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Arbitration & Commercial LawSupreme Court of India

MMTC Ltd. v. M/s Vedanta Ltd.

Civil Appeal · 2019 INSC 218Decided 18 Feb 2019
Civil Appeal No. 1862 of 2014
Justice Mohan M. Shantanagoudar · Justice Vineet Saran

Background

MMTC Ltd. had a 1993 agreement with Sterlite Industries (later renamed Vedanta Ltd.) to act as a consignment agent for selling copper rods, under which MMTC would collect advance payment from customers before passing on proceeds to Vedanta. A later amendment allowed sales against letters of credit instead of advance payment. One customer (HTPL) failed to honour its letters of credit, and a dispute arose over whether MMTC was liable to Vedanta for the unrecovered amount, which went to arbitration. A Majority Arbitral Award went against MMTC, and both a Single Judge and a Division Bench of the Bombay High Court upheld that award, leading to MMTC's appeal to the Supreme Court.

Decision Breakdown

The Supreme Court reviewed MMTC's correspondence with Vedanta, including letters admitting that the HTPL transaction fell under the 1993 agreement and acknowledging a duty to recover dues from HTPL. The Court found that MMTC had failed to ensure the letters of credit were honoured, amounting to negligence, and that the dispute was clearly governed by the arbitration clause in the 1993 agreement. Applying the limited scope of interference under Sections 34 and 37, the Court held that the Majority Award reflected a possible and reasonable view of the contract and evidence, and declined to disturb it. The appeal was dismissed and the High Court's order affirming the award was upheld.

Lesson Learnt

Courts exercising their limited supervisory jurisdiction over arbitral awards will not re-appreciate evidence or substitute their own view for a plausible one taken by the arbitrator; a party's own correspondence admitting liability under a contract can be decisive in such disputes.

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