Delhi HC Sets Aside Rejection Of MMTC Gold-Export Claims Over Late Payment And Returned Jewellery, But Awards No Money

MMTC supplied gold and packing credit to Chauhan Jewellers for export of jewellery under agreements providing for repayment with interest, recovery from export proceeds and other sources, and guarantees of financial liabilities and full realisation.

MMTC claimed ₹57,74,349, arising from five consignments: delayed realisation for CJ-25, CJ-26 and CJ-27; part realisation for CJ-31; and non-delivery and return of the jewellery for CJ-1.

The arbitral tribunal dismissed all claims and directed return of title deeds deposited as security.

The Delhi High Court Single Judge dismissed MMTC’s Section 34 challenge; MMTC appealed under Section 37.

The Court applied Sections 34 and 34(2A) of the Arbitration and Conciliation Act, 1996: a court does not reappraise evidence or substitute its preferred contractual interpretation for a permissible arbitral view; patent illegality must go to the root of the matter.

Under Section 37, appellate review remains subject to those limits.

An award must be read fairly and as a whole, but cannot ignore or override an express contractual stipulation governing the dispute; the Court relied on State of Chhattisgarh v. Sal Udyog Private Limited, (2022) 2 SCC 275, for that principle.

Section 137 of the Indian Contract Act, 1872 provides that mere forbearance to sue the principal debtor does not, absent a contrary term in the guarantee, discharge a surety.

Under Gayatri Balasamy v. ISG Novasoft Technologies Limited, 2025 INSC 605, a severable part of an award may be set aside without disturbing unaffected determinations.

The Court held that Muzzafar Shah v. MMTC Ltd., 2014 SCC OnLine Del 900, and Glitter Overseas & Ors. v. MMTC Ltd., 2022 SCC OnLine Del 2058, did not establish that an associate’s liability must be enforced irrespective of MMTC’s own performance or dictate a single interpretation of similar contracts.

For CJ-25 and CJ-26, the Tribunal attributed delayed realisation to MMTC’s handling of the diverted consignments; resolving the competing evidence would require impermissible reappraisal, and the finding supplied an intelligible answer to those interest claims.

For CJ-27, the evidence and final submissions clarified that MMTC claimed interest for delayed, not short, payment; the Tribunal and Single Judge therefore addressed the wrong question, and the Tribunal also proceeded on an LC premise despite the invoice’s COD term.

For CJ-31, the Tribunal attributed the shortfall to MMTC’s departure from the payment arrangements and subsequent conduct; Section 137 did not answer that reasoning, and the conclusion remained a permissible view.

For CJ-1, the Tribunal treated MMTC’s failure to collect the returned jewellery as defeating the financing claim, although the agreements preserved direct recovery without first realising goods or security. With no finding of repayment, adjustment or other discharge, that reasoning conflicted with the express recourse provisions and was patently illegal.

The defects concerning CJ-27 and CJ-1 were severable from the other consignment determinations.

The Section 34 judgment and arbitral award were set aside insofar as they rejected the claims concerning CJ-27 and CJ-1 and directed immediate return of the title deeds; no amount was awarded, and MMTC’s entitlement, quantum, interest and accounting treatment were left open.

The rejection of the claims concerning CJ-25, CJ-26 and CJ-31 remained undisturbed.

The Court made no finding on MMTC’s right to retain or enforce security against Mrs. Arti Chauhan or the property; if the deeds had already been returned, they were not required to be redeposited.