Calcutta High Court
Dcm Decometal Gmbh vs Rohit Ferro Tech Limited on 23 July, 2014
Equivalent citations: AIR 2014 CALCUTTA 203, (2014) 5 CAL HN 246 (2014) 3 CALLT 303, (2014) 3 CALLT 303
Author: I.P.Mukerji
Bench: I.P.Mukerji
A.P. No. 194 of 2011
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
Original Side
DCM DECOMETAL GMBH
Vs.
ROHIT FERRO TECH LIMITED
Appearance:
Mr. Anindya Kr. Mitra, Sr. Advocate, Mr. Avrajit
Mitra, Mr. Jishnu Chowdhury, Mr. S.S.Banerjee,
Mr. S. Chatterjee, Mr. S. Roy Chowdhury, Mr. S.
Ghosh, Mr. A. Sardar,
........Advocates for Petitioner
Mr. S.N. Mookerjee, Mr. Tilak Bose, Sr.
Advocates, Mr. Samrat Sen , Mr. Paritosh Sinha,
Ms. Monali Bose, Ms. Sreyashi Saha
..........Advocates for Respondent
Heard On:- 10th June, 2014
Judgement On: - 23rd July, 2014
I.P. Mukerji, J.
The Court: The petitioner is an Austrian company having its place of business in Austria. The respondent claimant is an Indian company having its registered office at 35, Chittaranjan Avenue, Kolkata-.
The arbitration in which these two parties were involved was an International Commercial Arbitration within the meaning of Section 2 (1) (f) of the Arbitration and Conciliation Act. 1996. The place where the arbitration took place was Kolkata. Hence, Part-I of the Act applied to it.
The petitioner challenges an award dated 19th January, 2011. It was made by an Arbitral Tribunal comprising of our former Chief Justice Chittotosh Mookerjee, an eminent Indian counsel Mr. Sudipto Sarkar and Mr. Alan J Thambiayah. The claimant in that application was the respondent.
By the award the petitioner herein was directed to pay the claimant US$ 1,13,04,00/-. The petitioner was also directed to pay interest on the said sum @ 12% p.a. from 28th November, 2008 till the date of payment. There were other directions in the award with regard to payment of costs and expenses of arbitration.
Now, I come to the contract between the parties which resulted in the above award.
It was executed by them on 4th September, 2008. The claimant agreed to sell and the petitioner agreed to buy 4,000/- M.T more or less 10% at the claimant's option high carbon silico manganese. The agreed price was US$ 2060 per M.T., FOB Haldia, Kolkata.
The petitioner alleged repudiation of the contract by the claimant by their letter dated 16th October, 2008. The petitioner accepted the claimant's repudiation and asked them not to produce any more goods. The contract stood terminated upon the expiry of September 2008 or latest by 16th October, 2008.
According to the claimant they had produced the entire quantity of the good contracted for. The petitioner herein failed to open any letter of credit. They were unable to take the goods. On 21st November, 2008 the claimant's lawyer wrote to them to perform the contract or else the claimant would "mitigate their losses." On 16th January, 2009 the claimant's lawyer wrote to the petitioner stating that the contract "has been terminated by reason of the letter's repudiatory breach. The price of the goods contracted for less the amount received on mitigated sale of 1225 M.T" of the goods was claimed, by the claimant.
The claimant, according to the petitioner was guilty of non-delivery of goods. Failure to open the letter of credit was no ground for the claimant to refuse to ship the goods.
Much turns on the letter of the claimant's-advocates M/s Bose and Mitra dated 16th January, 2009. The whole text of the letter is inserted below:-
BOSE & MITRA SOLICITORS & ADVOCATES Temple Chambers 1st Floor 6, Old Post Office Street Kolkata-700 001.
16th January, 2009 DCM DECO metal GmbH Grazerplatz 5 A-8280 Furstenfield By Fax : 00 43 3382 55765 Austria & By E-mail:[email protected] Dear Sir, Our Client: Rohit Ferro-Tech Ltd.
35, Chittaranjan Avenue, 1st Floor Kolkata-700 012.
Re: Contact No. SiMn/DXB/09-08/-69 dated 4th September, 2008.
We refer to our fax/e-mail of 21st November, 2008 to which we have received no reply. The contract has been terminated by reason of your repudiatory breach.
Our client's claim is as follows:
(a) 400 m.t. @ US$ 2060 FOB Haldia/ Calcutta =US$ 8,240,000.00
(b) Amount received from mitigation sales Of 1225 mt = US$ 1,211,799.00 © Storage charges = US$ 120,000.00 Plus 12% interest US$ 284,608.00
----------------------
TOTAL US$ 7,399,809.00
--------------------------
We hereby require you to pay the sum US$ 7,399,809.00 of within 14 days of the date of this letter failing which our clients will commence arbitration proceedings against you without further notice in accordance with the terms of the contract dated 4th September, 2008.
Yours faithfully, BOSE & MITRA What was claimed in the notice was the price of the goods according to the contract less the amount allegedly received by the claimant on account of sale of 1225 M.T. of the goods.
In that letter a reference was made to the letter of 21st November 2008. The letters stated that the petitioner was required, under the contract to receive the goods @ 1000M.T. per month between September and December 2008. Breach on the part of the petitioner was alleged. The claimant expressed their inability to hold on to the stock any longer. If the contract was not performed by the petitioner, the claimant would mitigate their losses.
Before proceeding further it is most necessary to set out the arbitration clause which is contained in the contract between the parties.
"All disputes or difference arising between the parties out of or relating to the construction, meaning and operation or effect of this contract or the breach thereof shall be finally settled under the rules of conciliation and arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with the said rules. The language of arbitration will be English. The venue of arbitration shall be Kolkata, India".
The contract stated that the governing law of the contract would be the substantive law of India. Clause 18, 19 and 40 are most important and were brought to my notice by Mr. T.K. Bose learned Senior Advocate for the claimant. According to Article 18 the tribunal would draw a terms of reference. These terms of reference would inter alia contain a summary of the respective claims of the parties. They would have to be signed by the parties and a member of the tribunal. After the terms of reference were signed by the parties no new claims were to be allowed under Article 19.
Now, it is imperative to have a look at the Terms of Reference in this matter. In the terms of reference the dispute between the parties which has been discussed above was enumerated. Reference was made to the letter of the claimant dated 16th January, 2009. The claimant claimed the amount mentioned in the letters together with interest and damages to be assessed.
Then, the claim of the claimant in the form of a Request for arbitration, dated 14th October, 2009 was filed before the International Chamber of Commerce. The petitioner served their answer on 11th February, 2010. The above terms of reference were signed on 18th March, 2010. On 10th November, 2010 ICC, International Court of Arbitration extended the time to make and publish the award till 28th February, 2011.
Meanwhile, on 08th August, 2010 the petitioner applied before the Arbitral Tribunal to dismiss the claimant's claim on the ground that the Arbitral Tribunal had no jurisdiction to determine the claim. The petitioner submitted that the claimant had claimed the contract price less the amount realised by way of mitigated sale. This was the dispute. Now the dispute was sought to be changed by the claimant claiming the difference between the contract price and the market price.
Now, let me refer to the issues which were framed by the Arbitral Tribunal:-
1. What were the parties' obligations under the Contract?
2. Have the Respondents breached any obligations under the Contract?
3. If so, which obligations have been breached by the Respondents?
4. a. Have the Claimants suffered loss and damage in consequence of any breach by the Respondents; and if so, b. What are the damages suffered by the Claimants?
5. Whether interest is recoverable by the Claimants, and if so, on what basis?
6. Whether the Claimants or the Respondents are entitled to costs and expenses arising out of this arbitration, including but not limited to reasonable attorney's fees?
7. Whether the Claimants are entitled to any other relief?
It appears from internal page 12 of the award that the question of jurisdiction was raised before tribunal, by the petitioner. This was expressly recorded by the tribunal. They argued that the tribunal did not have the jurisdiction to decide the difference between the market price and contract price and make an award on that basis. When the claimant changed the issue before the tribunal, on 07th August, 2010, at the first hearing before it, the tribunal ceased to have jurisdiction.
The Arbitral Tribunal ruled in paragraph-27 that the claimants' letter dated 16th January, 2009 "did not circumscribe the parameters of the dispute between the parties. It referred to an earlier letter dated 21st November, 2008 from the Claimant to the Respondents, and it set out the Claimant's computation of the amount of losses, being US$ 7,399,809, that they sought from the Respondents."
According, to the tribunal the claimant's letter dated 21st November, 2008 put the petitioner on notice that the claimant would be seeking damages from what they considered to be the petitioner's breach of contract.
Mr. Anindya Kr. Mitra, learned Senior Advocate for the petitioner made some fine arguments on technical law points. He stated that the arbitrator assumes jurisdiction on a pre- existing dispute. It cannot have jurisdiction over a dispute which is non-existing. The pre-existing dispute in this case was the claim by the claimant for contract price less the price obtained on mitigated sale. Only this dispute was referred to arbitration. The dispute which was gone into by the learned Arbitral Tribunal was not a pre-existing dispute which it was empowered to go into. It did not exist before the first date of hearing. The tribunal had no jurisdiction to enter upon it. Mr. Mitra cited Chandmull Ganeshmull Vs. Nippon Munkwa Kaisha reported in AIR 1921 Cal 342, Hindustan Zinc Ltd. Vs. Friends Coal Carbonisation reported in 2006(4) SCC
445. He also cited a Division Bench Judgment of our Court in Mathuradas Goverdhandass Vs. Khusiram Benarshilal reported in 53 CWN 873. The proposition of law expounded in this case is the same as that in Chandmull Ganeshmull Vs. Nippon Munkwa Kaisha reported in AIR 1921 Cal 342 (supra) , that the jurisdiction of the arbitrator depends on the existence of a dispute. This case went a step further in clarifying that the jurisdiction of an arbitrator did not depend on the existence of a claim or accrual of a cause of action but depended on the existence of a dispute.
Learned Counsel's next argument, based on Murlidhar Chiranjilal Vs. Harishchandra Dwarkadas and Another reported in AIR 1962 SC 366 was that there was no evidence of market price of the substance in Haldia on the date of the alleged breach, before the Arbitral Tribunal. Furthermore, no proof was adduced to show the exact amount realised on mitigated sale.
Two more judgments were cited: ONGC Ltd. Vs. Saw Pipes Ltd reported in (2003) 5 SCC 705, MSK Projects India (JV) Limited Vs. State of Rajasthan And Another reported in (2011) 10 SCC 573 paras 15 to 21.
It was also argued that the learned Arbitrator could not travel beyond the scope of reference. It was also said that Murlidhar Chiranjilal Vs. Harishchandra Dwarkadas and Another reported in AIR 1962 SC 366 was not discussed by the learned Arbitrator. Thus, the award has become vulnerable, on the basis of Comet Technocom Vs. Union of India (UOI) reported in 2011 (2) CHN 51.
On behalf of the claimant, submissions were made by Mr. T.K. Bose learned Senior Advocate supplemented by Mr. S.N. Mookerjee learned Senior Advocate. They submitted that a broad view should be taken of the judgment in Mathuradas Goverdhandass Vs. Khusiram Benarshilal reported in 53 CWN 873 (Supra). They referred to me clauses 18 & 19 of the ICC Rules relating to arbitration. They argued that a Terms of Reference was required to be prepared and signed by the parties and a member of the Arbitral Tribunal. This was duly done. Thereafter it was required to be filed before the Arbitral Tribunal. The terms of reference was signed on 18th March, 2010. The summary of the claimant's claim made the dispute between the petitioner and claimant absolutely plain. The claimant, under the contract was required to export 4,000 M.T of high carbon silico manganese (+ or - 10%) to be shipped in monthly installments between September 2008 and December 2008. According to the claimant the petitioner failed to open any letter of credit which was a breach of contract. The claimant had produced the entire contractual quantity. By their letter dated 21st November, 2008 followed by the letter dated 16th January, 2009 the claimant stated that the contract had been terminated and demanded payment of the sum of US$ 5,301,646. Apart from the above sum damages were also claimed in para 7 of the terms of reference. The petitioner's answer to this claim was that the opening or non-opening of the letter of credit had nothing to do with the performance of contract. The claimant had repudiated the contract when it fails to appropriate 1000 M.T of the product during the month of September 2008. By their letter dated 16th October, 2008 the petitioner had accepted the claimant's repudiation and the contract had come to an end.
According to learned counsel, on a perusal of the terms of reference, the dispute between the parties would be absolutely plain. Although in the notice issued by their Advocate the claimant had asked for the contract price less the value obtained on mitigated sale, it made no difference, because the dispute between the parties was absolutely clear. Only the method by which the damages were to be calculated was subsequently changed. So, instead of claiming the contract price minus the value of goods of mitigated sale, the claimant claimed the difference between the contract price and the market price, in the arbitral reference. They were entitled to do so. This did not change the dispute between the parties. The petitioner was not at any disadvantage in leading evidence.
My attention was drawn to the witness statement of the petitioner's witness, Balaji Devanathan. Referring to the metal pages he said that the international market price of the goods would not be lower than the contract price. This is what the witness had to say in paragraph 8 and 9 of the said statement dated 11th June 2010.
"8. It is stated that international market price of the said goods on September 9, 2008, October 10, 2008, November 9, 2008 and December 10, 2008 was not lower than the contract price and claimant would not have suffered and/or suffered no loss or damages. The claimant has no right to claim and in any event lost the right, if any, to claim loss and damages from the respondent. The claimant never asked the respondent to find out or nominate the vessel for shipment during the months of September and October 2008 or thereafter.
9. The respondent's document No.3 is the publication of Metal Pages which gives the prevalent metal prices of the said goods. Such publication is accepted industrially as the price of inter alia silico manganese.
This is without prejudice to the respondent's contention that the claimant did not manufacture the goods of the required specification and/or appropriate the same to the contract in question."
The metal pages at 183 to 188 of the compilation were tendered by the petitioner. This showed that the average price of the metal in question was between 1437.50-1493.75 e/m.t. in November 2008. The one produced by the claimant showed that the price of the concerned metal on 28th November, 2008 was Euro1400 and in November varied between Euro 1450 and Euro1400 Learned counsel for the claimant showed the passages from the evidence on affidavit of the petitioner's witness stating that the metal bulletin price had been accepted by them.
I was also shown the return of the claimant under Rule 12 of the Central Excise Rules 2000 and Rule 9(7) of the CENVAT credit rules 2004 to demonstrate that the claimant had in fact produced the required quantity of materials. This was also admitted in an e-mail dated 16th October, 2008 by the petitioner by which it was said "I realised you have already produced the material under the contract and it has also been moved to the ware house in the port"
DISCUSSION AND CONCLUSIONS:
If I have understood the contention of learned counsel for the petitioner correctly, it was, that, the Arbitral Tribunal had proceeded to decide a dispute which was not before it. To be more specific the dispute that the claimant was entitled to the difference between the market price and the contract price was not referred to the Arbitral Tribunal at all. What was referred to the Arbitral Tribunal was whether the claimant was entitled to the contract price less the amount realised on mitigated sale.
Therefore, according to Mr. Mitra, learned Senior Advocate the ratio in Chandmull Ganeshmull Vs. Nippon Munkwa Kaisha reported in AIR 1921 Cal 342 and Mathuradas Goverdhandass Vs. Khusiram Benarshilal reported in 53 CWN 873 applied. His argument was that it did not matter what was the claim or the cause of action but what mattered was the actual dispute between the parties. A dispute was what was asserted by the claimant and denied by the respondent as held in Chandmull Ganeshmull Vs. Nippon Munkwa Kaisha reported in AIR 1921 Cal 342 and only that dispute could be referred to and decided in arbitration as per the ratio of Mathuradas Goverdhandass Vs. Khusiram Benarshilal reported in 53 CWN 873. Following this logic the Arbitral Tribunal had adjudicated on matters which were outside the reference or submission before the tribunal, in terms of the ratio of the Hon'ble Supreme Court in ONGC Ltd. Vs. Saw Pipes Ltd reported in (2003) 5 SCC 705 and MSK Projects (I) (JV) Ltd. Vs. State of Rajasthan reported in (2011) 10 SCC 573 (Paras 15 to
25).
Hence, the Award was liable to set aside.
To my mind there is no difficulty at all in the principles of law expounded in the above cases. It is very logical to think that one may assert a claim against another but unless the other denies that claim there is no dispute between them. There is neither any need for litigation in a court of law nor any need to go to arbitration. Hence, if a court of law or a Arbitral Tribunal tries to decide something regarding which there is no dispute its decision is nonest. Nobody asked the Court or Tribunal to decide it.
But here the question is quite different. The claimant and the petitioner agreed that the claimant would supply 4000 M.T. of the contracted material. No material was supplied. According to the claimant 4000 M.T. of material had been manufactured, they were not sent to the petitioner because they did not open the letter of credit. According to the petitioner no materials were produced. Even if the petitioner did not open a letter of credit, the claimant was obliged to despatch the material.
The claimant made a claim against the petitioner for not buying the said contracted quantity of goods in the request for Arbitration. This cause of action had been pleaded by them in some detail. It had been pleaded in the terms of reference also signed by the parties.
The above defence of the petitioner was equally clear stated in this document. Therefore, the main issues or disputes between the parties were crystal clear.
Initially, the petitioner claimed the contract price less the amount realised on mitigated sale. Later on the case was changed claiming the difference between the market price and the contract price.
Now, the question is whether a different dispute than the one originally referred was adjudicated upon by the tribunal?
What is more important is that in the statement made by the witness for the petitioner, Balaji Devanathan dated 11th June, 2010 he mentions four dates when the international price of the goods was not lower than the contract price. What he wanted to say was that the claimant had not suffered any damages. The witness was cautious to cover the entire contractual period in his statement that the market price was not lower than the contract price.
Hence, the petitioner would not have to pay any damages at all.
Therefore, the petitioner was conscious of this issue or dispute actually considered by the Arbitral Tribunal: contract price - market price. It cannot be said that the petitioner was taken by surprise.
At any rate this issue or dispute is ancillary to the above main issue. It is more a measure of damages than a dispute. It flows out of the dispute and is ancillary to it. So, is the claim for contract price less the amount realised by mitigated sale. It is also a measure of damages which in my opinion flows from the dispute. There was no misconception amongst the parties in the understanding of the dispute. In fact the Arbitral Tribunal while considering the objection under Section 16 of the Act referred to Part-B3 of the petitioners' summary of claim where it was alleged that the claimant had failed to mitigate their loss or suffered no loss because the market price of the product on 09th September, 2008, 10th October, 2008, 09th November, 2008 and 10th December 2008 was not lower than the contract price.
The Arbitral Tribunal rightly held that since this dispute was before the Arbitral Tribunal and known by the parties to be before the tribunal, there was no question of a different dispute being referred to or tried by the tribunal. Hence, it continued to enjoy jurisdiction over the dispute.
Apart from the reasons given by the Arbitral Tribunal I find that both the parties referred to the price of the material at specific points of time, from the metal bulletin. This exercise was aimed at ascertaining whether at the time of breach of the contract the market price was lower or higher than the contract price. If the market price was lower, the claimant would be entitled to the difference between the two prices as damages for breach of contract. Since both parties adduced these metal bulletins and proved them, there is no doubt in my opinion that this particular issue with regard to ascertainment of the measure of damages was not only in the contemplation of the parties but was known by them to be the issue to be determined by the tribunal while adjudicating the reference.
On an examination of the metal bulletin for the relevant period as shown to by me by Mr. S.N. Mookerjee, learned Senior Advocate for the claimant and comparing the same with the rate accepted by the tribunal to be the price of the metal on the date of the breach, my judgment is, that the Arbitral Tribunal has tried to determine the exact price of the material on the date of the breach, on the basis of the above evidence, correctly. The tribunal has rightly taken the highest average price appearing in the metals bulletin in November 2008 as euro 1450 Per M.T. I am satisfied from the discussion made by the Arbitral Tribunal that it has gone into the question whether the claimant produced 4000 M.T. of the material and come to the answer that they did produce the material. My conviction was strengthened by the documents shown to me by Mr. Mookerjee, mainly the excise return, to prove that such production was undertaken by the claimant. Moreover, as stated above the petitioner admitted that the claimant had produced the contractual quantity.
With due humility I state that the case of Murlidhar Chiranjilal Vs. Harishchandra Dwarkadas and Another reported in AIR 1962 SC 366 has no application to the facts of this case, in as much as the transaction involved here is international in character. The market price is not the price of the product in any local market but is the global market price. I think the Arbitral Tribunal has applied the right standards in arriving at the market price.
In my judgment the Arbitral Tribunal has very rightly taken 3600 M.T. of the goods to be the subject quantity, on the basis of the stipulation in the contract that there could be a 10% + or - variation, at the option of the claimant.
For all those reasons, I find that there is no scope to interfere with the award dated 19th January, 2011.
This application is accordingly dismissed.
No order as to costs.
Urgent certified photocopy of this Judgment and order, if applied for, be supplied to the parties upon compliance with all requisite formalities.
(I.P.Mukerji, J.)