Thyssen Krupp Werkstoffe Gmbh vs Steel Authority Of India Ltd.
2011 Latest Caselaw 2019 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO(OS) No.258/2010 & CM No.7195/2010

THYSSEN KRUPP WERKSTOFFE GMBH ....Appellant through
                              Mr. Rajiv Nayyar, Sr.
                              Adv. with Mr. Arvind
                              Kumar & Shikha Sarin,
                              Advs.
             versus

STEEL AUTHORITY OF INDIA LTD.            ....Respondent through
                                         Mr. Sanjay Jain, Sr.
                                         Adv. with Ms. Ruchi
                                         Gaur Narula,
                                         Ms.Prabhsahay Kaur,
                                         Mr. Vivek Kishore &
                                         Ms. Shweta Mishra,
                                         Advs.

%                            Date of Hearing : April 05, 2011

                             Date of Decision : April 07, 2011

      CORAM:
*     HON'BLE MR. JUSTICE VIKRAMAJIT SEN
      HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
      1. Whether reporters of local papers may be
         allowed to see the Judgment?             No
      2. To be referred to the Reporter or not?   Yes
      3. Whether the Judgment should be reported Yes
         in the Digest?

VIKRAMAJIT SEN, J.

1. This Appeal has been filed under Section 37(1)(6) of the

Arbitration & Conciliation Act, 1996 (A&C Act for short)

assailing the Judgment dated 5.2.2010 delivered by the learned

Single Judge. The disputes arose in 1995, and despite the

existence of an arbitration clause, is still awaiting quietus. We

may mention that the Judgment is a very detailed one in which

all the grounds have been meticulously and minutely dealt with,

virtually as if Objections necessitated a hearing akin to that of a

Regular First Appeal. In this regard, we may reiterate the

prefatory observations made in Shree Vinayak Cement -vs-

Cement Corporation of India, 142(2007) DLT 385(DB) to the

effect that it is clearly impermissible, in view of the provisions of

Section 34 of the A&C Act, to require the learned Single Judge

seised with the Objections, to peruse the complete records with

a view to reappraise the materials, including evidence available

on the record of the Arbitral Tribunal. It had further been

observed that the jurisdiction or the scope of inquiry of the

Appellate Court under Section 37 of the A&C Act is even more

restricted and limited.

2. Mr. Rajiv Nayyar, Senior Counsel for the Appellant, has

canvassed three grounds before us. The first pertains to the law

of Discovery and as to whether it is also available in arbitral

proceedings. In this regard, the Arbitral Tribunal had arrived at

the conclusion that the ICC Rules do not contemplate discovery

of document and that the A&C Act also does not preserve these

powers for use of the Arbitral Tribunal. This opinion would

certainly justify a challenge under Section 34 of the A&C Act

since the view of the Arbitral Tribunal would be in

conflict with the public policy in India. Arbitrators seised with

disputes which relate to India would be best advised to give

primacy to the legal regime prevailing in India so as to insulate

their verdict/award from protracted challenge in Indian Courts.

3. While latitude is granted in the fasciculus of Chapter-V of

the A&C Act to the procedure to be pursued by the Arbitral

Tribunal, it would not be legally sound for the Arbitral Tribunal

to conclude that the provisions regarding Discovery are not

available to any of the adversaries before it. The learned Single

Judge, in the impugned Order, has corrected this legal error

concluding that "the Arbitrator has erred in holding that the ICC

Arbitration Rules did not have provision for discovery and

further that the Act, 1996 did not contain any provision for

discovery of documents. The Arbitrator's reasoning that Section

27 of Act, 1996 gave power for discovery only in certain

circumstances is also, in my view, not correct". Indeed, the

learned Senior Counsel for the parties do not challenge this

legal position. Learned Senior Counsel for the Appellant,

however, contends that inasmuch as the application for

Discovery was turned down and rejected by the Arbitral

Tribunal, Section 18 of the A&C Act has been transgressed

inasmuch as the Appellant has not been given a full opportunity

to present its case.

4. It would be convenient to now narrate the facts of the

case. The Appellant had placed an order for the supply of Steel

Plates on the Respondent. It has not been controverted that the

Appellant had breached this contract although an attempt to do

so had been made before us. The impugned Judgment clearly

states that the Appellant made no denial on this score. The

Respondent conveyed a Claim for Damages to the Appellant and

invoked the Arbitration Clause, as a consequence of which

proceedings were conducted by the Arbitral Tribunal. The

contention of the Respondent was that in order to mitigate

losses, it entered into two contracts with Stemcor Ltd. London

on 18.9.1995 and the third with M/s. Seco, USA. The original

claim was for US$ 1.13 million. However, on the first date fixed

for cross-examination of the Respondent/Claimant Witnesses,

the Claim was amended to read in the following fashion:

"As a consequence of the Defendant's breach of the contract, the Claimant has suffered huge losses as indicated herein under:-

A. LOSS ON ACCOUNT OF DIVERSION TO OTHER EXPORTS CONTRACTS LOSS (USD) Contract No.C-6072 a/c M/s Stemcor, quantity diverted 1623 MT @ USD 345/MT 1623 * (408-345) = 102,249 Contract No.C-6073 a/c M/s. Seco, quantity diverted 4857 MT @ USD 345/MT 4857 * (408-345) = 305,991 Additional Expenses incurred for handling & transportation for above diversion = 17632

Sub Total -(A) =425872 B. LOSS ON ACCOUNT OF DIVERSION TO DOMESTIC SALES Quantity Diverted - 3772 MT Quantity Sold in Domestic Market - 2871 MT Price realized in home sales Rs.13218 or USD 377 per MT Loss in realization on a/c of domestic sales 2871 * (408-377) = 89001 Additional expenses incurred for handling and transportation for above diversion = 9605 Loss on a/c of unrealized Export incentives @ 10% of FOB value (3772*408) = 153898 Sub Total-(B) = 243859 C. LOSS OON ACCOUNT OF UNSOLD MATERIAL Quantity remaining unsold 901 MT 901 * 408 = 367608 D. Ground rent @ USD 1 per MT per month = 71079 E. Administrative expenses for the contract @ USD 2/MT 10000*2 = 20000 Grand Total A+B+C+D+E = USD 11,28,418 F. Interest @ 18% from 21.10.95 till receipt of the amount claimed G. Costs and Expenses H. Any other amount(s) the Sole Arbitrator and/or ICC's Court of Arbitration may deem fit and proper".

5. After the conclusion of hearing, in respect of these Claims,

the Arbitral Tribunal published the following Award:-

"52.1 (a) Under Claim A I award and adjudge that the Respondent KRUPP shall pay to the Claimant SAIL the sum of US$ 425,872.00 made up as follows:

i) Loss on account of diversion to Exports contract C-6072 to STEMCOR UK LTD. - US$ 102,249.00 and Contract C-6073 to SECO -- US$ 305,991.00

ii) Additional expenses for handling and transportation - US$ 17,632.00 52.1(b) Under Claim B I award and adjudge that the Respondent KRUPP shall pay to the Claimant SAIL the sum of US$ 93,803.50 made up as follows:

i) Loss on account of diversion to Domestic Sales - US$ 89,001.00

ii) Additional handling and transportation expenses - US$ 4,802.50 52.1(c) Under Claim C I award and adjudge that the Respondent KRUPP shall pay to the Claimant SAIL the sum of US$ 183,804.00 being loss on account of unsold Materials. The grant total from Claims (A) + (B) + (C) is US$ 703,479.50 52.1(d) I award and adjudge that the Respondent KRUPP shall pay to the Claimant SAIL interest at the rate of 5% per annum on the sum of US$ 703,479.50 as from 21.04.1998 (the date when Notice of Arbitration was given by SAIL to KRUPP) till full payment.

52.1(e) I award and adjudge that the Respondent KRUPP shall pay to the Claimant SAIL (a) one-half (1/2) of the sum of US$ 80,000 constituting the costs of the Arbitration as well as (b) one-half (1/2) of the reasonable legal and other costs incurred by the claimant SAIL and parties for this Arbitration. 52.1(f) I also award and adjudge that the Respondent KRUPP shall pay to the Claimant SAIL the full costs given to them vide my order dated 03 March, 1999".

6. The question that immediately arises is whether any

prejudice has been caused to the Appellant as a consequence of

the Arbitral Tribunal having rejected its application for

Discovery, which was made by a letter dated 4.12.1998

addressed to the Arbitrator, the salient portion of which reads

as follows:-

The Respondents request that necessary directions for discovery and inspection be passed by the Learned Arbitrator in respect of the following categories of documents:

1) All documents, books, records (including correspondence) pertaining to matters raised in the pleadings by the Claimant.

2) All documents, books, records pertaining to the disposal by the Claimant of the 10000 MT of steel plates that were the subject matter of the contract between the Claimant and the Respondent ("the steel plates").

3) All documents, books, records (including correspondences between Claimant, M/s. Stemcor, SGS and the port authorities) concerning the steel plates.

7. We are in agreement with the learned Single Judge that

the application, as presented, was indeed vague being in the

nature of a roving or fishing enquiry. Indian law frowns on such

endeavours. It is patently clear that the Appellant was aware of

the fact that the Respondent had entered into a contract with

Stemcor. Mr. Sanjay Jain, learned Senior Counsel for the

Respondent, has stated that the documents, of which Discovery

was prayed for by the Appellant, were duly filed before the

Arbitral Tribunal as annexures/accompaniments of the Amended

Claim filed on 12.4.1999. Since this position has been disputed

by Mr. Nayyar, we have inspected the original records filed

before the learned Single Judge and we find that the submission

of learned Senior Counsel for the Appellant is not correct. It

was in these circumstances that the learned Single Judge has

dismissed these Objections holding that even though the

Arbitral Tribunal had declined to permit Discovery on the

inaccurate and specious ground that the ICC Rules as well as

the A&C Act do not contemplate such directions, no prejudice

had in fact been caused to the Appellant for the simple reason

that the three subject Contracts were actually, even though

belatedly filed in the Arbitral proceedings. The learned Single

Judge has also noted the stand taken on behalf of the Appellant,

viz. that since the amendment of the claims of the Respondent

stood reduced, the Appellant had no objection to it being

allowed. The learned Single Judge has also noted the complete

absence of any cross-examination by the Appellant vis-à-vis the

three contracts. In the event, the Award grants damages by

deducting from the price contracted between the parties the

price paid/received by the Respondent from the two contracts

with Stemcore Ltd. and the third contract with M/s. Seco. The

learned Single Judge was entirely correct in rejecting the

Objections in all aspects pertaining to the application for

Discovery. It is not the province of the learned Single Judge to

go into minute details of the evidence on the record of the

Arbitrator. It is well-settled, even in the context of the 1940 Act,

that it is the Arbitrator who has to appreciate evidence and that

minor mistakes even in this regard are not amenable to

correction by the Courts. The learned Single Judge, as are we,

had been confronted with a case where there was no evidence

in existence. Even so, as we have already observed, by a

detailed Judgment spanning 52 pages and 88 paragraphs, the

learned Single Judge has gone threadbare into every detail and

nuance of the dispute.

8. The second ground for assailing of the impugned Order is

that the amendment ought not to have been allowed when the

case was fixed for cross-examination of the Witnesses. As we

have already noted above, the learned Senior Counsel for the

Appellant in the Arbitral Proceedings had recorded, with

alacrity and for good reasons, the absence of any objection or

remonstration against the amendment of the downsizing of the

claim from the side of the Appellant, obviously because the

claim for Damages had been reduced. The copies of the

contracts between the Respondent on the one side and Stemcor

Ltd. and M/s.Seco were filed alongwith the application. Despite

an opportunity to cross-examine the claimants/Respondent

witness having been extended to the Appellant. The

opportunity was not availed of. This being the position, the

connection of the three contracts with the claim for damages

could not have been contested. In these premises, no ground for

interference with the Award is made on this score.

9. Thirdly, it is contended that there were irregularities so

far as the cross-examination of the Respondent's Witnesses

were concerned. This does not fall within the ambit of

Objections under Section 34 of the A&C Act and certainly are

not entertainable under Section 37.

10. Appeal is devoid of merits and the same is dismissed.

The brevity and disciple with which Mr Nayyar conducted

arguments on behalf of the Appellant persuade us not to impose

Costs, even though the Appeal is against concurrent findings.

CM No.7195/2010 is also dismissed.

( VIKRAMAJIT SEN ) JUDGE

( SIDDHARTH MRIDUL ) JUDGE April 07, 2011 tp