Case: MMTC LTD Vs. M/S.VEDANTA LTD

any independent understanding between the Appellant and the Respondent which was not governed by the agreement dated 14.12.1993.16. The Appellant has highlighted before us several correspondences addressed to it from the Respondent that refer to the fact that sales to HTPL had been made under the Respondent’s contract with HTPL. Indeed, it is evident from the agreement dated 28.07.1994 between HTPL and the Respondent that a direct agreement existed between them. However, as is undisputed, the Appellant received its commission in its entirety for the HTPL transaction, and thus clearly was a beneficiary of the agreement between the Respondent and HTPL. Moreover, in this regard, it was rightly observed in the Majority Award that the Appellant could not show under what separate agreement it was entitled to commission from such sales other than the agreement dated 14.12.1993, and for what services, if its only role in the transaction was to allow HTPL to lift goods from its godowns.17. Indeed, it is not the case of the Appellant that it only provided storage services to the Respondent by allowing the Respondent to store its goods in the warehouse of the Appellant (i.e. that it only acted as a warehouse for the Respondent). In fact, a series of correspondences amongst the Appellant, the Respondent and HTPL clearly reveals that the Appellant was also actively involved in the transaction in question entered into between the Respondent and HTPL, and as such was a beneficiary under their agreement, as observed supra. The Appellant released the Respondent’s goods to HTPL as per the directions of the Respondent without raising any objection, and thereafter engaged in correspondence in respect of the transaction.18. It would be appropriate to refer to some such communications amongst the Appellant, the Respondent and HTPL for illustrative purposes. For instance, as mentioned by the Respondent in a communication dated 19.09.1994 addressed to HTPL, the Appellant was to honour the terms and conditions of the agreement between the Respondent and HTPL. The said communication also referred to negotiations about issuance of a letters of credit in favour of the Appellant. Additionally, as can be seen from the correspondence from the Appellant to the Respondent dated 26.08.1994, the Appellant wrote to it to confirm that credit had to be supplied to HTPL at the discounted interest rate of 16.25% p.a., which was affirmed by the Respondent on the same day. At the same time, the correspondence dated 28.03.1995 from the Respondent to the Appellant discloses that a letter of credit issued by HTPL initially sent to the Respondent was forwarded to the Appellant with directions to despatch goods after verification of the letter of credit and other related papers.19. The issuance of letters of credit in the name of the Appellant with respect to the HTPL transaction was similar to the practice adopted in case of letters of credit or demand drafts issued in all other transactions, whether directly negotiated by the Respondent, or procured through the Appellant, which suggests that it was the duty of the Appellant in this case as well to ensure that usance letter of credits issued were bona fide, and in case of stand-by letters of credit, that they were negotiated in time in case of failure of payment on the due date, in terms of the agreement dated 14.12.1993.20. The Courts also rightly relied upon the communication dated 06.12.1995 from the Respondent to the Appellant adverting to the terms and conditions of the contract between the parties and referring to the fact that in respect of the sales made to HTPL in the period of April, May and July 1995, an amount of Rs. 9.2 crores together with interest was still to be received. The response to the above communication, from the Appellant to the Respondent, dated 08.12.1995, stated that the Appellant had taken steps to set the matter right, and that the Appellant had had certain internal difficulties which had since been resolved and the Respondent would have no grounds to complain thereafter. This communication clearly demonstrates the duty of the Appellant to recover the dues from HTPL and forward the same to the Respondent.21. Another important communication rightly relied upon by the Courts is the Appellant’s letter dated 24.01.1996 to the Respondent, informing it about the institution of a suit for damages by HTPL with respect to the quality of the goods supplied. This correspondence refers to HTPL as a customer introduced to the Appellant by the Respondent. Crucially, it was addressed in terms of the agreement dated 14.12.1993, which amounts to a clear admission that the sales made to HTPL were in terms of the said agreement.22. In this view of the matter, it is not open to the Appellant to argue that the agreement between the Respondent and HTPL was independent of the agreement dated 14.12.1993 between the Appellant and the Respondent and that the latter did not apply to such transaction.23. Moreover, as noticed in the Majority Award and also by the Courts, the oral evidence of the officers of the Appellant indicates that the Appellant did not make any effort to ensure that the letters of credits pertaining to the supplies made to HTPL were honoured, pointing towards gross negligence on the part of the Appellant.24. Based upon the above discussion, in our opinion, the view taken in the Majority Award, as confirmed by the High Court in the exercise of its powers under Sections 34 and 37 of the 1996 Act, is a possible view based upon a reasonable construction of the terms of the agreement dated 14.12.1993 between the Appellant and the Respondent and consideration of the material on record. We are also of the opinion that the dispute was covered under the agreement between the Appellant and the Respondent dated 14.12.1993, and as such the dispute is governed by the arbitration clause under the said agreement. Thus, we find no reason to disturb the Majority Award on the ground that the subject matter of the dispute was not arbitrable.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.13. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. However, this question has been addressed by the Courts in terms of the construction of the contract between the parties, and as such it can be safely said that a review of such a construction cannot be made in terms of re-assessment of the material on record, but only in terms of the principles governing interference with an award as discussed above.14. It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within thejurisdiction to consider the same.We have gone through the material on record as well as the Majority Award, and the decisions of the learned Single Judge and the Division Bench. The majority of the arbitral tribunal as well as the Courts found upon a consideration of the material on record, including the agreement dated 14.12.1993, the correspondence between the parties and the oral evidence adduced, that the agreement does not make any distinction within the type of customers, and furthermore that the supplies to HTPL were not made in furtherance of any independent understanding between the Appellant and the Respondent which was not governed by the agreement dated 14.12.1993.16. The Appellant has highlighted before us several correspondences addressed to it from the Respondent that refer to the fact that sales to HTPL had been made under thecontract with HTPL. Indeed, it is evident from the agreement dated 28.07.1994 between HTPL and the Respondent that a direct agreement existed between them. However, as is undisputed, the Appellant received its commission in its entirety for the HTPL transaction, and thus clearly was a beneficiary of the agreement between the Respondent and HTPL. Moreover, in this regard, it was rightly observed in the Majority Award that the Appellant could not show under what separate agreement it was entitled to commission from such sales other than the agreement dated 14.12.1993, and for what services, if its only role in the transaction was to allow HTPL to lift goods from its godowns.17. Indeed, it is not the case of the Appellant that it only provided storage services to the Respondent by allowing the Respondent to store its goods in the warehouse of the Appellant (i.e. that it only acted as a warehouse for the Respondent). In fact, a series of correspondences amongst the Appellant, the Respondent and HTPL clearly reveals that the Appellant was also actively involved in the transaction in question entered into between the Respondent and HTPL, and as such was a beneficiary under their agreement, as observed supra. The Appellant released thegoods to HTPL as per the directions of the Respondent without raising any objection, and thereafter engaged in correspondence in respect of the transaction.18. It would be appropriate to refer to some such communications amongst the Appellant, the Respondent and HTPL for illustrative purposes. For instance, as mentioned by the Respondent in a communication dated 19.09.1994 addressed to HTPL, the Appellant was to honour the terms and conditions of the agreement between the Respondent and HTPL. The said communication also referred to negotiations about issuance of a letters of credit in favour of the Appellant. Additionally, as can be seen from the correspondence from the Appellant to the Respondent dated 26.08.1994, the Appellant wrote to it to confirm that credit had to be supplied to HTPL at the discounted interest rate of 16.25% p.a., which was affirmed by the Respondent on the same day. At the same time, the correspondence dated 28.03.1995 from the Respondent to the Appellant discloses that a letter of credit issued by HTPL initially sent to the Respondent was forwarded to the Appellant with directions to despatch goods after verification of the letter of credit and other related papers.19. The issuance of letters of credit in the name of the Appellant with respect to the HTPL transaction was similar to the practice adopted in case of letters of credit or demand drafts issued in all other transactions, whether directly negotiated by the Respondent, or procured through the Appellant, which suggests that it was the duty of the Appellant in this case as well to ensure that usance letter of credits issued were bona fide, and in case of stand-by letters of credit, that they were negotiated in time in case of failure of payment on the due date, in terms of the agreement dated 14.12.1993.20. The Courts also rightly relied upon the communication dated 06.12.1995 from the Respondent to the Appellant adverting to the terms and conditions of the contract between the parties and referring to the fact that in respect of the sales made to HTPL in the period of April, May and July 1995, an amount of Rs. 9.2 crores together with interest was still to be received. The response to the above communication, from the Appellant to the Respondent, dated 08.12.1995, stated that the Appellant had taken steps to set the matter right, and that the Appellant had had certain internal difficulties which had since been resolved and the Respondent would have no grounds to complain thereafter. This communication clearly demonstrates the duty of the Appellant to recover the dues from HTPL and forward the same to the Respondent.21. Another important communication rightly relied upon by the Courts is theletter dated 24.01.1996 to the Respondent, informing it about the institution of a suit for damages by HTPL with respect to the quality of the goods supplied. This correspondence refers to HTPL as a customer introduced to the Appellant by the Respondent. Crucially, it was addressed in terms of the agreement dated 14.12.1993, which amounts to a clear admission that the sales made to HTPL were in terms of the said agreement.22. In this view of the matter, it is not open to the Appellant to argue that the agreement between the Respondent and HTPL was independent of the agreement dated 14.12.1993 between the Appellant and the Respondent and that the latter did not apply to such transaction.23. Moreover, as noticed in the Majority Award and also by the Courts, the oral evidence of the officers of the Appellant indicates that the Appellant did not make any effort to ensure that the letters of credits pertaining to the supplies made to HTPL were honoured, pointing towards gross negligence on the part of the Appellant.24. Based upon the above discussion, in our opinion, the view taken in the Majority Award, as confirmed by the High Court in the exercise of its powers under Sections 34 and 37 of the 1996 Act, is a possible view based upon a reasonable construction of the terms of the agreement dated 14.12.1993 between the Appellant and the Respondent and consideration of the material on record. We are also of the opinion that the dispute was covered under the agreement between the Appellant and the Respondent dated 14.12.1993, and as such the dispute is governed by the arbitration clause under the said agreement. Thus, we find no reason to disturb the Majority Award on the ground that the subject matter of the dispute was not arbitrable.