Calcutta high court upholds arbitral award, confirms appellant's breach of consent order in supply contract dispute

Calcutta High Court Upholds Arbitral Award, Confirms Appellant's Breach in Supply Contract Dispute.

Case Title: Neo Metaliks Ltd. v. Orrisa Metaliks Pvt. Ltd.

Coram: Justice Debangsu Basak and Justice Md. Shabbar Rashidi

The Calcutta High Court has dismissed an appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996, against a judgment of the Single Judge refusing to interfere with an arbitral award under Section 34 of the Act.

The Division Bench of Justice Debangsu Basak and Justice Md. Shabbar Rashidi was considering a challenge to an award dated October 16, 2023, whereby the Arbitrator had held the appellant responsible for breach of a consent order dated May 20, 2022, and awarded damages, port charges and handling charges in favour of the respondent.

Background

The dispute arose from a contract dated February 22, 2022 for supply of 10,000 MT of Lam Coke. Disagreements over the format and terms of the Letter of Credit led to litigation between the parties, including a suit for specific performance and multiple contempt applications. Two consent orders came to be passed, dated April 28, 2022 and May 20, 2022, recording the agreed terms for payment and delivery of goods and referring the disputes to arbitration.

Appellant's Case

The appellant contended that the Arbitrator had not decided the core issue of breach of the original contract dated February 20, 2022, and had instead wrongly framed the dispute around breach of the consent order dated May 20, 2022. It was argued that the difference in market price awarded to the respondent was erroneously computed, that the claim on account of market price difference had been withdrawn, and that port and handling charges could not have been awarded since these were payable by the recipient of the goods. The appellant characterised the award as suffering from patent illegality under Section 34(2)(a)(iv) of the Act.

Respondent's Case

The respondent submitted that the issue of breach of the original contract stood subsumed within the consent order dated May 20, 2022, since that order dealt with the very obligations arising from the contract. It was contended that the appellant failed to convert the Sight Letter of Credit into a Usance Letter of Credit despite repeated requests, and that the appellant illegally terminated the contract while an injunction restrained the respondent from dealing with the goods.

Findings Of The Court

The Court noted that the Arbitrator had examined the correspondence exchanged between the parties from May 23, 2022 to May 31, 2022, and found that the respondent had complied with its obligations under the consent order while the appellant had not. The Single Judge had also held that the issue decided by the Arbitrator, being breach of the consent order dated May 20, 2022, squarely covered the underlying contract dated February 22, 2022, since the consent order was directly connected to the payment and delivery clause of the contract.

The Bench held that the scope of interference under Section 37, being confined to the parameters of Section 34, does not permit re-appreciation of the correctness of the Arbitrator's findings of fact. It held that the award did not suffer from any patent illegality and that the appellant had failed to establish that the impugned judgment was perverse.

The appeal was accordingly dismissed, with no order as to costs.