AMERICAN METALLURGICAL COAL PTY LTD. versus MMTC LTD.

[2020] 14 S.C.R.

AANGLO AMERICAN METALLURGICAL COAL PTY LTD.

MMTC LTD.

(Civil Appeal No.4083 of 2020)

BDECEMBER 17, 2020

[ROHINTON FALI NARIMAN AND K. M. JOSEPH, JJ.]

Arbitration and Conciliation Act, 1996: Internationalcommercial arbitration – The present case is that of an internationalcommercial arbitration, the Majority Award being delivered in NewCDelhi on 12.05.2014 – Case was argued on the basis of the law asit stood before the Arbitration and Conciliation (Amendment) Act,2015 which added two explanations to s.34(1) and sub-section (2A)to s.34 of the Arbitration Act, in which it was made clear that theground of “patent illegality appearing on the face of the award” isDnot ground which could be taken to challenge an internationalcommercial award made in India after 23.10.2015, when theAmendment was brought into force – Given the parameters of judicialreview laid down in Associate Builders, neither the ground offundamental policy of Indian law, nor the ground of patent illegality,have been made out in the facts of this case, given the fact that theEMajority Award is certainly possible view based on the oral anddocumentary evidence led in the case, which cannot becharacterized as being either perverse or being based on noevidence – Majority Award, after reading the entire correspondencebetween the parties and examining the oral evidence, has come to aFpossible view, both on the Respondent being in breach, and on thequantum of damages – Majority Award is certainly possible viewof the case, and thus, cannot in any manner, be characterised asperverse.

Evidence Act, 1872: s.92, proviso (6) and illustration (f); s.94Gand s.95 – Interpretation of documents exchanged between the partiesin the performance of contract – Reading together proviso (6)and illustration (f) to s.92, s.94 and s.95 of the Evidence Act showthat when there are number of documents exchanged between theparties in the performance of contract, all of them must be readas connected whole, relating each particular document to “existingH

facts”, which include how particular words are used in particularsense, given the entirety of correspondence between the parties –Thus, after the application of proviso (6) to s.92 of the EvidenceAct, the adjudicating authority must be very careful when it appliesprovisions dealing with patent ambiguity, as it must first ascertainwhether the plain language of particular document appliesaccurately to existing facts – If, however, it is ambiguous orunmeaning in reference to existing facts, evidence may then be givento show that the words used in particular document were used ina sense that would make the said words meaningful in the contextof the entirety of the correspondence between the parties – In theinstant case, the three critical emails have to be read in thesurrounding circumstances of the entirety of the LTA and thecorrespondence which ensued between the parties – Once thatexercise is undertaken, as was undertaken by the Majority Award,it was not possible to hold that the Majority Award was not possibleview on the facts of this case – The reliance of the Majority Awardupon the correspondence between the parties buttressed by evidenceon behalf of appellant, was not therefore flawed.Evidence Act, 1872: ss.92, 94, 95 – “patent ambiguity”provision, as contained in s.94 of the Evidence Act, is only applicablewhen document applies accurately to existing facts, which includeshow particular word is used in particular sense – Given that, inthe facts of the present case, there was no mention of the price atwhich coal was to be supplied in the three “crucial” emails, theseemails must be read as part of the entirety of the correspondencebetween the parties, which would then make the so-called“admissions” in the emails apply to existing facts – Once this isdone, it is clear that there is no scope for the further application ofthe “patent ambiguity” principle contained in s.94 of the EvidenceAct, to the facts of the present case – However, s.95 of the EvidenceAct, dealing with latent ambiguity, when read with proviso (6) andillustration (f) to s.92 of the Evidence Act, could apply to the factsof the present case, as when the plain language of document isotherwise unmeaning in reference to how particular words are usedin particular sense, given the entirety of the correspondence,evidence may be led to show the peculiar sense of such language –Thus, if this provision is applied, the Majority Award cannot befaulted as it has accepted the evidence given by Mr. Wilcox, wherein

Ahe explained that the three emails would only be meaningful if theywere taken to refer to “mixed” supplies of coal, and not supplies ofcoal at the contractual price.

Law of evidence – Latent ambiguity and patent ambiguity –Distinction between.

Allowing the appeal, the Court

HELD: 1.1 There is finding of fact by the Majority Awardthat the Appellant was able to supply the contracted quantity ofcoal for the Fifth Delivery Period, at the contractual price, andthat it was the Respondent who was unwilling to lift the coal,Cowing to slump in the market, the Respondent being consciousof the fact that mere commercial difficulty in performing contractwould not amount to frustration of the contract. It was for thisreason that the Respondent decided, as an afterthought, in replyto the Appellant’s legal notice dated 04.03.2010, to attack theDAppellant on the ground that it was the Appellant that was unableto supply the contracted quantity in the Fifth Delivery Period.Once this becomes clear, it is obvious that the Majority Award,after reading the entire correspondence between the parties andexamining the oral evidence, has come to possible view, bothon the Respondent being in breach, and on the quantum ofEdamages. [Para 17][545-A-D]

1.2 The entire approach of the Division Bench is flawed.First and foremost, to cherry-pick three emails out of the entirecorrespondence and to rest judgment on those three emailsalone, without having regard to the context of the LTA and theFcorrespondence, both before and after those three emails, wouldrender the judgment of the Division Bench fundamentally flawed.Further, the finding that there was “no evidence” that theRespondent demanded stems of coal at reduced rate vis-à-visthe contractual rate, flies in the face of at least three differentGexchanges between the parties, being the Respondent’s lettersdated 20.11.2008, 27.11.2009 and 03.12.2009. Equally, the findingof the Division Bench that no evidence had been led to show thatthe Appellant had availability of the balance quantity of 454,034metric tonnes of coal to supply to the Respondent during the

Fifth Delivery Period, again completely fails to appreciate Mr.Wilcox’s evidence given by way of an Additional Affidavit dated03.09.2013 and in response to questions in cross-examinationbefore the Arbitral Tribunal on 23.09.2013, together with twoletters exchanged between the parties on 21.09.2009 and25.09.2009. All of these aspects were considered in the MajorityAward of the Arbitral Tribunal. The finding that there is “noevidence” to prove market price of coal at the time of breach,and that therefore, quantum of damages could not be fixed, againcompletely ignores Mr. Wilcox’s evidence in chief and crossexamination; Respondent’s letters dated 25.09.2009, 27.11.2009and 03.12.2009; as also the Appellant’s re-negotiated contractswith SAIL/RINL. All these aspects have been considered by theMajority Award in great detail. [Paras 18, 19, 20][545-D-H;546-A]

1.3 The crucial fact was that no price for the coal to belifted was stated in any of the emails or letters exchanged duringthis period. This is in fact what the Majority Award adverts toand fills up by having recourse to the evidence given by Mr.Wilcox, stating that the ambiguity qua price was resolved by thefact that no coal was available for lifting at price lower than thecontractual price. The Majority Award found, relying upon Mr.Wilcox’s evidence, that the supplies that were sought to be madein August and September, 2009 were therefore, also in the natureof “mixed” supplies, i.e., coal at the contractual price, as well ascoal at much lower price. This is finding of fact that cannot becharacterised as perverse, as it is clear from the evidence led,the factual matrix of the setting of there being slump in themarket, in which the performance of the contract took place, aswell as the ambiguity as to whether the correspondence referredto contractual price or “mixed” price, and thus, is possible viewto take. [Para 21][546-C-E]

2. Section 92 of the Evidence Act refers to the terms of a“contract, grant or other disposition of property or any matterrequired by law to be reduced to the form of document”.Illustration (f) of section 92 of the Evidence Act indicates thatfacts, which may on the face of it, be ambiguous and vague, canbe made certain in the contextual setting of the contract, grant

Aor other disposition of property. Section 94 of the Evidence Act,then speaks of language being used in document being “plainin itself”. It is only when such document “applies accurately toexisting facts”, that evidence may not be given to show that itwas not meant to apply to such facts. Likewise, the obversesituation is contained in section 95 of the Evidence Act, whichBthen states that when the language used in document is plain initself, but is “unmeaning in reference to existing facts”, only thenmay evidence be given to show that it was used in peculiarsense. When sections 92, 94 and 95 of the Evidence Act areapplied to string of correspondence between parties, it isCimportant to remember that each document must be taken to bepart of coherent whole, which happens only when the “plain”language of the document is first applied accurately to existingfacts. [Paras 27, 28][549-F-H; 550-A-B]3.1 “patent ambiguity” provision, as contained in sectionD94 of the Evidence Act, is only applicable when document appliesaccurately to existing facts, which includes how particular wordis used in particular sense. Given that, in the facts of the presentcase, there was no mention of the price at which coal was to besupplied in the three “crucial” emails, these emails must be readas part of the entirety of the correspondence between the parties,Ewhich would then make the so-called “admissions” in theaforementioned emails apply to existing facts. Once this is done,it is clear that there is no scope for the further application of the“patent ambiguity” principle contained in section 94 of theEvidence Act, to the facts of the present case. However, sectionF95 of the Evidence Act, dealing with latent ambiguity, when readwith proviso (6) and illustration (f) to section 92 of the EvidenceAct, could apply to the facts of the present case, as when theplain language of document is otherwise unmeaning in referenceto how particular words are used in particular sense, given theentirety of the correspondence, evidence may be led to show theGpeculiar sense of such language. Thus, if this provision is applied,the Majority Award cannot be faulted as it has accepted theevidence given by Mr. Wilcox, wherein he explained that thethree emails would only be meaningful if they were taken to refer

to “mixed” supplies of coal, and not supplies of coal at thecontractual price. [Paras 31, 32][552-E-H; 553-A-B]

3.2 When proviso (6) and illustration (f) to section 92,section 94 and section 95 of the Evidence Act are read together,the picture that emerges is that when there are number ofdocuments exchanged between the parties in the performanceof contract, all of them must be read as connected whole,relating each particular document to “existing facts”, which includehow particular words are used in particular sense, given theentirety of correspondence between the parties. Thus, after theapplication of proviso (6) to section 92 of the Evidence Act, theadjudicating authority must be very careful when it appliesprovisions dealing with patent ambiguity, as it must first ascertainwhether the plain language of particular document appliesaccurately to existing facts. If, however, it is ambiguous orunmeaning in reference to existing facts, evidence may then begiven to show that the words used in particular document wereused in sense that would make the aforesaid words meaningfulin the context of the entirety of the correspondence between theparties. [Para 34][57-D-G]

4. It is clear that the three critical emails have to be read inthe surrounding circumstances of the entirety of the LTA and thecorrespondence which ensued between the parties. Once thatexercise is undertaken, as was undertaken by the Majority Award,it is impossible to hold that the Majority Award is not possibleview on the facts of this case. Respondent’s argument in supportof the impugned judgment that there is no evidence todemonstrate proof of damage suffered as on the date of breach,is also factually incorrect. It is well established that the arbitraltribunal is the final judge of the quality, as well as the quantity ofevidence before it. The Majority Award took into account Mr.Wilcox’s Affidavit dated 10.07.2013 and Additional Affidavit dated03.09.2013 detailing the prices at which sales of coal were madeto Chinese purchasers during the Fifth Delivery Period, whichended on 30.09.2009, being the date of breach as found by theMajority Award. In addition, contemporaneous correspondence,including letters dated 27.11.2009 and 03.12.2009 were also relied

Aupon to show that the Respondent was itself seeking coal atroughly the price of $128 per metric tonne, at around the sametime. Hence, the difference between the contractual price andmarket price was arrived at as $173.383 per metric tonne, inaccordance with the law. It is not possible to accept respondent’sargument that the letters dated 27.11.2009 or 03.12.2009 do notBreflect the market price of coal as on the date of breach or thatthe market price of coal cannot be established from the speciallong-term contracts operating at around the same time as thedate of breach. This argument is therefore rejected. [Paras 37,38, 40][558-F-H; 559-A-D; 560-H; 561-A]CSmt. Kamala Devi v. Seth Takhatmal & Anr. [1964] 2SCR 152; Sudarsan Trading Co. v. Govt. of Kerala(1989) 2 SCC 38:[1989] 1 SCR 665; MurlidharChiranjilal v. Harishchandra Dwarkadas and Anr.[1962] 1 SCR 653 – relied onD5. The present case is that of an international commercialarbitration, the Majority Award being delivered in New Delhi on12.05.2014. Resultantly, this case has been argued on the basisof the law as it stood before the Arbitration and Conciliation(Amendment) Act, 2015 added two explanations to section 34(1)Eand subsection (2A) to section 34 of the Arbitration Act, in whichit was made clear that the ground of “patent illegality appearingon the face of the award” is not ground which could be taken tochallenge an international commercial award made in India after23.10.2015, when the Amendment was brought into force. Giventhe parameters of judicial review laid down in Associate Builders,Fit is obvious that neither the ground of fundamental policy ofIndian law, nor the ground of patent illegality, have been madeout in the facts of this case, given the fact that the Majority Awardis certainly possible view based on the oral and documentaryevidence led in the case, which cannot be characterized as beingGeither perverse or being based on no evidence. [Paras 41, 44][561-B-C; 565-B-D]

Associate Builders v. DDA (2015) 3 SCC 49: [2014] 13SCR 895 – relied on

MMTC Ltd. v. Vedanta Ltd. (2019) 4 SCC 163:[2019] 3SCR 1023; Dyna Technologies Pvt. Ltd. v. CromptomGreaves Ltd. 2019 SCC Online SC 1656; Parsa KenteCollieries Ltd. v. Rajasthan Rajya Vidyut Utpadan NigamLtd. (2019) 7 SCC 236 : [2019] 8 SCR 728; South EastAsia Marine Engg. & Constructions Ltd. (SEAMECLTD.) v. Oil India Ltd. (2020) 5 SCC 1649; Patel Engg.Ltd. v. North Eastern Electric Power Corpn. Ltd. (2020)7 SCC 167 : [2019] 7 SCR 522; Sangyong Engg. &Construction Co. Ltd. v. NHAI (2019) 15 SCC 131 :[2019] 7 SCR 522 – held inapplicable

Raghunandan v. Kirtyanand AIR 1932 PC 131; ZurichInsurance (Singapore) Pte Ltd v. B-Gold Interior Design& Construction Pte Ltd. [2008] SGCA 27; TransmissionCorpn. of Andhra Pradesh Ltd. v. GMR Vemagiri PowerGeneration Ltd. (2018) 3 SCC 716; Renusagar PowerCo. Ltd. v. General Electric Co. 1994 Supp (1) SCC644: [1993] 3 Suppl. SCR 22; ONGC Ltd. v. Saw PipesLtd. (2003) 5 SCC 705:[2003] 3 SCR 691; NationalHighways Authority of India v. ITD Cementation IndiaLtd. (2015) 14 SCC 21:[2015] 6 SCR 107; CentrotradeMinerals &Metal Inc. v. Hindustan Copper Ltd. (2017)2 SCC 228 : [2016] 9 SCR 83; Venture Global Engg.LLC v. Tech Mahindra Ltd. (2018) 1 SCC 656: [2017]12 SCR 259; Sutlej Construction Ltd. v. State (UT ofChandigarh) (2018) 1 SCC 718 : [2017] 12 SCR 134;Maharashtra State Electricity Distribution Co. Ltd. v.Datar Switchgear Ltd. (2018) 3 SCC 133: [2018] 1SCR 733; HRD Corpn. v. GAIL (India) Ltd. (2018) 12SCC 471: [2017] 11 SCR 857; M.P. Power GenerationCo. Ltd. v. ANSALDO Energia SpA, (2018) 16 SCC 661;Shriram EPC Ltd. v. Rioglass Solar Sa (2018) 18 SCC313; State of Jharkhand v. HSS Integrated Sdn (2019)9 SCC 798; Ssangyong Engg. & Construction Co. Ltd.v. NHAI (2019) 15 SCC 131:[2019] 7 SCR 522– referred to

Case Law Reference

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4083of 2020G

From the Judgment and Order dated 02.03.2020 of the High Courtof Delhi at New Delhi in FAO (OS) 532/2015.

Kapil Sibal, Neeraj Kishan Kaul, Mukul Rohatgi, Sanjiv Puri, Sr.Advs., Aman Ahluwalia, Samar Singh Kachwaha, Ms. Ankit Khushu,HRaghavendra Mohan Bajaj, Ms. Garima Bajaj, Agnish Aditya, Aayush

Marwah, Ms. Chanan Parwani, Ms. Shivangi Nanda, Ms. AnuradhaDutt, Ms. Suman Yadav, Aditya Sarin, Ms. Divya Krishnan, Akhil Sachar,Ms. B. Vijayalakshmi Menon, Advs. for the appearing parties.

The Judgment of the Court was delivered by

R. F. NARIMAN, J.

1. Leave granted.

2. This appeal is at the instance of an Australian company, AngloAmerican Metallurgical Coal Pty. Ltd. [“Appellant”], which producesand exports certain types of coal. By Long Term Agreement dated07.03.2007 [“LTA”], between the Appellant and MMTC Ltd.[“Respondent”], the Appellant, referred to as the “seller” in the LTA,agreed to supply certain quantities of freshly mined and washed “GermanCreek”, “Isaac” (Blend of 65% Moranbah North and 35% German Creekcoking coals) and “Moranbah North” coking coal to the Respondent.Clause 1 of this LTA is material and states as follows:

“CLAUSE 1: MATERIAL, QUANTITY, QUALITY ANDDELIVERY PERIOD:

The SELLER shall sell and the PURCHASER shall buy,

a) The base quantity during the currency of the contract shall be466,000 (Four hundred Sixty Six thousand) metric tons (of onethousand kilograms each) firm.

b) During the First Delivery Period (1st July, 2004 to 30th June,2005), quantity of 464,374 (Four Hundred Sixty Four Thousand,Three Hundred and Seventy Four) metric tons (of one thousandKilograms each) firm quantity of freshly mined and washed“Isaac”, “Moranbah North” and “German Creek” coking coals.

c) During the Second Delivery Period (1st July, 2005 to 30 June,2006) quantity of 382,769 (Three Hundred Eighty Two Thousand,Seven Hundred and Sixty Nine) metric tons (of one thousandkilograms each) firm quantity of freshly mined and washed“Isaac”, “Moranbah North” and “German Creek” cooking coals.

d) During the Third Delivery Period (1st July, 2006 to 30th June,2007) quantity of 466,000 (Four Hundred Sixty Six Thousand)metric tons (of one thousand Kilograms each) firm quantity offreshly mined and washed “Isaac”, “Moranbah North” and“German Creek” coking coals.

Ae) During the subsequent Delivery Periods, in case of thePURCHASER exercising the option to extend the duration of theAgreement by two more years, at its sole discretion, as indicatedat Para 1.3 herein below, quantity of 466,000 (Four HundredSixty Thousand) metric tons (of one thousand kilograms each) offreshly mined and washed “Isaac”, “Moranbah North” andB“German Creek” coking coals hereinafter referred to as theMATERIALS, in conformity with the Technical Specificationsincorporated in Annexure – IIB (applicable for “Moranbah North”coking coal) and Annexure IIC (applicable for “German Creek”coking coal) to this Agreement and which shall constitute anCintegral part of this Agreement, for use of imported coking coalsin the coke ovens in its integrated iron and steel works forproduction of metallurgical coke. The quality of the prime washedcoking coals to be supplied under this Agreement shall under nocircumstances be inferior to the Technical Specifications ascontained in Annexure IIA, Annexure IIB and Annexure IIC toDthis Agreement as applicable.1.1.1 Annual base quantity from 1st July, 2007 to 30 June, 2009,in case Purchaser exercises its option to extend the Agreementby 2 years, shall be 466,000 metric tonnes, subject to furtherdiscussions at the time of contract extension and the logical contractEspecification modifications to reflect the changing nature of existingreserves at the Moranbah North and German Creek miningoperations will be mutually agreed.

1.2 For the purpose of this Agreement, the Delivery Period shallbe reckoned as follows:

First Delivery Period 1st July 2004 to 30th June 2005Second Delivery Period 1st July 2005 to 30th June 2006Third Delivery Period 1st July 2006 to 30th June 2007

The shipments will be evenly spread during each Delivery Period.The PURCHASER reserves the right to prepone shipments againstany Delivery Period based on its requirement and subject toavailability with the SELLER.

The Purchaser reserved the right to postpone the deliveries to beeffected under each Delivery Period by upto 3 months i.e. the

month of September following each Delivery Period, without anyadditional financial liability to the PURCHASER.

1.3 The PURCHASER had the option to extend the duration ofthe Agreement by two more years, at its sole discretion and thePurchaser to exercise its option for extending the Agreement bytwo more years or otherwise by 31st January, 2007. In case thePURCHASER decides to exercise such option, at its solediscretion, the Agreement shall have two more Delivery Periodsas follows:

Fourth Delivery Period: 1st July 2007 to 30th June 2008

Fifth Delivery Period: 1st July 2008 to 30th June 2009"

3. Under clause 2 of the LTA, which refers to “Price”, forsubsequent Delivery Periods, including the “Fifth Delivery Period”, withwhich we are directly concerned, it is undisputed that when read withAnnexure I of the LTA and letter dated 14.08.2008, setting out theterms of the Fifth Delivery Period, the price was fixed at $300 per metrictonne. Clause 2.2 is important and states as follows:

“CLAUSE 2: PRICE

xxx xxx xxx

2.2 The Price for the Delivery of AGREEMENT quantity forsubsequent Delivery Periods shall be fixed in accordance withPara I of Annexure-1 and shall be firm and shall not be subject toany escalation for any reason, whatsoever, until the completion ofdelivery of the AGREEMENT quantity due for delivery in therelevant Delivery Period with such extensions as might be mutuallyagreed upon between the PURCHASER and the SELLER.”

4. Disputes arose between the Appellant and the Respondent asto shipments or “stems” that were to be covered by the Fifth DeliveryPeriod, which ranged from 01.07.2008 to 30.06.2009, the parties mutuallyextending this period to 30.09.2009. number of emails and letters wereexchanged between the parties from August 2008 to December 2009,which were examined in detail by panel of arbitrators consisting of Mr.Peter Leaver (Queen’s Counsel), Justice V.K. Gupta (Retd.) and Mr.Anthony Houghton (Senior Counsel) [“Arbitral Tribunal”] who sat atNew Delhi and delivered their international arbitral award in New Delhion 12.05.2014. It may be stated at the outset that the award is majority

Aaward of Mr. Peter Leaver and Mr. Anthony Houghton [“MajorityAward”], in favour of the Claimant, being the Appellant before us, adissenting award being delivered by Justice V.K. Gupta [“DissentingAward”], in which the claim of the Appellant was dismissed in its entirety.

5. The Majority Award was challenged under section 34 of theBArbitration and Conciliation Act, 1996 [“Arbitration Act”] before alearned Single Judge of the High Court of Delhi [“Single Judge”], whoupheld the Majority Award by judgment dated 10.07.2015. However,by the impugned judgment dated 02.03.2020, Division Bench of theHigh Court of Delhi [“Division Bench”] set aside the judgment of theSingle Judge and allowed an appeal filed under section 37 of theCArbitration Act by the Respondent, setting aside the Majority Award.6. The Majority Award contains detailed reasons, and since it isthe subject matter of intense debate between the parties, it is importantto set out the facts found by the Majority Award, together with the materialfindings and ultimate award.D5a. Under the heading, “I. Common Grounds and Issues inDispute”, the Majority Award set out what it describes as the undisputedfacts, as follows:

“I. Common Ground and Issues in DisputeE34. Before setting out the List of Issues to be decided by theTribunal, some of the undisputed facts are summarised by way ofbackground. These matters, of what the Tribunal understands tobe common ground, are summarised also in the Claimant’sOpening Submission dated 16th September 2013.

F35. By Long Term Agreement dated 7th March 2007 underwhich the Respondent contracted to purchase freshly mined andwashed coking coal from the Claimant on FOB (trimmed) basisfrom DBCT Gladstone in Australia. The Long Term Agreementthey signed was extended by agreement and is to be read alongwith Addendum No.2 dated 20th November 2008. As referred toGat paragraph 5 above, the Long Term Agreement as extended byAddendum No. 2 is referred to herein as “the Agreement”.

36. Prior to Addendum No.2, the Agreement encompassed threeDelivery Periods of one year each commencing on 1st July 2004and concluding on 30th June 2007. The Long Term AgreementH

included provision (at Clause 1.3) that gave the Respondent anoption to extend the Long Term Agreement for two more DeliveryPeriods, and this option was exercised such that purchases anddeliveries were also to be made in Fourth Delivery Period(between 1st July 2007 and 30th June 2008); and Fifth DeliveryPeriod (1st July 2008 to 30th June 2009).

38. In regard to these two additional Delivery Periods it wasprovided that the Respondent would purchase 466,000 MT ofcoking coal during each Delivery Period (Clause 1.1.1).

39. The matters which are in dispute arise out of the Fifth DeliveryPeriod. This was to have run to 30th June 2009, but was extendedby agreement between the parties so as to expire on 30thSeptember 2009 as confirmed in the Claimant’s letter to theRespondent dated 14th August 2008. The coking coal to be suppliedwas of two types (Isaac Coking Coal blend and Dawson Valleyblend) and the agreed price for each for the Fifth Delivery Periodwas US$300 per MT. That price was agreed by the parties inaccordance with the Agreement, and was confirmed by letterfrom the Respondent to the claimant dated the 20th November2008.

40. It is not in dispute that the Respondent lifted only two shipmentsat the agreed price of US$300 per MT during the Fifth DeliveryPeriod. The first was on 30th October 2008, and was quantityof 2,366 MT, and the second on 5th August 2009, when theRespondent lifted another 9,600 MT.

41. The first of these shipments was via the ‘Furness Hartlepool’and was part of larger shipment under which 48,655 MT waslifted in respect of balance quantities under the Fourth DeliveryPeriod (at the agreed rate for that period of US$96.40 per MT).The Fifth Delivery Period component of this delivery was 2,366MT and this was transacted at the agreed price of US$300 perMT.

42. The second of these shipments was an ad hoc agreementmade in meeting on 15th July 2009 and confirmed in writing bythe Respondent on 22nd July 2009. That ad-hoc agreement (“theSea Venus agreement”) was for 50,000 MT of coal under which9,600 MT was to be purchased at the contractual price of US$300

per MT, but the balance 40,400 MT was to be sold at an ad hocprice of US$128.25 per MT.

43. Even after these two deliveries were made there was aconsiderable shortfall in deliveries against the contracted quantityfor the Fifth Delivery Period. The total quantity actually lifted inrespect of the Fifth Delivery Period was 11,966 MT (2,366 +9,600MT) as compared to the contracted quantity of 466,000MT.Accordingly, the quantity not lifted by MMTC amounts to 454,034MT.

44. This quantity not lifted underpins the Claimant’s claim, whichis for damages arising out of an alleged breach on the part of theRespondent in not lifting the contracted quantity. The loss claimedby the Claimant is the difference between what is said to havebeen the market price, and the contract price.

45. For its part the Respondent denies any breach on its part innot having lifted the contracted quantity. This is because, accordingto the Respondent, the Claimant did not in fact have the goodsavailable for delivery to the Respondent. The Respondent’scontention is that the Claimant’s marketing manager expressedan inability to supply cargo under the Fifth Delivery Period, andthe Respondent says that this was simple refusal to perform theobligation to supply coal under the Agreement. Correspondingly,the Respondent contends that it was the Claimant which was inbreach of the Agreement.

46. The detailed issues which arise, as defined in the Terms ofReference and, as these were supplemented, are as follows:

A. Whether the Respondent committed breach of contract innot lifting 454,034 MT of coking coal in terms of Agreementand if so, the consequences thereof? If yes, what is the date ofsuch breach?

B. Whether the Claimant was in breach of contract in failingto supply goods to the Respondent during the Fifth DeliveryPeriod? If yes, what is the date of such breach?

In considering this issue, and so far as relevant, was theClaimant in position to perform its obligations by makingavailable the requisite quantities in timely manner as per thestipulations under the Contract?

C. Whether the Claimant’s claims are barred by limitation?

Whether there was failure on the part of any party to performthe obligations cast upon it under the Contract, in timely manner,or at all and if so, the effect thereof.

D. Whether the Claimant is entitled to any damages and if soto what amount?

E. Whether the Claimant is entitled to interest on any damagesto be awarded and if so, at what rate and for what period?

F. Whether the Claimant is entitled to interest pendente liteand post pendente lite, and if so at what rate.

G. Costs of the arbitration, and interest, if any, on the costsawarded.”

5b. Under the heading, “M. The Correspondence RegardingDeliveries”, the Majority Award referred to the various emails and lettersexchanged between the parties, as follows:

“M. The Correspondence Regarding Deliveries

56. The correspondence directly concerning deliveries in mid 2009comprises only few documents. Firstly, on 11th March 2009 theClaimant wrote to the Respondent:

“We refer to discussions in New Delhi on 24th February2009 between Mr Suresh Babu and our Mr John Wilcox atyour office. Anglo remains very concerned that deliveriesfor the Fifth Delivery Period of the Agreement remainunperformed by MMTC, and that to date MMTC has notintimated arrangements for performance of obligationsarising under the Agreement.

Accordingly, kindly send MMTC’s proposed DeliverySchedule for the Fifth Delivery Period, as referred to inClause 4 of Annexure IV of the Agreement, for ourconsideration. Under the circumstances, we seek yourresponse by close of business Brisbane time on Friday 20thMarch 2009.”

57. On 2nd July 2009 the Respondent wrote to the Claimant,requesting, the Respondent submits, the Claimant to indicate stemavailability for two deliveries, one each in August and September2009. The Respondent said:

“Transchart has already entered the market on behalf ofMMTC for the vessel against July 09 stem.

Keeping the huge backlogs in mind we would like to availtwo stems in August 09 and one in September 09. Pleaseconfirm availability and convey the laycans.”

58. On 3rd July 2009 the Claimant wrote to Mr. Babu of theRespondent seeking time to respond to the request. However therewas no follow up from the Claimant. On 21st July 2009 theRespondent again requested confirmation of stem availability:

“We are awaiting stem confirmation from Anglo for August2009. Please note we have given our Indent well inadvance. The flexibility of laycan vested with youcompletely. We look forward to hear from you...”

59. On 22nd July 2009 the Claimant responded, stating:

“Unfortunately, at this stage we are unable to confirm astem in Aug/Sep for MMTC due to cargo availability.

We are continuing to review our position and will adviseour preferred schedule for Oct-Dec 2009 as soon aspossible”

60. The Respondent submits that this means what it literally says;the Claimant refused to confirm stem availability for August andSeptember 2009 due to lack of availability. Correspondingly, theClaimant failed to supply the contracted material within the FifthDelivery Period.

61. On 4th September 2009, the Respondent wrote to the Claimantstating that:

“Our cokery has increased the pushing’s with the result,requirements of coking coal has gone upto 90,000t/month.After Anglo has not given any stem to MMTC. Seavenus[sic] Please give US’ one stem of 50,000MT each inOctober and November 09.”

62. Once again the Claimant (through Mr Wilcox) expressed itselfto be unable to supply the coal under the Fifth Delivery Periodbecause of non availability for the remainder of the year 2009 (e-mail of 7th September, 2009). Mr. Wilcox stated:

“Dear Suresh,

....Unfortunately at this stage we do not have any coalavailability for the remainder of the year.

We will continue to monitor the situation and let you knowif the position changes. “

63. On 21st September 2009 the Claimant wrote as follows:

“We refer to our letter of 11 March 2009 to which we havenot yet received response.

The Fifth Delivery Period of the Agreement has nowfinished bringing the terms of the Agreement to an end.However, to date, MMTC has only taken delivery of 11,966tonnes of coal out of total contracted tonnage of 466,000tonnes for the Fifth Delivery Period.

Despite our repeated requests MMTC has not providedAnglo with schedule for taking delivery of the remaining454,034 tonnes of coal from the Fifth Delivery Period(‘Carryover’), other than to say that it will agree to thesame arrangements made between Anglo and SAIL andRINL with regards delivery of 2008 carryover tonnes.”

64. The author of the letter (Mr. Elliott, the General Manager,Marketing and Transportation of the Claimant) then set out theterms which had been agreed with SAIL/RINL and set out aproposal for delivery of the “carryover” quantity and for renewalof the agreement with the Respondent.

65. On 25th September 2009 the Respondent (Mr. Babu) respondedto that letter. The response stated that the proposal was “near toimpossible” in that it envisaged the Respondent lifting verysubstantial quantity of the carryover quantity by end March 2010.The letter then stated:

“In this connection, It may please be appreciated that RINLis basically producer of LAM coke and pig Iron wherethe value addition is negligible or negative sometimes. Theindustry is yet to come out of the shock of recession. Liftingeven 18.7% carry over tonnage implies loss of USD 25/1 coke produced. Keeping these Issues in mind, we had

Aapproached Anglo Coal for reduction in price via ourletter dated 20.11.2008. Lifting another 38% implies afurther increase in loss by another USD 80/1. For the sakeof negotiation, we hope you will not ignore the economicrealities completely, Steel Melting Shop of NNL is underimplementation and the commissioning is expected sometimeBin end 2010. Economy will also come out of recessiongradually.

In short we are not denying our obligation. The request isonly for staggering the time frame for lifting as explainedin para. 1 & 2 above. Please review and reconsider ourCrequest for allotting at least one shipment of 50,000MTeach from October 09 onwards instead of zero stem tillend of 2009.” “

5c. After setting out summaries of the Claimant’s case and theRespondent’s case, under the sub-heading, “Availability of Coal”, theDMajority Award accepted the evidence of Mr. John B. Wilcox, MarketingManager, on behalf of the Appellant, reading the same with theRespondent’s letter dated 20.11.2008, as follows:

“Availability of Coal

118. The first element to be considered is the assertion advancedEon behalf of the Respondent that the Claimant did not have thecontracted goods to deliver. This depends entirely upon two e-mails, one dated 22nd July 2009 and the other dated 7th September,2009. The first of these stated that the Claimant was unable toconfirm the stem in August/September “due to cargoFavailability” and was reviewing the position in regard to OctoberDecember2009. In the 2nd the Claimant stated that “unfortunatelyat this stage we do not have any coal availability for theremainder of the year”.

119. The Claimant’s case, which we accept, is that there was noGshortage of supply at the relevant time. The e-mails have to beread in context, and as we explain below, the context is that theRespondent was seeking further deliveries of coal at below thecontract price.

120. Mr. Wilcox in his Additional Affidavit informed the TribunalHthat the Claimant was not trader in coal but owned coal mines in

Australia and had railway system in place to ensure smoothshipments. He stated that at the relevant time the market wasaffected by the global financial crisis which brought about crashin the demand for steel and, consequently, for the relevant type ofcoking coal. He said that, at the relevant time, the Claimant had alarge quantity of surplus production, some of which was sold offby way of “distress sales” during the Fifth Delivery Period.

121. Mr. Wilcox was challenged in cross examination (Q40) asto the availability of cargo to supply to the Respondent betweenJuly 2009 and 21st September 2009. He disagreed that the Claimanthad no supply, stating that the Claimant was producing around1,000,000 tonnes per month during this period. He said that it wouldhave been very easy for the Claimant to produce coal for theRespondent had they been willing to pay the contract price.

Subsequently (Q43-Q45) he was challenged about the allegeddistress sales. He confirmed that such distress sales were made.His affidavit indicated such sales amounted to approximately712,000 MT, and that these sales were made at between US$83and US$113 per MT, far below the price agreed with theRespondent.

122. The Tribunal accepts Mr. Wilcox’s evidence. It is entirelyconsistent with the Respondent’s own letter dated 20th November2008 which reads:

“As you are aware, due to worldwide crisis in financialmarkets, there has been unprecedented fall in prices ofmajor commodities including steel...

The prices of iron and steel products in the internationalmarket has nosedived in the month of September andOctober 2008 and pig iron, ... is not getting customer ondate even at US$300 FOB. Same is the situation in thedomestic market and we are not able to sell our product.Under the circumstances, you will appreciate it has becomeabsolutely unreliable to produce and sell pig iron basedon the imported coking coal having prices US$300 pertonne FOB for hard coking coal... The substantialdepreciation of Indian rupees to the US dollars is furtheradded to our woes .... In view of unprecedented

recessionary trends in the economy and consequentabnormal low realisation on pig iron, we request pricereduction of coal for quantities finalised for deliveryduring 1 July, 2008 to 30 of June 2009 period to levelthat was settled for delivery period 1 July, 2007 to 30 ofJune 2008.”

123. It appears to us that the evidence is all one way, to theeffect that demand for coking coal was substantially reduced duringthe last few months of 2008 and in, at least, the first half of 2009,and it follows, it seems to us, that this strongly corroborates Mr.Wilcox’s evidence as to the availability of coking coal for supplyto the Respondent.

124. Accordingly we reject the Respondent’s assertion that theClaimant did not have the contract goods to deliver. The Tribunalmakes one further observation: the Fifth Delivery Period pricewas agreed just over two months after the global financial crisisDwhich started at about the time of the collapse of Lehman Brotherson the 15th September 2008. The price agreed by the parties forthat period was significantly higher than the price for any of thepreceding periods. That is in itself extraordinary, but what is evenmore extraordinary is that the Respondent’s request for priceEreduction was made on the very same day on which the FifthDelivery Period price was agreed.”

5d. Under the sub-heading, “Failure to Offer Stem?”, the findingof the Majority Award was as follows:

“Failure to Offer Stem?

xxx xxx xxx

133. Accordingly we do not accept that the Agreement requiredthe Claimant to take the initiative and offer stem wholly withoutreference to any obligation on the part of the Respondent. Viewedoverall, it is clear to us that the Agreement envisaged and requiredthe parties to coordinate supply and delivery. The primary documentfor this was intended to be the Delivery Schedule. Indications ofstem availability and nomination of vessels were steps to be takenin the implementation of the Delivery Schedule, not preparatoryto it. It follows from this, it appears to us, that there is no contractualbasis on which the Respondent can contend that the Claimant

was in breach in failing to offer stem to the Respondent. Absentan agreed Delivery Schedule there was no obligation to do so.”

5e. Under the sub-heading, “Offer of Supply”, the Appellant’sletter dated 11.03.2009 was set out in which the Appellant demandedthat the Respondent propose Delivery Schedule for the coal in question.The Respondent denied the receipt of this letter. However, the MajorityAward found as follows:

“Offer of Supply

xxx xxx xxx

139. Mr. Babu does not rebut the existence of the meeting inApril. Nor does he deny having received the 2nd e-mailtransmission on 12th March. He merely said in his evidence thatthere was no need for him to be concerned with the attachmentsto that e-mail. That does not amount to evidence that the letterwas not received.

140. Moreover, the Claimant referred to its letter of 11th Marchin letter sent on 21st September 2009 (Vol.2, page 21) whichopened with the sentence “We refer to our letter of 11th March2009 to which we have not yet received response.”. TheClaimant did receive response to the letter of 21st September(Vol.2, page 23) sent on behalf of Mr. Babu, but that responseexpressed no surprise regarding the reference to letter of 11thMarch 2009, nor did it state that no such letter had been received.

141. In summary therefore there is much in the contemporaneouscorrespondence to support the Claimant’s assertion that this letterwas sent, and nothing to rebut that assertion. So far as the witnessevidence is concerned, not least because it is corroborated by thedocuments, the Tribunal prefers and accepts the evidence of Mr.Wilcox that supply of coal was offered by the Claimant to theRespondent, including by the letter of 11th March 2009.”

5f. Under the further sub-heading, “What Was the Respondent”Seeking in its emails in June/July 2009?, the Majority Award foundas follows:

“What Was the Respondent Seeking in its emails in June/ July2009?

A142. It appears to the Tribunal that the stage was set for thedealings between the two parties in regard to the Fifth DeliveryPeriod at the time that they agreed the rates for that deliveryperiod. As referred to above, there does not seem to be any disputethat contemporaneously with the agreement of the rates for theFifth Delivery Period the market price of coal fell markedly, andBthe Respondent immediately came back to the Claimant to askfor some reconsideration of the agreed rate for deliveries.

143. As the Tribunal has found to be the case above, when theClaimant wrote to the Respondent on 11th March 2009 seeking adelivery schedule for the then outstanding quantities under theCFifth Delivery Period, it met with no response. It is common groundthat only very small quantity of the total due under the FifthDelivery Period was in fact uplifted by the Respondent; onedelivery of 2,366 MT on 30th October 2008 via the ‘FurnessHartlepool’ was added to balance quantities under the FourthDDelivery Period, and one delivery on 5th August 2009, when theRespondent lifted another 9,600 MT. The second of theseshipments was the ad hoc Sea Venus agreement for deliverybetween 10th and 20th July 2009 (Vol. 2, pages 9-12).

144. The ad-hoc Sea Venus agreement was for 50,000 MT ofEcoal under which 9,600 MT, or thereabouts was transacted at theprice of US$300 per MT, with the balance 40,400 metric tonnessold at an ad hoc price of US$128.25 per MT. This was said tohave been “goodwill gesture” (Vol.2, page 9).

145. The market price remained low throughout the Fifth DeliveryFPeriod (see for example the agreement made by the Claimantwith SAIL/RINL on 15th July 2009 (Vol.2, pages 13-20) agreeingrates at below US$129.00 per MT) and, viewed commerciallythere was little incentive for the Respondent to continue to purchasefrom the Claimant at the agreed rates.

G146. The Tribunal’s view of the correspondence is that theRespondent saw matters similarly, and was seeking to purchasefurther quantities of coal at the lower rate obtained in the SeaVenus agreement. In the e-mail of 2nd July 2009 Mr. Babu referredto the Respondent having progressed the chartering of vesselfor the Sea Venus agreement, and asked, without apparentHdistinction about the availability of 2 further stems for August and

September. Receiving no substantive response to the enquiryregarding such further stems Mr. Babu followed up by e-mail on21st July 2009. He did not, as might have been expected if thiswas part of the usual contractual arrangements point out that theClaimant was obliged to fulfil this order, nor did he make anycomplaint that the Claimant had failed to comply with the“prerequisite” of indicating stem availability before the Respondentwas required to act.

147. It was in this context that Claimant wrote on 22nd July 2009referring to an inability to confirm stem in August/September dueto cargo availability. Seen in the context of the exchanges betweenthe parties, and seen against the background of the evidence givenby Mr. Wilcox to the effect that prices had slumped and theClaimant was “dumping” coal in China, the only possibleunderstanding of this e-mail is that the Claimant was declining tosupply further coal at below the contract rate as had been done inthe ad hoc Sea Venus agreement.

148. On 4th September 2009 the Respondent wrote again seekingstem (for delivery beyond the contract period), noting that therehad been no delivery since the Sea Venus agreement. Once againthe response received by the Respondent was that there was alack of availability.

149. None of these exchanges refer specifically to the price atwhich the coal was being sought, or at which it might be available.Mr. Wilcox’s evidence was however clear that thecontemporaneous discussions between the parties were on thebasis that the Respondent was seeking further discounted supplies,and indeed his understanding was that the Respondent waspurchasing from other suppliers at rates lower than those to whichit was bound under the Fifth Delivery Period.

150. The Respondent’s letter of 25th September 2009 is consistentonly with the Respondent having sought discounted price supplyin the July/August period. The letter described the difficulty theRespondent would face in incurring losses by purchasingproportions of the “carry over quantity”, that is the unfulfilledpart of the quantities under the Fifth Delivery Period. TheRespondent had proposed, in line with an agreement made by theClaimant with SAIL/RlNL, to purchase only 18.7% of the carry

over quantity, and was, in the correspondence, balking at thesuggestion made on behalf of the Claimant that 56.7% of thatquantity be lifted by 31st March 2010. This was described by theRespondent as “near to impossible’’, and the Respondent askedthe Claimant not to ignore the economic realities completely.

B151. Thus, the first relevant letter written by the Respondent duringthe Fifth Delivery Period [C-5] on 20th November 2008 sought areduction in the price of coal to be delivered under the FifthDelivery Period as did the last such letter, that of 25th September2009. Following the conclusion of the Fifth Delivery Period theClaimant made further offer of supply (on 25th November 2009)Cwhich the Respondent was prepared to accept only at pricereduced from the contractual rate (Respondent’s letter of 27thNovember 200[9]). The Respondent’s arguments now arepredicated on there having been temporary change of stanceduring the course of the year such that, in June and July 2009 itDwas seeking no more than to avail itself of supplies of coal at thecontract rate. Seen in context, the correspondence relied on doesnot begin to support that contention, and the Tribunal rejects it.The Respondent was seeking coal at below the contract rate andthe Claimant was refusing to supply on those terms. TheRespondent failed to fulfil its contractual obligation to lift theEcontracted quantities of coal at the contract rate.”

5g. Under the sub-heading, “Limitation”, the Majority Award held:

“155. It follows that the Claimant’s notice of arbitration, whichwas issued on 24[th] September 2012 and received by the SecretariatFon the same day was issued and the arbitration commenced withinthe three-year limitation period.”

5h. Under the sub-heading, “Proof of Damage?”, the MajorityAward found:

“Proof of Damage?

156. It appears to the Tribunal, with respect to the Respondent,that this is hopeless line of argument. There is ample evidenceof the market price for coal in 2009 both in the Affidavit andAdditional Affidavit of Mr. Wilcox (which details the prices atwhich the Claimant was selling coal to Chinese parties during theHFifth Delivery Period), but also in the contemporaneous

correspondence, including the Respondent’s letter of 3rdDecember 2009 and the agreement reached between the Claimantand SAIL/ RlNL. The Respondent was itself purchasing coal fromBHP Mitsui at about US$128 per MT at about this time.

157. There is no dispute as to the relevant quantity of coking coalwhich was not lifted, and the Tribunal accepts (this not being amatter of dispute) that the difference between the market rateand the contracted rate represents the correct measure ofdamages. That is the basis upon which the Claimant’s claim hasbeen evaluated in its claim documents. Accordingly the Tribunalaccepts the Claimant’s evidence as to the quantum of its loss.”

5i. Finally, therefore, in useful summary, the Majority Award

held:

“Summary

180. Having read heard and considered the evidence andsubmissions of the parties and for the reasons given above theTribunal finds, and holds, unanimously save where indicated, asfollows:

(a) The Respondent committed breach of contract by notlifting 454,034 MT of coking coal within the Fifth Delivery

Period, which expired on 30th September 2009.

(b) The Claimant was not in breach of contract in failing tosupply goods to the Respondent during the Fifth DeliveryPeriod.

(c) The Claimant was, at all material times in position toperform its obligations under the Agreement by supplying therequisite quantities in timely manner in accordance with theAgreement.

(d) The Claimant’s claims are not barred by limitation.”

5j. The award, therefore, in favour of the Appellant, was thenstated as follows:

“Dispositive Section

181. For the above reasons the Tribunal Orders and Directs that:

(1) By majority, the Claimant is entitled to damages from theRespondent in the sum of US$78,720,414.92.

(2) By majority the Tribunal concludes that the Claimant isentitled to simple interest on such damages in the sum ofUS$27,239,420.29 in respect of interest up to the date of thisAward, and at rate of 15% p.a. on the principal sum from thedate of this Award until payment.

(3) The Claimant is entitled to its costs of the arbitration which,by majority we assess in the amount of US$977,395.00.

(4) The sums set out above as being due to the Claimant aredue as at the date of this Award and are to be paid by theRespondent.

(5) This Award is final as to the matters in dispute between theparties and referred to arbitration before us. All other requestsand claims by the parties are dismissed.”

7. Justice V.K. Gupta (Retd.), in his Dissenting Award found asfollows:

“4. Analysis

xxx xxx xxx

(k) In the totality of circumstances and after appreciating thecontractual provisions and the conduct and evidence led by theClaimant I find apart from one request for the delivery schedulefrom the Respondent vide letter dated 11th March 2009 there isno evidence on record to show that the claimant had the contractedmaterial ready to supply. Even the chart showing supplies to thethird parties filed by the Claimant along with the additional evidenceof Mr. John Wilcox indicates that the supplies of the entire quantityof the material available with the Claimant had already been made

to all the other Buyers and it appears that the Claimant did nothave the material to supply under the Contract at least for theperiod between July to September 2009 which was the contractedperiod.

(l) It is incomprehensible that party which was ready with suchhuge quantity of coal would not send follow up communicationsto the Respondent urging them to lift the contracted goods if suchgoods were ready at the load port. Not single document hasbeen produced in terms of which the Claimant could show that ithad written to the Respondent that so much quantity of material

was sitting at the load port and that MMTC has failed to nominatethe vessel. After the 11th March 2009 letter there is no othercommunication addressed by the Claimant to the Respondentrequesting the Respondent to provide the delivery schedule. Onthe contrary in their emails they expressed their inability to supplyany cargo within the delivery period. It appears that there wereseveral Buyers between July and September 2009 on account ofshortage of coking coal and that there was sudden increase indemand of coal and during the month of July and September 2009and that the Claimant had over committed the supply and hadsupplied the contracted quantity to the third parties.

(m) In my view the claimant did not have the contracted materialor it diverted the contracted material to third party and thereforewas unable to make the contracted material available under theContract. The Claimant was therefore unable to supply thecontracted material and was in breach itself.

(n) The Claimant being itself in breach is not entitled to claim anydamages.”

The Dissenting Award also found that the Appellant had failed indischarging its burden of proving the quantum of damages as on the dateof breach of the LTA.

8. The learned Single Judge, by judgment dated 10.07.2015,after setting out the relevant facts, dismissed the Respondent’s plea oflimitation and then found:

“45. The majority Award concluded that there was in fact norepudiation of the contract by Anglo and that in any event noacceptance of such repudiation by MMTC. The Court is requiredto examine whether such conclusion is perverse or patently illegalas contended by MMTC. In the first place it appears that it wasnot the case of MMTC earlier that the letter dated 21st September,2009 constituted repudiation by Anglo of the contract. In its replydated 25th September, 2009, MMTC did not suggest that Anglohad repudiated the contract. It viewed the said letter dated 21stSeptember, 2009 as request from Anglo to start lifting thecontractual quantities. This explains why MMTC in the said replyexpressed inability to lift 2,25,174 MT by 31st March, 2010 sinceit seemed “near to impossible as it worked out to 56.7% of the

Acarryover tonnage.” It sought reduction in prices hoping thatAnglo would “not ignore the economic realities completely”.MMTC stated that “In short, we are not denying our obligation.The request is only for staggering the time frame for lifting...” Inits letter dated 3rd December, 2009 MMTC sought Anglo’s helpin the matter “so that somehow we are able to run the plant byBhaving mixture of costly coal which we are committed to liftvis-a-vis the coal at new contract prices.” The letter dated 21stSeptember, 2009 when read as whole and in the context of theabove correspondence reflects what the majority Award has rightlyunderstood, viz., that Anglo, far from repudiating the contract orCbringing it to an end, was offering MMTC way to spread out itsobligation to lift the carry over quantity over the subsequent period.”

plea of bias levelled against one of the arbitrators, namely, Mr.Peter Leaver, was also rejected. It was found, after copious referencesto both oral and documentary evidence, that the view of the MajorityDAward, being possible view on the Respondent being in breach and theAppellant having proven quantum of damages, that no ground undersection 34 of the Arbitration Act for interfering with the Majority Awardwas made out.

9. The impugned judgment of the Division Bench dated 02.03.2020,Eafter setting out the facts, the Majority Award and the Single Judge’sconclusions, based its decision on an appreciation of three emails betweenthe parties, which were picked out of the entire correspondence, namely,emails dated 02.07.2009, 22.07.2009 and 07.09.2009. The Division Benchreferred to these as “critical emails”, finding:

F“25. It is extremely important to note that in these three critical e-mails, upon which the decision of the Arbitral Tribunal as well assingle Judge hinges, there is no reference whatsoever to the priceof coal to be supplied. Furthermore, nowhere does the respondentsay that it does not have coal available at any specified price. Inthe e-mails, the respondent simply says that it does not have anyGcoal available for the remaining part of the year 2009 period.However, what has not been said or even reflected in the aforesaide-mails, is read into the said e-mails by the majority of the ArbitralTribunal; and accepted by the single Judge. The aforesaid e-mailcommunication is taken to mean that the respondent had coalHavailable at USD-300 per metric tonne ; and that the respondent

meant that it did not have coal available at USD 128 per metrictonne. The majority of the Arbitral Tribunal as well as the singleJudge therefore read the aforesaid emails to mean that the appellantwas requesting supply of coal only at USD 128 per metric tonne,which is something that has nowhere been said in any of these e-mails.”

As result, the Division Bench concluded:

“29. We are aware that court seized of proceedings undersection 37 of the A&C Act is not to re-appreciate evidence,muchless in case where the Arbitral Tribunal as well as thesingle Judge under Section 34 have agreed with certain view onthe facts of the case. However, it is also the law that where afactual inference is based on no evidence, the court may interferewith such inference even under section 37. In our reading of thelegal position, factual inference that is based on what is notstated in document or what may be called ‘imaginary evidence’,is the same as an inference based on ‘no evidence’ ; or aninference derived ignoring vital evidence. decision based onsuch inference would necessarily be perverse. If the majority ofthe Arbitral Tribunal ignores what is plainly stated in commercialcorrespondence and reads into e-mails words that do not exist, orignores words that are contained in e-mails, this can only pave theway for complete injustice. It is not the purport of any of theprecedents that inferences drawn from thin air would becomesustainable, hiding behind the shield of an arbitral award. As wesee it, this is exactly the position in the present case. There is noevidence to support the conclusion that the appellant wasdemanding consignment of coal at any reduced rate vis-à-vis thecontractually agreed price. There is also no evidence to supportthe conclusion that the respondent had coal available to supply tothe appellant, when the appellant demanded it. If anything, thereis straight forward acknowledgement by the respondent that ithad no coal available till the end of the year 2009, without anyqualification or reservation that coal was available at the contractedrate but not at discounted rate.

30. What is more is that there is also no basis to the calculation ofdamages. The Tribunal has calculated damages by taking thedifference in the agreed price of coal and the assumed ‘market

DEF

price’ at the relevant time. However there is no evidence to provethe market price of coal at that time. The question of mitigation ofdamages by the respondent has not even been alluded to.”

After setting out in some detail, the judgment in AssociateBuilders v. DDA, (2015) 3 SCC 49 [“Associate Builders”], theBDivision Bench held as follows:

33. … In the present case however, we find that the view takenby the majority of arbitrators is not possible view since it is nota question of the ‘quantity’ or ‘quality’ of evidence or of ‘littleevidence’ or of ‘evidence which does not measure-up in qualityto trained legal mind’ but this is case where the inferencesdrawn are non-sequitur to the plain and simple words of the e-mails/communications read in evidence, which were before theTribunal and which do not support the inferences drawn. In thisview of the matter, clearly the approach of the majority ofarbitrators is arbitrary and capricious; and therefore cannot passjudicial muster.

34. In the passing, we may also refer to the observations of athree-Judge Bench of the Supreme Court in Smt. Kamala Devivs. Seth Takhatmal & Anr.: (1964) 2 SCR 152, in which thecourt observed as follows:-

“8. … Sections 94 to 98 of the Indian Evidence. Act affordguidance in the construction of documents; they alsoindicate when and under what circumstances extrinsicevidence could be relied upon in construing the terms of adocument. Section 94 of the Evidence Act lays down ruleof interpretation of the language of document when it isplain and applies accurately to existing facts. It says thatevidence may be given to show that it was not meant toapply to such facts. When Court is asked to interpret adocument, it looks at its language. If the language is clearand unambiguous and applies accurately to existing facts,it shall accept the ordinary meaning, for the duty of theCourt is not to delve deep into the intricacies of the humanmind to certain one’s undisclosed intention, but only totake the meaning of the words used by him, that is to sayhis expressed intentions. Sometimes when it is said that

Court should look into all the circumstances to find anauthor’s intention, it is only for the purpose of finding outwhether the words apply, accurately to existing facts. Butif the words are clear in the context of the surroundingcircumstances, the Court cannot rely on them to attributeto the author an intention contrary to the plain meaningof the words used in the document. The other sections in thesaid group of sections deal with ambiguities, peculiarities inexpression and the inconsistencies between the written wordsand the existing facts. In the instant case, no such ambiguity orinconsistency exists as we shall demonstrate presently. ThePrivy Council’s case was one of ambiguity and the surroundingcircumstances gave the clue to find out the real intention ofthe parties expressed by them.”

In the present case, we find no reason to look for the ‘undisclosedintention’ of the respondent since the clear and express words ofthe respondent, as contained in the afore-cited e-mails/communications, are perfectly in accord with and apply squarelyto existing facts. We must therefore accept the ordinary meaningof what is stated in those emails/communications, namely that therespondent did not have any coal available till the end of the year2009 for supplying to the appellant.

35. Proceeding on this basis, by majority, the Tribunal hasawarded USD 78,720,414.92 as damages along with interest ofUSD 27,239,420.29 calculated upto the date of the award, alongwith 15% p.a. future interest on the principal sum, in addition toUSD 977,395.00 as costs. This amount, calculated at the ballparkprevailing exchange rate of approximately USD 1 = INR 70translates to INR 7,48,56,06,115 that is to approximately INR 748crores. In our view, such an award must rest on surer factual andlegal footing than only to say that it has been rendered by anarbitral tribunal; and is therefore sacrosanct. In the above view ofthe matter, the award of damages, interest and costs is travestyof justice and the award suffers from perversity.

36. In our consideration, the single Judge has also not appreciatedthe aforesaid basic aspects, upon which the decision of the majorityof the Tribunal turns. While doing so the single Judge has thereforecommitted error in the proceedings under section 34, which are

[2020] 14 S.C.R.

Aamenable to be corrected in the present proceedings under section37.

37. In view of the above discussion, we set-aside the majorityaward dated 12.05.2014 as also order dated 10.07.2015 of thesingle Judge made under section 34 of the A&C Act”

B10. Shri Kapil Sibal, learned Senior Advocate appearing on behalfof the Appellant, painstakingly took us through the LTA and the entirecorrespondence that ensued between the parties. He argued that all thefindings given by the Majority Award were findings of fact, there havingbeen little dispute on the construction of any term of the LTA; no disputeCas to the contracted quantity of coal that was to be supplied in the FifthDelivery Period, i.e., 466,000 metric tonnes; no dispute as to the price atwhich such coal was to be supplied, i.e., at the rate of $300 per metrictonne; and no dispute as to the quantity of coal that remained unlifted,i.e., 454,034 metric tonnes. The only issue before the Arbitral Tribunalwas whether the Appellant was unable to supply the contracted quantityDof coal at the contractual price, or whether the Respondent was unwillingto lift the quantity of coal at the contractual price, both being purelyquestions of fact as to the performance of contractual obligationsstemming from the LTA.

11. Shri Sibal then argued that crucial letter dated 11.03.2009,Eby which the Appellant requested the Respondent to propose DeliverySchedule under the LTA, remained unanswered, the Majority Awardhaving found as matter of fact that the said letter was received by theRespondent. In any event, he argued that the Appellant’s letter dated21.09.2009, which referred to the letter dated 11.03.2009, would clinchFthe case in the Appellant’s favour, as this letter clearly referred to thedelivery of the balance quantity of coal, giving without prejudice offer,open and capable of acceptance until 30.09.2009. The Respondent’sonly response to this was by letter dated 25.09.2009, in which theobligation to lift coal at the contractual price was admitted, the Respondentasking for reduction in price, without ever stating that it had not receivedGthe letter dated 11.03.2009. This, he argued, showed the Appellant’swillingness to perform the deliveries as per the LTA, by demanding aDelivery Schedule from the Respondent. His argument, therefore, wasthat the Majority Award and the learned Single Judge, after referring tothe entirety of the correspondence, arrived at the conclusion that theHRespondent was in breach of the LTA, whereas the Division Bench

arbitrarily picked out three emails out of the welter of correspondencebetween the parties, ignoring what was communicated before and afterthose three emails, thereby arriving at faulty conclusion on facts, as ifit were court of appeal.

12. Shri Sibal also argued that to get over the parameters of judicialreview of arbitral awards laid down in Associate Builders (supra), theDivision Bench wrongly stated that there is “no evidence” to support theconclusion that the Respondent was seeking stems of coal at reducedrate, below the contractual price, and pointed out several letters andemails showing this to be entirely incorrect. It was also entirely incorrectfor the Division Bench to have concluded that there was “no evidence”to support the conclusion that the Appellant had coal available to supplyto the Respondent, which would amount to ignoring the evidence of Mr.Wilcox, as well as the documentary evidence of the correspondencebetween the parties. Equally, he argued that the market price of coal atthe relevant period was clearly proven by the figures supplied by Mr.Wilcox and therefore, for the Division Bench to state that there is “noevidence” to prove the market price of coal at the time of breach, wasalso completely incorrect.13. Shri Neeraj Kishan Kaul, learned Senior Advocate,supplemented the submissions of Shri Sibal and stated that the overallcontext of the correspondence showed that the Respondent repeatedlyasked for supplies to be made at price lower than the contractual pricethroughout the Fifth Delivery Period, since it was clearly unable to liftcoal at the price of $300 per metric tonne. Even when only two monthsin the Fifth Delivery Period were left, maximum of 50,000 metric tonnesof “mixed” supply was asked for, at “mixed” rate of $300 per metrictonne and at rate much lower than that. He also referred to Mr. Wilcox’stestimony to argue that the Appellant was major producer of coal andhuge quantities of coal were produced at the time of the Fifth DeliveryPeriod, in July 2009, which could have easily been supplied, had theRespondent demanded the balance unlifted quantity of 454,034 metrictonnes at the price of $300 per metric tonne.

14. Shri Mukul Rohatgi, learned Senior Advocate appearing onbehalf of the Respondent, supported the impugned judgment of theDivision Bench and took us through the correspondence between theparties, the Majority Award, the Dissenting Award, and the judgments ofthe learned Single Judge and the Division Bench. According to him, this

ACourt ought not to interfere under Article 136 of the Constitution ofIndia, given the fact that the Division Bench had not acted as court ofappeal, but had specifically followed the judgment in Associate Builders(supra), in that, it found the present case to be case in which “noevidence” was led on the crucial issues of breach, as well as quantum ofdamages. According to him, the three crucial emails that were reliedBupon by the Division Bench were correctly relied upon, as these emailswould unequivocally show that the Appellant was not in position tosupply coal, and that the Respondent was in position to take supplies,and did in fact demand that supplies of coal be made in accordance withthe LTA.C15. Shri Rohatgi then referred to clause 7.2 and annexure IV ofthe LTA, dealing with the intimation of Delivery Schedule, and statedthat under the LTA, it was first incumbent upon the Appellant, as theseller, to ensure that sufficient quantities of coal were available,subsequent to which, the nomination of vessel was to take place beforeDa Delivery Schedule would be agreed upon between the parties. Heargued, based on the emails and letters exchanged between the parties,that in point of fact, only one ad hoc shipment took place at “mixed”rate, partially at the contractual price of $300 per metric tonne and partiallyat the rate of $128.25 per metric tonne, under which an ad hoc quantityof 50,000 metric tonnes was supplied in August 2008. It was thus clearEthat when the Appellant stated that it was “unable to confirm stem inAug/Sep” and that it did not have “any coal availability for the remainderof the year”, the Appellant breached and repudiated the LTA. Accordingto Shri Rohatgi, the three critical emails referred to by the Division Benchwere crystal clear and unequivocal, and could not be contradicted byForal evidence, the Majority Award, therefore, being wholly incorrect inarbitrarily and capriciously relying upon statements by Mr. Wilcox, toattempt to explain what was unequivocally stated in these emails. Healso added that the Division Bench’s conclusion of there being no evidenceas to the market price of coal as on the date of breach was correct, andcited number of judgments to buttress his submissions.G

16. Having heard the learned counsel appearing for the parties,there can be no doubt whatsoever that the Majority Award is detailedaward, which goes into the facts in great detail, outlines the issues to beanswered, and then answers all the issues, with due regard to the oraland documentary evidence given in the case.H

17. The first and most important point, therefore, to be noted isthat this is case in which there is finding of fact by the MajorityAward that the Appellant was able to supply the contracted quantity ofcoal for the Fifth Delivery Period, at the contractual price, and that itwas the Respondent who was unwilling to lift the coal, owing to slumpin the market, the Respondent being conscious of the fact that merecommercial difficulty in performing contract would not amount tofrustration of the contract. It was for this reason that the Respondentdecided, as an afterthought, in reply to the Appellant’s legal notice dated04.03.2010, to attack the Appellant on the ground that it was the Appellantthat was unable to supply the contracted quantity in the Fifth DeliveryPeriod. Once this becomes clear, it is obvious that the Majority Award,after reading the entire correspondence between the parties andexamining the oral evidence, has come to possible view, both on theRespondent being in breach, and on the quantum of damages.

18. We may hasten to add that the entire approach of the DivisionBench is flawed. First and foremost, to cherry-pick three emails out ofthe entire correspondence and to rest judgment on those three emailsalone, without having regard to the context of the LTA and thecorrespondence, both before and after those three emails, would renderthe judgment of the Division Bench fundamentally flawed. Further, thefinding that there was “no evidence” that the Respondent demandedstems of coal at reduced rate vis-à-vis the contractual rate, flies in theface of at least three different exchanges between the parties, being theRespondent’s letters dated 20.11.2008, 27.11.2009 and 03.12.2009.

19. Equally, the finding of the Division Bench that no evidencehad been led to show that the Appellant had availability of the balancequantity of 454,034 metric tonnes of coal to supply to the Respondentduring the Fifth Delivery Period, again completely fails to appreciateMr. Wilcox’s evidence given by way of an Additional Affidavit dated03.09.2013 and in response to questions in cross-examination before theArbitral Tribunal on 23.09.2013, together with two letters exchangedbetween the parties on 21.09.2009 and 25.09.2009. All of these aspectswere considered in the Majority Award of the Arbitral Tribunal.

20. The finding that there is “no evidence” to prove market priceof coal at the time of breach, and that therefore, quantum of damagescould not be fixed, again completely ignores Mr. Wilcox’s evidence inchief and cross examination; the Respondent’s letters dated 25.09.2009,27.11.2009 and 03.12.2009; as also the Appellant’s re-negotiated contracts

Awith SAIL/RINL. All these aspects have been considered by the MajorityAward in great detail.

21. However, Shri Rohatgi invited us to look at the unequivocallanguage contained in the three emails relied upon by the Division Bench,namely the emails dated 02.07.2007, 22.07.2009 and 07.09.2009, whichBstated that not only were no stems available for August/September 2009,but that also there was no coal left for the remainder of the year, makingit clear that this was an admission on the part of the Appellant that it wasunable to supply the contracted quantity of coal during the remainder ofthe Fifth Delivery Period. However, what is missed by Shri Rohatgi isthe crucial fact that no price for the coal to be lifted was stated in any ofCthe emails or letters exchanged during this period. This is in fact whatthe Majority Award adverts to and fills up by having recourse to theevidence given by Mr. Wilcox, stating that the ambiguity qua price wasresolved by the fact that no coal was available for lifting at price lowerthan the contractual price. The Majority Award found, relying upon Mr.DWilcox’s evidence, that the supplies that were sought to be made inAugust and September, 2009 were therefore, also in the nature of “mixed”supplies, i.e., coal at the contractual price, as well as coal at muchlower price. This is finding of fact that cannot be characterised asperverse, as it is clear from the evidence led, the factual matrix of thesetting of there being slump in the market, in which the performanceEof the contract took place, as well as the ambiguity as to whether thecorrespondence referred to contractual price or “mixed” price, and thus,is possible view to take.

22. The Division Bench also relied upon Smt. Kamala Devi v.Takhatmal and Anr., (1964) 2 SCR 152, [“Smt. Kamala Devi”]Fwhich in turn, relied upon section 94 of the Indian Evidence Act, 1872[“Evidence Act”], by which the Division Bench concluded that it foundno reason to look for the undisclosed intention of the parties, since theclear and express words contained in the three “crucial” emails wereperfectly in accord with and applied squarely to the existing facts.GTherefore, the ordinary meaning of what was stated in those emailsmust be accepted, without more, which led to the conclusion that theAppellant did not have any coal available till the end of the year (i.e.,2009) to supply to the Respondent.

23. The judgment in Smt. Kamala Devi (supra) dealt with theinterpretation of surety bond which was executed by the appellant inH

favour of the Court. judgment of the Privy Council reported asRaghunandan v. Kirtyanand, AIR 1932 PC 131 was referred to, inwhich Lord Tomlin referred to an ambiguous surety bond which was tobe considered in the surrounding circumstances of the facts in that case,i.e., in light of the order directing the security to be given. After settingout the judgment of the Privy Council, this Court then held:

“These observations only apply the well settled rule of constructionof documents to surety bond. Sections 94 to 98 of the IndianEvidence. Act afford guidance in the construction of documents;they also indicate when and under what circumstances extrinsic-evidence could be relied upon in construing the terms of adocument. Section 94 of the Evidence Act lays down rule ofinterpretation of the language of document when it is plain andapplies accurately to existing facts. It says that evidence may begiven to show that it was not meant to apply to such facts. Whena court is asked to interpret document, it looks at its language. Ifthe language is clear and unambiguous and applies accurately toexisting facts, it shall accept the ordinary meaning, for the duty ofthe Court is not to delve deep into the intricacies of the humanmind to certain one’s undisclosed intention, but only to take themeaning of the words used by him, that is to say his expressedintentions. Sometimes when it is said that Court should look intoall the circumstances to find an author’s intention, it is only for thepurpose of finding out whether the words apply accurately toexisting facts. But if the words are clear in the context of thesurrounding circumstances, the Court cannot rely on them toattribute to the author an intention contrary to the plain meaningof the words used in the document. The other sections in the saidgroup of sections deal with ambiguities, peculiarities in expressionand the inconsistencies between the written words and the existingfacts. In the instant case, no such ambiguity or inconsistency existsas we shall demonstrate presently. The Privy Council’s case wasone of ambiguity and the surrounding circumstances gave the clueto find out the real intention of the parties as expressed by them.”

(page 162)

Having so held, the Court then found that the surety bond did notneed to be qualified by adding words to it when the words used in thebond were otherwise clear. Importantly, the words “in default of his

Adoing so” were held by the Court to make it absolutely clear that thesurety comes into effect only if the judgment debtor makes defaultwhen required to produce the document. Adding that the surety bondhas to be strictly construed, the Court held that demand of the Courton the judgment debtor, and default made by him in so doing, werenecessary pre-conditions for the enforcement of the bond against theBappellant.

24. Section 1 of the Evidence Act states as follows:

“1. Short title. –– This Act may be called the Indian EvidenceAct, 1872.

Extent. –– It extends to the whole of India except the State ofJammu and Kashmir and applies to all judicial proceedings in orbefore any Court, including Courts-martial, other than Courts-martial convened under the Army Act, the Naval Discipline Actor the Indian Navy (Discipline) Act, 1934, or the Air Force ActDbut not to affidavits presented to any Court or officer, nor toproceedings before an arbitrator;”

25. This would be sufficient to keep the application of section 94of the Evidence Act out of harm’s way. However, on the footing that theprinciple contained in section 94 of the Evidence Act, as to extrinsicEevidence being inadmissible in cases of “patent ambiguity”, is fundamentalto Indian jurisprudence, we proceed to examine whether section 94 ofthe Evidence Act has been correctly applied by the Division Bench tonon-suit the Appellant.

26. Section 94 appears in Chapter VI of the Evidence Act titled,“OF THE EXCLUSION OF ORAL BY DOCUMENTARYFEVIDENCE”. In this regard, proviso (6) to section 92 of the EvidenceAct is important and states as follows:

“92. Exclusion of evidence of oral agreement. –– When theterms of any such contract, grant or other disposition of property,or any matter required by law to be reduced to the form of aGdocument, have been proved according to the last section, noevidence of any oral agreement or statement shall be admitted, asbetween the parties to any such instrument or their representativesin interest, for the purpose of contradicting, varying, adding to, orsubtracting from, its terms:

xxx xxx xxx

Proviso (6). –– Any fact may be proved which shows in whatmanner the language of document is related to existing facts.”Illustration (f), then states:

“Illustrations

xxx xxx xxx

(f) orders goods of by letter in which nothing is said as tothe time of payment, and accepts the goods on delivery. sues Afor the price. may show that the goods were supplied on creditfor term still unexpired.”

Followed by this, are sections 94 and 95 of the Evidence Act,which state:

“94. Exclusion of evidence against application of documentto existing facts. –– When language used in document is plainin itself, and when it applies accurately to existing facts, evidencemay not be given to show that it was not meant to apply to suchfacts.”

95. Evidence as to document unmeaning in reference toexisting facts. –– When language used in document is plain initself, but is unmeaning in reference to existing facts, evidencemay be given to show that it was used in peculiar sense.”

27. Importantly, section 92 of the Evidence Act refers to the termsof “contract, grant or other disposition of property or any matter requiredby law to be reduced to the form of document”. In all these cases,under proviso (6) read with illustration (f), any fact may be provenwhich shows in what manner the language of document is related toexisting facts. Illustration (f) of section 92 of the Evidence Act indicatesthat facts, which may on the face of it, be ambiguous and vague, can bemade certain in the contextual setting of the contract, grant or otherdisposition of property. Section 94 of the Evidence Act, then speaks oflanguage being used in document being “plain in itself”. It is only whensuch document “applies accurately to existing facts”, that evidence maynot be given to show that it was not meant to apply to such facts. Likewise,the obverse situation is contained in section 95 of the Evidence Act,which then states that when the language used in document is plain in

Aitself, but is “unmeaning in reference to existing facts”, only then mayevidence be given to show that it was used in peculiar sense.

28. When sections 92, 94 and 95 of the Evidence Act are appliedto string of correspondence between parties, it is important to rememberthat each document must be taken to be part of coherent whole, whichBhappens only when the “plain” language of the document is first appliedaccurately to existing facts.

29. In Woodroffe and Ali’s Law of Evidence,[1] the learned authorsopine that whereas sections 93 and 94 of the Evidence Act deal withcases of patent ambiguity, sections 95 to 97 of the Evidence Act dealCwith cases of latent ambiguity (see pages 3119-3120). “patentambiguity” is explained in the following terms in Starkie on Evidence[2]:

“By patent ambiguity must be understood an ambiguity inherentin the words, and incapable of being dispelled, either by any legalrules of construction applied to the instrument itself, or by evidenceDshowing that terms in themselves unmeaning or unintelligible arecapable of receiving known conventional meaning, the greatprinciple on which the rule is founded is that the intention of parties,should be construed, not by vague evidence of their intentionsindependently of the expressions which they have thought fit touse, but by the expression themselves. Now, those expressionsEwhich are incapable of any legal construction and interpretationby the rules of art are either so because they are in themselvesunintelligible, or because, being intelligible, they exhibit plain andobvious uncertainty. In the first instance, the case admits of twovarieties; the terms though at first sight unintelligible, may yet beFcapable of having meaning annexed to them by extrinsicevidence, just as if they were written in foreign language, aswhen mercantile terms are used which amongst mercantile menbear distinct and definite meaning, although others do notcomprehend them; the terms used may, on the other hand, becapable of no distinct and definite interpretation. Now, it is evidentGthat to give effect to an instrument, the terms of which, thoughapparently ambiguous are capable of having distinct and definite

1 Woodroffe, J. and Ali, A., Law of Evidence, 19th Edition (Volume 3), 2013, ButterworthsWadhwa, Nagpur.2 Starkie, T., Treatise on the Law of Evidence, 7th Edition, 1829, William Benning,HLondon.

meaning annexed to them is no violation of the general principle,for, in such case, effect is given, not to any loose conjecture asto the intent and meaning of the party, but to the expressed meaningand that, on the other hand, where either the terms used areincapable of any certain and definite meaning, or, being inthemselves intelligible, exhibit plain and obvious uncertainty, andare equally capable of different applications, to give an effect tothem by extrinsic evidence as to the intention of the party wouldbe to make the supposed intention operate independently of anydefinite expression of such intention. By patent ambiguity, therefore,must be understood an inherent ambiguity, which cannot beremoved, either by the ordinary rules of legal construction or bythe application of extrinsic and explanatory evidence, showingthat expressions, prima facie, unintelligible, are yet capable ofconveying certain and definite meaning.”

(page 653)

On the other hand, “latent ambiguity” is described in Woodroffeand Ali’s Law of Evidence, as follows:

“Latent ambiguity, in the more ordinary application, arises fromthe existence of facts external to the instrument, and the creationby these facts of question not solved by the document itself. Alatent ambiguity arises when the words of the instrument are clear,but their application to the circumstances is doubtful; here theambiguity, being raised solely by extrinsic evidence, is allowed tobe removed by the same means. In strictness of definition, suchcases, as those in which peculiar usage may afford constructionto term different from its natural one as can be seen in s 98,would be instances of latent ambiguity, since the double use of theterm would leave it open to the doubt in which of its two senses itwas to be taken. It is not, however, to this class of cases thatreference is now made, but to those in which the ambiguity israther that of description, either equivocal itself from the existenceof two subject matter, or two persons, both falling within its termsas can be seen in s 96, or imperfect when brought to bear on anygiven person or thing as per ss 95 and 97.”

(pages 3132-3133)

30. At this stage, it is also important to advert to the definition of“fact” in section 3 of the Evidence Act, which is set out hereinbelow:

A“3. Interpretation-clause.––In this Act the following words andexpressions are used in the following senses, unless contraryintention appears from the context: ––

xxx xxx xxx

“Fact”.–– “Fact” means and includes –– (1) anything, state ofBthings, or relation of things, capable of being perceived by thesenses;

(2) any mental condition of which any person is conscious.

Illustrations

C(a) That there are certain objects arranged in certain order in acertain place, is fact.

(b) That man heard or saw something, is fact.

(c) That man said certain words, is fact.

D(d) That man holds certain opinion, has certain intention,acts in good faith or fraudulently, or uses particular word in aparticular sense, or is or was at specified time conscious of aparticular sensation, is fact.

(e) That man has certain reputation, is fact.”

E31. The picture that emerges, therefore, is that “patent ambiguity”provision, as contained in section 94 of the Evidence Act, is only applicablewhen document applies accurately to existing facts, which includeshow particular word is used in particular sense. Given that, in thefacts of the present case, there was no mention of the price at whichFcoal was to be supplied in the three “crucial” emails, these emails mustbe read as part of the entirety of the correspondence between the parties,which would then make the so-called “admissions” in the aforementionedemails apply to existing facts. Once this is done, it is clear that there isno scope for the further application of the “patent ambiguity” principlecontained in section 94 of the Evidence Act, to the facts of the presentGcase.

32. However, section 95 of the Evidence Act, dealing with latentambiguity, when read with proviso (6) and illustration (f) to section 92of the Evidence Act, could apply to the facts of the present case, aswhen the plain language of document is otherwise unmeaning inHreference to how particular words are used in particular sense, given

the entirety of the correspondence, evidence may be led to show thepeculiar sense of such language. Thus, if this provision is applied, theMajority Award cannot be faulted as it has accepted the evidence givenby Mr. Wilcox, wherein he explained that the three emails would only bemeaningful if they were taken to refer to “mixed” supplies of coal, andnot supplies of coal at the contractual price.

33. judgment of the Court of Appeal in Singapore, in ZurichInsurance (Singapore) Pte Ltd v B-Gold Interior Design &Construction Pte Ltd, [2008] SGCA 27, discussed section 96 of theEvidence Act of Singapore, which is the equivalent of section 94 of theIndian Evidence Act. The Singapore Court of Appeal, after setting outthe section, held:

“77 … The somewhat narrow wording of s 96, which refers tothe specific situation where the language in document “appliesaccurately to existing facts”, is probably attributable to itsprovenance as rule of interpretation pertaining to wills. Thissection should therefore not be read too restrictively. Like s 95 of-the Evidence Act, s 96 should be viewed as prescribing commonsense limit on the use of extrinsic evidence which has been admittedunder proviso (f) to s 94. In Butterworths’ Annotated Statutes, itis stated (at p 275) that:

The earlier section [ie, s. 95] and the present section [ie, s 96]lay down the outer limits of interpretation in the sense thatthey mark the place where the language used by the writermust prevail over any extrinsic evidence and the place whereextrinsic evidence may prevail over the language. So just aswhere the language is patently ambiguous it cannot be curedby extrinsic evidence, so where the language used is plain onits face, it must be given effect to, although it can be shownthat the writer has made mistake.

Similarly, in Woodroffe at p 3510, the explanation of s 94 of theIndian Act (which is in pari materia with s 96 of the EvidenceAct) makes clear that:

When court is asked to interpret document, it looks at itslanguage. If the language is clear and unambiguous and appliesaccurately to existing facts, the court accepts the plain andordinary meaning ... When it is said that court should look

into all the circumstances to find an author’s intention, it is onlyfor the purpose of finding out whether the words applyaccurately to existing facts. If, however, the words are clearin the context of the surrounding circumstances, the courtcannot rely on them to attribute to the author an intentioncontrary to the plain meanings of the words used in thedocument.””

(emphasis supplied)

“108 It is evident from the Court of Appeal’s reasoning in SandarAung [2007] 2 SLR 89 that in Singapore, the parol evidence ruleC(as statutorily embedded in s 94 of the Evidence Act) still operatesas restriction on the use of extrinsic material to affect contract.However, extrinsic material is admissible for the purpose ofinterpreting the language of the contract. In this respect, SandarAung acknowledges that extrinsic material is admissible even ifno ambiguity is present in the plain language of the contract.DHowever, ambiguity still plays an important role, in that the courtcan only place on the relevant contractual word, phrase or terman interpretation which is different from that to be ascribed by itsplain language if consideration of the context of the contractleads to the conclusion that the word, phrase or term in questionEmay take on two or more possible meanings, ie, if there is latentambiguity. In Sandar Aung, after the Estimate was taken intoaccount, the phrase “all charges, expenses and liabilities incurredby and on behalf of the Patient” could plausibly be taken to meanall charges, expenses and liabilities incurred by and on behalf ofthe Patient in respect of the envisaged angioplasty. Thus, theFcourt had legitimate basis to place narrower interpretation onthe contractual term (or, in more informal parlance, to “read down”that term) which would not otherwise have been warranted by itsbroad and general language. It may be possible to argue that whatthe court did in Sandar Aung in fact constituted variation of theGrelevant contractual terms in contravention of s 94 of the EvidenceAct. This issue shall be addressed in greater detail at [122]–[123]below. It remains to be noted that proviso (f) to s 94 was notdiscussed in Sandar Aung. Thus, the issue of whether ambiguitywas prerequisite for the application of this proviso and itsrelationship with the common law contextual approach toHcontractual interpretation was left open.”

“(B) THE PAROL EVIDENCE RULE

111 As mentioned earlier, in Singapore, the parol evidence rulelives on in s 94 of the Evidence Act and has been appliedassiduously by the courts in case law. The Singapore courts havealways been mindful of the need for contractual certainty,especially in commercial agreements (such as the Policy in thepresent case). In Forefront Medical Technology (Pte) Ltd vModern-Pak Pte Ltd [2006] 1 SLR 927, the High Courtemphasised that not only is “sanctity of contract … vital tocertainty and predictability in commercial transactions”, but also:

The perception of the importance of commercial certainty andpredictability is deeply entrenched within the commercial legallandscape in general and in the individual psyches ofcommercial parties (and even non-commercial parties, for thatmatter) in particular.

112 However, the parol evidence rule only operates where thecontract was intended by the parties to contain all the terms oftheir agreement. Where the contractual terms are ambiguous ontheir face, it is likely that the contract does not contain all theterms intended by the parties. Furthermore, in order to ascertainwhether the parties intended to embody their entire agreement inthe contract, the court may take cognisance of extrinsic evidenceor the surrounding circumstances of the contract.

113 Assuming that the contract is one to which the parol evidencerule applies, no extrinsic evidence is admissible to contradict, vary,add to or subtract from its terms (see s 94 of the Evidence Act).”

(emphasis supplied)

Finally, in synopsis at the end, the Court of Appeal held:

“132 To summarise, the approach adopted in Singapore tothe admissibility of extrinsic evidence to affect writtencontracts is pragmatic and principled one. The main featuresof this approach are as follows:

(a) court should take into account the essence and attributes ofthe document being examined. The court’s treatment of extrinsicevidence at various stages of the analytical process may differdepending on the nature of the document. In general, the court

ought to be more reluctant to allow extrinsic evidence to affectstandard form contracts and commercial documents.

(b) If the court is satisfied that the parties intended to embodytheir entire agreement in written contract, no extrinsic evidenceis admissible to contradict, vary, add to, or subtract from its terms(see ss 93–94 of the Evidence Act). In determining whether theparties so intended, our courts may look at extrinsic evidence andapply the normal objective test, subject to rebuttable presumptionthat contract which is complete on its face was intended tocontain all the terms of the parties’ agreement. In other words,where contract is complete on its face, the language of thecontract constitutes prima facie proof of the parties’ intentions.

(c) Extrinsic evidence is admissible under proviso (f) to s 94 to aidin the interpretation of the written words. Our courts now adopt,via this proviso, the modern contextual approach to interpretation,in line with the developments in England in this area of the law todate. Crucially, ambiguity is not prerequisite for the admissibilityof extrinsic evidence under proviso (f) to s 94.

(d) The extrinsic evidence in question is admissible so long as it isrelevant, reasonably available to all the contracting parties andrelates to clear or obvious context. However, the principle ofEobjectively ascertaining contractual intention(s) remainsparamount. Thus, the extrinsic evidence must always go towardsproof of what the parties, from an objective viewpoint, ultimatelyagreed upon. Further, where extrinsic evidence in the form ofprior negotiations and subsequent conduct is concerned, we findFthe views expressed in McMeel’s article and Nicholls’ articlepersuasive. For this reason, there should be no absolute or rigidprohibition against evidence of previous negotiations or subsequentconduct, although, in the normal case, such evidence is likely tobe inadmissible for non-compliance with the requirements set outat [125] and [128]–[129] above. (We should add that the relevanceGof subsequent conduct remains controversial and evolving topicthat will require more extensive scrutiny by this court at moreappropriate juncture.) Declarations of subjective intent remaininadmissible except for the purpose of giving meaning to termswhich have been determined to be latently ambiguous.

(e) In some cases, the extrinsic evidence in question leads topossible alternative interpretations of the written words (ie, thecourt determines that latent ambiguity exists). court may giveeffect to these alternative interpretations, always bearing in minds 94 of the Evidence Act. In arriving at the ultimate interpretationof the words to be construed, the court may take into accountsubjective declarations of intent. Furthermore, the normal canonsof interpretation apply in conjunction with the relevant provisionsof the Evidence Act, ie, ss 95–100.

(f) court should always be careful to ensure that extrinsicevidence is used to explain and illuminate the written words, andnot to contradict or vary them. Where the court concludes thatthe parties have used the wrong words, rectification may be amore appropriate remedy.”

(emphasis supplied)

34. The approach of the Singapore Court of Appeal has our broadapproval, being in line with the modern contextual approach to theinterpretation of contracts. When proviso (6) and illustration (f) tosection 92, section 94 and section 95 of the Evidence Act are readtogether, the picture that emerges is that when there are number ofdocuments exchanged between the parties in the performance of acontract, all of them must be read as connected whole, relating eachparticular document to “existing facts”, which include how particularwords are used in particular sense, given the entirety of correspondencebetween the parties. Thus, after the application of proviso (6) to section92 of the Evidence Act, the adjudicating authority must be very carefulwhen it applies provisions dealing with patent ambiguity, as it must firstascertain whether the plain language of particular document appliesaccurately to existing facts. If, however, it is ambiguous or unmeaning inreference to existing facts, evidence may then be given to show that thewords used in particular document were used in sense that wouldmake the aforesaid words meaningful in the context of the entirety ofthe correspondence between the parties.

35. This approach is also reflected in recent judgment of thisCourt in Transmission Corpn. of Andhra Pradesh Ltd. v. GMRVemagiri Power Generation Ltd., (2018) 3 SCC 716, as follows:

“21. In the event of any ambiguity arising, the terms of the contractwill have to be interpreted by taking into consideration all

Asurrounding facts and circumstances, including correspondenceexchanged, to arrive at the real intendment of the parties, and notwhat one of the parties may contend subsequently to have beenthe intendment or to say as included afterwards, as observed inBank of India v. K. Mohandas [Bank of India v. K. Mohandas,(2009) 5 SCC 313] : (SCC p. 328, para 28)B

“28. The true construction of contract must depend upon theimport of the words used and not upon what the parties chooseto say afterwards. Nor does subsequent conduct of the partiesin the performance of the contract affect the true effect of theclear and unambiguous words used in the contract. The intentionCof the parties must be ascertained from the language they haveused, considered in the light of the surrounding circumstancesand the object of the contract. The nature and purpose of thecontract is an important guide in ascertaining the intention ofthe parties.””

(page 727)

36. The Division Bench’s reliance upon Smt. Kamala Devi (supra)to set aside the Majority Award is wholly misplaced. The ratio in Smt.Kamala Devi (supra) is contained in the words:

“… Sometimes when it is said that Court should look into all theEcircumstances to find an author’s intention, it is only for the purposeof finding out whether the words apply accurately to existing facts.But if the words are clear in the context of the surroundingcircumstances, the Court cannot rely on them to attribute to theauthor an intention contrary to the plain meaning of the wordsused in the document… “F

(page 162)

37. So read, the judgment in Smt. Kamala Devi (supra) accordswith what has been held hereinabove. It is clear that the three criticalemails have to be read in the surrounding circumstances of the entiretyGof the LTA and the correspondence which ensued between the parties.Once that exercise is undertaken, as was undertaken by the MajorityAward, it is impossible to hold that the Majority Award is not possibleview on the facts of this case. The reliance of the Majority Award uponthe correspondence between the parties pre-July and in September toDecember 2009, buttressed by Mr. Wilcox’s evidence, cannot thereforeHbe said to be flawed.38. Shri Rohatgi’s argument in support of the impugned judgmentof the Division Bench that there is no evidence to demonstrate proof ofdamage suffered as on the date of breach, is also factually incorrect. Itis well established that the arbitral tribunal is the final judge of the quality,as well as the quantity of evidence before it (see Sudarsan TradingCo. v. Govt. of Kerala, (1989) 2 SCC 38 at page 53). As was correctlypointed out by Shri Sibal, the Majority Award has taken into account Mr.Wilcox’s Affidavit dated 10.07.2013 and Additional Affidavit dated03.09.2013 detailing the prices at which sales of coal were made toChinese purchasers during the Fifth Delivery Period, which ended on30.09.2009, being the date of breach as found by the Majority Award. Inaddition, contemporaneous correspondence, including letters dated27.11.2009 and 03.12.2009 were also relied upon to show that theRespondent was itself seeking coal at roughly the price of $128 permetric tonne, at around the same time. Hence, the difference betweenthe contractual price and market price was arrived at as $173.383 permetric tonne, in accordance with the law laid down by this Court inMurlidhar Chiranjilal v. Harishchandra Dwarkadas and Anr.,(1962) 1 SCR 653, as follows:

“We may in this connection refer to the following observations inChao v. British Traders and Shippers Ltd. [(1954) 1 All ER779, 797] which are apposite to the facts of the present case:

“It is true that the defendants knew that the plaintiffs weremerchants and, therefore, had bought for re-sale, but everyone who sells to merchant knows that he has bought for re-sale, and it does not, as I understand it, make any difference tothe ordinary measure of damages where there is market.What is contemplated is that the merchant buys for res-ale,but, if the goods are not delivered to him, he will go out into themarket and buy similar goods and honour his contract in thatway. If the market has fallen he has not suffered any damage,if the market has risen the measure of damages is the differencein the market price.”

In these circumstances this is not case where it can be said thatthe parties when they made the contract knew that the likely resultof breach would be that the buyer would not be able to makeprofit in Calcutta. This is simple case of purchase of goods forre-sale anywhere and therefore the measure of damages has to

Abe calculated as they would naturally arise in the usual course ofthings from such breach. That means that the respondent had toprove the market rate at Kanpur on the date of breach for similargoods and that would fix the amount of damages, in case that ratehad gone above the contract rate on the date of breach. We aretherefore of opinion that this is not case of the special type toBwhich the words “which the parties knew, when they made thecontract, to be likely to result from the breach of it” appearing ins. 73 of the Contract Act apply. This is an ordinary case of contractbetween traders which is covered by the words “which naturallyarose in the usual course of things from such breach” appearingCin s. 73. As the respondent had failed to prove the rate for similarcanvas in Kanpur on the date of breach it is not entitled to anydamages in the circumstances.”

(pages 660-661)

39. The Single Judge correctly appreciated this part of the caseDwhen he stated as follows:

“86. MMTC’s submission is belied by what it has itself stated inthe correspondence exchanged with Anglo. In its letter dated 25thSeptember, 2009, MMTC describes USD 128 as the ‘2009’ rate.In its letter dated 27th November, 2009 it refers to “the 2009 priceElevel of US$ 128/125 PMT.” In its letter dated 3rd December,2009 MMTC referred to “coal being purchased at current priceof US$ 128.25 PMT.” Further the re-negotiated contracts withSAIL and RINL acknowledge the slump in coal prices to USD128 during the period from April, 2009 to March 2010. The dateFof 30th September, 2009 fell between the said dates and was thedate to be reckoned for determining the prevalent market price.87. The majority Award has based its conclusion as regards theprevalent market price of coal as on 30th September, 2009 on thebasis of the above evidence. It was view that was possible to betaken on the evidence made available to the AT. The Court is notGpersuaded to hold the said finding to be perverse or patentlyillegal.”

40. This being the case, it is not possible to accept Shri Rohatgi’sargument that the letters dated 27.11.2009 or 03.12.2009 do not reflectthe market price of coal as on the date of breach or that the marketH

price of coal cannot be established from the special long-term contractsoperating at around the same time as the date of breach. This argumentmust therefore be rejected.

41. The present case is that of an international commercialarbitration, the Majority Award being delivered in New Delhi on12.05.2014. Resultantly, this case has been argued on the basis of thelaw as it stood before the Arbitration and Conciliation (Amendment)Act, 2015 [“Amendment”] added two explanations to section 34(1)and sub-section (2A) to section 34 of the Arbitration Act, in which it wasmade clear that the ground of “patent illegality appearing on the face ofthe award” is not ground which could be taken to challenge aninternational commercial award made in India after 23.10.2015, whenthe Amendment was brought into force. We, therefore, proceed toconsider this case on the pre-existing law, which is contained in theseminal decision of Associate Builders (supra).

42. The judgment in Associate Builders (supra) examined eachof the heads set out in Renusagar Power Co. Ltd. v. General ElectricCo., 1994 Supp (1) SCC 644, together with the addition of the fourthhead of “patent illegality” laid down in ONGC Ltd. v. Saw Pipes Ltd.,(2003) 5 SCC 705. Since we are concerned with the “perversityprinciple”, the relevant paragraphs of this judgment are set out as follows:

“29. It is clear that the juristic principle of “judicial approach”demands that decision be fair, reasonable and objective. On theobverse side, anything arbitrary and whimsical would obviouslynot be determination which would either be fair, reasonable orobjective.”

(page 75)

“31. The third juristic principle is that decision which is perverseor so irrational that no reasonable person would have arrived atthe same is important and requires some degree of explanation. Itis settled law that where:

(i) finding is based on no evidence, or

(ii) an Arbitral Tribunal takes into account something irrelevantto the decision which it arrives at; or

(iii) ignores vital evidence in arriving at its decision,

such decision would necessarily be perverse.

32. good working test of perversity is contained in twojudgments. In Excise and Taxation Officer-cum-AssessingAuthority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it washeld: (SCC p. 317, para 7)

“7. … It is, no doubt, true that if finding of fact is arrived atby ignoring or excluding relevant material or by taking intoconsideration irrelevant material or if the finding so outrageouslydefies logic as to suffer from the vice of irrationality incurringthe blame of being perverse, then, the finding is rendered infirmin law.”

In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC 10] , itwas held: (SCC p. 14, para 10)

“10. broad distinction has, therefore, to be maintainedbetween the decisions which are perverse and those whichare not. If decision is arrived at on no evidence or evidencewhich is thoroughly unreliable and no reasonable person wouldact upon it, the order would be perverse. But if there is someevidence on record which is acceptable and which could berelied upon, howsoever compendious it may be, the conclusionswould not be treated as perverse and the findings would not beinterfered with.”

33. It must clearly be understood that when court is applyingthe “public policy” test to an arbitration award, it does not act asa court of appeal and consequently errors of fact cannot becorrected. possible view by the arbitrator on facts has necessarilyto pass muster as the arbitrator is the ultimate master of theFquantity and quality of evidence to be relied upon when he delivershis arbitral award. Thus an award based on little evidence or onevidence which does not measure up in quality to trained legalmind would not be held to be invalid on this score. Once it is foundthat the arbitrators approach is not arbitrary or capricious, then heis the last word on facts. In P.R. Shah, Shares & Stock BrokersG(P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594], thisCourt held: (SCC pp. 601-02, para 21)

“21. court does not sit in appeal over the award of an ArbitralTribunal by reassessing or reappreciating the evidence. Anaward can be challenged only under the grounds mentioned in

Section 34(2) of the Act. The Arbitral Tribunal has examinedthe facts and held that both the second respondent and theappellant are liable. The case as put forward by the firstrespondent has been accepted. Even the minority view wasthat the second respondent was liable as claimed by the firstrespondent, but the appellant was not liable only on the groundthat the arbitrators appointed by the Stock Exchange underBye-law 248, in claim against non-member, had nojurisdiction to decide claim against another member. Thefinding of the majority is that the appellant did the transactionin the name of the second respondent and is therefore, liablealong with the second respondent. Therefore, in the absenceof any ground under Section 34(2) of the Act, it is not possibleto re-examine the facts to find out whether different decisioncan be arrived at.”

34. It is with this very important caveat that the two fundamentalprinciples which form part of the fundamental policy of Indianlaw (that the arbitrator must have judicial approach and that hemust not act perversely) are to be understood.”

(pages 75-77)

“42. In the 1996 Act, this principle is substituted by the “patentillegality” principle which, in turn, contains three subheads:

42.1. (a) contravention of the substantive law of India wouldresult in the death knell of an arbitral award. This must beunderstood in the sense that such illegality must go to the root ofthe matter and cannot be of trivial nature. This again is really acontravention of Section 28(1)(a) of the Act, which reads as under:

“28. Rules applicable to substance of dispute.—(1) Wherethe place of arbitration is situated in India—

(a) in an arbitration other than an international commercialarbitration, the Arbitral Tribunal shall decide the disputesubmitted to arbitration in accordance with the substantive lawfor the time being in force in India;”

42.2. (b) contravention of the Arbitration Act itself would beregarded as patent illegality — for example if an arbitrator givesno reasons for an award in contravention of Section 31(3) of theAct, such award will be liable to be set aside.

564SUPREME COURT REPORTS

[2020] 14 S.C.R.

A42.3. (c) Equally, the third subhead of patent illegality is really acontravention of Section 28(3) of the Arbitration Act, which readsas under:

“28. Rules applicable to substance of dispute.—(1)-(2)***

(3) In all cases, the Arbitral Tribunal shall decide in accordanceBwith the terms of the contract and shall take into account theusages of the trade applicable to the transaction.”

This last contravention must be understood with caveat. AnArbitral Tribunal must decide in accordance with the terms of thecontract, but if an arbitrator construes term of the contract in aCreasonable manner, it will not mean that the award can be setaside on this ground. Construction of the terms of contract isprimarily for an arbitrator to decide unless the arbitrator construesthe contract in such way that it could be said to be somethingthat no fair-minded or reasonable person could do.”

D(page 81)

43. This judgment has been consistently followed in plethora ofsubsequent judgments, including:

a.National Highways Authority of India v. ITDCementation India Ltd., (2015) 14 SCC 21 at paragraphE24 (page 38);

b.Centrotrade Minerals & Metal Inc. v. HindustanCopper Ltd., (2017) 2 SCC 228 at paragraph 45 (page252);

c.Venture Global Engg. LLC v. Tech Mahindra Ltd.,F(2018) 1 SCC 656 at paragraph 85 (page 687);

d.Sutlej Construction Ltd. v. State (UT of Chandigarh),(2018) 1 SCC 718 at paragraph 11 (page 722);

e.Maharashtra State Electricity Distribution Co. Ltd. v.GDatar Switchgear Ltd., (2018) 3 SCC 133 at paragraph51 (page 169);

f.HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471at paragraphs 18-19 (page 493);

g.M.P. Power Generation Co. Ltd. v. ANSALDO EnergiaHSpA, (2018) 16 SCC 661 at paragraph 25 (page 679);

h.Shriram EPC Ltd. v. Rioglass Solar Sa, (2018) 18 SCCA313 at paragraph 34 (page 328);

i.State of Jharkhand v. HSS Integrated Sdn, (2019) 9SCC 798 at paragraph 7 (page 804); and

j. Ssangyong Engg. & Construction Co. Ltd. v. NHAI,(2019) 15 SCC 131 at paragraphs 20, 34-36 (pages 154,169-170).

44. Given the parameters of judicial review laid down in AssociateBuilders (supra), it is obvious that neither the ground of fundamentalpolicy of Indian law, nor the ground of patent illegality, have been madeout in the facts of this case, given the fact that the Majority Award iscertainly possible view based on the oral and documentary evidenceled in the case, which cannot be characterized as being either perverseor being based on no evidence.

45. However, Shri Rohatgi relied upon number of recentjudgments, which according to him, throw further light upon the elucidationof law in Associate Builders (supra). Thus, in MMTC Ltd. v. VedantaLtd., (2019) 4 SCC 163, this Court held:

“11. As far as Section 34 is concerned, the position is well-settledby now that the Court does not sit in appeal over the arbitralaward and may interfere on merits on the limited ground providedunder Section 34(2)(b)(ii) i.e. if the award is against the publicpolicy of India. As per the legal position clarified through decisionsof this Court prior to the amendments to the 1996 Act in 2015, aviolation of Indian public policy, in turn, includes violation of thefundamental policy of Indian law, violation of the interest ofIndia, conflict with justice or morality, and the existence of patentillegality in the arbitral award. Additionally, the concept of the“fundamental policy of Indian law” would cover compliance withstatutes and judicial precedents, adopting judicial approach,compliance with the principles of natural justice, and Wednesbury[Associated Provincial Picture Houses v. Wednesbury Corpn.,(1948) 1 KB 223 (CA)] reasonableness. Furthermore, “patentillegality” itself has been held to mean contravention of thesubstantive law of India, contravention of the 1996 Act, andcontravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court mayinterfere with an arbitral award in terms of Section 34(2)(b)(ii),but such interference does not entail review of the merits of thedispute, and is limited to situations where the findings of thearbitrator are arbitrary, capricious or perverse, or when theconscience of the Court is shocked, or when the illegality is nottrivial but goes to the root of the matter. An arbitral award maynot be interfered with if the view taken by the arbitrator is possibleview based on facts. (See Associate Builders v. DDA, (2015) 3SCC 49. Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006)4 SCC 445; and McDermott International Inc. v. Burn StandardCo. Ltd., (2006) 11 SCC 181)

13. It is relevant to note that after the 2015 Amendment to Section34, the above position stands somewhat modified. Pursuant to theinsertion of Explanation 1 to Section 34(2), the scope ofcontravention of Indian public policy has been modified to theextent that it now means fraud or corruption in the making of theaward, violation of Section 75 or Section 81 of the Act,contravention of the fundamental policy of Indian law, and conflictwith the most basic notions of justice or morality. Additionally,sub-section (2-A) has been inserted in Section 34, which providesthat in case of domestic arbitrations, violation of Indian publicpolicy also includes patent illegality appearing on the face of theaward. The proviso to the same states that an award shall not beset aside merely on the ground of an erroneous application of thelaw or by reappreciation of evidence.

14. As far as interference with an order made under Section 34,as per Section 37, is concerned, it cannot be disputed that suchinterference under Section 37 cannot travel beyond the restrictionslaid down under Section 34. In other words, the court cannotundertake an independent assessment of the merits of the award,and must only ascertain that the exercise of power by the courtunder Section 34 has not exceeded the scope of the provision.Thus, it is evident that in case an arbitral award has been confirmedby the court under Section 34 and by the court in an appeal underSection 37, this Court must be extremely cautious and slow todisturb such concurrent findings.

15. Having noted the above grounds for interference with an arbitralaward, it must now be noted that the instant question pertains todetermining whether the arbitral award deals with dispute notcontemplated by or not falling within the terms of the submissionto arbitration, or contains decisions on matters beyond the scopeof the submission to arbitration. However, this question has beenaddressed by the courts in terms of the construction of the contractbetween the parties, and as such it can be safely said that reviewof such construction cannot be made in terms of reassessmentof the material on record, but only in terms of the principlesgoverning interference with an award as discussed above.

16. It is equally important to observe at this juncture that whileinterpreting the terms of contract, the conduct of parties andcorrespondences exchanged would also be relevant factors and itis within the arbitrator’s jurisdiction to consider the same. [SeeMcDermott International Inc. v. Burn Standard Co. Ltd., (2006)11 SCC 181; Pure Helium India (P) Ltd. v. ONGC, (2003) 8SCC 593 and D.D. Sharma v. Union of India, (2004) 5 SCC325].

17. We have gone through the material on record as well as themajority award, and the decisions of the learned Single Judge andthe Division Bench. The majority of the Arbitral Tribunal as wellas the courts found upon consideration of the material on record,including the agreement dated 14-12-1993, the correspondencebetween the parties and the oral evidence adduced, that theagreement does not make any distinction within the type ofcustomers, and furthermore that the supplies to HTPL were notmade in furtherance of any independent understanding betweenthe appellant and the respondent which was not governed by theagreement dated 14-12-1993.”

46. Likewise, in Dyna Technologies Pvt. Ltd. v. CromptomGreaves Ltd., 2019 SCC Online SC 1656, [“Dyna Technologies”],this Court held:

“26. There is no dispute that Section 34 of the Arbitration Actlimits challenge to an award only on the grounds provided thereinor as interpreted by various Courts. We need to be cognizant of

Athe fact that arbitral awards should not be interfered with in acasual and cavalier manner, unless the Court comes to conclusionthat the perversity of the award goes to the root of the matterwithout there being possibility of alternative interpretation whichmay sustain the arbitral award. Section 34 is different in itsapproach and cannot be equated with normal appellateBjurisdiction. The mandate under Section 34 is to respect the finalityof the arbitral award and the party autonomy to get their disputeadjudicated by an alternative forum as provided under the law. Ifthe Courts were to interfere with the arbitral award in the usualcourse on factual aspects, then the commercial wisdom behindCopting for alternate dispute resolution would stand frustrated.27. Moreover, umpteen number of judgments of this Court havecategorically held that the Courts should not interfere with anaward merely because an alternative view on facts andinterpretation of contract exists. The Courts need to be cautiousDand should defer to the view taken by the Arbitral Tribunal even ifthe reasoning provided in the award is implied unless such awardportrays perversity unpardonable under Section 34 of theArbitration Act.”

47. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya VidyutEUtpadan Nigam Ltd., (2019) 7 SCC 236, after referring to theparameters of review in Associate Builders (supra) and other cases,this Court found that with respect to the first claim, relating to priceadjustment/escalation, the arbitrator interpreted the relevant clauses ofthe contract and came to certain finding. The High Court, in interferingwith that finding, was wrong in doing so merely because some otherFview could have been taken, as the interpretation made by the arbitratorwas possible one. The High Court’s judgment was, therefore, set asideto this extent. However, insofar as the second and third claims wereconcerned, on the facts of that case, the finding was said to be so perverseor irrational that no reasonable person could have arrived at the same,Gbased on the material/evidence on record, as result of which, the HighCourt’s judgment was upheld.

48. In South East Asia Marine Engg. & Constructions Ltd.(SEAMEC LTD.) v. Oil India Ltd., (2020) 5 SCC 164, threeJudge Bench of this Court referred to the judgment of this Court inHDyna Technologies (supra) and found that the interpretation of the

arbitral tribunal in expanding the meaning of clause 23 of the contract toinclude change in rate of high-speed diesel, not being even possibleinterpretation of the concerned contract, the High Court in setting asidethe award, could not be said to be incorrect. Also, other contractualterms when seen together with this interpretation would also render suchfinding perverse.

49. In Patel Engg. Ltd. v. North Eastern Electric PowerCorpn. Ltd., (2020) 7 SCC 167, this Court, after setting out the lawstated in Associate Builders (supra) and Ssangyong Engg. &Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, applied thetest of perversity and then concluded:

“26. Even though the High Court in para 44 of the judgmentreferred to various judgments, including Western Geco [ONGCv. WesternGeco International Ltd., (2014) 9 SCC 263] [whichis now no longer good law], the case has been decided on theground that the arbitral award is perverse award and on holisticreading of all the terms and conditions of the contract, the viewtaken by the arbitrator is not even possible view. The High Courthas rightly followed the test set out in para 42.3 of AssociateBuilders [Associate Builders v. DDA, (2015) 3 SCC 49, paras40 to 45], which was reiterated in para 40 of Ssangyong Engg.[Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019)15 SCC 131, para 19] judgment.

27. In our view, while dealing with the appeal under Section 37 ofthe Act, the High Court has considered the matter at length, andheld that while interpreting the terms of the contract, no reasonableperson could have arrived at different conclusion and that theawards passed by the arbitrator suffer from the vice of irrationalityand perversity.”

(pages 179-180)

50. All the aforesaid judgments are judgments which, on theirfacts, have been decided in particular way after applying the tests laiddown in Associate Builders (supra) and its progeny. All these judgmentsturn on their own facts. None of them can have any application to thecase before us, as it has been found by us that in the fact situation whicharises in the present case, the Majority Award is certainly possibleview of the case, given the entirety of the correspondence between theparties and thus, cannot in any manner, be characterised as perverse.

DEF

A51. Accordingly, the appeal stands allowed. The judgment of theDivision Bench dated 02.03.2020 is set aside, thereby restoring theMajority Award dated 12.05.2014 and the Single Judge’s judgment dated10.07.2015 dismissing the application made under section 34 of theArbitration Act by the Respondent.

Devika Gujral

Appeal allowed.