Glitter Overseas & Ors. MMTC Limited (Delhi High Court)
Held that an arbitral award can be set aside/ challenged u/s 34 of A&C Act only if an arbitral tribunal’s view is not a possible view and no reasonable person could possibly accept the same.
Facts- Glitter Overseas (Petitioner) and MMTC (respondent) entered into a ‘Hypothecation Agreement for Pre and Post Shipment Credit Advance’. Disputes arose between the parties in respect of certain transactions between the years 1993-1996. MMTC claimed that Glitter was liable to pay an amount of ₹1,13,39,008.71/-, on account of shortfall in receipt of payment of twelve (12) invoices. In respect of five invoices, MMTC claimed that the importer/foreign buyer had accepted the delivery of goods, however, it had failed to make any payment. In respect of seven invoices, MMTC claimed that the foreign buyer neither took the delivery of the goods in question nor paid for the same. However, MMTC sold four of the said seven consignments to alternate foreign buyers.
MMTC further claimed that it had released six kgs of gold on loan basis for manufacture and export of jewellery within the specified period of 120 days, in favour of Glitter. However, the gold in question was seized by the Indian Customs Authorities as Glitter failed to manufacture and export the jewellery within the specified period. The Customs Authorities seized 4 kgs of gold on 30.04.1996 and the remaining 2 kgs of gold was surrendered by Glitter to them.
MMTC also claimed an amount of ₹17,07,198/- on account of deferment of interest in respect of certain consignments. MMTC averred that two cheques (₹8,50,000/- and ₹8,57,198/-) dated 19.02.1996 were issued by Glitter, however, the said cheques were dishonored and thus, Glitter was liable to pay an amount of ₹17,07,198/-.
By the impugned award, the Arbitral Tribunal awarded a sum of ₹1,02,62,076.88/- on account of the twelve unpaid invoices; ₹5,98,58,350.74/- on account of interest on the aforesaid unpaid invoices; ₹3,21,45,351.43/- on account of six kgs of gold confiscated by the Indian Custom Authorities; ₹1,09,73,775.03/- on account of deferred payment interest; and, ₹20,00,000/- on account of costs, in favour of MMTC. Further, the Arbitral Tribunal awarded pendente lite and future interest at the rate of 12% per annum on the aforesaid amounts.
Aggrieved by the impugned award, Glitter has filed the present petition.
Conclusion- Merely because the impugned award is contrary to the arbitral awards rendered in other cases does not render it amenable to challenge u/s. 34 of the A&C Act. It is trite law that an arbitral award can be set aside only if an arbitral tribunal’s view is not a possible view and no reasonable person could possibly accept the same. If an arbitral tribunal’s decision is found to be a possible one, the same would warrant no interference in proceedings u/s. 34 of the A& C Act. It does follows that in certain contentious cases, where there are two plausible views, the decision of an arbitral tribunal accepting either one of them, would not render the award vulnerable under Section 34 of the A&C Act.
This Court had merely dismissed the challenge to the arbitral awards as the same did not fall within the limited scope of interference available u/s. 34 of the A&C Act. It is necessary to bear in mind that an application to set aside an arbitral award u/s. 34 of the A&C Act is not in the nature of a first appeal against a decree, where the court examines a decree to determine whether questions of law and fact are correctly determined by the Trial Court. Therefore, the rejection of an application u/s. 34 of the A&C Act cannot be construed to mean that the court has concurred with the view of the arbitral tribunal.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Glitter Overseas (hereinafter ‘Glitter’), a partnership firm and its constituent partners have filed the present petition under Section 34 of the Arbitration and Conciliation Act (hereinafter ‘the A&C Act’) impugning an arbitral award dated 08.01.2020 (hereafter ‘the impugned award’) rendered by an Arbitral Tribunal comprising of a learned Sole Arbitrator (hereinafter ‘the Arbitral Tribunal’).
FACTUAL BACKGROUND
2. On 17.01.1992, Glitter and the respondent (hereinafter ‘MMTC’) entered into a ‘Hypothecation Agreement for Pre and Post Shipment Credit Advance’ (hereinafter ‘the Hypothecation Agreement’). In terms of the Hypothecation Agreement, MMTC agreed to grant Glitter financial assistance upto a limit of ₹25 lakhs, which was to be secured by goods or documents or title deeds. In terms of Clause 2 of the Hypothecation Agreement, Glitter agreed to pay interest at the rate of 15.5% per annum calculated on a daily balance basis. Further, in case of default in payment of the dues, Glitter also agreed to pay interest at the rate of 1% per annum over and above the interest rates applicable to cash credit facilities. In consideration of the Hypothecation Agreement, on 17.01.1992, petitioner nos. 2 and 3 signed and executed a Demand Promissory Note of a sum of ₹25 lakhs
3. In accordance with Clause 20 of the Hypothecation Agreement, the parties executed an agreement for ‘Export of Gold Jewellery’ (hereinafter ‘the Export Agreement’). In terms of the Export Agreement, Glitter agreed to export goods worth ₹20 crores through MMTC over a period of three years. Clause 3 of the Export Agreement stipulates that the foreign buyers would open “confirmed, irrevocable without recourse to drawer and divisible letter of credit in the name of MMTC” to effect payment against delivery of the goods. In terms of Clause 6 of the Export Agreement, the parties agreed that the exports which were not covered under the letters of credit, would be covered against an ECGC comprehensive policy by MMTC, at the cost of Glitter.
4. MMTC, from time to time, released gold of 0.995 purity (24 carats) at the prevailing international price, in favour of Glitter, for manufacture and export of jewellery produced from the said gold. The jewellery had to be exported within a specified period of 120 days.
5. Disputes arose between the parties in respect of certain transactions between the years 1993-1996. MMTC claimed that Glitter was liable to pay an amount of ₹1,13,39,008.71/-, on account of shortfall in receipt of payment of twelve (12) invoices. In respect of five invoices, MMTC claimed that the importer/foreign buyer had accepted the delivery of goods, however, it had failed to make any payment. In respect of seven invoices, MMTC claimed that the foreign buyer neither took the delivery of the goods in question nor paid for the same. However, MMTC sold four of the said seven consignments to alternate foreign buyers.
6. MMTC further claimed that apart from the aforementioned invoices, it had released six kgs of gold on loan basis for manufacture and export of jewellery within the specified period of 120 days, in favour of Glitter. However, the gold in question was seized by the Indian Customs Authorities as Glitter failed to manufacture and export the jewellery within the specified period. The Customs Authorities seized 4 kgs of gold on 30.04.1996 and the remaining 2 kgs of gold was surrendered by Glitter to them.
7. MMTC also claimed an amount of ₹17,07,198/- on account of deferment of interest in respect of certain consignments. MMTC averred that two cheques (₹8,50,000/- and ₹8,57,198/-) dated 19.02.1996 were issued by Glitter, however, the said cheques were dishonored and thus, Glitter was liable to pay an amount of ₹17,07,198/-.
8. MMTC, by a notice dated 09.08.1996, invoked the Arbitration clause as contained in the Export Agreement and raised a claim of ₹1.70 crores along with interest at the rate of 25% per annum. Thereafter, an arbitral tribunal was constituted to adjudicate the disputes between the parties; however, the matter continued to be pending before the originally constituted arbitral tribunal till the year 2015 without much progress. In the month of July, 2015, MMTC filed a petition under Section 11 of the A&C Act in this Court for appointment of another tribunal. By an order dated 18.01.2018, this Court appointed the learned Sole Arbitrator (the Arbitral Tribunal) to adjudicate the disputes between the parties.
9. In the month of October, 2018, MMTC also amended its Statement of Claims and sought to include interest at the rate of 24% per annum over the principal amount claimed for the period upto 30.09.2018.
10. Before the Arbitral Tribunal, MMTC claimed the following amounts: -.
