Calcutta High Court
Neo Metaliks Limited vs Orrisa Metaliks Private Limited on 6 January, 2025
IN THE HIGH COURT AT CALCUTTA
ORIGINAL SIDE
COMMERCIAL DIVISION
Present:
The Hon'ble Justice Krishna Rao
A.P. (COM) No. 32 of 2024
Neo Metaliks Limited
Versus
Orrisa Metaliks Private Limited
Mr. Aspi Chinoy, Sr. Adv.
Mr. Jishnu Chowdhury, Sr. Adv.
Mr. Sandip Agarwal
Mrs. Suchismita Ghosh Chatterjee
Mr. Pranit Bag
Mr. Tanoy Agarwal
Mr. Rohit Bhattacharjee
Mr. Amogh Joshi
..... For the petitioner.
Mr. S.N. Mookherjee, Sr. Adv.
Mr. Krishnaraj Thaker, Sr. Adv.
Mr. Rishad Medora
Mr. Meghajit Mukherjee
Mr. Debrup Bhattacharya
Ms. Sweta Mohanty
Ms. Srijeeta Gupta
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Mr. Yash Singhi
Ms. Sonia Das
Ms. Brinda Sengupta
.....For the respondent.
Hearing Concluded On : 10.12.2024
Judgment on : 06.01.2025
Krishna Rao, J.:
1. This is an application under Section 34 of the Arbitration and
Conciliation Act, 1996 filed by the petitioner challenging the Award
passed by the Learned Sole Arbitrator dated 16th October, 2023
wherein the Statement of Claim of the petitioner was rejected but held
that the petitioner will be entitled to adjustment of Rs. 4,49,55,000/-
paid to the respondent on 30th April, 2022 being the 10% of the total
contract price of the goods from the compensation payable to the
respondent and the Counter Claim of the respondent was allowed in
part directing the petitioner to pay a sum of Rs. 1,57,95,372/- as
compensation after adjustment of the amount of Rs. 4,49,55,000/- with
interest at the rate of 18% per annum from 25th April, 2022 till the date
of realization to the respondent. The Learned Sole Arbitrator also
directed the petitioner to pay a sum of Rs. 52,43,696/- as cost to the
respondent with interest at the rate of 18% per annum from the date of
Award.
2. As per agreement entered between the petitioner and the respondent
dated 22nd February, 2022, the respondent agreed to sell and the
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petitioner agreed to purchase 10,000 MT of Lam Coke of the
specification mentioned in the contract. The petitioner in discharge of
its obligation as per the contract has paid Rs. 4,49,55,000/- to the
respondent being the 10% of the contract amount on 22nd February,
2022. The balance consideration was to be paid by the petitioner by
opening a required Letter of Credit seven days prior to arrival of the
vessel and the said Letter of Credit would be in a mutually agreed
format from a First Class Bank.
3. The petitioner by an email dated 1st April, 2022, requested the
respondent to share the format of the proposed Letter of Credit and on
8th April, 2022, the respondent forwarded a format of the Letter of
Credit to the petitioner. On receipt of format of Letter of Credit, the
petitioner had sent an email dated 9th April, 2022 suggesting track
changes to the format of Letter of Credit. On 9th April, 2022 and 13th
April, 2022, the petitioner sent reminders to the respondent requesting
confirmation of the draft Letter of Credit.
4. The respondent transferred the 10% advance amounting to Rs.
4,49,55,000/- to the petitioner and the same was also informed to the
petitioner by email dated 14th April, 2022. The respondent refunded the
advance of Rs. 4,49,55,000/- to the petitioner on the ground of breach
of contract by the petitioner failing to establish a Letter of Credit
leading to termination of the contract. On 16th April, 2022, the
petitioner sent an email to the respondent stating that it was unable to
understand the reason for the transfer of an amount of Rs.
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4,49,55,000/- to the petitioner. The petitioner further requested for
confirmation of draft Letter of Credit and date of arrival of vessel so as
to enable the petitioner for opening Letter of Credit and other facilities.
On 18th April, 2022, the petitioner again sent reminder to the
respondent for confirmation of draft Letter of Credit.
5. The petitioner has filed a suit on 25th April, 2022 against the
respondent being T.S. No. 519 of 2022 praying for delivery of 10000 MT
of Lam Coke, Specific Performance of Contract, perpetual injunction
and other reliefs. The petitioner has also filed an application for grant of
ad-interim order under Order 39, Rule 1 and 2 of the CPC. On the
same day, the Learned Civil Judge (Sr. Division) 4th Court, Alipore
granted an ad-interim injunction restraining the respondents not to
deal with or disposing of or alienating or encumbering or creating any
third party right or interest or from removing the goods from the vessels
M.V. Akij Pearl or making over the same to any third party or storing
the same in warehouse or precincts of any third party in any manner
whatsoever till 21st May, 2022.
6. Being aggrieved and dissatisfied with the order dated 25th April, 2022,
the respondent has preferred an appeal before the Hon’ble Division
Bench of this Court being FMAT No. 137 of 2022 along with an
application being CAN No. 1 of 2022 praying for stay of the operation of
the order dated 25th April, 2022. The Hon’ble Division Bench has
passed an interim order by giving liberty to the respondent to remove
entire consignment after retaining 10,000 MT of LAM Coke in favour of
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the petitioner. The appeal preferred by the respondent as well as the
application was disposed of by way of consent order dated 28th April,
2022. As per order dated 28th April, 2022, the petitioner made 10%
advance payment of Rs. 4,49,55,000/- to the respondent on 30th April,
2022 and the petitioner also sent an email to the respondent recording
payment details and seeking confirmation of draft Letter of Credit. By
an email dated 2nd May, 2022, the respondent acknowledged the 10% of
the advance payment and forwarded a revised draft Letter of Credit to
the petitioner requesting the petitioner to open Letter of Credit.
7. By an email dated 2nd May, 2022, the petitioner informed the
respondent that as per contract, the deal on High Sea Sale basis and
CFR mode. Since the goods have already unloaded and shifted at the
port, the sale can only be a GST sale, the bankers required an
addendum to the agreement date 22nd February, 2022 since it accounts
for High Sea Sale to open Letter of Credit. The petitioner can open
either Usance Letter of Credit or a Sight Letter of Credit, which can be
negotiated against GST Sale Invoice. The Expenses incurred at Haldia
Port can be added as per ton cost in GST invoice itself based on actual.
The respondent by an email dated 4th May, 2022 clarified that the value
of Letter of Credit must include GST. The agreement does not require
any amendment since it already contains provisions relating to GST
sale. The sight Letter of Credit would include GST Sale. The respondent
is in full agreement to supply 10,000 MT of Lam Coke out of 33,000
MT.
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8. On 4th May, 2022, the petitioner informed the respondent that the draft
Letter of Credit received from the respondent on 2nd May, 2022 was
incomplete and defective on certain points. The petitioner further
informed that it is proceeding to open the sight Letter of Credit. In
terms of the order dated 28th April, 2022, the respondent has filed
affidavit of undertaking before the Hon’ble Division Bench. On 6th May,
2022, the petitioner has provided two Letters of Credit. On receipt of
Letters of Credit, on the same day, the respondent by an email
informed the petitioner that the Letters of Credit proposed suffer from
serious anomalies i.e. (i) Payment is to be made through Letter of credit
based on invoice for the entire balance quantity of 9000 MT in one go,
instead of payments against material movement and (ii) The respondent
would not be able to issue lorry receipts.
9. The petitioner has objected to the demand of the respondent for
payment of balance of 9000 MT in a single transaction akin to 100%
advance payment. The petitioner also informed to the respondent that
the demand of the respondent would result in defeating the purpose of
the Letter of Credit itself. The respondent has informed the petitioner
that there is hardly any reference to make payment phase wise or in
instalments in the contract. Receipt of payments in installments is not
acceptable to the respondent. The respondent reiterated its readiness to
deliver the balance quantity of 9000 MT against payment in terms of
the contract.
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10. The petitioner has forwarded bank guarantee to the respondent on 12th
May, 2022 in terms of the order passed by the Hon’ble Division Bench
of this Court dated 28th April, 2022. The petitioner also filed contempt
application against the respondent for non-compliance of the order
passed by the Hon’ble Division Bench of this Court dated 28th April,
2022 by not permitting the petitioner to lift 10,000 MT of Lam Coke.
The petitioner has also filed an application before the Hon’ble Division
Bench of this Court for modification of the order dated 28th April, 2022
by deleting the direction pertaining to furnish bank guarantee of Rs. 5
Crores. On 20th May, 2022, the Hon’ble Court had disposed of the
application filed by the petitioner as per the terms agreed between the
parties:
“By consent of the parties, the application for
contempt being CPAN 457 of 2022 and the
application for modification being CAN 2 of 2022
are taken up together and disposed of on the
following agreed terms:
1. The applicant will amend the Sight LC into
a Usance LC upon a written request letter from the
appellant within 7 working days for the balance
contract value against following documents to be
provided by the appellant:
a. GST Sale Invoice for 10,000 MT;
b. Delivery Order for supply of 10,000 MT of
Coke from a single port plot in favour of the
applicant with a copy to the Handling Agent,
Customs Authorities and the Port Authorities.
c. Confirmation Letter to all concerned
authorities stating that the applicant is authorized
to lift the 10,000 MT of Coke.
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2. The applicant shall be liable for and shall
make payment of Port Handling charges and other
charges in terms of the contract.
3. The amended LC will be discounted by the
applicant through the applicant’s bankers under
the applicant’s limit within another 3 days after
submission of originals of (a) bill of exchange, (b)
GST Sale Invoice, (c) Irrevocable Delivery Order and
(d) Confirmation Letter as mentioned in 1(c) above
by the appellant to the banker of the applicants. It
is pertinent to add that the discounting/interest
and incidental changes will be borne by the
applicant. The applicant will submit proof of
dispatch documents to the bankers from time to
time.
4. The appellant undertakes to start giving
delivery of the 10,000 MT of materials to the
applicant immediately after receiving the balance
consideration through the said Usance LC without
any delay. The appellant undertakes to provide full
co-operation and to ensure that the materials are
delivered.
5. If within June 13, 2022 the appellant does
not receive the entire balance consideration for the
goods, it would be free to sale and deal with the
10,000 MT of LAM Coke and the parties would then
make all claims in the arbitration.
6. The undertakings filed by the respective
parties shall be exchanged and the original bank
guarantee furnished by the applicant in terms of
the order dated April 28, 2022 be handed over to
the appellant within 7 days from date. The bank
guarantee shall be invoked in terms of the order
dated April 28, 2022 only after giving 14 days’
prior notice in writing to be given to the applicant in
this regard.
7. However, all issues are left open to be
raised before the learned Arbitrator.
There will be no order as to costs.”
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11. After the order passed by the Hon’ble Court, the petitioner through its
Advocate sent a letter to the Advocate of the respondent requested to
send a written request immediately for amending the Letter of Credit
upon which the petitioner will take necessary steps to convert the Sight
Letter of Credit to usance Letter of Credit within 7 days. On receipt of
the said letter, the respondent has sent email to the petitioner with the
required modifications of the Letter of Credit in terms of the order dated
20th May, 2022. The petitioner by email dated 24th May, 2022, stated
that the mail sent by the respondent is illegal and contrary to the order
dated 20th May, 2022. It is also mentioned that the order merely directs
the respondent to send a request letter for amendment of Letter of
Credit from Sight Letter of Credit to Usance Letter of Credit and the
contents of the Letter of Credit is no within the domain of the
respondent. The petitioner further requested the respondent to send a
request for conversion of Sight Letter of Credit to Usance Letter of
Credit. The respondent by an email dated 25th May, 2022 reiterated the
directions passed by the Hon’ble Court dated 20th May, 2022 and
clarified the contention raised by the petitioner. The petitioner by an
email dated 26th May, 2022 informed the respondent that the Letter of
Credit opened on 6th May, 2022 will be amended to a usance Letter of
Credit upon receipt of a mail from the respondent in the format given
therein. The respondent provided the petitioner with the debit note
along with supporting documents and requested the petitioner to make
payment towards port handling charges and other charges. The
respondent again called upon the petitioner to amend the Letter of
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Credit and make provisions therein for discounting the Letter of Credit
within three days after submissions of original documents. The
respondent has also requested the petitioner to make payment of the
port handling and other charges.
12. The petitioner informed the respondent that the Letter of Credit can be
amended only after receipt of an email from the respondent in the form
of a request letter, the contents of which were shared by the petitioner’s
mail I’d. The respondent by an email dated 27th May, 2022 informed the
petitioner that port handling and other charges remained unpaid, the
amendment of Sigh Letter of Credit to Usance Letter of Credit, only
keeping the contents therein unchanged is violation of the order dated
20th May, 2022 and the respondent while advising to amend Letter of
Credit from Sight to Usance, emphasized that necessary changes
incorporating discounting of the Letter of Credit within three days after
submission of original documents are required. The petitioner by an
email dated 28th May, 2022 stated that the respondent till date due to
malafide motives have refrained from sending a request to amend the
Sight Letter of Credit to Usance Letter of Credit. The respondent by an
email dated 30th May, 2022 informed the petitioner that the respondent
in several occasions by series of emails requested incorporation of
necessary amendments/ modifications in the Letter of Credit including
form Sight Letter of Credit to Usance Letter of Credit. The learned
Advocate for the respondent in terms of the order dated 20th May, 2022,
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provided the copy of undertaking filed before the Hon’ble Court by the
respondent.
13. The petitioner by an email dated 31st May, 2022 informed the
respondent that the petitioner had decided to procure LAM Coke from
the market and demanded for refund of Rs. 4,49,55,000/-. The
respondent in reply to the said email informed the petitioner that the
petitioner has violated the order passed by the Hon’ble Court dated 20th
May, 2022 by not amending the Sight Letter of Credit to Usance Letter
of Credit inspite of repeated requests of the respondent, not paid the
port handling charges and other charges, failed to make provisions for
discounting the amended Letter of Credit within specified time and
failed to hand over the original bank guarantee to the respondent.
14. On 31st May, 2022, the petitioner has filed an application under Section
17 of the Arbitration and Conciliation Act, 1996 prays for grant of
interim reliefs. On 2nd June, 2022, the petitioner has also filed a
contempt application before the Hon’ble Court being CPAN No. 491 of
2022 against the respondent on the allegation for violation of the order
passed by the Hon’ble Court on 28th April, 2022 and 20th May, 2022.
By an order dated 10th June, 2022, the Hon’ble Court issued Rule
against the alleged contemnors. By emails dated 1st June, 2022 and 3rd
June, 2022, the respondent informed the petitioner that the petitioner
has violated the order dated 20th May, 2022 by refusing to amend
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Letter of Credit and also not paid the port handling charges and has
not handed over the original Bank Guarantee to the respondent.
15. On 22nd June, 2022, the petitioner has filed Statement of Claim before
the Learned Sole Arbitrator praying for following reliefs:
a. An Award for a sum of Rs. 25,35,75,803/-
being the damages for non-delivery of goods.
b. In the alternative an enquiry into damages
and award for such as may be found due and
payable.
c. Interim interest and interest on award at the
rate of 18% per annum
d. Receiver
e. Injunction
f. Costs
g. Further and other reliefs.
16. On 16th July, 2022, the respondent had also filed contempt application
against the petitioner for violation of order dated 28th April, 2022 and
20th May, 2022 being CPAN No. 592 of 2022.
17. The respondent has filed its Statement of Defence along with
Counterclaim on 16th July, 2022 praying for following reliefs:
(a) An award for a sum of Rs. 75,867,706/-
(Rupees Seven crore fifty eight lakhs sixty
seven thousand seven hundred and six only),
(b) Alternatively, an enquiry into damages and
award for such sum as may be found due and
payable to the Respondent;
(c) Interim interest and interest on award @ 18%
per annum;
(d) Receiver;
(e) Injunction;
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(f) Attachment
(g) Costs; and
(h) Further and other reliefs.
18. The petitioner has also filed an application under Section 31(6) of the
Arbitration and Conciliation Act, 1996 before the Learned Arbitrator
praying for an order of interim award directing the respondent to
refund and/or release the sum of Rs. 4,49,55,000/- in favour of the
petitioner but subsequently the petitioner has not pressed the said
application.
19. The application filed by the petitioner under Section 17 of the
Arbitration and Conciliation Act, 1996 was dismissed on 8th August,
2022. The respondent had filed an application before the Learned
Arbitrator for amendment of the Written Statement and Counter Claim
praying for the following reliefs:
a. An award for a sum of Rs. 78,066,406/- (Rupees
Seven crore eighty lakhs sixty six thousand four
hundred and six only),b. Alternatively, an enquiry into damages and
award for such sum as may be found due and
payable to the Respondent;
c. Interim interest and interest on award @ 18% per
annum;
d. Receiver;
e. Injunction;
f. Attachment
14g. Costs; and
h. Further and other reliefs.
20. By an order dated 26th August, 2022, the Learned Arbitrator allowed
the amendment in the Counter Claim. During hearing of the proceeding
before the Learned Arbitrator, on 11th September, 2022, the respondent
not pressed the claim for a sum of Rs. 21,98,700/- being the damages
for the difference between the market price of the goods on 14th June,
2022 and the contract price in the sum of Rs. 21,98,700/- (Rs.
46,00,00,000/- – Rs. 457,801,300/-).
21. The Learned Sole Arbitrator has framed the following issues:
“(1) Whether there was breach of the terms of
the contract dated 22nd February, 2022
admittedly executed by the parties and if so,
who has actually committed such breach?
(2) Whether the terms of the first consent order
dated 28th April, 2022 passed by the Division
Bench of the Hon’ble High Court at Calcutta
while appointing this Tribunal has been
breached at the instance of any of the parties
and if so, who is responsible for such breach?
(3) Whether the terms of the consent order
dated 20th May, 2022 passed by the Division
Bench has been breached by any of the
parties and if so, who has committed such
breach?
4) Whether the breach committed by a party in
view of the Issue Nos. 1, 2 or 3 would enable
the other party to claim damages and if so, to
what extent?
(5) Whether the successful party would be
entitled to interest on the loss suffered by
reason of the breach committed by the other
15party as may be found by this Tribunal to be
due and payable and if so, to what extent?
(6) Whether the successful party is entitled to
any other relief or reliefs?”
22. Mr. Aspi Chinoy with Mr. Jishnu Chowdhury, Learned Senior
Advocates representing the petitioner submits that the Award is breach
of Section 32(2)(a)(iv) is perverse and vitiated by patent illegality and is
beyond the pleadings/ case of the parties. He submits that the
Arbitrator fails to decide the main issue referred to Arbitration by an
order dated 28th April, 2022, i.e. the question that which of the parties
had committed breach of the contract of sale dated 22nd February,
2022.
23. He submits that the issue of non-compliance or breach of the second
consent order dated 20th May, 2022 as a substantive claim independent
of the issue of breach of the Contract dated 22nd February, 2022
knowing fully well that the contempt application with regard to the
breach of order dated 20th May, 2022 was pending before the Hon’ble
High Court wherein a Rule had been issued against officials of the
respondent.
24. He submits that on the date of reference to the Arbitration by an order
dated 28th April, 2022, the only difference / dispute between the parties
were regarding their rights and obligations under the contract of sale
dated 22nd February, 2022. He submits that in the suit, the claim of the
petitioner was whether under the contract dated 22nd February, 2022,
16
the respondent was bound and liable to deliver the goods to the
petitioner at the contract price dated 21st April, 2022. The defence of
the respondent was that the respondent was not liable to deliver the
goods to the petitioner as the respondent terminated the contract on
14th April, 2022 and had refunded the advance amount of Rs. 4.49
crores to the petitioner.
25. In support of his submissions, Mr. Chinoy has relied upon the
judgment in the case of Union of India, through the General
Manager, Eastern Railway vs. Industrial Laminated (India) Pvt.
Ltd. report in 2017 SCC OnLine Cal 169 wherein the Coordinate
Bench of this Court held that:
“11. In my opinion, when the learned
arbitrator, does not address the real dispute or
issues between the parties, he is trying to decide
something which is not referred to him. Or, in other
words he is not exercising the jurisdiction vested in
him. The award is liable to be set aside under
Section 34(2)(a)(iv) of the Arbitration and
Conciliation Act, 1996 which is as follows:
“(2) An arbitral award may be set aside by the
Court only if –
(a) ……………..
(i) ……………..
(ii) …………….
(iii) …………..
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of
the submission to arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration:”
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26. Mr. Chinoy submits that the order dated 28th April, 2022 which
referred the disputes between the parties to arbitration, had only
provided a working arrangement for payment and delivery of the goods,
whilst the legal rights of the parties were being determined in
Arbitration and which arrangement was not intended to modify or affect
the rights and contentions of the parties under the Agreement dated
22nd February, 2022. He submits that if the consent order is modified
the date of performance/ rights of the parties under the contract dated
22nd February, 2022, there would have been no question of referring to
arbitration the issue of breach/ performance of the original contract as
there would have been no subsisting dispute.
27. Mr. Chinoy submits that the Arbitrator has at a number of places in
the Award held that the fact that the imposition of security by way of
bank guarantee and legal costs were added would not amount in itself
to superseding the original contract as these relate to payments under
the original contract and put the promisee in the same position as if the
contract had originally been performed.
28. Mr. Chinoy submits that the Award purports to deal with and decide
the issue of non-compliance/ breach of the second consent order dated
20th May, 2022 as a substantive claim independent of the issue of
breach of the contract dated 22nd February, 2022. He submits that
issue regarding non-compliance with the order dated 20th May, 2022
did not and could not have existed on the date of reference dated 28th
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April, 2022. He submits that both the parties in their pleadings referred
to the orders dated 28th April, 2022 and 20th May, 2022 as a result of
which additional loss, damages, consequential upon the determination
of which party was in breach of contract dated 22nd February, 2022.
29. He submits that the Award purports to consider and decides the issue
of non-compliance / breach of the consent order dated 20th May, 2022
as an issue, dehors from and independent of the issue of breach of
contract dated 22nd February, 2022. He submits that the Arbitrator has
decided the issue no.3 i.e. breach of consent order dated 20th May,
2022 as issue dehors from and independent of the issue of breach of
contract dated 22nd February, 2022, which vitiated under Section
34(2)(a)(iv) and also having decided beyond the pleadings of the parties.
In support of his submissions, Mr. Chinoy relied upon the judgment in
the case of National Housing Bank vs. ANZ Grindlays Bank PLC.
passed by the Bombay High Court in Arbitration Petition No. 1 of
1997 dated 4th February, 1998 and held that:
“102. This was the pleadings on which the
parties went to trial. It is because of these
pleadings that no Issue has been raised as to
whether or not the 1st Respondents had become
the owners of the cheques or the proceeds thereof.
In my view, Mr. Parasaran is quite right when he
submits that there is no assertion of title as
“payees” or “holders in due course” either positively
or by reason of non-traverse. The pleadings show
that there is a disclaimer of title in themselves by
the 1st Respondents. The assertion is that it was
Mr. Harshad Mehta who was the intended
beneficiary of the cheques. The averment also is
that Mr. Harshad Mehta was the owner of the
cheques and the proceeds. The plea that the 1st
19Respondents as payees became true owners of the
cheques is contrary to the positive case in
pleadings. It is a case on which parties did not go
to trial and on which no Issue was raised. Even
though normally a person claiming conversion has
to prove title or immediate right to possession, in
this case Petitioners’ title to the cheques was
positively accepted in the pleadings. Thus even
under Issue No. 12 the Petitioners did not need to
lead evidence on this point. A new case, contrary to
pleadings, was made out for first time in
arguments. Undoubtedly this was done as 1st
Respondents realised that they had failed to prove
the case pleaded by them. In allowing such an
argument and upholding it there is an error
apparent on the face of the Award. The Award then
proceeds on the basis that the 1st Respondents
had title to the cheques. It would therefore vitiate
other portions of the Award also. Thus on this
ground also the Court would have to interfere.
103. At this stage it must be mentioned that
Mr. Venugopal had, based upon Jajodia’s case,
submitted that the Court could not look into the
pleadings as the pleadings had not been
incorporated by the Arbitrators into the Award. I
am unable to accept this submission. As seen, the
Arbitrators have in fact noted the respective case of
the parties not only at the beginning of the Award
but thereafter again while considering the case of
conversion. The case has been set out again from
page 169 of the Award onwards. Whilst setting out
the case of the 1st Respondents the Arbitrators do
not state that the 1st Respondents claimed that
they had become the true owners of the cheques.
The Arbitrators do not even state that by reason of
non-traverse such a case must be presumed. If the
Arbitrators had gone beyond and contrary to the
pleadings and the case on which parties went to
trial there would have been a jurisdictional error.
That would been a case falling under the ratio laid
down in Associated Engineering Co’s. case. As has
been held in that case the Arbitrators cannot act
arbitrarily or independently of the contract or case
on which the parties go to trial. Their function is to
arbitrate in terms of the case with which the
parties go to trial. If they travelled beyond this they
would be acting without jurisdiction. A conscious
disregard of the pleadings and specific case would
20vitiate the Award. In order to decide whether
Arbitrators have exceeded jurisdiction matters not
appearing on the face of the Award could be looked
at. It was thus open to the Court to see what was
the case with which parties went to trial. Even
otherwise, the Arbitrators set out Petitioners’
submission that this case is contrary to pleadings.
Arbitrators only say that disclaiming transactions
is not disclaiming title. However, the pleadings are
not just disclaiming transactions. In pleadings title
in themselves has been specifically disclaimed by
the 1st Respondents. There is error apparent on the
face of the Award.”
30. Mr. Chinoy relied upon the judgment in the case of Dolphin Drilling
Limited Vs. Oil and Natural Gas Corporation Limited reported in
(2010) 3 SCC 267 wherein the Hon’ble Supreme Court held that :
“8. The plea of the respondent is based on the
words “all disputes” occurring in Para 28.3 of the
agreement. Mr Agrawal submitted that those two
words must be understood to mean “all disputes
under the agreement” that might arise between the
parties throughout the period of its subsistence.
However, he had no answer as to what would
happen to such disputes that might arise in the
earlier period of the contract and get barred by
limitation till the time comes to refer “all disputes”
at the conclusion of the contract. The words “all
disputes” in Clause 28.3 of the agreement can only
mean “all disputes” that might be in existence
when the arbitration clause is invoked and one of
the parties to the agreement gives the arbitration
notice to the other. In its present form Clause 28 of
the agreement cannot be said to be a one-time
measure and it cannot be held that once the
arbitration clause is invoked the remedy of
arbitration is no longer available in regard to other
disputes that might arise in future.”
31. Mr. Chinoy submits that the Award passed by the Learned Arbitrator
with respect to damages is not for the breach of contract dated 22nd
February, 2022 but for the breach of consent order dated 20th May,
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2022 which is ex facie perverse and vitiated by patent illegality and
beyond the scope of submission to arbitration.
32. Mr. Chinoy without prejudiced to the contentions raised by him as
stated above, he submits that the award of damages of Rs.
5,60,00,000/- for breach of order dated 20th May, 2022, is ex-facie
contradictory, discloses errors apparent on the face of record and
virtually incomprehensible. He submits that the Award recorded that
the difference between the contract price of Rs. 46,000/- and market
price of the goods on 25th April, 2022 is Rs. 52,033/- when petitioner
had obtained the injunction was Rs. 5,600/- per Metric Ton and the
respondent was entitled to receive Rs. 5,60,00,000/- being the
difference in the price of 10,000 MT and the Award records that the
Market price of goods was Rs. 45,780.13 per Metric Ton on 14th June,
2022 and the respondent was entitled to receive the difference between
the Market price on 14th June, 2022 and the contract price which is Rs.
46,00,000 – Rs. 45,78,013 = Rs. 21,98,700/-.
33. Mr. Chinoy submits that the Arbitrator deals with the petitioner’s
submission that only relevant date for breach of the contract dated 22nd
February, 2022 was 21st April, 2022 i.e. the date of delivery under the
contract and that no damages could be awarded as on that date the
market price was higher than the contract price. He submits that it is
clearly contrary to the finding in paragraph 58 of the Award, the
Arbitrator in the final computation of damages Awarded at paragraph
22
59, the Arbitrator does not make and Award/ direct payment of
damages in accordance with his finding in paragraph 58. i.e. Rs.
21,98,000/- but instead makes an award directing payment of damages
for Rs. 5,60,00,000/- although the said amount is not even referred to,
considered or dealt with in paragraphs 55 to 58 of the Award.
34. Mr. Chinoy submits that the finding of the Arbitrator that the petitioner
committed breach of the order dated 20th May, 2022 by failing to open a
usance Letter of Credit under which the respondent/ beneficiary was to
be paid at sight, is ex-facie contrary to the clear terms of the order
dated 20th May, 2022. He submits that order dated 20th May, 2022
required the petitioner to provide usance Letter of Credit and as per
Clause 3 the Letter of Credit would be discounted by the petitioner
through the petitioner’s bank within another 3 days after submission
of original, so as to enable payment being made by the petitioner to the
respondent within 3 days.
35. Mr. Chinoy submits that the Letter of Credit was only to be a Usance
Letter of Credit and there was no question of the respondent/
beneficiary receiving payment under such Letter of Credit at sight. He
submits that the payment was to be made by the petitioner by
discounting the documents submitted by the respondent under the
usance Letter of Credit, with the petitioner’s bankers and accordingly
making payment to the respondent within three days. He submits that
23
payment to the respondent/ beneficiary at sight was contrary to the
clear terms of the order dated 20th May, 2022.
36. Mr. S.N. Mookherjee with Mr. Krishnaraj Thaker, Learned Senior
Advocates representing the respondent submits that consent order
dated 28th April, 2022 does not only refer the disputes between the
parties which was the subject-matter of the suit being T.S. No. 519 of
2022. The reference by the order dated 28th April, 2022 has to be read
in conjunction with the arbitration clause of the contract. He submits
that the reference to arbitration was not limited to breach of the
contract but also included any dispute arising out of the contract. He
submits that by reason of the order dated 20th May, 2022, the disputes
pertaining to non-compliance of the orders dated 28th April, 2022 and
20th May, 2022 were to be referred to the Arbitrator.
37. Mr. Mookherjee submits that Issues Nos. 2 and 3 which were
concerned with breach of the consent orders at the instance of any of
the parties were framed on 8th August, 2022 as suggested by both the
parties. He submits that framing of such issues clearly shows that the
parties were ad idem that the consent orders recorded the revised and
agreed modalities for working out contract and were therefore germane.
38. Mr. Mookherjee submits that the statement of claim of the petitioner
arising out of the alleged breach of the two consent orders by the
respondent. He submits that the petitioner has also claimed damages
arising out of alleged breach of two consent orders by the respondent.
24
He submits that in the written notes of argument, the petitioner
addressed the Tribunal exclusively on the alleged breach of the two
consent orders by the respondent. Mr. Mookherjee relied upon the
judgment in the case of Ssangyong Engineering and Construction
Company Limited Vs. National Highways Authority of India
reported in (2019) 15 SCC 131 and submitted that as long as disputes
raised are within the ken of the arbitration agreement or the disputes
submitted to arbitration, they cannot be said to be disputes which are
either not contemplated by or which fall outside the scope of the
arbitration agreement. Even matters that are not strictly in issue but
are connected with matters in issue, would fall within the scope of
submission to the arbitration.
39. Mr. Mookherjee submits that the Arbitrator after considering all the
facts and circumstances has held that the 3rd issue is the real issue to
be decided in this proceeding. He submits that the learned Arbitrator
has held that the contract was not superseded by the consent orders
but was only sought to be enforced by the consent orders. He submits
that the consent orders are agreements that are binding upon the
parties and is essentially a contract between the parties which derives
sanctity by the Court superseding its seal to the contract. Mr.
Mookherjee in support of his submission relied upon the judgment in
the case of Prithvichand Ramchand Sablok Vs. S.Y. Shinde reported
in (1993) 3 SCC 271.
25
40. Mr. Mookherjee submits that the Learned Arbitrator addressed the
issue no.1 by coming to a finding that the effect of the two consent
orders on the contract dated 22nd February, 2022 was such that Issue
no.1 and Issue No.2 were not significant as the consent order dated
20th May, 2022, determined the way in which the contract was to be
performed which was covered by Issue No. 3. He submits that the
Learned Arbitrator came to a finding that Issue no.3 remained the only
significant issue in adjudicating the dispute, the finding cannot be
faulted in the proceeding under Section 34 of the Arbitration and
Conciliation Act, 1996.
41. Mr. Mookherjee relied upon Order 14, Rule 2 and Order 20, Rule 5 of
the Code of Civil Procedure, 1908 and submitted that if the finding on
anyone or more issues is sufficient for the decision of a case, there need
not to be a finding on each separate issue and the non-adjudication of
other issues will not render the decision bad. In support of his
submissions, Mr. Mookherjee relied upon the judgment in the case of
LIC Housing Finance Ltd. Vs. M/s Pearl Developers (P) Ltd. reported
in 2008 SCC OnLine Del 1248.
42. Mr. Mookherjee submits that the parties were aware of the issue of
breach of consent orders and effect on the contract by the consent
orders, no grievance can be made by the petitioner on the ground that
modification of the contract by the consent orders were not pleaded. He
submits that the parties had knowledge of the issue of compliance and
26
non- compliance of the consent orders as notes of arguments were filed
and arguments were advanced on the said issue.
43. Mr. Mookherjee relied upon the judgments in the case of Bhagwati
Prasad Vs. Chandramaul reported in AIR 1966 SC 735 and in the
case of Ram Sarup Gupta (Dead) By Lrs. Vs. Bishun Narain Inter
College and Others reported in (1987) 2 SCC 555 and submitted that
even if a plea is not specifically made but is covered by an issue by
implication, the mere fact that the plea was not expressly taken in the
pleadings would not disentitle a party from relying upon it. As long as
parties had knowledge that the matter was in issue and has had an
opportunity to deal with the issue, the Court is entitled to consider and
decide such an issue.
44. Mr. Mookherjee submits that the Learned Arbitrator has not altered or
added terms to the contract nor has passed an award that is contrary
to the terms of the contract. He submits that Clause 10 of the contract
provides that Letter of Credit either in the form of a Sight or Usance
Letter of Credit would be in a mutually agreed format, wherein delivery
order will only be issued upon receipt of full payment of the material
value from the buyer. By a consent order dated 28th April, 2022, the
parties had agreed to a period of 3 days from date to finalize the Letter
of Credit. The petitioner had agreed to make over payment of balance
amount of the contract value being Rs. 40,50,45,000/- through the
Letter of Credit in accordance with the contract within 3 days
27
thereafter. It is only after such payment was made by the petitioner, the
petitioner was permitted to lift the subject goods. Therefore, the
aforesaid order directed the respondent to issue a sight LC.
45. Mr. Mookherjee submits that by an e-mail dated 6th May, 2022, the
petitioner has opened two Sight Letters of Credit, however, Clause 46A
of the Letter of Credit provided for consignee copy of lorry
receipt/consignment note which clearly suggests that the payments will
be made to the respondent only after goods are loaded onto the lorry.
He submits that the said Clause 46A is contrary to the terms of the
contract as well as order dated 28th April, 2022 wherein the petitioner
would make payments against material movement rather than
payments against the entire quantity in one go as required under
Clause 10 of the contract.
46. Mr. Mookherjee submits that by a consent order dated 20th May, 2022,
the respondent acceded to the request of the petitioner to amend the
sight Letter of Credit into a Usance Letter of Credit for the balance
contract value. He submits that the amendment was to be effected
upon a written request letter from the respondent within 7 working
days and thereafter within 3 days of submission of original documents,
the amended Letter of Credit would be discounted by the petitioner
through the petitioner’s banker. He submits that it was agreed between
the parties that it is only upon discounting such Letter of Credit and
28
receiving the balance amount the petitioner would be permitted to start
taking delivery of the subject goods.
47. Mr. Mookherjee submits that complying with the order dated 20th May,
2022, the respondent sent a request for usance LC to be payable at
sight on the first working day after the order, to avoid any delay but the
petitioner’s delaying tactics continued as the petitioner raised absurd
objection to request letter dated 23rd May, 2022 stating that the order
permits only for a sight Letter of Credit to be converted to a Usance
Letter of Credit and thereby payments have to be deferred.
48. Mr. Mookherjee submits that the Award passed by the learned
Arbitrator is not inconsistent or unintelligible or has an error apparent
on the face of the Award. He submitted the Learned Arbitrator also
came to a finding that the respondent should get the difference of
contract price and price of goods in the market on 14th June, 2022 as
loss suffered for the breach committed by the petitioner of the order
dated 20th May, 2022.
49. Relevant Clauses of the agreement entered between the parties to
decide the present application are Clauses 4, 6, 10, 11, 12, 13, 23 and
27 which reads as follows:
“4. PRICE:
US$ 610 (UNITED STATES DOLLARS SIX
HUNDRED) PER MT CFR SAGAR ANCHORAGE
AND/OR HALDIA PORT, INDIA
29
6. RATE OF CONVERSATION OF USD TO INR-
CLOSING USD RATE OF RBI EITHER ON DATE OF
BL OR BILL OF ENTRY. AS ADVISED BY BUYER
10. PAYMENT:
10% ADVANCE AMOUNT IN INR TO BE PAID BY
BUYER TO THE SELLER LATEST BY 22-FEB-2022
AND BALANCE AMOUNT BY SIGHT/ USANCE
CONFIRMED, IRREVOCABLE LC TO BE OPENED
BEFORE 7 DAYS PRIOR TO ARRIVAL OF THE
VESSEL. SELLER WILL MAKE HIGHSEAS SALES
INVOICE AND AGREEMENS UPON ISSUE OF THE
BILL OF LADING. OPENING OF LC WITHIN THE
STIPULATED TIME AND IN A MUTUALLY AGREED
FORMAT FROM A FIRST CLASS BANK ANY
DEFAULT IN THE AFORESAID CLAUSE SHALL
GIVE RIGHT TO THE SELLER, INTER ALIA, TO
TERMINATE THE CONTRACT AND PROCEED FOR
RECOVERY OF DAMAGES. DELIVERY ORDER
WILL BE ISSUED UPON RECEIPT OF THE FULL
PAYMENT OF THE MATERIAL VALUE FROM THE
BUYER AS PER POINT NO. 4 AND 6 ABOVE.
ALL OTHER RELEVANT DOCUMENTS REQUIRED
BY THE BUYER WILL BE PROVIDED
ACCORDINGLY TO THE EXTENT REASONABLE..
11. DOCUMENTATION-
SELLER TO PROVIDE THE FOLLOWING
DOCUMENTSA. CEPA CERTIFICATE IN ORIGINAL (FOR
CLAIMING NIL BASIC COUSTOM DUTY). IN
CASE THE SAME IS PROVIDED BY THE
EXPORTER, OTHER WISE THE SAME WILL BE
LOCAL SALES UNDER GST LAWS.
B. ENDORSED BILL OF LADING
C. COPY OF CERTIFICATE OF WEIGHT
D. COPY OF CERTIFICATE OF QUALITY
E. HIGH SEA SALE AGREEMENT
30F. HIGH SEA SALE INVOICE
G. ANY OTHER DOCUMENT AS REQUIRED BY
CUSTOM/ HALDIA PORT/ GST DEPT/BANK
FOR LC.
12. DOCUMENTATION REQUIRED-
PART A: BILL OF EXCHANGE FOR 100 PCT OF
INVOICE BENEFICIARY’S SIGNED COMMERCIAL
INVOICE IN 3 SETS STATING THE FULL INVOICE
VALUELESS ADVANCE, IF ANY PHOTOCOPY OF
HIGH SEA SALE AGREEMENTPART B: DEBIT NOTE FOR ACUTAL DEMURRAGE
AMOUNT LAY TIME CALCULATION
13. PURCHASE TERMS:
IN CASE SELLER IN UNABLE TO SALE THE MET
COKE (DUE TO DIFFICULTY AVILEMENT OF ZERO
DUTY BASED OF CEPF CERTIFICATES BY THE
EXPORTER, SELLER SHOULD EXECUTE DEAL BY
MAKING GST SELLS INVOICE (RATE AS PER POINT
NO 4 & 5) OF MET COKE. BUYER WILL
REIMBURSE ACTUALLS FOLLOWING EXPENSES
BASED ON PRORATA QUANTITY BASIS.
A. ALL PAYMENT MADE TO PORT
B. ALL PAYMENTS MADE TO CHA FOR
HANDLING THE CARGO AND LOADING ON TO
TRUCKS
23. GOVERNING LAWS
THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH INDIAN
LAWS, AND THE COURTS AT KOLKATA SHALL
HAVE THE EXCLUSIVE JURISDICTION TO
ADJUDICATE UPON OR OTHERWISE DEAL WITH
ANY MATTER UNDER OR RELATING TO THIS
AGREEMENT.
27. LAW AND ARBITRATION:
THIS CONTRACT SHALL BE GOVERNED BY
INDIAN ARBITRATION AND CONCILIATION ACT
1996 (AS AMENDED UPTO DATE) ANY DISPUTE
31ARISING OUT OF OR IN CONNECTION WITH THIS
CONTRACT, INCLUDING ANY QUESTION
REGARDING ITS EXISTENCE, VALIDITY OR
TERMINATION. SHALL BE REFERRED TO AND
FINALLY RESOLVED BY ARBITRATION IN
KOLKATA IN ACCORDANCE WITH THE
ARBITRATION RULES OF THE INDIAN
ARBITRATION AND CONCILIATION ACT 1996 (AS
AMENDED UPTO DATE) FOR THE TIME BEING IN
FORCE WHICH RULES ARE DEEMED TO BE
INCORPORATED BY REFERENCE IN THIS
CLAUSE.”
50. Order passed by the Learned Civil Judge, (Senior Division), 4th Court,
Alipore dated 25th April, 2022 reads as follows:
“that the prayer of the plaintiff for temporary
injunction with ad interim effect is hereby allowed
restraining the defendants not to deal with or
disposing of or alienating or encumbering or
creating any third party right or interest or from
removing the goods from the vessel MV Akij Parl or
making over the same to any third party or storing
the same in warehouse or precincts of any third
party in any manner whatsoever till 21.05.2022.”
51. Order passed by the Hon’ble Division Bench in FMAT 137 of 2022
dated 28th April, 2022 reads as follows:
“By consent of the parties the appeal and
application are taken up together and disposed of
by this order.
Mr. Kishore Dutta, learned senior counsel
representing the appellant and Mr. Jisnu Saha,
learned senior counsel representing the respondent
no. 1/plaintiff upon instruction have agreed to
disposal of the appeal on the following terms:-
i) The respondent no. 1 will pay
Rs.4,49,55,000/- being 10% of the contract value,
in terms of the Agreement dated 22.2.2022 to the
appellant within April 30, 2022.
32
ii) The parties shall take necessary steps for
finalization of the L/C within a period of three days
from date. The respondent shall make over
payment of the balance amount of the contract
value being Rs.40,50,45,000/- through the L/C in
accordance with the contract within 3 days
thereafter. The respondent no. 1 shall be at liberty
to lift the 10000MT of LAM Coke thereafter.
Mr. Kishore Dutta, learned senior counsel
representing the appellant, has suggested that in
view of the fact that the appellant would be
required to supply 10000MT materials at a reduced
price some protection in the form of bank guarantee
or otherwise may be extended to the appellant.
Mr. Jisnu Saha, learned senior counsel
representing the respondent no. 1/plaintiff,
submits that the refusal to deliver the goods, after
the agreement has been concluded, was illegal and
unfair and in the event the suit succeeds the
appellant would have no claim against the
plaintiff/respondent no. 1.
In the plaint it is alleged that the current
market value of the materials would be Rs.67
crores and by reason of cancellation of the contract
the plaintiff/respondent no. 1 would suffer damage
to the extent of Rs. 22 crores approximately.
In order to balance the equities, keeping in
mind that in the event the appellant succeeds, they
would be entitled to the differential amount, we
direct the plaintiff/respondent no. 1 to furnish an
unconditional bank guarantee in favour of the
appellant for sum of Rs. 5 crores within two weeks
from date initially for a period of one year and in
the event the arbitration proceeding is not
concluded within the aforesaid period to keep it
renewed till an award is passed.
In addition to the aforesaid, the plaintiff shall
also file an affidavit of undertaking to be
accompanied by the board resolution of the plaintiff
with the Registrar General on or before 3rd May,
2022 to the effect that in the event an award is
passed against the plaintiff and ultimately
sustained, the plaintiff would pay interest at the
rate of 18% p.a from 25th April, 2022 till the
realisation of the amount. The appellant shall also
33
file an affidavit of undertaking to be accompanied
by the board resolution of the appellant with the
Registrar General on or before 3rd May, 2022 to the
effect that in the event an award is passed against
the appellant, the appellant shall pay interest at
the rate of 18% p.a from 25th April, 2022 till the
realisation of the amount.
The aforesaid direction shall not prevent the
parties to challenge the award if so advised in
accordance with law.
The undertakings are without prejudice to the
rights and contentions of the parties in the
arbitration proceeding.
In view of the existence of the arbitration
clause in the contract, the parties through their
learned senior advocates have agreed to refer their
disputes and differences to arbitration and have
requested this court to appoint an arbitrator.
On the basis of such request, by consent of the
parties we appoint Hon’ble Mr. Justice Bhaskar
Bhattacharyya, former Chief Justice of 4 Gujrat
High Court, as an arbitrator to decide the disputes
and differences of the appellant and the
plaintiff/respondent no. 1.
We request the learned arbitrator to fix his
remuneration at the first sitting of arbitration.
The parties shall bear all charges and
expenses including the remuneration of the learned
arbitrator in equal measure. This, however, shall
not restrict the power of the learned arbitrator
exercising any of the power under Section 31A of
the Arbitration and Conciliation Act, 1996.
We request the learned arbitrator to dispose of
the reference as expeditiously as possible.
Since we are of the view that the respondent
nos. 2 and 3 are not necessary parties, their
representation before the arbitrator is not
necessary.
The suit pending before the trial court shall
remain permanently stayed.
In view of the above, FMAT 137 of 2022 is
disposed of.
34
In view of the disposal of the appeal, CAN 1 of
2022 is accordingly disposed of.”
52. Order passed by the Hon’ble Division Bench of this Court in CPAN No.
457 of 2022 in CAN No. 2 of 2022 dated 20th May, 2022, reads as
follows:
“By consent of the parties, the application for
contempt being CPAN 457 of 2022 and the
application for modification being CAN 2 of 2022
are taken up together and disposed of on the
following agreed terms:
1. The applicant will amend the Sight LC into
a Usance LC upon a written request letter from the
appellant within 7 working days for the balance
contract value against following documents to be
provided by the appellant:
a. GST Sale Invoice for 10,000 MT;
b. Delivery Order for supply of 10,000 MT of
Coke from a single port plot in favour of the
applicant with a copy to the Handling Agent,
Customs Authorities and the Port Authorities.
c. Confirmation Letter to all concerned
authorities stating that the applicant is authorized
to lift the 10,000 MT of Coke.
2. The applicant shall be liable for and shall
make payment of Port Handling charges and other
charges in terms of the contract.
3. The amended LC will be discounted by the
applicant through the applicant’s bankers under
the applicant’s limit within another 3 days after
submission of originals of (a) bill of exchange, (b)
GST Sale Invoice, (c) Irrevocable Delivery Order and
(d) Confirmation Letter as mentioned in 1(c) above
by the appellant to the banker of the applicants. It
is pertinent to add that the discounting/interest
and incidental changes will be borne by the
applicant. The applicant will submit proof of
35dispatch documents to the bankers from time to
time.
4. The appellant undertakes to start giving
delivery of the 10,000 MT of materials to the
applicant immediately after receiving the balance
consideration through the said Usance LC without
any delay. The appellant undertakes to provide full
co-operation and to ensure that the materials are
delivered.
5. If within June 13, 2022 the appellant does
not receive the entire balance consideration for the
goods, it would be free to sale and deal with the
10,000 MT of LAM Coke and the parties would then
make all claims in the arbitration.
6. The undertakings filed by the respective
parties shall be exchanged and the original bank
guarantee furnished by the applicant in terms of
the order dated April 28, 2022 be handed over to
the appellant within 7 days from date. The bank
guarantee shall be invoked in terms of the order
dated April 28, 2022 only after giving 14 days’
prior notice in writing to be given to the applicant in
this regard.
7. However, all issues are left open to be
raised before the learned Arbitrator.
There will be no order as to costs.”
53. Though the Learned Arbitrator has framed altogether 8 issues but at
the time of deciding the issues, the learned Arbitrator held that:
“28. Therefore, the first two issues framed by
this Tribunal have lost their significance after the
passing of the second consent order and need not
be decided in this proceeding. In place of those, the
issue no.3 framed in this proceeding viz. (3)
“Whether the terms of the consent order dated 20th
May, 2022 passed by the Division Bench has been
breached by any of the parties and if so, who has
committed such breach?” is the real issue to be
decided in this proceeding and the issue no.4
should be slightly varied as follows:
36
“(4) Whether the breach committed by a party in
view of the Issue No. 3 would enable the other
party to claim damages and if so, to what extent?”
The issues nos.5 and 6 would remain the same
and this Tribunal will answer those depending
upon the finding of the reframed issue no.3 quoted
above.”
54. The main issue raised by the petitioner in the present application that
the Arbitrator fails to decide the main issue referred to Arbitration by
an order dated 28th April, 2022 i.e. which of the parties had committed
breach of the contract of sale dated 22nd February, 2022 but the
Arbitrator has decided the issue of non -compliance /breach of the
second consent order dated 20th May, 2022, which is ex-facie perverse
and vitiated by patent illegality and is also vitiated under Section
34(2)(a)(iv) of the Arbitration and conciliation Act, 1996.
55. In the order dated 28th, April, 2022 passed by the Hon’ble Division
Bench of this Court recorded that “the parties through their learned
senior advocates have agreed to refer their disputes and differences to
arbitration” Clause 27 of the contract dated 22nd February, 2022
provides that “Any dispute arising out of or in connection with this
contract, including any question regarding its existence, validity or
termination, shall be referred to and finally resolved by Arbitration.”
56. By an order dated 20th May, 2022, the Hon’ble Division Bench of this
Court categorically held that “If within 13th June, 2022, the appellant
(Respondent herein) does not receive the entire balance consideration for
37
the goods, it would be free to sale and deal with the 10,000 MT of LAM
Coke and the parties would then make all claims in the arbitration.”
The Hon’ble Court further held that “However all issues are left open to
be raised before the learned Arbitrator”.
57. The petitioner in the statement of claim filed before the Learned
Arbitrator in paragraph 33 and 35 has categorically stated that the
respondent not only acted in breach of the terms of the contract but
also in violation of the orders of the Court. On the basis of the alleged
breach, the petitioner has made claim in paragraph 37 of the statement
of claim. In notes of argument filed by the petitioner before the Learned
Arbitrator, the petitioner has categorically pointed out with regard to
breach of the agreement dated 22nd February, 2022 and non-
compliance of the orders dated 28th April, 2022 and 20th May, 2022.
58. The allegation of the petitioner that the respondent has committed
breach of contract dated 22nd February, 2022 by not delivering the
goods to the petitioner on 21st April, 2022 when the ship had arrived.
Immediately the petitioner has filed the suit before the Learned Civil
Judge, Senior Division at Alipore on 25th April, 2022 and obtained
interim order. Subsequently, the respondent filed an appeal before the
Hon’ble High Court and the Hon’ble Division Bench of this Court with
the consent of the parties disposed of the said appeal and provided for
working arrangements for payment by the petitioner and delivery of
goods by the respondent. The petitioner filed a contempt application on
38
the allegation that the respondent has not complied with the order
passed by the Hon’ble Appellate Court and in the said contempt
application by an order dated 20th May, 2022, the Appellate Court with
the consent of both the parties again provided for working arrangement
for payment and delivery of goods. In the order dated 20th May, 2022,
the appellate Court has clarified that if the respondent dose not receive
the entire balance consideration for the goods, it would be free to sale
and deal with the 10,000 MT LAM Coke and the parties would then
make all claims in the arbitration. The Hon’ble Court all the issues are
kept open to be raised before the Learned Arbitrator.
The dispute between the parties was for payment and delivery of
goods. Clause 10 of the contract provides for payment. As per said
clause, the petitioner paid 10% advance of the total cost of the goods
i.e. Rs. 4,49,55,000/- on 22nd February, 2022 to the respondent. The
balance consideration was to be paid by the petitioner by opening
sight/ usance confirmed irrevocable Letters of Credit seven days prior
to arrival of the vessel. Opening of the Letters of Credit was not
materialized between the parties and in the meantime, the petitioner
has filed civil suit and the respondent returned the advanced amount
to the petitioner. The matter went upto the Division Bench of this Court
and the Hon’ble Court by orders dated 28th April, 2022 and 20th May,
2022 with the consent of the parties provided for working arrangements
so that the contract can be completed between the parties but inspite of
the order passed by the Hon’ble Court, the contract was not completed.
39
59. The Learned Arbitrator has framed six issues. The Learned Arbitrator
before deciding the issues taken the point of consideration that “What
would be the effect of two consent orders passed by the Hon’ble High
Court on the original contract between the parties”. While deciding the
said issue, the learned Arbitrator has taken into consideration of
Section 62 and 63 of the Contract Act, 1872. Dealing with said
provisions, the Arbitrator come to the conclusion that “the original
agreement was not superseded but was only sought to be enforced, the
manner of performance being different and consequently section 63 of
the Contract Act, 1872 is applicable.” By considering the same, it was
held that the date of performance of the original contract dated 22nd
February, 2022 had been extended by consent of both the parties in
terms of Section 63 of the Contract Act, 1872.
60. The learned Arbitrator come to the conclusion that the consent order
dated 28th April, 2022 having been merged with the order dated 20th
May, 2022 and the imposition of security by way of bank guarantee and
the legal costs were added would not amount in itself to superseding
the original contract and put the promisee in the same position as if the
contract had originally been performed.
61. The Learned Arbitrator has considered whether the conditions of the
order dated 20th May, 2022 have been fulfilled by the parties and if not,
who has breached the conditions.
40
62. After the order dated 20th May, 2022, the respondent by an email
dated 23rd May, 2022 requested the learned advocate for the petitioner
to advise the petitioner to amend the Letter of Credit in terms of the
order dated 20th May, 2022. Thereafter, several correspondences were
made between the parties but the Letter of Credit was not finalized and
by an email dated 31st May, 2022, the petitioner informed the
respondent that the petitioner is now proceeding to procure the
materials from the market for which the respondent would be liable for
all costs and consequences, damages suffered and to be suffered by the
petitioner by the illegal act and conduct and breach of the contract. By
the said email, the petitioner called upon the respondent to refund the
sum of Rs. 4,49,55,000/- being the 10% of the consideration value
remitted to the respondent on 30th April, 2022 and requested for
consent letter for closure and release of the Letters of Credit dated 6th
May, 2022 and the Bank Guarantee dated 12th May, 2022.
63. The Arbitrator considering the correspondences between the parties on
and from 23rd May, 2022 till 31st May, 2022 come the conclusion that
the respondent has complied with its obligation in terms of the order
dated 20th May, 2022 by the email dated 23rd May, 2022. The Arbitrator
further held that request for amending the Sight Letter of Credit into a
Usance Letter of Credit is in conformity with the direction of the Hon’ble
Court but the petitioner has not complied with its obligation in terms of
the order dated 20th May, 2022 and on the other hand has illegally
41
terminated the contract though there was no violation on the part of
the respondent.
64. The Learned Arbitrator while deciding the issues held that the first two
issues framed by the Tribunal have lost their significance after the
passing of second order and need not to be decided in this proceeding.
In place of those, the issue no.3 farmed in this proceeding i.e. (3)
“Whether the terms of the consent order breached by any of the parties
and if so, who has committed breach?”
Order 14, Rule 2 and Order 20, Rule 5 of the Code of Civil
Procedure, 1908, read as follows:
“Order 14, Rule 2. Register of suits. – The
Court shall cause the particulars of every suit to be
entered in a book to be kept for the purpose and
called the register of civil suits. Such entries shall
be numbered in every year according to the order in
which the plaints are admitted.
Order 20, Rule 5. Court to state its
decision on each issue.- In suits in which issues
have been framed, the Court shall state its finding
or decision, with the reasons therefor, upon each
separate issue, unless the finding upon any or
more of the issue is sufficient for the decision of the
suit.”
In the case of Narne Rama Murthy Vs. Ravula Somasundaram
and Others reported in (2005) 6 SCC 614, the Hon’ble Supreme Court
held that:
“7. We also see no substance in the
submission of Mr. Ramachandran that there is no
finding on Issue 1. In our view, once the finding
was reached on Issue 5 the answer to Issue 1
followed. Even otherwise, both these issues have
42been dealt with together and the reasoning given
by the trial court for answering these two issues in
favour of the respondents applies to both these
issues.”
In the present case, the main contention of the petitioner that the
Learned Arbitrator has not decided the first issue whether there was
breach of the terms of the contract dated 22nd February, 2022. By the
consent order dated 20th May, 2022 both the parties agreed with regard
to the terms of payment and delivery of goods. Clause 10 of the
Contract provides for opening of Letter of Credit of the balance
payment, issuance of delivery order upon receipt of full payment and
other conditions. The Learned Arbitrator has decided issue no.3 with
regard to any breach of the consent order dated 20th May, 2022. The
order dated 20th May, 2022, is directly connected with Clause 10 of the
Agreement and the Hon’ble Court had provided for working
arrangement for payment and delivery of the goods. Thus this Court
finds that the issue decided by the Learned Arbitrator squarely covered
the agreement dated 22nd February, 2022 and thus it cannot be said
that the Learned Arbitrator fails to decide the main issue with respect
of the agreement dated 22nd February, 2022.
This Court considered the judgment relied by the petitioner in the
case of National Housing Bank (Supra) and the Industrial
Laminates (India) Pvt. Ltd. (Supra) but finds that the facts of the said
cases and the present case are distinguishable.
43
65. Now the question whether the Learned Arbitrator has committed any
illegality for awarding damages in favor of the respondent and rejecting
the claim of the petitioner. By an order dated 25th April, 2022 in T.S.
No. 519 of 2022, the respondent was restrained form dealing with the
subject goods. In the said suit, the final relief of the petitioner is for
Specific Performance. In an appeal preferred by the respondent against
the order dated 28th April, 2022, the Hon’ble Court directed the
petitioner to furnish bank guarantee of Rs. 5 Crores as the respondents
was restrained from dealing with the goods. In the said order, the
Hon’ble Court protected the respondent’s interest in case the
respondent succeeds and the petitioner failed to open a Letter of Credit
in terms of the contract and was therefore not entitled to delivery of the
goods. In one hand, the petitioner has filed suit before the Civil Court
for specific Performance of Contract and obtained injunction and on the
other hand, the petitioner has filed an application under Section 17 of
the Arbitration and Conciliation Act, 1996 before the Learned Arbitrator
praying for the following relief:
a. The Letter of Credit dated 6th May, 2022 and
the Bank Guarantee dated 12th May, 2022 be
discharged.
b. Direction upon the respondent to forthwith
refund a sum of Rs. 4,49,55,000/- to the
petitioner.
c. Ad-interim orders in terms of prayers above.
44
Subsequent to filing of the application under Section 17 of the
Arbitration and Conciliation Act, 1996, the petitioner has filed
Statement of Claim for refund of amount and damages. By an order
dated 8th August, 2022, the application filed by the petitioner under
Section 17 of the Arbitration and Conciliation Act, 1996 is dismissed.
66. The petitioner filed suit for Specific Performance of Contract of sale of
goods and obtained an order of injunction and the Hon’ble Court
maintained the order of injunction till 13th June, 2022 and the Hon’ble
Court also imposed certain conditions to protect the interest of both the
parties till the disposal of the Arbitration proceeding. By an order dated
28th April, 2022, the Hon’ble Court while appointing an Arbitrator has
permanently stayed the suit. The petitioner has filed Statement of
Claim praying for Award for a sum of Rs. 25,35,75,803/- and in the
alternative, an enquiry into the damages and award for such as may be
found due and payable and interim interest and interest on award at
the rate of 18% per annum. It is pertinent to mentioned here that
interestingly, the petitioner has not prayed for any relief for Specific
Performance of Contract dated 22nd February, 2022.
67. The respondent in its counter claim prayed for damages of Rs.
5,60,00,000/-, Port Charges for the period from 21st April 2022 to 13th
June 2022 for a sum of Rs. 18,12,400/-, Handling Charges of Rs.
29,37,972.08/- and loss of interest of Rs. 15,117,334/- total
amounting to Rs. 75,867,706/-.
45
The respondent has also filed an application for amendment of the
counter claim for addition of prayer “Alternatively, the respondent
claims an enquiry into damages and award for such sum as may be
found due and payable.” And ” Damages for the difference between the
market price of the goods on 14th June, 2022 and the contract price in
sum of Rs. 21,98,700/-, which increased the total amount of claim
from Rs. 75,867,706/- to Rs.78,066,406/-. Subsequently, the
respondent not pressed the amended counter claim of paragraph 47E
with respect to damages for the difference between the market price of
the goods on 14th June, 2022 and the contract price in sum of Rs.
21,98,700/-.
68. Learned Arbitrator categorically held that the petitioner was fully
conscious that on the consent of the parties, the respondent was
restrained from disposing of the goods till 13th June, 2022, it could not
before that day terminate the contract when the price of goods were
falling in the market from the contract price and abandon its prayer for
Specific Performance. Learned Arbitrator found that the petitioner is
guilty of non-compliance of the order dated 20th May, 2022 and it is the
duty of the Arbitrator to restore to the respondent, the loss suffered by
it for the order of injunction imposed against the respondent. The
Arbitrator also held that the litigant cannot take benefit of the interim
order after having lost on merit and the benefit so taken must be
restored to the other party who suffered such interim order.
46
In the case of South Eastern Coalfields Ltd. Vs. Sate of M.P.
and Others reported in (2003) 8 SCC 648, the Hon’ble Supreme Court
held that:
“28. That no one shall suffer by an act of the
court is not a rule confined to an erroneous act of
the court; the “act of the court” embraces within its
sweep all such acts as to which the court may form
an opinion in any legal proceedings that the court
would not have so acted had it been correctly
apprised of the facts and the law. The factor
attracting applicability of restitution is not the act of
the court being wrongful or a mistake or error
committed by the court; the test is whether on
account of an act of the party persuading the court
to pass an order held at the end as not
sustainable, has resulted in one party gaining an
advantage which it would not have otherwise
earned, or the other party has suffered an
impoverishment which it would not have suffered
but for the order of the court and the act of such
party. The quantum of restitution, depending on the
facts and circumstances of a given case, may take
into consideration not only what the party excluded
would have made but also what the party under
obligation has or might reasonably have made.
There is nothing wrong in the parties demanding
being placed in the same position in which they
would have been had the court not intervened by
its interim order when at the end of the proceedings
the court pronounces its judicial verdict which does
not match with and countenance its own interim
verdict. Whenever called upon to adjudicate, the
court would act in conjunction with what is real
and substantial justice. The injury, if any, caused
by the act of the court shall be undone and the gain
which the party would have earned unless it was
interdicted by the order of the court would be
restored to or conferred on the party by suitably
commanding the party liable to do so. Any opinion
to the contrary would lead to unjust if not
disastrous consequences. Litigation may turn into a
fruitful industry. Though litigation is not gambling
yet there is an element of chance in every litigation.
Unscrupulous litigants may feel encouraged to
approach the courts, persuading the court to pass
interlocutory orders favourable to them by making
47out a prima facie case when the issues are yet to
be heard and determined on merits and if the
concept of restitution is excluded from application
to interim orders, then the litigant would stand to
gain by swallowing the benefits yielding out of the
interim order even though the battle has been lost
at the end. This cannot be countenanced. We are,
therefore, of the opinion that the successful party
finally held entitled to a relief assessable in terms
of money at the end of the litigation, is entitled to
be compensated by award of interest at a suitable
reasonable rate for the period for which the interim
order of the court withholding the release of money
had remained in operation.”
69. In the present case while ascertain the damage suffered by the
respondent, the Learned Arbitrator has decided as follows:
“54. After taking into consideration the
materials on record showing the admitted rate of
the goods in question as would appear from the
uncontroverted documents marked as GG, HH, II,
JJ, of the SOD, and also the consent order of the
Hon’ble High Court dated 28th April, 2022 which is
marked as FF of the SOD, the Respondent has
been able to successfully establish the following
facts:
A. The market price of the goods in question on
April 25, 2022 was Rs. 52,033/ (Rupees Fifty two
thousand and thirty three only) (exclusive of
handling and other charges) per MT and the
Respondent is entitled to get damages for being
unable to sell the goods at such price due to the
order of injunction passed against it on the
representation of the Claimant that it would
purchase the goods at the contractual rate of Rs.
46000/- per MT.
B. The contract price of the said goods being Rs.
46,433/- Per MT and the fact that the Respondent
could have sold the said goods even at the rate of
Rs. 52,033/- (Rupees Fifty two thousand and thirty
three only) (exclusive of handling and other
charges) per MT, it was therefore entitled to the
difference, being Rs. 5,600/- per MT. Consequently,
48it could receive an additional amount of Rs.
5,60,00,000/- (Rupees Five Crore and Sixty lakh
only), being the difference in the price of the said
10,000 MT of goods, the total subject matter of the
aforesaid contract,C. The Respondent is also entitled to port charges
in respect of the said consignment for the period
April 21, 2022 to June 13, 2022, the date till which
it was restrained by the order of injunction by
virtue of the second consent order dated 20th May,
2023, amounting to Rs. 18,12,400/-. The claimant
is also bound to compensate the respondent for the
handling charges which the Respondent has
incurred because of the claimant’s failure to take
delivery of the goods. Consequently, the
Respondent is entitled to a sum of Rs.
29,37,972.08/- on account of handling charges
from the claimant as would appear from the
uncontroverted Bills and/or documents in support
of such claims which are collectively annexed and
marked “HH” to the SOD
D. The Respondent has paid the supplier / seller of
the said consignment, viz. Noble Resources, a sum
of Rs. 59,75,04,799.65/- for the quantity of 11,500
MT on May 13, 2022 as would appear from the
document marked II to the SOD which remains
uncontroverted. In terms of the said contract, the
Respondent could have received the contract value
of the goods amounting to the sum of
Rs.46,00,00,000/- through letter of credit which
the claimant was obliged to establish on or before
14th April 2022. The Respondent would have
received the value of the letter of credit in the
minimum sum of Rs. 56,00,00,000/- latest by 30th
April 2022. However, the respondent has been
deprived of the price of goods by Claimant in the
facts and circumstances stated in paragraph 3 of
the foregoing statement of defence till 13th June
2022. The Respondent is, therefore, entitled to and
claims interest at 18% per annum on Rs.
11,80,00,000/- from 1st May 2022 till 13th June
2022.
E. As would appear from the documents marked as
JJ to the SOD, the market price of the goods on
14th June was Rs. 45780.13/- реr МТ. The
Respondent is, accordingly, entitled to the
49
difference between market price of the goods on
14th June, 2022 and the contract price being the
sum of Rs.21,98,700/- (Rs.46,00,00,000/- minus
Rs.457,801,300/- = Rs.21,98,700).”
70. In the case of Hindustan Construction Company Limited Vs.
National Highways Authority of India reported in (2024) 2 SCC
613, the Hon’ble Supreme Court held that:
“26. The prevailing view about the standard
of scrutiny — not judicial review, of an award, by
persons of the disputants’ choice being that of their
decisions to stand — and not interfered with, (save
a small area where it is established that such a
view is premised on patent illegality or their
interpretation of the facts or terms, perverse, as to
qualify for interference, courts have to necessarily
choose the path of least interference, except when
absolutely necessary). By training, inclination and
experience, Judges tend to adopt a corrective lens;
usually, commended for appellate review.
However, that lens is unavailable when exercising
jurisdiction under Section 34 of the Act.
Courts cannot, through process of primary contract
interpretation, thus, create pathways to the kind of
review which is forbidden under Section 34. So
viewed, the Division Bench’s approach, of appellate
review, twice removed, so to say (under Section
37), and conclusions drawn by it, resulted in
displacing the majority view of the tribunal, and in
many cases, the unanimous view, of other
tribunals, and substitution of another view. As long
as the view adopted by the majority was plausible
— and this Court finds no reason to hold otherwise
(because concededly the work was completed and
the finished embankment was made of
composite, compacted matter, comprising both soil
and fly ash), such a substitution was
impermissible.”
71. In the case of Punjab State Civil Supplies Corporation Limited and
Another Vs. Sanman Rice Mills and Others reported in 2024 SCC
OnLine SC 2632 wherein the Hon’ble Supreme Court held that the
50
scope of intervention of the Court in arbitral matters is virtually
prohibited, if not absolutely barred and that the interference is confined
only to the extent envisaged under Section 34 of the Act.
72. In the present case also, this Court did not find any illegality committed
by the Learned Arbitrator by dismissing the claim of the petitioner and
by allowing the counter claim of the respondent in part. Thus, the
Award passed by the Learned Arbitrator dated 16th October, 2023 does
not require any interference.
73. In view of the above, A.P. (Com) No. 32 of 2024 is dismissed
Parties shall be entitled to act on the basis of a server copy of the
Judgment placed on the official website of the Court.
Urgent Xerox certified photocopies of this judgment, if applied for,
be given to the parties upon compliance of the requisite formalities.
(Krishna Rao, J.)