Mmtc Ltd vs Chauhan Jewellers & Ors

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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 22.09.2026
Judgment pronounced on: 27.10.2026
Judgment uploaded on: 27.10.2026
# CNR No. DLHC011963872017
+ FAO(OS) (COMM) 108/2017 and CM APPL. 18464/2017
MMTC LTD .....Appellant
Through: Mr. Ashok Chhabra and Mr.
Kunal Jaggi, Advs.

versus

CHAUHAN JEWELLERS & ORS .....Respondents
Through: Mr. Surendra Chauhan and Ms.
Priyanka Priyadarshni, Advs.
CORAM:
HON'BLE MR. JUSTICE ANIL KSHETARPAL
HON'BLE MR. JUSTICE BHARAT PARASHAR
J U D G M E N T
ANIL KSHETARPAL, J.:
1. The present Appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (“the Act”) is directed against the judgment
dated 07.03.2017 passed by the learned Single Judge in O.M.P.
1
(COMM) 371/2016, titled MMTC Ltd. v. Chauhan Jewellers & Ors.
By the Impugned Judgment, the Petition instituted by MMTC Limited
(“MMTC”) under Section 34 of the Act was dismissed, and the
Arbitral Award dated 26.04.2016 (“the Award”) was upheld.
2. The Award was rendered by a three-member Arbitral Tribunal.
The learned Tribunal rejected MMTC’s claims against Chauhan

1
The Impugned Judgment
Signature Not Verified
Signed By:JAI
NARAYAN
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Jewellers and its partners and directed MMTC to return the title deeds
retained as security. MMTC assails both the rejection of its monetary
claims and the consequent direction concerning the security.
3. The dispute arises from a scheme under which MMTC supplied
gold and extended packing credit to Chauhan Jewellers for
manufacture and export of gold jewellery. MMTC’s claim centred on
five export consignments. The first three consignments, CJ-25, CJ-26
and CJ-27, gave rise to a claim for interest and charges on delayed
realisation. CJ-31 was a case of part realisation. The overseas buyer
did not take delivery of CJ-1, which was subsequently returned to
India. MMTC claimed an aggregate sum of ₹57,74,349/- as on
26.06.1997, together with further interest and costs.
FACTUAL MATRIX
THE CONTRACTUAL ARRANGEMENT
4. MMTC is a Government of India undertaking engaged, inter
alia, in the import and export of metals and other commodities.
Chauhan Jewellers was a partnership firm engaged in the manufacture
and export of gold jewellery. The other respondents before this Court
are its partners. For convenience, Chauhan Jewellers and those
partners are collectively referred to as “the Respondents”.
5. At the material time, MMTC operated a scheme for the supply
of gold and provision of pre-shipment and post-shipment credit to
jewellery manufacturers. The manufacturer was to convert the gold
into jewellery and export it to an overseas buyer. The export order and
shipping documents were to be in MMTC’s name, although shipment
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NARAYAN
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was to be effected by the manufacturer on MMTC’s behalf. MMTC
would receive the export proceeds, adjust the price of gold, the
packing credit, interest, service charges and other permissible
deductions, and release the balance to the manufacturer.
6. The arrangement between the parties was recorded principally
in three instruments: a Hypothecation Agreement for Pre and Post
Shipment Credit Advances, an Agreement between MMTC and the
unit for export of gold jewellery, and an Agreement of Guarantee. The
Hypothecation and Export Agreements bear the date 09.10.1990. A
promissory note dated 15.10.1990 was also executed. The documents
contemplated financial assistance up to ₹25 lakh.
7. Under Clauses 2 and 3 of the Hypothecation Agreement, the
borrower agreed to pay interest on the sums advanced and to repay the
advances, interest and costs on demand. Clause 24 provided that
liabilities under the credit facility would primarily be cleared from
export proceeds received directly by MMTC, without preventing
MMTC from recovering its dues from the borrower otherwise.
Clauses 28 and 29 dealt with a personal guarantee and penal interest in
the event of default.
8. Clauses 1 and 2 of the Export Agreement provided that orders
and shipping documents would stand in MMTC’s name and that the
overseas buyer was to open a confirmed, irrevocable and divisible
Letter of Credit (“LC”) in MMTC’s favour. Clause 3 set out the
deductions to be made by MMTC upon realisation of the sale
proceeds and further provided that the unit would stand guarantee for
their full realisation. Clause 5 required MMTC to obtain ECGC
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comprehensive cover, at the unit’s cost, for exports not covered by a
letter of credit. Clause 6 placed responsibility for satisfactory
shipment and conformity of the goods with the stipulated
specifications upon the unit.
9. The separate Agreement of Guarantee secured the financial
liability of the borrower, including principal, interest, costs and
charges. Title deeds relating to Apartment No. 3, Oberoi Club House,
Oberoi Apartments, 2, Shamnath Marg, Civil Lines, Delhi were also
deposited with MMTC as security. The property was stated to belong
to Mrs Arti Chauhan, wife of Mr Balbir Singh Chauhan.
THE FIVE CONSIGNMENTS
10. The first consignment was exported under invoice CJ-25 dated
14.07.1993. The packing credit advanced against it was ₹12,00,236/-.
The invoice initially named Devji Purshottam Jewellers, Dubai. That
buyer did not take delivery, and the parcel was redirected to Al-Aseer
Jewellers. MMTC received ₹13,72,411/- on 25.01.1995. Its surviving
claim concerned interest for the period of delay and the related
charges.
11. The second consignment was exported under invoice CJ-26
dated 16.07.1993. Certain portions of the Award refer to the date as
26.07.1993, but the invoice bears the date 16.07.1993. Packing credit
of ₹12,01,441/- was advanced. This parcel was also initially intended
for Devji Purshottam Jewellers and was later redirected to Al-Aseer
Jewellers. MMTC received ₹13,79,456/- on 23.01.1995 and claimed
interest and charges for delayed realisation.
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NARAYAN
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12. The parties differed on the reason for the redirection of CJ-25
and CJ-26. The Respondents maintained that MMTC had arranged the
diversion after the original buyer failed to take delivery. Mr Ashwini
Kapoor (CW-2) accepted that MMTC issued the instructions, but
stated that it did so at the Respondents’ written request. The proceeds
of both consignments were, however, received in full.
13. Invoice CJ-27 is dated 27.07.1993 and records the payment
term as Cash on Delivery. Packing credit of ₹11,89,478 was advanced.
MMTC received ₹13,68,684/- on 11.04.1994. Its account nevertheless
reflected a debit balance of ₹14,653/- after inclusion of interest and
charges. In cross-examination, Mr Ashwini Kapoor (CW-2) stated that
payment against CJ-25, CJ-26 and CJ-27 had been received in full, but
belatedly, and that interest and service charges were consequently
claimed. MMTC’s final written arguments before the learned Tribunal
described CJ-27 in the same manner.
14. The fourth consignment was exported to Al-Aseer Jewellers
under invoice CJ-31 dated 11.11.1993. The invoice records payment
on documents against acceptance (“DA”) terms (“DA-90 DAYS”),
rather than against an LC. Packing credit of ₹11,24,620/- was
advanced. MMTC recorded realisation of ₹9,43,875/- on 26.04.1995
and claimed the unpaid balance, interest and charges.
15. The record refers to a cheque or cheques furnished by Al-Aseer
which were subsequently dishonoured. In a letter dated 16.06.1995,
the Respondents asked MMTC to recover the amount or initiate
proceedings against Al-Aseer. MMTC, in turn, asked the Respondents
to deposit ₹30,000/- towards legal expenses. No proceedings were
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ultimately instituted against the overseas buyer. The parties disputed
responsibility for the adoption of DA terms and for recovery of the
unpaid amount.
16. The fifth consignment concerned invoice CJ-1 dated 28.06.1994
and S.S. Jewellery Traders, Dubai. Packing credit of ₹18,87,977/- was
advanced. By its letter dated 04.07.1994, Chauhan Jewellers requested
that delivery be permitted on DA-60 days basis instead of cash on
delivery. MMTC’s replies dated 05 July and 25 July 1994 stipulated
the conditions on which a change in the payment terms could be
considered.
17. S.S. Jewellery Traders did not take delivery. On 16.06.1995, the
Respondents sought one month to arrange clearance by another buyer,
asked MMTC to defer action during that period and undertook
responsibility for costs after expiry of the extended period. The
request also sought a concessional rate of interest, reasonable
commission and release of the property papers upon completion of the
formalities.
18. The parcel was thereafter returned to India to avoid its auction
by the Dubai Customs authorities. It was examined by the Indian
Customs/Directorate of Revenue Intelligence authorities in the
absence of the Respondents. MMTC asserted that the examination
disclosed a shortage in the jewellery. The Respondents disputed both
the alleged shortage and their liability, contending that they had
neither been given notice of the recall and opening nor associated with
the examination. According to the record before the learned Tribunal,
the parcel remained in the custody of the Customs authorities.
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NARAYAN
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THE ARBITRAL PROCEEDINGS
19. MMTC lodged its Statement of Claim in 1997. The claim was
quantified, as on 26.06.1997, at ₹57,74,349/-. MMTC’s account
divided this amount into two parts. For CJ-25, CJ-26, CJ-27 and CJ-
31, it showed a balance of ₹12,18,841/- after crediting the receipts,
further interest of ₹7,52,269/- and additional service charges of
₹1,05,063/-, aggregating to ₹20,76,173/-. For CJ-1, it claimed
₹36,98,176/-, comprising the packing credit and accrued interest and
charges. The aggregate claim was thus ₹57,74,349/-, apart from
further interest and costs.
20. The Respondents denied liability. They contended, among other
things, that the exports and realisations were controlled by MMTC,
that MMTC had itself redirected the first two consignments, that CJ-
31 had been sent on DA terms at MMTC’s instance and without the
stipulated insurance, and that the returned CJ-1 parcel had been
opened without notice to them. They also questioned the contractual
basis and rate of interest claimed. MMTC filed a rejoinder disputing
those assertions.
21. MMTC examined three witnesses. Mr. S. Guruswamy and Mr.
Ashwini Kapoor deposed to the operation of the scheme, the five
consignments and the accounts. Mr I.S. Sidana (CW-3) dealt with the
export documentation, the Sale Day Register and the accounting
records. Mr. R.S. Chauhan testified for the Respondents. In cross-
examination, he accepted his signatures on Exhibits C-1 to C-4, and
that gold had been obtained on loan under the agreements, while
asserting that the dates had been inserted subsequently.
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22. The parties placed their final written submissions before the
learned Tribunal in 2015. MMTC, in its written arguments, classified
CJ-25, CJ-26 and CJ-27 as cases in which payment had been received
late, CJ-31 as a case of part payment, and CJ-1 as a case of non-
realisation. The Respondents’ written submissions also distinguished
the three delayed-payment consignments from the consignment
involving short payment.
THE AWARD
23. The learned Tribunal first recorded that, for CJ-25, CJ-26 and
CJ-27, the entire price was to be received by MMTC and that
MMTC’s claim concerned interest on delayed payment. It thereafter
considered each consignment separately.
24. For CJ-25 and CJ-26, notwithstanding the evidence of CW-2
noticed in Paragraph 12 above, the learned Tribunal found no material
to show that the consignments had been redirected to Al-Aseer at the
Respondents’ instance. It held that the exports and receipts were in
MMTC’s name, that the Respondents had no role in collection of the
price, and that they could not be held liable for the resulting delay.
The claim for interest was accordingly rejected.
25. While separately considering CJ-27, the learned Tribunal
referred to MMTC’s assertion that the Respondents had failed to
ensure remittance of the full invoice value “on due date”. It treated the
assertion as unclear as to whether the case was one of delayed
payment or short payment. Since MMTC had not specified or proved
the amount of any shortfall, the Tribunal rejected the claim. It further
held that the Respondents were not responsible for ensuring payment
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where the export was made by MMTC in its own name and proceeded
on the basis that the consignment had been sent against a letter of
credit. The invoice itself, however, records the payment term as cash
on delivery.
26. As regards CJ-31, the learned Tribunal observed that the
consignment had been sent on DA basis instead of against a letter of
credit. It noted the dishonoured cheque furnished by the overseas
buyer, MMTC’s failure to take action against that buyer, and
MMTC’s demand that the Respondents provide the legal expenses for
such action. It consequently held that the Respondents could not be
made liable for the short realisation.
27. For CJ-1, the learned Tribunal relied on the examination report
recording that the seals were intact and had not been tampered with. It
treated this as showing that there was no proof of pilferage and
ultimately concluded that there had been no loss of jewellery. It also
found that the parcel had been opened in the absence of the
Respondents, and that only MMTC, in whose name the export was
made, could obtain its release from the Customs authorities. The
learned Tribunal held that MMTC could not fasten liability upon the
Respondents while leaving the returned jewellery uncollected.
28. On these findings, the learned Tribunal dismissed MMTC’s
claims in their entirety. It directed MMTC to return the title deeds
relating to the Shamnath Marg property to Mr. Balbir Singh Chauhan
immediately and left the parties to bear their own costs.

Signature Not Verified
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NARAYAN
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PROCEEDINGS UNDER SECTION 34 OF THE ACT
29. MMTC then challenged the Award under Section 34 of the Act
in O.M.P. (COMM) 371/2016. It contended that the learned Tribunal
had failed to decide the dispute in accordance with the Hypothecation
Agreement, the Export Agreement and the Agreement of Guarantee. It
relied particularly on the Respondents’ obligations to repay the credit
with interest, to ensure satisfactory shipment and to guarantee full
realisation of the export proceeds. MMTC also assailed the
consignment-wise findings and the adequacy of the reasons furnished
by the Tribunal.
30. By the Impugned Judgment, the learned Single Judge dismissed
the petition. Reproducing clauses 1, 2, 3 and 5 of the Export
Agreement, the learned Single Judge held that the shipments and
receipts stood in MMTC’s name. In relation to CJ-25 and CJ-26, the
learned Single Judge found no ground to disturb the learned
Tribunal’s conclusion that MMTC had redirected the parcels and
caused the delay. The learned Single Judge further held that clause 3
of the Export Agreement did not impose an obligation upon the
Respondents to pay interest on delayed realisation.
31. The Impugned Judgment treated CJ-27 as a claim for short
payment. It upheld the Tribunal’s conclusion on the ground that
MMTC had not established any shortfall in the invoice proceeds. It
also observed that the contractual arrangement contemplated an
irrevocable letter of credit and questioned how a short payment could
arise in such a transaction. The judgment did not separately address
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MMTC’s case, reflected in the witness evidence and final written
submissions, that CJ-27 was a delayed-realisation claim.
32. For CJ-31, the learned Single Judge held that the letters dated
04.07.1994, 05.07.1994 and 25.07.1994, on which MMTC relied to
attribute DA terms to the Respondents, concerned the later shipment
to S.S. Jewellery Traders and not the November 1993 consignment to
Al-Aseer. The Court further relied on MMTC’s obligation under
clause 5 to obtain ECGC cover for a non-LC export and on the
Tribunal’s finding that MMTC had not diligently pursued the overseas
buyer after dishonour of the cheque.
33. In relation to CJ-1, the learned Single Judge found no palpable
error in the learned Tribunal’s conclusion that MMTC alone could
obtain delivery of the returned jewellery from the Customs authorities
and that the Respondents could not be blamed for MMTC’s failure to
do so.
34. The learned Single Judge held that MMTC had failed to
establish that the Award was patently illegal, perverse or opposed to
the public policy of India. The Petition and the pending application
were accordingly dismissed. Aggrieved by that decision, MMTC has
preferred the present Appeal.
CONTENTIONS
35. MMTC contends that the learned Tribunal, and thereafter the
learned Single Judge, failed to examine the contractual arrangement as
a whole. It relies upon the obligations to repay the packing credit with
interest, the provisions preserving recovery otherwise than from
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export proceeds or other security, and the guarantee of full realisation
under Clause 3 of the Export Agreement. It also relies upon the
separate Agreement of Guarantee. According to MMTC, the fact that
the exports and foreign remittances stood in its name did not
extinguish these obligations. Its claims therefore required
consideration under the financing documents as well as the Export
Agreement.
36. In relation to CJ-25 and CJ-26, MMTC submits that its
surviving claim was for interest and charges occasioned by delayed
realisation of the export proceeds. It disputes the finding that the
diversion of the consignments to Al-Aseer was attributable
exclusively to MMTC and relies upon the evidence of CW-2 that,
although MMTC issued the diversion instructions, it did so pursuant
to a written request from the Respondents. It is further contended that,
in any event, the question whether MMTC participated in the
diversion did not dispense with consideration of the repayment and
interest obligations arising under the financing documents.
37. In relation to CJ-27, MMTC relies upon the account, the
evidence of CW-2 and its final written arguments before the Tribunal
to submit that the invoice proceeds had been received in full, though
belatedly. Its claim was therefore for interest and related charges,
rather than an unpaid portion of the invoice value. This objection is
expressly raised in the Section 34 petition and the memorandum of
appeal. MMTC further points out that the invoice records COD terms,
whereas the reasoning below proceeds on the basis of a letter of credit.
The treatment of CJ-27 in its later appellate synopsis is considered in
the analysis below.
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38. As regards CJ-31, the Appellant submits that part of the invoice
value admittedly remained unrealised and that the Respondents had
guaranteed full realisation of the export proceeds. The subsequent
dishonour of the cheque furnished by Al-Aseer, according to MMTC,
could not discharge that contractual obligation. Reliance is also placed
upon Section 137 of the Indian Contract Act, 1872 to contend that the
creditor’s failure or forbearance to institute proceedings against Al-
Aseer did not, without more, discharge the Respondents from their
liability under the contractual guarantees.
39. In respect of CJ-1, MMTC relies upon the correspondence
preceding the return of the consignment. It submits that the
Respondents were repeatedly informed that the jewellery remained
unclaimed in Dubai and faced auction by the Customs authorities, but
failed to arrange its clearance despite having sought further time for
that purpose. According to MMTC, the parcel had ultimately to be
brought back to India in consequence of that failure. It contends that
the learned Single Judge, while sustaining the finding concerning
MMTC’s ability to obtain release of the returned jewellery from
Indian Customs, did not adequately consider the antecedent
obligations of the Respondents or the circumstances in which the
consignment came to be returned.
2
40. MMTC also relies upon Muzzafar Shah v. MMTC Ltd. , the
orders passed in the appeal and special leave proceedings arising
3
therefrom, and Glitter Overseas & Ors. v. MMTC Ltd . It submits that
these decisions support the associate’s liability notwithstanding export

2
2014 SCC OnLine Del 900
3
2022 SCC OnLine Del 2058
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and collection in MMTC’s name. It separately challenges the direction
requiring return of the title deeds. On these grounds, MMTC seeks
setting aside of the Impugned Judgment and the Award.
41. The Respondents, on the other hand, support the Award and the
Impugned Judgment. Their case is that MMTC was the exporter, the
shipping documents stood in its name and foreign remittances were
received directly by it. They rely upon the contractual requirement of
a letter of credit and MMTC’s obligation to obtain ECGC cover for
non-LC exports, and contend that the guarantee of realisation cannot
be read independently of MMTC’s own obligations concerning export
and collection.
42. As regards CJ-25 and CJ-26, the Respondents maintain that the
original buyer failed to take delivery and that MMTC itself redirected
the consignments to Al-Aseer. Since the full proceeds were ultimately
received, they contend that the delay attributable to that course of
dealing could not furnish a claim for interest against them. In relation
to CJ-27, their case is that the entire invoice value was received by
MMTC and that no further amount was payable by them.
43. For CJ-31, the Respondents maintain that MMTC permitted the
shipment on DA terms instead of the contractual LC mechanism,
received security in the form of a cheque or cheques from the foreign
buyer, and thereafter failed to pursue that buyer. They contend that the
resulting short realisation could not be shifted to them. As regards CJ-
1, they rely upon the absence of notice of the recall and opening of the
parcel, the intact seals recorded in the examination report, and the
continued custody of the jewellery with Customs. Their case is that
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neither any shortage attributable to them nor any corresponding
monetary liability was established.
44. The Respondents accordingly submit that the learned Tribunal’s
conclusions were based upon the contractual documents and the
evidence before it and represented, at the least, a possible view of the
record. The learned Single Judge was therefore justified in declining
to reappraise the evidence under Section 34. They contend that no
ground for interference under Section 37 is made out and that the
direction concerning return of the title deeds follows from the
concurrent finding that nothing was payable to MMTC.
ISSUES
45. In view of the rival submissions, two overarching questions
arise for determination:
i. Whether the reasons for rejecting MMTC’s claims
concerning the five consignments disclose a ground for
interference under Sections 34 and 37 of the Act.
ii. What bearing the decisions relied upon by MMTC have
on that enquiry, and what consequential relief, including in
relation to the title deeds, follows.
46. This Court will first set out the governing standard of review
and address the structure of the contractual arrangement, before
examining the precedents relied upon by MMTC, the Tribunal’s
findings on each of the five consignments, and the appropriate relief.

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ANALYSIS & FINDINGS
47. The Section 34 petition was instituted after the Arbitration and
Conciliation (Amendment) Act, 2015 came into force and is governed
by the amended provision. The Court does not sit in appeal over the
Award. A possible view of the evidence or a reasonable construction
of the contract cannot be displaced because another conclusion
appears preferable. Patent illegality under Section 34(2A) must go to
the root of the matter; an erroneous application of law or
reappreciation of evidence does not suffice. The jurisdiction under
Section 37 remains subject to those limits.
48. Furthermore, an Award must be read fairly and as a whole.
Arbitrators are not required to write exhaustive awards or to discuss
every document and contractual clause in isolation. The decisive
question is whether the pathway to the learned Tribunal’s conclusion
is discernible and reflects a permissible view of the dispute.
49. Judicial deference, however, has a defined boundary.An award
cannot ignore or override an express contractual stipulation that
governs the dispute, as the Supreme Court explained in State of
4
Chhattisgarh v. Sal Udyog Private Limited . Before interfering on
that ground, the Court must examine the tribunal’s reasoning and
determine whether its conclusion genuinely conflicts with the
governing contractual term in a way that goes to the root of the matter.
50. The Hypothecation Agreement, the Export Agreement and the
separate Agreement of Guarantee formed parts of the same

4
(2022) 2 SCC 275
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arrangement. The fact that exports and foreign receipts stood in
MMTC’s name did not exclude the repayment and guarantee
obligations. At the same time, those obligations had to be considered
with MMTC’s duties concerning export and collection, and with the
Tribunal’s findings about the performance of the particular
transaction.
51. Before the learned Tribunal, MMTC anchored its claim in the
borrower’s obligation to repay the advances with interest, the clauses
preserving direct recourse against the borrower, and the guarantees.
The Respondents answered that the losses and delays stemmed from
MMTC’s own conduct in managing the shipments and collections.
The question in this appeal is whether the Tribunal’s resolution of
those competing positions remained within the permissible bounds of
arbitral adjudication.
52. The answer depends on the reasons for rejecting each claim.
The absence of a separate discussion of every clause of the
Hypothecation Agreement does not vitiate the Award if the Tribunal’s
factual finding supplies a complete answer to the claim. Equally, the
Tribunal could not dispose of every contractual claim simply by
observing that MMTC was the named exporter. Each of the five
consignments must therefore be examined in its own factual and
contractual setting.
THE DECISIONS RELIED UPON BY MMTC
53. Before turning to the individual shipments, it is necessary to
consider the precedents cited by MMTC. In Muzzafar Shah (supra) ,
the learned Single Judge rejected objections under Section 33 of the
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Arbitration Act, 1940 to an award enforcing the associate’s liability.
The decision addressed the associate’s contractual undertakings, its
role in identifying the foreign buyer and specific indemnity
provisions. On appeal, the Division Bench, by its order dated
12.11.2014 in FAO(OS) 469/2014, sustained the interpretation as
reasonable in the circumstances. Those decisions arose under the
earlier Arbitration regime and on the contractual and factual record
before that Tribunal. They do not establish that an associate’s liability
must be enforced irrespective of MMTC’s performance of its own
obligations in another transaction.
54. Nor does the Supreme Court’s order dated 04.05.2017 in
SLP(C) 10816/2015 carry the matter further. The dismissal of the
special leave petition under Article 136, without reasons or a
construction of the contract, did not authoritatively settle the
contractual issue raised here.
55. As for Glitter Overseas (supra) , that decision expressly
considered the present Impugned judgment. The Court explained that
two arbitral tribunals may adopt different, but plausible,
interpretations of similar contracts, each of which may withstand
scrutiny under Section 34. Dismissal of a Section 34 petition does not
establish a single authoritative interpretation of the contract. In Glitter
Overseas(supra) itself, the challenge was partly allowed while the
finding of liability on the invoices was upheld. The decision therefore
does not support MMTC’s contention that the learned Single Judge
departed from binding precedent.
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56. These decisions require the present Award to be tested on its
own reasons and against the grounds available under Section 34. An
award accepting MMTC’s claim in another case does not establish
patent illegality in this Award. Nor can reasons furnished in another
arbitration replace the reasons of this Tribunal.
CJ-25 AND CJ-26
57. For both CJ-25 and CJ-26, MMTC ultimately received the
entire sale proceeds. The surviving claims were confined to interest
and related charges for delayed realisation. The Tribunal found that
when the original buyer failed to take delivery, it was MMTC that
redirected the parcels to Al-Aseer. Attributing the delay in realisation
to that course of dealing, the Tribunal held that its financial
consequences could not be shifted onto the Respondents.
58. Read in that light, the Award’s references to MMTC’s role in
handling the exports and collection form part of its explanation of
responsibility for the delay. The learned Tribunal understood that
these two claims were for delayed payment, and it rejected them on a
finding of fact as to why the payment was late.
59. MMTC disputes that finding and relies upon the evidence of
CW-2 that the diversion instructions were issued at the Respondents’
written request. The Respondents maintained that MMTC selected Al-
Aseer, and their letter dated 22.08.1994 referred to MMTC’s diversion
instructions. These competing accounts were before the Tribunal.
Reassessing them to determine who should bear responsibility would
require this Court to undertake an appraisal of the evidence which the
present jurisdiction does not permit.
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60. Crucially, the financing provisions do not render that factual
determination irrelevant. The Tribunal’s reason for refusing the
interest claimed was that the delay was attributable to MMTC. That
supplies an intelligible answer to the particular claims. The absence of
a separate discussion of Clause 2 of the Hypothecation Agreement
does not establish that the interest claim remained undecided. Nor
need the rejection rest upon the learned Single Judge’s additional
observation that Clause 3 of the Export Agreement contains no
express stipulation for interest on delayed realisation.
61. The Tribunal’s conclusion on CJ-25 and CJ-26 reflects a
tenable assessment of how MMTC’s own conduct bore upon the
claims for delayed realisation. This Court finds no ground to disturb it.
That conclusion is confined to the responsibility for delay found in
these transactions. It does not establish that routing exports through
MMTC generally excludes the borrower’s contractual liability.
CJ-27
62. CJ-27 stands differently. Paragraph 11 of the Statement of
Claim alleged failure to remit the full invoice value “on due date”,
while the rejoinder asserted that full remittance had not been received.
Those pleadings were capable of creating uncertainty about whether
the complaint concerned delayed payment or short payment.
63. The evidence and final arbitral submissions clarified the
position. CW-2, in his evidence, stated that payment against CJ-25,
CJ-26 and CJ-27 had been received in full, though belatedly, and that
interest and service charges were claimed. MMTC’s final written
arguments classified the first three invoices in those terms. The
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Respondents’ final submissions also distinguished three delayed-
payment consignments from CJ-31, which involved part payment. The
Award itself initially records that distinction.
64. Nevertheless, in its separate determination of CJ-27, the
Tribunal rejected the claim because MMTC had not specified or
proved the amount of a short payment. That inquiry answered the
wrong question: the claim before the Tribunal was for interest and
charges occasioned by delay, not for an unpaid shortfall in the invoice
price. The learned Single Judge fell into the same error, upholding the
rejection because no shortfall in the invoice proceeds had been
established.
65. The Tribunal’s alternative observation that MMTC was the
named exporter does not sustain the rejection either. The Tribunal
proceeded on the mistaken premise that CJ-27 was backed by a letter
of credit, whereas the invoice specifies COD terms. Further, unlike
CJ-25 and CJ-26, the Award records no finding that MMTC diverted
CJ-27 or otherwise caused the delay in realisation. In the absence of
such a finding, MMTC’s status as exporter does not answer the
borrower’s obligation to pay interest under the financing agreements.
66. MMTC squarely challenged this mischaracterisation in Ground
L of its Section 34 petition and has again challenged it in Ground G of
this appeal. Although its August 2025 additional synopsis is
inconsistent and reverts to describing CJ-27 as a case of short
payment, that subsequent slip in a written note cannot alter the claim
that stood clarified in the evidence and final submissions before the
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Tribunal, or supply an adjudication of that claim which the Award
does not contain.
67. The rejection of the claim concerning CJ-27 thus rests upon an
enquiry into a shortfall that MMTC was not claiming, compounded by
a misreading of the payment terms stated in the invoice. The error
goes to the root of the determination and constitutes patent illegality
under Section 34(2A). The rejection must therefore be set aside. This
Court expresses no opinion on whether MMTC is ultimately entitled
to interest or charges, or on their rate, period or quantum.
CJ-31
68. CJ-31 involved part realisation of the sale proceeds. The
consignment was shipped under the invoice dated 11.11.1993 on
“DA-90 DAYS” terms, against which packing credit of ₹11,24,620/-
was advanced. MMTC received ₹9,43,875/- on 26.04.1995 and
claimed the unpaid principal balance, together with interest and
charges.
69. In rejecting that claim, the Tribunal accepted the Respondents’
case that MMTC had departed from the LC mechanism by shipping
on DA terms, and pointed to the dishonour of Al-Aseer’s cheque,
MMTC’s failure to sue the foreign buyer, and its insistence that the
Respondents first deposit legal expenses. Because of that course of
conduct, the Tribunal held, the resulting shortfall could not be shifted
onto the Respondents.
70. The learned Single Judge correctly noticed that the letters dated
04.07.1994, 05.07.1994 and 25.07.1994 pertained to the later
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shipment to S.S. Jewellery Traders. They did not establish that the
Respondents requested the terms on which CJ-31 had already been
exported in November 1993. Reliance upon that correspondence does
not demonstrate perversity in the Tribunal’s treatment of CJ-31.
71. Even assuming that Section 137 of the Indian Contract Act,
1872 applies in the manner urged by MMTC, it does not dispose of
the Tribunal’s actual reasoning. Under that provision, mere
forbearance by a creditor to sue the principal debtor does not, in the
absence of a contrary provision in the guarantee, discharge the surety.
The Tribunal, however, attributed the shortfall to MMTC’s departure
from the agreed payment arrangements and considered its subsequent
recovery efforts in that setting. Its conclusion therefore did not rest on
forbearance to sue alone.
72. The repayment and guarantee provisions do not require a
different result within the present jurisdiction. Clauses 3 and 24 of the
Hypothecation Agreement preserve recovery from the borrower
independently of the receipt of export proceeds. They do not make
MMTC’s performance of the connected Export Agreement irrelevant
to a defence against the particular demand. The unit’s undertaking
under Clause 3 of the Export Agreement must also be distinguished
from the separate guarantee of the borrower’s financial liabilities.
73. Clause 4 of the separate Agreement of Guarantee addresses
variations and specified acts or omissions by MMTC. It may preserve
a subsisting guaranteed debt notwithstanding such variation or
conduct; its application nevertheless requires consideration of the
liability secured and whether the particular demand was recoverable
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under the composite arrangement, having regard to the defence
accepted by the Tribunal. Read fairly, the Award treats the shortfall as
a consequence of MMTC’s departure from the export arrangement
which could not be passed to the Respondents. The omission to
discuss each financing provision separately does not establish that this
conclusion was outside the range of permissible views.
74. Clause 5 of the Export Agreement contemplated non-LC
exports with ECGC cover. It therefore prevents treating the absence of
an LC as an absolute bar to recovery, but does not establish that every
alteration of the agreed payment terms was authorised or that its
consequences necessarily fell upon the Respondents. Neither the
Award nor the impugned judgment contains an express finding that
CJ-31 was uninsured, and this Court does not supply one. The
rejection is sustained on the Tribunal’s assessment of responsibility
for the short realisation, read in the context of the payment
arrangements and the parties’ conduct.
75. MMTC’s submissions disclose a competing construction of the
arrangement and a competing assessment of responsibility for the
shortfall. They do not establish that the Tribunal’s conclusion, read as
a whole, contradicts an express contractual term in a manner that
admits of no permissible interpretation. The inclusion of unpaid
principal in this claim does not enlarge the scope of review or exclude
a defence founded on MMTC’s own performance. As with CJ-25 and
CJ-26, the Tribunal identified the claim and attributed the financial
consequence to MMTC’s conduct. Revisiting that attribution would
require a fresh determination of the merits. The rejection of the claim
concerning CJ-31 is therefore left undisturbed.
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CJ-1
76. CJ-1 raises a different contractual difficulty. MMTC’s claim
included the packing credit advanced and the accumulated interest and
charges. It was not confined to compensation for the alleged shortage
in the returned jewellery.
77. The Tribunal relied upon Ex. C-40 to find that the seals were
intact, the jewellery had been resealed without damage and no loss of
jewellery had been established. It also noted the Respondents’ absence
when the parcel was opened. This Court need not reappraise those
findings. The further reason for rejecting liability was that MMTC
alone could obtain release of the returned jewellery and had left it
uncollected with Customs.
78. That reason must be tested against the express provisions for
direct recovery. Clause 9 of the Hypothecation Agreement permits
MMTC to demand payment without first enforcing its remedies
against others or its security. Clause 14 preserves the right to sue the
borrower alongside the power to realise the goods. Clause 24 provides
that the credit liabilities would primarily be cleared from export
proceeds, while preserving recovery from the borrower otherwise. The
availability of the goods was therefore not an exclusive source of
repayment.
79. The Award treats the intact return and continued availability of
the jewellery as sufficient to exclude the financing claim. It identifies
no repayment or adjustment of the value of the goods against the
credit. Nor does it explain a contractual basis on which MMTC’s
failure to collect the goods extinguished the asserted liability for the
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advance. In effect, the rejection makes realisation of the goods a
condition of recovery from the Respondents, contrary to the
reservation of direct recourse. This is a substantive difficulty in the
reasoning, rather than a demand for a separate recital of the financing
clauses.
80. MMTC’s conduct could have consequences for its claim.
However, the Award contains no finding that MMTC had lost the
goods, had become unable to restore them upon satisfaction of the
debt, or had adjusted their value against the advance. Its finding was
that the jewellery remained intact and available for collection. This
Court cannot supply an unrecorded accounting adjustment or another
basis of discharge to reconcile the rejection with the express right of
direct recovery.
81. The distinction from CJ-31 is material. There, the Tribunal
attributed the shortfall to MMTC’s departure from the payment
arrangements. Here, the reason for rejecting the financing claim was
that the returned jewellery remained available and MMTC had not
collected it, notwithstanding the express provisions permitting direct
recovery without first realising the goods. The Award does not
determine an adjustment or other discharge of the advance which
could reconcile that reason with those provisions. The defect goes to
the foundation of the rejection and constitutes patent illegality under
Section 34(2A). The rejection of the claim concerning CJ-1 must
therefore be set aside. The effect of MMTC’s conduct upon the
accounts, interest and charges, and the adjustment of the returned
jewellery remains for substantive adjudication. This Court determines
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none of those matters, makes no independent finding concerning the
contents of the parcel and awards no sum to MMTC.
EXTENT OF INTERFERENCE AND RELIEF
82. The infirmities affecting CJ-27 and CJ-1 do not extend to the
rejection of CJ-25, CJ-26 and CJ-31. Each consignment was
separately considered by the Tribunal, and the two affected
determinations can be removed without reopening the three
determinations that have withstood scrutiny. The presentation of parts
of MMTC’s claim in an aggregate account does not make those
determinations inseparable. Any further proceedings concerning the
portions set aside cannot revive amounts whose rejection remains
undisturbed through a recomputation of that aggregate account.
5
83. In Gayatri Balasamy v. ISG Novasoft Technologies Limitedṣ ,
the Supreme Court recognised the power to set aside part of an award
where the affected determination is legally and practically severable.
That requirement is satisfied here. Setting aside the rejections
concerning CJ-27 and CJ-1 leaves the determinations on the other
consignments intact. It does not require this Court to decide liability,
calculate interest or reconstruct the accounts. Those tasks would
involve an adjudication of the merits beyond the limited relief granted
in this Appeal.
THE TITLE DEEDS
84. The direction for immediate return of the title deeds followed
the learned Tribunal’s conclusion that nothing remained due to

5
2025 INSC 605
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MMTC. Setting aside the rejections concerning CJ-27 and CJ-1
removes the foundation for that categorical consequential direction,
notwithstanding the preservation of the rejections concerning the other
consignments. The direction must therefore also be set aside.
85. Mrs. Arti Chauhan was not a party to the arbitration. The
Statement of Claim referred to separate proceedings against her, and
the creation of an equitable mortgage was disputed. This judgment
determines neither her rights in relation to the property nor MMTC’s
entitlement to retain or enforce the security. If the deeds have already
been returned pursuant to the Award or any subsequent order, this
judgment does not require their re-deposit.
CONCLUSION
86. In the result, the Appeal succeeds in part. The challenge fails in
respect of CJ-25, CJ-26 and CJ-31, where the learned Tribunal
identified the claims and attributed the disputed financial
consequences to MMTC’s conduct. Those determinations remain
within the permissible bounds of arbitral adjudication. The challenge
succeeds in respect of CJ-27, where the clarified delayed-realisation
claim was rejected through an inquiry into an unproved shortfall and
an alternative reason that did not answer that claim. It also succeeds in
respect of CJ-1, where the rejection of the financing claim rested on
MMTC’s failure to collect the returned jewellery despite the express
reservation of direct recourse.
87. Setting aside the rejections concerning CJ-27 and CJ-1 does not
establish MMTC’s entitlement to either claim. This Court leaves
undecided the disputed liability, permissible interest and charges, and
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the accounting treatment of receipts and returned jewellery relevant to
those claims. These reservations do not reopen the rejection of any
claim concerning CJ-25, CJ-26 or CJ-31.
88. The parties are left to such remedies as may be available in
accordance with law in respect of the portions set aside. Nothing
stated herein directs recommencement of the arbitral proceedings or
determines any question of limitation, constitution of the arbitral
forum or other objection which may arise in further proceedings. The
determinations left undisturbed by this judgment retain their effect.
FINAL ORDER
89. Accordingly, the Appeal is partly allowed in the following terms:
i. The judgment dated 07.03.2017 in O.M.P. (COMM)
371/2016 is set aside only insofar as it sustains the rejection of
MMTC’s claims concerning CJ-27 and CJ-1 and the direction for
immediate return of the title deeds. The Section 34 petition is
allowed to that extent.
ii. The Arbitral Award dated 26.04.2016 is set aside insofar
as it rejects MMTC’s claims concerning CJ-27 and CJ-1 against
the Respondents before this Court and directs immediate return
of the title deeds relating to Apartment No. 3, Oberoi Club
House, Oberoi Apartments, 2, Shamnath Marg, Civil Lines,
Delhi.
iii. The rejection of MMTC’s claims concerning CJ-25, CJ-
26 and CJ-31, and the impugned judgment sustaining those
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rejections, remain undisturbed. The Appeal is dismissed to that
extent.
iv. No amount is awarded to MMTC. The parties may
pursue remedies available in law in respect of the portions set
aside, subject to the questions left open in this judgment and
without reopening the determinations left undisturbed.
v. No finding is returned on MMTC’s entitlement to retain
or enforce any security against Mrs Arti Chauhan or the property.
All rights and contentions of MMTC and Mrs Arti Chauhan in
that regard are left open. If the title deeds have already been
returned pursuant to the Award or any subsequent order, this
judgment shall not require their re-deposit.
vi. Pending application stands disposed of.

ANIL KSHETARPAL, J.

BHARAT PARASHAR, J.
OCTOBER 27, 2026
s.godara/ad
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