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.

JUDGEMENT

S. RAVINDRA BHAT, J.

1. 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, 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 1 By final order dated 27-07-2009 in F.A.O. (OS) No. 477 of 2001. Digitally signed by VISHAL ANAND Date: 2023.08.19 12:42:09 IST Reason:

Signature Not Verified 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 01-06- 1986 and thereafter was to be extended annually on ever green basis unless terminated by either party through six month’s 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 MMTC’s 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 MMTC’s 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, de- canalising 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, 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 court.3 MMTC appealed the affirmation of the award by the learned single judge. On appeal, the Division