Calcutta HC Declines To Interfere With Arbitral Awards In Iron Ore Supply Dispute; Dismisses Section 37 Appeals On Excess Procurement Costs And Loss Of Profits
Isabella Mariam
The Calcutta High Court Division Bench of Justice Sabyasachi Bhattacharyya and Justice Supratim Bhattacharya has dismissed two connected appeals, declining to interfere with arbitral awards that directed a mining company to compensate a steel manufacturer for additional procurement costs and loss of profits after iron ore supplies were halted. The Court upheld the awards and the earlier order refusing to set them aside, noting that judicial review under the Arbitration and Conciliation Act remains narrow. It found no basis to treat the tribunal’s conclusions as perverse or tainted by patent illegality, jurisdictional error, or public policy concerns, and observed that the challenge largely sought a reappraisal of contractual interpretation and factual findings already assessed by the tribunal.
The dispute arose out of two commercial supply agreements between a mineral supplier and an industrial purchaser for the supply of calibrated iron ore of specified grades and quantities during defined contractual periods. Under the agreements, iron ore was to be supplied either on a monthly basis or annually, subject to contractual terms including pricing, payment, tender participation, and availability. Disputes emerged when the purchaser alleged inferior quality of supplied material and interruption of supply, while the supplier stopped further deliveries citing non-payment of advance amounts.
The purchaser invoked arbitration, claiming breach of contract, excess expenditure incurred in procuring iron ore from alternative sources, and loss of profits. The Arbitral Tribunal awarded compensation towards price differentials, loss of profits, interest, and costs. Applications challenging the awards under Section 34 of the Arbitration and Conciliation Act, 1996 were dismissed by the District Courts.
Aggrieved, the supplier preferred appeals under Section 37 of the 1996 Act, contending that the Tribunal ignored mandatory contractual preconditions, wrongly inferred waiver of advance payment, awarded speculative loss of profits, and exceeded jurisdiction. The purchaser defended the awards on the basis of contractual interpretation, conduct of parties, documentary evidence, and limited scope of interference under Sections 34 and 37 of the Act.
The Division Bench first examined whether the contracts imposed mandatory preconditions for prior demand, tender participation, and availability. The Court recorded that “we do not find within the four corners of either of the Agreements any such provision mandating prior demands to be made by the respondent for the agreed quantum of iron ore to be supplied.” It observed that although the phrase “subject to availability” appeared in certain clauses, it was qualified by mandatory language such as “shall provide during the tenure of the contract.”
On waiver of advance payment, the Court noted that continued supply without insisting on advance payment constituted conscious relinquishment of a contractual right, observing that “there was sufficient material before the Arbitral Tribunal to arrive at the conclusion that there was conscious relinquishment of the known right to claim 100% advance payment.” It rejected the contention that absence of specific pleadings defeated the plea of waiver, stating that the issue was fully argued and addressed before the Tribunal.
While dealing with stoppage of supply, the Court stated that “we do not find within the four corners of either of the Agreements any provision empowering the appellant to stop supply due to non-payment.” It further recorded that quality disputes were contemporaneously raised and supply continued despite non-payment, justifying the Tribunal’s finding of breach by the supplier.
On damages and loss of profits, the Court observed that the Tribunal relied on documentary evidence including purchase orders, and that “reasonable amount of ‘guesstimate’ can be resorted to in such cases, since claims in the nature of damages/loss of profits cannot be calculated with exactitude.” It held that mitigation was duly considered and no windfall was granted.
Regarding the scope of interference, the Court reiterated that “none of the criteria for judicial interference, as stipulated in Section 34 of the 1996 Act, are attracted in the present case,” and that appellate jurisdiction under Section 37 remains circumscribed by the same limitations.
The Division Bench directed that “both the appeals fail” and accordingly ordered that “F.M.A. No. 939 of 2012 and F.M.A. No. 941 of 2012 are dismissed on contest.” The dismissal would result in “affirming the Judgment and Order dated February 29, 2012, passed by the learned Additional District Judge, Fourth Court at Barasat, District: North 24-Parganas in Miscellaneous Case No. 173 of 2010 and the Judgment and Order dated February 27, 2012, passed by the learned Additional District Judge, Fifth Court at Barasat, District: North 24-Parganas in Miscellaneous Case No. 159 of 2010 respectively as well as affirming the awards passed in both matters by the Arbitral Tribunal.”
Advocates Representing the Parties
For the Appellants: Mr. Suman Kumar Dutt, Senior Advocate; Mr. Kamal Kumar Chattopadhyay, Advocate; Mr. Debdeep Sinha, Advocate; Ms. Rini Chatterjee, Advocate
For the Respondents: Mr. Jishnu Saha, Senior Advocate; Mr. Sourojit Dasgupta, Advocate; Mr. Shaunak Mukhopadhyay, Advocate; Mr. Tanay Agarwal, Advocate; Ms. Darshana Sett, Advocate; Ms. Priyansha Agarwal, Advocate
Case Title: The Orissa Minerals Development Company Limited v. Jai Balaji Industries Limited
Case Number: F.M.A. No. 939 of 2012
Bench: Justice Sabyasachi Bhattacharyya, Justice Supratim Bhattacharya
