The main legal point established in the judgment is that the award can be set aside if it is contrary to the terms of the contract, patently illegal, and opposed to public policy. The court also emphasized that the decision of the Arbitral tribunal must not be perverse and irrational.

JUDGMENT :

ALOK ARADHE, J.

This appeal under section 37(1)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’ for short) has been filed against judgment dated 08.10.2010 passed by the trial court, by which objection filed by respondent No.1 under Section 34 of the Act has been allowed.

FACTUAL BACKGROUND

2. The respondent No.1 and the appellant No.2 entered into a Joint Venture Agreement dated 21.10.2003 for supply and purchase of iron ore fines. The main object of the agreement was to procure supply and sell the iron ore fines of specified quality to overseas customers to be nominated by appellant No.2 and to share the profit from such a sale. Under the agreement, it was agreed that respondent No.1 shall export the iron ore of requisite quantity and quality to the overseas buyers at the price and in the manner agreed to between the parties. The appellant No.2 represented the appellant No.1 as an agent and the authorized representative of appellant No.2 executed the agreement on behalf of appellant No.1. It is the case of respondent No.1 that after execution of the agreement, it continuously endeavored to honor its obligation under the agreement and perform its part of the agreement. The respondent No.1 had to procure iron ore in Chikkanayakananalli, Hospet, Bellary to ensure supply of iron ore fines under the agreement. The agreement prescribed supply of screened iron ore fines of iron content of not less than 61.6%.

3. It is the case of the respondent No.1 that the iron ore found in ROM condition was required to be processed by crushing and screening to tailor it to the needs of the appellants. The respondent No.1 agreed to supply the iron ore agreement under the agreement. The respondent No.1 could not put up a crushing and screening plant on account of various objections raised by local authorities and transported the iron ore in Run of Mill conditions to New Mangalore Airport. Under the agreement, the plaintiff was required to obtain a certificate from the Quality Inspection Agencies, certifying the iron content in the ore. The quality inspection agency certified that iron content in the iron ore Run of Mill from Chikkanayakananalli mines had less than 61.60% of iron content and thus, was not conforming to the standards prescribed in the agreement.

4. It is the case of respondent No.1 that since, the quality of the iron ore fines of the quality specified in the agreement was not available in Chikkanayakananalli and surrounding areas, it vide communication dated 14.11.2003 offered either to ship the consignment of screened iron ore fines during second week of January 2004 or alternatively supply ore in Run of Mill condition. The appellants however declined to accept the respondent No.1’s proposal. As per the version of the respondent No.1, the appellants failed to furnish the copies of agreements for sale, which they had entered into with overseas purchasers, which was an essential precondition in the agreement for initiation of supply of trial consignment. The respondent No.1 therefore, could not effect trial shipment of 40,000 metric tonnes and had to transport iron ore in Run of Mill condition from Chikkanayakananalli mines to New Mangalore port in the hope that the same would be accepted by the appellants. However, the appellants declined to purchase the aforesaid ore. Thereupon, the respondent No.1 was left with no option but to sell it to third parties. Thus, the dispute arose between the parties and an arbitral tribunal was constituted comprising of the sole arbitrator. The appellants filed a claim of Rs.76,03,20,000/along with interest, as damages on account of nonsupply of iron ore by the respondent No.1 as per the agreement.

5. The respondent No.1 inter alia pleaded that the contract in question was a contingent contract and in fact there was a breach of contract on part of the