Background of the Dispute
In Great Eastern Energy Corporation Ltd vs SRMB Srijan Ltd, a dispute arose over a gas purchase and sale agreement. SRMB sought to waive a Minimum Guaranteed Offtake (MGO) clause, leading to contract termination. When the matter was arbitrated, SRMB challenged the Tribunal's award under Section 34 of the Arbitration and Conciliation Act, 1996.
Court's Key Observations
The Calcutta High Court, presided by Justice Sabyasachi Bhattacharyya, emphasized the limited scope of judicial interference in arbitral awards. The court observed that re-appreciating evidence or reinterpreting contracts falls outside its purview unless there’s patent illegality. Relying on precedents such as Ssangyong Engineering and Venture Global Engineering, the Court rejected SRMB's contention of contract novation and wrongful termination. It held that the Arbitral Tribunal had correctly interpreted the correspondence and found no agreement to waive the MGO clause.
Issue of Termination
SRMB had terminated the contract based on a dispute over bank guarantees and suspension of gas supply. However, the Court ruled that SRMB’s termination did not comply with the contract's requirements. The Court noted that the suspension of gas supply did not breach the contract, as the MGO clause required a guarantee regardless of emergencies.
Damages Award and Loss Assessment
The Tribunal had awarded damages for future losses, which SRMB contested, arguing the claimant hadn’t demonstrated actual loss. The Court upheld the damages, noting the claimant's losses due to gas flaring as a consequence of SRMB’s wrongful termination. It cited Dwarka Das to affirm that future damages could be calculated based on the contract’s MGO clause.
Conclusion
The Calcutta High Court upheld the arbitral award, emphasizing that courts should not act as appellate forums in arbitration cases unless there is clear patent illegality. The ruling reinforces the principle of limited judicial review under Section 34 of the Arbitration Act.
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