H.J. Baker and Bros. Inc. vs. The Minerals and Metals Trade Corporation Ltd. (MMTC)
Background
MMTC, a government trading corporation, had a long-term contract with the US-based supplier H.J. Baker & Bros. Inc. to buy 60,000 metric tons of sulphur annually. After the Indian government "de-canalised" (deregulated) sulphur imports in 1992, MMTC stopped lifting the contracted sulphur, telling Baker only belatedly that it could import more cheaply directly from Gulf countries instead. Baker invoked arbitration, and a tribunal awarded it damages for two periods; on court challenge, the Delhi High Court upheld damages for the first half of 1992 but set aside the damages awarded for the later period (July-December 1992). Both MMTC and Baker separately appealed to the Supreme Court over the parts of the award that went against them.
Decision Breakdown
The Court held that courts have very limited power to interfere with an arbitral award, and since MMTC had never raised the "failure to mitigate losses" argument before the arbitral tribunal itself, it could not raise it for the first time later, so the damages award for the first period (January-June 1992) was upheld. For the second, later period, however, the Court agreed with the High Court that damages under Section 73 of the Contract Act require proof of the actual market price of the goods on the date of the breach, and Baker had failed to produce its best available evidence (its own sale contracts and shipment records) to prove that market price, relying instead only on a few invoices and third-party price bulletins, so that portion of the award was correctly set aside. On interest, since neither party had specifically argued the point before the tribunal and there was no error amounting to "patent illegality," the tribunal's chosen interest rate was left undisturbed. Both parties' appeals were accordingly dismissed.
Lesson Learnt
In a damages claim for breach of contract, a party must proactively produce its own best evidence (like actual sale contracts or shipment invoices) to prove the real market price at the time of breach: vague reliance on published price bulletins or a handful of selective invoices is not enough, and a failure to raise an argument before the arbitrator generally forecloses raising it later in court.