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IN THE HIGH COURT OF DELHI AT NEW DELHI
S. MURALIDHAR, J.
MMTC Ltd. - Petitioner
Versus
Anglo American Metallurgical Coal Pvt. Ltd. - Respondent
O.M.P. 790/2014
Decided on : 10-07-2015
MMTC challenged the majority award dated 12th May 2014 of the Arbitral Tribunal (AT) in a dispute between the parties. The AT allowed Anglo's claim for damages on account of alleged non-lifting of coking coal by MMTC and held MMTC liable to pay damages of USD 78,720,414.92 along with interest. MMTC's petition was dismissed, and the award was upheld.
Fact of the Case:
MMTC and Anglo entered into a Long Term Agreement (LTA) for the sale and purchase of coking coal. MMTC was to lift 466,000 MT of coking coal during the fifth delivery period from 1st July 2008 to 30th June 2009. However, MMTC lifted only 11,966 MT, resulting in a shortfall of 454,034 MT. Anglo claimed damages for the unlifted quantity.
Finding of the Court:
The court found that MMTC failed to communicate to Anglo the proposed delivery schedule during the fifth delivery period. The correspondence between the parties showed that MMTC was asking for accommodation as regards the price during the fifth delivery period and was making clear that it was not in a position to lift the stocks at USD 300 per MT. The court also found that Anglo did not repudiate the contract or bring it to an end, but rather offered MMTC a way to spread out its obligation to lift the carry over quantity over the subsequent period.
Issues: 1. Whether Anglo repudiated the contract? 2. Whether the award of the majority was vitiated by bias? 3. Whether the quantum of damages was correctly determined?
Ratio Decidendi: 1. The court held that Anglo did not repudiate the contract or bring it to an end. Anglo offered MMTC a way to spread out its obligation to lift the carry over quantity over the subsequent period. 2. The court held that the allegations of bias against one of the members of the AT were not substantiated by the evidence. The court found that the member's questioning of witnesses was not particularly biased and that he had conducted his own questioning of witnesses in accordance with the IBA Rules on Taking of Evidence in International Commercial Arbitration. 3. The court held that the majority Award's finding that the prevailing market price at the relevant time was USD 126 per MT was not perverse or contrary to the evidence. The court found that the majority Award had examined the evidence and arrived at a view that was possible to be taken.
Final Decision: The court dismissed MMTC's petition and upheld the majority award dated 12th May 2014.
Key Points: - A party cannot be said to have repudiated a contract if it offers the other party a way to spread out its obligation to perform the contract over a subsequent period (!) . - The test for repudiation is whether a party made it clear that it did not intend to perform the contract, and the party’s conduct must be assessed from the context and correspondence (!) . - The challenge to an arbitrator under the Arbitration and Conciliation Act must be made within 15 days of becoming aware of the grounds, and the challenge is decided by the International Court of Arbitration (!) . - The quantum of damages is determined based on the market price at the last date on which the seller ought to have fulfilled the contract, which in this case was 30th September 2009 (!) . - The valuation of the market price must be based on evidence of prices agreed in related contracts during the relevant period, such as contracts with SAIL and RINL (!) .
1. The Petitioner, MMTC Limited (MMTC), has filed this petition under Section 34 of the Arbitration and Conciliation Act, 1996 (Act) against the final Award dated 12th May, 2014 of the Arbitral Tribunal (AT) by a majority of 2:1 in the disputes between the parties. By the impugned majority Award the claim filed by the Respondent, Anglo American Metallurgical Coal Pty. Ltd. (formerly known as Anglo Coal Australia Pty. Ltd.) [Anglo] for damages on account of alleged non-lifting of 453,034 MT of coking coal of MMTC was allowed and Anglo was held to be entitled to recover damages from MMTC in the sum of US dollars (USD) 78,720,414.92 together with pendente lite and future interest. A dissenting Award dated 13th March, 2014 was passed by the third learned Arbitrator dismissing the claim petition filed by Anglo.
Background facts
2. On 7th March, 2007 an agreement was entered into between the parties for sale and purchaser of coking coal. This was a Long Term Agreement (LTA) in terms of which MMTC was to purchase freshly mined and washed coking coal from Anglo on FOB (trimmed) basis from DBCT Gladstone in Australia. The LTA encompassed three delivery periods of one year each, commencing on 1st July, 2004 and ending on 30th June, 2007. Under Clause 1.3 of the LTA, MMTC was given the option of extending the LTA for two more delivery periods. MMTC accordingly exercised this option. The fourth delivery period was between 1st July, 2007 and 30th June, 2008 and the fifth delivery period from 1st July, 2008 to 30th June, 2009.
3. Under Clause 1.1.1 of the LTA, MMTC was to purchase an annual base quantity of 466,000 MT of coking coal during the additional delivery period. No issues arose till the completion of the fourth delivery period. The fifth delivery period was initially up to 30th June, 2009. However, Anglos letter dated 14th August, 2008 addressed to MMTC confirmed the agreement between the parties that the fifth delivery period would expire only on 30th September, 2009. The coking coal to be supplied was of two types: Isaac coking coal blend and Dawson Valley blend. The price agreed for the fifth delivery period was USD 300 per MT. The letter dated 20th November, 2008 from MMTC to Anglo confirmed this position and enclosed an addendum to the agreement. The LTA was to be read along with Addendum No. 2 dated 20th November, 2008 which in turn was also to be read collectively with the LTA.
4. During the fifth delivery period MMTC lifted two shipments at USD 300 per MT. The first was on 30th October, 2008 for a quantity of 2,366 MT and the second was on 5th August, 2009 for a quantity of 9,600 MT. As far as the first of the above shipments was concerned, it was part of a larger shipment of 48,655 MT due under the fourth delivery period. For this period the agreed rate was USD 96.40 PMT. Of the aforementioned quantum, it was agreed that delivery of 2,366 MT can be attributed to the fifth delivery period and lifted at the agreed price of USD 300 per MT.
5. The second of the shipments during the fifth delivery period was pursuant to an ad hoc agreement arrived at in a meeting held on 15th July, 2009 and confirmed in writing by MMTC on 22nd July, 2009. The ad hoc agreement was for MMTC to lift 50,000 MT of coal under which 9,600 MT was to be purchased at USD 300 per MT, and the balance 40,400 MT at an ad hoc price of USD 128.25 per MT. Consequently, as far as the fifth delivery period was concerned, coal at the agreed price of USD 300 per MT was lifted only to an extent of 2,366 plus 9,600 MT, i.e., 11,966 MT. The contracted quantity being 466,000 MT, the shortfall worked out to 454,034 MT.
6. The LTA envisaged a sequence to be followed for the delivery of coking coal. Under Clause 4 of Annexure IV, based on the delivery schedule agreed to between the parties, MMTC was to nominate a vessel about two weeks prior to effecting of the shipment. Anglo was to then confirm to MMTC via fax/email the acceptance of such vessel within two working day
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