Case Note & Summary
The Supreme Court of India heard an appeal against a Division Bench judgment of the Delhi High Court that had set aside a majority international arbitral award. The appellant, Anglo American Metallurgical Coal Pty Ltd, an Australian company, had entered into a Long Term Agreement (LTA) dated 07.03.2007 with MMTC Ltd, the respondent, for the supply of coking coal. The LTA provided for five delivery periods, with the Fifth Delivery Period running from 01.07.2008 to 30.06.2009, later extended to 30.09.2009. The agreed price for the Fifth Delivery Period was US$300 per metric tonne. Disputes arose when the respondent lifted only 11,966 MT out of the contracted 466,000 MT, leaving a shortfall of 454,034 MT. The appellant claimed damages for breach of contract, while the respondent contended that the appellant was unable to supply the coal. The matter was referred to an arbitral tribunal comprising Mr. Peter Leaver (QC), Justice V.K. Gupta (Retd.), and Mr. Anthony Houghton (Senior Counsel). The majority award, delivered on 12.05.2014, found the respondent in breach and awarded damages. The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before a Single Judge of the Delhi High Court, who upheld the award. However, a Division Bench, in an appeal under Section 37, set aside the majority award, holding it to be perverse and contrary to the terms of the contract. The Supreme Court, in its judgment, examined the scope of interference under Sections 34 and 37. It held that the Division Bench had exceeded its jurisdiction by reappreciating evidence and substituting its own view for that of the arbitral tribunal. The court emphasized that the findings of the majority award were plausible and based on evidence, and therefore not open to challenge. The Supreme Court set aside the Division Bench's judgment and restored the Single Judge's order upholding the majority award. The court also noted that the existence of a dissenting opinion does not render the majority award perverse. The appeal was allowed, and the majority award was reinstated.
Headnote
A) Arbitration Law - International Commercial Arbitration - Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996 - Scope of Challenge - The court examined the limited grounds for setting aside an arbitral award under Section 34 and the appellate power under Section 37. Held that the Division Bench exceeded its jurisdiction by reappreciating evidence and substituting its own view, as the majority award's findings were plausible and not perverse. (Paras 1-6) B) Contract Law - Breach of Contract - Damages - Long Term Agreement for Supply of Coal - The dispute pertained to the Fifth Delivery Period under a Long Term Agreement dated 07.03.2007, where the respondent failed to lift the contracted quantity of 454,034 MT of coking coal. The majority award found the respondent in breach and awarded damages based on the difference between market price and contract price. Held that the findings of fact by the arbitral tribunal were based on evidence and were not open to challenge under Section 34. (Paras 5a-6) C) Arbitration Law - Majority Award - Dissenting Opinion - Effect - The majority award was rendered by two arbitrators, with a dissenting opinion by the third. The court noted that the existence of a dissenting opinion does not make the majority award perverse or against public policy. Held that the majority view, being plausible, must be upheld. (Paras 4-5)
Issue of Consideration
Whether the Division Bench of the High Court was justified in setting aside the majority arbitral award under Section 37 of the Arbitration and Conciliation Act, 1996, on the ground that the award was perverse and contrary to the terms of the contract.
Final Decision
The Supreme Court allowed the appeal, set aside the Division Bench judgment dated 02.03.2020, and restored the Single Judge's order dated 10.07.2015 upholding the majority arbitral award. The majority award was reinstated.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Section 37
- International Commercial Arbitration
- Breach of Contract
- Damages
- Plausible Findings
- Perversity
- Public Policy
