ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. MMTC LTD.

A into all the circumstances to find an author’s intention, it is only for the purpose of finding out whether the words apply accurately to existing facts. If, however, the words are clear in the context of the surrounding circumstances, the court cannot rely on them to attribute to the author an intention contrary to the plain meanings of the words used in the B document.”” (emphasis supplied) “108 It is evident from the Court of Appeal’s reasoning in Sandar Aung [2007] 2 SLR 89 that in Singapore, the parol evidence rule C (as statutorily embedded in s 94 of the Evidence Act) still operates as a restriction on the use of extrinsic material to affect a contract. However, extrinsic material is admissible for the purpose of interpreting the language of the contract. In this respect, Sandar Aung acknowledges that extrinsic material is admissible even if no ambiguity is present in the plain language of the contract. D However, ambiguity still plays an important role, in that the court can only place on the relevant contractual word, phrase or term an interpretation which is different from that to be ascribed by its plain language if a consideration of the context of the contract leads to the conclusion that the word, phrase or term in question may take on two or more possible meanings, ie, if there is latent ambiguity. In Sandar Aung, after the Estimate was taken into account, the phrase “all charges, expenses and liabilities incurred by and on behalf of the Patient” could plausibly be taken to mean all charges, expenses and liabilities incurred by and on behalf of the Patient in respect of the envisaged angioplasty. Thus, the court had a legitimate basis to place a narrower interpretation on the contractual term (or, in more informal parlance, to “read down” that term) which would not otherwise have been warranted by its broad and general language. It may be possible to argue that what the court did in Sandar Aung in fact constituted variation of the relevant contractual terms in contravention of s 94 of the Evidence Act. This issue shall be addressed in greater detail at [122]–[123] below. It remains to be noted that proviso (f) to s 94 was not discussed in Sandar Aung. Thus, the issue of whether ambiguity was a prerequisite for the application of this proviso and its relationship with the common law contextual approach to contractual interpretation was left open.”

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 555 MMTC LTD. [R.F. NARIMAN, J.]

“(B) THE PAROL EVIDENCE RULE A 111 As mentioned earlier, in Singapore, the parol evidence rule lives on in s 94 of the Evidence Act and has been applied assiduously by the courts in case law. The Singapore courts have always been mindful of the need for contractual certainty, especially in commercial agreements (such as the Policy in the present case). In Forefront Medical Technology (Pte) Ltd v Modern-Pak Pte Ltd [2006] 1 SLR 927, the High Court emphasised that not only is “sanctity of contract … vital to certainty and predictability in commercial transactions”, but also: The perception of the importance of commercial certainty and predictability is deeply entrenched within the commercial legal landscape in general and in the individual psyches of commercial parties (and even non-commercial parties, for that matter) in particular. 112 However, the parol evidence rule only operates where the contract was intended by the parties to contain all the terms of their agreement. Where the contractual terms are ambiguous on their face, it is likely that the contract does not contain all the terms intended by the parties. Furthermore, in order to ascertain whether the parties intended to embody their entire agreement in the contract, the court may take cognisance of extrinsic evidence or the surrounding circumstances of the contract. 113 Assuming that the contract is one to which the parol evidence rule applies, no extrinsic evidence is admissible to contradict, vary, add to or subtract from its terms (see s 94 of the Evidence Act).” F (emphasis supplied) Finally, in a synopsis at the end, the Court of Appeal held: “132 To summarise, the approach adopted in Singapore to the admissibility of extrinsic evidence to affect written contracts is a pragmatic and principled one. The main features G of this approach are as follows: (a) A court should take into account the essence and attributes of the document being examined. The court’s treatment of extrinsic evidence at various stages of the analytical process may differ depending on the nature of the document. In general, the court H

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A ought to be more reluctant to allow extrinsic evidence to affect standard form contracts and commercial documents. (b) If the court is satisfied that the parties intended to embody their entire agreement in a written contract, no extrinsic evidence is admissible to contradict, vary, add to, or subtract from its terms B (see ss 93–94 of the Evidence Act). In determining whether the parties so intended, our courts may look at extrinsic evidence and apply the normal objective test, subject to a rebuttable presumption that a contract which is complete on its face was intended to contain all the terms of the parties’ agreement. In other words, where a contract is complete on its face, the language of the contract constitutes prima facie proof of the parties’ intentions. (c) Extrinsic evidence is admissible under proviso (f) to s 94 to aid in the interpretation of the written words. Our courts now adopt, via this proviso, the modern contextual approach to interpretation, in line with the developments in England in this area of the law to date. Crucially, ambiguity is not a prerequisite for the admissibility of extrinsic evidence under proviso (f) to s 94. (d) The extrinsic evidence in question is admissible so long as it is relevant, reasonably available to all the contracting parties and relates to a clear or obvious context. However, the principle of objectively ascertaining contractual intention(s) remains paramount. Thus, the extrinsic evidence must always go towards proof of what the parties, from an objective viewpoint, ultimately agreed upon. Further, where extrinsic evidence in the form of prior negotiations and subsequent conduct is concerned, we find the views expressed in McMeel’s article and Nicholls’ article persuasive. For this reason, there should be no absolute or rigid prohibition against evidence of previous negotiations or subsequent conduct, although, in the normal case, such evidence is likely to be inadmissible for non-compliance with the requirements set out at [125] and [128]–[129] above. (We should add that the relevance of subsequent conduct remains a controversial and evolving topic that will require more extensive scrutiny by this court at a more appropriate juncture.) Declarations of subjective intent remain inadmissible except for the purpose of giving meaning to terms which have been determined to be latently ambiguous. H

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 557 MMTC LTD. [R.F. NARIMAN, J.]

(e) In some cases, the extrinsic evidence in question leads to possible alternative interpretations of the written words (ie, the court determines that latent ambiguity exists). A court may give effect to these alternative interpretations, always bearing in mind s 94 of the Evidence Act. In arriving at the ultimate interpretation of the words to be construed, the court may take into account subjective declarations of intent. Furthermore, the normal canons of interpretation apply in conjunction with the relevant provisions of the Evidence Act, ie, ss 95–100. (f) A court should always be careful to ensure that extrinsic evidence is used to explain and illuminate the written words, and not to contradict or vary them. Where the court concludes that the parties have used the wrong words, rectification may be a more appropriate remedy.” (emphasis supplied)

34Copy pinpoint34. The approach of the Singapore Court of Appeal has our broad approval, being in line with the modern contextual approach to the interpretation of contracts. When proviso (6) and illustration (f) to section 92, section 94 and section 95 of the Evidence Act are read together, the picture that emerges is that when there are a number of documents exchanged between the parties in the performance of a contract, all of them must be read as a connected whole, relating each particular document to “existing facts”, which include how particular words are used in a particular sense, given the entirety of correspondence between the parties. Thus, after the application of proviso (6) to section 92 of the Evidence Act, the adjudicating authority must be very careful when it applies provisions dealing with patent ambiguity, as it must first ascertain whether the plain language of a particular document applies accurately to existing facts. If, however, it is ambiguous or unmeaning in reference to existing facts, evidence may then be given to show that the words used in a particular document were used in a sense that would make the aforesaid words meaningful in the context of the entirety of the correspondence between the parties. G

35Copy pinpoint35. This approach is also reflected in a recent judgment of this Court in Transmission Corpn. of Andhra Pradesh Ltd. v. GMR Vemagiri Power Generation Ltd., (2018) 3 SCC 716, as follows: “21. In the event of any ambiguity arising, the terms of the contract will have to be interpreted by taking into consideration all H

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A surrounding facts and circumstances, including correspondence exchanged, to arrive at the real intendment of the parties, and not what one of the parties may contend subsequently to have been the intendment or to say as included afterwards, as observed in Bank of India v. K. Mohandas [Bank of India v. K. Mohandas, (2009) 5 SCC 313] : (SCC p. 328, para 28) B “28. The true construction of a contract must depend upon the import of the words used and not upon what the parties choose to say afterwards. Nor does subsequent conduct of the parties in the performance of the contract affect the true effect of the clear and unambiguous words used in the contract. The intention C of the parties must be ascertained from the language they have used, considered in the light of the surrounding circumstances and the object of the contract. The nature and purpose of the contract is an important guide in ascertaining the intention of the parties.”” D (page 727)

36Copy pinpoint36. The Division Bench’s reliance upon Smt. Kamala Devi (supra) to set aside the Majority Award is wholly misplaced. The ratio in Smt. Kamala Devi (supra) is contained in the words: “… Sometimes when it is said that a Court should look into all the circumstances to find an author’s intention, it is only for the purpose of finding out whether the words apply accurately to existing facts. But if the words are clear in the context of the surrounding circumstances, the Court cannot rely on them to attribute to the author an intention contrary to the plain meaning of the words used in the document… “ (page 162)

37Copy pinpoint37. So read, the judgment in Smt. Kamala Devi (supra) accords with what has been held hereinabove. It is clear that the three critical emails have to be read in the surrounding circumstances of the entirety of the LTA and the correspondence which ensued between the parties. Once that exercise is undertaken, as was undertaken by the Majority Award, it is impossible to hold that the Majority Award is not a possible view on the facts of this case. The reliance of the Majority Award upon the correspondence between the parties pre-July and in September to December 2009, buttressed by Mr. Wilcox’s evidence, cannot therefore be said to be flawed.

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 559 MMTC LTD. [R.F. NARIMAN, J.]

38Copy pinpoint38. Shri Rohatgi’s argument in support of the impugned judgment of the Division Bench that there is no evidence to demonstrate proof of damage suffered as on the date of breach, is also factually incorrect. It is well established that the arbitral tribunal is the final judge of the quality, as well as the quantity of evidence before it (see Sudarsan Trading Co. v. Govt. of Kerala, (1989) 2 SCC 38 at page 53). As was correctly pointed out by Shri Sibal, the Majority Award has taken into account Mr. Wilcox’s Affidavit dated 10.07.2013 and Additional Affidavit dated 03.09.2013 detailing the prices at which sales of coal were made to Chinese purchasers during the Fifth Delivery Period, which ended on 30.09.2009, being the date of breach as found by the Majority Award. In addition, contemporaneous correspondence, including letters dated C 27.11.2009 and 03.12.2009 were also relied upon to show that the Respondent was itself seeking coal at roughly the price of $128 per metric tonne, at around the same time. Hence, the difference between the contractual price and market price was arrived at as $173.383 per metric tonne, in accordance with the law laid down by this Court in D Murlidhar Chiranjilal v. Harishchandra Dwarkadas and Anr., (1962) 1 SCR 653, as follows: “We may in this connection refer to the following observations in Chao v. British Traders and Shippers Ltd. [(1954) 1 All ER 779, 797] which are apposite to the facts of the present case: E “It is true that the defendants knew that the plaintiffs were merchants and, therefore, had bought for re-sale, but every one who sells to a merchant knows that he has bought for re- sale, and it does not, as I understand it, make any difference to the ordinary measure of damages where there is a market. What is contemplated is that the merchant buys for res-ale, F but, if the goods are not delivered to him, he will go out into the market and buy similar goods and honour his contract in that way. If the market has fallen he has not suffered any damage, if the market has risen the measure of damages is the difference in the market price.” G In these circumstances this is not a case where it can be said that the parties when they made the contract knew that the likely result of breach would be that the buyer would not be able to make profit in Calcutta. This is a simple case of purchase of goods for re-sale anywhere and therefore the measure of damages has to H

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A be calculated as they would naturally arise in the usual course of things from such breach. That means that the respondent had to prove the market rate at Kanpur on the date of breach for similar goods and that would fix the amount of damages, in case that rate had gone above the contract rate on the date of breach. We are therefore of opinion that this is not a case of the special type to which the words “which the parties knew, when they made the contract, to be likely to result from the breach of it” appearing in s. 73 of the Contract Act apply. This is an ordinary case of contract between traders which is covered by the words “which naturally arose in the usual course of things from such breach” appearing in s. 73. As the respondent had failed to prove the rate for similar canvas in Kanpur on the date of breach it is not entitled to any damages in the circumstances.” (pages 660-661)

39Copy pinpoint39. The Single Judge correctly appreciated this part of the case when he stated as follows: “86. MMTC’s submission is belied by what it has itself stated in the correspondence exchanged with Anglo. In its letter dated 25th September, 2009, MMTC describes USD 128 as the ‘2009’ rate. In its letter dated 27th November, 2009 it refers to “the 2009 price level of US$ 128/125 PMT.” In its letter dated 3rd December, 2009 MMTC referred to “coal being purchased at current price of US$ 128.25 PMT.” Further the re-negotiated contracts with SAIL and RINL acknowledge the slump in coal prices to USD 128 during the period from April, 2009 to March 2010. The date of 30th September, 2009 fell between the said dates and was the date to be reckoned for determining the prevalent market price.

87. The majority Award has based its conclusion as regards the prevalent market price of coal as on 30th September, 2009 on the basis of the above evidence. It was a view that was possible to be taken on the evidence made available to the AT. The Court is not persuaded to hold the said finding to be perverse or patently illegal.”

40Copy pinpoint40. This being the case, it is not possible to accept Shri Rohatgi’s argument that the letters dated 27.11.2009 or 03.12.2009 do not reflect the market price of coal as on the date of breach or that the market H

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 561 MMTC LTD. [R.F. NARIMAN, J.]

price of coal cannot be established from the special long-term contracts operating at around the same time as the date of breach. This argument must therefore be rejected.

41Copy pinpoint41. The present case is that of an international commercial arbitration, the Majority Award being delivered in New Delhi on 12.05.2014. Resultantly, this case has been argued on the basis of the law as it stood before the Arbitration and Conciliation (Amendment) Act, 2015 [“Amendment”] added two explanations to section 34(1) and sub-section (2A) to section 34 of the Arbitration Act, in which it was made clear that the ground of “patent illegality appearing on the face of the award” is not a ground which could be taken to challenge an international commercial award made in India after 23.10.2015, when the Amendment was brought into force. We, therefore, proceed to consider this case on the pre-existing law, which is contained in the seminal decision of Associate Builders (supra).

42Copy pinpoint42. The judgment in Associate Builders (supra) examined each of the heads set out in Renusagar Power Co. Ltd. v. General Electric D Co., 1994 Supp (1) SCC 644, together with the addition of the fourth head of “patent illegality” laid down in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705. Since we are concerned with the “perversity principle”, the relevant paragraphs of this judgment are set out as follows: “29. It is clear that the juristic principle of a “judicial approach” E demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.” (page 75) F “31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where: G (i) a finding is based on no evidence, or (ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or (iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse. H

p. 562

A 32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312], it was held: (SCC p. 317, para 7) “7. … It is, no doubt, true that if a finding of fact is arrived at B by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.” C In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC 10] , it was held: (SCC p. 14, para 10) “10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence D which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with.” E

33. It must clearly be understood that when a court is applying the “public policy” test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594], this Court held: (SCC pp. 601-02, para 21) “21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in H

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 563 MMTC LTD. [R.F. NARIMAN, J.]

Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.”

34. It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian D law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood.” (pages 75-77) “42. In the 1996 Act, this principle is substituted by the “patent illegality” principle which, in turn, contains three subheads: E

42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act, which reads as under: F “28. Rules applicable to substance of dispute.—(1) Where the place of arbitration is situated in India— (a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute G submitted to arbitration in accordance with the substantive law for the time being in force in India;” 42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality — for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside. H

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A 42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under: “28. Rules applicable to substance of dispute.—(1)-(2)*** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.” This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a C reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.” D (page 81)

43Copy pinpoint43. This judgment has been consistently followed in a plethora of subsequent judgments, including: a. National Highways Authority of India v. ITD Cementation India Ltd., (2015) 14 SCC 21 at paragraph E 24 (page 38); b. Centrotrade Minerals & Metal Inc. v. Hindustan Copper Ltd., (2017) 2 SCC 228 at paragraph 45 (page 252); c. Venture Global Engg. LLC v. Tech Mahindra Ltd., F (2018) 1 SCC 656 at paragraph 85 (page 687); d. Sutlej Construction Ltd. v. State (UT of Chandigarh), (2018) 1 SCC 718 at paragraph 11 (page 722); e. Maharashtra State Electricity Distribution Co. Ltd. v. G Datar Switchgear Ltd., (2018) 3 SCC 133 at paragraph 51 (page 169); f. HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471 at paragraphs 18-19 (page 493); g. M.P. Power Generation Co. Ltd. v. ANSALDO Energia H SpA, (2018) 16 SCC 661 at paragraph 25 (page 679);

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 565 MMTC LTD. [R.F. NARIMAN, J.]

h. Shriram EPC Ltd. v. Rioglass Solar Sa, (2018) 18 SCC A 313 at paragraph 34 (page 328); i. State of Jharkhand v. HSS Integrated Sdn, (2019) 9 SCC 798 at paragraph 7 (page 804); and j. Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 at paragraphs 20, 34-36 (pages 154, B 169-170).

44Copy pinpoint44. Given the parameters of judicial review laid down in Associate Builders (supra), it is obvious that neither the ground of fundamental policy of Indian law, nor the ground of patent illegality, have been made out in the facts of this case, given the fact that the Majority Award is certainly a possible view based on the oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence.

45Copy pinpoint45. However, Shri Rohatgi relied upon a number of recent judgments, which according to him, throw further light upon the elucidation of law in Associate Builders (supra). Thus, in MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, this Court held: “11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of F India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the “fundamental policy of Indian law” would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., G (1948) 1 KB 223 (CA)] reasonableness. Furthermore, “patent illegality” itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract. H

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A 12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not B trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA, (2015) 3 SCC 49. Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) C 4 SCC 445; and McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181)

13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

F 14. 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, G 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. H

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 567 MMTC LTD. [R.F. NARIMAN, J.]

15. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. However, this question has been addressed by the courts in terms of the construction of the contract between the parties, and as such it can be safely said that a review of such a construction cannot be made in terms of reassessment of the material on record, but only in terms of the principles governing interference with an award as discussed above.

16. It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator’s jurisdiction to consider the same. [See McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181; Pure Helium India (P) Ltd. v. ONGC, (2003) 8 D SCC 593 and D.D. Sharma v. Union of India, (2004) 5 SCC 325].

17. We have gone through the material on record as well as the majority award, and the decisions of the learned Single Judge and the Division Bench. The majority of the Arbitral Tribunal as well as the courts found upon a consideration of the material on record, including the agreement dated 14-12-1993, the correspondence between the parties and the oral evidence adduced, that the agreement does not make any distinction within the type of customers, and furthermore that the supplies to HTPL were not made in furtherance of any independent understanding between the appellant and the respondent which was not governed by the agreement dated 14-12-1993.” (pages 166-168)

46Copy pinpoint46. Likewise, in Dyna Technologies Pvt. Ltd. v. Cromptom G Greaves Ltd., 2019 SCC Online SC 1656, [“Dyna Technologies”], this Court held: “26. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of H

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A the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

27. Moreover, umpteen number of judgments of this Court have categorically held that the Courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.”

47Copy pinpoint47. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut E Utpadan Nigam Ltd., (2019) 7 SCC 236, after referring to the parameters of review in Associate Builders (supra) and other cases, this Court found that with respect to the first claim, relating to price adjustment/escalation, the arbitrator interpreted the relevant clauses of the contract and came to a certain finding. The High Court, in interfering with that finding, was wrong in doing so merely because some other view could have been taken, as the interpretation made by the arbitrator was a possible one. The High Court’s judgment was, therefore, set aside to this extent. However, insofar as the second and third claims were concerned, on the facts of that case, the finding was said to be so perverse or irrational that no reasonable person could have arrived at the same, based on the material/evidence on record, as a result of which, the High Court’s judgment was upheld.

48Copy pinpoint48. In South East Asia Marine Engg. & Constructions Ltd. (SEAMEC LTD.) v. Oil India Ltd., (2020) 5 SCC 164, a three Judge Bench of this Court referred to the judgment of this Court in H Dyna Technologies (supra) and found that the interpretation of the

ANGLO AMERICAN METALLURGICAL COAL PTY LTD. v. 569 MMTC LTD. [R.F. NARIMAN, J.]

arbitral tribunal in expanding the meaning of clause 23 of the contract to A include a change in rate of high-speed diesel, not being even a possible interpretation of the concerned contract, the High Court in setting aside the award, could not be said to be incorrect. Also, other contractual terms when seen together with this interpretation would also render such finding perverse. B

49Copy pinpoint49. In Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC 167, this Court, after setting out the law stated in Associate Builders (supra) and Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, applied the test of perversity and then concluded: C “26. Even though the High Court in para 44 of the judgment referred to various judgments, including Western Geco [ONGC v. WesternGeco International Ltd., (2014) 9 SCC 263] [which is now no longer good law], the case has been decided on the ground that the arbitral award is a perverse award and on a holistic reading of all the terms and conditions of the contract, the view D taken by the arbitrator is not even a possible view. The High Court has rightly followed the test set out in para 42.3 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49, paras 40 to 45], which was reiterated in para 40 of Ssangyong Engg. [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) E 15 SCC 131, para 19] judgment.

27. In our view, while dealing with the appeal under Section 37 of the Act, the High Court has considered the matter at length, and held that while interpreting the terms of the contract, no reasonable person could have arrived at a different conclusion and that the awards passed by the arbitrator suffer from the vice of irrationality and perversity.” (pages 179-180)

50Copy pinpoint50. All the aforesaid judgments are judgments which, on their facts, have been decided in a particular way after applying the tests laid down in Associate Builders (supra) and its progeny. All these judgments turn on their own facts. None of them can have any application to the case before us, as it has been found by us that in the fact situation which arises in the present case, the Majority Award is certainly a possible view of the case, given the entirety of the correspondence between the parties and thus, cannot in any manner, be characterised as perverse. H

p. 570

51Copy pinpoint51. Accordingly, the appeal stands allowed. The judgment of the Division Bench dated 02.03.2020 is set aside, thereby restoring the Majority Award dated 12.05.2014 and the Single Judge’s judgment dated 10.07.2015 dismissing the application made under section 34 of the Arbitration Act by the Respondent. B Devika Gujral Appeal allowed.

C

D

E

F

G

H