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SUPREME COURT OF INDIA
S. Ravindra Bhat, Aravind Kumar, JJ.
H. J. BAKER AND BROS. INC. - Appellant
Versus
The Minerals And Metals Trade Corporation Ltd. (MMTC) – Respondents
Civil Appeal No(S). 2437 of 2010 with Civil Appeal No(S). 5286-5287 of 2023 [@ SLP (Civil) No(S). 12870-12871 of 2011]
Decided on : 18-08-2023
Arbitration and Conciliation Act, 1996 – Section 34 – Contract Act, 1872 – Section 73 – Setting aside arbitral award – Agreement for purchase of US-origin sulphur – Question of proof of damages and mitigation was not argued before Single Judge – MMTC did not deny that plea of mitigation of losses was not raised before Tribunal. Since on this aspect, conclusions of courts below have affirmed award, this court finds no good reason to interfere with findings – However, failure to produce best evidence that Baker possessed in form of contracts for balance quantity and payments received as proof of damage suffered and shipping arrangements in question as well as shipments as billed from time to time with full particulars, disentitled it to any compensation for later period – Findings of Division Bench are in accord with law – Where goods are to be bought and sold damages has to be calculated as they would naturally arise in usual course of things from such breach – If parties agree to a particular rate of interest, that would prevail – Impugned judgment applied correct principles of law, in partly setting aside award. (Paras 14, 19, 20, 21 and 22)
Facts of the case:
Present appeals are directed against a common judgment of the Delhi High Court, which partly interfered with an arbitration award. One appeal has been preferred by the respondent – MMTC Limited in arbitration to the extent that the impugned judgment did not set aside the award, and other appeal by the arbitration claimant – M/s H.J Baker & Bros. INC to the extent it did.
Findings of Court:
The award is bereft of any reasoning why given that Baker was a New York based supplier which sourced its supplies from various parts of the world had agreed to supply in the contracts in question based upon Canadian prices, and instead, arbitrarily outrightly rejected that standard.
Result : Appeals dismissed.
JUDGMENT
S. Ravindra Bhat, J.
Leave granted in SLP (Civil) No(s). 12870-12871 of 2011.
2. These appeals are directed against a common judgment of the Delhi High Court1[ By final order dated 27-07-2009 in F.A.O. (OS) No. 477 of 2001], which partly interfered with an arbitration award. One appeal has been preferred by the respondent - MMTC Limited in arbitration (hereafter "MMTC") to the extent that the impugned judgment did not set aside the award, and the other appeal by the arbitration claimant - M/s H.J Baker & Bros. INC (hereafter "Baker") to the extent it did.
Essential facts
3. MMTC entered into an agreement dated 14-01-1986 with Baker for the purchase of US-origin sulphur. In terms of the agreement, MMTC was to purchase on an annual basis 60,000 metric tons of sulphur (+/- 5% for shipping convenience). The agreement was to be operative for three years from 01-061986 and thereafter was to be extended annually on ever green basis unless terminated by either party through six months written notice. Under the contract, MMTC purchased the material till 1991. On 20-12-1991, MMTC telexed Baker, confirming supply-price for the period from January to June 1992. As no vessel was nominated for this purpose, by a fax dated 27-01-1992, Baker requested nomination of a vessel. On 31-01-1992, MMTC communicated that it would be nominating its vessel in March 1992 for 25,000 metric tons of sulphur in May-June 1992. Thereafter some correspondence was exchanged between the parties over the nomination of the vessel.
4. The quantity of 50,000 metric tons of sulphur for January-July 1992 was not lifted by MMTC. Instead, MMTC by fax, on 08-04-1992 informed Baker that the import of sulphur was de-canalised by the Union Government on 20-02- 1992 and consequently, it could not nominate any vessel against the balance quantity in the contract. Baker did not accept MMTCs reason for not nominating the vessel and lifting the balance quantity of sulphur. Baker kept insisting upon lifting the desired quantity and also stated that because of MMTCs inaction, it was incurring storage expenses as well. MMTC, by its letter dated 21/22-05-1992 stated that import of sulphur directly from the Gulf was at lower landed costs and because of the changed situation, namely, decanalising of sulphur import by the Union Government, its import from the USA or Canada ceased to be competitive. MMTC requested for cost and freight prices (hereafter, "C & F prices") mentioning that it was eager to continue relations with Baker. The latter maintained that de-canalisation would not affect the contract between the parties and MMTC had to purchase the quantity at agreed prices. Ultimately, Baker sent a legal notice to MMTC claiming damages for the past three half-yearly semesters i.e. January-June 1992, July- December 1992 and January-June 1993. This was followed by another legal notice dated 19-07-1993. By this legal notice, arbitration was invoked by Baker.
5. A three-member tribunal was constituted, which adjudicated the claims. Eventually, under the award2[Award dated 07.02.1996], MMTC was held liable to pay US $ 5,10,215/- to Baker, for two distinct periods. The award was challenged by MMTC through objections. The objections were rejected by the learned single judge and the award was made the rule of court3[ By order dated 05.09.2001 in Suit No 1038-A of 1996& IA No 6093 of 1996]. MMTC appealed the affirmation of the award by the learned single judge. On appeal, the Division Bench, by the impugned order upheld the single judges findings, to the extent the award granted damages for the period January-June, 1992, but set it aside for the balance period.
6. Some of the relevant clauses of the agreement dated 14.01.1986 which are material for this case are extracted below:
"Clause 6:- The price will be settled half yearly and shall be in line with Canadian producers prices to their long terms contract customers. Both parties will make utmost efforts to settle the prices for supplies dur
SupremeToday
(1) Where goods are to be bought and sold damages has to be calculated as they would naturally arise in usual course of things from such breach.(2) If parties agree to a particular rate of interest, ....
The measure of damages for breach of contract under Section 73 must reflect the market value at the time of breach, less the agreed contract price.
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