outright, or inform the employee before accepting the offer of voluntary retirement that it could not accept the condition, so that the employee would have had the option to withdraw the offer itself.”…

6. The learned Senior Advocate for the appellant submits that that the core issue of the challenge of this appeal is whether the appellant would be prevented in agitating an important aspect i.e., the prevailing market price as of 12.12.2011, when the counter offer was made. According to the appellant, USD444.50 PMT was the prevailing market price, for which they sought to lead evidence before the Arbitral Tribunal but the request was declined on the ground that the prevailing market price would be known to both the parties. The learned Arbitral Tribunal’s order dated 05.11.2016 is reproduced hereunder:-

“1. This order will dispose of the following two applications:-

(i) Application dated 26.8.2016 under Order 8 Rule 1A(3) filed on behalf of the Respondent for leave to produce 5 documents listed in the application,

(ii) Application dated 3.9.2016 filed by the Claimant to strike off and expunging certain paragraphs of the affidavit by way of evidence dated 30.3.2016 filed by the Respondent and for removing the aforesaid documents from the record and not exhibiting them.

2. The Claimant filed the Statement of Claim dated 8.3.2013. The Respondent filed its reply dated 14.12.2015 to the Statement of Claim. The hiatus of nearly 2 years and 9 months was because one of the learned Arbitrators recused and by an order dated 17.4.2015 passed by the Hon’ble Delhi High Court, the vacancy was filled. The Arbitral Tribunal was thus reconstituted and proceedings were resumed.

3. As directed, the parties filed their affidavits by way of evidence. Mr. Sanjay Grover, learned Advocate for the Respondent, started cross-examination of the Claimant’s witness on 5.5.2016 and continued on 17.5.2016 and 18.5.2016 when it concluded. The cross-examination of Respondent’s witness by Mr. Sanjeev Puri, learned Senior Advocate for the Claimant, started on 8.8.2016. During the hearing on 9.8.2016, Mr. Sanjeev Puri pointed out that paragraphs 4 to 9 and 25, 26 & 27 of the affidavit of Mr. S.S. Sandhawalia dated 30.3.2016 filed on behalf of the Respondent do not arise from the pleadings and that the documents referred to in those paragraphs and filed with the affidavit were not filed earlier. He submitted that the said paragraphs in the affidavit of Mr. Sandhawalia be expunged and the documents referred to in those paragraphs should not be exhibited or taken on record. The various statements made in the said paragraphs are beyond the pleadings, in the reply to the Statement of Claim and the Respondent is trying to set up a new case.

4. Mr. Grover, learned Advocate for the Respondent, pointed out during the proceedings on 9.8.2016; that he should not be taken by surprise by Mr Puri when the Respondent’s witness was being cross-examined. It is recorded in the proceedings of 9.8.2016 that Mr. Puri had referred to this aspect of the case at the sitting on 8.8.2016 and further that since the affidavit/evidence of the Respondent had been tendered on this date, he could raise objection to the same only thereafter. The Claimant had sought leave to file an application in this connection which was granted. Mr. Grover was granted 3 weeks to file reply to such an application.

5. We have heard detailed arguments on 5.11.2016 on both the applications. Mr. Puri submitted that the application of the Respondent under Order 8 is misconceived as the same can be moved before evidence of a party is recorded and not where the Claimant’s evidence has already concluded and its witness has been cross-examined. It was contended that the application is an attempt to fill up the lacunae in the Respondent’s defence. Mr. Puri referred to Order 8 Rule 1A(3) of CPC and pointed out that the documents sought to be introduced now ought to have been produced with the Statement of Defence. Admittedly, these documents were in possession and power of the Respondent and there is no reason why they were not produced with the Statement of

Defence, According to him, the evidence of the Respondent is substantially over as the Respondent’s witness has also been cross-examined.

6. Mr. Grover submitted that it became necessary to file these documents after the rejoinder dated 15.1.2016 filed by the Claimant. He particularly drew our attention to page 9, paragraph 3(v) of the rejoinder to show that the Claimant had taken the stand that urea had already arrived at the discharge port at Kandla and It being a canalized item could not have been diverted to any other customer by the Claimant. Paragraphs 4 to 9 and 25, 26 &27 of the affidavit of Mr. Sandhawalia and the documents annexed therewith are in response to the above stand of the Claimant. Mr. Grover referred to Order 6 CPC. According to him, the contents of paragraphs 4 to 9 and 25, 26 & 27 of the affidavit in question are not beyond the pleadings. He submitted that they are within the purview of the dispute. They constitute evidence in support of defence. He submitted that evidence cannot be part of the pleadings. The facts stated in the said paragraphs constitute evidence in support of the pleadings in the Statement of Defence.

7. In paragraph 4 of the reply on behalf of the Respondent to the application of the Claimant dated 3.9.2016, the case of the Respondent is purportedly summarized. It is contended that the above pleadings are part of the Statement of Defence. If that is so, there is no need to include paragraphs 4 to 9 and 25, 26 &27 in the affidavit of Mr. Sandhawalia. Conversely, if that is not so, then the contents of these paragraphs are fresh pleadings. The documents now sought to be filed in support of the contents of the aforesaid paragraphs of Mr. Sandhawalia’s affidavit cannot be taken on record because they are new documents and not in support of the pleadings in the Statement of Defence.

8. The Respondents have not amended their Statement of Defence and instead tried to amend the pleadings through the affidavit of Mr. Sandhawalia and have tried to file documents beyond the pleadings which is not permissible. The affidavit of Mr. Sandhawalia is by way of evidence in support of the case of the Respondent, and new facts cannot be pleaded by means of such an affidavit. Consequently, documents in support of such pleadings in the affidavit also cannot be taken on record paragraphs 4 to 9 as well as 25, 26 &27 need to be expunged.

9. We may notice that document RW-1/2 and RW-1/3 are documents in respect of contracts different from the one from which the dispute arises for adjudication before this Tribunal. The fact that those contracts are between the same parties does not make any difference because they are not the same contracts and the Tribunal is of the view that it cannot look into any other contract than the one before it. We do not know the other details of the contract. Document RW-1/4 is purportedly to show the international price of fertilizer. Document RW-1/13 is a letter dated 22.12.2011 from the Government of India on the condition that the price of the cargo shall be reduced to USD 444.50 PMT. It is not in dispute that the price of urea at that time was as stated in document RW-1/13. Therefore, neither document RW-1/4 nor document RW-1/13 need be taken on record. The document RW-1/14 is only to show that the reduced price of urea enured to the benefit .of the Government of India and that it shows that the Respondent was acting as an agent on behalf of the Government of India.

10. The contract between the parties is on record and whether or not the Respondent is an agent of the Government of India will be decided on that basis. In any case, the fresh pleadings in the affidavit of Mr. Sandhawalia beyond the pleadings in the Statement of Defence cannot be looked at and the Claimant’s stand that they need to be expunged has merit. Without the pleadings, there cannot be evidence and, therefore, the documents sought to be introduced along with the affidavit of Mr. Sandhawalia also cannot be taken on record. We are of the view that the Respondent cannot set up a case in the affidavit of Mr. Sandhawalia which is different from the Statement of Defence. As noticed above, if those pleadings are already in the Statement of Defence, there is no need for them to be incorporated through the affidavit of Mr. Sandhawalia. Conversely, if those pleadings are not in the Statement of Defence then they cannot be introduced through the affidavit of evidence filed on behalf of the Respondent by Mr. Sandhawalia.

11. Mr. Grover cited the following judgments in support of his argument that the documents filed by the Respondent with the affidavit of Mr. Sandhawalia should be taken on record:-

12. None of these judgments support the case of the Respondent. The factual matrix in all those cases is different from the instant matter where the cross-examination of the Claimant’s witness has been completed and the cross-examination of the Respondent’s witness has also been partially done. The documents of contracts though between the same parties which are different from the one with which this Tribunal is concerned cannot be looked at for deciding the dispute before us. Mr. Puri relied upon a judgment of the Hon’ble Supreme Court in the case of Bharat Coking Coal Limited Vs. Annapurna Construction reported in (2003) 8 SCC 154 in support of this proposition.

13. The documents that are sought to be placed on record are not evidence in support of the pleadings. Mr, Puri rightly contended that it is well settled that in the absence of pleadings, evidence, if any, produced by the parties cannot be considered. He cited the judgment of the Hon’ble Supreme Court in the case of Ram Sarup Gupta (dead) by LRs Vs. Bishnu Narain Inter College & Ors. reported in AIR 1987 SC 1242 where in paragraph 6it has- been categorically so held.

14. The Respondent had various opportunities of filing the documents which are sought to be introduced through the affidavit of Mr. Sandhawalia. If the pleadings in paragraph 3(v) of the rejoinder needed to be replied to, the Respondent could have sought leave of the Tribunal and filed a sur-rejoinder. This was not done. When the Claimant’s witness was being cross-examinied, questions pertaining to the documents sought to be introduced with the said affidavit could have been put to the witness. The Respondent could, in fact, have filed these documents with the Statement of Defence and if that required to be amended to incorporate the pleadings in paragraphs 4 to 9as well as 25, 26 &27 then application for such amendment should have been made and on such application being allowed, the documents could have been filed as they would then have been in support of the pleadings. None of this was done.

15. Having given our serious consideration to the matter, the Tribunal is of the view that the application of the Claimant for expunction of paragraphs 4 to 9 and 25, 26 & 27 in the affidavit of Mr. Sandhawalia deserve to be allowed. Consequently, the documents sought to be introduced through the affidavit of Mr. Sandhawalia also cannot be taken on record or exhibited. We have given our reasons in detail herein before for so deciding. Consequently, we cannot allow the application of the Respondent under Order 8 not only for the reasons mentioned above but also because that would mean retrial of the case which cannot be permitted.

16. The application dated 26.8.2016 under Order 8 filed by the Respondent is dismissed and the application dated 3.9.2016 on behalf of the Claimant to strike off paragraphs 4 to 9 and 25, 26 & 27 is allowed. The said paragraphs of the affidavit of Mr. Sandhawalia are struck off the record and expunged. Consequently, the documents sought to be introduced with the affidavit cannot be taken on record nor exhibited.”

7. The learned Senior Advocate for the appellant submitted that the international trade price is a vital factor. The appellant being importer of the canalized item, had exercised its right to seek reduction in the prices of imported goods on the ground that there had been a fall of roughly 16-17% in international prices and the extension of time was granted only on account of the request of the claimant/respondent-supplier. The appellant had sought to refer to documents to prove the then prevailing international prices of bulk Urea. The request was declined. The Tribunal opined that the parties would be aware of the prevailing market price. The case of the supplier was that the rate of USD 520 PMT, i.e. the agreed price would be payable.

8. The impugned judgment has referred to the Majority Award and has considered the relevant issues, as under:-

“32. The majority of the Arbitral Tribunal has considered this issue in detail and has held as under:

“63. We have perused the pleadings and, in fact, have noted their contents in detail. We have gone through and examined the evidence; both oral and documentary; and have considered and noted the arguments on behalf of the parties elaborately. We have already decided above that the preliminary objection of the Respondent, about the legality of the reference and maintainability of the arbitration proceedings based on the provision of Section 230 of the Contract Act, is without merit and have, therefore, rejected the same. In the written submissions of the Respondents, it has been fairly stated that the Respondent exercised the option under Clause XIV(a) in e-mail dated 25.11.2011 with regard to the payment of liquidated damages. The contention of the Respondent thereafter in the written submissions that the option was exercisable after the breach and not before the breach is contradictory. The wording of the e-mail dated 25.11.2011 states that the Seller shall be liable for liquidated damages for delay in shipment/arrival at discharge port. We cannot accept the argument of Mr. Grover, that the wording in the e-mail of 25.11.2011, regarding the Seller being liable for liquidated damages for delay in shipment/arrival, relates to the past liability for delay from 7.11.2011. This is because firstly, the past liability was covered by the original contract and secondly, because the delay in arrival of the shipment can only relate to the future. We are of the view that the Respondent had already exercised its option under default Clause XIV(a) for liquidated damages. No breach had occurred but the aforesaid option was already exercised.

xxx

66. We are unable to accept the ingenious argument raised in the written submissions that on account of the second breach on 30.11.2011, the contract ceased to exist. It has been submitted that no extension of time was sought by the Claimant; which is true. But that does not mean that the contract came to an end. The contract was not abrogated but was amended whereby the date of shipment was changed. It was also stipulated, as already noticed, that delay will entail the consequence of the Claimant having to pay liquidated damages to the Respondent. We are not in agreement with the interpretation given in the written submissions that consequence of the breach on 30.11.2011; when the shipment did not start sailing, was that the contract itself came to an end. Again, this was not even argued orally by the learned Advocate for the Respondent. The new terms incorporated in the contract by the Addendum which amended the contract by the two documents dated 25.11.2011, one of which is an e-mail, show that the amendment dovetailed into the main parent contract.

67. There is merit in the argument of Mr. Sanjeev Puri that the conduct of the Respondent right from 30.11.2011 upto 12.12.2011 shows that the Respondent had opted for levying liquidated damages under Clause XIV(a). They did not cancel the contract on 30.11.2011 when the vessel did not sail from the load port to India. They did not cancel the contract during the next 8-9 days till the vessel sailed on 9.12.2011. They could have cancelled the contract even on 9.12.2011 when they received intimation regarding shipment inspite of being informed about this vide e-mail dated 9.12.2011. From 9.12.2011 to 12.12.2011 also, i.e. for 4 days, they did not exercise the option of cancelling the contract. It is true and the Respondent is right in contending that the Claimant did not seek any extension of time and made the vessel to sail and confronted the Respondent with fait accompli. However, that does not detract from the fact that on innumerable occasions, the Respondent could have cancelled the contract as noticed herein and they chose not to do so. Therefore, we find merit in the submission made by Mr. Puri that this was because the Respondent had already exercised the option of imposing liquidated damages. There is also merit in the submission of Mr. Puri that Clause XIV does not give the right or the option to the Respondent to reject the goods, more so after they had arrived at the discharge port. There is difference between cancellation of the contract and the rejection of the goods and material.

68. Under the contract, shipping intimation was required to be given as per Clause VIII (b). There was no intimation required to be given by the Claimant to the Respondent that the vessel had not sailed. A fortiori since no intimation of sailing of vessel was given, it was obvious that the vessel had not sailed. There is no concealment of the breach when the vessel did not sail on 30.11.2011 and the intimation of sailing of the vessel given on 9.12.2011 which was as per Clause VIII (b). There is no explanation by the Respondent for inaction and silence from 30.11.2011 to 9.12.2011 and even from 9.12.2011 to 12.12.2011. We are of the view that the Respondent exerted pressure on the Claimant to sell the urea after it had arrived in Kandla at a price lower than the agreed contract price. It is incorrect on the part of the Respondent to urge that the Claimant ‘chose’ to accept the lower price offered; which was not the offer made by the Respondent but it was the stand taken by the Department of Fertilizers.”

9. The learned Single Judge has referred to the dicta in Arosan Enterprises Ltd. v. Union of India and Anr., (1999) 9 SCC 449 as well as Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, to conclude that where the time is of essence of contract, it is for the Arbitrators to determine on the issue as they may deem fit and the courts would have no right or authority to interdict an Award on a factual issue. The learned Single Judge has concluded that the findings of the Arbitral Tribunal cannot be said to be contrary to the record or perverse and that within the limited scope to challenge to the Award, no case is made out for interference under section 34 of the Act.

10. The learned Senior Advocate for the appellant contends that insofar as the shipment had not left the port by 30.11.2011 even after the expiry of the extended time, the respondent-supplier was clearly in second breach of the terms of the mutually extended timeline as per Addendum No.2 to the Contract. Since prices of the goods were falling, therefore, like a prudent businessperson, it was only logical that the goods be accepted at the prevailing international market prices, which were much less than the agreed rate as per the Agreement. It is argued that by not intimating the loading of the cargo uptil 08.12.2011 and only intimating the shipment on the following date 09.12.2011, the respondent-supplier had sought to create fait accompli by seeking to reach the goods at the Indian Port for the appellant to inexorably accept the same. The supplier being in breach of the Contract, the appellant could not have accepted the goods which were delivered beyond the extended time. In view of a fall in international prices, a fresh offer was made, which was agreed to by the supplier and only then the goods were accepted by the appellant. The dispute pivots on whether the appellant was entitled only to liquidated damages in terms of Clause XIV (a) of the Contract dated 30.08.2011, which would be a sum equivalent to 2% of the contract value of the undelivered material for each month, or part of month’s delay or to other damages.

11. Clause XIV (a) of the Contract reads, inter alia, as under:-

“XIV Default

In the event of failure of delivery of the material within the time stipulated for delivery in the contract, it is agreed that the Buyer shall have the option.

a) To recover as liquidated damages and not by way of penalty for the period after this material was due until actual delivery or until the Buyer secures the material from other sources, a sum equivalent to 2% of the contract value of the undelivered material for each month, or part of month’s delay.”

12. The Award has concluded that the appellant had exercised its option under Clause XIV(a) of the Contract with respect to the respondent’s first default. The scheduled time had been extended in terms of Addendum No.2 to the Contract and the vessel was to sail from the port in Iran by 30.11.2011; the appellant never alleged a subsequent breach beyond the extended time of 30.11.2011 under Clause XIV of the Contract, till 12.12.2011. According to the appellant, this finding is perverse.

13. Mr. Rajshekhar Rao, the learned Senior Advocate for the respondent-supplier submitted that the appellant’s offer for accepting the goods at USD444.50 PMT was agreed to under duress and this duress was communicated to the appellant. It was not an unconditional acceptance, therefore, it was not a contract in terms of section 7 of the Indian Contract Act, 1872. The acceptance was neither absolute nor unqualified. The reasons for the conditional acceptance were specified in the aforesaid letter of 23.12.2011.

14. It is argued that all these issues have been dealt with in the Arbitral Award; there is no explanation on behalf of the appellant for their silence from 30.11.2011 to 09.12.2011 and that the appellant created pressure on the respondent-supplier to sell the goods at a price lower than the agreed contract price. Furthermore, the rejection of the cargo by the Department of Fertilizers, Government of India on 09.12.2011 was communicated to the appellant on the same day at around 7.00 p.m., the appellant sat over it for a weekend and rejected the shipment scheduled on Monday at around 4.00 p.m. on 12.12.2011, when the vessel had almost reached the port of discharge. It is only at that penultimate stage that the respondent-supplier was intimated that the shipment would be accepted at the reduced price of USD 444.50 PMT; in these circumstances the supplier was left with no option but to accept the unilateral reduction insisted upon by the appellant under economic duress.

15. What is evident from the above is that the view taken by the learned Arbitrators in the Majority Award is a plausible view and it has been so held in the impugned judgment. In these circumstances, it is not for this Court to interfere in an appeal under section 37 of the Act as the scope for judicial review under section 37 is rather narrow in terms of the dicta of the Supreme Court in the following cases:

i) Delhi Airport Metro Express Pvt Ltd vs. Delhi Metro Rail Corporation (2022) 1 SCC 131

“28. …The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of Courts of setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award …

29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression “patent illegality”. Likewise, erroneous application of law cannot be categorized as patent illegality…”

ii) UHL Power Company Ltd. vs. State of Himachal Pradesh (2022) 4 SCC 116

“16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in e examining an order, setting aside or refusing to set aside an award, is all the more circumscribed…

18. It is also been held time and again by this court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one interpretation as against the other…”

iii) Ssanyong Engineering & Construction Co. Ltd. vs. NHAI (2019) 15 SCC 131

“38. …reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality on the face of award.

40. …the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair minded or reasonable person would; in short, that the arbitrator’s view is not even a possible view to take… “

16. No patent illegality is shown in Award. In view of the above, this court would not re-appreciate evidence as it is trite law that the scope of interference of the Hon’ble Court in an Arbitral Award is extremely narrow under section 34 and even more so circumscribed under section 37 of the Act. All the arguments raised by the appellant have been duly considered by the learned Single Judge. We agree with the conclusions in the impugned judgment. It does not call for any interference by this Court. The appeal is without merit and is accordingly dismissed.

NAJMI WAZIRI, J.

VIKAS MAHAJAN, J.

JULY 7, 2023


Click on below button to search similar judgments:


Follow for daily updates:


Scroll to Top