Anglo American Metallurgical Coal Pty Ltd. vs Mmtc Ltd.

Evidence Act, 1872: s.92, proviso (6) and illustration (f); s.94 and s.95 – Interpretation of documents exchanged between the parties in the performance of a contract – Reading together proviso (6) and illustration (f) to s.92, s.94 and s.95 of the Evidence Act show that when there are a number of documents exchanged between the parties in the performance of a contract, all of them must be read as a connected whole, relating each particular document to “existing facts”, which include how particular words are used in a particular sense, given the entirety of correspondence between the parties – Thus, after the application of proviso (6) to s.92 of the Evidence Act, the adjudicating authority must be very careful when it applies provisions dealing with patent ambiguity, as it must first ascertain whether the plain language of a particular document applies accurately to existing facts – If, however, it is ambiguous or unmeaning in reference to existing facts, evidence may then be given to show that the words used in a particular document were used in a sense that would make the said words meaningful in the context of the entirety of the correspondence between the parties – In the instant case, the three critical emails have to be read in the surrounding circumstances of the entirety of the LTA and the correspondence which ensued between the parties – Once that exercise is undertaken, as was undertaken by the Majority Award, it was not possible to hold that the Majority Award was not a possible view on the facts of this case – The reliance of the Majority Award upon the correspondence between the parties buttressed by evidence on behalf of appellant, was not therefore flawed.

Evidence Act, 1872: ss.92, 94, 95 – A “patent ambiguity” provision, as contained in s.94 of the Evidence Act, is only applicable when a document applies accurately to existing facts, which includes how a particular word is used in a particular sense – Given that, in the facts of the present case, there was no mention of the price at which coal was to be supplied in the three “crucial” emails, these emails must be read as part of the entirety of the correspondence between the parties, which would then make the so-called “admissions” in the emails apply to existing facts – Once this is done, it is clear that there is no scope for the further application of the “patent ambiguity” principle contained in s.94 of the Evidence Act, to the facts of the present case – However, s.95 of the Evidence Act, dealing with latent ambiguity, when read with proviso (6) and illustration (f) to s.92 of the Evidence Act, could apply to the facts of the present case, as when the plain language of a document is otherwise unmeaning in reference to how particular words are used in a particular sense, given the entirety of the correspondence, evidence may be led to show the peculiar sense of such language – Thus, if this provision is applied, the Majority Award cannot be faulted as it has accepted the evidence given by Mr. Wilcox, wherein he explained that the three emails would only be meaningful if they were taken to refer to “mixed” supplies of coal, and not supplies of coal at the contractual price.

Law of evidence – Latent ambiguity and patent ambiguity – Distinction between.

Allowing the appeal, the Court

HELD: 1.1 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 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. Once this becomes clear, it is obvious that the Majority Award, after reading the entire correspondence between the parties and examining the oral evidence, has come to a possible view, both on the Respondent being in breach, and on the quantum of damages. [Para 17][545-A-D]

1.2 The entire approach of the Division Bench is flawed. First and foremost, to cherry-pick three emails out of the entire correspondence and to rest a judgment on those three emails alone, without having regard to the context of the LTA and the correspondence, both before and after those three emails, would render the judgment of the Division Bench fundamentally flawed. Further, the finding that there was “no evidence” that the Respondent demanded stems of coal at a reduced rate vis-à-vis the contractual rate, flies in the face of at least three different exchanges between the parties, being the Respondent’s letters dated 20.11.2008, 27.11.2009 and 03.12.2009. Equally, the finding of the Division Bench that no evidence had been led to show that the Appellant had availability of the balance quantity of 454,034 metric tonnes of coal to supply to the Respondent during the Fifth Delivery Period, again completely fails to appreciate Mr. Wilcox’s evidence given by way of an Additional Affidavit dated 03.09.2013 and in response to questions in cross-examination before the Arbitral Tribunal on 23.09.2013, together with two letters exchanged between the parties on 21.09.2009 and 25.09.2009. All of these aspects were considered in the Majority Award of the Arbitral Tribunal. The finding that there is “no evidence” to prove market price of coal at the time of breach, and that therefore, quantum of damages could not be fixed, again completely ignores Mr. Wilcox’s evidence in chief and cross examination; Respondent’s letters dated 25.09.2009, 27.11.2009 and 03.12.2009; as also the Appellant’s re-negotiated contracts with SAIL/RINL. All these aspects have been considered by the Majority Award in great detail. [Paras 18, 19, 20][545-D-H; 546-A]

1.3 The crucial fact was 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. [Para 21][546-C-E]

2. Section 92 of the Evidence Act refers to the terms of a “contract, grant or other disposition of property or any matter required by law to be reduced to the form of a document”. Illustration (f) of section 92 of the Evidence Act indicates that facts, which may on the face of it, be ambiguous and vague, can be made certain in the contextual setting of the contract, grant or other disposition of property. Section 94 of the Evidence Act, then speaks of language being used in a document being “plain in itself”. It is only when such document “applies accurately to existing facts”, that evidence may not be given to show that it was not meant to apply to such facts. Likewise, the obverse situation is contained in section 95 of the Evidence Act, which then states that when the language used in a document is plain in itself, but is “unmeaning in reference to existing facts”, only then may evidence be given to show that it was used in a peculiar sense. When sections 92, 94 and 95 of the Evidence Act are applied to a string of correspondence between parties, it is important to remember that each document must be taken to be part of a coherent whole, which happens only when the “plain” language of the document is first applied accurately to existing facts. [Paras 27, 28][549-F-H; 550-A-B]

3.1 A “patent ambiguity” provision, as contained in section

94 of the Evidence Act, is only applicable when a document applies accurately to existing facts, which includes how a particular word is used in a particular sense. Given that, in the facts of the present case, there was no mention of the price at which coal was to be supplied in the three “crucial” emails, these emails must be read as part of the entirety of the correspondence between the parties, which would then make the so-called “admissions” in the aforementioned emails apply to existing facts. Once this is done, it is clear that there is no scope for the further application of the “patent ambiguity” principle contained in section 94 of the Evidence Act, to the facts of the present case. However, section

95 of the Evidence Act, dealing with latent ambiguity, when read with proviso (6) and illustration (f) to section 92 of the Evidence Act, could apply to the facts of the present case, as when the plain language of a document is otherwise unmeaning in reference to how particular words are used in a particular sense, given the entirety of the correspondence, evidence may be led to show the peculiar sense of such language. Thus, if this provision is applied, the Majority Award cannot be faulted as it has accepted the evidence given by Mr. Wilcox, wherein he explained that the three emails would only be meaningful if they were taken to refer to “mixed” supplies of coal, and not supplies of coal at the contractual price. [Paras 31, 32][552-E-H; 553-A-B]

3.2 When proviso (6) and illustration (f) to section 92, section 94 and section 95 of the Evidence Act are read together, the picture that emerges is that when there are a number of documents exchanged between the parties in the performance of a contract, all of them must be read as a connected whole, relating each particular document to “existing facts”, which include how particular words are used in a particular sense, given the entirety of correspondence between the parties. Thus, after the application of proviso (6) to section 92 of the Evidence Act, the adjudicating authority must be very careful when it applies provisions dealing with patent ambiguity, as it must first ascertain whether the plain language of a particular document applies accurately to existing facts. If, however, it is ambiguous or unmeaning in reference to existing facts, evidence may then be given to show that the words used in a particular document were used in a sense that would make the aforesaid words meaningful in the context of the entirety of the correspondence between the parties. [Para 34][57-D-G]

4. It is clear that the three critical emails have to be read in the surrounding circumstances of the entirety of the LTA and the correspondence which ensued between the parties. Once that exercise is undertaken, as was undertaken by the Majority Award, it is impossible to hold that the Majority Award is not a possible view on the facts of this case. Respondent’s argument in support of the impugned judgment that there is no evidence to demonstrate proof of damage suffered as on the date of breach, is also factually incorrect. It is well established that the arbitral tribunal is the final judge of the quality, as well as the quantity of evidence before it. The Majority Award took into account Mr. Wilcox’s Affidavit dated 10.07.2013 and Additional Affidavit dated 03.09.2013 detailing the prices at which sales of coal were made to Chinese purchasers during the Fifth Delivery Period, which ended on 30.09.2009, being the date of breach as found by the Majority Award. In addition, contemporaneous correspondence, including letters dated 27.11.2009 and 03.12.2009 were also relied upon to show that the Respondent was itself seeking coal at roughly the price of $128 per metric tonne, at around the same time. Hence, the difference between the contractual price and market price was arrived at as $173.383 per metric tonne, in accordance with the law. It is not possible to accept respondent’s argument that the letters dated 27.11.2009 or 03.12.2009 do not reflect the market price of coal as on the date of breach or that the market price of coal cannot be established from the special long-term contracts operating at around the same time as the date of breach. This argument is therefore rejected. [Paras 37, 38, 40][558-F-H; 559-A-D; 560-H; 561-A]

Smt. Kamala Devi v. Seth Takhatmal & Anr. [1964] 2 SCR 152; Sudarsan Trading Co. v. Govt. of Kerala (1989) 2 SCC 38:[1989] 1 SCR 665; Murlidhar

Chiranjilal v. Harishchandra Dwarkadas and Anr. [1962] 1 SCR 653 – relied on

5. The present case is that of an international commercial arbitration, the Majority Award being delivered in New Delhi on 12.05.2014. Resultantly, this case has been argued on the basis of the law as it stood before the Arbitration and Conciliation (Amendment) Act, 2015 added two explanations to section 34(1) and subsection (2A) to section 34 of the Arbitration Act, in which it was made clear that the ground of “patent illegality appearing on the face of the award” is not a ground which could be taken to challenge an international commercial award made in India after 23.10.2015, when the Amendment was brought into force. Given the parameters of judicial review laid down in Associate Builders, it is obvious that neither the ground of fundamental policy of Indian law, nor the ground of patent illegality, have been made out in the facts of this case, given the fact that the Majority Award is certainly a possible view based on the oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence. [Paras 41, 44] [561-B-C; 565-B-D]

Associate Builders v. DDA (2015) 3 SCC 49: [2014] 13 SCR 895 – relied on

MMTC Ltd. v. Vedanta Ltd. (2019) 4 SCC 163:[2019] 3 SCR 1023; Dyna Technologies Pvt. Ltd. v. Cromptom Greaves Ltd. 2019 SCC Online SC 1656; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (2019) 7 SCC 236 : [2019] 8 SCR 728; South East Asia Marine Engg. & Constructions Ltd. (SEAMEC LTD.) v. Oil India Ltd. (2020) 5 SCC 1649; Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd. (2020)

7 SCC 167 : [2019] 7 SCR 522; Sangyong Engg. & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131 : [2019] 7 SCR 522 – held inapplicable

Raghunandan v. Kirtyanand AIR 1932 PC 131; Zurich Insurance (Singapore) Pte Ltd v. B-Gold Interior Design & Construction Pte Ltd. [2008] SGCA 27; Transmission Corpn. of Andhra Pradesh Ltd. v. GMR Vemagiri Power Generation Ltd. (2018) 3 SCC 716; Renusagar Power Co. Ltd. v. General Electric Co. 1994 Supp (1) SCC 644: [1993] 3 Suppl. SCR 22; ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705:[2003] 3 SCR 691; National Highways Authority of India v. ITD Cementation India Ltd. (2015) 14 SCC 21:[2015] 6 SCR 107; Centrotrade Minerals &Metal Inc. v. Hindustan Copper Ltd. (2017)

2 SCC 228 : [2016] 9 SCR 83; Venture Global Engg. LLC v. Tech Mahindra Ltd. (2018) 1 SCC 656: [2017]

12 SCR 259; Sutlej Construction Ltd. v. State (UT of Chandigarh) (2018) 1 SCC 718 : [2017] 12 SCR 134; Maharashtra State Electricity Distribution Co. Ltd. v. Datar Switchgear Ltd. (2018) 3 SCC 133: [2018] 1 SCR 733; HRD Corpn. v. GAIL (India) Ltd. (2018) 12 SCC 471: [2017] 11 SCR 857; M.P. Power Generation Co. Ltd. v. ANSALDO Energia SpA, (2018) 16 SCC 661; Shriram EPC Ltd. v. Rioglass Solar Sa (2018) 18 SCC 313; State of Jharkhand v. HSS Integrated Sdn (2019)

9 SCC 798; Ssangyong Engg. & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131:[2019] 7 SCR 522

– referred to