Calcutta High Court Upholds Arbitral Awards in Iron Ore Supply Dispute, Affirming Breach by Supplier

The High Court at Calcutta, in a significant ruling on December 9, 2025, dismissed appeals under Section 37 of the Arbitration and Conciliation Act, 1996, thereby upholding arbitral awards and judgments under Section 34 passed in 2012. The bench, comprising Justice Sabyasachi Bhattacharyya and Justice Supratim Bhattacharya, confirmed that Orissa Minerals Development Company Limited (OMDCL) breached supply contracts with Jai Balaji Industries Limited by halting iron ore deliveries without contractual justification. The decision emphasizes the enforceability of mandatory supply obligations and the waiver of advance payment preconditions.

Case Background and Parties Involved

The appeals (F.M.A. No. 939 of 2012 and F.M.A. No. 941 of 2012) stem from two supply agreements between OMDCL (appellant, a state-owned mining company) and Jai Balaji Industries Limited (respondent, a steel manufacturer).

• The first agreement, dated August 13, 2003, required OMDCL to supply 100,000 tonnes (+25%) of 63% Fe iron ore (10-30mm) annually from October 1, 2003, to September 30, 2004.
• The second, dated March 11, 2004, mandated 7,000 metric tonnes per month of 65% Fe sponge-grade iron ore (5-18mm) from April 1, 2004, to March 31, 2005, renewable by mutual consent.

Disputes arose over the quality of supplied ore, leading Jai Balaji to withhold full payments. OMDCL ceased supplies after June 2004, citing non-payment. Jai Balaji initiated arbitrations, resulting in awards for excess procurement costs (for 43,413.70 MT of unsupplied ore) and loss of profits, plus interest. These were affirmed under Section 34, prompting the Section 37 appeals heard on November 13 and December 1, 2025.

Key Arguments from Both Sides

OMDCL argued that the arbitral tribunal erred by ignoring contract preconditions: 100% advance payment, prior demand for goods, participation in tenders, and supply "subject to availability." They claimed no breach occurred as Jai Balaji failed to meet these, and the tribunal impermissibly rewrote the contracts. OMDCL further contended that waiver of advance payment was unpleaded and unproven, loss of profits were hypothetical without evidence of actual opportunities, and awards violated public policy by allowing remote claims. They cited precedents like Sikkim Subba Associates v. State of Sikkim (2001) 5 SCC 629 for equity principles and Motilal Padampat Sugar Mills v. State of Uttar Pradesh (1979) 2 SCC 409 for waiver requiring pleading.

Jai Balaji countered that the contracts imposed no prior demand requirement and used mandatory language ("shall provide") overriding "subject to availability." They highlighted supplies made for nine months under the 2003 agreement and three months under the 2004 one without advances, establishing waiver through conduct. Quality disputes justified payment delays, supported by contemporaneous complaints and evidence like purchase orders for alternative sourcing. The tribunal adequately addressed all issues, and OMDCL's appeal reinterpreted the contract impermissibly under limited Section 37 review.

Legal Precedents and Principles Applied

The court applied the narrow scope of interference under Sections 34 and 37 of the 1996 Act, requiring awards to shock judicial conscience or violate public policy (pre-2015 amendment standards). It distinguished waiver as a factual issue inferable from conduct, not requiring explicit pleading if addressed in arguments ( ONGC Ltd. v. Saw Pipes Ltd. , (2003) 5 SCC 705; Associate Builders v. DDA , (2015) 3 SCC 49).

On mandatory supply, the bench reconciled clauses: "Subject to availability" was overridden by "shall provide during tenure," absent proof of non-availability. Tender participation was non-fatal if prices were matched. For damages, it upheld excess costs based on documented price differences and loss of profits via "reasonable guesstimate" from purchase orders, considering mitigation ( Unibros v. All India Radio , 2023 SCC OnLine SC 1366; Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corpn. Ltd. , (2024) 2 SCC 375). No windfall was allowed, and equity principles from Sikkim Subba were inapplicable to contractual claims.

Pivotal excerpt: "A conjoint reading of the said provisions allow for a possible interpretation that the appellant had mandatorily to supply such quantities of iron ore respectively under both the agreements, irrespective of prior demands being made by the claimant/respondent and/or availability of the iron ore." (Para 28)

Another key quote: "There was sufficient material before the Arbitral Tribunal to arrive at the conclusion that there was conscious relinquishment of the known right to claim 100% advance payment by the appellant. Such conclusion is not only one of the 'possible' views but also a 'plausible' conclusion." (Para 35)

Court's Final Decision and Implications

The appeals were dismissed, affirming the arbitral awards and Section 34 judgments from February 2012 by the Additional District Judges at Barasat. OMDCL was held in breach for stopping supplies amid unresolved quality disputes, without contractual empowerment to do so. Awards for excess procurement costs, loss of profits (with interest at 6-10% p.a.), and costs were justified within the tribunal's jurisdiction under Section 31(7).

This ruling reinforces arbitral finality in commercial disputes, particularly in resource supply contracts, by limiting re-interpretation of terms. It underscores waiver through conduct in ongoing performances and the need for evidence of preconditions like unavailability. For mining and steel sectors, it highlights risks of unilateral supply halts, potentially influencing future arbitration outcomes in similar commodity agreements. No costs were awarded in the appeals.