ARBITRATION AND CONCILIATION ACT, 1996 — Ss. 34, 36, 37 — Enforcement of award — Scope of objections at execution stage:
Held, an arbitral award, once surviving S.34 and affirmed on appeal up to the Supreme Court (judgment dated 17-12-2020, review confined to interest), is enforceable “as if” a decree (S.36). In execution, Section 47 CPC objections lie only on very narrow grounds of jurisdictional nullity or voidness. Errors of law/fact, or new defences, cannot be re-agitated. Electrosteel Steel Ltd. v. Ispat Carrier Pvt. Ltd., 2025 INSC 525, applied; Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman, followed. (¶¶21–24, 97–98)
CIVIL PROCEDURE CODE, 1908 — S. 47; O. XXI R. 29 — Maintainability; stay of execution pending suit:
If the suit itself has been rejected (O. VII R. 11) and only an RFA(OS)(Comm) is pending, O. XXI R. 29 does not arise. Section 47 is not a gateway for a re-trial of disputes concluded in arbitration/judicial review. (¶¶96–98)
FRAUD — Allegations against own officers; “fraud unravels everything” — Limits at execution stage:
Where alleged fraud is not on the tribunal or the court, but on the corporation (internal fiduciary breach), and the contract architecture pegged price to SAIL/RINL EJC (fixed at US$ 300 PMT pre-Lehman), and contemporaneous approvals (SPCoD 06-10-2008) and performance (partial shipment before Addendum) exist, prima facie fraud not made out to render the award a nullity. An FIR registered during pendency of SLP, mirroring earlier civil pleas, does not ipso facto stay or render the award inexecutable. (¶¶25–33, 52–67, 68–84, 85–93)
COMPANY LAW — Directors’ duties; Business Judgment Rule — Judicial deference:
Courts avoid hindsight bias and do not substitute their view for a board’s where the decision lies within a range of reasonableness available to a reasonably competent director, based on material/time available. (Re Living Images; Sharp v. Blank; Maple Leaf Foods; Kerr v. Danier), applied. On facts, MMTC’s officials’ decisions fell within that range. (¶¶35–40, 95)
ARBITRATION — Carry-over/mixed price cargo; parity with SAIL/RINL:
On record, offers to spread performance and ad hoc mixed-price shipments existed; SAIL/RINL were in different delivery-period posture (new LTAs), explaining mixed shipments. No discrimination shown rendering award void. (¶¶69–79)
RESULT:
Appeal dismissed; Section 47 objections rejected; no costs. (¶100)2025 INSC 1279
Page 1 of 82
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 13321 OF 2025
(@ SPECIAL LEAVE PETITION (CIVIL) NO. 14832 OF 2025)
MMTC LIMITED …Appellant(s)
VERSUS
ANGLO AMERICAN METALLURGICAL
COAL PVT. LIMITED …Respondent(s)
J U D G M E N T
K.V. Viswanathan, J.
1. Leave granted.
2. The present appeal calls in question the correctness of
the judgment dated 09.05.2025 passed by a learned Single
Judge of the Delhi High Court in OMP (ENF.) (COMM.) No. 19
of 2018. By the said judgment, the High Court dismissed the
objections filed by the appellant-MMTC Limited [for short
“MMTC”] under Section 47 of the Code of Civil Procedure,
Page 2 of 82
1908 [“CPC”] as well as an application under Order XXI Rule
29 of CPC seeking stay of the enforcement proceedings. The
High Court further directed that the amount deposited by
MMTC shall be withdrawn by the decree holder-Anglo
American Metallurgical Coal Pvt. Limited [for short “the
Anglo”] along with the interest accrued. Aggrieved, the
appellant-MMTC is in appeal by way of special leave.
BRIEF FACTS:-
3. The respondent-Anglo, on 24.09.2012, invoked the
arbitration clause in the Long Term Agreement [LTA] dated
07.03.2007 entered into between MMTC and Anglo. The claim
in the arbitration was for damages on account of the unlifted
quantity of coal contracted by the appellant-MMTC. The
damages were computed based on the difference in the price
between the contracted price of US$ 300 Per Metric Tonne [for
short “PMT”] and the market price of US$ 126 PMT, multiplied
by the unlifted quantity. In the arbitration, by an Award dated
Page 3 of 82
12.05.2014, Anglo was awarded a sum of US$ 78.720 million
along with interest and costs by a majority of 2:1.
4. By a judgment dated 10.07.2015, challenge under Section
34 of the Arbitration and Conciliation Act, 1996 [for short ‘the
A&C Act’] failed before a learned Single Judge of the High
Court of Delhi. However, the Division Bench, by its judgment
dated 02.03.2020, allowed MMTC’s appeal under Section 37 of
the A&C Act and set aside the arbitral Award along with the
decision of the learned Single Judge. By a judgment of
17.12.2020, this Court allowed the Civil Appeal filed by Anglo
and after setting aside the judgment of the Division Bench
restored the judgment of the learned Single Judge and the
arbitral Award.
5. On 29.07.2021, a review petition filed by MMTC, which
was admitted on the limited issue of interest, was disposed of
by reducing the pendente lite and future interest to 6%. The
remaining findings were not disturbed. On 19.04.2022, a
clarification application filed by MMTC was disposed of by
clarifying that MMTC would be liable to pay interest @ 6%
Page 4 of 82
from the date of reference till the date of payment and for the
period from the date of breach till the date of reference,
interest was to be paid @ 7.5%.
6. In the meantime, the respondent filed Execution Petition
seeking enforcement of the Award. Post the disposal of the
clarification application, on 20.07.2022, MMTC deposited a
sum of Rs.1,087/- crores with the High Court of Delhi at New
Delhi. On 28.11.2022, E.A. No. 3728 of 2022 in the Execution
Petition was filed by MMTC seeking to stay the operation and
implementation of the Award till the Central Bureau of
Investigation [CBI] concludes its investigation into the matter.
It transpires that on 02.09.2022 and 23.11.2022, complaints
were filed by MMTC against persons including its erstwhile
employees alleging fraud and collusion with the respondent
in relation to the price fixed for coal for the 5
th Delivery Period.
On 09.01.2023, the CBI, it transpires registered a preliminary
enquiry.
Page 5 of 82
7. When the matter stood thus, on 10.01.2024, MMTC filed
its objections under Section 47 of the CPC. In the objections,
the primary contentions of MMTC were:-
7.1 Despite having complete knowledge of the recession
in the market due to the collapse of the Lehman
Brothers, the officials of MMTC in collusion and
conspiracy with the officials of Anglo contracted the
price of coal for the 5th delivery period at US$ 300 PMT.
This price was 3 times more than the price of US$ 96.40
PMT which prevailed during the 4th delivery period.
7.2 Viewed in the background of the fact that Neelachal
Ispat Nigam Ltd (for short the “NINL”) for whom the
coal was sourced did not have pressing requirement of
the ultimately contracted quantity and considering the
fact that there was room for negotiation of the price, the
contention of collusion and conspiracy became stark.
7.3 The fraud could not be discovered earlier since Shri
Ved Prakash, who was Chief General Manager in 2008,
became Director (Marketing) in 2010 and ultimately
Page 6 of 82
Chairman-cum-Managing Director in 2015, remained
at the helm of affairs till 29.02.2020. The said officer was
in control of the arbitral proceedings as well as at
Section 34 and Section 37 stage.
7.4 When the Division Bench under Section 37 of the A&C
Act set aside the Award on 02.03.2020, there was no
occasion to examine the file to unearth the conspiracy.
On 17.12.2020, when this Court set aside the judgment
of the Division Bench and reinstated the Award, the
matter was examined and on 24.02.2021, the then CMD
of MMTC issued a confidential note requesting the
Chief Vigilance Officer to seek permission of the
Government of India to enquire into the matter.
7.5 It was thereafter that the matter was enquired into, and
a decision was taken to refer the matter to the CBI and
a preliminary enquiry came to be registered on
09.01.2023 by the CBI.
Page 7 of 82
8. A detailed reply was filed by Anglo taking objections on
maintainability and limitation. Primarily, the reply to the
objections on the aspect of fraud were set out as under:-
8.1 Under the LTA entered into on 07.03.2007 between
MMTC and Anglo, in each of the 5 delivery periods of
the contract, Anglo was to supply specified quantity of
coking coal.
8.2 After the 3rd delivery period, MMTC had an option to
extend the Agreement by two years on condition that
the option was to be exercised latest by 31.01.2007.
This was as per Clause 1.3. The 3rd delivery period was
to expire on 30.06.2007. Clause 1.3 reads as under: -
"1.3 The PURCHASER had the option to extend the
duration of the Agreement by two more years, at
its sole discretion and the Purchaser to exercise
its option for extending the Agreement by two
more years or otherwise by 31st January, 2007. In
case the PURCHASER decides to exercise such
option, at its sole discretion, the Agreement shall
have two more Delivery Periods as follows:
Fourth Delivery Period: 1
st July 2007 to 30th June
2008
Fifth Delivery Period: 1
st July 2008 to 30th June
2009"
Page 8 of 82
8.3 The option was indeed exercised before 31.01.2007,
on 30.01.2007, with the execution of the Memorandum
of Understanding [MoU]. Option once exercised,
MMTC was obliged to pick up the stipulated quantities
at the stipulated price during the 4th and 5th delivery
periods. The 4th delivery period was from 01.07.2007
to 30.06.2008 and the 5th delivery period was from
01.07.2008 to 30.06.2009. There could be
postponement of delivery at the option of the
purchaser for a period of three months following each
delivery period.
8.4 As per the contract, the price was linked with the price
fixed for two other Public Sector Undertakings, the
Steel Authority of India Limited (SAIL) and the
Rashtriya Ispat Nigam Limited (RINL). For SAIL and
RINL, the prices were negotiated by the Government's
Empowered Joint Committee and those contracts were
long term contracts for purchase up to 2.5 million MT
Page 9 of 82
per annum as opposed to MMTC’s contracted quantity
of 4,66,000 Metric Tonnes per annum.
8.5 Addendum No. 2 dated 20.11.2008 to the LTA was only
to firm up the terms and conditions. Shri Ved Prakash
was a junior member of the Committee in 2008 and by
the time he became CMD of MMTC on 14.03.2015 (as
mentioned in the objections), the Award had been
pronounced by the Arbitral Tribunal on 12.05.2014.
8.6 The dispute commenced in March 2010 and
culminated with the judgment of this Court on
17.12.2020 and the allegation of fraud is only to escape
the liability under the Award.
9. By 28.10.2024, when the judgment was reserved in the
Section 47 objections, MMTC had filed a Civil Suit praying that
the Award dated 12.05.2014 is void and unenforceable. It
further transpires that, on 29.07.2025, the said Civil Suit has
been dismissed as not maintainable and a Regular First
Appeal being RFA (OS) (Comm) No. 28 of 2025 is pending
before the High Court.
Page 10 of 82
10. On 11.11.2024, MMTC filed an application under Order
XXI Rule 29 CPC. By the impugned judgment, the Executing
Court dismissed the objections under Section 47 as well as the
Order XXI Rule 29 application seeking stay of execution,
pending the suit. Aggrieved, MMTC has filed the present
Appeal, by way of special leave, and this is how the matter
presents itself before us.
11. The High Court, by the impugned judgment, though held
that the objections under Section 47 were not maintainable,
made a brief observation on merits. It held that on merits that
the acts of the Officers bind the Corporation as MMTC being
a separate legal entity can only function through its Officers.
Only a preliminary enquiry had been registered (when the
proceedings were pending in the High Court) and, as such,
there is no finding of fraud, cheating and collusion against the
Officers of MMTC with the Officers of the decree-holder.
12. We have heard Mr. N. Venkataraman, learned Additional
Solicitor General and Mr. Sanat Kumar, learned Senior
Advocate, ably assisted by Mr. Akhil Sachar, Ms. Astha Tyagi,
Page 11 of 82
Ms. Sunanda Tulsyan and Ms. Karishma Sharma, learned
counsels for the appellant. We have also heard Mr. Neeraj
Kishan Kaul and Mr. Jayant Mehta, learned Senior Advocates,
ably assisted by Mr. Sumeet Kachwaha, Mr. Samar Singh
Kachwaha, Ms. Ankit Khushu, Ms. Garima Bajaj, Ms. Akanksha
Mohan, Mr. Pratyush Khanna and Ms. Ira Mahajan, learned
counsels for the respondent.
13. We have carefully considered the submissions and
perused the records of the case. Elaborate arguments were
heard on 22.05.2025, 23.05.2025, 24.07.2025, 29.08.2025,
18.09.2025 and 25.09.2025, both on maintainability and merits
of the Section 47-objections.
14. Before we proceed to consider the contentions, we need
to notice one additional fact which transpired during the
pendency of the proceedings. It appears that, on 20.07.2025,
MMTC had filed a follow-up complaint with the CBI and the
CBI, on 21.07.2025, registered an FIR. We will deal with the
same during the course of the judgment.
Page 12 of 82
QUESTION FOR CONSIDERATION: -
15. In the above background, the question that arises for
consideration is – Whether the High Court was justified in not
entertaining the objections filed by the appellant under
Section 47 of CPC and in dismissing the same?
MAINTAINABILITY: -
16. Mr. N. Venkataraman, learned ASG, assailed the
impugned judgment by first contending that the finding on
maintainability is completely untenable in view of the
judgment of this Court in Civil Appeal No. 2896 of 2024
[Electrosteel Steel Limited (Now M/s ESL Steel Limited) vs.
ISPAT Carrier Private Limited1] decided on 21.04.2025.
According to the learned ASG, this Court has held that the plea
of nullity qua an Arbitral Award can be raised in a proceeding
under Section 47 of CPC though the scope was very narrow.
1 2025 INSC 525
Page 13 of 82
17. Before the High Court, considerable arguments were
advanced on the question of maintainability of Section 47
objections under the CPC, once the award had been
challenged and the Section 34 objection had been dismissed
and sustained right up to the highest Court. The High Court
held that if the objections under Section 47 are allowed to be
entertained during the enforcement proceedings of an Award,
it would effectively open a second round for challenging the
Award. According to the High Court, this was not intended by
the legislature and would defeat the purpose of the A&C Act,
apart from delaying the finality of disputes.
18. Mr. N. Venkataraman, learned ASG, drew our attention to
the judgment of this Court in Electrosteel (supra). In
Electroteel (supra), certain arbitration proceedings between
parties therein were commenced on 07.06.2017. On
27.06.2017, proceedings commenced under Section 7 of the
Insolvency and Bankruptcy Code, 2016(IBC) against the
appellant therein. The arbitration proceedings were kept in
abeyance, due to the moratorium. The respondent therein
Page 14 of 82
filed a claim before the resolution professional who partly
admitted the claim. A resolution plan submitted by the
successful resolution applicant therein was approved by the
Adjudicating Authority on 17.04.2018 under Section 31 of the
IBC. In the plan, ‘nil’ value was provided for the operational
creditors. The approval of the plan attained finality right up to
this Court and the challenge made by some other operational
creditors were not fruitful.
19. The arbitrator, whose proceedings were kept in
abeyance, resumed proceedings after the lifting of the
moratorium and passed an Award on 06.07.2018 with the
appellant therein Electrosteel not even contesting the
proceedings. An award for a sum of Rs. 1,59,09,214/- along
with interest was made in terms of Section 16 of the Micro,
Small and Medium Enterprises Development Act, 2006 (for
short ‘MSME Act’). No challenge was made under Section 34.
Execution came to be levied by the respondent therein, when
appellant Electrosteel filed a petition under Section 47 CPC,
contending that the Award was a nullity and is not executable.
Page 15 of 82
The Executing Court dismissed the petition resulting in a
challenge under Article 227 before the High Court. The High
Court dismissed the Article 227-petition primarily holding that
since arbitral proceedings were initiated prior to the
insolvency resolution process, the arbitrator was not barred
from proceeding.
20. Before this Court, apart from arguments on Section 31 of
the IBC which provided for binding nature of the plan on all
the stakeholders, Electrosteel also argued that it was not
barred from challenging the award at the execution stage.
The contention was that since the award was a nullity, even if
the appellant had not filed a petition under Section 34 of the
A&C Act, it would not foreclose them from challenging the
award in the execution proceedings. It was argued therein
that the Facilitation Council in the said case inherently lacked
jurisdiction to arbitrate the claim of the respondent, post the
approval of the resolution plan. The respondent therein
contended that since the appellant-Electrosteel did not
Page 16 of 82
challenge the award it was not open to them to raise a
challenge to the award in the Section 47 proceeding.
21. In answering the issue about the maintainability of the
objection under Section 47, this Court held that the High Court
was correct insofar as it stated that plea of nullity qua an
Arbitral award can be raised in a proceeding under Section
47 of CPC, but such a challenge would lie within a very narrow
compass. This Court further held that in terms of Section 36 of
the A&C Act, an Award can be enforced in accordance with
the provisions of the CPC, in the same manner as if it were a
decree of the Civil Court. This Court further held as under.
“48. ………. Execution of decrees and orders is provided for
in Order XXI CPC. The law is well settled that at the stage of
execution, an objection as to executability of the decree can
be raised but such objection is limited to the ground of
jurisdictional infirmity or voidness. The law laid down by
this Court in Vasudev Dhanjibhai Modi Vs. Rajabhai Abdul
Rehman, (1970) 1 SCC 670, is that only a decree which is a
nullity can be the subject matter of objection under Section
47 CPC and not one which is erroneous either in law or on
facts. The aforesaid proposition of law continues to hold the
field.”
22. In conclusion, this Court on the said issue, held that
objection to execution of an award under Section 47 was not
Page 17 of 82
dependent or contingent upon filing a petition under Section
34. Ultimately insofar as Electrosteel (supra) was concerned,
the appeal of Electrosteel was allowed in view of the
provisions of the IBC, particularly, Section 30 and 31. It was
found that the Facilitation Council did not have jurisdiction to
arbitrate the claim after approval of the plan.
23. Electrosteel (supra) held that any challenge under
Section 47 would lie within a narrow compass. It has also been
held that at the stage of execution, an objection as to
executability of the decree can be raised, limited to the
ground of jurisdictional infirmity or voidness. It has been
further held that errors of facts and law cannot be the subject
matter of objection under Section 47.
24. In Vasudev Dhanjibhai Modi vs. Rajabhai Abdul
Rehman2
, it was held that an Executing Court cannot go
behind the decree. It was also held that where a decree is a
nullity like, for example, in cases where it is passed without
2
(1970) 1 SCC 670
Page 18 of 82
bringing the legal representatives on record or made by a
Court which inherently lacked jurisdiction, objections can be
raised at the execution stage.
25. It should be pointed out that, in the present case, the
objection is not based on the ground of any inherent lack of
jurisdiction. What is really argued is that the Officials of MMTC
committed fraud on MMTC, their employer and there was
collusion and conspiracy between the Officials of MMTC and
Anglo in pegging the price at US$ 300 PMT for the 5th delivery
period. So, the argument on inexecutability of the decree was
based on fraud committed by the Officials of MMTC on MMTC,
by collusion and conspiracy resulting in a favourable Award
for Anglo. It is also argued that fraud was discovered only after
the Award was upheld by this Court.
26. Mr. Neeraj Kishan Kaul, learned senior counsel for Anglo,
argued that objections under Section 47 were barred by law;
that the A&C Act is a complete Code and Section 5 bars any
form of judicial intervention other than what is expressly
provided in the Act. According to the learned senior counsel,
Page 19 of 82
the A&C Act contains a comprehensive mechanism not just for
the conduct of arbitral proceedings but also for challenge to
an execution of an arbitral award. Learned senior counsel
contended that awards cannot be challenged by a sidewind in
Section 47-proceedings. Mr. Kaul contended that the fraud
alleged in the present case is a fraud on itself by the
employees (on the MMTC) and is not a fraud on the Arbitral
Tribunal. According to the learned senior counsel, fraud
alleged is a fraud on the formation and validity of the
underlying contract. Learned Senior Counsel also submits that
these objections were never taken at any point in the earlier
stage of litigation.
27. In response, Mr. N. Venkataraman, learned ASG drew
our attention to a judgment of the English Court and to the
following passage in Lazarus Estates Ltd. v. Beasley3, as cited
in Ram Preeti Yadav v. U.P. Board of High School and
Intermediate Education and Ors.4:-
3
(1956) 1 All ER 341
4
(2003) 8 SCC 311
Page 20 of 82
"I cannot accede to this argument for a moment. No court in
this land will allow a person to keep an advantage which he
has obtained by fraud. No judgment of a court, no order of a
minister, can be allowed to stand if it has been obtained by
fraud. Fraud unravels everything. The court is careful not to
find fraud unless it is distinctly pleaded and proved; but
once it is proved it vitiates judgments, contracts and all
transactions whatsoever;"
28. Learned ASG also relied on the principle that fraud
avoids all judicial acts, ecclesiastical or temporal and relied
on the judgment in S.P. Chengalvaraya Naidu v. Jagannath
and Ors.5, as cited in Ram Preeti Yadav (supra). Learned ASG
further relied on Indian Bank v. Satyam Fibres (India) Pvt.
Ltd.6, United India Insurance Co. Ltd. v. Rajendra Singh and
Others7, and judgment of the Delhi High Court in National
Projects Construction Corporation v. Royal Construction
Company Private Ltd.8, to contend that fraud avoids all
judicial acts and that fraud affects the solemnity, regularity
and orderliness of the proceedings. By relying on Rajendra
Singh (supra), it was contended that no Court or Tribunal can
5
(1994) 1 SCC 1
6
(1996) 5 SCC 550
7
(2000) 3 SCC 581
8 2017 SCC Online Del 10944
Page 21 of 82
be regarded as powerless to recall its own order if it is
convinced that the order was wangled due to fraud or
misrepresentation of such a dimension as would affect the
very basis of the claim.
29. In Rajendra Singh (supra), while allowing the appeal of
the Insurance Company to recall two awards of the Motor
Accident claims Tribunal and permitting them to resist the
claim on the ground of fraud, this Court opened the judgment
with the following strong words:-
“2. If what the appellant Insurance Company now says is
true, then a rank fraud had been played by two claimants
who wangled two separate awards from a Motor Accident
Claims Tribunal for a bulk sum. But neither the Tribunal nor
the High Court of Allahabad, before which the Insurance
Company approached for annulling the awards, opened the
door but expressed helplessness even to look into the
matter and hence the Insurance Company has filed these
appeals by special leave.
3. “Fraud and justice never dwell together” (fraus et jus
nunquam cohabitant) is a pristine maxim which has never
lost its temper over all these centuries. Lord Denning
observed in a language without equivocation that “no
judgment of a court, no order of a Minister can be allowed
to stand if it has been obtained by fraud, for, fraud unravels
everything” (Lazarus Estates Ltd. v. Beasley : (1956) 1 All ER
341).
4. For a High Court in India to say that it has no power even
to consider the contention that the awards secured are the
by-products of stark fraud played on a tribunal, the plenary
Page 22 of 82
power conferred on the High Court by the Constitution may
become a mirage and people's faith in the efficacy of the
High Courts would corrode. We would have appreciated if
the Tribunal or at least the High Court had considered the
plea and found them unsustainable on merits, if they are
meritless. But when the courts pre-empted the Insurance
Company by slamming the doors against them, this Court
has to step in and salvage the situation.”
30. Faced with this situation, Mr. Kaul submitted that even if
the case is examined on merits, the MMTC has not made out
any case, nor even a prima facie case, by establishing any
fraud or collusion warranting a decision that the Award is
inexecutable.
31. In the light of the judicial pronouncements discussed
hereinabove, we are not inclined to dismiss the objections
only on maintainability. Elaborate arguments spanning over
several days have been heard on merits and we set out to
examine the objection of the appellants on merits to see if any
prima facie case of fraud is made out for the appellant to
contend that the Award is inexecutable.
Page 23 of 82
NATURE OF ALLEGATION OF FRAUD – BREACH OF
FIDUCIARY DUTY: -
32. The fraud that is alleged in this case originates in the
grievance of MMTC that its employees in senior managerial
roles including directors on the Board committed a breach of
fiduciary duty. According to MMTC, there was collusion and
criminal conspiracy by them with the Officials of Anglo in
fixing the contracted price for the 5th delivery period at US$
300 PMT. MMTC contends that the market price was only US$
96.40 PMT for the 4th delivery period. The further contention
is that the contracted quantity was far in excess of what was in
need for NINL for whom the coal was being sourced. They
also seek to explain the delay in unearthing the fraud for the
reasons adduced by them which have been discussed in the
earlier part of the judgment.
33. It is important to recollect here that we are at a stage
where the award has attained finality in view of the dismissal
of the appeal by this Court in proceedings arising under
Section 34 of the A&C Act. The initiation of the dispute was on
Page 24 of 82
04.03.2010 and the judgment of this Court was delivered on
17.12.2020.
LEGAL FRAMEWORK TO DETERMINE BREACH OF
FIDUCIARY DUTY: -
34. Before we discuss the nitty-gritty of the merits insofar as
they are essential for adjudication of Section 47-objection to
examine whether at all even a prima facie case is made out, it
is important to set out the legal parameters as laid down in
judicial precedents in cases involving breach of fiduciary
duty. The broad framework as to what would constitute the
breach of fiduciary duty and what are the legal parameters for
deciding the same have arisen before courts across the globe
in various fact situations. To understand the principles that
would govern is even more important in a case like ours
where parties have litigated for over a period of 15 years and
the allegation of breach of fiduciary duty has cropped up after
the Award has had the imprimatur of this Court.
Page 25 of 82
35. As was rightly forewarned in Re Living Images Ltd.9, the
first precaution to be taken is not to fall into the trap of being
too wise after the event. In Re Living Images (supra),
highlighting the need to discount the benefit of hindsight, the
Court observed as under:-
“I should add that the court must also be alert to the dangers
of hindsight. By the time an application comes before the
court, the conduct of the directors has to be judged on the
basis of statements given to the Official Receiver, no doubt
frequently under stress, and a comparatively small collection
of documents selected to support the Official Receiver’s and
the respondents’ respective positions. On the basis of this the
court has to pass judgment on the way in which the directors
conducted the affairs of the company over a period of days,
weeks or, as in this case, months. Those statements and
documents are analysed in the clinical atmosphere of the
courtroom. They are analysed, for example, with the
benefit of knowing that the company went into
liquidation. It is very easy therefore to look at the signals
available to the directors at the time and to assume that
they, or any other competent director, would have
realised that the end was coming. The court must be
careful not to fall into the trap of being too wise after the
event.”
(Emphasis supplied)
36. It is always useful while adjudicating on alleged breach
of fiduciary cases to remember the memorable words of Lord
9
(1996) 1 BCLC 348
Page 26 of 82
Davey in Dovey and The Metropolitan Bank (of England and
Wales) Limited v. John Cory10:-
“I think the respondent was bound to give his attention to and
exercise his judgment as a man of business on the matters
which were brought before the board at the meetings
which he attended, and it is not proved that he did not do
so”
(Emphasis supplied)
37. MMTC now launches a ‘no holds barred attack’ on most
of the directors and senior managerial personnel who were in
office from 2008-2009 right up to those who held office till
2020. The case projected is that the senior managerial
personnel including the directors operated as a cabal to
defraud MMTC and that it was only after this Court upheld the
Award that an enquiry was launched and the fraud unearthed.
TEST OF A REASONABLY COMPETENT DIRECTOR: -
38. Before we examine the merits, we should also bear in
mind the principle that in cases like this, a court cannot be
swayed by what the Court thinks would have been a
10 1901 Appeal Cases 477
Page 27 of 82
reasonable course of action for the director to adopt but the
duty is to enquire whether on the available evidence before
the Court to consider whether the course adopted by the
director was one reasonably competent directors could have
adopted. In Sharp and Ors. v. Blank and Ors,
11 a judgment
by Norris J in Chancery Division in the context of negligence
the Court observed as under:
“631. … in testing whether a director has been negligent the
question is not simply what the Court thinks it would be
reasonable for the director to have done; rather it is what the
evidence before the Court establishes were the courses open
to reasonably competent directors (the burden lying on a
complainant to establish that the course of which complaint is
made is not amongst them).
627. … When embarking upon a transaction a director does
not guarantee or warrant the success of the venture. Risk is
an inherent part of any venture (whether it is called
‘entrepreneurial’ or not). A director is called upon (in the
light of the material and the time available) to assess and
make a judgment upon that risk in determining the future
course of the company. Where a director honestly holds the
belief that a particular course is in the best interests of the
company then a complainant must show that the director’s
belief is one which no reasonable director in the same
circumstances could have entertained.”
11 (2019) EWHC 3096 (Ch)
Page 28 of 82
RANGE OF REASONABLENESS - TEST
39. Dealing with the aspect of how the Court cannot second
guess the directors by substituting its opinion and laying
down that the enquiry should be whether the decision taken
was within the range of reasonableness, it was held by the
Court of appeal for Ontario in Maple Leaf Foods Inc. v.
Schneider Corp.12, thus:
“The mandate of the directors is to manage the company
according to their best judgment; that judgment must be an
informed judgment; it must have a reasonable basis. If there
are no reasonable grounds to support an assertion by the
directors that they have acted in the best interests of the
company, a court will be justified in finding that the
directors acted for an improper purpose.
The law as it has evolved in Ontario and Delaware has the
common requirements that the court must be satisfied that the
directors have acted reasonably and fairly. The court looks
to see that the directors made a reasonable decision not a
perfect decision. Provided the decision taken is within a
range of reasonableness, the court ought not to substitute
its opinion for that of the board even though subsequent
events may have cast doubt on the board's determination.
As long as the directors have selected one of several
reasonable alternatives, deference is accorded to the
board's decision…...
12 42 OR (3d) 177
Page 29 of 82
This formulation of deference to the decision of the Board
is known as the "business judgment rule". The fact that
alternative transactions were rejected by the directors is
irrelevant unless it can be shown that a particular
alternative was definitely available and clearly more
beneficial to the company than the chosen transaction”
(Emphasis supplied)
BUSINESS JUDGMENT RULE: -
40. The above decision also highlights the principle that as
long as the decision taken falls within the range of options
reasonably available, Court would defer to the decision of the
Board under the “Business Judgment Rule”. The said
principle was also reiterated by the Supreme Court of Canada
in Kerr v. Danier Leather Inc.,13 in the following words:
“On the broader legal proposition, however, I agree with
the appellants that while forecasting is a matter of
business judgment, disclosure is a matter of legal
obligation. The Business Judgment Rule is a concept welldeveloped in the context of business decisions but
should not be used to qualify or undermine the duty of
disclosure. The Business Judgment Rule was well stated
by Weiler J.A. in Maple Leaf Foods Inc. v. Schneider Corp.
(1998), 42 O.R. (3d) 177 (C.A.): The court looks to see that
the directors made a reasonable decision not a perfect
decision. Provided the decision taken is within a range of
reasonableness, the court ought not to substitute its
13 (2007) 3 SCR 331 Canadian Supreme Court Reports
Page 30 of 82
opinion for that of the board even though subsequent
events may have cast doubt on the board's
determination. As long as the directors have selected one
of several reasonable alternatives, deference is
accorded to the board's decision ...”
APPLICATION OF THE LEGAL PRINCIPLES TO THE
FACTS AT HAND
41. With the above legal principles in mind, it is time to apply
the same to the facts of the case and consider the contentions
raised by the respective parties. The dispute revolves around
the 5th delivery period, i.e., from 01.07.2008 to 30.06.2009, as
well as on the status and execution of Addendum No.2 dated
20.11.2008, to the LTA of 07.03.2007. A brief narration of the
facts essential for appreciating this aspect of the controversy
has also been discussed, while dealing with the rival
contentions.
LONG TERM AGREEMENT (LTA) OF 07.03.2007
42. Indisputably, on 07.03.2007, an agreement for sale and
purchase of coking coal was executed between the MMTC and
Anglo. This is the Long Term Agreement (LTA). Under the
Page 31 of 82
LTA, Clauses 1 and 2 are crucial for the determination of the
case and they are set out hereunder:
“CLAUSE 1: MATERIAL, QUANTITY, QUALITY AND
DELIVERY PERIOD:
1.1 The SELLER shall sell and the PURCHASER shall buy,
a) The base quantity during the currency of the contract
shall be 466,000 (Four hundred Sixty six thousand)
metric tons (of one thousand kilograms each) firm.
b) During the First Delivery Period (1
st July, 2004 to 30th
June, 2005), a quantity of 464,374 (Four Hundred Sixty
Four Thousand, Three Hundred and Seventy Four)
metric tons (of one thousand kilograms each) firm
quantity of freshly mined and washed "Isaac",
"Moranbah North" and "German Creek" coking coals.
c) During the Second Delivery Period (1
st July, 2005 to 30th
June, 2006) a quantity of 382,769 (Three Hundred Eighty
Two Thousand, Seven Hundred and Sixty Nine) metric
tons (of one thousand kilograms each) firm quantity of
freshly mined and washed "Isaac", "Moranbah North"
and "German Creek" coking coals.
d) During the Third Delivery Period (1st July, 2006 to 30th
June, 2007) a quantity of 466,000 (Four Hundred Sixty
Six Thousand) metric tons (of one thousand kilograms
each) firm quantity of freshly mined and washed
"Isaac", "Moranbah North" and "German Creek" coking
coals.
e) During the subsequent Delivery Periods, in case of
the PURCHASER exercising the option to extend the
duration of the Agreement by two more years, at its
sole discretion, as indicated at Para 1.3 herein
below, a quantity of 466,000 (Four Hundred Sixty Six
Thousand) metric tons (of one thousand kilograms
each) of freshly mined and washed "Isaac", "Moranbah
Page 32 of 82
North" and "German Creek" coking coals hereinafter
referred to as the MATERIALS, in conformity with the
Technical Specifications incorporated in Annexure- IIA
(applicable for "Isaac" coking coal) and Annexure- IIB
(applicable for "Moranbah North" coking coal) and
Annexure IIC (applicable for "German Creek" coking
coal) to this Agreement and which shall constitute an
integral part of this Agreement, for use of imported
coking coals in the coke ovens in its integrated iron and
steel works for production of metallurgical coke. The
quality of the prime washed coking coals to be supplied
under this Agreement shall under no circumstances be
inferior to the Technical Specifications as contained in
Annexure IIA, Annexure IIB and Annexure IIC to this
Agreement as applicable.
1.1.1 Annual base quantity from 15th July, 2007 to 30th June,
2009, in case Purchaser exercises its option to extend
the Agreement by 2 years, shall be 466,000 metric
tonnes, subject to further discussions at the time of
contract extension and the logical contract specification
modifications to reflect the changing nature of existing
reserves at the Moranbah North and German Creek
mining operations will be mutually agreed.
1.2 For the purpose of this Agreement, the Delivery Periods
shall be reckoned as follows:
First Delivery Period: 1
st July 2004 to 30th June 2005
Second Delivery Period: 1
st July 2005 to 30th June 2006
Third Delivery Period: 1
st July 2006 to 30th June 2007
The shipments will be evenly spread during each
Delivery Period. The PURCHASER reserves the right to
prepone shipments against any Delivery Period based
on its requirement and subject to availability with the
SELLER.
The PURCHASER reserves the right to postpone the
deliveries to be effected under each Delivery Period by
upto 3 months i.e. upto the month of September
Page 33 of 82
following each Delivery Period, without any additional
financial liability to the PURCHASER.
1.3 The PURCHASER had the option to extend the
duration of the Agreement by two more years, at its
sole discretion and the Purchaser to exercise its
option for extending the Agreement by two more
years or otherwise by 31 January, 2007. In case the
PURCHASER decides to exercise such option, at its
sole discretion, the Agreement shall have two more
Delivery Periods as follows:
Fourth Delivery Period: 1
st July 2007 to 30thJune 2008
Fifth Delivery Period: 1
st July 2008 to 30thJune 2009
CLAUSE 2: PRICE:
2.1 The firm price of the MATERIALS for the First Delivery
Period 1st July 2004 to 30th June, 2005 shall be US$ 57.75
(United States Dollars, Fifty Seven and Cents Seventy
Five only) per metric ton (of one thousand kilograms
each) Free on Board (Trimmed). Port of Loading will be
Dalrymple Bay Coal Terminal, Queensland, Australia.
The firm price of the MATERIALS for the Second
Delivery Period 1st July 2005 to 30th June, 2006 shall be
US$ 126.75 (United States Dollars One hundred twenty
six and Cents Seventy Five only) per metric ton (of one
thousand kilograms each) Free on Board (Trimmed).
Port of Loading will be Dalrymple Bay Coal Terminal,
Queensland, Australia.
2.2 The Price for the delivery of AGREEMENT quantity
for subsequent Delivery Periods shall be fixed in
accordance with Para 1 of Annexure I and shall be
firm and shall not be subject to any escalation for
any reason, whatsoever, until the completion of
delivery of the AGREEMENT quantity due for
delivery in the relevant Delivery Period with such
Page 34 of 82
extensions as might be mutually agreed upon
between the PURCHASER and the SELLER.
2.3 The payment of the price of the MATERIALS delivered
by the SELLER under this Agreement shall be made by
the PURCHASER by means of an irrevocable, without
recourse to drawer Letter of Credit providing for
payment of the full invoice value of the MATERIALS at
sight. The Letter of Credit will provide for full payment
in US Dollars at Brisbane, Queensland, Australia. The
payment shall be made on presentation of the
documents mentioned in Para 6.2 of Annexure - 1.
2.3.1 Notwithstanding the method of payment as mentioned
at 2.3 above, the SELLER may also provide Supplier's
credit for 180 days at the terms and conditions mutually
agreed upon from time to time, against an irrevocable,
without recourse to drawer letter of credit upon
presentation of documents mentioned at Para 6.2 of
Annexure-I.
The documents in original and by fax referred to
hereinabove should be delivered at the following
address.
General Manager (Coal & Coke)
MMTC Limited,
SCOPE Complex, Core-1,
7, Institutional Area, Lodi Road,
New Delhi-110003
India
All bank charges at the Seller's end (outside India) shall
be borne and paid for by the SELLER. All bank charges
at the PURCHASER'S end (inside India) shall be borne
and paid for by the PURCHASER.”
(Emphasis supplied)
Page 35 of 82
43. It will be noticed that under Clause 1.1 (a), the base
quantity of 4,66,000 MT was fixed for the currency of the
contract. For the first three delivery periods, the quantity was
mentioned along with the period. Clause 1.1 (e) dealt with the
option of the purchaser to extend the duration by two more
years, after the third delivery period. It further provided that
if option is exercised a quantity of 4,66,000 MT of coal was to
be purchased.
44. Clause 1.3 vested the option in the purchaser to extend
the contract. Clause 2.1 provided the firm price of the
materials for subsequent delivery periods. As per Clause 2.2,
the price was to be fixed in accordance with Para 1 of
Annexure-I which dealt with General Conditions of
Agreement. Under Para 1 of Annexure-I, the price for
delivery of the materials during subsequent delivery periods
was to be mutually discussed and settled by the purchaser and
seller prior to the commencement of relevant delivery period
at the same price as settled between the seller and SAIL/RINL,
applicable to the relevant delivery period under the LTAs.
Page 36 of 82
45. Clause 1.1 of the General Conditions of Agreement in
Annexure-I is extracted hereunder:
“GENERAL CONDITIONS OF AGREEMENT (GCA)
PARA 1.0: PRICE FIXATION
1.1 The price for delivery of the MATERIALS during
subsequent Delivery Periods shall be mutually
discussed and settled by the PURCHASER and
SELLER prior to commencement of the relevant
Delivery Period at the same price as settled
between the SELLER AND STEEL AUTHORITY OF
INDIA (SAIL) / RASHTRIYA ISPAT NIGAM LTD
(RINL), applicable to the relevant Delivery Period
under their respective Long Term Agreements.”
(Emphasis supplied)
It is undisputed that the third delivery period also passed off
smoothly from 01.07.2006 to 30.06.2007.
EXECUTION OF THE MoU AND EXERCISE OF OPTION: -
46. One of the questions that arise is whether option was
exercised on or before 31.01.2007 as required under Clause
1.3 of the LTA. While Mr. Venkataraman-learned ASG,
contends that it was Addendum No.2 dated 20.11.2008 which
was the real agreement, Mr. Kaul submits that, on 30.01.2007,
a MoU was executed between MMTC and Anglo. Mr. Kaul
Page 37 of 82
contends that while the LTA was not formally signed,
deliveries for the first and second delivery period were
completed and by 30.01.2007 they were in the process of
completing the third delivery period which was from
01.07.2006 to 30.06.2007. It was at this point that on
30.01.2007, a MoU has been executed with the following
Clauses:
“1. MMTC to execute the long term contract agreed between
the parties in correspondence and provide to Anglo for
execution earliest.
2. The parties agree to foreclose a quantity of
a) 1615 MT undelivered against first delivery period
July 2004- June 2005 of long term contract @ USD
57.75 PMT FOBT and
b) 83231 MT undelivered against second delivery
period July 2005-June 2006 of long term contract
@ USD 126.75 PMT FOBT
2. Supply of a quantity of 466,000 MT @ USD 114.00 PMT
FOBT for third delivery period July 2006-June 2007. The
delivery period is extended to September 30,2007.
3. Supply of a quantity 466,000 MT at price to be
finalized by EJC for SAIL and RINL, for fourth
delivery period July 2007- June 2008. The delivery
period is extendable up to September 2008.
4. The contract is extended by a further two years in
accordance with clause 1.3 of the long term
agreement.
Page 38 of 82
Fourth delivery period 1st July 2007 to 30th June
2008.
Fifth delivery period 1st July 2008 to 30th June 2009.
The price terms & Conditions of coal supply to
MMTC for fourth and fifth delivery periods shall be
as per Anglo-Agreement UNL/SAIL”
(Emphasis supplied)
47. It will be noticed that this MoU was signed on 30.01.2007
and this is a fact not disputed by the learned ASG and, in fact,
filed by the learned ASG as part of his additional documents.
This date was one day before the deadline of 31.01.2007 which
came to be signed on 07.03.2007.
DELIVERIES DID NOT AWAIT FORMAL EXECUTION OF
AGREEMENTS: -
48. As is clear from the MoU, based on the agreement in the
correspondence, deliveries were taking place and by the
time the LTA was signed, it was mid-way during the third
delivery period. As could be seen from the MoU, even the 4th
delivery period was agreed upon and passed on without any
dispute. The 5th delivery period was to begin on 01.07.2008,
when the 4th delivery period stood extended till 30.09.2008.
Page 39 of 82
PRICES PEGGED TO SAIL/RINL PRICE: -
49. The price for the periods concerned was pegged by what
the Empowered Joint Committee would fix for the contract
with SAIL and RINL. This was also reiterated on 30.01.2007,
contends Mr. Kaul. When matters stood thus, the time for the
4
th delivery period which was extended to 30.09.2008,
however, continued till 30.10.2008. In the meantime, as is
clear from the internal note of 03.06.2008 circulated by Shri
Suresh Babu of MMTC, SAIL and RINL had fixed their price for
the delivery period from 01.07.2008 to 30.06.2009. On
03.06.2008, the Lehman Brothers’ collapse had not happened.
It commenced on 15.09.2008, and that is also not in dispute.
INTERNAL NOTE OF 03.06.2008
50. At this stage, it is relevant to extract the internal note of
03.06.2008 prepared by Shri Suresh Babu for MMTC, which
reads as under:-
“COAL & HYDROCARBON DIVISION
Sub: Finalization of long term price of Coking Coal for
Delivery Period of 01-07-2008 to 30-06-2009.
Page 40 of 82
Anglo and BMA had already finalized the price of hard
coking coal for the above delivery period with Japanese
Steel Mills and SAIL and RINL. The price of prime hard
coking coal for the above delivery period is fixed at usd
300/t and Torrington hard coking coal at usd 292.50/ t as
against usd 96.4/91.5 per ton respectively in the previous
year. It is understood that BMA had not allowed carrying
forward the left over quantities for the delivery period 2007-
08 in case of Japanese Steel Mills. So MMTC made all out
effort to secure the cargo from both BMA and Anglo within the
delivery period itself. MMTC will not be able to lift the entire
contracted quantity of Anglo Coal for 07-08 by 30th June, 2008.
Accordingly shipment schedule has been obtained from
Anglo to complete shipment within the extension allowed i.e.,
upto Sept,'08. However, BMA has to give us the schedule for
left over quantity for 2007-08. Here also every effort is being
made to ensure that the entire quantity relating to 2007-08
delivery period will be secured within the extended delivery
period upto 30th Sept., 2008.
The coal supplied within the extended period will be
sufficient to take care of NINL requirement upto March'09. As
per the shipment schedule given by Anglo, two vessels have
to be nominated in Sept 08 to load coking coal from DBCT.
These vessels will come up for loading from DBCT in Oct 08
and reach Paradip early November 08.
Both Anglo and BMA are offering Japanese price to Indian
consumers. The demurrage rate offered by Japanese Steel
Mills are said to be in the range of US $ 9000-15,000 per day.
So Indian consumers also have been asked to accept similar
demurrage rates. Despite all these, the spot price of hard
coking coal has reached US $ 400/t FOB; availability is
very-very tight. Since the 2007-08 contract cargo is to be
delivered upto 30.9.09, there was a suggestion from
Anglo that quantity for 1.7.08 to 30.6.09 will be
Page 41 of 82
proportionately reduced keeping in mind 9 months left
for the supplies.
Considering the huge shortage for coking coal and the spot
premium, it is felt that "we may continue to keep the delivery
period from 1.7.08 to 30.06.09 and the contracted quantity
will be 4,66,000 tons with provision for extension of delivery
period by another three months, i.e., upto 30.9.09. in case the
entire quantity cannot be delivered by 30 June 2009, delivery
period will be extended upto 30.9.09." We may also request
Anglo to extend the long term agreement for another five
years with the terms and conditions of Steel Authority of India
Ltd.
For approval 'A' please Sd/-
(SURESH BABU)
03.06.08
DIR (HSM)
Upto March 09, we should try to avoid/ defer US$ 300 price
coal to be finalised for 08-09 pl. 'X' app.
Sd/-
HS Mann
04/08.”
(Emphasis added)
51. As will be noticed, there was a note of Shri H.S. Mann,
Director, to the effect that MMTC should try to avoid/defer US$
300 price coal to be finalised for 08-09. Learned ASG
highlighted this aspect of the matter in great detail. The
Page 42 of 82
learned ASG contended that even Mr. Mann, later was a party
consenting to the price of US$ 300 PMT and wanted to infer
certain sinister conduct in the same.
EJC – APPROVAL OF SAIL/RINL PRICE AT US$ 300 PMT:
52. On 14.08.2008, Anglo wrote to MMTC about their
agreement with the Empowered Joint Committee (EJC) on 08th
and 9th May, 2008 for supply of hard coking coal to SAIL and
RINL during the delivery period from 01.07.2008 to
30.06.2009. They confirmed by the same mail the supply
arrangement for the 5th delivery period with MMTC for
4,66,000 MT. Indisputably, the price fixed with SAIL and RINL
was US$ 300 PMT.
53. On 25.09.2008, a letter was written by Shri Suresh Babu
of MMTC to Shri SP Padhi, Executive Director of NINL,
suggesting that since SAIL has already signed the agreement
for 2008-2009 and the price is also fixed, MMTC may also sign
the agreement. In the letter, it was suggested that a new
brand of hard coking coal “Dawson Valley Blend” has been
introduced. The letter suggested that “Dawson” coal be
Page 43 of 82
preferred because “Dawson” coal will be loaded from
Gladstone where the pre-berthing delay is only around a
week as against 25 to 30 days in port (DBC) where Isaac
coking coal was loaded. Suggestion was that demurrage can
be saved by MMTC.
AGENDA NOTE OF 29.09.2008
54. In the agenda note dated 29.09.2008 put up by Shri
Suresh Babu to the Sale/Purchase Committee of Directors
[SPCoD] of MMTC, it was stated as under:-
“5. Status Of 2007-08 Contract:
a) Contracted Quantity: 466,000 Mt: As on today a quantity
of 417,345 MTs of Hard Coking Coal has already been loaded
by Anglo and a vessel is already nominated in lay can 20-30
October 2008, for loading about 50,000 Mt.
6. New 5 Year Long Term Agreement by SAIL: RINL/SAIL's
LT agreement was valid till 30.6.08. They have entered into a
new five year long term agreement with Anglo Coal for the
period of 15th July 2008 to 30th June 2013. Our LT agreement
is valid upto 30.6.09. We may, if approved, explore the
possibility and enter into a five year long term agreement
with effect from 01.07.2008 to 30.06.2013 as in the case of
RINL/SAIL.
B: RECOMMENDATION OF THE DIVISION: -
7. SPC may please deliberate and accord approval for:-
Page 44 of 82
i) Inclusion of new coking coal brand "Dawson Valley Blend".
ii) Price of US$ 300.00 PMT FOB each for the purchase of Isaac
and Dawson Valley Blend Brand of Coking Coal totaling
466,000 MT from Anglo for the period of 1st July 2008 to 30th
June 2009.
iii) Subject to acceptance by Anglo Coal for entering into five
years long term agreement with them w.e.f. 1.07.2008,
incorporating the terms and conditions of Anglo's
Agreement/ amendment to Agreement with SAIL from time to
time with logical changes wherever applicable.
8. The total value of the proposed purchase for 2008-09 is
about Rs.615 crores (exchange rate US$/Rs. = 1/44).
9. Authorising Dir (HSM) and Dir (Fin) to sort out deadlock
issues/make logical changes wherever required.
10. Associate Finance has concurred the proposal.
11. Director-HSM has seen and approved for circulation to
SPCOD.
C: DECLARATION
The Division has truly and fairly brought out all material
information available with the division which is likely to
influence the decision SPC, in the agenda and no material
information has been withheld.”
SPCoD APPROVAL OF 06.10.2008
55. The SPCoD met on 06.10.2008. The SPCoD (including Mr.
H.S. Mann) granted approval in the following terms:-
Page 45 of 82
“Item No. 1: Agreement with Anglo coal Australia Pty.
Ltd., for import of Coking Coal for NINL-as
per note of GM (SB) dated 29.9.2008
The Committee after being informed that the proposed terms
and conditions including deviations are same, as in the case
of RINL/SAIL approved the proposal subject to acceptance of
the same by NINL. Possibility of reduction of quantity for
2008-09 be explored without affecting long-term
prospects from the supplier in view of recent fall in prices
of Pig Iron and Steel products
Item No. 2: Import of Coking Coal of NINL-Qty. & Price
Fixation as per note of GM (SB) dated 29.9.2008
The Committee after being informed that the proposed terms
and conditions including deviations are same, as in the case
of RINL/SAIL, approved the proposal subject to acceptance
of the same by NINL. Possibility of reduction of quantity for
2008-09 be explored without affecting long-term prospects
from the supplier in view of recent fall in prices of Pig Iron
and Steel products.”
(Emphasis supplied)
The Minutes of 06.10.2008 mentioned that in view of the recent
fall in prices of pig iron and steel products possibility of
reduction of quantity should be explored.
56. Dealing with reference to “approval by NINL” in the
Minutes, Mr. Kaul sought to explain the same by stating that
the LTA was not dependent on the approval of NINL and what
Page 46 of 82
was meant by the Minutes was the approval of the proposed
change in the technical specifications of coal.
5
TH DELIVERY PERIOD COMMENCED WITH THE LAST
SHIPMENT UNDER THE FOURTH DELIVERY PERIOD: -
57. During this period, the 4th delivery period was nearing
completion in view of the extension up to 30.09.2008 which
prolonged up to 30.10.2008. In fact, it was not disputed that
with the last shipment of the 4th delivery period of 48,655 MT
at US$ 96.40 PMT, 2,366 MT was loaded on the vessel as part
of the 5th delivery period at US$ 300 PMT. This was even
before the Addendum No.2 of 20.11.2008 and on a query by
the Court, the learned ASG replied that this was a miniscule
quantity intended to save dead freight. What is, however,
significant is even before agreements were entered into,
based on the agreement on correspondence, deliveries were
being executed and that is clear from the events that
transpired from 2004 onwards. No grievance has been raised
for any of the shipments till 20.11.2008.
Page 47 of 82
REPLY OF NINL TO MMTC LETTERS OF 25.09.2008: -
58. In reply, NINL wrote two letters, first a letter was written
on 14.10.2008 giving a go-ahead. Thereafter, a letter dated
16.10.2008 was written in reply to MMTC’s letter dated
25.09.2008. This letter of 16.10.2008 is strongly relied upon by
learned ASG to contend that NINL needed only 2.2 Lakh tons
of Anglo coal. The letters dated 14.10.2008 and 16.10.2008
read as under:-
“Ref.No.NINL/GM(Comml)/2008/1085
Date: 14.10.2008
Mr. Suresh Babu,
GM (Coal & Coke)
MMTC Ltd.,
New Delhi
Dear Sir,
Please refer to your mail dated 25th September, 2008 for
procurement of coking coal of 12.66 lakh tons.
MMTC may please place order for Anglo Coal consisting of
80% Dawson and 20% Capricon, since the same is approved
by SAIL. Other terms and conditions may be negotiated and
finalized.
Thanking you,
Yours faithfully
For Neelanchal Ispat Nigam Ltd
Sd/-
Page 48 of 82
[P.K. Pandey]
DGM (Commercial)
*** *** ***
Ref. No. NINL/CM/24/1103 Dt. 16th October, 2008
Mr. Suresh Babu,
General Manager (Coal & Coke)
MMTC Limited
Core-1, Scope Complex
7 Institutional Area, Lodhi Road
New Delhi-110003
Dear Sir,
Please refer to your mail dated 25th September, 2008 for
procurement of Coking Coal of 12.66 Lakh Tons.
It may be noted that our annual requirement is 11.80 lakh
tons. Our present stock of coal is around 3.70 Lakh tons.
Hence, we need to procure coal around 9.00 Lakh tons in a
year from now. However, procurement quantity may be
decided based on the coal supply in pipe line and our
present stock. Considering, blending of the hard coal and
soft coal is in 80:20 ratio, coal may be procured as under:
Hard Coking Coal:
a) BMA : 5 Lakh tons approx.
b) ANGLO : 2.2 Lakh tons approx.
Out of 2.2 Lakh tons of ANGLO Coal, 20% may be procured
from Dawson Valley Blend consisting of 80% Dawson and
20% Capricorn, since the same is approved by SAIL, at the
option of MMTC/NINL (to be exercised in a manner for
minimizing the demurrage)
Page 49 of 82
Soft Coking Coal
Black Water: 1.80 Lakh Tons Approx.
Price, terms and conditions may be negotiated and finalized.
Thanking you,
Yours faithfully,
Sd/-
16/10
(P.K. Pandey)
Dy. General Manager (Commercial)
Encl: Approved copy of Competent Authority for your
reference and record.”
59. Mr. Kaul contends that the terms of LTA had already fixed
the quantity and NINL’s correspondence one way or the other
can have no bearing on the committed quantity which MMTC
agreed to procure from Anglo.
ADDENDUM NO.2 DATED 20.11.2008 – THE BONE OF
CONTENTION: -
60. It is in this background that the 20.11.2008-Addendum
No.2 to the LTA was formally signed. Learned ASG contended
that it was by the agreement of 20.11.2008 that price and other
Page 50 of 82
terms of delivery were fixed and relied on the evidence of Mr.
John Wilcox who was examined in the Arbitration as Anglo’s
witness. According to learned ASG, the officials of MMTC by
entering into Addendum No.2 tied up MMTC in knots and no
ends were kept loose to ensure that MMTC was committed to
huge financial amounts due to the fraudulent fixation of the
price.
61. Learned ASG referred to the news release of Anglo dated
20.02.2009 to demonstrate that it was within the knowledge of
Anglo that the price of coking coal has drastically fallen in the
second half of 2008.
62. In response, Mr. Kaul contended that Addendum No.2
signed on 20.11.2008 was only the last in the series of
documents to finetune the shipping terms, moisture content
and the specific variety of coal for the 5th delivery period all
material terms including the shipping period (from 01.07.2008
to 30.09.2009) quantity (4,66,000 MT) and price were already
fixed in terms of the LTA. The price was to follow the
Page 51 of 82
SAIL/RINL price which has been duly fixed at US$ 300 PMT for
the said period.
63. The Addendum of 20.11.2008 is in the form of a letter
addressed by MMTC to Anglo. It is to the attention of Mr. John
B. Wilcox. It states that MMTC was pleased to confirm the
settlement with Anglo and, thereafter, the column below deals
with (i) delivery period – 01.07.2008 to 30.06.2009, (ii)
quantity – 4,66,000 MT. Thereafter, it deals with coal brands
and price (US$ 300 PMT), other terms like total moisture,
loading terms, vessel sizes, loading rates, demurrage rates for
different ports, the variation permissible limits and force
majeure clause. At the end it has the following clause:
“All other terms and conditions of agreement no.
MMTC/C&HC/LT/HCC/NINL/ANGLO/585 DATED 7TH
MARCH 2007 shall remain unchanged”.
64. It should be recalled that shipments have happened
based on correspondence, as stated earlier from 2004 and
agreements have been entered into post the shipments even
for the 5
th delivery period. Admittedly, 2,366 MT were
Page 52 of 82
shipped on 30.10.2008 along with the last shipment of the 4
th
delivery period.
SAME DAY (20.11.2008) LETTER SEEKING PRICE
REDUCTION: -
65. On the same day after entering into Addendum No.2, the
following letter was written by Mr. Ved Prakash, the Chief
General Manager of MMTC to Anglo:-
“File No. MMTC/C&HC/08-09/CC/Anglo/798
20th November 2008
Anglo Coal Australia Pty. Ltd.
201, Charlotte Street
Brisbane 4000
Queensland, Australia
Fax No. 0061-7-3834-1390
KIND ATTN: MR. JOHN B WILCOX, MARKETING MANAGER
Sub: Addendum to Long Term supply of coking coal contract
for the
Delivery Period 2008-09
Dear Sirs,
As discussed, we hereby confirm the acceptance of
coking coal supply during the period 2008-09 vide
Addendum No.2 LT Agreement
MMTC/C&HC/LT/HCC/NINL/ANGLO/585 DATED 7th March
2007
Page 53 of 82
As you are aware, due to worldwide crisis as financial
markets, there has been unprecedented fall in prices of
major commodities including steel Such a steep tall is a rare
phenomenon and all over there is a feeling that it is a
beginning of economic recession in the world. It is feared that
it may continue for long time to come
The prices of iron and steel products in the international
market has nose-dived in the month of September and
October 2008 and pig iron, a finished product manufactured
by us and being exported is not getting customer on date
even at US $100 FOB. Same is the situation in the domestic
market and we are not able to sell our product. Under the
circumstances, you will appreciate it has become
absolutely unviable to produce and sell pig iron based on
the imported coking coal having price of US$ 300 per
tonne FOB for hard coking coal. More than three-fold
increase in the price of coking coal during a period when
the prices of finished steel including pig iron had
virtually crashed, will make difficult for us to run the
plant on sustainable basis. The substantial depreciation
of Indian rupees to USD has further added to our woes and
under the circumstances, we have already out the
production to a bare minimum so as to just keep running our
coke oven batteries as well as blast furnace. In view of
unprecedented recessionary trends in the economy and
consequent abnormal low realization on pig iron, we request
price reduction of coal for quantities finalized for delivery
during 1st July 2008 to 30th June 2009 period to level that was
settled for delivery period 1st July 2007 to 30th June 2008. This
only will help us to keep the plant running and to produce on
consistent basis.
We look forward for your positive response.
Yours faithfully
Page 54 of 82
Sd/-
MMTC Ltd.
Ved Prakash
Chief General Manager”
(Emphasis supplied)
66. The letter was written by Shri Ved Prakash who was then
the Chief General Manager and the substance of the letter was
that since pig iron prices have crashed, to purchase coal at
US$ 300 PMT to produce pig iron could be an unviable option.
Hence, a request was made for price reduction of coal for the
period from 01.07.2008 to 30.06.2009 to the level which
obtained for the delivery period from 01.07.2007 to
30.06.2008.
67. Elaborate arguments were advanced by the learned ASG
about the significance of letter being written on the same day
after signing the Addendum No.2. The learned ASG also
invited our attention to the observations of majority members
of the Board of Arbitration about the Addendum being
executed and the letter being written on the same day
respectively.
Page 55 of 82
SUBSEQUENT CORRESPONDENCE – CONCEPT OF
“CARRY OVER”: -
68. Learned ASG referred to a series of correspondence that
ensued between MMTC and Anglo pursuant to MMTC lifting
only 11,966 MT out of the contracted 4,66,000 MT. Learned
ASG contended that the correspondence only reflected a
friendly fight between erring officials, after having committed
to the price of US$ 300 PMT while the prevailing market price
was US$ 128 PMT. Learned ASG submitted that on the one
hand Anglo was justifying the fixation of prices at US$ 300 PMT
on the premise that agreements entered into between SAIL
and RINL were of the said price, while on the other hand Anglo
chose to ignore the same analogy for the period post the
execution of Addendum. According to learned ASG, the
refusal on the part of Anglo for staggering at the price of US$
128 PMT in the same manner as was provided to SAIL was an
act of arbitrariness on the part of Anglo. Learned ASG
lamented that the erring officials of MMTC did not even
attempt to persuade Anglo to provide the same treatment as
Page 56 of 82
was given to SAIL and RINL after the execution of the
Addendum dated 20.11.2008.
69. Learned ASG referred to the letter dated 21.09.2009 of
Anglo which referred to the earlier letter dated 09.03.2009
(which MMTC claims was not received by MMTC) and
submitted that Anglo had made the following proposal:-
• MMTC to perform a total of 38% of the total contracted
tonnage for the Fifth Delivery Period on the terms and
conditions (including price) applicable under the
Agreement (a further 172,533 tonnes) by March 31, 2010.
This will bring MMTC in line with the contract
performance of SAIL and RINL for the 2008/09 Delivery
Period.
• In addition, MMTC is to perform 18.7% of the remaining
Carryover (a further 52,641 tons) by March 31, 2010 on
the terms and conditions of the Agreement (including
price) as agreed with SAIL and RINL.
• Anglo will enter into a new long term agreement with
MMTC on the same terms and conditions as the current
long term agreements with SAIL and RINL (including
performance of the remaining carryover) for 466,000
tonnes per annum for a period of 3 years commencing 1st
April, 2010.
• Therefore, in summary, MMTC will take delivery of
225,174 tonnes of coal at 2008 price, terms and conditions
between now and 31 March 2010 and, under the new 3
year contract, perform the remainder of the Carryover
evenly spread over the first 2 years of the contract.
Page 57 of 82
• This proposal is made without prejudice to our rights
under the Agreement. It will remain open and capable of
acceptance until 5:00 pm (Brisbane time) on Wednesday
30th Sept 2009.
70. Learned ASG submitted that by letter of 25.09.2009,
Shri Suresh Babu declined the proposal which the learned
ASG stated would indicate that the reply strengthened the
case of Anglo. Referring to the counter proposal in the letter
of 25.09.2009, the learned ASG referred to the following
paragraph in the said letter:-
"...Keeping these issues in mind, we had approached
Anglo Coal for a reduction in price vide our letter dated
20.11.2008. Lifting another 38% implies a further
increase in loss by another USD 80/t. For the sake of
negotiation, we hope you will not ignore the
economic realities completely. Steel Melting Shop of
NINL is under implementation and the
commissioning is expected sometime in end 2010.
Economy will also come out of recession gradually.
In short we are not denying our obligation. The
request is only for staggering the time frame for lifting
as explained in para 1 and para 2. Please review and
consider our request for allotting at least one shipment
of 50,000 MT each from October 09 onwards instead of
zero stem till end of 2009."
(Emphasis supplied)
Page 58 of 82
71. Learned ASG also referred to the further proposal of
Anglo vide their letter dated 25.11.2009, whereby Anglo
proposed that MMTC lifts the remaining quantities of 4,54,034
MT of 2008 contract year in line with the agreement with SAIL
and RINL at the 2008 price of US$ 300 as per the following
schedule:-
“January - March, 2010 85,000 18.7%
April 2010 - March 2011 1,84,566 40.65%
April 2011 - March 2012 1,84,566 40.65%
We trust that this arrangement meets with your
approval.
This proposal is made without prejudice to our rights
under the Agreement. It will remain open and capable
of acceptance until 5.00pm (Brisbane time) on Friday 4th
December 2009.”
72. Learned ASG referred to the reply of Shri Suresh Babu,
for MMTC dated 27.11.2009 in his letter addressed to Mr. Rod
H. Elliott of Anglo stating that the said proposal was
acceptable to MMTC subject to Anglo allocating the left-over
quantities pertaining to 2009 contract at 2009 prices based on
Page 59 of 82
the terms and conditions agreed upon in the EJC of SAIL and
RINL. The learned ASG referred to the following para in the
said letter.
“……conditions agreed upon in the EJC of SAIL & RINL. To
be specific the balance supplies amounting to 4,25,600 MT
at the 2009 price level of US$ 128/125 PMT shall also be
made in proportion along with the carryover quantities of
2008 as proposed above in line with the terms agreed upon
with SAIL & RINL.”
73. Learned ASG referred to the reply of Anglo dated
01.12.2009 stating that it was not possible to make any
additional tonnage commitment to MMTC over and above
what was detailed in the proposal of 25.11.2009. The above
correspondence was characterised by the learned ASG as a
make believe and friendly fight and only a creation of a paper
trail to give an impression that there was no collusion.
74. Mr. Kaul, on the other hand, submitted that the offers
made by Anglo were good faith offers. Explaining the concept
of “carry over” learned senior counsel, Mr. Kaul, pointed out
that “carry over” arrangements do not dilute price or quantity
Page 60 of 82
and all that happens is some more time is given to the
purchaser to lift the quantities at the contracted price.
75. Mr. Kaul strongly refuted the contention that Anglo
allowed SAIL and RINL to lift their 2008-09 quantities at a
reduced price. Mr. Kaul submitted that SAIL and RINL were in
the first delivery period of their new LTA and as such could lift
coal pertaining to their future delivery period alongside their
2008-09 carryover and could thus seek mixed price cargo with
shipments containing some percentage of 2008-09 carryover
and some percentage of the ongoing delivery period. Mr.
Kaul submitted that MMTC was in the last delivery period and
even then they were not treated differently than SAIL or RINL.
76. According to Mr. Kaul, on 15.07.2009, MMTC was offered
an ad hoc “mixed price shipment” to tide over financial
difficulties of MMTC. According to the learned senior
counsel, what was offered in the letter, namely, 40,400 MT at
US$ 128.25 PMT was on ad hoc basis with a condition that their
carry over quantity of 5th delivery period will be supplied only
at US$ 300 PMT.
Page 61 of 82
77. Mr. Kaul, learned senior counsel for Anglo submitted that
the letter of 21.09.2009 by Anglo offered the same “carry over
terms” to MMTC as was offered to SAIL/RINL, as is clear from
the letter itself. According to Mr. Kaul, the attempt of MMTC
by its letter of 21.05.2009 was to perform the carry-over
obligation at the adhoc mixed price, which was offered vide
letter of 15.07.2009 as a onetime measure and as a goodwill
gesture.
78. Mr. Kaul submitted that by letter of 21.09.2009, Anglo
even agreed that MMTC could spread out its contractual
performance over the next 3 years. The letter of MMTC of
27.11.2009, according to Mr. Kaul, purported to accept this
offer provided, in parallel, Anglo also supplied additional
(Adhoc) (coal) @ US$ 128/125 PMT. This could not be
accommodated by Anglo resulting in the invocation of
arbitration ultimately.
79. According to Mr. Kaul, MMTC kept asking for reduction
of price and when Anglo refused to supply at the reduced
price a defence was taken in the arbitration and in the Court
Page 62 of 82
proceedings that Anglo was incapable of supplying.
According to Mr. Kaul, this submission was rejected both by
the majority of the arbitral Tribunal and by the learned SingleJudge in Section 34 which was restored by this Court and a
finding was recorded that the stand of MMTC that Anglo was
incapable of supplying was found to be incorrect.
80. Mr. Kaul invited our attention to the following findings of
this Court to buttress his submission.
“…….However, what is missed by Shri Rohatgi is the crucial
fact that no price for the coal to be lifted was stated in any of
the emails or letters exchanged during this period. This is in
fact what the Majority Award adverts to and fills up by
having recourse to the evidence given by Mr. Wilcox,
stating that the ambiguity qua price was resolved by the fact
that no coal was available for lifting at a price lower than the
contractual price. The Majority Award found, relying upon
Mr. Wilcox's evidence, that the supplies that were sought to
be made in August and September, 2009 were therefore,
also in the nature of "mixed" supplies, i.e., coal at the
contractual price, as well as coal at a much lower price. This
is a finding of fact that cannot be characterised as perverse,
as it is clear from the evidence led, the factual matrix of the
setting of there being a slump in the market, in which the
performance of the contract took place, as well as the
ambiguity as to whether the correspondence referred to
contractual price or "mixed" price, and thus, is a possible
view to take.”
Page 63 of 82
MMTC’S CONTRACT WITH BMA – SAME PERIOD /
SAME PRICE (APPROXIMATELY): -
81. Dealing with the aspect of the contracted price, namely,
US$ 300 PMT, Mr. Kaul highlighted the fact that MMTC had a
parallel contract with BHP Billiton Mitsubishi Alliance (BMA).
Under the said contract, MMTC lifted five lakh tons of hard
coking coal at US$ 300 PMT (Goonyella Middle Seam brand)
and US$ 292.5 PMT (Torrington brand) and US$ 270 PMT (soft
coking coal) and absolutely no grievance was made about the
said contract with BMA. Quantities were lifted and price paid
without demur, contends Mr. Kaul. Mr. Kaul further submitted
that in fact the price paid to BMA was used as a defence when
Anglo sought damages pointing to market price at US$ 126
PMT. The argument of MMTC before the arbitrators was that
there was no scope for damages as the market price was what
they had paid to BMA.
82. In response to the aspect of supply by BMA, learned ASG
submitted that the said transaction was vastly different from
the one entered with MMTC. The learned ASG submitted that
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a. The agreement entertained between BMA and MMTC
was qua 5,00,000 MT hard coking coal and 3,00,000 black
water soft coking coal whereas Addendum 2 with Anglo
by MMTC was only qua 4,66,000 hard coking coal.
b. BMA showed flexibility, commercial wisdom and
prudence by providing coking coal at the rate agreed
that is US$ 292.50 for Torrington brand coking coal and
US$ 270 Black water soft coking coal in a staggered
manner which commenced from 25.05.2009 till
23.06.2012.
c. BMA continued to supply the much needed hard coking
coal to the tune of 3,21,410 MT for operating the NINL
plan at the prevailing market rate that is US$ 122 PMT
whereas Anglo adopted an extremely hard and
uncompromising stand and refused to supply coking
coal, except for one adhoc quantity of 40,446 MT of
coking coal at US$ 128.25 PMT on 05.08.2009.
d. The quality of coking coal supplied by BMA was different
from the one supplied by Anglo.
Page 65 of 82
LONG CONTINUANCE OF MR. VED PRAKASH: -
83. Dealing with the contention of the learned ASG that Mr.
Ved Prakash, being at the helm of affairs in different senior
positions from 2008 to 2020, Mr. Kaul submitted that the
arbitration proceedings and the Court proceedings were
hotly contested and that at no point was the issue of fraud and
collusion and breach of fiduciary duty in the making of the
contract ever raised. Mr. Kaul pointed out that Mr. Ved
Prakash retired on 29.02.2020 when judgment was reserved
in the Section 37-Appeal of MMTC. The judgment was
pronounced on 02.03.2020 in favour of MMTC and cited this to
rebut the contention that Mr. Ved Prakash and team played a
friendly match. Mr. Kaul further submitted that Anglo carried
the matter further to this Court and by a detailed judgement
this Court upheld the award and restored the findings of the
learned Single Judge.
84. Mr. Kaul invited our attention to the following findings of
this Court in judgment dated 17.12.2020.
Page 66 of 82
“3. "Under clause 2 of the LTA, which refers to "Price", for
subsequent Delivery Periods, including the "Fifth
Delivery Period", with which we are directly concerned,
it is undisputed that when read with Annexure I of the LTA
and a letter dated 14.08.2008, setting out the terms of the
Fifth Delivery Period, the price fixed at $300 per metric
tonne .... "
10. "Shri Kapil Sibal, learned Senior Advocate appearing
on behalf of the Appellant, painstakingly took us through
the LTA and the entire correspondence that ensued
between the parties. He argued that all the findings given
by the Majority Award were findings of fact, there having
been little dispute on the construction of any term of the
LTA; no dispute as to the contracted quantity of coal that
was to be supplied in the Fifth Delivery Period, i.e.
466,000 metric tonnes: no dispute as to the price at which
such coal was to be supplied, i.e., at the rate of $300 per
metric tonne; and no dispute as to the quantity of coal that
remained unlifted, i.e., 454,034 metric tonnes. The only
issue before the Arbitral Tribunal was whether the
Appellant was unable to supply the contracted quantity of
coal at the contractual price, or whether the Respondent
was unwilling to lift the quantity of coal at the contractual
price, both being purely questions of fact as to the
performance of contractual obligations stemming from
the LTA."
14. "Shri Mukul Rohatgi, learned Senior Advocate
appearing on behalf of the Respondent, supported the
impugned judgment of the Division Bench ... According to
him... the Respondent was in a position to take supplies,
and did in fact demand that supplies of coal be made in
accordance with the LTA."
17. "The first and most important point, therefore, to be
noted is that this is a case in which there is a finding of fact
by the Majority Award that the Appellant was able to
supply the contracted quantity of coal for the Fifth
Delivery Period, at the contractual price, and that it was
the Respondent who was unwilling to lift the coal, owing
to a slump in the market, the Respondent being conscious
of the fact that mere commercial difficulty in performing a
Page 67 of 82
contract would not amount to frustration of the contract. It
was for this reason that the Respondent decided, as an
afterthought, in reply to the Appellant's legal notice dated
04.03.2010, to attack the Appellant on the ground that it
was the Appellant that was unable to supply the
contracted quantity in the Fifth Delivery Period.”
IMPACT OF THE FIRST INFORMATION REPORT: -
85. Mr. N. Venkataraman, learned ASG, drew attention to the
complaints filed by MMTC which resulted in the registration of the
First Information Report on 21.07.2025. The FIR is registered for
offences under Section 120(B), IPC, and Sections 13(2) read with
13(1)(d) of the Prevention of Corruption Act, 1988 [PC Act]. The
FIR is lodged by Shri Abhay Kumar, General Manager, MMTC,
New Delhi. The FIR records that the information prima facie
disclosed commission of offences punishable under the Sections
referred to above. The FIR is registered against 13 named officials
of MMTC, against the Anglo, against unknown officials of MMTC
and Anglo and other unknown persons.
86. FIR refers to the background of the Long Term Agreement
(LTA) dated 07.03.2007 details about the 5th delivery period; the
quantity agreed to be procured and the price of US$ 300 PMT,
labeled as massively inflated. The FIR makes reference to
Page 68 of 82
Addendum 2 dated 20.11.2008 having been entered into ignoring
NINL letter of 16.10.2008 and attributes collusion between MMTC
and Anglo officials for execution of Addendum 2 at a peak price
when the Lehman Brothers collapse happened in September 2008.
87. The FIR further mentions that the SPCoD approved
Addendum 2, based on misleading inputs from Mr. Ved Prakash
and Suresh Babu who failed to disclose the reduced demand and
obtained approval under false pretences amounting to
administrative frauds. A reference is also made to the letter of the
same dated 20.11.2008 seeking reduction of price. FIR refers in
detail to the subsequent correspondence which, according to the
complaint, discloses that officials did not assert the legal position
of MMTC against Anglo. A particular reference is made to the use
of phrase “we are not denying our obligation” in the letter of
25.09.2009 which, according to the complaint, weakened the
MMTC’s defense in arbitration.
88. The FIR refers to an allegation about Anglo providing
reduced price US$ 128 PMT and staggered deliveries to SAIL and
RINL but refusal of the same to MMTC/NINL. It alleges that MMTC
officials failed to invoke parity or renegotiation clauses, indicating
Page 69 of 82
deliberate inaction. It was stated in the FIR that all this suggested
that there was exchange of unlawful and illegal consideration
between the erring officials of MMTC and Anglo.
89. As will be noticed above, the gravamen of the allegations in
the FIR is similar to the allegations set out in the proceedings
before us which we have discussed in detail hereinabove.
90. Alluding to the First Information Report, Mr. Kaul
submitted that the whole attempt to file a criminal complaint
and get the FIR registered is a malicious attempt to wriggle
out of the award and mere pendency of the FIR could not
render the award inexecutable. Mr. Kaul submitted that
MMTC filed a criminal complaint with the CBI on 02.09.2022
with the follow-up complaint on 23.11.2022. The CBI
registered the preliminary enquiry on 09.01.2023. MMTC
moved the CBI Court seeking a direction to register the FIR.
The CBI Court passed a judgment on 09.05.2024 stating that it
did not have power to direct the CBI to register the FIR. On
01.03.2025, MMTC filed a Revision Petition against CBI Court’s
order before the High Court. In the meantime, the Executing
Page 70 of 82
Court allowed the Enforcement Petition and dismissed the
MMTC’s objections on 09.05.2025 which is the order
impugned herein.
91. During the pendency of this Special Leave Petition, and
when arguments have been heard on 22.05.2025 and
23.05.2025 and when the matter was posted after the partial
working days i.e., for 24.07.2025, on 20.07.20205 MMTC filed
the follow-up complaint with the CBI and the CBI, very
promptly, registered the FIR on 21.07.2025. Mr. Kaul
submitted that all this was done when the matter was partheard only to create some support to the allegations of fraud.
Mr. Kaul made a grievance that no leave of the Court was
taken and that MMTC had resorted to abuse of the legal
process of the Court. Mr. Kaul submits that execution of the
award cannot be kept in abeyance pending an FIR based on a
self-serving and convenient criminal complaint.
92. The FIR has been filed for the offences punishable under
Section 120B, IPC, read with Section 13(2) and 13(1)(d) of the
PC Act, against named public servants of MMTC the
Page 71 of 82
respondent company, unknown officials of MMTC and the
respondent.
93. Mr. Kaul, learned Senior Counsel, submitted that had
there been criminal conspiracy/fraud, the common course of
human conduct of recalcitrant parties would be to lift the coal
at the agreed price, pay the amount, and share the booty.
Instead, here was a case where not only was the contracted
quantity not lifted except to the extent of 11,966 MT, leaving a
huge amount of contracted quantity un-lifted, Anglo had to
litigate for the last 15 years and have still not seen the fruits of
the award. To say that there was collusion, submits Mr. Kaul,
would be completely unjustified.
ANALYSIS
94. We have set out hereinabove the contentions of both the
parties to enable us to examine the issue whether at least
prima facie the case of breach of fiduciary duty has been
established by MMTC in this appeal. From the analysis of the
Page 72 of 82
pros and cons of the case advanced by both the parties, the
following undisputed facts/irresistible deductions emerge:-
a. That there was a Long Term Agreement (LTA) between
the parties on 07.03.2007 which for the first three
delivery periods clearly prescribed the quantity of
4,66,000 MT as the yearly base quantity of which
4,64,374 MT was fixed for the first delivery period,
3,82,769 MT was fixed for the 2nd delivery and 4,66,000
was fixed for 3rd delivery period.
b.In clause 2 of the LTA, the price for the 1st and 2nd
delivery period was prescribed. For the subsequent
delivery period, the price was fixed in accordance with
para 1 of the General Conditions of the Agreement
(GCA). Para 1.1 of GCA prescribed that the price was
to be mutually discussed and settled at the same price
as settled between Anglo and SAIL/RINL.
c. Under clause 1.3 of the LTA, the option to extend the
duration of the agreement was to be exercised by
31.01.2007. It has not been disputed before us that a
MoU dated 30.01.2007 was executed between MMTC
and Anglo. Under the MoU read with Clause 1.3 of LTA,
supply of a quantity of 4,66,000 MT at a price to be
finalized by the Empowered Joint Committee for
SAIL/RINL was agreed upon. The contract was
Page 73 of 82
extended further for 2 years, covering the 4th and 5th
delivery period.
d. MoU also indicates that based on correspondence and
even before the execution of the Long Term
Agreement, the first, 2
nd and part of the 3rd delivery
period was even completed. So parties had, based on
correspondence, discharged their obligations.
e. It is not disputed that the 4 delivery periods namely the
first, second, third and fourth passed on peacefully with
no dispute between the parties.
f. The 5th delivery period was to begin on 01.07.2008.
However, the 4th delivery period under the 3 month
extension clause stood extended till 30.09.2008 and in
fact was further extended for a month to 30.10.2008.
g.It is also not disputed that the Empowered Joint
Committee on 8
th and 9th May 2008, did approve a price
of US$ 300 PMT for supply for coal to SAIL/RINL. This is
important because the price fixed for SAIL/RINL is
linked to the price that MMTC was to pay.
h.It is also not disputed that with the last shipment of the
4
th delivery period, 2366 MT pertaining to the 5th
delivery period was also shipped on 30.10.2010.
i. The EJC, fixed the price for the 5th delivery period on
8
th and 9th May 2008. The Lehman brothers fiasco
happened in mid-September 2008.
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j. The internal note for the finalization of terms for the 5th
delivery period is of 03.06.2008 which expressed the
concern that the spot price for coal was US$ 400 PMT
FOB.
k.The Addendum signed on 20.11.2008 followed after the
quantity of 2366 MT as part of the 5th delivery period
had already been shipped. The explanation of the
learned ASG is that this was only to save dead freight.
l. SPCoD approval Minutes of 06.10.2008 was also signed
by Mr. H.S. Mann whose initial note of April 2008 was
one of the main points urged by MMTC before us. The
approval also noticed the recent fall in prices of pig iron
and steel products and did in fact suggest exploring
possibility of reduction in quantity.
m. The explanation of Anglo that NINL had no say in the
quantity since the quantity was fixed in the LTA and
MoU and that in fact, NINL’s approval was only for the
specification is a plausible one.
n. That MMTC purchased coal from BMA at US$ 300/292
PMT which had not been disputed and in fact the
argument in the proceedings to set aside the award was
based on the price paid to BMA to contend that no
damages occurred to Anglo. Further, the stand of the
learned ASG insofar as the supply by BMA is concerned
as dealt with above shows that there was indeed supply
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by BMA at the rate of US$ 292 PMT and US$ 270 PMT,
though the period of carryover offered may have been
different.
o. The exercise of writing a letter on 20.11.2008, namely,
the same day as the Addendum No.2 has been
explained as an attempt by MMTC to renegotiate the
price. Per se on this basis and without anything more,
nothing sinister could be imputed. There has been no
convincing explanation from the appellant to the
argument of Anglo that the common course of human
conduct of conspiring parties would be to lift the coal at
the agreed price, pay the amount and share the booty,
instead of litigating for 15 years.
p. The subsequent correspondence and the context in
which they were written viewed in the background of
the findings of this Court do not indicate that it was a
friendly fight intended to commit certain admissions in
the correspondence. On the concept of carryover also,
the explanation by Anglo that there was no
discrimination between the contract with MMTC and
contract with SAIL and that a carryover offered in the
respective contracts have to be viewed in the
background of the “delivery periods in question” of the
respective contracts is a plausible explanation borne
out from the records.
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q.A First Information Report by itself is only a document
to set in motion a legal process. It is the version of one
party and by itself we are not able to, for the reasons set
out above, declare that the award upheld by this Court
should be rendered inexecutable.
r. The argument that Mr. Ved Parkash orchestrated the
arbitration and the litigation before the High Court of
Delhi and facilitated success for Anglo is also not
convincing because when Mr. Ved Prakash was at the
helm, the Section 37 proceedings were prosecuted by
MMTC successfully. While Ved Prakash retired on
29.02.2020 the Delhi High Court pronounced its
judgement in favour of MMTC on 02.03.2020.
s. Ultimately, the arbitration was fought over a period of 2
years before the arbitrators and the matter was fought
in the Delhi High Court and this Court for over a period
of 6 years till this court restored the award and set aside
the judgment of the Division Bench.
t. The only two arguments raised before the arbitrators
and Court were:-
i. Anglo was incapable of supplying the agreed
quantity.
ii. In any event, there was no loss in the form of
damages as the market price was in the range of
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US$ 300 PMT as is evident from the supply done
by BMA.
CONCLUSION: -
95. In the light of the above analysis, we are not able to
conclude, on the material furnished before us, that the Senior
Managerial personnel involved at the helm in MMTC during
the relevant period acted in a manner as no reasonable
personnel/director in the circumstances would have acted.
We are also not able to conclude on the material furnished that
the decisions taken were not within the range of
reasonableness or that the course adopted by them was not
one, a reasonably competent personnel/director would
adopt. Applying the business judgment rule, the course
adopted by them cannot be said to be one to which a court of
law would not defer to. The appellants have not been able to
even prima facie demonstrate that circumstances exist to
conclude that the personnel of MMTC did not act in the best
interest of the company.
Page 78 of 82
96. The appeal challenges, in the prayer clause, the
judgment dismissing the objections in OMP (ENF.) (COMM.)
19 of 2018. Though in the prayer clause, there is no challenge
to dismissal of the application under Order XXI Rule 29 filed
in EX/application (OS) 1806 of 2024, in Para 1 of the civil
appeal the appellants have indicated that they are aggrieved
by the said order also. Order XXI Rule 29 provides for stay of
execution pending suit between decree holder and judgment
debtor. We were, however, told that the suit filed itself now
stands rejected under Order VII Rule 11 but a regular first
appeal in RFA-28 of 2025 has been filed. Hence, an occasion
for considering an Order XXI Rule 29 Application does not
arise.
97. We are dealing with an objection filed under Section 47
claiming that the award as upheld by this Court is
inexecutable. As held by this Court in Electrosteel (Supra) the
jurisdiction lies in a narrow compass. It is the mandate of this
Court that the object of Section 47 is to prevent unwarranted
litigation and dispose of all objections as expeditiously as
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possible. This Court has warned that there is a steady rise of
proceedings akin to a retrial which causes failure of
realization of the fruits of a decree, unless prima facie grounds
are made out entertaining objections under Section 47 would
be an abuse of process.
98. An objection petition under Section 47 should not
invariably be treated as a commencement of a new trial. In
Rahul S. Shah Vs Jinendra Kumar Gandhi and Ors.,
14 this
Court had the following telling observations to make.
“24. In respect of execution of a decree, Section 47 CPC
contemplates adjudication of limited nature of issues
relating to execution i.e. discharge or satisfaction of the
decree and is aligned with the consequential provisions of
Order 21 CPC. Section 47 is intended to prevent multiplicity
of suits. It simply lays down the procedure and the form
whereby the court reaches a decision. For the applicability
of the section, two essential requisites have to be kept in
mind. Firstly, the question must be the one arising between
the parties and secondly, the dispute relates to the
execution, discharge or satisfaction of the decree. Thus, the
objective of Section 47 is to prevent unwanted litigation and
dispose of all objections as expeditiously as possible.
25. These provisions contemplate that for execution of
decrees, executing court must not go beyond the decree.
However, there is steady rise of proceedings akin to a retrial
at the time of execution causing failure of realisation of fruits
of decree and relief which the party seeks from the courts
despite there being a decree in their favour. Experience has
14 (2021) 6 SCC 418
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shown that various objections are filed before the executing
court and the decree-holder is deprived of the fruits of the
litigation and the judgment-debtor, in abuse of process of
law, is allowed to benefit from the subject-matter which he
is otherwise not entitled to.
26. The general practice prevailing in the subordinate
courts is that invariably in all execution applications, the
courts first issue show-cause notice asking the judgmentdebtor as to why the decree should not be executed as is
given under Order 21 Rule 22 for certain class of cases.
However, this is often misconstrued as the beginning of a
new trial. For example, the judgment-debtor sometimes
misuses the provisions of Order 21 Rule 2 and Order 21 Rule
11 to set up an oral plea, which invariably leaves no option
with the court but to record oral evidence which may be
frivolous. This drags the execution proceedings indefinitely.
27. This is antithesis to the scheme of the Civil Procedure
Code, which stipulates that in civil suit, all questions and
issues that may arise, must be decided in one and the same
trial. Order 1 and Order 2 which relate to parties to suits and
frame of suits with the object of avoiding multiplicity of
proceedings, provides for joinder of parties and joinder of
cause of action so that common questions of law and facts
could be decided at one go.”
POSTSCRIPT :-
99. Before we part, a small postscript. Whether in
Government, Public Sector Corporations or even in the
private sector, the driving force of the entity are the persons
who administer them. A certain play in the joints is inevitable
for their day-to-day functioning. If they are shackled with the
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fear that, their decisions taken for the day-to-day
administration, could years later with the benefit of hindsight,
be viewed with a jaundiced eye, it will create a chilling effect
on them. A tendency to play it safe will set in. Decision
making will be avoided. Policy paralysis will descend. All this
will in the long run prove detrimental not just to that entity but
to the nation itself. We are not to be understood to be
condoning decisions taken for improper purposes or
extraneous considerations. All that we are at pains to drive
home is that great caution and circumspection have to be
exercised before such allegations are brought forward and
adequate proof must exist to back them. Otherwise for fear
that carefully built reputations could be casually tarnished,
best of talent will not be forthcoming, especially for
government and public sector corporations.
100.In view of what is stated hereinabove, we find no merit in
the objections filed by MMTC under Section 47 of the CPC.
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There are no good grounds to entertain the same. The appeal
is dismissed. No order as to costs.
……….........................J.
[SANJAY KUMAR]
……….........................J.
[K. V. VISWANATHAN]
New Delhi;
3
rd November, 2025
