MMTC LTD.versusM/S VEDANTA LTD.

                        [2019] 3 S.C.R. 1023                             1023


                            MMTC LTD.                                    A
                                  v.
                       M/S VEDANTA LTD.
                   (Civil Appeal No. 1862 of 2014)
                       FEBRUARY 18, 2019                                 B
           [MOHAN M. SHANTANAGOUDAR AND
                 VINEET SARAN, JJ.]
      Arbitration and Conciliation Act, 1996: s.34, 37 – Scope of
interference with an arbitral award in India – Pre and Post              C
amendment made to s.34 in 2015, position explained.
       Arbitration and Conciliation Act, 1996: s.34, 37 – In terms of
Arbitration agreement dated 14.12.1993, the appellant was
appointed as a consignment agent from whom respondent could
avail services such as storage, handling and marketing of the copper     D
rods produced by the respondent – Appellant used to raise invoices
in the name of customers and remit the sum received to the respondent
after deducting its services charges – The agreement was altered
later, and the amendment enabled appellant to supply goods to
customers against the letter of credit and it was total responsibility
of the appellant to credit the sale proceeds to the respondent –         E
Dispute in the instant matter pertains to supplies made by the
appellant to Hindustan Transmission Products Ltd. (HTPL) after
the amendment of the arbitration agreement – Since the payment
was not made by HTPL to appellant and who also subsequently did
not make payment for the supplied goods to the respondent, the           F
respondent invoked the arbitration clause under agreement dated
14.12.1993 – Arbitral tribunal passed award in favour of the
respondent which was confirmed by the High Court – In the instant
appeal, the case of the appellant was that it used to supply the
goods of the respondent to customers as per agreement dated
14.12.1993 only – However, the appellant had to make deviation           G
from this procedure at the request of the respondent by allowing the
customers arranged by the respondent to lift its goods stored in the
appellant’s godown and in such case, the appellant was not bound
by the contract since such contract was independent from the
agreement dated 14.12.1993 – Held: It is evident from the subsequent     H
                                1023
1024              SUPREME COURT REPORTS                  [2019] 3 S.C.R.


 A agreement between HTPL and the respondent that a direct agreement
   existed between them – However, the appellant received its
   commission in its entirety for the HTPL transaction, and thus clearly
   was a beneficiary of the agreement between the respondent and
   HTPL – Series of correspondences amongst appellant, respondent
   and HTPL also revealed that the appellant was also actively involved
 B
   in the transaction in question entered into between the respondent
   and HTPL, and as such was a beneficiary under their agreement –
   The issuance of letters of credit in the name of the appellant with
   respect to the HTPL transaction was similar to the practice adopted
   in case of letters of credit or demand drafts issued in all other
 C transactions, whether directly negotiated by the respondent, or
   procured through the appellant, which suggested that it was the
   duty of the appellant in this case as well to ensure that letter of
   credits issued were bona fide, and in case of stand-by letters of
   credit, that they were negotiated in time in case of failure of payment
   on the due date, in terms of agreement dated 14.12.1993 – In this
 D
   view of the matter, it is not open to the appellant to argue that the
   agreement between the Respondent and HTPL was independent of
   the agreement dated 14.12.1993 between the appellant and the
   respondent and that the latter did not apply to such transaction –
   Thus, there was no reason to disturb the award on the ground that
 E the subject matter of the dispute was not arbitrable.
           Dismissing the appeal, the Court
         HELD: 1.1 Interference with an arbitral award may be
   undertaken in terms of Section 34 or Section 37 of the Arbitration
   and Conciliation Act, 1996. While the former deals with challenges
 F to an arbitral award itself, the latter, inter alia, deals with appeals
   against an order made under Section 34 setting aside or refusing
   to set aside an arbitral award. As regards Section 34, the Court
   does not sit in appeal over the arbitral award and may interfere
   on merits on the limited ground provided under Section
 G 34(2)(b)(ii), i.e. if the award is against the public policy of India.
   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 India, conflict
   with justice or morality, and the existence of patent illegality in
   the arbitral award. Additionally, the concept of the “fundamental
 H
              MMTC LTD. v. M/S VEDANTA LTD.                            1025


policy of Indian law” would cover compliance with statutes and         A
judicial precedents, adopting a judicial approach, compliance with
the principles of natural justice, and Wednesbury 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. It is
                                                                       B
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 trivial but goes   C
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. [Paras 10, 11][1031-C-H; 1032-A]
      Associate Builders v. DDA (2015) 3 SCC 49 ; ONGC
      Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 : [2003] 3               D
      SCR 691 ; Hindustan Zinc Ltd. v. Friends Coal
      Carbonisation, (2006) 4 SCC 445 ; McDermott
      International v. Burn Standard Co.Ltd. (2006) 11 SCC
      181 : [2006] 2 Suppl. SCR 409 – relied on
      1.2 After the 2015 amendments to Section 34, the position        E
stood modified. Pursuant to the insertion of Explanation 1 to
Section 34(2), the scope of contravention of Indian public policy
was 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.       F
Additionally, sub-section (2A) was inserted in Section 34, which
provided that in case of domestic arbitrations, violation of Indian
public policy also included patent illegality appearing on the face
of the award. The proviso to the same stated that an award shall
not be set aside merely on the ground of an erroneous application      G
of the law or by re-appreciation of evidence. [Para 11][1032-B-D]
      1.3 Interference under Section 37 with an order made under
Section 34 cannot travel beyond the restrictions laid down under
Section 34. In other words, the Court cannot undertake an
                                                                       H
1026               SUPREME COURT REPORTS                   [2019] 3 S.C.R.


 A     independent assessment of the merits of the award, and must
       only ascertain that the exercise of power by the Court under
       Section 34 has not exceeded the scope of the provision. Thus, in
       case an arbitral award is 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
 B
       findings. [Para 12][1032-D-F]
             2. 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. The majority of the arbitral tribunal as well as the Courts
 C     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
 D     furtherance of any independent understanding between the
       Appellant and the Respondent which was not governed by the
       agreement dated 14.12.1993. It is evident from the agreement
       dated 28.07.1994 between HTPL and the respondent that a direct
       agreement existed between them. However, the appellant
       received its commission in its entirety for the HTPL transaction,
 E     and thus clearly was a beneficiary of the agreement between the
       respondent and HTPL. Moreover, in this regard, in the Majority
       Award, the appellant could not show under what separate
       agreement it was entitled to commission from such sales other
       than the agreement dated 14.12.1993, and for what services, if
 F     its only role in the transaction was to allow HTPL to lift goods
       from its godowns. [Paras 14-16][1033-C-F]
             Pure Helium India (P) Ltd. v. ONGC (2003) 8 SCC 593
             : [2003] 4 Suppl. SCR 561 ; D.D. Sharma v. Union of
             India (2004) 5 SCC 325 : [2004] 1 Suppl. SCR 767 –
 G           relied on
             3.1 The issuance of letters of credit in the name of the
       appellant with respect to the HTPL transaction was similar to
       the practice adopted in case of letters of credit or demand drafts
       issued in all other transactions, whether directly negotiated by
 H
              MMTC LTD. v. M/S VEDANTA LTD.                             1027


the respondent, or procured through the appellant, which suggests       A
that it was the duty of the appellant in this case as well to ensure
that usance letter of credits issued were bona fide, and in case of
stand-by letters of credit, that they were negotiated in time in
case of failure of payment on the due date, in terms of the
agreement dated 14.12.1993. The Courts also rightly relied upon
                                                                        B
the communication dated 06.12.1995 from the Respondent to the
Appellant adverting to the terms and conditions of the contract
between the parties and referring to the fact that in respect of
the sales made to HTPL in the period of April, May and July
1995, an amount of Rs. 9.2 crores together with interest was still
to be received. This communication clearly demonstrated the             C
duty of the appellant to recover the dues from HTPL and forward
the same to the respondent. [Paras 19, 20][1034-E-H; 1035-A]
       3.2 Another important communication rightly relied upon
by the Courts is the Appellant’s letter dated 24.01.1996 to the
Respondent, informing it about the institution of a suit for damages    D
by HTPL with respect to the quality of the goods supplied. This
correspondence refers to HTPL as a customer introduced to the
Appellant by the Respondent. It was addressed in terms of the
agreement dated 14.12.1993, which amounts to a clear admission
that the sales made to HTPL were in terms of the said agreement.
In this view of the matter, it is not open to the Appellant to argue    E
that the agreement between the Respondent and HTPL was
independent of the agreement dated 14.12.1993 between the
appellant and the respondent and that the latter did not apply to
such transaction. Moreover, the oral evidence of the officers of
the appellant indicates that the appellant did not make any effort      F
to ensure that the letters of credits pertaining to the supplies
made to HTPL were honoured, pointing towards gross
negligence on the part of the Appellant. The view taken in the
Majority Award, as confirmed by the High Court in the exercise
of its powers under Sections 34 and 37 of the 1996 Act, is a possible
view based upon a reasonable construction of the terms of the           G
agreement dated 14.12.1993 between the Appellant and the
Respondent and consideration of the material on record. The
dispute was covered under the agreement between the Appellant
and the Respondent dated 14.12.1993, and as such the dispute is
                                                                        H
1028                SUPREME COURT REPORTS                     [2019] 3 S.C.R.


 A     governed by the arbitration clause under the said agreement.
       Thus, there is no reason to disturb the Majority Award on the
       ground that the subject matter of the dispute was not arbitrable.
       [Paras 21, 22 and 23, 24][1035-B-F]
                               Case Law Reference
 B     (2015) 3 SCC 49                  relied on                 Para 11
       [2003] 3 SCR 691                 relied on                 Para 11
       (2006) 4 SCC 445                 relied on                 Para 11
       [2006] 2 Suppl. SCR 409          relied on                 Para 11
 C
       [2003] 4 Suppl. SCR 561          relied on                 Para 14
       [2004] 1 Suppl. SCR 767          relied on                 Para 14
             CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1862
       of 2014.
 D           From the Judgment and Order dated 09.02.2009 of the High
       Court of Judicature of Bombay in Appeal No. 949 of 2002.
             Shyam Divan, Sr. Adv., Ms. Surekha Raman, Purushottam Kumar
       Jha, Ms. Remya Raj, Advs. for the Appellant.

 E           Sanjay R. Hegde, Sr. Adv., Anil Kumar Mishra-I, Pranjal Kishore,
       Ankit Dhawan, Advs. for the Respondent.
             The Judgment of the Court was delivered by
             MOHAN M. SHANTANAGOUDAR, J.
             1. This civil appeal arises out of the judgment and final order
 F
       dated 09.02.2009 passed by a Division Bench of the High Court of
       Judicature at Bombay in Appeal No. 949 of 2002, affirming the judgment
       and order dated 05.08.2002 of the Learned Single Judge whereby the
       Appellant’s Objections Petition challenging the Majority Award dated
       27.06.2001 had been disallowed. Vide the Majority Award, the Appellant
 G     had been directed to pay certain amounts to the Respondent under their
       agreement dated 14.12.1993.
             2. The brief facts leading to the instant appeal are as follows:
             M/s Sterlite Industries (India) Ltd., (renamed M/s Vedanta Ltd.,
       the Respondent herein) was a manufacturer of continuous Cast Copper
 H
               MMTC LTD. v. M/S VEDANTA LTD.                                   1029
              [MOHAN M. SHANTANAGOUDAR, J.]

Rods. Vide the agreement dated 14.12.1993, MMTC Ltd. (the Appellant            A
herein), a government company, was appointed as a consignment agent
from whom the Respondent could avail services such as storage, handling
and marketing of the copper rods produced by the Respondent. Such
rods were to be stored at various godowns of the Appellant. The
agreement dated 14.12.1993 contained an arbitration clause.
                                                                               B
       3. Importantly, under the aforementioned agreement, the Appellant
raised its own invoices in the name of the customers of the products sold
and delivered. Goods were to be sold only against payment of 100%
advance by the customer to the Appellant, who then had to remit the
same to the Respondent after deducting service charges (i.e. commission)
at the rate of Rs. 500/- per metric tonne.                                     C

        4. The aforementioned agreement was materially altered for the
first time on 06.01.1994, in terms of a Memorandum of Understanding
between the parties. This amendment enabled the Appellant to supply
goods to customers against a letter of credit (usance or stand-by), i.e.
without advance payment, while maintaining that it was the “total              D
responsibility” of the Appellant to ensure the bona fides of the letter of
credit furnished and that the principal and interest were paid on the due
date for the supplies made against the letter of credit. In case of a stand-
by letter of credit, it was further specified that it was the Appellant’s
responsibility, in the event of non-payment by the due date, to negotiate      E
the stand-by letter of credit in a timely way and credit the sale proceeds
to the Respondent. Interest was fixed at 18.25% per annum.
       5. A further revision to the above terms was undertaken vide a
meeting between the parties on 20.01.1994, the minutes of which indicate
that the Appellant could thereafter extend credit to customers on its own      F
terms and responsibility, and in case of credit being extended, payment
to the Respondent was to be effected by the Appellant upon delivery of
the copper rods to the customer.
       6. The dispute in the instant matter pertains to supplies of the
Respondent’s copper rods made by the Appellant to Hindustan                    G
Transmission Products Ltd. (in short, “HTPL”) after April 1995. Payment
for the same were not made by HTPL to the Appellant, who also
subsequently failed to make payment for the supplied goods to the
Respondent. Hence, the Respondent invoked the arbitration clause under
the agreement dated 14.12.1993 and the dispute was referred to a three-
member arbitral tribunal.                                                      H
1030                 SUPREME COURT REPORTS                      [2019] 3 S.C.R.


 A            7. The majority of the arbitral tribunal found in favour the
       Respondent, and vide its award dated 27.06.2001, inter alia directed the
       Appellant to pay to the Respondent a sum of Rs. 15,73,77,296/- with
       interest at the rate of 14% p.a. from 05.02.1997 till the date of the award
       and at the rate of 18% p.a. thereafter, as well as an amount of Rs. 2.25
       crores as interest on overdue payment up to 05.02.1996. The said award
 B
       was confirmed by the learned Single Judge of the High Court of Bombay
       as well as the Division Bench thereof.
              8. There were several grounds of challenge raised by the Appellant
       before the learned Single Judge of the High Court; however, before the
       Division Bench as well as before this Court the main ground raised
 C     concerns the arbitrability of the dispute under the arbitration clause under
       the agreement dated 14.12.1993. This ground encompasses all other
       arguments raised by the Appellant. To elaborate, it is the case of the
       Appellant that it used to supply the goods of the Respondent to customers
       arranged by the Appellant as per the Agreement dated 14.12.1993 only.
 D     However, sometimes, the Appellant had to make a deviation from this
       procedure at the request of the Respondent, i.e. M/s Vedanta Ltd., by
       allowing customers arranged by M/s Vedanta Ltd. to lift its goods stored
       in the Appellant’s godowns. It is further the case of the Appellant that
       whenever it made this deviation, the Appellant was not bound by the
       contract between the Respondent and the relevant customer, inasmuch
 E     as such contract was independent of and totally different from the
       agreement dated 14.12.1993. Whenever there was a direct agreement
       between the Respondent and its customers (not arranged through the
       Appellant), the payment was to be made directly by the customers to
       the Respondent for which the Appellant would not be responsible.
 F     However, if the transaction took place pursuant to the agreement dated
       14.12.1993, i.e. if the Appellant was supplying the Respondent’s goods
       to customers booked through the Appellant, the Appellant would be
       responsible for collecting the sale consideration from the customers, and
       to remit the same to the Respondent by deducting commission as agreed.
       Therefore, the direct agreement between the Respondent and its customer
 G     HTPL in the instant case would not be binding on the Appellant, and
       consequently could not have been subjected to the arbitration proceedings
       that led to the arbitral award dated 27.06.2001.


 H
                MMTC LTD. v. M/S VEDANTA LTD.                                     1031
               [MOHAN M. SHANTANAGOUDAR, J.]

       9. On the contrary, the case of the Respondent is that there is no         A
such distinction within the nature of transactions undertaken by the
Appellant on behalf of the Respondent. Moreover, it is submitted that
though there was an agreement between the Respondent and HTPL,
the terms of such agreement were communicated to the Appellant, upon
whose acceptance of such terms the agreement dated 14.12.1993 stood
                                                                                  B
modified to such extent.
        10. Before proceeding further, we find it necessary to briefly revisit
the existing position of law with respect to the scope of interference
with an arbitral award in India, though we do not wish to burden this
judgment by discussing the principles regarding the same in detail. Such
interference may be undertaken in terms of Section 34 or Section 37 of            C
the Arbitration and Conciliation Act, 1996 (for short, “the 1996 Act”).
While the former deals with challenges to an arbitral award itself, the
latter, inter alia, deals with appeals against an order made under Section
34 setting aside or refusing to set aside an arbitral award.
       11. As far as Section 34 is concerned, the position is well-settled        D
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,          E
in turn, includes a violation of the fundamental policy of Indian law, a
violation of the interest of 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 reasonableness.            F
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.
       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       G
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 trivial but goes to the root of the matter. An
arbitral award may not be interfered with if the view taken by the arbitrator     H
1032                 SUPREME COURT REPORTS                        [2019] 3 S.C.R.


 A     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)
       4 SCC 445; and McDermott International v. Burn Standard Co. Ltd.,
       (2006) 11 SCC 181).
 B              It is relevant to note that after the 2015 amendments 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
 C     conflict with the most basic notions of justice or morality. Additionally,
       sub-section (2A) 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
 D     an erroneous application of the law or by re-appreciation of evidence.
              12. 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
 E     independent assessment of the merits of the award, 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.
 F
              13. 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
 G     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 re-assessment of the material
       on record, but only in terms of the principles governing interference with
 H     an award as discussed above.
               MMTC LTD. v. M/S VEDANTA LTD.                                   1033
              [MOHAN M. SHANTANAGOUDAR, J.]

      14. It is equally important to observe at this juncture that while       A
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. (supra); Pure Helium
India (P) Ltd. v. ONGC, (2003) 8 SCC 593, D.D. Sharma v. Union of
                                                                               B
India, (2004) 5 SCC 325).
       15. 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             C
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.                                                D
       16. The Appellant has highlighted before us several
correspondences addressed to it from the Respondent that refer to the
fact that sales to HTPL had been made under the Respondent’s contract
with HTPL. Indeed, it is evident from the agreement dated 28.07.1994
between HTPL and the Respondent that a direct agreement existed                E
between them. However, as is undisputed, the Appellant received its
commission in its entirety for the HTPL transaction, and thus clearly
was a beneficiary of the agreement between the Respondent and HTPL.
Moreover, in this regard, it was rightly observed in the Majority Award
that the Appellant could not show under what separate agreement it
was entitled to commission from such sales other than the agreement            F
dated 14.12.1993, and for what services, if its only role in the transaction
was to allow HTPL to lift goods from its godowns.
       17. Indeed, it is not the case of the Appellant that it only provided
storage services to the Respondent by allowing the Respondent to store
its goods in the warehouse of the Appellant (i.e. that it only acted as a      G
warehouse for the Respondent). In fact, a series of correspondences
amongst the Appellant, the Respondent and HTPL clearly reveals that
the Appellant was also actively involved in the transaction in question
entered into between the Respondent and HTPL, and as such was a
beneficiary under their agreement, as observed supra. The Appellant            H
1034                 SUPREME COURT REPORTS                        [2019] 3 S.C.R.


 A     released the Respondent’s goods to HTPL as per the directions of the
       Respondent without raising any objection, and thereafter engaged in
       correspondence in respect of the transaction.
              18. It would be appropriate to refer to some such communications
       amongst the Appellant, the Respondent and HTPL for illustrative
 B     purposes. For instance, as mentioned by the Respondent in a
       communication dated 19.09.1994 addressed to HTPL, the Appellant was
       to honour the terms and conditions of the agreement between the
       Respondent and HTPL. The said communication also referred to
       negotiations about issuance of a letters of credit in favour of the Appellant.
       Additionally, as can be seen from the correspondence from the Appellant
 C     to the Respondent dated 26.08.1994, the Appellant wrote to it to confirm
       that credit had to be supplied to HTPL at the discounted interest rate of
       16.25% p.a., which was affirmed by the Respondent on the same day.
       At the same time, the correspondence dated 28.03.1995 from the
       Respondent to the Appellant discloses that a letter of credit issued by
 D     HTPL initially sent to the Respondent was forwarded to the Appellant
       with directions to despatch goods after verification of the letter of credit
       and other related papers.
              19. The issuance of letters of credit in the name of the Appellant
       with respect to the HTPL transaction was similar to the practice adopted
 E     in case of letters of credit or demand drafts issued in all other transactions,
       whether directly negotiated by the Respondent, or procured through the
       Appellant, which suggests that it was the duty of the Appellant in this
       case as well to ensure that usance letter of credits issued were bona
       fide, and in case of stand-by letters of credit, that they were negotiated
       in time in case of failure of payment on the due date, in terms of the
 F     agreement dated 14.12.1993.
              20. The Courts also rightly relied upon the communication dated
       06.12.1995 from the Respondent to the Appellant adverting to the terms
       and conditions of the contract between the parties and referring to the
       fact that in respect of the sales made to HTPL in the period of April,
 G     May and July 1995, an amount of Rs. 9.2 crores together with interest
       was still to be received. The response to the above communication, from
       the Appellant to the Respondent, dated 08.12.1995, stated that the
       Appellant had taken steps to set the matter right, and that the Appellant
       had had certain internal difficulties which had since been resolved and
 H     the Respondent would have no grounds to complain thereafter. This
                 MMTC LTD. v. M/S VEDANTA LTD.                                  1035
                [MOHAN M. SHANTANAGOUDAR, J.]

communication clearly demonstrates the duty of the Appellant to recover         A
the dues from HTPL and forward the same to the Respondent.
       21. Another important communication rightly relied upon by the
Courts is the Appellant’s letter dated 24.01.1996 to the Respondent,
informing it about the institution of a suit for damages by HTPL with
respect to the quality of the goods supplied. This correspondence refers        B
to HTPL as a customer introduced to the Appellant by the Respondent.
Crucially, it was addressed in terms of the agreement dated 14.12.1993,
which amounts to a clear admission that the sales made to HTPL were
in terms of the said agreement.
      22. In this view of the matter, it is not open to the Appellant to        C
argue that the agreement between the Respondent and HTPL was
independent of the agreement dated 14.12.1993 between the Appellant
and the Respondent and that the latter did not apply to such transaction.
       23. Moreover, as noticed in the Majority Award and also by the
Courts, the oral evidence of the officers of the Appellant indicates that       D
the Appellant did not make any effort to ensure that the letters of credits
pertaining to the supplies made to HTPL were honoured, pointing towards
gross negligence on the part of the Appellant.
       24. Based upon the above discussion, in our opinion, the view
taken in the Majority Award, as confirmed by the High Court in the              E
exercise of its powers under Sections 34 and 37 of the 1996 Act, is a
possible view based upon a reasonable construction of the terms of the
agreement dated 14.12.1993 between the Appellant and the Respondent
and consideration of the material on record. We are also of the opinion
that the dispute was covered under the agreement between the Appellant
and the Respondent dated 14.12.1993, and as such the dispute is governed        F
by the arbitration clause under the said agreement. Thus, we find no
reason to disturb the Majority Award on the ground that the subject
matter of the dispute was not arbitrable.
      25. Appeal is, therefore, dismissed and the order of the High Court
of Judicature at Bombay in Appeal No. 949 of 2002 is affirmed.                  G

Devika Gujral                                               Appeal dismissed.




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