Annual Arbitration Review 2018

MMTC v Vedanta

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Judgment: MMTC Limited v M/s Vedanta Limited

 

Citation:(2019) 4 SCC 163

 

Court: Supreme Court of India

 

Coram: Mohan M. Shantanagoudar, Vineet Saran J.

 

Date: February 18, 2019

 

Overview:Through this petition, the court looked into the scope of interference with an arbitral award in India under Section 34 and 37 of the Act by a court. It was held thatthe Court cannot undertake an independent assessment of the merits of the award, and must only ascertain whether the exercise of power by the Court under Section 34 has not exceeded the scope of the provision.

Issue: Whether the courts can undertake an independent assessment of the merits of the award in exercise of its appellate powers or not?

 

Factual Background:

The arbitration clause pertaining to an agreement dated 14 December 1993 between M/s Vedanta Ltd. (“Respondent”) and MMTC Ltd. (“Appellant”) was invoked by the Respondent. Respondents claimed payments for goods sold by the them to Hindustan Transmission Products Ltd. (“HTPL”) through the Appellant. By their award dated 27 June 2001 (“Award”), the three-member Arbitral Tribunal allowed the claims of the Respondent and directed the Appellant to pay for the goods sold albeit with interest.

 

This award was challenged by the Appellant u/s 34 of the Act before the Learned Single Judge of the Bombay High Court, on the ground that the disputes before the Arbitral Tribunal were not arbitrable as the same were not covered by the arbitration clause contained in the agreement. The Learned Single Judge after considering the entire evidence and material on record dismissed the challenge vide order dated 05 August 2002. The said order passed by the Learned Single Judge was challenged by the Appellant before the Division Bench of the Bombay High Court only on one ground i.e. that the disputes before the Arbitral Tribunal were not arbitrable. The Division Bench vide its order dated 9 February 2009 refused to interfere with the order passed by the Learned Single Judge and dismissed the appeal filed by the Appellant. The Appellant subsequently appealed against this order before the Supreme Court of India.

 

Analysis:

The court made a distinction between an application to set aside the award under Section 34 and an application under Section 37. It was observed that ‘the former dealt with challenges to an arbitral award itself, while, the latter, inter alia, dealt with appeals against an order made under Section 34 setting aside or refusing to set aside an arbitral award’.[1]

 

Another issue which was dealt with by the court was on the aspect of appellate jurisdiction and pertained to whether power conferred on the Court under Section 34 has not exceeded the scope of the provision.[2]The bench observed “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.[3]

 

After dealing with the scope of Section 37, the Court went on to ascertain whether the dispute was contemplated or fell within the scope of the arbitration clause. The Court addressed this question by interpreting the terms of contracts and the intention of the parties in the same. The Court in order to undertake this analysis referred to its earlier judgments in McDermott International Inc. v. Burn Standard Co. Ltd[4]and Pure Helium India (P) Ltd. v. ONGC and D.D. Sharma v. Union of India[5] and held that conduct of the parties and correspondences exchanged between them would be relevant factors for such interpretation.

 

The Court analysed the facts at hand and came to the conclusion that the contract did not make any distinction within the type of customers and despite the fact that there was a separate agreement between Vedanta (“Respondent”) and HTPL, MMTC (“Appellant”) was a clear beneficiary in the situation. Further, the Court was unconvinced that the commission entitled to the Appellant did not flow from the contract. The Court used the evidence of the correspondence between the parties to conclude that the Appellant had not only acknowledged the agreement but also played an active role in it. Consequently, the Court held that dispute was covered under the contract and affirmed the approach taken by the Bombay High Court.

 

Conclusion:

This ruling further reiterates and strengthens the already existing position of law which has been settled by judicial precedents from time to time that Courts must exercise judicial restraint while exercising jurisdiction under Section 34 and 37 of the Act unless the findings of the Arbitral Tribunal are perverse or patently illegal. Although, the right to appeal is universally recognised as an invaluable legal right and such a ruling may be seen as going against this principle, however not doing so would render the expediency and finality offered by arbitration proceedings to be moot. Furthermore, post the 2015 Amendment to the Act, it has been provided that an arbitral award shall not be set aside merely on the ground of an erroneous application of law or by re-appreciation of evidence. Thus, the Supreme Court has rightly concluded in this case that review of the findings contained in the arbitral award cannot be made in terms of re-assessment of the material on record and/or the merits of the dispute.[6]

[1]MMTC v Vedanta, (2019) 4 SCC 163.

[2]Economic Laws Practice on the case of MMTC v Ltd v/s M/s Vedanta Ltd.

[3]MMTC v Vedanta, (2019) 4 SCC 163.

[4]McDermott International Inc v Burn Standard Co Ltd, (2006) 11 SCC 181.

[5]Pure Helium India (P) Ltd. V ONGC & D.D. Sharma v Union of India, (2003) 8 SCC 593.

[6]Economic Laws Practice on the case of MMTC v Ltd v/s M/s Vedanta Ltd.

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