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IN THE HIGH COURT OF DELHI AT NEW DELHI
Najmi Waziri, Vikas Mahajan, JJ.
Indian Potash Ltd – Appellant
Versus
M/s Emmsons Gulf Dmcc – Respondent
FAO(OS) (COMM) 262 of 2018
Decided On : 07-07-2023
Arbitration & Conciliation Act - Appeal - 1996 - [Arbitration & Conciliation Act] - [Section 34] - [Section 37] - The court discussed the order dismissing the appellant's petition under section 34 of the Act challenging the Arbitral Award. The contract involved the supply of Urea, breach of contract, and acceptance of goods at a reduced price. The court considered the core issue of whether the prevailing market price at the time of the counter offer was relevant. The court also discussed the exercise of the option under Clause XIV(a) of the Contract, the acceptance of goods under duress, and the rejection of the cargo by the Department of Fertilizers, Government of India. The court concluded that the findings of the Arbitral Tribunal were not contrary to the record or perverse, and no case was made out for interference under section 34 of the Act.
Fact of the Case:
The case involved a dispute over the supply of Urea under a contract, breach of contract, acceptance of goods at a reduced price, and the exercise of the option under Clause XIV(a) of the Contract. The appellant challenged the Arbitral Award, claiming that the prevailing market price at the time of the counter offer was relevant. The respondent argued that the acceptance of goods at a reduced price was under duress, and the rejection of the cargo by the Department of Fertilizers, Government of India was communicated to the appellant.
Finding of the Court:
The court found that the findings of the Arbitral Tribunal were not contrary to the record or perverse, and no case was made out for interference under section 34 of the Act.
Issues: The core issue was whether the prevailing market price at the time of the counter offer was relevant. Other issues included the exercise of the option under Clause XIV(a) of the Contract, the acceptance of goods under duress, and the rejection of the cargo by the Department of Fertilizers, Government of India.
Ratio Decidendi: The court held that the findings of the Arbitral Tribunal were not contrary to the record or perverse, and no case was made out for interference under section 34 of the Act.
Final Decision: The appeal was dismissed as the court found no merit in the appellant's arguments and agreed with the conclusions in the impugned judgment.
JUDGMENT
Najmi Waziri, J. 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, along with 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 accept
The main legal point established in the judgment is that the findings of the Arbitral Tribunal were not contrary to the record or perverse, and no case was made out for interference under section 34 ....
The court affirmed that arbitral awards may only be set aside under specific grounds stated in Section 34, emphasizing judicial restraint from reevaluating evidence or merits beyond legal provisions.
The interpretation of contractual clauses by an Arbitrator cannot be interfered with unless it is unreasonable or against settled legal principles.
The court emphasized that an arbitral award must be reasoned and address core contractual issues, with judicial intervention restricted to cases of patent illegality under Section 34 of the Arbitrati....
The main legal point established in the judgment is the limited role of the court in reviewing arbitral decisions under Section 34 of the Arbitration and Conciliation Act, 1996.
The court clarified the limited grounds for interference with arbitral awards under Section 34 and emphasized the importance of timely goods delivery in contractual obligations.
The Court's power while exercising jurisdiction under Section 37 of the Act is limited, and it cannot undertake an independent assessment on the merits of the Award.
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