Delhi High Court slammed PSU MMTC for filing a civil suit after the Supreme Court upheld the arbitral award, stating that arbitration cannot become a never-ending cycle of legal challenges.
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NEW DELHI: The Delhi High Court recently dismissed a civil suit filed by Public Sector Undertaking MMTC Limited, which attempted to challenge an arbitral award previously upheld by the Supreme Court. The Court termed the move a “classic case of abuse of the process of law”, reaffirming the legislative intent behind the Arbitration and Conciliation Act, 1996.
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Background
MMTC Limited, a central government PSU, had entered into a long-term agreement (LTA) with Anglo American Metallurgical Coal Pty Ltd (AAMC), an Australian mining company, in 2007 for the supply of hard coking coal. This agreement was later extended by Addendum 2, fixing the price of coal at USD 300 per MT for a supply of 4.66 lakh MT between July 2008 and June 2009.
However, MMTC failed to lift most of the committed coal quantity, prompting AAMC to initiate arbitration proceedings. In May 2014, the International Chamber of Commerce awarded damages to AAMC for MMTC’s failure to honor the deal. The award was upheld by the Supreme Court in December 2020, and MMTC’s review petitions and applications for clarification were also dismissed.
The Civil Suit
Despite the arbitral award attaining finality, MMTC filed a fresh civil suit in 2022 before the Delhi High Court. The PSU alleged that Addendum 2 was executed fraudulently, citing a conspiracy between its officials and AAMC’s representatives. MMTC claimed that due to the global financial crisis in 2008, coal prices had drastically reduced, and the deal caused a loss of Rs 1,000 crores to the exchequer.
The company further stated that this conspiracy came to light only in 2022 and is under investigation by the CBI. MMTC sought a declaration that Addendum 2 and the arbitration proceedings were void ab initio due to fraud.
Delhi High Court’s Ruling
Justice Jasmeet Singh firmly rejected MMTC’s plea, emphasizing:
“The filing of the present suit by the plaintiff herein is a classic case of abuse of the process of law.”
The Court noted that allowing such suits would encourage litigants to relitigate settled matters under the guise of newly discovered facts, thereby undermining the core tenets of arbitration: finality, speed, and efficiency.
The Court highlighted the exhaustive nature of Section 34 of the Arbitration and Conciliation Act, 1996, which provides exclusive grounds for setting aside arbitral awards. MMTC had already exhausted all legal remedies up to the Supreme Court, and the current civil suit was simply a disguised collateral challenge.
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The Delhi High Court made several crucial observations while dismissing MMTC’s civil suit. It emphasized that courts must remain vigilant and guard against “clever drafting” that seeks to circumvent the statutory restrictions laid down in the Arbitration and Conciliation Act, 1996.
The Court categorically stated that arbitral awards, especially those upheld by the Supreme Court, cannot be indirectly challenged through fresh civil suits framed under the guise of discovery of new facts. Allowing such suits would not only undermine the principles of finality and efficiency in arbitration but also affect public confidence in arbitration as a reliable dispute resolution mechanism.
In line with this reasoning, the Court exercised its powers under Order VII Rule 11 of the Civil Procedure Code (CPC) to reject the plaint at the threshold itself, reinforcing the need to curb frivolous litigation and uphold judicial discipline.
Case Title: MMTC Limited v Anglo-American Metallurgical Pty Limited and Ors
CS(COMM) 959/2024 & I.A. 43586/2024
READ JUDGMENT HERE
Click Here to Read More Reports On the Arbitration and Conciliation Act, 1996
