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Balasore Alloys Limited v. Medima LLC

Arbitration Petition (Civil) · 2020 INSC 550Decided 16 Sept 2020
Arbitration Petition (Civil) No. 15 of 2020
Chief Justice S.A. Bobde · Justice A.S. Bopanna · Justice V. Ramasubramanian

Background

Balasore Alloys, a manufacturer, had a long-running commercial relationship with Medima LLC for selling a metal product in the US and Canada, governed by 37 individual purchase orders and also by an overarching 2018 "Pricing Agreement" between them. When a dispute over pricing and deductions arose, Medima invoked the arbitration clause in the Pricing Agreement and got a tribunal constituted through the International Chamber of Commerce (ICC) in London, while Balasore separately asked the Supreme Court to appoint an arbitrator under the different arbitration clause found in the purchase orders.

Decision Breakdown

The Court had to decide which of the two competing arbitration clauses, the one in the purchase orders or the one in the overarching Pricing Agreement, should govern the dispute. Examining the substance of the dispute (which concerned pricing, deductions and payment terms), the Court found these issues were actually governed by the Pricing Agreement, not the individual purchase orders, especially since it was Balasore itself that framed its claim in terms of the Pricing Agreement's payment mechanism. Since an arbitral tribunal had already been validly constituted under the Pricing Agreement's clause through the ICC, the Court held it would be inappropriate to additionally appoint a separate arbitrator under the purchase-order clause, and it dismissed both the arbitration application and the connected Special Leave Petition challenging the tribunal's constitution.

Lesson Learnt

When two related contracts between the same parties contain different, overlapping arbitration clauses, courts will look at the real substance of the dispute to decide which clause actually governs: simply picking the clause that is procedurally convenient for a party will not work if another tribunal has already properly taken up the matter under the other agreement.

Official source (sci.gov.in)View Judgment (PDF)

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