A bench of two judges of the Delhi High Court set aside, in this case, a domestic award in an appeal under Section 37 ACA. By a majority of 2:1, the arbitral tribunal had ruled against MMTC Limited (an enterprise of the Government of India), and Muralidhar J, sitting singly, had rejected MMTC’s set-aside application under Section 34 ACA. On appeal, the 2-judge bench of GS Sistani and Anup Jairam Bhambhani JJ (the latter authoring) set aside the award and the single judge’s judgment on the ground that it conflicted with the public policy of India. The case highlights very sharply how different judges can interpret the same material in diametrically opposite fashion and effectively apply the same legal principles to reach the exact opposite conclusions.
A. The Facts
The facts are long-winded, and it is not necessary to narrate them in full. At issue was the interpretation of certain correspondences between the parties and what they meant. Very briefly put, MMTC and Anglo American had a Long Term Contract (LTA) under which MMTC was to purchase coking coal from Anglo American. The agreed price was USD 300 per metric tonne. Following several intervening events and a slump in the industry, there were subsequent agreements and ad hoc arrangements between the parties. As a consequence, the parties fixed the price for the ad hoc lot as USD 128.25 per MT. The obligations under the original agreement also continued side by side. At one point, MMTC asked for coal, but Anglo responded, saying there was no availability. When Anglo initiated arbitration for breach of contract by MMTC for not lifting the coal under the original agreement, the main question was whether Anglo had referred to the non-availability under the ad hoc arrangement or the original transaction. If it was a reference to the original agreement, the contract perhaps stood repudiated. If it was a reference to the ad hoc arrangement, probably MMTC had breached its obligations under the original contract.
B. The tribunal’s award, which was upheld by Muralidhar J  Mssrs. Peter Leaver (Anglo’s nominee), VK Gupta, retired Chief Justice of High Court (MMTC’s nominee), and Anthony Houghton, the presiding arbitrator. Show More
On analysing the testimonies and the correspondence, the Tribunal, MMTC’s nominee dissenting, concluded that there was no shortage of supply. It found that Anglo’s e-mails (of 02 July 2009 and 07 September 2009) referred to the non-availability of coal should be read in the context that MMTC was seeking further deliveries at the ad hoc price and not under the original contract. The tribunal held that MMTC had breached the agreement. It awarded Anglo damages of USD 78,720,414.92 with pendente lite and future interest and cost. Muralidhar J also examined the matter in great detail in MMTC’s application under Section 34 ACA to set aside the award. He found no reason to disagree with the tribunal’s findings. He held, after a detailed analysis of the facts, that the view taken by the majority of the tribunal was the correct view on the appreciation of the evidence. He also held that the correspondence had to be understood in the proper context. He concluded that Anglo did not repudiate the contract.
C. The judgment of the division bench
The division bench strongly disagreed. It interpreted the correspondences differently and held that there was no justification for the tribunal’s conclusion and that it was perverse:-
The court then found “the legal foundations” of its views in the decision of the Supreme Court in Associate Builders v. DDA, (2015) 3 SCC 49 (Ranjan Gogoi and Rohinton Fali Nariman JJ):-
D. Editor's comments
The Supreme Court’s decision in Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 (by RF Nariman and Vineet Saran JJ) discusses the law on the public policy of India as that concept applies in arbitration. A 3-judge bench of RF Nariman, Aniruddha Bose and V. Ramasubramanian, JJ cited Ssangyong with approval in Vijay Karia and others v. Prysmian Cavi E Sistemi SRL and others. Ssangyong summarizes the law before the 2015 Amendments and after that. In the MMTC case, though it was not an issue, clearly the pre-2015 amendment law applied, and that is why the court also relied on paragraph 28 of Western Geco, which is no longer good law.  The division bench referred to Geco possibly because the Section 34 application was filed before the 2015 amendments. Show More The thing to note more prominently is, however, that what Muralidhar J considered was a reasonable appreciation of evidence by the arbitral tribunal, the division bench thought was wholly arbitrary. For the division bench, the plain text of the e-mails was the sole source to identify the fact situation and what Anglo meant, without regard to the context (which is what the tribunal and the single-judge emphasized).
In my view, it would be a better approach to put that construction to an e-mail or a correspondence that considers the subject, the context, and common sense. It should not be confined to a single, definitive and fixed idea apply the ‘plain meaning rule’. A fact situation can exist independent of what an e-mail may say. To not consider that possibility on the ground that the text of the e-mail is plain is to effectively advance a principle that human beings use language at all times, even in their daily business correspondence, with surgical precision. This is a wrong approach.
Also, the division bench was aware of the law that the arbitral tribunal is the final authority on findings of facts. Here the tribunal’s findings were upheld after a careful analysis. The test, therefore, which the division bench should have applied is whether a possibility existed that Anglo meant to refer to the availability under the ad hoc arrangement? If that possibility existed, the division bench should have stopped at that inquiry, considering that such a possibility was then rightly explored in detail by the tribunal. If, however, that possibility couldn’t exist in the first place, it would have robbed the tribunal’s enquiry of its foundations, for there could be no validation for the tribunal’s findings one way or the other. Then its conclusions may have been arbitrary. In this case, the possibility existed and that wasthe whole purpose of the tribunal’s examination of the context of the situation.