O.M.P./414/2011 of VALE AUSTRALIA PTY LIMITED Vs STEEL AUTHORITY OF INDIA LIMITED & ANR

IN THE HIGH COURT OF DELHI AT NEW DELHI

O.M.P. 414/2011

Reserved on: 2[nd]January, 2012Decision on: 30[th]March, 2012

VALE AUSTRALIA PTY LIMITED..... PetitionerThrough: Mr. Arvind Nigam, Senior Advocate withMr. Amit Sibal, Mr. Anirudh Das and Ms. SmarikaSingh, Advocates.

versus

STEEL AUTHORITY OF INDIA LIMITED& ANR

..... RespondentsThrough Mr. A.K. Ganguli and Mr. Sanjay Jain,Senior Advocates with Mr. Sharat Kapoor, Mr. SunilK. Jain, Mr. Aneesh Mittal, Mr. Parmatma Singh, Ms.Reeta Chaudhary, Mr. Mayank Jain and Mr. SachinSharma , Advocates for R-1/SAIL.Mr. Rajiv Nayar, Senior Advocate withMr. Dhirendra Negi, Mr. Dheeraj Nair and Mr.Shidharth Sethi, Advocates for R-2/AMCI.

With

O.M.P. 415/2011

AMCI PTY LIMITED

..... PetitionerThrough Mr. Rajiv Nayar, Senior Advocate withMr. Dhirendra Negi, Mr. Dheeraj Nair andMr. Shidharth Sethi, Advocates.

versus

STEEL AUTHORITY OF INDIA LIMITED

& ANR..... RespondentsThrough Mr. A.K. Ganguli and Mr. Sanjay Jain,Senior Advocates with Mr. Sunil K. Jain, Mr. AneeshMittal, Mr. Parmatma Singh, Ms. Reeta Chaudhary,Mr. Mayank Jain and Mr. Sachin Sharma , Advocatesfor R-1/SAIL.Mr. Arvind Nigam, Senior Advocate with Mr. AmitSibal, Mr. Anirudh Das and Ms. Smarika Singh,

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Advocates for R-2.

AND

O.M.P. 451/2011

AMCI PTY LIMITED

..... Petitioner

Through Mr. Rajiv Nayar, Senior Advocate withMr. Dhirendra Negi, Mr. Dheeraj Nair andMr. Shidharth Sethi, Advocates

versus

STEEL AUTHORITY OF INDIA LIMITED& ANR

..... RespondentsThrough Mr. Sunil K. Jain, Mr. Aneesh Mittal,Mr. Parmatma Singh, Ms. Reeta Chaudhary, Mr.Mayank Jain and Mr. Sachin Sharma , Advocates forR-1/SAIL.Mr. Arvind Nigam, Senior Advocate withMr. Amit Sibal, Mr. Anirudh Das and Ms. SmarikaSingh, Advocates for R-2.

CORAM: JUSTICE S. MURALIDHAR

JUDGMENT30.03.2012

Introduction

1. These are three petitions under Section 34 of the Arbitration andConciliation Act, 1996 (‘Act’) arising out of the proceedings in which finalAward dated 10[th]March 2011 was passed by the Arbitral Tribunal(‘Tribunal’) constituted under the Rules of Arbitration of the ICCInternational Court of Arbitration.

2. OMP No.414 of 2011 is by Vale Australia Pty Ltd. (‘Vale’) formerlyknown as CVRD Australia Pty Ltd. and OMP No.415 of 2011 is by AMCIPty Ltd. (‘AMCI’). Both petitions challenge the final Award dated 10[th]March 2011 whereby the Tribunal allowed the claim of Respondent No.1 -

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Steel Authority of India Ltd. (‘SAIL’) for damages and held that Vale andAMCI were liable to pay SAIL damages equivalent to US Dollar (‘USD’)152,270,789.10, simple interest on the said sum at the rate of 2.335364% perannum pendente lite from 2[nd]April 2009 till the date of the Awardaggregating to USD 6,897,815.48, 80% of the SAIL’s legal costs andexpenses in the sum of USD 320,000 and sum of USD 160,000 being theadvance on costs paid by the SAIL to ICC.

3. After the final Award was passed, both Vale and AMCI filed separateapplications on 7[th]April 2011 under Section 33 of the Act praying for anadditional award on the issue of interest for the post-Award period. Theseapplications were rejected by the Tribunal on 16[th]May 2011 clarifying thatthe Tribunal had “consciously omitted to make any direction on post-Awardinterest in the final Award”. AMCI has filed separate petition being OMPNo.451 of 2011 under Section 34 of the Act challenging the aforementionedOrder dated 16[th]May 2011.

Background Facts

4. Vale is company incorporated in Australia having its registered office atBrisbane.It was formerly known as AMCI Australia Pty. Ltd.It wasrenamed as CVRD Australia Pty. Ltd. and thereafter as Vale after the CVRDGroup acquired the shares of AMCI Holding Australia Pty. Ltd., the parentCompany of AMCI Australia Pty Ltd. pursuant to an agreement executed on24[th]February 2007. AMCI Australia Pty. Ltd. was acting both as the coalproducer and seller in terms of the earlier agreements executed betweenAMCI Australia Pty Ltd. and SAIL as well as under the Long TermAgreement (‘LTA’) dated 23[rd]April 2007 (LTA 217/2007) between theparties which forms the subject matter of the present dispute.After theacquisition by the CVRD Group of Vale, Vale acted as the producer underthe Agreement and AMCI Pty. Ltd. (AMCI) which was the newly formed

subsidiary of AMCI Australia Pty. Ltd. was to act as the seller.In otherwords, under the present arrangement, Vale was the producer of coal andAMCI was the seller.

5. By an Agreement dated 22[nd]June 2004 and by subsequent Agreementdated 12[th]April 2005 Vale, then known as AMCI Australia Pty Ltd., hadcompleted supplies of coking coal to SAIL. Under the LTA in question dated23[rd]April 2007, Vale and AMCI agreed to supply SAIL 750,000 MetricTonnes (‘MT’) of Broad-Borough medium volatile hard coking coal.Pursuant to an amendment dated 7[th]June 2007, Vale and AMCI were jointlyresponsible to supply the contracted hard coking coal, with Vale acting as theproducer and AMCI the seller.

6. In terms of Clauses 1.1, 1.2, and 1.3 of the LTA 750,000 MT plus/minus10%, plus 250,000 MT at SAIL’s option, was to be supplied by Vale andAMCI to SAIL within the delivery period from July 2007 to June 2008[hereinafter referred to as ‘the First Delivery Period’ (FDP)] at price ofUSD 96.45 per MT (‘PMT’) FOB. In terms of Clause 2, the price for the laterdelivery periods was to be mutually fixed prior to the commencement of thedelivery period. Clause 1 of the LTA specified that Broad-Borough MediumVolatile hard coking coal was to be blend of 50% Carborough Downs hardcoking coal and 50% Broadlea hard coking coal.

7.On 26[th]March 2007, SAIL exercised its option for purchase of anadditional quantity of 250,000 MT Broad-Borough hard coking coal forsupply during the FDP. Vale and AMCI supplied 246,539 MT of thecontracted hard coking coal during the FDP between 1[st]September 2007 and21[st]March 2008. Disputes arose between Vale and AMCI on the one handand SAIL on the other regarding the supply of the balance 753,461 MT.SAIL’s case was that there was deliberate breach of the LTA by Vale and

AMCI in not meeting the target supplies in the FDP since there was amanifold rise in the price of coal from USD 96.45 PMT to USD 400 PMTFOB during the relevant period 2007-08. SAIL’s case is that as result it hadto procure the balance quantity from other sources at price much higherthan the market price at the risk and cost of Vale and AMCI.

8. Under Clause 2.2 of the LTA “price shall be firm and not be subject toany escalation for any reason, whatsoever, until the completion of delivery ofthe entire Agreement quantity due for delivery in the relevant delivery periodwith such extensions as might be mutually agreed upon between thepurchaser and seller.” Under Para 1.2 of the General Conditions of theAgreement (‘GCA’), it was stated that “quantities which are delayed and aredelivered after expiry of the relevant delivery period shall not attract priceadjustment and shall be supplied at the price fixed for the relevant deliveryperiod subject to provisions of Clause 2.2 of the Agreement.” Para 7.1 of theGCA stated that “The period of delivery is of the essence of this Agreement.”Under Para 8.1 of the GCA, upon the seller’s failure to deliver the requiredmaterials within the time specified in the Agreement, the seller would have topay the liquidated damages (not by way of penalty), sum equivalent to onepercent of the price of any materials which the seller has failed to deliver foreach and every month of delay or part thereof provided, however, suchliquidated damages (‘LD’) shall not apply to any period of extension grantedby the purchaser under the force majeure condition. The maximum amountof LD levied on any shipment will not exceed 10% of the value of thematerials in that shipment. Further, delivery of materials, after the same wasto become liable for levy of LD under the said clause, “shall not operate as awaiver of the Purchaser’s right to levy liquidated damages.”

9. Para 9 of GCA concerned risk purchase. Para 9.1 read as under:

“9.1 If the Seller in any manner or otherwise neglects or fails

to perform the Agreement, the Purchaser after having come to knowof such negligence or non-performance after giving notice shalltake such action as it considers fit including taking any risk purchaseaction for supply of similar materials at the risk and cost of theSeller.”

10.Under Para 12.1 of the GCA if the Agreement did not meet theobjectives set out therein and upon mutual agreement between the parties, itcould be foreclosed. Para 20.1 of the GCA contained an arbitrationagreement whereby all disputes arising in connection with the Agreementwere to be finally settled under the Rules of Arbitration of the InternationalChamber of Commerce, Paris by the Sole Arbitrator appointed in accordancewith the said Rules. The Award made pursuant thereto was to be binding onthe parties. The Arbitrator was to give reasons for the award. The place ofArbitration was to be New Delhi, India. Under Para 21.1 of the GCA, theAgreement was to be governed by and construed according to the laws ofIndia for the time being in force.

Arbitral proceedings

11. SAIL submitted its request for arbitration to the ICC on 31[st]March 2009.The ICC International Court of Arbitration appointed Professor Lawrence G.S. Boo as the Sole Arbitrator in accordance with Article 9(3) of the ICCRules at its session on 11[th]June 2009.

12. SAIL’s claim as it initially submitted to the Tribunal included claim fora sum of USD 153,440,000 for non-supply of the contracted quantity of753,461 MT. This was computed as the total of the excess price PMT paidfor different quantities i.e. USD 203.55 (USD 300 – USD 96.45 for 605,240tonnes); 204.45 (USD300.90 – USD 96.45 for 148,221 tonnes). SAIL alsoclaimed unpaid demurrage charges pursuant to Bill of Lading dated 21[st]February 2008 (Hardwar Shipment) in the sum of USD 950,000. In addition

to the above two claims, SAIL had initially claimed USD 7,260,000 as LD interms of Para 8 of the GCA and USD 50,000 being the sum incurred onaccount of extra efforts to obtain the contracted material from alternatesources. The last two claims were given up at the final closing submissionsby SAIL. The revised claim was for the sum of USD 153,440,000 for non-supply of contracted tonnage based on the excess PMT paid over the contractprice and USD 950,000 towards unpaid demurrage charges for the vesselHardwar and interest at 12.75% per annum from April 2008 till the date ofrealization and cost of arbitration.

13. The above claims were resisted by Vale and AMCI on the ground that onaccount of the failure by SAIL to issue them risk purchase notice underClause 9.1 of the GCA, no claim for risk purchase could be sustained. SAILhad agreed to accept alternate supply of coal and had thereby discharged bothVale and AMCI from further obligation to supply the hard coking coal forthe FDP. SAIL had itself granted extension of time for performance of thecontract without reserving its rights. Therefore, Vale and AMCI were not inbreach of the contract. It was contended that the letters dated 22[nd]and 31[st]October 2008 and 1[st]December 2008 from SAIL to Vale and AMCImanifested the intention on the part of SAIL “to recognize or to accept thepromise of the performance of the alternate obligation” by Vale and AMCI.SAIL had elected for performance and not opted to void the LTA. SAIL was,thus, estopped from alleging any breach by Vale and AMCI. It was furthercontendedthattheongoingparticipation,negotiationandcontinuedinsistence upon specific performance by SAIL after the alleged date of riskpurchase was inconsistent with the risk purchase claimed. Therefore, SAILhad lost or alternatively waived its right to claim damages towards riskpurchase. It was also inconsistent with its claim for LD. It was specificallypleaded by Vale and AMCI that SAIL had failed to mitigate the loss and thatSAIL had not established that it had made risk purchase. The claims for risk

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purchase were not properly documented. The documents tendered by SAILmade no reference to the risk purchase. It was likely that SAIL had made thepurchase pursuant to the existing LTAs with other Long Term Suppliers(LTSs) which were not risk purchases under the contract. SAIL’s claim forLD was resisted on the ground that there were no particulars to substantiatesuch claim. Also while extending the time for performance of the contract,SAIL had made no reservation of its right to claim LD for the delay. SAILhad not suffered any loss on account of delay and had not pleaded loss. Theclaim for LD was inconsistent with the claim for risk purchase. Since thecontract did not provide for payment of interest, there was no basis for theclaim on that score. In any event, the rate of interest claimed was excessive.

Issues

14.The Tribunal, on the basis of the pleadings, identified the followingissues for determination:-

“WhethertheRespondentswereinbreachofContractNo.217/2007 dated 23.4.2007?

a. Whether the time for performance by the Respondents of the FirstDelivery Period under the Contract has been extended by theClaimant?

b. Whether the Claimant had accepted the Respondents’ promise tosupply an alternate quality of coal?

c. Whether the Claimant had dispensed with strict performance ofContract?

d. Whether the Claimant has waived and/or is estopped fromclaiming any remedy for the Respondents’ alleged non-performance?

e. Whether the Claimant’s legal notice of 20 January 2009 wasproperly given and its effect (if any)?

Risk Purchase Damages

f. Whether Para 9 of the GCA requires the Claimant to give prior

notice of any contemplated risk purchase or only notice ofnegligence or non-performance?

g. Whether the Claimant had complied with the requirement to givesuch notice?

h. Whether the Respondents have waived the requirement of suchnotice?

i. Whether the Claimant undertook risk purchase under Para 9 of theGCA?

j. Whether the Claimant had affirmed the Contract; if so, whether theaffirmation precludes the claim for risk purchases action for non-delivery during the First Delivery Period?

k. Whether the Claimant is entitled to claim damages on account ofthe purported risk purchase and if so, to what amount?

l. Whether the Claimant mitigated the loss it is alleged to havesuffered?

Liquidated Damages

m. Whether the Para 8.1 of the GCA is enforceable?

n. If so, whether the claim for liquidated damages can be maintainedcumulatively with that of risk purchase under Para 9.1?

o. Whether the Claimant is entitled to liquidated damages, and if so,to ascertain the period of delay for which such damages are payable,and the amount of such damages?

Expenditure

p. Whether the Claimant has incurred extra expenditure towardsprocurement of deficit coal from alternate sources?

q. If so, what are the expenditure incurred and whether they fall to beborne by the Respondent?

Demurrage

r. Whether demurrage charges were incurred by the Claimant on theshipment on “Hardwar”?

s. If so to ascertain the amount of demurrage and whether they arepayable by the Respondent to the Claimant.

Award of interests and costs

t. Whether interest ought to be paid on any of the sums found to bedue to the Claimant and if so the proper rate and period thereof.

u. Who should bear the cost of this arbitration and to ascertain thequantum thereof?”

The Arbitral Award

15.The impugned Award answered issue (a) in the negative. Afterexamining the correspondence exchanged between the parties and afterdiscussing the decisions of the Indian Courts interpreting Sections 55 and 63of the Contract Act 1872, the Tribunal concluded that while due considerationwas given by SAIL to the proposals of Vale and AMCI to fulfill theircontractual commitments, none of them came to fruition and the time for theperformance of contract was never extended by SAIL. In particular, it washeld that “no carryover of the First Delivery Period was ever agreed”. It washeld that the alleged extension of time to be granted by the non-defaultingparty had to be “categorical in nature, rather being vague or on the anvil ofpresumptions”.It was further held that mere call by SAIL (through itscounsel’s letter dated 20[th]January 2009) to Vale and AMCI to perform theircontractual obligation in accordance with the terms of the contract would notamount to an extension of time or waiver of late performance.16. The impugned Award answered issue (b) in the negative. It was held thatSAIL had not accepted the promise of Vale and AMCI to supply an alternatequality of coal. Issue (c) was answered in the negative by holding that SAILhad not dispensed with the strict performance of the contract. Issue (d) wasanswered in the negative by holding that SAIL had not waived and was notestopped from claiming any remedy for the non-performance of the contract

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by Vale and AMCI. Issue (e) was answered in the affirmative. It was heldthat the notice dated 20[th]January 2009 by SAIL’s lawyer to Vale and AMCIwas properly given. Its effect was, however, minimal and did not affect theparties’ rights whatsoever in the arbitration. It was concluded by the Tribunalthat the balance of the contracted materials of 753,461 MT had not beendelivered to SAIL within the First Delivery Period. Vale and AMCI did notoffer any reason or explanation to account for such failure. It followed thatthey were in breach of the contract dated 23[rd]April 2007.

17. As regards issues (f) and (g) , the Tribunal found that the invitation bySAIL to AMCI and Vale to attend the meeting of the Empowered JointCommittee (‘EJC’) would not itself constitute sufficient notice of riskpurchase which was required to be given under Para 9 of the GCA. However,the Tribunal answered issue (h) in the affirmative and held that Vale andAMCI had waived notice under Para 9 of the GCA by letter dated 18[th]December 2007. SAIL was thereafter not required to comply with therequirement of prior notice for making risk purchase. The Tribunal furtherheld that by merely asking Vale and AMCI to comply with their contractualobligation, SAIL had elected not to go in for risk purchase or to exercise itsother remedies. Answering issue (j) in the negative, the Tribunal held thatthere was no affirmation of the contract by SAIL and its actions or omissionsdid not preclude it “from taking all actions including risk purchase action forthe undelivered balance of the Materials due under the First Delivery Period.”

18. As regards issue (i), the Tribunal held that SAIL had consciously decidedto purchase 800,000 MT of hard coking coal to cover the amount of coal notdelivered by AMCI and Vale. On the issue of similarity of the coking coalpurchased by SAIL from its three LTSs i.e. BHP Billiton Marketing AG(‘BHP’), Anglo Coal Australia Pty Ltd. (‘Anglo’) and Peabody EnergyAustralia Coal Pty Ltd. (‘Peabody’), it was held that the differences in quality

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were not substantial. On issue (l), the Tribunal held that SAIL had done all itcould to minimize its loss by purchasing replacement coal from its LTSsinstead of the spot market. On issue (k), it was held that SAIL had sufferedloss and damage amounting to USD 152,270,789.10.

19.SAIL did not press its claim for LD. Also, at the stage of finalsubmissions SAIL elected to abandon the claim for expenditure. Thus issues(m) to (q) were not required to be decided. SAIL’s claim for demurrage issues(r) and (s) were rejected.

20. As regards the claim for pendente lite interest [issue (t)], the Tribunalawarded SAIL the LIBOR interest rate + 1.25% i.e. at 2.335364% on USD152,270,789.10 from the date of request for arbitration (2[nd]April 2009) tillthe date of the Award. As regards the cost of arbitration [issue (u)], it washeld that Vale and AMCI had to bear the whole of the cost and accordingly,the Arbitrator directed that USD 160,000 be paid to SAIL being the cost paidto the ICC. As regards the legal costs incurred by SAIL, the Tribunal heldthat Vale and AMCI should pay 80% of the cost incurred.

21.SAIL has accepted the impugned Award and has not challenged therejection of its claim for demurrage. The present petitions by AMCI and Valechallenge the findings of the learned Arbitrator on issues (a) to (e) [regardingbreach of the contract by them], on issues (f) to (l) [concerning risk purchasedamages], issues (t) and (u) [concerning interest, cost of arbitration and legalcosts] and to the extent that both the applications of AMCI and Vale underSection 33 of the Act were rejected by the Tribunal by the further Order dated16[th]May 2011 clarifying that the Tribunal had “consciously omitted to makeany direction on post-Award interest in the final Award”.

22.This Court has heard the submissions of Mr. Arvind Nigam, Senior

Advocate and Mr. Amit Sibal, Advocate for Vale, Mr. Rajiv Nayar, SeniorAdvocate for AMCI, Mr. A.K. Ganguli and Mr. Sanjay Jain, SeniorAdvocates and Mr. Sunil K. Jain, Advocate for SAIL.

23. The Court proposes to consider the submissions issue-wise in the sameorder as the Tribunal did. Issues (a) to (d) concerned the failure of Vale andAMCI to meet their respective obligations under Contract No. 217 of 2007dated 23[rd]April 2007. It was held by the Tribunal that (a) SAIL had notextended the time for the supply to be made by Vale and AMCI under theFDP; (b) SAIL had not accepted their offer to supply alternate quality ofcoal; (c) that SAIL had not dispensed with strict performance of the contractand (d) that SAIL was not estopped from claiming remedies for non-performance of contract by Vale and AMCI.

Scope of the Court’s jurisdiction under Section 34 of the Act

24. Before commencing the exercise of examining the correctness of theimpugned Award, it is necessary to recapitulate the settled principles of lawregarding the scope of the powers of the Court under Section 34 of the Act.In McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC181 the Supreme Court traced the change in the parameters for judicialreview of arbitral awards from the 1940 Act to the 1996 Act as under (SCC,p. 209):

“58. In Renusagar Power Co. Ltd. v. General Electric Co.1994 Supp (1)SCC 644, this Court laid down that the arbitral award can be set aside if itis contrary to (a) fundamental policy of Indian law; (b) the interests ofIndia; or (c) justice or morality. narrower meaning to the expression“public policy” was given therein by confining judicial review of thearbitral award only on the aforementioned three grounds. An apparentshift can, however, be noticed from the decision of this Court in ONGCLtd. v. Saw Pipes Ltd. (2003) 5 SCC 705 (for short “ONGC”). This Courttherein referred to an earlier decision of this Court in Central InlandWater Transport Corpn. Ltd. v. Brojo Nath Ganguly (1986) 3 SCC 156wherein the applicability of the expression “public policy” on thetouchstone of Section 23 of the Indian Contract Act and Article 14 of theConstitution of India came to be considered. This Court therein wasdealing with unequal bargaining power of the workmen and the employerand came to the conclusion that any term of the agreement which ispatently arbitrary and/or otherwise arrived at because of the unequalbargaining power would not only be ultra vires Article 14 of theConstitution of India but also hit by Section 23 of the Indian Contract Act.In ONGC this Court, apart from the three grounds stated in Renusagar,added another ground thereto for exercise of the court's jurisdiction insetting aside the award if it is patently arbitrary.

59. Such patent illegality, however, must go to the root of the matter. Thepublicpolicyviolation,indisputably,shouldbesounfairandunreasonable as to shock the conscience of the court. Where the arbitrator,however, has gone contrary to or beyond the expressed law of the contractor granted relief in the matter not in dispute would come within thepurview of Section 34 of the Act. However, we would consider theapplicability of the aforementioned principles while noticing the merits ofthe matter.

60. What would constitute public policy is matter dependant upon thenature of transaction and nature of statute. For the said purpose, thepleadings of the parties and the materials brought on record would berelevant to enable the court to judge what is in public good or publicinterest, and what would otherwise be injurious to the public good at therelevant point, as contradistinguished from the policy of particularGovernment. (See State of Rajasthan v. Basant Nahata (2005) 12 SCC77)

61. In ONGC this Court observed: (SCC pp. 727-28, para 31)

“31. Therefore, in our view, the phrase ‘public policy of India’used in Section 34 in context is required to be given widermeaning. It can be stated that the concept of public policyconnotes some matter which concerns public good and the publicinterest. What is for public good or in public interest or whatwould be injurious or harmful to the public good or publicinterest has varied from time to time. However, the award whichis, on the face of it, patently in violation of statutory provisionscannotbesaidtobeinpublicinterest.Suchaward/judgment/decisionislikelytoadverselyaffecttheadministration of justice. Hence, in our view in addition tonarrower meaning given to the term ‘public policy’ in Renusagarcase it is required to be held that the award could be set aside if it

is patently illegal. The result would be—award could be set asideif it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality; or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivialnature it cannot be held that award is against the public policy. Awardcould also be set aside if it is so unfair and unreasonable that it shocks theconscience of the court. Such award is opposed to public policy and isrequired to be adjudged void.”

25. Significantly, in McDermott International Inc., the Supreme Court wascareful to highlight that the ONGC grounds of challenge were an addition tothe grounds earlier listed in Renusagar. Those grounds have been reiteratedin large number of decisions and summarised in Steel Authority of IndiaLimited v. Gupta Brother Steel Tubes Limited (2009) 10 SCC 63 (SCC, p.78):

“(i) In case where an arbitrator travels beyond the contract, theaward would be without jurisdiction and would amount to legalmisconduct and because of which the award would become amenablefor being set aside by court.

(ii) An error relatable to interpretation of the contract by an arbitratoris an error within his jurisdiction and such error is not amenable tocorrection by courts as such error is not an error on the face of theaward.

(iii) If specific question of law is submitted to the arbitrator and heanswers it, the fact that the answer involves an erroneous decision inpoint of law does not make the award bad on its face.

(iv) An award contrary to substantive provision of law or against theterms of contract would be patently illegal.

(v) Where the parties have deliberately specified the amount ofcompensation in express terms, the party who has suffered by such

breach can only claim the sum specified in the contract and not inexcess thereof. In other words, no award of compensation in case ofbreach of contract, if named or specified in the contract, could beawarded in excess thereof.

(vi) If the conclusion of the arbitrator is based on possible view ofthe matter, the court should not interfere with the award.

(vii) It is not permissible to court to examine the correctness of thefindings of the arbitrator, as if it were sitting in appeal over hisfindings.”

26.The proceedings under Section 34 are certainly not of an appellatenature. In P.R. Shah, Shares & Stock Broker v. M/s. B.H.H. Securities (P)Ltd. 2011 (11) SCALE 668, the Supreme Court held: “A court does not sit inappeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence.” Section 34 is not meant to clothe the Court withanything more than power of limited judicial review, the width of which isdefinitely less than that of an appellate court. Considering that the essentialthrust of the 1996 Act was to minimize judicial interference, where the courtis satisfied that the parties have had full-fledged opportunity of hearing onfacts and law, including examination of witnesses, followed by detailedreasoned Award issue-wise, the Court should be reluctant to easily interfere.The threshold set in ONGC by the Supreme Court and further elaborated inMcDermott International Inc., has to necessarily be high. The illegality hasto be “patent” or “go to the root of the matter”. Otherwise, every petitionunder Section 34 of the Act would end up being argued as an appeal, whichdefinitely was not the legislative intent behind Section 34. Also, sincearbitration as an alternative to judicial proceedings was intended to be bothefficacious and expeditious, converting the proceedings under Section 34 tothat of an appeal on facts and law would defeat that objective.

27. The Court proceeds to examine the challenge to the impugned Award in

light of the parameters delineated in the above decisions of the SupremeCourt.

Were Vale and AMCI in breach of the LTA?

28. Issues (a) to (e) were grouped under the broader issue whether Vale andAMCI were in breach of the LTA? The defence of AMCI and Vale was thatSAIL had impliedly granted extension of time for performance and chose toinsist on performance rather than voiding the contract. Issue (a) therefore waswhether in fact there was such extension of time granted by SAIL? Vale andAMCI submitted that the Tribunal’s finding that there was nothing to suggestthat SAIL had granted an extension of time or had acquiesced for time to “goby” is against the evidence on record, in particular SAIL’s letters of 22[nd]and31[st]October 2008, 1[st]December 2008 and 20[th]January 2009. Further it issubmitted that SAIL’s witness Mr. Rawat had in respect of the aforesaidletters admitted that in effect SAIL had offered an opportunity to Vale tosupply the balance quantity.29. There were two specific submissions by Vale and AMCI in this regard.One was that by extending the time for performance of the contract SAIL haddispensed with requirement for timely performance of the contract.Reference was made to Sections 55 and 63 of the Contract Act by pointingout that there was no avoidance of the contract by SAIL, which in thecircumstances was one option available to it. Reliance is placed on thedecisions in Muhammad Habidullah v. Bird & Co. AIR 1922 Privy Council178; Kailash Nath and Associates v. Delhi Development Authority 2007(98) DRJ 9; Aryan Mining and Trading Corporation Ltd. v. B. N. Elias &Co. AIR 1959 Cal 472; Manni Lal v. Nihal Chand AIR 1930 Oudh 417;Shriram Pistons v. Buckeye Machines 136 (2007) DLT 254; HindConstruction v. State of Maharashtra (1979) 2 SCC 70 and ArosanEnterprises v. Union of India (1999) 9 SCC 449. Secondly, it is submitted

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that Section 63 of the Contract Act does not require any bilateral agreementfor dispensation of performance. It entitles promisee to dispense with strictperformance of the contract and the promisor would then not be held liablefor non- performance of the original obligation. In this regard, reliance isplaced on the decisions in Todarmal v. Chironjilal AIR 1956 M.B. 25 andMt. Jamnubai v. Murlidhar AIR 1946 Nagpur 148. It is pointed out that inpara 66 of the Award, the Tribunal noted AMCI’s argument that time beingof the essence of the contract then upon non-performance, the contractbecomes voidable at the option of the promisee and that in such case theonly right under Section 55 of the Indian Contract Act which the promiseehas is to avoid the contract. It is submitted that this argument was based uponthe judgment of the High Court of Andhra Pradesh in T. Venkata Reddy v.Vegesana AIR 1968 AP 190. The Tribunal however wrongly assumed thatAMCI’sargumentwas“culledfromPrivyCouncil’sremarks”inMuhammad Habidullah v. Bird & Co. and held in Para 67 that there wasnothing in the said judgment to substantiate AMCI’s argument. It isaccordingly submitted that the Tribunal rejected the plea available in law ona totally misconceived premise.

30. The facts relevant for the first set of issues are that under the LTA dated23[rd]April 2007 Vale and AMCI were required to deliver to SAIL 1 millionMT of hard coking coal during the FDP July 2007 to June 2008. In responseto query from SAIL on 18[th]May 2007 whether Vale and AMCI would bewilling to supply any additional quantity for the FDP, AMCI replied thesame day citing restricted port allocation at the Dalrymple Bay CoalTerminal (DBCT) which was undergoing expansion of its facilities andupgrade of its loading capacity. This meant no supplies during July 2007 butdeferred coal supplies of 100,000 MT during the months of August, Octoberand December 2007 in two batches of 50,000 MT each month. SAIL wroteto AMCI on 19[th]May 2007 reminding it that it was required to supply evenly

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at least 85,000 MT per month continuously in order to meet the LTAobligations and that other Australian LTSs, were despite the port restrictionsat DBCT, not prevented from supplying not less than the pro rata quantityduring the same period. SAIL requested that supply of at least 100,000 MTbe made per month. AMCI by its reply dated 20[th]May 2007 howeverexpressed inability to offer additional quantities due to port restrictions.There was continuous exchange of correspondence thereafter between theparties with the explanations offered by AMCI and Vale for not meeting thetarget supplies under the LTA ranging from technical problems with the coalprocessing equipment to high demurrage rates and restricted port allocationat DBCT. As result the supply targets under the LTA were progressivelyreduced to 300,000 MT by December 2007 (instead of 500,000 MT) and thenfurther down to 250,000 and 200,000 MT. In the third quarter of the FDP itwas 150,000MT and finally down to nil supplies in the last quarter of theFDP 2007-08. During this period from May 2007 till May 2008 the marketprice of hard coking coal sharply rose from USD 96.45 PMT to USD 400PMT.

31. It is in the above background of continuous exchange of letters betweenthe parties before and after the letter dated 18[th]December 2007 of AMCI,that the said letter had to be viewed. By the said letter AMCI informed SAILthat due to the delay in completion of the expansion of the port of DBCTthey had not been able to get access to the port allocation and “this portallocation has been permanently lost.” Further, “with the delay of January toMarch period, 1/4[th]of this capacity has been lost i.e. 500,000 MT has beenlost. In an effort to treat all customers fairly, we had allocated 50% of thisallocation to the SAIL business, therefore our ability to perform the abovementioned agreement has been permanently reduced to 300 kt.” AMCI madeit clear therefore that it would not be able to deliver 0.3 million MT of hardcoking coal as contracted under the LTA dated 23[rd]April 2007 in the FDP. It

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had “tentatively planned” shipping schedule for the 0.7 million MT to besupplied between July 2007 and June 2008. AMCI requested deferral of “alltonnage commitments for the 2008 and 2009 contract years with resumptionof deliveries in 2010.” It was emphasised that AMCI and Vale had “verylittle confidence in the availability of port capacity in the near to mediumterm.” They were impelled to “advise SAIL as early as possible so that SAILis able to consider any other sourcing options that may be available.”

32. This was followed by series of letters exchanged between the partieswhich has been tabulated by the Tribunal in para 61 of the Award. Since insupport of their submissions Vale and AMCI have particularly referred to theletters dated 22[nd]and 31[st]October 2008, 1[st]December 2008 and 20 January2009 from SAIL, those may be briefly examined. By its letter dated 22[nd]October 2008 SAIL rejected the offer of Vale and AMCI to foreclose thecontract and asked them to supply the balance contracted quantity of 750,000MT for the FDP. This by no means was grant of extension of time butactually reminder of the default in complying with contractual obligation.The letter dated 31[st]October 2008 was in the nature of further reminder bySAIL to Vale and AMCI to honour their supply commitments for the FDP.The ‘conceptual proposal’ that Vale and AMCI put forth was rejected bySAIL by its letter dated 1[st]December 2008 and they were asked to supply thebalance FDP quantity in “the shortest possible time.” It is inconceivable howthis could be viewed as an extension of time for performance. The legalnotice dated 20[th]January 2009 reminded Vale and AMCI to resume suppliesunder the LTA.33.The Tribunal concluded, after reviewing the case law in regard toSections 55 and 63 of the Contract Act that the extension of time by the non-defaulting party had to be “categorical in nature rather than being vague onthe anvil of presumptions.” Indeed this is the law explained in Arosan

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Enterprises v. Union of India where it was explained that the parties should“knowingly give go-by to the stipulation as regards the time” and pointedout that this may have two effects. Either they may “name future specificdate for delivery” or “may agree to abandonment of the contract.” Eithercourse of course had to have consensus. In the present case there was noconsensus between the parties that the time for performance would beextended. There were negotiations but to no result. In the circumstances, theTribunal rightly concluded that SAIL’s calls for performance was at best aninvitation to redress breach and would not amount to an extension of timeor “a waiver of late performance.” The finding that there was no extension oftime granted by SAIL was the right one as it was based on correctunderstanding of the requirement under Indian law for the defence underSections 55 and 63 of the Contract Act to be availed by the defaulting parties,which in this case were Vale and AMCI.

34.It is next submitted that the Tribunal erred in holding that SAIL hadnever accepted the offer by Vale and AMCI to supply an alternate qualitycoal. The facts relevant to this issue are that by letters dated 23[rd]April, 29[th]April and 1[st]May 2008 Vale and AMCI made it clear that they were not in aposition to supply coal of the quantity and quality as agreed under the LTA.Going to the spot market to make up for the deficit would have proved toocostly for SAIL and so it turned to its other LTSs.On 11[th]June 2008 Valeand AMCI offered what SAIL terms as “soft coking coal” with nocommitments as to quantity or delivery period. On 9[th]September 2008 Valeand AMCI offered 300,000 MT of Broadlea specification coking coal to bedelivered within 12 months. But SAIL insisted on confirmation that the fullbalance quantity of 750,000 MT would be supplied. This was notforthcoming from Vale and AMCI. On 7[th]November 2008 Vale offered tocombine the FDP and SDP quantities but this was rejected by theEmpowered Joint Committee (EJC) since the offer had elements that were

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“vague and uncertain.” It was stated that “there cannot be any question ofnovation of the earlier contract based on such premises.” The fourth offerwas made on 8[th]December 2008 for supply of 300,000 MT of Broadleacoking coal at USD 96.45 but SAIL did not accept it and asked it to resumesupplies of coal as agreed under the LTA.The fifth offer was on 2[nd]February 2009 for supplying 300,000 MT of Broadlea coal and 450,000MTof hard coking coal but not specifying the delivery period or price. The sixthoffer was for the entire balance quantity of 750,000 MT of hard coking coalbut again without mentioning the price or delivery period. The Tribunal toohas, in paras 84 to 94 of the Award, analysed the entire correspondencebetween the parties in this regard and concluded that SAIL had not acceptedthe offer of Vale and AMCI to supply an alternate quality of coal.It isaccordingly concluded that at no time did SAIL dispense with the strictperformance of the contract. The Court is unable to find any error in theanalysis of the evidence or the conclusion of the Tribunal.35. Raising the plea of estoppel in law, it is submitted by Vale and AMCIthat the Tribunal did not consider whether SAIL’s conduct after June 2008 inseeking deliveries of 750,000 MT of coal till January 2009 amounted to arepresentation to AMCI and Vale that SAIL had not procured risk purchasecoal. According to Vale and AMCI, the question to be answered by theTribunal was whether they had acted upon the representation that SAIL hadnot undertaken risk purchase action. In para 105 of the Award, the Tribunalnoted that the various proposals given by AMCI and Vale were not based onany “representation that SAIL would not undertake risk action”. It issubmitted that the Tribunal failed to note that the question whether “SAILwould not undertake risk action” was irrelevant to the defence of estoppel.According to Vale and AMCI, the relevant question was whether SAIL hadrepresented to AMCI and Vale, whether by conduct or otherwise, that it hadnot undertaken risk purchase (and not that it would not). It is submitted that

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the Tribunals’ finding in Para 106 of the Award that AMCI and Vale had notacted on SAIL’s representation, and had suffered no prejudice or detriment,was without any basis or reasoning. It is submitted that the Impugned Awardis against the principle of promissory estoppel under Section 115 of theEvidence Act, which binds promisor to his promise if the person to whomthis promise is made acts on that promise. In this regard, reliance is placed onthe decisions in Central London Property v. High Trees (1947) I KB 130;Motilal Padampat Sugar Mills v. The State of Uttar Pradesh AIR 1979 SC621; Amalgamated Investment v. Texas Commerce (1982) 1 QB 84; Spirov. Lintern (1973) 1 WLR 1002; Taylors Fashions v. Liverpool Victoria(1982) 1 QB 133;L.M.L. Ltd. v. State of U.P. (2008) 3 SCC 128; JaiNarain Parasrampuria v. Pushpa Devi Saraf (2006) 7 SCC 756; DhiyanSingh v. Jugal Kishore AIR 1952 SC 145 and Azizullah Khan v. GulamHussein AIR 1924 Sind 97.

36. The factual foundation for sustaining plea of estoppel against SAIL hadnot been laid by Vale and AMCI in the arbitral proceedings. They wereunable to show that SAIL had made any representation about not going in forrisk purchase. The very submission that by “seeking deliveries of 750,000MT of coal till January 2009” SAIL had made representation to AMCI andVale that it “had not procured risk purchase coal” is to say the least, far-fetched. The correspondence between the parties discussed earlier could nothave left Vale and AMCI in any doubt that they were in breach of theirobligations of the LTA and SAIL was justifiably concerned about theirdefault. In asking them to honour their commitments under the LTA, SAILwas making no “representation” about not opting for risk purchase, “byconduct or otherwise”. Their response was not to comply but make offers ofalternate supplies which were not acceptable to SAIL. Neither Vale norAMCI altered their positions in any manner or suffered any detriment. In anyevent neither placed evidence to prove that proved that it did. The plea of

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estoppel raised by Vale and AMCI has been rightly rejected by the Tribunal.

37.Vale and AMCI admit that they failed to supply 753,461 MT ofcontracted coal during the FDP. They have also not seriously contested thefinding in Issue (e) that SAIL’s legal notice dated 20[th]January 2009 wasproperly issued. Vale and AMCI did not examine any witness to explain whythey were unable to complete their supply obligations during the FDP. Aspointed out by the Tribunal, both AMCI and Vale chose to rely only on theevidence of Mr. Rawat and Mr. Arun Jot Malhotra, who were both SAIL’switnesses. That evidence has been analysed in great detail by the Tribunal.This Court is not persuaded to re-appreciate that evidence although it wasread extensively by Senior Counsel appearing on behalf of Vale and AMCI.The scope of the present proceedings under Section 34 does not allow thisCourt to go over the entire evidence again and come to different conclusiononly because it is possible to do so.

38. The Court finds no error in the Tribunal’s determination that Vale andAMCI were in breach of the LTA dated 23[rd]April 2007.

Risk Purchase Damages

39. The Tribunal addressed issues (f) to (l) under the broad heading of ‘Riskpurchase damages’. It noted in Para 119 that SAIL “had not pleaded its caseto come within the ambit of Section 73 (of the Contract Act) for generaldamages but have elected to pursue its claim damages under specific clausein the conditions of the contract viz., Para 9 GCA.” In the context of thedefences raised by Vale and AMCI the Tribunal addressed the issues whetherSAIL had elected for performance of the contract which in turn precluded itfrom taking risk purchase action for non-delivery during the FDP [issue (j)];whether SAIL was required to and in fact did give Vale and AMCI priornotice of risk purchase under Para 9 GCA [issues (f) and (g)]; whether Vale

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and AMCI had waived the requirement of such notice [issue (h)]; It thenaddressed the issue whether SAIL in fact undertook risk purchase under Para9 GCA [issue (i)]; whether SAIL was entitled to damages on that account[issue (k)] and whether SAIL had mitigated the loss it alleged to havesuffered [issue (l)].

Election

40.According to Vale and AMCI, not only did SAIL not give them anynotice of its intention to go in for risk purchase, which in fact, was found tobe the case by the Tribunal but it in fact required both Vale and AMCI toperform the contract. It is, accordingly, contended that SAIL elected topursue with the contract and kept extending the time for Vale and AMCI toperform their obligations thereunder.It is only in the claim petition thatSAIL adverted to the fact of having undertaken risk purchase. It is submittedthat having elected to affirm the contract and insist on its performance, SAILwas estopped from invoking the risk purchase clause and making riskpurchase.

41. It is pointed out that when SAIL invited AMCI and Vale for the firstmeeting with the EJC, it continued referring to the FDP. It is, therefore,claimed by Vale and AMCI that risk purchase was not contemplated by SAILeven at that stage. According to Vale and AMCI, the issue before theTribunal was whether SAIL had affirmed the Contract and if so, whether theaffirmation precluded the claim for risk purchase action for non-deliveryduring the FDP. It is submitted that the Tribunal did not decide the issue thatwas framed for determination. What had been submitted before the Tribunalwas that even assuming SAIL had invoked Para 9 of the GCA and hadprocured risk purchase coal, SAIL could not claim damages as it had electedfor and communicated to AMCI and Vale its election of the right to seekperformance of the Contract. The right to seek performance beinginconsistent with the right to claim damages under Para 9 GCA, no damagescould be claimed under the latter right because of election by SAIL of theformer right. According to AMCI the Tribunal, in Para 125 of the Award,however, assumed AMCI’s argument to be that SAIL having elected forperformance, it could not invoke Para 9 of the GCA “to make riskpurchases”. Because of this fundamental error in the premise on which theTribunal proceeded to decide the issue of election, it concluded in Para 136of the Award that SAIL was not precluded from taking risk purchase action.The Tribunal erred in proceeding on the basis that risk purchase action wasundertaken subsequent to SAIL’s demands for performance after 22[nd]October 2008 whereas SAIL had invoked Para 9 even before it claimedperformance. Reliance is placed on the decisions in National Insurance Co.Ltd. v. Mastan (2006) 2 SCC 641; Haridas Mafatlal Gagalbhai v.Vijaylakshmi Navinchandra Mafatlal Gagalbhai AIR 1956 Bom. 721;Aquis Estates Ltd. v. Minton [1975] 1 WLR 1452; Benjamin Scarf Jardinev. Alfred George (1882) VII AC 345; Hanmat Bhimrao v. Gururao AIR1943 Bombay 36; Ganga Retreat & Towers v. State of Rajasthan (2003) 12SCC 91; Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd. (2005) 6 SCC462 and Karam Kapahi v. Lalchand Public Charitable Trust (2010) 4 SCC753.

42.The correspondence between the parties reveals that both Vale andAMCI conceded to their respective inability to make the balance suppliesunder the LTA in the FDP. While SAIL cannot be faulted for insisting thatVale and AMCI should fulfil their contractual obligations, this by no meanscan be construed as waiver by SAIL of its right to seek other appropriateremedies, including making good of the shortfall from other sources. Thismuch was known to AMCI and Vale as is evident from the correspondencebetween the parties. The email dated 24[th]April 2008 addressed to AMCIinviting it to the EJC meeting held on 9[th]May 2008 was indeed to discuss

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“the status of supply of coking coal by M/s. AMCI and CVRD to sell duringJuly 2007 – June 08 delivery period under the existing LT AgreementNo.217/2007.” However, it was also for supply of coking coal to be made toSAIL during the “July 2008 - June 09 delivery periods.” While SAIL wasinviting AMCI and Vale to make good the shortfall for the FDP, neither Valenor AMCI was ready for this. In its email dated 29[th]April 2008, AMCIinformed SAIL that it was unable to participate “meaningfully in the EJCmeeting.” Vale too indicated that it will not be possible to produce thenecessary coal required under the contract.It further stated that “to theextent of those discussions impact upon the LT Agreement Number217/2007, I would be pleased if you could keep me advised.” Vale by letterdated 1[st]May 2008 reiterated that “we cannot continue to meet the targetedobligations and our assessments has identified that we cannot meet thecontracted specifications for another at least Mean Max Reflectance, Fluidityand Vitrinite Percentage going forward.”Vale attached copy of theBoradlea Coking Coal specification which showed deterioration in quality.Vale stated that “these conditions were not foreseen at the time of theAgreement No. 27/2007 was entered into.” It was stated that in thecircumstances, “we are left with little choice but to suggest foreclosure of theAgreement217/2007.”BothAMCIandValeknewtheinevitableconsequence of their failure to meet their commitments under the LTA wouldmean that SAIL would have to source the shortfall from elsewhere. This infact was their advice to SAIL.

43.In the instant case, the Court is unable to read the correspondencebetween the parties as implying any waiver by SAIL of its right to seek allremedies available to it in terms of Para 9.1 GCA including risk purchase “atthe risk and cost of the Seller.” SAIL has reiterated in its written submissionsthat its claim is “not based on the principle of general damages”. It has basedits claim under the risk purchase clause for only the price difference between

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the contracted price and the price at which it effected risk purchase. Giventhe wording of Para 9.1 GCA it cannot be said that if SAIL opted for riskpurchase it cannot claim damages as envisaged in Para 9.1 itself. Further,when it was plain that Vale and AMCI were in breach of their obligationsdespite being repeatedly asked to comply, SAIL was not precluded fromopting for risk purchase under Para 9.1. The effect of non-compliance withthe requirement of prior notice under Para 9 will be considered hereafter.However, to the question whether SAIL was precluded from opting for riskpurchase only because it had asked Vale and AMCI to comply with theirobligations under the LTA, which they admittedly failed to, the answer mustbe in the negative. When SAIL actually invoked the risk purchase option isalso not determinative of whether it could still claim damages. In otherwords, merely because SAIL had already taken steps for risk purchase andwas still asking Vale and AMCI to comply with their contractual obligationsdid not preclude SAIL from seeking to be compensated for the risk purchaseunder Para 9.1 GCA. These were options available to SAIL which it couldand did exercise. The Tribunal has already discussed the case law cited byVale and AMCI in sufficient detail and rightly summarised the position inIndian law in regard to the doctrine of election.

44.There is merit in the contention that an innocent party that suffers abreach of contract by the defaulting party can resort to either statutoryremedy that may be available or remedy envisaged by the contract itself.The principle in law that party suffering breach of contract must berestituted to the same position had the breach not occurred is well recognised(See Rohtas Industries Ltd. v. Maharaja of Kasimbazar, China Clay Mines

ILR (1951) 1 Cal 420; R.K. Malik v. Kiran Pal (2009) 14 SCC 1; LalchandChowdhury v. Union of India AIR 1960 Cal 270). In the present case, therisk purchase clause that envisages the innocent buyer that invokes it to do soat the cost of the defaulting seller, is one species of the above settled legal

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principle.

45. The finding of the Tribunal that SAIL was not precluded from invokingPara 9.1 GCA to make risk purchase does not call for interference.

Notice under Para 9 GCA and Waiver

46. The next issue to be considered is whether the Tribunal, after holdingunder issues (f) and (g) that SAIL had failed to give Vale and AMCI priornotice under Para 9.1 GCA, held in issue (h) that Vale and AMCI had waivedthe requirement of such notice.

47.It is submitted by Vale and AMCI that advance notice prior toundertaking risk purchase as envisaged under Para 9 GCA, was consistentwith the customary practice. Reliance is placed on the decisions in AlfaLaval (India) Ltd. v. Union of India (2000) I AD (Del) 145; Union of Indiav. Peekay Industries 2008 (3) Arb LR 569 (Del); Flowmore Private Limitedv. National Thermal Power Corporation 2009 X AD (Del) 486; BhagawatiOxygen Ltd. v. Hindustan Copper Ltd. (2005) 6 SCC 462; MaharashtraState Electricity Board, Bombay v. Sterlite Industries AIR 2000 Bom 204. Itis pointed out that the Tribunal in fact found that no risk purchase notice ascontemplated under Para 9 GCA, was given by SAIL. Since this pre-condition of prior notice had not been met, SAIL could not have resorted torisk purchase at all. It is further submitted by Vale and AMCI that theTribunal erroneously concluded that the letter dated 18[th]December 2007 wasan unequivocal recognition by AMCI that SAIL could proceed under Para 9GCA. The Tribunal not only acted contrary to the settled principle of waiverbut also consciously disregarded Para 17 of the Agreement which mandates

strict compliance of the Agreement. Para 17.1 of the Agreement reads asfollows:

“This Agreement cancels all previous negotiations between the partieshereto. There are no understanding or agreements between thePurchaser and the Seller which are not fully expressed herein and nostatement or agreement, oral or written, made prior to or at signinghereof shall affect or modify the terms hereof or otherwise be bindingon the parties hereto. No change in respect of the terms covered bythis Agreement shall be valid unless the same is agreed to in writingby the parties hereto specifically stating the same as an amendment tothis Agreement”.

48.It is further submitted that in any event even if the letter dated 18[th]December 2007 amounted to waiver, it was incumbent on SAIL to informVale and AMCI that it was purchasing coal at their risk and cost fromalternate suppliers. Admittedly, SAIL had not done so. Even the letter dated18[th]December 2007 did not ask SAIL to procure coal at the risk and cost ofboth Vale and AMCI. Thus, even if SAIL wanted to procure alternatesupplies, it could never have imposed the costs on AMCI and Vale. In thisregard reliance is placed on the decisions in Babulal Badriprasad Varma v.Surat Municipal Corporation AIR 2008 SC 2919 and Ramdev FoodProducts Pvt. Ltd. v. Arvindbhai Rambhai Patel 2006 (33) PTC 281;Provash Chandra Dalui v. Biswanath Banerjee AIR 1989 SC 1834; M.Gangareddy v. The State of A.P. 1996 (3) ALT 53 and Pradip KumarChatterjee v. State of West Bengal (1997) 2 Cal LT 4 (HC).

49. Para 9.1 GCA, which has been reproduced earlier, is the clause of theLTA that permits SAIL to undertake risk purchase where Vale and AMCIfail to meet their obligations to supply the contracted quantity. That clausepermits SAIL to take “such action as it considers fit including taking riskpurchase action for supply of similar materials at the risk and cost of theSeller” but “after giving notice”. As rightly pointed out by Vale and AMCI,the Tribunal has in Paras 140 and 141 of the impugned Award held that such

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prior notice was required to be given by SAIL if it contemplated riskpurchase action and that in fact it did not give such written notice. It alsoobserved in Para 144 of the Award that the invitation by SAIL to Vale andAMCI to attend the EJC meeting “would not of itself be sufficient toconstitute notice under Para 9.” Also, it was held that the failure of Vale andAMCI to attend the EJC meeting could not be taken as “green light” forSAIL “to do as it liked.” However, the letter dated 18[th]December 2007 fromVale and AMCI to SAIL was held to be waiver by them of the requirementof notice.

50. Before dealing with the factual aspects of the case in this regard, the lawmay be briefly recapitulated. In Babulal Badriprasad Varma v. SuratMunicipal Corporation it was explained that “waiver” is the abandonment ofa right “in such way that the other party is entitled to plead theabandonment by way of confession and avoidance if the right is thereafterasserted, and is either express or implied from conduct.” In Pradip KumarChatterjee v. State of West Bengal the Calcutta High Court held that waiverof legal right required “clear, unequivocal and decisive act of partyshowing such purpose as acts amounting to an estoppel on his part”

51. The contents of the letter dated 18[th]December 2007 have been discussedin some detail earlier. It was urged both by Vale and AMCI that at best theabove letter could be read as an inability by them to deliver only 0.3 millionMT for the FDP and not an inability as regards the entire lot for the FDP. Itwas submitted that it was only for the Second Delivery Period (SDP) andThird Delivery Period (TDP) that they were putting SAIL on notice of theirinability to perform their contractual obligation and asking SAIL to considerother sourcing options.

52. The letter dated 18[th]December 2007 from AMCI to SAIL reiterated the

explanation earlier offered for why the target supplies of hard coking coalunder the LTA for the FDP could not be adhered to. The delay in completionof the expansion of the port of DBCT had according to Vale and AMCIresulted in their not been able to get access to the port allocation and that thesaid port allocation had “been permanently lost.” Vale and AMCI made itclear that their ability to perform the LTA in the FDP “has been permanentlyreduced by 300 kt.” Also in relation to the FDP they offered tentativeschedule of supply of 700,000 MT in the FDP. Vale and AMCI requesteddeferral of “all tonnage commitments for the 2008 and 2009 contract yearswith resumption of deliveries in 2010.” AMCI and Vale advised that SAILshould “consider any other sourcing options that may be available.” The saidletter therefore talks of the FDP as well as the SDP and TDP. As regards theFDP, there is an admission by Vale and AMCI of the inability to meet thecommitment of 300,000 MT in the FDP. Since even the offer of supply of700,000 MT was only “tentative”, it was plain that there was no firmcommitment even as regards that quantity. By this date therefore it was plainto Vale and AMCI that it was unlikely that they were going to meet theircommitments for the FDP. They also anticipated what SAIL was likely to doin that event and so advised it to consider “other sourcing options”. This wasa conscious act of Vale and AMCI and was clear and as unequivocal as itcould be. As it turned out Vale and AMCI admittedly failed to supply753,461 MT in the FDP. They left SAIL with little option but to go for othersources. SAIL adopted the strategy of still pressing for the FDP quantitieswhile undertaking risk purchase, which was an option available to it andwhich approach, as rightly held by the Tribunal, cannot be said to be“improper”.

53. Both of SAIL’s witnesses, Mr. Rawat and Mr. Arun Jot Malhotra, statedthat Vale and AMCI were in fact not told by SAIL of the risk purchaseundertaken and at the same time SAIL asked them to comply with the FDP

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commitments. The Tribunal has analysed the evidence in great detail to cometo the conclusion that Vale and AMCI “as sophisticated players in theindustry” were fully aware that they would be exposed to claims by SAILand that the various proposals made by them to supply alternate coal was topersuade SAIL to delay exercising its options to seek remedies including theremedies under Para 9 GCA. The conduct of the parties had to be viewed inthe light of the exchange of letters between them before and after 18[th]December 2007. When so viewed, the conclusion of the Tribunal that therewas an implied waiver by Vale and AMCI of the prior notice under Para 9GCA does get strengthened. The objection in this regard is rejected.

SAIL did undertake risk purchase

54.It will be recalled that with regard to issue (i) the Tribunal held thatSAIL had in fact undertaken risk purchase under Para 9 GCA to make up forthe shortfall of supply of coking coal by Vale and AMCI under the LTA forthe FDP. According to Vale and AMCI, the case pleaded by SAIL in itsstatement of claim was that consequent upon the meetings and discussionsheld by the EJC, SAIL had agreed to purchase from its LTSs the short fall of753, 461 MT of coal at about USD 300 PMT. However, SAIL set up anothercase through its witnesses from which it was apparent that no consciousdecision as such was taken to procure risk purchase coal. According to Valeand AMCI, the Tribunal did not consider the case which was put forward bySAIL in its Statement of Claim and proceeded on the basis of the case set upby SAIL’s witnesses while completely ignoring the plea raised by AMCI andVale that SAIL’s evidence was not in support of its Statement of Claim butwas in fact, new case set up by SAIL.

55.It is further submitted that SAIL did not produce any document insupport of any alleged decision taken by the EJC for procuring Risk Purchasecoal. The request to produce the decision was opposed by SAIL on the

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ground that the minutes of the EJC meeting were confidential. It is submittedthat the Tribunal’s conclusion in Para 177 of the Award that SAIL hadprocured 803, 395 MT of Hard Coking coal out of which it had consciouslyattributed 753,461 MT as Risk Purchase coal was not supported by reasons.Further, the Tribunal’s conclusion that SAIL had procured 803,395 MT ofcoal was without any factual basis. It is submitted that SAIL did not produceany witness to say that any decision to procure risk purchase coal was in facttaken. Being public sector undertaking, it was inconceivable that SAILwould have taken ‘conscious decision’ without written document.

56.Vale and AMCI submit that SAIL’s case of inviting other LTSs tonegotiate the procurement of risk purchase coal was patently false. SAIL hadnot filed any document to show that as consequence of the non-supply offull quantity of coal by AMCI and Vale, it had invited the other LTSs fordiscussions about risk purchase. The redacted contracts filed by SAIL alsodid not reveal that there was any procurement of additional coal by SAILfrom its Australian LTSs. According to Vale and AMCI, to overcome this,Mr. Arun Jot Malhotra in his affidavit dated 17[th]March 2010 pleaded newcase for SAIL that all the Australian suppliers except AMCI and Vale hadsupplied full quantity of coal which they agreed to supply during theDelivery Period 2007-08; that because of non-supply by AMCI and Vale,there was shortfall in the buffer stock which SAIL was required to maintainfor the year 2008-09; in order to make up the shortfall in the buffer stock,SAIL agreed to procure “additional” 800,000 MT of coal from the otherAustralian suppliers 500,000 tons from BHP, 100,000 tons from Peabody and200,000 tons from Anglo. It is submitted that the Tribunal ignored that theaforesaid was new case set up by SAIL only for the reason that thecontracts it was compelled to produce belied its case put forward in theStatement of Claim.57. Vale and AMCI submitted that SAIL in order to enhance its case had byway of the affidavits of its witnesses travelled beyond its pleadings whichwas prima facie unfair and contrary to settled legal principles. Reliance isplaced on Rajgopal (Dead) by LRS. v. Kishan Gopal (2003) 10 SCC 653 andState Bank of India v. S.N Goyal (2008) 8 SCC 92. It is submitted that asettled rule of evidence is that if the contents of document are to be proved,the document must be produced itself (“the best evidence rule”). In thisregard, reliance is placed on Roop Kumar v. Mohan Thedani (2003) 6 SCC595; Bai Hira Devi v. The Official Assignee of Bombay AIR 1958 SC 448;Kamakshi Builders v. Ambedkar Educational Society (2007)12 SCC 27;Gopal Krishnaji Ketkar v. Mahomed Haji Latif (1968) 3 SCR 862 andNarayan Govind Gavate v. State of Maharashtra (1977) 1 SCC 133.

58. It is submitted that the Tribunal also ignored the evidence adduced in thearbitration which showed that SAIL’s other Australian supplier BHP had notsupplied the full contracted quantities in 2007-08 and, further, that there hadbeen no decline in the buffer stock of SAIL as result of any non delivery byAMCI and Vale. The quantities mentioned in Ex. C-85, which purportedlywere the risk purchase quantities procured by SAIL, did not in fact tally withthe actual purchases claimed to have been made for the purpose of riskpurchase. Exception was taken to SAIL producing documents along with itswritten submissions that disclosed that in fact there was default in supplyby one LTS BHP of the contracted quantities for 2007-08. It is submittedthat the Tribunal was to give finding on this aspect along with the finalAward but it failed to do so.

59. Before considering the above submissions it is necessary to advert to theinternational practice in the sourcing of hard coking coal. It is the commoncase between the parties that Japan is the largest manufacturer of steel andsets benchmark for purchase of coal for all other steel producing countries

including India. Procurement of coal is done on yearly basis. In Japan it isdone on calendar year basis. In India it is done on yearly basis in the sameyear. While the procurement process in Japan commences during April, inIndia it commences in May and continues till August and September.Additionally, in the instant case, where the EJC meeting was to assess thelikely consumption of coal in the following year, it was not an exercise forSAIL alone but other steel manufacturers including Rashtriya Ispat NigamLtd. Long Term Contracts are entered into by steel companies with coalsuppliers to provide for total quantities, the specific quantities of coal to besupplied periodically as well as the terms and conditions of delivery. Theprocurement is continuous process for which the steel industry is requiredto maintain buffer stock. It is stated that the buffer stocks of carry over inconnection with the supply of coking coal was common feature in the longterm coking coal market. The experts examined on behalf of the parties havebroadly testified to the above international practice.

60. There is merit in the submission on behalf of SAIL that any suggestionto the LTSs that they were being approached to supply extra quantities onaccount of the failure by AMCI and Vale to meet their obligations under theLTA dated 23[rd]April 2007 would have resulted in those LTSs quoting muchhigher prices. With view to mitigate the significant losses that would haveto be borne by it if it had gone for spot purchases, SAIL invited all its LTSs,including Vale and AMCI to the EJC. SAIL’s decision not to disclose to theother LTSs that Vale and AMCI had defaulted in their obligations under theLTA dated 23[rd]April 2007 was its prerogative. Vale and AMCI despite beinginvited were not prepared to attend the EJC meeting since they were certainthat they would not be able to meet the supply obligations during the FDP orthe SDP and TDP.

61. On the issue of whether conscious decision was indeed taken by the

EJC or SAIL to undertake risk purchase, Mr. Rawat’s cross examinationrevealed how he briefed the EJC, and how it was the Chairman, SAIL whohad to take final call on undertaking purchase of additional coal to make upfor the shortfall during the FDP. The affidavit of Mr. Arun Jot Malhotra dealtwith this aspect and he too was subject to extensive cross examination. TheTribunal analysed their evidence at great length. It ultimately concluded thatSAIL did in fact procure 800,000 MT of additional coking coal for the periodfollowing the FDP.

62.The Tribunal in the impugned Award analyzed in great detail thedocuments by SAIL which showed the quantities agreed to be supplied bythe LTSs under the respective LTAs with them. It took note of thesubmissions of Vale and AMCI that if there was any additional increase insupply and purchase from those LTSs in the post delivery period, it wouldhave been 200,000 MT and not 800,000 MT as claimed by SAIL. TheTribunal negatived the submission by holding that it is not unreasonable forSAIL to take into account the actual delivery quantities for one period andproject them in the next delivery period. The figure of 800,000 MT correlatedwith the total amount of actual coal supplied by BHP, Anglo and Peabodyduring the period July to September 2008.The total hard coking coalreceived in August to September 2008 was 803,395 MT. The Tribunal hasgiven its reasoning in the following manner:

“175. The Respondents had spent much time in the course of thearbitration to build scenario under which it was suggested that theClaimant could not have consciously decided to undertake riskpurchase action. It was not disputed that price negotiations for hardcoking coal usually take place between BHP Billiton – MitsubishiAlliance (“BMA”) and Nippon Steel of Japan usually begin at theend of the calendar year and settlement is usually reached betweenJanuary and March. The prices settled between BMA and Nipponwould usually be the benchmark price for the Claimant in itsnegotiations with its suppliers in May. For 2008-2009, it was settledat US$300/MT. During September 2008 to March 2009, due to theglobal financial crisis, the steel producers announced rapid cuts in

production. Steel producers such as SAIL faced high prices for itshard coking coal of USD 300/MT, and lower steel price of USD500/MT. By January-February 2009 the spot market prices of primehard coking coal fell to around USD 135/T.So SAIL would bepaying high premium for its coking coal from its long termsuppliers. Relying on McCloskey’s Coal Report of October 28, 2008,it was said that SAIL was pushing back stems (a term used inmaritime transportation to mean shipping/loading arrangements) asthe demand for steel had declined. The respondents therefore saidthat SAIL had never intended to take up the Respondents’ variousoffers for the short-delivered coal because of the fall in coal pricesuch that it became no longer beneficial to do so.

176.However, interesting and realistic the theory propounded bythe Respondents may be, the fact still remained that the Respondentshad failed in the performance of the Contract, giving the Claimant theliberty to exercise its right under Para 9 of the GCA. If indeed SAILwas behaving as the Respondents suggested it did, the Respondentscould have simply offered and made delivery of the full contractedMaterials much earlier rather than wait until the threat of legalproceedings.As it is, without any factual witness from theRespondents, the full facts can never be ascertained. The Tribunalcan only make its decision on what is before it and what can actuallybe ascertained.”

63. The Tribunal analysed the evidence of both Mr. Rawat and Mr.Malhotraand came to the conclusion that SAIL had affected the shortfall of supplyduring the FDP into the overall requirement for 2008-09. It cannot be saidthat the said conclusion was beyond the scope of the arbitral proceedings ornot based on any evidence whatsoever. With their affidavits the internal notesof SAIL regarding requirement of coking coal for 2007-08 and 2008-09 wereenclosed. The extensive cross-examination of the two witnesses does indicatethat there was decision taken at the EJC for sourcing the shortfall during theFDP and subsequent delivery periods.

64. The Tribunal’s analysis of the invoices attached to Exhibit C-85 to theStatement of Claim showed 397,543 MT received from BHP, 198,155 MTfrom Peabody and 207,697 MT from Anglo. The Tribunal held that there

O.M.P. 414/2011 with O.M.P. 415/2011 and O.M.P. 451/2011

need not be specific attribution or earmarking of specific shipment fromspecific supplier to be considered as risk purchase coal. There was noobligation on SAIL “to have to connect each and every procurement fromBHP, Anglo and Peabody to the shortfall of cargo”. The findings in para 174of the Award are purely factual based on the figures produced before theTribunal. The overall conclusion drawn by the Tribunal, on the evidence ofSAIL’s witnesses, was that SAIL “had taken into consideration the amount ofcoal not delivered by the Respondents in 2007-2008 and factored them intothe overall coal requirements for 2008-2009.”

65.On the above aspects, as can be seen from the submissions made,counsel for Vale and AMCI treated these proceedings under Section 34 of theAct as first appeal on facts and took the court through several pages ofdocuments and depositions of the witnesses. At the risk of repetition it mustbe stressed that the Court hearing petition under Section 34 of the Act is notexpected to re-examine the evidence that has been analysed threadbare by thearbitral Tribunal and interfere only because it is possible to take differentview. The Court is not persuaded to do so in the present case.

66. The Tribunal’s conclusion in the final Award that SAIL had made a‘conscious’ decision to procure additional quantities of coal to make up forthe ‘lost’ quantity calls for no interference.

Quality of risk purchase coal

67. On the question of the quality of coal, it is submitted by Vale and AMCIthat Para 9 of the GCA required that coal to be purchased in exercise of theright there under must be “similar” to the coal agreed to be procured underthe Contract. However, SAIL had not led any evidence to establish this.Further, SAIL had redacted the specifications of the coal in the copies of thecontracts with other suppliers produced by it during discovery. Therefore, it

O.M.P. 414/2011 with O.M.P. 415/2011 and O.M.P. 451/2011

was not possible to precisely compare the risk purchase coal with thecontracted coal. It is submitted that in Paras 192 and 193 of the Award, theTribunal referred to the shipping documents of the other LTSs to compare thespecifications of the alleged risk purchase coal with the contracted coal. Indoing so, the Tribunal ignored that such shipping documents did not containcomplete specifications of the alleged risk purchase coal. Reliance is placedon the decisions in Highway Engineering Pvt. Ltd. v. Union of India (1997)1 Arb LR 128 (Delhi); Flowmore Private Limited v. National ThermalPower Corporation (2009) X AD (Delhi) 486; Union of India v. KundraShoes 2007 (2) Arb LR 471 (Delhi) and Union of India v. Peekay Industries2008 (3) Arb LR 569 (Delhi). Since SAIL had deliberately and willinglywithheld evidence on specification of material purchased under the allegedrisk purchase action, the Arbitral Tribunal ought to have drawn an adverseinference against SAIL in terms of Sections 101, 102, 106 and 114 of theEvidence Act, 1872 (“Evidence Act”). In this regard, reliance is placed onthe decisions in Kamakshi Builders v. Ambedkar Educational Society(2007) 12 SCC 27, Gopal Krishnaji Ketkar v. Mohamed Haji Latif (1968) 3SCR 862; Narayan Govind Gavate v. State of Maharashtra (1977) 1 SCC133.

68. The Tribunal analysed in great detail the descriptions of coal appearing inthe contracts between SAIL and its three LTSs for the period July 2008-June2009. It also examined the shipping documents and commercial invoiceswhich indicated two of the factors which were of concern to the parties,namely moisture and ash content. In regard to the third supplier, the shippingdocument gave even more details and these were considered by the Tribunal.

69. The Tribunal discussed the evidence of the expert Dr. Bristow in greatdetail about the quality of the coking coal sourced by SAIL from other LTSs.It did comparison of the material specifications of the contracted materials

O.M.P. 414/2011 with O.M.P. 415/2011 and O.M.P. 451/2011

with Vale and AMCI and the coal supplied by BHP, Anglo and Peabody. Itcame to the conclusion that “Dr. Bristow viewed that the coal purchased fromBHP and Anglo were superior to the contracted material based on hispersonal knowledge of the coal emerging from his familiarity with the coalsthat are mentioned in the specifications”.

70.Given the extensive documentation already available from which theTribunal was able to make detailed analysis for the purposes of determiningthe quality of coal procured by SAIL, the criticism that the Tribunal failed tospecifically rule on the effect of redaction of the documents by SAIL is notjustified. In para 161 of the Award the fact that the copies of the contractsfurnished by SAIL were in redacted form was noted. Further, the fact thaton the direction of the Tribunal the originals of the said documents weremade available for inspection during the course of oral hearing was alsonoted.The entire transcript of the Tribunal’s proceedings is available. Itbears out that at the arbitral hearing the complete original un-redactedagreements were made available to counsel for Vale and AMCI. SAIL’switnesses were cross-examined extensively regarding the statements made bythem in their affidavits about the purchase of additional quantities of coalduring 2007-08. The case set up in the affidavits of SAIL’s witnesses wasseverely tested by the counsel for Vale and AMCI. The Court is satisfied thatno procedural irregularity was committed by the Tribunal and that fulleffective opportunity was indeed provided to both Vale and AMCI toestablish their respective cases.

71. After the above detailed analysis of the evidence the Tribunal concludedthat the coal purchased by SAIL from the three LTSs post July 2008 “belongto the same class of hard coking coal as those of the contracted materials andwere not in fact superior”. This was possible view to take on the evidenceplaced on record before the Tribunal. No ground for interference under

O.M.P. 414/2011 with O.M.P. 415/2011 and O.M.P. 451/2011

Quantification of damages

72. As regards the quantification of the damages, it is settled principle thatthe defaulting party is liable to pay the aggrieved party for the breach ofcontract. The Bills of Lading and invoices produced by SAIL described thequantity and quality of the coal procured from the LTSs. The Tribunal inquantifying the damages referred to the principles enunciated by the SupremeCourt in Murlidhar Chiranjilal v. Harishchandra Dwarkadas AIR 1962 SC366 and Muna Sona Sundaram Chettiar v. Sona Theeanna ChockalingamChettiar AIR 1938 Mad 672. The Tribunal went by the chart prepared byAMCI along with its final submissions and determined the differential pricefor the quantity of 753,461 MT of coking coal. It also undertook the exerciseof verifying that the gross quantities and paid tonnages largely correspondedwith the bills of lading and accompanying commercial invoices for each ofthe shipments.

73. Whether the disclosure of further specifications than that that were madeavailable may have led to different conclusion is matter of conjecture. TheTribunal has after discussing the evidence of expert witnesses and analyzingthe documents on record taken particular view which is plausible one.While it may be possible to argue that another view is also possible, that byitself does not constitute valid ground for court to interfere under Section34 of the Act. Consequently, this Court is unable to find any error in thequantification of the damages by the Tribunal.

Costs and pendente lite interest

74. As regards pendente lite interest, cogent reasons have been given by theTribunal for awarding 1.25% above the LIBOR rate as regards the pendente

lite interest and, therefore, the rate of interest is fixed at 2.335364% perannum on simple basis to run from the date of the request for Arbitration(2[nd]April 2009) until the date of this award (1 year + 343 days). This hasbeen computed as USD 6,897,815.48. Even as regards the award ofarbitration and legal costs, this Court is unable to find any ‘patent illegality’in impugned Award.

Post-Award interest

75.After the making of the Final Award on 10[th]March 2011, Vale andAMCI each filed an application under Section 33 (4) of the Act stating thatalthough the Tribunal had rejected SAIL’s prayer for post-Award interest,this rejection had been omitted from the Award. They accordingly requestedthe Tribunal to pass an additional Award under Section 33(4) of theArbitration Act expressly recording that SAIL’s claim for post-Awardinterest had been rejected.

76.By decision dated 16 May 2011, the Tribunal dismissed the saidapplications by AMCI and Vale on the ground that there was no error in thefinal Award. The Tribunal observed that the final Award had clearly rejectedSAIL’s prayer for grant of interest in the pre-arbitration period. Afterreferring to Section 31(7) (b) of the Act, the Tribunal observed that it had“consciously omitted” to make any direction on post-Award interest in thefinal Award.

77. AMCI has challenged the aforesaid decision dated 16[th]May 2011 of theTribunal by filing separate petition OMP No. 451 of 2011 under Section 34of the Act inter alia on the grounds that:

a. The Tribunal made an unnecessary and meaningless reference to Section31(7) (b) of the Act. It was clear from Para 14 of the decision and thedispositive paragraph (V) of the final Award that the Tribunal had rejected

the claim for post-Award interest. Section 31(7) (b) of the Act therefore hadno applicability.

b. The decision amounted to review of the final Award which the Tribunalwas not permitted to do under Section 33 of the Act.

78.Vale has alternatively submitted that post-Award interest of 18% perannum was contrary to the recent trend in India where courts awarded lowinterest rates where the award amount was in USD. Reference is made to thedecisions in M.M. T. v. Al Bamar Company Ltd. (2009) 155 PLR 13,(where this Court was guided by the LIBOR rates where the amount awardedwas in USD) and Krishna Bhagya Jala Nigam Ltd. v. G. HarischandraReddy (2007) 2 SCC 720.

79.In para 126 of the Statement of Claim, SAIL claimed interest 12.75%per annum “from April 2008 till the date of its realization”. In para 219 of theimpugned final Award the Tribunal discussed the issue of award of interest.It concluded that the interest could be allowed on the amount of damages inUSD “only from the date of commencement of this arbitration, viz., 2[nd]April2009 until the date of this Award.” The Tribunal expressly rejected SAIL’sclaim for interest @ 12.75% based on the Prime Lending Rate (PLR) of theState Bank of India since that was applicable only on domestic loans inIndian currency. It concluded that the LIBOR rates for USD “provides abetter baseline to gauge the costs of funds of USD to the claimant as itrepresents the lowest real-world cost of unsecured funding in the Londonmarket.” On that basis, it fixed the rate of interest by adding 1.25% to theLIBOR rate and awarded simple interest at 2.335364% per annum on thesum awarded as damages. The dispositive para (V) of the Final Award stated“all other claims are accordingly rejected.”

80. Since the only period for which the Tribunal had awarded interest wasfrom 2[nd]April 2009 till the date of the Award, the rejection of all otherclaims meant that the Tribunal rejected the claim for interest not only for theperiod prior to 2[nd]April 2009 but for the period after the Award till “till thedate of its realization” which had been prayed for by SAIL. There was nooccasion therefore, for the Tribunal to refer Section 31 (7) (b) of the Actsince that would have applied, if at all to an international Award, only wherethe Award was otherwise silent on the question of post-Award interest. Withthe final dispositive para (V) of the Award stating that “all other claims areaccordingly rejected” SAIL’s claim for post-Award interest “till the date ofits realization” was in fact rejected.

81.While the Tribunal has correctly, in its Order dated 16[th]May 2011,observed that “the Award is clear in its terms that interest prior to the requestfor arbitration although claimed is not awarded”, it erred in observing that inthe final Award the Tribunal had consciously “omitted to make any directionon the post-Award interest.” Dispositive para (V) of the final Award in factrejected all “other claims” which included SAIL’s claim for post-Awardinterest. The Tribunal also erred in referring to Section 31 (7) (b) of the Actsince that provision was not attracted. With SAIL not having assailed thefinal Award, the Tribunal could not have by its Order dated 16[th]May 2011,in the applications filed by Vale and AMCI, clarified that it had “consciouslyomitted” to pass an order on post-Award interest. To this limited extentO.M.P. No.451 of 2011 succeeds.

82. In that view of the matter, it is not required for this Court to consider thealternative plea of Vale that the rate of post-Award interest was excessive.

Conclusion

83. In conclusion and for the aforementioned reasons,

(a) all objections by Vale and AMCI to the impugned Award dated 10[th]March 2011 passed by the Tribunal are hereby rejected. OMP Nos. 414 and415 of 2011 are hereby dismissed with costs of Rs. 1 lakh each to be paid byeach Petitioner to SAIL within four weeks.

(b) The observation of the Tribunal in its Order dated 16[th]May 2011 to theextent that it had consciously omitted to issue any direction as regards thepost-Award interest in the final Award is hereby set aside. The reference inthe said Order to Section 31 (7) (b) of the Act is also set aside. The finalAward dated 10[th]March 2011 rejecting “all other claims” of SAIL includingits claim for post-Award interest, is upheld. OMP No. 451 of 2011 isdisposed of in the above terms.

MARCH 30, 2012s.pal

S. MURALIDHAR, J.