J. Anup Jairam Bhambhani
Appellant- Mmtc Limited
Respondent- Anglo American Metallurgical Coal Pty. Ltd.
The appeal arises out of an award granted by the arbitral tribunal in favor of the respondent. The tribunal has interpreted the communications between the two parties to mean that the appellant was wrongly attempting to reduce the price of the goods that the respondent was supposed to supply. Under Section 37 of the Arbitration and Conciliation Act, 1996 this decision is challenged in the High Court.
- The Government of India, which is the appellant, entered into a Long-Term Agreement with the respondent. Under this, the appellant agreed to purchase a certain amount of freshly mined and washed coking coal from the respondent over three delivery periods. The period of the agreement was extended, and two delivery periods were added. The last period was extended by mutual consent.
- Due to a global financial crisis, the appellant asked the respondent for a reduction in the price for the last delivery. The appellant submits that they wrote to the respondent inquiring about availability and received no reply. Later, the respondent said they would be unable to supply the same. Thus, they failed to supply the material in the last delivery period but sent a letter saying the agreement had ended.
- The appellant contends that the respondent not supplying coal constitutes an unqualified repudiation of their obligation and the respondent put an end to the contract without there being any intimation by the appellant that it was refusing to perform its obligation.
- The Appellant moves against the findings of the tribunal, stating that arbitrators have exceeded jurisdiction by providing unwarranted interpretations of the communication, and has erred by holding the appellant in breach of the agreement.
- The respondent contends that the Arbitral Tribunal is the final word on facts, on the interpretation of the documents, and the arbitrators are entitled to read the documents holistically.
- The tribunal's conclusion was that there was no shortage of coal, and the appellant was attempting to seek delivery at a lower price.
Section 34 of the Arbitration and Conciliation Act, 1996-Provides conditions under which a Court can set aside an arbitral award.
Section 37of the Arbitration and Conciliation Act, 1996- Arbitral awards are appealable to court.
Whether the Arbitral Tribunal has correctly interpreted and provided an award for the dispute between the parties?
- The High Court stated that they are aware of the scope of interference it has under Section 37 of the Arbitration Act. But under Section 34 of the Act, the court can correct a wrong conclusion drawn by the Arbitral Tribunal.
- The court found that the tribunal has filled in words in the communications interpreted by it. There is no mention of the price of coal in the emails exchanged. The court is shocked at how the tribunal can read into the communication.
- The court says they must read plainly into the emails, and try and gather what was intended. With written communication, the court has to assume the parties understood each other, and the emails in the case have to be 'read' and not 'interpreted'.
- The tribunal has erred in attempting to draw inferences from the emails, instead of simply reading them.
- An inference based on what is not stated in a document or ‘imaginary evidence’, is the same as an inference based on no evidence. A decision given on such inference is perverse.
- There was no evidence to support the conclusion that the appellant was demanding coal at any reduced rate, and there is no evidence that the respondent had coal available to supply to the appellant, even though they claimed to not have it. The calculation of damages also had no basis.
- The Court referred to Associate Builders v. DDA where the Supreme Court has laid down the third juristic principle for the perversity of a decision is that:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
- The court found that the award should rest on sound factual and legal footing, and the decision of the Tribunal suffers from a travesty of justice, and the award suffers from perversity.
- The judge did not give enough consideration to the facts and committed an error that can be corrected in the present proceedings under Section 37. The arbitral award is set aside.
An award from arbitration is binding on both parties and there is little recourse left. However, Sections 37 and 34 allow a party to approach the court if the Arbitral Award was based on an insufficient interpretation of the facts. In the present case, the tribunal grossly misconstrued the communication between the parties, thus the court felt it was right to step in and correct the misinterpretation. It found that the tribunal’s evidence was based on wrong evidence, which means their final decision was perverse. The tribunal’s judgment was thus reversed.
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- What do Sections 34 and 37 of the Arbitration and Conciliation Act provide?
- What does the court mean by “read, not interpreted”?