Steel Authority Of India Ltd vs. Noble Chartering Inc

IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on:15.07.2024
+ FAO(OS) (COMM) 94/2019 and CM APPL. 19449/2019
NOBLE CHARTERING INC ..... Appellant
versus
STEEL AUTHORITY OF INDIA LTD. ..... Respondent
AND

+ FAO(OS) (COMM) 121/2019 and CM APPL. 26007/2019
STEEL AUTHORITY OF INDIA LTD. ..... Appellant
versus
NOBLE CHARTERING INC ..... Respondent
Advocates who appeared in this case:

For the Appellant : Mr V.K. Ramabhadran, Senior Advocate
with Mr J.K. Ashar, Mr Abhishek Singh, Mr
Sudhanshu Sikka and Ms Nancy Thapar,
Advocates and for respondent in FAO(OS)
(COMM) 121/2019.
For the Respondent : Mr Raj Shekhar Rao, Senior Advocate with
Mr Ashish Tiwari, Mr Anurag Tiwari and Mr
Sahib Patel, Advocates and for appellant in
FAO(OS) (COMM) 121/2019.
CORAM
HON’BLE MR JUSTICE VIBHU BAKHRU
HON’BLE MSJUSTICE TARA VITASTA GANJU
JUDGMENT
VIBHU BAKHRU, J.
1. These cross appeals have been filed under Section 37(1)(c) of the
Arbitration & Conciliation Act, 1996 (hereafter the A&C Act )
Signature Not Verified

Digitally Signed
By:KAMLA RAWAT
Signing Date:18.07.2024
12:55:59
FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 1 of 58

impugning a judgment dated 28.02.2019 (hereafter the impugned
judgment ) passed by the learned Single Judge in OMP(COMM)
No.225/2018. The said petition was preferred by the Steel Authority of
India Limited (hereafter the SAIL ) under Section 34 of the A&C Act
impugning an arbitral award dated 27.12.2017 (hereafter the impugned
award ) rendered by an Arbitral Tribunal comprising of the sole
arbitrator (hereafter the Arbitral Tribunal ). By the impugned award,
the Arbitral Tribunal has awarded a sum of USD 8,564,908.60 along
with interest at the rate of 3% per annum from the date of letter of
termination dated 02.01.2013 (hereafter the termination e-mail ) till the
date of the impugned award, with a further direction that the same be
paid within a period of three months. In addition, the Arbitral Tribunal
also awarded future interest at the rate of 9% per annum on the awarded
amount in the event the same was not paid within a period of three
months from the date of the impugned award.
2. The learned Single Judge partly allowed SAIL’s application and
set aside the impugned award to the extent of damages computed on
account of failure to issue stems for the period after the termination e-
mail. The learned Single Judge confined the award of damages to USD
2,013,585.60 on account of stem due in December, 2012. Additionally,
the learned Single Judge modified the award of interest to LIBOR rate
plus 3%.
3. Noble Chartering Inc. (hereafter Noble ) has assailed the
impugned judgment to the extent that the claims awarded by the Arbitral
Tribunal have been set aside. Additionally, it is also contended on its

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behalf that the decision to modify the award of interest is erroneous.
SAIL has also appealed the impugned judgement to the extent that the
learned Single Judge has not interfered with the award of damages of
USD 2,013,585.60.
4. The disputes in the present case arise out of the Contract of
Affreightment dated 20.08.2008 (hereafter the COA ) entered into
between Noble as ‘ Owners ’ and SAIL as ‘ Charterers’ for shipment of
coking coal from the ports in the United States of America to the ports
in India for a shipment period of three years from September, 2008 to
August, 2011.
F ACTUAL C ONTEXT
5. Noble is a company incorporated under the laws of Hong Kong
and is engaged in the business of owning, chartering and operating
th
vessels. Its principal place of business is at 18 Floor, Mass Mutual
Tower, 38 Gloucester Road, Hong Kong.
6. SAIL is a public sector company that is owned and controlled by
the Government of India. It is, inter alia , engaged in manufacturing
steel and has its office at Central Marketing Organisation, Ispat Bhavan
th
(6 Floor), 40 Jawahar Lal Nehru Road, Kolkata- 700 071. The shipping
requirements of SAIL are arranged by Transchart, a division of Ministry
of Shipping, Government of India.
7. The parties entered into the COA on 20.08.2008. In terms of the
COA, SAIL agreed to load 18,00,000 MT, plus/minus 5% at its option,
cargo of coking coal during a period of three years commencing from

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September, 2008 to August, 2011. The shipments were to be made in
parcels of 70,000 MT (5% more or less at Noble’s option) on a ‘Fairly
Evenly Spread’ (hereafter also referred to as ‘ FES’ in short) prorate
basis during the shipment period. Thus, it is stated by Noble that SAIL
was required to make twenty-five shipments of coking coal after
intervals of approximately forty-four days. In terms of Clause 2 of the
COA, the shipment period was extendable by three months at SAIL’s
option and such extension was to be declared five months before the
completion of the period of the COA.
8. SAIL declared two stems in the month of September, 2008 and
November, 2008. However, it did not declare any further stems till
May, 2009 thereafter.
9. By an e-mail dated 17.11.2008, the representative of SAIL
informed the counsel for Noble that on account of the economic,
financial, and market conditions, the nomination for stem for the month
of December, 2008 was uncertain. SAIL claimed that due to the Sub-
Prime Crisis in the United States of America, manufacturing of steel
was adversely affected and its requirement of coking coal, for such
manufacturing, was reduced.
10. By an e-mail dated 04.12.2008, Noble urged SAIL to declare a
stem for the month of December, 2008 in terms of the COA and
conveyed that in the event SAIL did not declare the stem within 24
hours, Noble would be constrained to take appropriate legal action and
claim damages amounting to USD 3,533,846/-. SAIL responded by its

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e-mail dated 05.12.2008, stating that it intends to honour its obligations
under the COA as the global economic situation improves. Noble by
another e-mail dated 09.12.2008 informed SAIL that it would be
constrained to take legal action if stems are not declared and would also
charge interest on all overdue payments.
11. After certain discussions between the parties, the parties agreed
that coal could be loaded from Australia in addition to the United States
of America. Subsequently, two stems (one in May 2009 and another in
August 2009) were declared by SAIL for loading from Australia.
12. This agreement was formalised by the parties by entering into an
Addendum to the COA dated 29.09.2009 (hereafter the Addendum ). In
terms of the Addendum, SAIL was given the option of loading from
Australian Ports. The duration of the COA was also extended to
February, 2012.
13. A tabular statement setting out the shipments made under the
COA as set out in the impugned award, is reproduced below:
NO. LOAD/DISCH
PORT
VSL LAYCAN CARGO
QTY
BL date
1 USEC/ECI CALYPSO 20-30 SEP 08 71130 01 October
2008
2 USEC/ECI FORTUNE
RAINBOW
10-20 NOV 08 73560 19 November
2008
3 DBCT/EC INDIA PHILLIPPINE
EXPRESS
20-30 MAY 09 73500 28 May 2009
4 DBCT/EC INDIA GIANT SKY 20-30 AUG 09 76402 18 September
2009
5 HAY POINT / ECI MEDI KOBE 5-14 NOV 09 73473 22 November
2009
6 QUEENSLAND/ECI WEN ZHU
HAI
5-15 FEB 10 74476 24 February
2010

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7 QUEENSLAND/ECI PINA
5-15 MAR 10 71269 19 April 2010
CAFIERO
8 DBCT/EC INDIA INTER
PRIDE
10-25 APR 10 71875 27 April 2010
9 HAY POINT / ECI AOM
MILENA
1-10 JUN 10 73508 02 June 2010
10 HAY POINT / ECI PRABHU

SATRAM
9-18 JUL 10 73459 13 July 2010
11 HAY POINT / ECI GH POWER 16-25 SEP 10 72994 17 September

2010
12 HAY POINT / ECI CLIPPER
MONARCH
10-19 NOV 10 72476 11 November
2010
13 HAY POINT / ECI MINERAL
STAR
10-20 APR 11 73508 14 April 2010
14 GLADSTONE/ECI YONG TAI 1-10 MAY 11 71432 04 May 2011
15 EC AUSSIE CAPT
DIAMANTIS
25 JUN-05 JUL
11
72715 07 July 2011


16 EC AUSSIE BARGARA 14-23 FEB 12 72650 17 February
2012
17 EC AUSSIE CAPTAIN

DIAMANTIS
29 FEB- 9 MAR
12
72602 28 March 2012
18 EC AUSSIE EVANGELIA
PETRAKIS
20-30 MAY 12 72126 31 May 2012
19 EC AUSSIE ARCHON 5-14 JUL 12 73012 09 July 2012

14. In terms of Clause 1 of the Addendum, SAIL agreed that it would
declare five laycan on FES basis between May, 2009 and March, 2010.
Noble also agreed to defer the balance five shipments and SAIL agreed
that the said five shipments would be performed within the duration of
COA but after 31.03.2010.

15. In terms of Clause 3 of the Addendum, it was agreed that the
deferred five shipments would be performed in addition to the balance
twelve shipments under the COA and thus, a total of seventeen
shipments would be performed during the period April, 2010 to
February, 2012.

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16. During the period of April, 2010 to January, 2012, SAIL
provided eight shipments. SAIL claims that due to heavy rain and
flooding in Australia during the period 24.12.2010 to 20.06.2011, the
mines could not dispatch coal to the ports. And, this constituted force
majeure . Notwithstanding the same, SAIL made two shipments during
the said period, one in April, 2011 and the second in May, 2011.
17. According to Noble, SAIL failed to perform its obligations under
the COA as extended. It claimed that SAIL was obliged to make
seventeen shipments between the period April, 2010 and February,
2012 on FES basis. Noble states that in this background further
discussions took place between the parties till early January, 2012,
which were recorded in an e-mail dated 05.01.2012. SAIL provided
further four shipments between the period February, 2012 to July, 2012.
18. Noble claims that as on 01.08.2012, the shipments made fell short
of 413,833 MT out of the agreed 18,00,000 MT as was contracted in
terms of the COA. There were certain communications exchanged
between the parties in this regard.
19. On 26.10.2012, Noble sent an e-mail informing SAIL that it was
prepared to extend time till 30.09.2013 to allow SAIL to lift the
outstanding 413,833 MT of cargo by way of five shipments performed
at FES intervals and in accordance with the COA. Noble also specified
that the same would be against “full reservation of rights”. SAIL
responded by an e-mail dated 30.10.2012 agreeing to the extension of

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COA till September, 2013 but reserving the rights for reduction in
quantity by 5%.
20. Noble’s solicitors confirmed the said extension of the COA till
30.09.2013 by an e-mail dated 09.11.2012. However, it was also
clarified that the remaining shipments were to be performed on FES
basis. Noble also sought declaration of stems for the month of
December, 2012 on an urgent basis by its e-mails dated 09.11.2012 and
20.11.2012.
21. SAIL terminated the COA by the termination e-mail referring to
Clause 62 of the COA.
22. Noble did not accept the termination of the COA and sent an e-
mail dated 04.01.2013 alleging that SAIL’s termination was wrongful
and unless the same is withdrawn, it would be treated that SAIL had
repudiated the COA. Thereafter, by an e-mail dated 10.01.2013, Noble
informed SAIL that they were accepting SAIL’s repudiation of the
COA while reserving the right to claim losses under the Maritime
Arbitration Rules before the Indian Council of Arbitration (hereafter
ICA ).
23. Noble invoked Clause 60 of the COA and sought reference of the
disputes to arbitration under the aegis of the ICA. Pursuant thereto an
Arbitral Tribunal comprising of three members (hereafter ICA
Tribunal ) was appointed on 07.03.2014.

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24. SAIL challenged the reference of disputes before the ICA
Tribunal and filed a suit being CS No. 193/2013, inter alia , seeking a
declaration that the arbitration clause (Clause 60) in the COA does not
cover disputes arising out of breach of terms of the COA and is limited
to maritime disputes. SAIL sought a perpetual injunction restraining
Noble from pursuing the arbitration before the ICA Tribunal. SAIL also
filed an application seeking interim stay of the proceedings before the
ICA Tribunal. SAIL challenged the mandate of the members of the ICA
Tribunal to continue the arbitral proceedings. Noble instituted a suit for
damages before the High Court of Delhi.
25. Thereafter on 29.06.2016, the parties entered into an Arbitration
Agreement (hereafter the Arbitration Agreement ) and agreed to refer
the disputes to a sole arbitrator for determination. The parties agreed to
appoint the Arbitral Tribunal and in terms of Clause 3 of the Arbitration
Agreement collectively revoked the jurisdiction of the ICA Tribunal to
decide the disputes. Clause 3 of the Arbitration Agreement is quoted
hereinbelow:
“3. The Parties agree to appoint Retired Justice S.S. Nijjar
as the Sole Arbitrator. The appointment of Retired
Justice S.S. Nijjar is made on a joint basis by both
Parties. Upon acceptance of appointment, Retired
Justice S.S. Nijjar shall take up his appointment and
become the Sole Arbitrator on the terms set out in this
Agreement. Once Retired Justice S.S. Nijjar has
accepted his appointment and become the Sole
Arbitrator, the Tribunal collectively and each
individual arbitrator of the Tribunal as well as the ICA
shall no longer have jurisdiction to determine the

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Disputes and their appointments as arbitrators shall
cease.”
26. In terms of the Arbitration Agreement, it was agreed that the sole
arbitrator constituting the Arbitral Tribunal, would take up its
appointment from the stage the arbitral proceedings had reached. The
parties agreed to withdraw the litigation pending before the courts.
HE RBITRAL ROCEEDINGS
T A P

27. The Arbitral Tribunal continued the proceedings on 09.07.2016.
The pleadings were completed by the parties before the ICA. An
amended Statement of Claim was filed by Noble before the ICA on
01.04.2015 whereby it sought a declaration that SAIL was in
repudiatory breach or had unlawfully renounced the COA and the
Addendum.
28. Noble claimed that SAIL had failed to declare the stems on FES
basis, which it was obliged to do in terms of the COA and the
Addendum. According to Noble, if the stems were declared on FES
basis, the outstanding laycans would have been declared on or around
20.12.2012, 10.03.2013, 30.05.2013 and 20.08.2013. It was contended
that SAIL unjustly enriched itself by arranging shipments through the
spot market, to the extent of the difference between the agreed freight
set out in the COA and the spot market rates. Noble claimed that it was
entitled to the difference between the COA and market rates for freight
for the shipments that were not declared by SAIL. Noble referred to the
Baltic Exchange rates for determining the market freight rates. It
calculated the loss and damage caused to it in respect of four shipments,

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which, according to Noble should have been performed prior to the
termination of the COA, that is, during 09.11.2012 to 30.09.2013 by
considering the market rate of freight at the material time (USD 19.15
per MT). And, claimed that it had suffered a loss of USD 2,013,585.60
during the said period. The losses suffered by Noble for three other
shipments were calculated by it on the basis of the difference between
the rate of freight as per the COA and the market rate of freight with
reference to Forward Prices as on the date of the termination of the
COA. The same was quantified, as a Time Charter Equivalent of USD
59,347.82 per day over a period of 41.28 days per shipment, at a sum of
USD 6,550,628.25. Alternatively, Noble calculated the loss by
considering the market rates of freight as per the spot market rates
prevalent at the material time the shipments should have been
performed, at a sum of USD 6,511,323.00.
29. An Expert Report prepared by Ms Jean Richards (CW-2) was
submitted before the Arbitral Tribunal along with a note on calculation
of damages whereby damage/ loss occasioned was calculated based on
the Baltic Index method at USD 8,463,585.09. Alternatively, the
damage was calculated as USD 8,844,185.00 based on stems declared
by SAIL in the spot market and it was evaluated to be USD
8,587,838.31 based on Forward Pricing.
30. Accordingly, Noble set up its claim for a sum of USD
8,564,213.85 or alternatively, a sum of USD 8,524,908.60 as
compensation for breach of the COA and the Addendum along with
compensation for incidental losses suffered by Noble for a sum of USD

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32,500. It also sought interest at the rate of 18% per annum from the
respective shipment dates and cost of arbitration.
31. An amended Statement of Defence was filed by SAIL on
30.06.2015 and a reply to the amended Statement of Defence was filed
by Noble on 24.07.2015.
32. The issues for determination, as set out in the impugned award,
are reproduced below:
“No.1A Is the Respondent precluded from challenging
Capt. V. K. Gupta’s nomination as an arbitrator –
particularly in view of the decision of the
Maritime Arbitration Committee dated 23
October 2013 and 14 November 2013?
No.1B If the Respondent is not precluded as stated
above, then whether this Tribunal has jurisdiction
to decide the challenge to Capt. V. K. Gupta’s
nomination on the grounds that he does not
possess the qualifications agreed to by the parties
and more particularly that he is not a commercial
man?
No.1C If the Respondent is not so precluded, and if this
Tribunal has the jurisdiction to decide the
challenge to Capt. Gupta’s nomination, then does
the Respondent prove that Capt V. K. Gupta does
not satisfy the requirement of being a
“commercial man” as agreed in the Arbitration
Agreement between the parties i.e. Clause 60 of
th
the agreement dated 20 August 2008?
No.2 Whether the Tribunal has jurisdiction to
determine the present Claim?

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No.2(a) Whether the agreement dated 20.08.2008 is a
‘Contract of Affreightment’ or otherwise if so to
what effect?
No.3 Whether the Contract of Affreightment
Agreement dated 20.08.2008 (“the Agreement”)
was in the nature of a standing order/contingent
contract/MoU/agreement to agree in future with
no binding obligation on the Respondent to make
available any specific quantity of shipment and
the Claimant had to nominate a vessel only when
the Respondent declared a stem or whether it was
a binding obligation requiring the Respondent to
ship 1,800,000 MT of cargo (+/-5% in its option)
over the period of 3 years (such period
subsequently being amended by agreement) at
fairly evenly spread intervals?
No.4 If so, what meaning is the term “fairly evenly
spread” to be given in the facts and circumstances
of the case and whether the stems declared by the
Respondent were “fairly evenly spread”?
No.5 Whether the Respondent was obliged to provide
7 (seven) shipments to the Claimant, 4 (four)
between 9 November 2012 and 30 September
2013 at approximately 65 days intervals, and 3
(three) thereafter, as alleged by the Claimant?
No.6 Whether the proposed Addendum contained in
Claimant’s email of 05 January 2012 was
concluded as an amendment to Agreement
between the parties? If so, to what effect?
No.7 Whether the Respondent was entitled to terminate
the Agreement in terms of Clause 62 by its letter
dated 2 January 2013? If so, was such termination
without liability?
th
No.7(a) What was the effect of claimant's letter dated 10
January, 2013?

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No.8 Whether the Claimant was in breach of the
Agreement, as alleged by the Respondent, and, if
so, to what effect?
No.9 Whether the Respondent’s conduct amounted to a
renunciation and/or repudiation and/or breach of
the Agreement by the Respondent, thereby
entitling the Claimant to terminate the
Agreement, as alleged?
No.10 Whether, by reason of unprecedented economic
meltdown throughout the world, the Agreement
stood frustrated?
No.11 Whether the Respondent proved that events
which occurred in Queensland, Australia in
December 2010 constitute force majeure events
under the Agreement and if so, whether the
Respondent gave the Claimant proper notice of
the occurrence of the force majeure events? If the
answer to both the foregoing questions is in the
affirmative, what effect does the occurrence of the
force majeure events have?
No.12 Whether the Claimant proves to have suffered any
legally recoverable loss on account of the
Respondent’s repudiation/breach of the
Agreement and if so, the quantum of loss suffered
by the Claimant?
No.13 Whether the Claimant is entitled to recover from
the Respondent losses suffered by the Claimant
on account of incidental expenses as claimed?
No.14 Whether the Claimant is entitled to recover
interest from the Respondent and if so, on what
sums and from what date and at what rate?
No.15 Whether the Claimant is entitled to recover from
the Respondent its legal costs of this arbitration
(including fees of the Tribunal as may be paid or

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payable by Claimant and other expenses incurred
by Noble incurred in connection with this arbitral
proceeding)?
No.16 What order?”
33. Noble examined Mr. Jagmeet Singh (CW-1) to prove the material
facts and Ms Jean Richards (CW-2) as an expert witness. SAIL
examined Ms. Jasmine Maiti (RW-1) as a fact witness and Mr Colm
Nolan (RW-2) as an expert witness. Witnesses were cross examined
before the Arbitral Tribunal.
34. The issues for determination as framed by the ICA tribunal were
decided by the Arbitral Tribunal, except Issue Nos. 1 and 2, which the
parties agreed were not relevant.
T HE I MPUGNED A WARD
35. Noble’s claims were founded on alleged wrongful repudiation of
the COA. The principal controversy before the Arbitral Tribunal related
to the interpretation of the COA and the termination of the COA by
SAIL under Clause 62 of the COA. The Arbitral Tribunal considered
the rival contentions advanced by the parties. It determined the nature
of the COA and interpreted the terms of the COA based on evidence led
by the parties.
36. The Arbitral Tribunal took note of the record of shipments as
stated in the Statement of Claim and observed that a total of 1,385,627
MTs of cargo was shipped during the period of September, 2008 to July,
2012.

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37. SAIL contended that the COA was not in the nature of a ‘Contract
for Affreightment’ but in the nature of a standing order or a contingent
contract, or a Memorandum of Understanding, or an agreement to agree
to declare stems, which would give rise to obligations when such
declaration was made. This contention was rejected by the Arbitral
Tribunal. The Arbitral Tribunal also considered the evidence of
witnesses (Mr. Makkar, CW 1 and Ms. Jasmine Maiti, RW 1) in
drawing its conclusion. It observed that, broadly, the COA was in the
nature of a Contract for Affreightment which, was a binding contract
between the parties for shipment of a fixed quantity of coking coal
(18,00,000 MTs) over a specified duration (3 years). The term of the
COA could be extended by way of addendums and the parties had the
right to terminate the contract under the provisions of the COA.
38. The Arbitral Tribunal referred to the evidence led by Ms Jean
Richards, CW 2 and the decision in Aquavita International SA
1
Glendive Enterprise Ltd v. AsaPura Minechem Limited , and accepted
that the terms of the COA specified that the shipments were to be made
on a ‘fairly evenly spread’ basis. The Arbitral Tribunal observed that as
per the customs and usage of the shipping industry the term ‘fairly
evenly spread’ would apply to the COA and accordingly, the shipments
were to be made with a gap of 44 to 45 days during the term of the COA.
The Arbitral Tribunal accepted Noble’s contention that the stems were
not declared by SAIL on a ‘fairly evenly spread’ basis.

1
(2015) EWHC 2807 (QB)

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39. The Arbitral Tribunal determined the issue whether a second
addendum was entered into between the parties (Addendum dated
05.01.2012) or whether the same was merely a proposed addendum for
extension of the terms of the COA till 30.09.2013 on the basis of the
material placed by the parties. The Arbitral Tribunal considered the
communications between the parties including the email dated
05.01.2012, (which discussed the terms of the said addendum) and
email dated 12.01.2012 addressed by representative on behalf SAIL
seeking time for approval of the terms of the Addendum dated
05.01.2012. And, held that there was no consensus arrived at between
the parties with regard to the second addendum dated 05.01.2012,
which sought to extend the period of the COA to 30.09.2013 and that
the parties continued operations under the impression that the said
addendum had not come into effect.
40. As noted above, the principal controversy centered around the
termination of the COA by SAIL under Clause 62 of COA by email
dated 02.01.2013. The Arbitral Tribunal interpreted the said clause and
observed that a strict reading of Clause 62 of the COA shows that the
COA can be terminated under the said Clause in the following two
circumstances:
“(a) In case suppliers fail to provide the material to the
charterer. Obviously, therefore charterer would be
justified in not making any shipments.
(b) In case there is a late supply by the supplier, the
charterer would not be able to ship the materials by
the time or times agreed upon. Again, the charterer

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would be justified in not making the shipments in
time.”
41. The Arbitral Tribunal did not accept that the part of Clause 62 of
the COA that read as “Suppliers/Charterers in any manner or otherwise
fail to perform the contract”, permitted SAIL to terminate the COA
without cause. The Arbitral Tribunal held that the COA could be
terminated under Clause 62 of the COA on account of circumstances
beyond the control of the respondent (SAIL) and the termination e-mail
did not terminate the COA under such circumstances.
42. The Arbitral Tribunal interpreted Clause 61 of the COA as one
enabling both parties to terminate the COA on account of force majeure
events. The Arbitral Tribunal accepted that Clause 62 of the COA,
permitted only SAIL to terminate the contract without any liability for
either party. But did not accept that the intention of Clause 62 was not
to grant SAIL unbridled, unilateral and absolute powers to terminate the
contract at its will or for commercial expediency.
43. The Arbitral Tribunal held that SAIL was not justified in
terminating the COA by virtue of the termination e-mail under the
default clause (Clause 62 of the COA).
44. The Arbitral Tribunal denied SAIL’s claim that Noble was in
breach of the COA including by reason of substitution of the vessels to
perform the shipments. SAIL’s contentions that Noble’s conduct led to
renunciation/ repudiation/ breach of the COA and that the contract stood
frustrated by virtue of the unprecedented economic meltdown, were
rejected.

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45. Noble’s contention that proper notice of force majeure was not
given for non-declaration of the stems by SAIL during the period from
December, 2010 to 20.06.2011 during which force majeure events
occurred in Australia, was rejected on the ground that the COA was not
terminated by the termination e-mail on account of force majeure events
(under Clause 61 of the COA).
46. The Arbitral Tribunal granted damages to Noble for breach of the
COA by SAIL. The Arbitral Tribunal accepted that laycans were due
during December 2012, March 2013, May 2013 and August 2013 as the
stems were to be declared on ‘fairly evenly spread’ basis. The measure
of damages was taken as the difference between the contract price
(COA rates) and the spot market rate at the time of the breach of the
COA. The Arbitral Tribunal dismissed the Baltic Index method and the
Forward Pricing method for evaluating the quantum of damages. The
quantum of damages calculated by Ms Jean Richards based on the spot
market rate was also not accepted.
47. Noble’s claim of damages, quantified at USD 8,524,908.60, was
allowed. Furthermore, interest at the rate of 3% per annum was granted
from 02.01.2013 (date of termination of the COA) till the date of the
award. The Arbitral Tribunal also awarded future interest at the rate of
9% per annum in case of default in payment of the amount awarded
within a period of three months. The operative part of the impugned
award is set out hereinbelow:
“AWARD

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NOW, FOR THE REASONS GIVEN ABOVE, I,
JUSTICE S. S. NIJJAR (RETD.) HEREBY AWARD,
ORDER, AND DIRECT THAT:
(1) The Respondent shall pay to the Claimant a sum of
USD 8,524,908.60, with interest @ 3% p.a. from the
date of the issuance of the letter of termination by
the Respondent i.e. 02.01.2013, within a period of
three months from the date of the Award. In the
event of default the amount awarded together with
interest shall be paid @ of 9% p.a. from the date of
the award, till payment.
(ii) The Parties shall bear their own costs for the entire
proceedings.”
T HE I MPUGNED J UDGEMENT
48. The learned Single Judge partially allowed the challenge raised
by SAIL to the impugned award.
49. The learned Single Judge noted SAIL’s submissions that there
was a typographical error in the amount as awarded in favour of Noble.
And, sum of USD 8,524,908.60 was awarded in favour of Noble in
place of USD 8,506,669.6. This was accepted by counsel appearing for
Noble.
50. The learned Single judge accepted SAIL’s contention that the
Arbitral Tribunal had misinterpreted Clause 62 of the COA. The learned
Single Judge found that the Arbitral Tribunal had proceeded on an
erroneous assumption that the power to unilaterally terminate the COA
under Clause 62 of the COA would render the said Clause void under
Sections 23 and 28 of the Indian Contract Act, 1872 (hereafter the

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 20 of 58

2
Contract Act ). The learned Single Judge referred to certain authorities ,
and held that a contractual clause conferring the power to unilaterally
terminate a contract, on a party would not render the same void.
51. The Arbitral Tribunal’s decision that Clause 62 of the COA
would have to be read ejusdem generis with other provisions of the
contract was also rejected. The learned Single Judge held that there was
no ambiguity in the language of Clause 62 of the COA and thus, the
same was to be read literally.
52. The learned Single Judge took notice of the limited jurisdiction
of a court under Section 34 of the A&C Act, however, observed that in
case of an ex facie incorrect interpretation of a contract by an Arbitral
Tribunal, the arbitral award would be liable to be set aside. It was
observed that the interpretation of the Arbitral Tribunal with respect to
Clause 62 of the COA being applicable only if the reason for such
termination was outside the control of the Charterer (SAIL), was
fallacious and unsustainable in law.
53. The learned Single Judge also faulted the Arbitral Tribunal’s
decision to hold that that the termination of the COA by SAIL was
wrongful as the same was based on an erroneous interpretation of the
provisions of the COA.

2
Her Highness Maharani Shantidevi P.Gaikwad vs. Savjibhai Haribhai Patel & Ors.: (2001) 5 SCC
101, Central Bank of India Ltd, Amritsar vs. Hartford Fire Insurance Co., Ltd.: AIR 1965 SC 1288,
M/s Classic Motors Ltd. v. Maruti Udyog Ltd.: 1996 SCC OnLine Del 872, Oil and Natural Gas
Corporation Ltd., Mumbai v. M/s Streamline Shipping Co. Pvt. Ltd.: 2002 SCC OnLine Bom 303,
Altus Group India Pvt. Ltd. vs. Darrameks Hotels & DevelopersPvt Ltd.: MANU/DE/1362/2018

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54. The learned Single Judge referred to the decision of the Supreme
3
Court in Juggilal Kamlapat v. Pratapmal Rameshwar and held that a
contract could be repudiated on any ground existing at the time of such
repudiation, regardless of whether the ground was stated in the
correspondence communicating such repudiation.
55. The damages awarded by the Arbitral Tribunal on account of
failure to declare stems after the termination of the COA, were set aside
with the observation that SAIL could not be held responsible to loss
occasioned after the COA was terminated. The claim for damages for
the stem that was required to be declared prior to the issuance of the
termination e-mail – that is prior to the termination of the COA – being
a sum of USD 2,013,585.60, was upheld. The learned Single Judge
reasoned that the termination of the COA could not be construed to be
effective retrospectively to absolve SAIL of its liability for the breach
during the period prior to the termination of the COA. However, SAIL’s
contention that the amount awarded would have to be reduced by 1.25%
payable as brokerage, was accepted.
56. The learned Single Judge found the method adopted by the
Arbitral Tribunal for determining the quantum of damages, being the
difference between the contract price (COA rates) and the spot market
rate at the time of the breach of the COA, was reasonable and accepted
the same.

3
(1978) 1 SCC 69

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57. The objection raised by SAIL regarding the rate of interest
awarded on the awarded amount – that is, 3% from the date of issuance
of the termination e-mail till the date of the impugned award and 9%
from the date of the impugned award till the date of payment – was
allowed by the learned Single Judge in view of the decision of the
Supreme Court in Vedanta Limited v. Shenzhen Shandong Nuclear
4
Power Construction Co. Ltd . .
58. The learned Single Judge set aside the interest awarded by the
Arbitral Tribunal and awarded interest at the London Interbank Offered
Rate (LIBOR) plus 3% per annum.
S UBMISSIONS
59. Mr Ramabhadran, learning senior counsel appearing for Noble
submitted that the learned Single Judge had, in effect, attempted to re-
adjudicate the disputes between the parties, which is impermissible. He
contended that the learned Single Judge had exceeded the remit of
Section 34 of the A&C Act by expansively construing the same and
supplanting its opinion in place of that of the Arbitral Tribunal. He
contended that the impugned award could be assailed only on the
ground of conflict with public policy as explained by the Supreme Court
5
in Renusagar Power Company Limited v. General Electric Company .
He submitted that even if it was found that there was contravention of
any statute, the same would not render an arbitral award in conflict with
the public policy of India if it did not affect national interest as held by

4
2019 (11) SCC 465
5
1994 SCC SUPL. (1) 644

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this Court in National Highways Authority of India v. GVK Jaipur
6
Expressway Private Limited .
60. He submitted that the learned Single Judge had erred in
proceeding on the basis that the Arbitral Tribunal’s decision to interpret
Clause 62 of the COA rested only on the ground that if the clause is
interpreted in the manner as canvassed by SAIL, it would be void. He
submitted that a plain reading of the impugned award indicated that the
learned Arbitral Tribunal had examined Clause 62 of the COA and had
interpreted the same in reference to the context, which was neither
perverse nor implausible. He submitted that an interpretation of an
agreement by an arbitrator is not amenable to challenge under Section
34 of the A&C Act unless it is an impossible interpretation. Further,
such a challenge would fall within the scope of patent illegality and
within the scope of conflict with the public policy of India.
61. He also submitted that by virtue of amendment to Section 28(3)
of the A&C Act, the Arbitral Tribunal was required to render an award
having regard to the terms of the COA. The said amendment was
introduced to remove the basis of the decision of the Supreme Court in
7
Oil and Natural Gas Corporation Limited v. Saw Pipes Limited . He
contended that in the present case, the Arbitral Tribunal had rendered
the decision having due regard to the provisions of the COA and thus,
the Arbitral Tribunal’s decision could not be faulted.

6
2023 SCC OnLine Del 3790
7
(2003) 5 SCC 705

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62. Lastly, he submitted that the learned Single Judge had also erred
in amending the impugned award by modifying the award of interest.
He contended that pre-award interest at the rate of 3% and future
interest at the rate of 9%, could not be considered as unreasonable or
patently illegal.
63. Mr Rajshekhar Rao, learned senior counsel appearing for SAIL
countered the aforesaid submissions. He supported the decision of the
learned Single Judge that the Arbitral Tribunal’s interpretation of
Clause 62 of the COA to the effect that it did not entitle SAIL to
terminate the COA at its discretion and without reason, was erroneous.
He contended that the learned Single Judge had, thus, rightly set aside
the impugned award on the ground of an erroneous interpretation of the
said Clause. He submitted that the Arbitral Tribunal had, by interpreting
Clause 62 of the COA in the manner that it had, re-written the bargain
between the parties and the same would be contrary to the public policy
of India. He relied on the decisions of the Supreme Court in Ssangyong
Engineering and Construction Co. Ltd. v. National Highways
8
Authority of India and PSA SICAL Terminals Pvt. Limited v. Board
9
of Trustees of V.O. Chidambaran Port Trust Tuticorin and Ors. in
support of his contention.
64. Whilst, Mr Rao supported the findings of the learned Single
Judge faulting the impugned award regarding the interpretation of
Clause 62 of the COA, he also assailed the impugned judgment to the

8
(2019) 15 SCC 131
9
2021 SCC OnLine SC 508

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extent the learned Single Judge had upheld the award of damages
arising out of the stem due in December, 2012 as the same was prior to
SAIL terminating the COA. He submitted that sustaining the impugned
award to the said extent, notwithstanding that the foundation of the
impugned award had been set aside, amounted to modification of the
impugned award, which is impermissible. He referred to the decision of
the Supreme Court in Project Director, National Highways No.45E
and 220 National Highways Authority of India v. M. Hakeem and
10
Another and submitted that the Court has no jurisdiction to modify an
arbitral award in proceedings under Section 34 of the A&C Act. He
contended that since the learned Single Judge had set aside the
impugned award on the basis of an erroneous interpretation of Clause
62 of the COA, there was no scope for further sustaining any part of the
impugned award.
65. He submitted in the alternative that, the assumption that there was
any stem due in December, 2012 was also not based on any adjudication
of the said question. He submitted that the parties had by their conduct
waived the condition for FES and therefore, the assumption that any
stem was due in December, 2012, was, ex facie , erroneous.
66. Next, he submitted that in any event, there were no stems that
could have been declared on account of force majeure conditions. Thus,
the question of award of damages for failure to declare stems did not
arise.

10
(2021) 9 SCC 1

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67. Lastly, he submitted that the quantification of damages was also
unsustainable on two grounds. First, that it was erroneous to compute
damages on the basis of contractual rate of freight and spot market rate
and, the same would be violative of Section 73 of the Contract Act. He
contended that the COA was a long-term contract and damages could
not be ascertained on the basis of spot market rates, which were not
comparable to the freight rates as agreed. Thus, the damages were
required to be worked out on the basis of rates as applicable for a long-
term agreement such as the COA. Second, he submitted that Noble had
led no evidence to establish the loss suffered by it. He contended that
Noble had a back-to-back service agreement with Noble Chartering Ltd.
and therefore, the only possible loss suffered by Noble would be the
difference between the freight rates under the COA and the rates
negotiated by Noble on a back-to-back basis. However, the said
Agreement between Noble and Noble Chartering Ltd. was not brought
on record. He also contended that the obligation of Noble to arrange a
vessel would arise, when a stem is declared. Since no stem was
declared, Noble had not suffered any loss.
68. It is important to note that the counsel had submitted their written
submissions. But, apart from the submissions as briefly noted above, no
other submissions were advanced or pressed before this Court.
69. As noted above, before the learned Single Judge, it was
contended on behalf of SAIL that there was a typographical error in
calculation of the amount awarded but no such contention was advanced

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in these proceedings. This was also brought to the notice of the learned
senior counsel by this Court.
R EASONS AND C ONCLUSION
70. At the outset, it is relevant to note that SAIL had assailed the
impugned award before the learned Single Judge on several grounds
including that the COA was not a binding agreement but was merely a
document expressing the intention of the parties to enter into a separate
contract of affreightment. The said contention was neither accepted by
the learned Arbitral Tribunal nor by the learned Single Judge. The
learned counsel for SAIL did not press this contention before this Court
and did not dispute that the COA was a binding agreement. It is, thus,
not necessary to address SAIL’s challenge to the impugned award on
this ground.
71. SAIL’s challenge to the impugned award centers around the
Arbitral Tribunal’s decision to hold that Clause 62 of the COA did not
entitle SAIL to terminate the COA at will and on account of its failure
to declare stems. According to SAIL, Clause 62 of the COA is a ‘no-
fault’ termination clause and it entitled SAIL to terminate the COA at
will. The Arbitral Tribunal has held otherwise.
72. The Arbitral Tribunal also observed that construing Clause 62 of
the COA in the manner as contended by SAIL would render it
vulnerable to being declared void under Sections 23 and 28 of the
Contract Act. The learned Single Judge held that the said
“interpretation was predicated on the finding of the Arbitrator that the

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plain reading of the clause would make the clause vulnerable as being
declared void ” . The learned Single Judge faulted the said conclusion
on the ground that a clause enabling unilateral termination of a contract
by one party could not be construed to be void as being contrary to
public policy. The learned Single Judge held that once the foundation
of interpretation of the contractual Clause is found to be incorrect, the
Arbitral Tribunal’s interpretation of Clause 62 of the COA could not be
sustained.
73. It is important to note that it was not Noble’s case before the
Arbitral Tribunal that Clause 62 of the COA was void. It was also not
its contention that construing Clause 62 of the COA as a no-fault
‘default clause’ entitling SAIL to terminate the COA at will would
render it void as falling foul of Sections 23 or 28 of the Contract Act.
74. The controversy in the present appeal is, essentially, two-fold.
First, whether the Arbitral Tribunal’s interpretation of Clause 62 of the
COA rests substantially on the aforesaid premise. And second whether
the Arbitral Tribunal’s interpretation rendered the impugned award
vulnerable under the public policy exception under Section 34(2)(b)(ii)
of the A&C Act.
75. At this stage, it is relevant to refer to Clauses 61 and 62 of the
COA as the controversy regarding interpretation of those Clauses is
central to SAIL’s challenge to the impugned award. The said Clauses
are set out below:
“61. Force Majeure Clause

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If either shippers/Charterers be prevented from
discharging their or its obligations under this
agreement by reason of arrests or restraints by
Government or people, war, blockade,
revolution, insurrection, mobilization, strikes,
civil commotions, acts of God, plague or other
epidemics, breakdowns of mining, rail, road or
port equipment, destruction of materials by fire or
flood or other natural calamity interfering with
production, loading or discharging, the
obligations under this agreement shall be deferred
to a date to be agreed considering the length of
time required to resume natural operations.
However, if any one occurrence of force majeure
continues uninterrupted for 30 days or more or if
the total of such occurrence within the agreed
shipment period adds to 90 days or more,
Owners/Charterers may opt to cancel this
agreement without in any way being liable to the
other party for such cancellation.
Party invoking protections under such clause will
put the other party on notice within a reasonable
period of time supported by certificate from
chamber of commerce or concerned government
authority or concerned authority or company
secretary and shall likewise intimate cessation of
such causes.
The delivery shall be resumed by the party/parties
after cessation of Force Majeure causes.
62. Default
Should Suppliers/Charterers fail to provide
materials for shipment or to ship the materials by
the time or times agreed upon or should
Suppliers/Charterers in any manner or otherwise,

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fail to perform the contract or should a Receiver
be appointed on its assets or make or enter into
any arrangements or composition with creditors
or suspend payments (or being a company should
enter into liquidation either compulsory or
voluntary) the Suppliers/Charterers shall be
entitled to declare the contract as at an end
without any liabilities on either side.”
76. Concededly, it was not Noble’s case that construing Clause 62 of
the COA to mean that SAIL had a unilateral right to terminate the COA
at will, would render it void on the ground of public policy. It was
Noble’s case that on a proper construction of Clause 62 of the COA, it
could not be construed to empower SAIL to terminate the COA without
any reason and on account of its own default.
77. It is, thus, necessary to carefully examine the Arbitral Tribunal’s
interpretation of Clause 62 of the COA and the reasons for the same.
78. The Arbitral Tribunal noted that the real bone of contention
between the parties is a part of the said Clause, which entitled SAIL to
declare the COA at an end without any liability on either side if the
“ suppliers/charterers in any manner or otherwise fail to perform the
contract ”. SAIL claimed that the aforesaid part of Clause 62 of the COA
entitled it to terminate the COA as it thought fit.
79. The Arbitral Tribunal rejected the aforesaid submission for a
number of reasons as set out briefly in Paragraphs 150 and 151 of the
impugned award. The same are set out below:
“150. I am unable to accept the aforesaid submission of the
Respondent for a number of reasons.

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(i) Such an interpretation of Clause 62 would render
the same to be vulnerable to being declared void
under Section 23 of the Indian Contract Act,
1872. Such an interpretation would be forbidden
being contrary to Section 73 of the Indian
Contract Act, 1872 (hereinafter referred as “the
Contract Act, 1872”).
(ii) It would be in violation of Section 23 read with
Section 28 of the Contract Act, 1872. It is a well-
settled proposition of law that parties cannot
contract against the statute.
(iii) The words “ Suppliers/Charterers in any manner
or otherwise fail to perform the contract ” cannot
be read in isolation. These words have to be
construed in such a way as not to destroy the
sanctity of the contract. Therefore, the aforesaid
words have to be read eusdem generis to the
other terms within this clause. It is notable that
under Clause 62 the Respondent is entitled to
declare the contract as at an end, in case the
Respondent is unable to declare a stem which for
circumstances are akin to the circumstances
described under Clause 61 of the Case 1
Agreement. The only difference between Clause
61 and Clause 62 of the Case 1 Agreement is that
under Clause 61 the inability to declare the stems
by the Respondent is caused by circumstances
beyond the control of the Claimant or the
Respondent. Under Clause 62 is the inability of
the Respondent in circumstances not under the
control of the Respondent.
(iv) Therefore, in my opinion, the term
“ Suppliers/Charterers in any manner or
otherwise fail to perform the contract ” would be
applicable when it is not possible for the
Respondent to perform its obligations under the

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 32 of 58

COA, in circumstances similar to those in the
opening and the closing of Clause 62. The term
in any manner or otherwise if not so defined
would be inconsistent with the opening and the
closing parts of Clause 62. It is well settled that
when a clause in a contract is open to two
constructions, one which will give effect to the
contract, while the other will render one or more
of them nugatory, it is the former that should be
adopted on the principle expressed in the maxim
“ ut res magis valeat quam pereat. ”
(v) In Halsbury's laws of England , Vol.32 (2012),
para 435 , the above principle of interpretation is
stated thus:
“Where particular things named (in a
document) have some common
characteristics which constitute them as a
genus and the general words (following
an enumeration of specific things or
classes of things) ca be properly regarded
as in the nature of a sweeping clause
designed to guard against accidental
omission, then the rule of ejusdem
generis will apply, and the general words
will be restricted to things of the same
nature as those which have been already
mentioned; but the absence of a common
genus between the enumerated words
will not necessarily prevent a restricted
construction of the general words if
justified by the context. The ejusdem
generis construction will be assisted if
the general scope or the language of the
deed, or the particular clause, indicates
that the general words should receive a
limited construction will produce some
unforeseen loss to the grantor.”

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 33 of 58

(vi) The aforesaid words do not permit the
Respondent to invoke Clause 62 of the Case 1
Agreement for any of the reasons mentioned in
the letter of termination dated 02.01.2013.
(vii) The second paragraph of the letter of
termination dated 02.01.2013 only makes a
reference to different events and circumstances
adversely effecting the subject agreement. It is
well settled that a party cannot be absolved of its
liability perform Its obligations under the
contract, merely because due to some extraneous
circumstances, the performance of the contract
has become onerous. See (1) Alopi Prasad and
Sons v Union of India; (1960) 2 SCR 793
(Paras 22 and 24); (ii) Travancore Devaswom
Board Vs. Thanath International; (2004) 13
SCC 44 ( Paras 12 and 13 ).
(viii) The third paragraph of the letter of termination
dated 02.01.2013 makes general allegations that
the Claimant has imposed extraneous demands
which were beyond the scope of the COA. This
cannot be accepted as the Respondent has failed
to give any particulars of the alleged extraneous
demands which were beyond the scope of the
COA.
(ix) The fourth paragraph of the letter of termination
dated 02.01.2013, firstly affirms that SAIL has
continued to honour the agreement. It is then
alleged that harassment was caused to the
Respondent, as and when vessels were
substituted by the Claimant as well as by the
delayed arrival of vessels etc. This reason is also
without any basis as substitution of the vessels is
permitted under Clause 5 of the COA. In any
event, all the substitutions and delayed arrivals
were accepted by the Respondent.

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 34 of 58

151. In my opinion that the facts and circumstances
narrated in the letter dated 02.01.2013 would not
justify the termination of the COA under Clause 62.”
[emphasis added]
80. It is apparent from the above that apart from mentioning that
SAIL’s interpretation of Clause 62 of the COA is violative of Sections
23, 73 and 28 of the Contract Act – which was not Noble’s case – the
Arbitral Tribunal also furnished several other reasons for arriving at the
conclusion. The main reason being the construction of Clause 62 of the
COA in conformity with other clauses of the COA. It is clear that
according to the Arbitral Tribunal, part of the Clause 62 of the COA,
which was relied upon by SAIL could not be read in isolation and the
manner as contended by SAIL. According to Arbitral Tribunal the same
was required to be read in the context of the other terms as well as the
nature of the COA.

81. At least one decision of this Court – Simplex Concrete Piles
11
(India) Limited v. Union of India . – has held that a clause of a
contract, which prohibits a claim of damages for breach of contract by
the other party, would be opposed to public policy. Although this view
has not found much acceptance, the proposition is not alien to legal
jurisprudence. The learned Single Judge may be right in its conclusion
that the Arbitral Tribunal’s observations to the effect that enabling a
party to unilaterally terminate the contract without any consequences
would render the Clause void, is erroneous. But the key question is

11
2010 SCC OnLine Del 821

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 35 of 58

whether such interpretation renders the impugned award in conflict with
public policy of India. In this context the fact that a similar view had
found acceptance by a court may be of some significance. However, it
is not necessary to delve any deeper into the question whether literal
interpretation of an expression in Clause 62 of the COA would render
it void. This is because it is clear that the Arbitral Tribunal’s
construction of Clause 62 of the COA was largely founded on the
contextual interpretation of the said Clause.
82. This is apparent from the further detailed reasoning provided by
the Arbitral Tribunal. The Arbitral Tribunal accepted that in construing
a clause of a contract, the words and expressed terms are required to be
given their plain meaning unless the same lead to any absurdity or
results in making the said clause otiose. The Arbitral Tribunal
proceeded to consider SAIL’s contention that Clause 62 of the COA
was required to be read literally as well as the decision in the case of
Rajasthan State Industrial Development and Investment Corporation
12
& Anr. v. Diamond & Gem Development Corporation Ltd. & Anr.
which was relied upon by SAIL in support of its contention. The
Arbitral Tribunal rejected the contention that the said decision
supported SAIL’s contention. The Arbitral Tribunal held that the
expression “ Suppliers/Charterers in any manner or otherwise fail to
perform the contract ” in Clause 62 of the COA would have to be read
in the context of the other words contained in Clause 62 of the COA.
The Arbitral Tribunal found that the said expression enabled SAIL to

12
(2013) 5 SCC 470

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 36 of 58

terminate the COA only when it was helpless in performing the same
and not at its will or for commercial reasons. The Arbitral Tribunal did
not accept that SAIL would be entitled to terminate the contract as it
had become commercially unprofitable to perform the same.

83. The Arbitral Tribunal accepted Noble’s contention that the said
clause must be given a purposive interpretation to give effect to the joint
intent of the parties. The Arbitral Tribunal supported the said view by
interpreting Clauses 61 and 62 of the COA as exceptions, which release
the parties from their obligations to be performed under the COA.
Plainly, such exceptions could not entail an absolute unfettered
discretion to terminate the COA at will.
84. The Arbitral Tribunal also reasoned that if the intent of the parties
was to give SAIL an unguided power to terminate the COA, the clause
would have simply read so. The Arbitral Tribunal also found that the
literal reading of the expression “ suppliers/charterers in any manner or
otherwise fail to perform the contract ” would render it inconsistent with
the first part and the last part of the same Clause.
85. The Arbitral Tribunal held that in such circumstances, the
construction of the expression, which is different from its literal
meaning, must be accepted. The Arbitral Tribunal also referred to the
decisions of the Privy Council in Raneegunge Coal Association Ltd. v.
13
Tata Iron and Steel Co. Ltd. and of the Supreme Court in Radha
14
Sundar Dutta v. Mohd. Jahadur Rahim & Ors. as supporting such a

13
1940 SCC OnLine PC 36
14
1959 SCR 1309

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 37 of 58

view. In addition, the Arbitral Tribunal held that accepting SAIL’s
interpretation would render Clause 61 of the COA redundant. It
observed that if one interpretation would render Clause 61 of the COA
as redundant and two constructions are possible, the one which would
give effect to the other provisions of the contract, must be accepted. The
aforesaid reasoning of the Arbitral Tribunal informed its decision that
SAIL’s termination of the COA was invalid.
86. The relevant extract of the impugned award, which clearly
reflects the aforesaid reasoning of the Arbitral Tribunal, is reproduced
below:
“153. The Claimant has relied on the Judgment of the
Hon’ble Supreme Court of India in Rajasthan State
Industrial Development and Investment
Corporation & Anr. Vs. Diamond & Gem
Development Corporation Ltd & Anr . [ (2013) 5
SCC 470) (Para 23) , wherein it is held as under:
“23. A party cannot claim more than what is covered
by the terms of contract, for the reason that
contract is transaction between the two parties
and has been entered into with open eyes and
understanding the nature of contract. Thus,
contract being a creature of an agreement
between two or more parties, has to be
interpreted giving literal meanings unless, there
is some ambiguity therein. The contract is to be
interpreted giving the actual meaning to words
contained in the contract and it is not permissible
for the court to make a new contract, however
reasonable, if the parties have not made it
themselves. It is to be interpreted in such a way
that its terms may not be varied. The contract has

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 38 of 58

to be interpreted without any outside aid. The
terms of the contract have to be construed strictly
without altering the nature of the contract, as it
may affect the interest of either of the parties
adversely.”
154. I am of the opinion that the aforesaid observations do
not support the submissions of the Respondent. The
expression “Suppliers/Charterers in any manner or
otherwise fail to perform the contract” would have to
be read in the context of the provision contained in
Clause 62. The Clause is clearly intended to enable
the Respondent to declare the contract to be at an end
when it is helpless in performing the contract.
*
156. The Claimant in support of its submission that the
Contract must be given a purposive interpretation
relied on DLF Limited ( Supra ) wherein it is held as
follows:
“13. It is a settled principle in law that a contract is
interpreted according to its purpose. The
purpose of a contract is the interests,
objectives, values, policy that the contract is
designed to actualise. It comprises the joint
intent of the parties. Every such contract
expresses the autonomy of the contractual
parties' private will. It creates reasonable,
legally protected expectations between the
parties and reliance on its results. Consistent
with the character of purposive interpretation,
the court is required to determine the ultimate
purpose of a contract primarily by the Joint
intent of the parties at the time the contract so
framed. It is not the intent of a single party, it
is the joint intent of both the parties and the
joint intent of the parties is to be discovered

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 39 of 58

from the entirety of the contract and the
circumstances surrounding its formation.
14. As is stated in Anson’s Law of Contract:
‘a basic principle of the common law of contract
is that the parties are free to determine for
themselves what primary obligations they will
accept.... Today, the position is seen in a
different light. Freedom of contract is
generally regarded as a reasonable, social,
ideal only to the extent that equality of
bargaining power between the contracting
parties can be assumed and no injury is done
to the interests of the community at large’
15. The Court assumes:
‘that the parties to the contract are reasonable
persons who seek to achive reasonable results,
fairness and efficiency....In a contract between
the joint intent of the parties and the intent of
the reasonable person, joint intent trumps, and
the judge should interpret the contract
accordingly’”
157. The aforesaid observations leave no manner of doubt
that the Clauses of the Contract should be interpreted
to give effect to the Joint intent of the parties. The
Court is required to determine the ultimate purpose
of a contract. This has to be determined primarily on
the basis of the joint intention of the parties at the
time the contract was formed.
158. Applying the aforesaid test it becomes apparent,
from a bare perusal of the opening paragraphs of the
COA, that the parties had mutually agreed that a
Cargo of 18,00,000 MT of Coking Coal shall be
shipped from specified ports in America to the
specified ports in India. It has been held earlier in the

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Award that the parties had entered into a COA with
binding rights and obligations on both the parties.
The Contract is to be performed in a specified period
of time. The shipments are to be made at Fairly,
Evenly, Speared (FES) periods, over three (3) years.
Both the parties may opt to cancel the Agreement
under the Force Majeure Clause 61 of the Case 1
Agreement. Clause 62 of the Case 1 Agreement gives
an option to the Respondent to declare the Contract
as at an end without any liabilities on either side.
Clauses 61 and 62 are exceptions which release
either one or both parties from obligations to be
performed under the COA.
159. The Respondent has placed strong reliance on the
observations made by the Hon’ble Supreme Court in
the cases of (i) Her Highness Maharani Shantidevi
P. Gaikwad vs. Savjibhai Haribhati Patel ; (2001) 5
SCC 101 . In paragraph 56 it has been observed as
follows:
*
(ii) Hajee S.V.M. Mohamed Jamaludeen Bros &
Co. vs. Govt. of T.N. ; (1997) 3 SCC 466 . In
paragraph 18 it has been observed as follows:
*
(iii) Crompton Greaves v. Dyna Technologies ; 2007
4 Arb. LR 228 (Mad) . In paragraph 16 it has been
observed as follows:
*
(iv) ONGC v. WIG Bros. Builders & Engineers (P)
Ltd. ; (2010) 13 SCC 377 . In paragraph 7 it has
been observed as follows:
*

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160. I am of the opinion that the aforesaid judgments do
not affect in any manner the plea put forward by the
Claimant. It is not the case of the Claimant that
Clause 62 per se would interfere with the integrity of
the contract. It is also not the submission of the
Claimant that the Clause should be declared void
only on the ground that it gives the Respondent
absolute right to cancel the contract. Therefore the
submissions made by the Ld. Senior Counsel of the
Claimant cannot be said to be contrary to the law laid
down by the Supreme Court and the Madras High
Court in the judgments noted above.
161. I find merit in the submissions of the Claimant that
Clause 62 would not entitle the Respondent to
terminate the Agreement whimsically or at will. It
could also not be terminated for the reasons stated in
the letter of termination dated 02.01.2013.
162. The reasons mentioned by the Respondent in the
letter of termination dated 02.01.2013, would tend to
indicate that the Respondent was finding it un-
economical to perform its obligations. It seems to me
that letter of termination dated 02.01.2013 was
issued as a number of adverse circumstances had
made it onerous for the Respondent to perform its
obligations under the COA. I am of the opinion that
in such circumstances the Respondent could not have
invoked the Default Clause in Clause 62 of the Case
1 Agreement.
163. It is a settled proposition of law that a contract must
be read as a whole in order to ascertain the true
meaning of its several clauses. The words of each
clause should be interpreted so as to bring them into
harmony with the other provisions (North Eastern
Railway Co. v. Lord Hastings ; 1900 AC 260) .
Acceptance of the interpretation of clause 62 given
by the Respondent would result in making the same

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 42 of 58

redundant. If the Intention was to give a unilateral,
absolute and unbridled power of termination to the
Respondent the Clause would have simply provided
that “Suppliers/Charterers in any manner or
otherwise fail to perform the contract”. There was no
necessity to limit the first limb of Clause 62 to the
failure of the Mine Owners in USA or Australia to
supply coking coal to the Respondent. Similarly, the
second limb of the Clause would not have tied the
Inability of the Respondent to perform its obligations
on the receiver being appointed. Therefore I find no
merit in the submissions made on behalf of the
Respondent.
164. A bare perusal of Clause 62 of the case 1 Agreement
would show that the expression “Suppliers/
Charterers in any manner or otherwise fail to perform
the contract” is wholly inconsistent with the first part
and the last part of Clause 62. In similar
circumstances the Privy Council in the case of
Raneegunge Coal Association Ltd. Vs. Tata Iron
and Steel Co. Ltd. has observed as follows:
“.......The position accordingly is that that of the two
portions of the clause which disclose the
inconsistency, one is susceptible of a possible
construction different from its literal meaning,
while the other is not: and if the possible
construction is applied all inconsistency
disappears. That construction must therefore be
adopted. This alternative construction of the
clause is not, their Lordships think, open to the
objection which seems to have pressed upon the
Chief Justice. It does not convert a condition
precedent into anything other than a condition
precedent; nor does it involve having recourse to
the Calcutta market otherwise than on the
condition specified, except of course according
to the literal meaning of the words used. What

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the Courts in Bombay have done is, in order to
reconcile two apparent inconsistencies, to
attribute to the words used a meaning which the
words used are capable of bearing, though
different from their literal meaning. The
condition precedent so construed remains as a
condition precedent, and the condition specified
by the agreement is the condition as so
construed.”
165. In Radha Sundar Dutta versus Mohd. Jahadur
Rahim & Ors ; 1959 SCR 1309: AIR 1959 SC 24 ; the
Supreme Court sums up the rule on inconsistency as
follows:
“11. Now, it is a settled rule of interpretation that if
there be admissible two constructions of a
document, one of which will give effect to all the
clauses therein while the other will render one or
more of them nugatory, It is the former that
should be adopted on the principle expressed in
the maxim "ut res magis valeat quam
pereat........”
166. Furthermore, accepting the interpretation of the
Respondent would render Clause 61 of the COA as
redundant. It is a settled proposition of law that when
two constructions are possible to be given to a Clause
in the Contract, the one which would give effect to
the other provisions of the Contract must be
accepted. The interpretation which would render any
other clause(s) of the Contract redundant or nugatory
must be discarded.
167. Section 28(2) of the Arbitration and Conciliation
Act, 1996 specifically provides that the Arbitral
Tribunal shall decide the matter in accordance with
the terms of the contract. An Arbitrator cannot do
what he thinks is just and right. This legal position is

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 44 of 58

well settled. In the case of Associated Engineering
Co. vs. Government of Andhra Pradesh and another;
(1991) 4 SCC 93, it has been observed as follows…”
[emphasis added]
87. Whilst the Arbitral Tribunal made observations to the said effect
by construing Clause 62 of the COA in the manner as canvassed by
SAIL would render it vulnerable on the ground of public policy, the
Arbitral Tribunal’s interpretation of Clause 62 of the COA is not
founded on that reason alone. The Arbitral Tribunal’s decision is
founded on its finding that Clause 62 of the COA was required to be
construed in accordance with the nature of the contract (COA) and
SAIL’s interpretation of the said clause would render it inherently
conflicting.
88. SAIL’s contention that Arbitral Tribunal’s interpretation of
Clause 62 of the COA was plainly contrary to the language of the COA
and no other view is possible, is not persuasive. It is settled law that the
deed has to be construed as a whole. The intent of the parties is to be
ascertained by the language of the written contract read as a whole and
not by reading parts of the clauses of the contract literally dehors their
context. The Arbitral Tribunal undertook precisely the same exercise.
89. It is well settled that interpretation of a contract falls within the
jurisdiction of the Arbitral Tribunal, thus, it is the final adjudicator of
the said construction and its decision cannot be interfered unless it is
found that the Arbitral Tribunal’s view is not a possible one.

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90. In Assam State Electricity Board & Ors. v . Buildworth (P.)
15
Ltd . , the Supreme Court had observed that “matters relating to the
construction of a contract lie within the province of the Arbitral
Tribunal” and are not amenable to review on merits unless, the
interpretation is not a possible one.
16
91. In Associate Builders v. Delhi Development Authority the
Supreme Court reiterated the said proposition in the following words:
“42 . … 42.3 . … if an arbitrator construes aterm of
the contract in a reasonable manner, it will not mean
that the award can be set aside on this ground.
Construction of the terms of a contract is primarily
for an arbitrator to decide unless the arbitrator
construes the contract in such a way that it could be
said to be something that no fair-minded or
reasonable person could do.”
92. We are unable to accept that the Arbitral Tribunal’s interpretation
of Clause 62 of the COA is not a plausible one. The Arbitral Tribunal
has interpretated the said clause in the context of the COA and a merits
review of the said decision is not permissible.
93. In MSK Projects India (JV) Limited v State of Rajasthan &
17
Anr the Supreme Court had explained that even an error of
interpretation of a contract is an error within the jurisdiction of the
Arbitral Tribunal.

15
(2017) 8 SCC 146
16
(2015) 3 SCC 49
17
(2011) 10 SCC 573

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 46 of 58

94. We are unable to accept that this is a case where the Arbitral
Tribunal has re-written the bargain between the parties. The Arbitral
Tribunal has adjudicated the intent of the parties having due regard to
the terms of the COA.

95. The learned Single Judge had erred in proceeding on the basis
that the Arbitral Tribunal’s decision to interpret Clause 62 of the COA
rested on its reasoning that the literal reading of the clause would render
it void. That may have been one of the observations made by the
Arbitral Tribunal, but it is apparent that the Arbitral Tribunal’s
construction of Clause 62 of the COA rested on the interpretation of the
said clause in the context of the COA and having regard to the language
of the said Clause. The interpretation is founded on sound principles of
interpretation of deeds.
96. The learned Single Judge had also erred in not considering the
scope of examination in the present case. The learned Single Judge
failed to note that the impugned award was rendered in an international
commercial arbitration as defined under Section 2(1)(f) of the A&C
Act. Concededly, the impugned award cannot be assailed on the ground
of patent illegality as in terms of Section 34(2A) of the A&C Act, the
challenge to an arbitral award on the ground of patent illegality is not
available in respect of arbitral awards in an international commercial
arbitration. Thus, SAIL’s challenge to the impugned award was
required to be tested solely on the anvil whether the impugned award is
in conflict with the public policy of India.

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97. The Explanations to Section 34(2) of the A&C Act clarify the
scope of an arbitral award being in conflict with the public policy of
India and states that an arbitral award would be considered in conflict
with the public policy of India if there was fraud or corruption in the
making of the award; if it falls foul of the fundamental policy of India;
or offends the most basic notions of morality and justice.
98. Misinterpretation of terms of a contract would not render an
arbitral award vulnerable on the ground of the public policy exception.
99. In Ssangyong Engineering and Construction Co. Ltd. v.
18
National Highways Authority of India , the Supreme Court held that
the expression “fundamental policy of Indian law” would necessarily
have to be understood as explained in paragraphs 18 and 27 of its
19
decision in Associate Builders v. Delhi Development Authority and,
its earlier decision in Renusagar Power Co. Ltd. v. General Electric
20 21
Company . The relevant extract of the said decision is set out below:
“34. What is clear, therefore, is that the expression
“public policy of India”, whether contained in
Section 34 or in Section 48, would now mean the
“fundamental policy of Indian law” as explained in
paras 18 and 27 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] i.e. the fundamental policy of Indian law
would be relegated to “Renusagar” understanding of
this expression. This would necessarily mean that
Western Geco [ONGC v. Western Geco

18
supra
19
supra
20
supra
21
Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 48 of 58

International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12] expansion has been done away with. In
short, Western Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12], as explained in paras 28 and 29 of
Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would
no longer obtain, as under the guise of interfering
with an award on the ground that the arbitrator has
not adopted a judicial approach, the Court's
intervention would be on the merits of the award,
which cannot be permitted post amendment.
However, insofar as principles of natural justice are
concerned, as contained in Sections 18 and
34(2)(a)(iii) of the 1996 Act, these continue to be
grounds of challenge of an award, as is contained in
para 30 of Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
35. It is important to notice that the ground for
interference insofar as it concerns “interest of India”
has since been deleted, and therefore, no longer
obtains. Equally, the ground for interference on the
basis that the award is in conflict with justice or
morality is now to be understood as a conflict with
the “most basic notions of morality or justice”. This
again would be in line with paras 36 to 39 sof
Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], as it is
only such arbitral awards that shock the conscience
of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paras 18 and 27 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204], or secondly, that such
award is against basic notions of justice or morality

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 49 of 58

as understood in paras 36 to 39 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204]. Explanation 2 to Section
34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii)
was added by the Amendment Act only so that
Western Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC
(Civ) 12], as understood in Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204], and paras 28 and 29 in
particular, is now done away with.”
100. Paragraphs 18 and 27 of the decision in Associate Builders v.
22
Delhi Development Authority are set out below:
“18. In Renusagar Power Co. Ltd. v. General Electric
Co. [Renusagar Power Co. Ltd. v. General Electric
Co., 1994 Supp (1) SCC 644], the Supreme Court
construed Section 7(1)(b)(ii) of the Foreign Awards
(Recognition and Enforcement) Act, 1961:
“7. Conditions for enforcement of foreign
awards.—
(1) A foreign award may not be enforced under
this Act—
*
(b) if the Court dealing with the case is satisfied
that—
*
(ii) the enforcement of the award will be contrary
to the public policy.”

22
supra

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 50 of 58

In construing the expression “public policy” in the
context of a foreign award, the Court held that an
award contrary to
(i) The fundamental policy of Indian law,
(ii) The interest of India,
(iii) Justice or morality,
would be set aside on the ground that it would be
contrary to the public policy of India. It went on
further to hold that a contravention of the provisions
of the Foreign Exchange Regulation Act would be
contrary to the public policy of India in that the
statute is enacted for the national economic interest
to ensure that the nation does not lose foreign
exchange which is essential for the economic
survival of the nation (see SCC p. 685, para 75).
Equally, disregarding orders passed by the superior
courts in India could also be a contravention of the
fundamental policy of Indian law, but the recovery
of compound interest on interest, being contrary to
statute only, would not contravene any fundamental
policy of Indian law (see SCC pp. 689 & 693, paras
85 & 95).

27. Coming to each of the heads contained in Saw
Pipes [(2003) 5 SCC 705 : (2003) 5 SCC 705 : AIR
2003 SC 2629] judgment, we will first deal with the
head “fundamental policy of Indian law”. It has
already been seen from Renusagar [Renusagar
Power Co. Ltd. v. General Electric Co., 1994 Supp
(1) SCC 644] judgment that violation of the Foreign
Exchange Act and disregarding orders of superior
courts in India would be regarded as being contrary
to the fundamental policy of Indian law. To this it
could be added that the binding effect of the

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 51 of 58

judgment of a superior court being disregarded
would be equally violative of the fundamental policy
of Indian law.”
101. In HRD Corporation (Marcus Oil and Chemical Division0 v.
23
GAIL (India) Limited (Formerly Gas Authority of India Limited) ,
Ssangyong Engineering and Construction Co. Ltd. v. National
24
Highways Authority of India and Vijay Karia & Ors v. Prysmian
25
Cavi E Sistemi SRL & Ors , the Supreme Court explained that after
the amendment in the A&C Act introduced by the Arbitration &
Conciliation (Amendment) Act, 2015, Section 48 of the A&C Act,
which concerned the enforcement of a foreign award is amended to
delete the provision for declining enforcement of the foreign award on
the ground of “contrary to interest of India”. Further, Explanation 2 to
Section 48 of the A&C Act was added clarifying that the question
whether there is contravention of the fundamental policy of Indian law,
shall not entail a review on the merits of the dispute. Similarly,
Explanation 2 was added to Section 34(2)(b) of the A&C Act, which
clarify that the tests “as to whether there is a contravention with the
fundamental policy of Indian Law shall not entail a review on the merits
of the dispute”
102. Sub-section (2A) was also introduced in Section 34 of the A&C
Act, which would be applicable to arbitral awards other than those
delivered in an international commercial arbitration. In terms of said

23
(2018) 12 SCC 471
24
supra
25
(2020) 11 SCC 1

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 52 of 58

Sub-section, an arbitral award could be set aside if the same is vitiated
by patent illegality appearing on the face of the award.
103. It is relevant to note the following passages from the decision of
the Supreme Court in Vijay Karia & Ors. v. Prysmian Cavi E Sistemi
26
SRL & Ors. , as the same explain the scope of the public policy
exception:
“43. It will be noticed that in the context of challenge to
domestic awards, Section 34 of the Arbitration Act
differentiates between international commercial
arbitrations held in India and other arbitrations held in
India. So far as “the public policy of India” ground is
concerned, both Sections 34 and 48 are now identical, so
that in an international commercial arbitration conducted
in India, the ground of challenge relating to “public
policy of India” would be the same as the ground of
resisting enforcement of a foreign award in India. Why it
is important to advert to this feature of the 2015
Amendment Act is that all grounds relating to patent
illegality appearing on the face of the award are outside
the scope of interference with international commercial
arbitration awards made in India and foreign awards
whose enforcement is resisted in India. In this respect, it
is important to advert to paras 41 and 69 of Ssangyong as
follows:

“ 41. What is important to note is that a decision
which is perverse, as understood in paras 31
and 32 of Associate Builders , while no longer
being a ground for challenge under “public
policy of India”, would certainly amount to a
patent illegality appearing on the face of the
award. Thus, a finding based on no evidence at
all or an award which ignores vital evidence in

26
supra

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 53 of 58

arriving at its decision would be perverse and
liable to be set aside on the ground of patent
illegality. Additionally, a finding based on
documents taken behind the back of the parties
by the arbitrator would also qualify as a
decision based on no evidence inasmuch as
such decision is not based on evidence led by
the parties, and therefore, would also have to be
characterised as perverse.
*
69. We therefore hold, following the
aforesaid authorities, that in the guise of
misinterpretation of the contract, and
consequent “errors of jurisdiction”, it is not
possible to state that the arbitral award would
be beyond the scope of submission to
arbitration if otherwise the aforesaid
misinterpretation (which would include going
beyond the terms of the contract), could be said
to have been fairly comprehended as “disputes”
within the arbitration agreement, or which were
referred to the decision of the arbitrators as
understood by the authorities above. If an
arbitrator is alleged to have wandered outside
the contract and dealt with matters not allotted
to him, this would be a jurisdictional error
which could be corrected on the ground of
“patent illegality”, which, as we have seen,
would not apply to international commercial
arbitrations that are decided under Part II of the
1996 Act. To bring in by the backdoor grounds
relatable to Section 28(3) of the 1996 Act to be
matters beyond the scope of submission to
arbitration under Section 34(2) (a)(iv) would
not be permissible as this ground must be
construed narrowly and so construed, must
refer only to matters which are beyond the

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 54 of 58

arbitration agreement or beyond the reference
to the Arbitral Tribunal.”

This statement of the law applies equally to
Section 48 of the Arbitration Act.

44. Indeed, this approach has commended itself in other
jurisdictions as well. Thus, in Sui Southern Gas Co.
Ltd. v. Habibullah Coastal Power Co. (Pte) Ltd. , the
Singapore High Court, after setting out the legislative
policy of the Model Law that the “public policy”
exception is to be narrowly viewed and that an arbitral
award that shocks the conscience alone would be set
aside, went on to hold:

“ 48. It is clear, therefore, that in order for
SSGC to have succeeded on the public policy
argument, it had to cross a very high threshold
and demonstrate egregious circumstances
such as corruption, bribery or fraud, which
would violate the most basic notions of
morality and justice. Nothing of the sort had
been pleaded or proved by SSGC, and its
ambiguous contention that the award was
“perverse” or “irrational” could not, of itself,
amount to a breach of public policy.”

104. A plain reading of the above clearly indicates that the scope of
setting aside an arbitral award on the ground that it falls foul of public
policy of India is extremely narrow. The grounds that an arbitral award
is perverse or irrational does not necessarily qualify as a ground to set
aside an arbitral award on the ground that it is in conflict with the public
policy of India. Thus, even if we accept (which we do not) that the
Arbitral Tribunal’s interpretation of the COA is erroneous, the

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 55 of 58

impugned award could not be set aside on the ground of being in
conflict with the public policy of India.
105. The decision of the learned Single Judge to modify the award of
interest is also without jurisdiction. The Arbitral Tribunal had awarded
3% interest for the date of termination of the COA till the date of the
award. The said interest cannot be stated to be either perverse or
unreasonable. We are also unable to accept that the award of future
interest at the rate of 9% on the awarded amount conflicts with the
public policy of India. The learned Single Judge had referred to the
decision in Vedanta Limited v. Shenzhen Shandong Nuclear Power
27
Construction Company Limited and held that dual rates of interest are
impermissible.
106. The decision in Vedanta Limited v. Shenzhen Shandong
28
Nuclear Power Construction Company Limited is inapplicable in the
facts of this case. In the said case, the Arbitral Tribunal had awarded
interest at dual rates. The Arbitral Tribunal had held that “ interest @
9% per annum would be paid from the date of institution of the present
arbitration proceedings provided the amount is paid / deposited within
120 days of the award” . The Arbitral Tribunal had further held that if
the respondent fails to pay the amounts within 120 days from the date
of the award, the claimant would be entitled to further interest at the rate
of 15% per annum till realization of the amount. Thus, it does appear
that a higher rate of interest would be applicable depending on whether

27
supra
28
supra

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 56 of 58

the awarded amount was paid within the specified period of 120 days
or not. In the present case, the Arbitral Tribunal has awarded interest
at the rate of 3% per annum from the date of the Letter of Termination
(termination e-mail dated 02.01.2023) till the date of the impugned
award. The Arbitral Tribunal has also awarded interest for the post
award period at the rate of 9% per annum, which would commence after
three months from the date of the award. The pre-award interest is a
part of the awarded amount and covered under Clause (a) of Sub-section
(7) of Section 31 of the A&C Act while future interest at the rate of 9%
is covered under Clause (b) of Sub-section (7) of Section 31 of the A&C
Act.
107. This is not a case where the Arbitral Tribunal has awarded
interest at dual rates for the same period. The decision to modify the
interest awarded cannot be sustained for yet another reason: it is
impermissible to modify an arbitral award in proceedings under Section
29
34 of the A&C Act .
108. It is also relevant to note that in Pradeep Vinod Construction
30
Co. v. Union of India , this Court had held that the decision of the
Supreme Court in Vedanta Limited v. Shenzhen Shandong Nuclear
31
Power Construction Company Limited to modify the arbitral award
was in exercise of powers under Article 142 of the Constitution of India.

29
Project Director, National Highways No.45E and 220 National Highways Authority of India v.
M. Hakeem and Another ( supra )
30
2022 SCC OnLine Del 4937
31
supra

FAO(OS)(COMM) Nos.94/2019 & 121/2019 Page 57 of 58

109. In view of the above, Noble’s appeal is allowed and the impugned
judgment is set aside. In view of the aforesaid decision, SAIL’s appeal
fails and is accordingly, dismissed.

110. The parties are left to bear their own costs.


VIBHU BAKHRU, J




TARA VITASTA GANJU, J
JULY 15, 2024
‘gsr’/ RK/ M


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