Delhi High Court
M.M.T.C. Ltd. vs G. Premjee Trading P. Ltd. on 3 March, 2010
Author: Manmohan
F-17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. 91/2001
M.M.T.C. LTD. ..... Petitioner/Objector
Through: Mr. Sanjeev Puri, Senior Advocate.
with Mr. Rohit Puri, Advocate.
versus
G. PREMJEE TRADING P. LTD. ..... Respondent
Through: Mr. Rajiv Bakshi, Advocate.
% Date of Decision : March 03, 2010
CORAM:
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment? No
2. To be referred to the Reporter or not? No
3. Whether the judgment should be reported in the Digest? No
JUDGMENT
MANMOHAN, J (ORAL)
1. Present objection petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Act,
1996) challenging the majority Arbitral Award dated 18th January,
2001, insofar as it rejects petitioner-objector's claim for USD 1,17,500
with regard to Contract No.15.
2. The facts relevant for this case are that petitioner-objector entered
into various purchase contracts with respondent whereunder respondent
was to supply various quantities of Urea. However, dispute in the
present petition relates to Contract No.15 dated 07th June, 1994 for
supply of 55,000 MTs (+ 10%) of Urea @ US$ 143.50 per metric ton.
In August, 1994, the quantity to be supplied under Contract No.15 was
amended to 45,000 - 55,000 MTs (+ 5%) of Urea @ US $ 149 per
metric ton.
3. In December, 1994, respondent supplied 22,976.45 metric tons
towards Contract No.15. On 30th December, 1994, respondent loaded
25,259.596 metric tons of Urea on vessel MV Mike - K towards
Contract No.15 which sailed from Constanza, Romania.
4. On 23rd January, 1995, just one day prior to vessel arriving in
India, respondent wrote to petitioner-objector stating that out of the
loaded cargo, 17,523.55 MTs (being alleged minimum quantity) be
treated as full and final supply under Contract No.15 and the balance
quantity i.e. 7,735.09 metric tons be adjusted towards Contract No.99
@ US$ 201 per metric ton. It is pertinent to mention that Contract
No.99 dated 30th November, 1994 was for supply of 20,000 metric tons
(+ 5%) of Urea @ US$ 201 per metric ton. The relevant portion of
respondent's letter dated 23rd January, 1995 is reproduced hereinbelow:
".....we would like to convey to you that the quantity load on
board the vessel is 25,259.56 M.T. and as per the contract we
have to supply minimum of 17523.55 M.T. at US $149 P.M.T.
to fulfill our obligation under contract No. 15 and the balance
of 7,736.046 MT is to be considered as the part execution of
contract No. 99 at US $ 201 P.M.T.
We have already clarified the same to you vide our letter No.
1115/VNK dated 17.1.95 and subsequent reminder vide letter
No. 333/VNK dated 18.1.95.
Kindly confirm by return fax that you are accepting 17,523.45
MT at US $ 149 PMT against Contract No. 15 as full and
final execution of the contract and balance 7,736.046 MT at
US $ 201 PMT as part execution of contract No. 99"
(emphasis supplied)
5. Petitioner-objector replied to the aforesaid letter vide its fax dated
23rd January, 1995, which reads as under:
"VSL MIKE-K sailed with 25,259.596 MT urea from
Constanza on 20.12.94. Department of Fertilizer has
nominated discharge port as Vizag. Quantity of VSL MIKE-K
will be adjusted as under:
Contract No. & Qty. Price
date PMT
--------------------------------------------------------------------
1. MMTC/94-95/FZ (U) 17,523.500 US$ 149.00
/15 dated 7.6.94 C&F.FO
2. MMTC/94-95/FZ(U) 7,736.096 US$ 201.00
/99 dated 30.11.94 C&F. FO
Request to prepare B/L as mentioned above and draw invoice
accordingly. Please send original shipping documents
immediately to MMTC for payment and onward transmission
to DOF. Regards.
(emphasis supplied)
6. On 24th April, 1995, petitioner-objector informed the respondent
that though bifurcation of Urea on vessel MV Mike - K had been
approved, there was a shortfall of 4500 metric tons of Urea under
Contract No.15 and a further shortfall of 1482.645 metric tons of Urea
under contract No.99. The relevant portion of the said letter reads as
under:
"The competent authority has approved the settlement of
supply of Urea against vessel Mike-K on the following basis :
MMTC shall pay only for quantity of 7,736.09 MT @ US $
201.00 PMT C&F FO. This quantity shall be taken towards
adjustment of contract No. MMTC/94-95/FZ(U)/99 dated
30.11.94.
The above quantity shall be taken towards adjustment of the
balance quantity remaining to be performed in contract No.
99. This contract was for 20000 MTs + 5% (shipping
tolerance). Against this contract M/s G. Premjee supplied
through Vessel DARIN- NAREE quantity of 10781.265 MTs.
Out of the balance quantity for performance is 9218.735 MTs,
after adjusting the quantity of 7736.09 MTs, there is a shortfall
of 1482.645 MTs towards full and final performance of the
contract.
Under the circumstances, we request you to supply the balance
latest by 31st July 1995 failing which we will be constrained to
invoke the contractual provisions relating to short-fall/non-
supply of the contracted quantity. In addition, G. Premjee
needs to fulfill the original contract No. 15 with the quantity
duly amended to 45000-55000 MTs + 5% (shipping
tolerance). It has been agreed to take minimum quantity of the
range that is to say 45000 MTs for the purpose of contract
performance. By reckoning the above minimum quantity of
45000 MTs and reducing the actual performance of 40500
MTs (22,976.45 + 17,524) done by G. Premjee, shortfall still
to be performed equals to 4500 MTs. You are kindly required
to make good the shortfall as soon as possible but not later
than 31st July 1995.
Please note that in respect of the shortfall in the above
referred contracts of 1482.645 MTs under contract No. 99 and
4500 MTs under contract No. 15, in case of failure to supply
the said quantities by 31st July 1995, you are liable to
compensate MMTC under the risk purchase clause of our
standard purchase contract. Accordingly, the differential of
the price between the above two contracts respectively and
MMTC‟s recent purchase price of US $ 245 PMT. CNFFO
shall be the basis for the calculation of the total amount.
Under contract No. 99 you have to compensate us at a
differential rate of $ 44 PMT for the quantity 1482.645 MTs
and under contract No. 15 at $ 96 PMT for quantity of 4500
MTs.
We propose the above towards full and final settlement of the
above contracts without prejudice to our rights provided in the
contract. You may kindly inform us the remittance channel
and the bank account through which we can arrange the above
remittance "immediately"."
(emphasis supplied)
7. On 26th April, 1995, petitioner-objector once again called upon
respondent to supply the shortfall of 4500 metric tons of Urea and
1482.645 metric tons of Urea under Contracts No. 15 and 99,
respectively. The relevant portion of letter dated 26 th April, 1995, reads
as under:
"3. Our letter dated 23.1.1995 informing you to claim
17,523.5 MT under Contract No. 15 and 7,736.09 MT under
Contract No. 99 is for the purpose of payment of shipment per
M V MIKE-K only and to suit our sale/discharge requirements
with the separate shipping documents for the said quantities
and such split up of quantities in Shipping documents of one
Vessel can not be interpreted to mean that the balance left
over Contracted quantity need not be supplied. Therefore, we
can not at all appreciate your contention in this regard. We
have never informed you that with the solid (sic) split up of the
quantities per MIKE-K, the contract No. 15 to be (sic)
completed."
(emphasis supplied)
8. On 05th May, 1995, petitioner-objector sent another fax to
respondent which reads as under:-
"Sub: PAYMENT FOR 7736.09 MT UREA PER MV
MIKE-K............. We wish to inform you that
competent authority has approved the following :
1. Pyament at US $201 PMT for a quantity of
7736.09 MT per the subject vessel.
2. You have to supply balance quantity of 1482.645
MT at US $ 201 under the contract No. 99 and
this supply should be completed before end of
May 1995;
3. We are not agreeable to recognize and/or pay
any interest indicated in your various
communications in respect of settlement of Mike-
K invoices.
This adjustment is full and final settlement of the
subject case and no further claims of any nature
related to contract No. 15 and/or contract No.
99 shall be entertained by us."
(emphasis supplied)
9. On 08th September, 1995, petitioner-objector wrote to respondent
disputing the fact that supply of 40500 metric tons of Urea constituted
full execution of Contract No.15. In the said letter, petitioner-objector
alleged that it had suffered substantial losses on account of shortfall of
supply of Urea under Contracts No. 15 and 99. The said letter reads as
under:-
"Reg: Contract No. 15:
"The Contracted quantity was 45,000-55,000 MT, +5%
shipping tolerance, bulk urea stop. You had supplied
Urea against the above contract in two lots:
MV DARIN N 22,976.450 MT
MV MIKE-K 17,523.550 MT
--------------------
40,500.000 MT
------------------
VSL MIKE-K brought a total quantity of 25,259.596
MT and the quantity was bifurcated 17,523.550 MT
against contract No. 15 and balance quantity of
7736.046 MT against contract No. 99 STOP. The
basis for bifurcation of the quantities are not correct
STOP Department of Fertilizers, Govt. of India, did not
agree with this contention.
In terms of the contract, the minimum quantity of urea
to be supplied is 45000 MT + 5% shipping tolerance
stop. This shipping tolerance is to be exercised by the
captain of the VSL on the basis of loading capacity of
the VSL STOP. In case of MIKE-K the loading capacity
is not restricted to 17523.50 MT and as such the
shipping tolerance has not been exercised as the Vessel
contained a total quantity of 25,259.546 MT and
bifurcating the quantity against two different contracts
is against the contracted obligation.
The Department of Fertilizers had taken the contention
that since the VSL contained higher quantity, they had
the right to exercise the option of limiting the quantity
under the contract No. 15 to 47250 MT (i.e. 45000 +
2250 being 5 percent tolerance). STOP In fact they
intended to adjust the entire quantity against contract
No. 15 but were persuaded to restrict the quantity as
above.
Your contention that the contract has been fully
executed with supply of 40500 MT by exercising the
tolerance limits is, therefore, not tenable STOP
Department of Fertilizers has accordingly made the
adjustments from the amount payable to MMTC STOP
MMTC had suffered substantial loss on this account
and the details were explained to Mr. Navrattan Mittal,
your Regional Manager STOP MMTC is therefore, fully
justified invocation of the said PG."
(emphasis supplied)
10. As the petitioner-objector invoked the performance guarantees
furnished by the respondent, respondent invoked the disputes resolution
mechanism in the contracts namely, the Arbitration clauses.
11. On 21st April, 1998, this Court appointed Mr. Justice (Retd.)
Rajinder Sachar and Mr. Justice (Retd.) S.S. Chadha as the Arbitrators
to adjudicate upon the claims and counter claims arising out of the
purchase contracts. The two Arbitrators appointed Mr. Justice S.
Ranganathan, a retired Supreme Court Judge, as the Presiding
Arbitrator.
12. On 18th January, 2001, the Arbitral Tribunal passed a majority
Award in favour of respondent. The relevant portion of the majority
Arbitral Award reads as under:-
"25. Oral evidence was also given on behalf of Premjee that,
at the time of discussion preceding the amendment in August
1994, no variation in the tolerance limit from 5% to 10% was
discussed and hence the letter of 8.8.94. On behalf of the
MMTC it is suggested that this letter was only a request for
amending the tolerance from 5% to 10%, a request that has not
been accepted by the MMTC. It was an after thought following
on the letters of 17.1.95 and 18.1.95, as, it is said, the MMTC‟s
records show it as having been received only on 20.1.95. On
this issue, the correct position is not clear. On the one hand,
the original contract had provided for a + 10% tolerance and
the insertion of the figures + 5% could be a slip or mistake but
Premjee does not specifically say so. On the other hand, as
pointed out for MMTC, the original contract was for 55000 MT
and it is equally possible that while reducing the quantity to be
supplied, the tolerance margin was also agreed to be reduced.
On the part of Premjee, there is the evidence of Shri Mittal that
the tolerance level was not agreed to be changed and that the
letter of 8.8.94 was delivered by him personally, as a covering
letter to the amendment, to Shri Jaiswal. There has been no
cross examination of Shri Mittal on this. On the other hand,
MMTC has led no oral evidence but produced, at a later stage,
a photocopy of the letter said to have been received and
endorsed by Shri I.S. Khanna and Premjee has had no
opportunity to cross-examine that officer. The only witness for
MMTC was an officer who had no personal knowledge of the
transactions and could speak only from the record. It is
however, unnecessary to pursue this, for if the tolerance level
had not been intended to be changed in the discussions between
the parties for amendment as suggested, Premjee would and
should have declined to sign the amendment in the form
proposed. Its mere unilateral reservation, while appending its
signature to the written amendment, cannot have the effect of
modifying the terms of the written amendment signed by both
the parties, particularly in view of clause XXIV of the contract.
This aspect of the claim Premjee has therefore to fail.
26. The second, and more substantial, answer of Premjee to
MMTC‟s claim is that a variation of the contract to the above
effect has been accepted by MMTC by its fax dated 23.1.95 by
which MMTC has accepted the delivery of 40500 MTs on
DARIN-N and MIKE-K as constituting full performance of
Contract No. 15. In support of this contention, Premjee relies
on the fax sent by MMTC in response to the requests made in
Premjee‟s letter of 17,18 and 23 January 1995 to accept 40500
MT in fulfillment of the obligations under contract No. 15. On
the other hand, the plea of MMTC is that Premjee‟s request
consisted of two parts - one, that payment for the cargo on
MIKE-K be made on a bifurcated basis and two, that supply of
40500 tons be considered to be full discharge of contract No.
15. By its fax of 23.1.95, MMTC, it is claimed, only accepted
the first part of the request viz. the bifurcation of the cargo on
board MIKE-K as between contract No. 15 and 99 but that the
fax of 23.1.95 does not specifically deal with, or spell out any
acceptance of, the second part of the request to treat contract
No. 15 as fulfilled or discharged with the supply of 40500 MT.
To appreciate the factual basis for these contentions it is
necessary to refer to certain further correspondence that
ensued between the parties.
xxx xxx xxx xxx
33. Looking in isolation at, and on a cursory reading of, the
two letters dated 23.1.1995, one of Premjee and one of MMTC,
MMTC‟s plea that Premjee had made two requests, only, one of
which MMTC accepted and that the silence of the MMTC in
regard to the other cannot be taken as its acceptance may seem
plausible. It is argued that, in the absence of a clear and
positive written acceptance of the second request, MMTC
cannot be held to have agreed to accept 40,500 MTs as full
discharge of Contract No. 15, particularly in view of the failure
of Premjee to establish its plea that Contract No. 15 had been
amended to provide a 10% latitude so as render the supply of
40,500 MT adequate to fulfill the contract.
34. On the other hand, attention is drawn by Premjee to
several circumstances and pieces of correspondence to show
that MMTC had in fact accepted the consignments aggregating
to 40500 tons on DARIN-N and MIKE-K in full discharge of
Contract No. 15 and that the plea that further quantities
remained to be supplied thereunder is an after thought, perhaps
because of a contrary view taken by the D.O.F. We have
considered carefully the entire correspondence and evidence.
We have come to the conclusion that the following
circumstances fully support of the contention of Premjee:
(a) A comparison of three contracts entered into between
Premjee and MMTC and referred to in the above
correspondence discloses a very significant trend. The prices
agreed upon in contract No. 15 were USD 143.50 PMT on
7.6.94 and USD 149 per MT in the amendment of 8.8.94; they
went upto USD 201 per MT in the contract of 30.11.94 and
USD 245 per MT under Contract No. 6 of 21.3.95. In other
words, it was a rising market and it is also clear that suppliers
had difficulties in securing and making adequate supplies. In
these circumstances it was that Premjee, having performed a
substantial part of contract No. 15 sent the letters of 17,18 and
23.1.1995. These letters did not contain two separate requests
as alleged by MMTC. It was a single consolidated request to
accept 40,500 tons in full discharge of Contract No. 15 and so
to permit the balance of the cargo on MIKE-K to be
apportioned to contract No. 99. The separate basis of payment
asked for was not an independent request but an immediate and
direct consequence of the above plea. It was not, and could not
have been, the intention of Premjee to supply the residuary
balance in contract No. 15 at USD 149 out of goods which had
to be purchased necessarily at higher prices, on a later date.
Nor was there any basis or justification for MMTC to accept
the division of payment without necessarily accepting the basic
request of discharge of contract No. 15. For if, according to
MMTC, the quantity to be supplied under contract No. 15
originally was to be adhered to and Premjee had to supply
45000 or 42750 MT (or indeed, 47250 MT as is said to have
been the stand of DOF), it would not and should not have
agreed to be bifurcation as proposed. It would have taken and
paid for the entire cargo on MIKE-K at 149 USD PMT or
directed a different basis of bifurcation and specifically
restricted its liability to pay at 201 USD PMT to a smaller
extent.
(b) It is said that Premjee had anyhow to supply cargo at
201 USD per MT under contract No. 99 and that this
bifurcation of prices did not prejudicially affect MMTC and
was merely intended as a concession to Premjee. This
contention does not ring true. No business organization like
the MMTC could have agreed to pay at 201 USD PMT for a
part of the cargo which it was entitled to receive at 149 USD
PMT particularly in the state of the market that prevailed. No
doubt a concession was shown to Premjee but, on a reasonable
construction of the letters of 23.1.95, it seems to us that the
concession made was not that, though Premjee had still to
supply goods under contract No. 15, it would be paid at 201
USD PMT for a part of the cargo on MIKE-K with a liability to
supply an unspecified balance later at 149 USD PMT. It was,
we think, an acceptance of the request of Premjee that contract
No. 15 be varied to accept a tolerance of 10% and to accept
17,523.55 tons on MIKE-K in full discharge of that contract,
the balance being appropriated to contract No. 99. It is only
such acceptance that can explain the permitted bifurcation of
quantity. Shri J.S. Kuberi, Senior Manager, is duly authorized
to act on behalf of the MMTC. He is the officer who has signed
the original contract dated 17.06.1994 and it is he who has
signed the letter dated 23.01.95. If it had been intended to
preserve MMTC‟s rights and Premjee‟s obligations for further
supplies under that contract, MMTC would and should have
made it expressly clear and failure to do this is very significant
particularly when Premjee had asserted its request in three
letters.
(c) It is significant that MMTC did not reply to any of
Premjee‟s letters rejecting Premjee‟s request that 40500 MT be
accepted as the quantity to be supplied under contract No. 15.
It is true that MMTC was not bound to reply to an incorrect
claim of Premjee but since Premji‟s claim for bifurcation was
based on this request or claim and it is said that MMTC
accepted the bifurcation but not the claim, it had a duty to
clarify the position in its response. It is certainly reasonable to
infer that it was because the basic request was accepted that
the bifurcation was allowed without any reservation. It will be
appreciated that, before sending response to Premjee‟s letter of
23.1.1995, MMTC had to apply its mind to the plea of Premjee
that it should be taken as having discharged contract No. 15 in
full by the delivery of the part of the cargo on MIKE-K. It
could not have remained indifferent to or silent on that request
as is now alleged. According to MMTC, Premji‟s letter of
8.8.94 had been delivered to it only on 20.1.95. The recipient,
Shri I.S. Khanna, clearly understood it as a plea to accept a
tolerance of 10% which was not what the contrat provided
for. If so, at least at that stage, a denial of the request should
have been issued. In this situation and considering that there
was a single comprehensive request made by Premjee which
had two consequences and that the fax of 23.1.1995 was in
direct response to Premjee‟s letters explaining the basis of the
bifurcation, we are of the view that the two letters of 23.1.1995
together constitute a written agreement between the parties
modifying the terms of contract No.15 to accept supply of
40500 MT in full discharge and that MMTC cannot demand
further supplies under the contract or seek to recover any
portion of the moneys paid in respect of the goods on MIKE-K.
(d) Even as per MMTC, there had been a clear cut
concession on its part to pay 201 USD PMT for 7736.04 MT on
MIKE-K (though Premjee was not entitled to it) and this should
have been paid immediately on the production of the bills on
28.1.95. It has not been explained why this undisputed
payment was not made despite repeated requests. The only
possible explanation is that second thoughts had surfaced
regarding the correctness or wisdom of the decision taken on
23.1.1995.
(e) It will be seen that by 23.1.1995, the time for delivery
under contract No.15 had already expired. So, one would have
expected MMTC at once to write to Premjee and indicate the
quantity remaining due under that contract and also stipulating
a time for its delivery. This was not done till very much later.
The reason for this is also obvious. First, it accepted
Premjee‟s request to bifurcate the cargo on MIKE-K into two
portions one allocable to Contract No.15 and the other to
contract No.99. This has been the root cause of all the
controversy in the present case. In the letters of April 1995 its
case was that 7736.49 MTs on MIKE-K having been
appropriated to contract No.99, it will be paid for at the rate of
201 USD PMT but that, since this meant that only 17523.500
MT had been supplied against Contract No.15, there was a
deficit supply of 4500 MT which should be made good by
31.7.1995. From the letter dated 8.9.95, it is seen that it was
the DOF that was not prepared to accept Premjee‟s contention
and that it had been claiming a deficiency of 4750 MT in
contract No.15 which it has been "persuaded" to restrict to
4500 MT. Also, according to the letter of 26.4.95 the short
supply of 4500 tons would have to be compensated at the rate
of US $ 96 PMT (245-149). In the statement of claim, however,
a concession was made that the quantity to be supplied under
the contract would be treated as 42750 MT and the deficit
supply only as 2250 MT. It was however, claimed that as
MMTC has paid for 2250 MT at 201 USD PMT as against 149
USDPMT it was entitled to a refund of 2250 x (201-149) =
1,17,000 US $. This is certainly not consistent with the position
earlier set out that 7736.09 MT had been adjusted against
contract No.99 and so rightly paid for at 201 US $ PMT. The
claim now put forward by counsel Sri Sanjeev Puri, is
therefore, slightly different. It is this, that since there has been
a default on the part of Premjee to supply 2250 MT (on
contract No.15), MMTC is entitled to claim damages for
breach of contract at the difference between the contract price
of $ 149 and $ 201 the market price of the goods as reflected by
the price mentioned in contract No.99 on which supplies were
made at the same time. This also comes to 1,17,000 US $ but
this is on a basis different from that pleaded in the statement of
claim. In other words, the MMTC has not been able to take a
clear, cogent and consistent stand regarding the quantity of
short supply and the rate at which it should be compensated.
Having given the go-by to the acceptance of 23.1.1995, MMTC
has been trying to grope about for a basis for claims of further
supplies under the contract. The omission of this claim in the
first instance, is also indicative of its vacillations.
35. There is one more important circumstance that calls for
mention. The stand of the MMTC in its letters dated 24.4.95,
26.4.95 and 5.5.95 is admittedly based on an approval by the
MMTC‟s „competent authority‟. The minutes of the competent
authority at its meeting of 19.4.1995 were produced by Shri
Puri after initial objections to their relevance and
confidentiality (which were over-ruled) and make interesting
reading. The relevant item on the agenda is stated to be
"supply of urea by M/s G. Premjee against contract No.15"
and reads thus:
"The Committee was informed that the Division had
sent a communication to M/s G. Premjeet on 23.1.95
confirming acceptance of higher quantity of 7736
tones shipped against contract No.99 in vessel Mike-
K. Having regard to the commitment already made by
the Division to the supplier, the case had become fait
accompli. The Committee, however, directed the
Division to take note of the following issues while
settling the case with the supplier:
i) That adjustment be made, while settling the
final accounts at USD 201 per ton for a
quantity of 2236 tons delivered short by the
supplier against contract No.99.
ii) No claim for overdue interest, as demanded by
the supplier, should be entertained and that the
settlement to be made with the party should be
full and final."
(emphasis supplied)
13. Mr. Sanjeev Puri, learned senior counsel for petitioner submitted
that impugned majority Arbitral Award was a contradictory one and
based on inferences. He submitted that the majority Arbitral Award's
reliance upon petitioner-objector's internal communications was
erroneous as they were confidential in nature. He pointed out that the
majority Award after concluding in paras 25 and 33 that the
margin/tolerance limit was + 5% instead of +10% had disallowed the
petitioner-objector's claim on account of shortfall of supply of Urea
under Contracts No. 15 and 99 on the ground that letter and fax dated
23rd January, 1995 constituted a variation of the Contract No. 15.
14. According to Mr. Puri, silence on the part of petitioner-objector
in its fax dated 23rd January, 1995 could not be construed as variation of
the contract executed between the parties. He submitted that the
majority Award erroneously relied upon the minutes of the meeting
dated 19th April, 1995 as the same were confidential in nature. Mr. Puri
submitted that the minority Award correctly interpreted the contractual
provisions as well as the contemporaneous correspondence exchanged
between the parties. In this connection, he relied upon paras 61, 63, 77
and 79 of the minority Award which read as under:-
"61. Mr. Puri‟s contention is that this is a superficial
reading of the material on record. Apart from the fact that
such an important amendment cannot be just slipped in
and has to be done in specific and certain manner, he says
that the letter of 17th January was an attempt suddenly
thought of to get out of the liability arising out of contract
No.15, and the claimant knew fully well that amended
contract No.15 permitted shipping tolerance of +5% on
45,000 PMT. He has drawn our attention to the fact,
which is admitted in his evidence by Mittal, that when the
cargo was loaded on Vessel Mike K on 30th December,
1994, the whole quantity of 25,289 MT on board was in
respect of contract No.15. It is also admitted by Mr. Mittal
that inspection done by Premjee‟s authorised agent on 4 th
January, 1995 also shows that whole quantity on board
Mike K was with respect of contract No.15. It is also the
evidence that no attempt was made by Premjee to ask for
shipment papers to be modified earlier to 23 rd January,
1995 to seek bifurcation. It is relevant to note that Mike K
arrived at port on 24th January. So this maneuvering to
purport to suggest by correspondence to MMTC that
contract No.15 was being fulfilled was just a clear
maneuver to seek to avoid to supplying against contract
No.15 which was priced at USD 149 and to substitute that
by attempting to supply it against contract No.99 priced at
US Dollar 201 M.T.
xxx xxx xxx xxx
63. The quantity of 25,259 MT in Mike K fits in with
amended clause of + 5% contract No.15. It is common
case that prior to loading ship Mike K 17,523 MT had
been supplied. Adding these two 25,259 + 17,523 comes
to 42,782. Contract No.15 postulated minimum quantity of
45,000 MT. Now adjusting + 5% from 45,000 the quantity
comes to 45,000 - 2250 = 42,750. The closeness of both
quantities cannot be just accidental. By supply from whole
lot of Mike K , contract No.15 could be executed fully.
That alone can explain the fact of full loading for contract
No.15, the absence of any attempt at bifurcation earlier
than 30th December. Mr. Puri, therefore, suggests, and not
without force, that having got the split up from friendly
personnel in the department this story of further purported
amendment of shipping tolerance, even when there is no
specific entry to that effect is being put forth.
xxx xxx xxx xxx
77. The strongest argument of Mr. Bhatnagar is founded
on the silence on the part of MMTC at not immediately
repudiating the suggestion of + 10% given by Premjee in
its letter of 17th January, 1995. Now it is possible to say
that not repudiating promptly the interpretation being put
by Premjee reflects poorly on the officers dealing with the
matter. I can agree. But surely no contract can be deemed
to have been modified by the instance of unilateral conduct
of one party. The inefficiency or remissness of junior
officials cannot lead to a deemed amendment of a solemn
contract entered into by the competent authority. As it is
the decision repudiating the suggestion of Premjee was
communicated by MMTC by letter of 24th April, 26th April
and 5th May, 1995, in pursuance of the decision of the
competent authority dated 19th April, 1995.
xxx xxx xxx xxx
79. A reference to the minutes would show that the
decision was invited with regard to Contract N0.99 above
for which no payment was being made to Premjee. The
question of considering and accepting less quantity with
regard to Contract No. 15 never figured in the minutes.
As mentioned before payment with regard to Contract
No.15 had already been made, in February, 1995.
Apparently the competent authority had withheld the
payment for supply with regard to contract No.99 because
it presumably felt that officers below were not justified in
having agreed to receive quantity of 7736 against contract
No.99 which had a higher price when the balance quantity
of contract No.15 was still outstanding. That is why it
mentioned that having regard to the commitment already
made by the Division to the supplier the case has become
fait accompli and that is why a direction was given as to
how to settle the financial account and adjust the short
delivery against contract no.99. That these minutes were
so understood properly by no less by a person than Mrs.
Bhan who was not unsympathetic to the Claimant is clear
from the letter of 24th April written by her stating what the
competent authority had decided regarding Contract
No.99 about 7736 MT and specifically pointing out that
there was a shortfall in the supply with regard to the
contract No.15 and that Premjee had to supply the balance
quantity against Contract No.15. Similar repudiation of
any modification of + 5% tolerance having taken place
was also specifically reiterated in subsequent letter of 26th
April.
80. In the award by Mr. Justice Ranganathan and Mr.
Justice S.S. Chadha it has been mentioned that there is no
allegations pleadings and no evidence in support of the
assertion by MMTC that Mrs. Girija Bhan, Chief General
manager later resigned from MMTC and took up
employment with Premjee. This probably has been
mentioned by an oversight because though there was no
pleadings yet Mr. Mittal was cross-examined on this
aspect and has admitted in his evidence and Mrs. Bhan has
resigned from MMTC and later on taken an employment
with Premjee. I mention this to show that Mrs. Bhan‟s
understanding of the decision that balance had to be
supplied in contract No.15 was not that of unsympathetic
or a hostile officer but an officer who was quite
sympathetically inclined to Premjee and therefore, her
writing the letter specifically mentioning that balance of
quantity from Contract No.15 was yet to be supplied by
Premjee must carry significant confirmation of the stand
taken by MMTC before us.
81. This clearly shows that even when no disputes had
arisen, persons dealing with the matter had no doubt as to
what the decision was and that no amendment of + 5%
tolerance had been made. I have no doubt that the story
by Claimant of amendment having taken place was a make
believe."
(emphasis supplied)
15. On the other hand, Mr. Rajiv Bakshi, learned counsel for
respondent submitted that letters dated 23rd January, 1995, 24th April,
1995, 26th April, 1995 and 05th May, 1995 along with minutes of
meeting dated 19th April, 1995 constituted a variation of Contract No.
15. Mr. Bakshi further submitted that quantity was rightly accepted by
the petitioner-objector as the supply of 17,523.55 metric tons of Urea
against Contract No.15 constituted a full and final execution of the said
contract.
16. Having heard the parties at length and having perused the
impugned majority Award, I am of the view that it would be
appropriate to first outline the circumstances in which a Court can
interfere with an arbitral award passed under the Act, 1996. The
Supreme Court in Delhi Development Authority Vs. R.S. Sharma and
Company, New Delhi reported in (2008) 13 SCC 80 after referring to a
catena of judgments including Oil & Natural Gas Corporation Ltd. v.
Saw Pipes Ltd. reported in (2003) 5 SCC 705 has held that an arbitral
award is open to interference by a court under Section 34(2) of the Act,
1996 if it is:-
(i) contrary to substantive provisions of law; or
(ii) contrary to the provisions of the Arbitration and
Conciliation Act, 1996; or
(iii) against the terms of the respective contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties.
17. The Supreme Court has further held in the aforesaid judgment
that an award can be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
18. I am of the opinion that in the present case, the majority Award
contradicts itself and ignores specific terms of the contract executed
between the parties such as Clause 24 and is based on internal
communication/deliberations of petitioner-objector's officers. The
majority Arbitral Award is contrary to the contractual term as it holds
that petitioner-objector's silence in response to respondent's letter dated
23rd January, 1995, constituted a variation of quantities to be supplied
under Contract No. 15 even though Clause 24 of the Contract
specifically stipulated that modification of the contract could only take
place, if the said modification was in writing and signed by both the
parties. The relevant portion of the Clause 24 reads as under:
"......No modifications, waiver or discharge of this contract or
any of its terms shall bind either party unless in writing and
signed by both parties."
(emphasis supplied)
19. I am also in agreement with Mr. Puri's submissions that the
majority Award could not have relied upon deliberations/discussions of
officers of petitioner-objector as they were confidential in nature. In
any event, the said internal note did not constitute a variation of the
contract. Moreover, as rightly observed by the minority Award, the
minutes of meeting dated 19th April, 1995 pertained to dispute arising
under Contract No. 99 and not with regard to Contract No.15 with
which, this Court is concerned in the present proceedings.
20. The majority Award is further based on surmises and conjectures
as is apparent from para 34 of the Arbitral Award. The majority
Award is also contradictory inasmuch as after coming to the conclusion
in para 25 that respondent's unilateral amendment of the tolerance limit
+ 5% to + 10% was contrary to the procedure prescribed in Clause 24
and could not have the effect of modifying the written contract, the two
Arbitrators have concluded in para 34 (b) of the Award that the
tolerance limit stood varied from + 5% to + 10%.
21. In view of the aforesaid, the impugned Arbitral Award dated 18 th
January, 2001 passed by the majority Arbitrators in respect of Contract
No.15 is set aside and the petitioner-objector is held entitled to a sum of
USD 1,17,500 along with the rate of interest as awarded by the Arbitral
Tribunal on the claims filed by the respondent. Petition stands allowed
accordingly. However, petitioner is directed to pay costs imposed vide
orders 20th February, 2009 and 12th May, 2009 to the respondent within
a period of one week from today.
MANMOHAN,J.
MARCH 03, 2010
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