Centrotrade Minerals and Metals Inc v. Hindustan Copper Limited [Supreme Court, 2 June 2020]

CENTROTRADE MINERALS AND METALS V. HINDUSTAN COPPER

ISSUE:

Whether the contract’s two-tier arbitration clause, which allows for a second arbitration with the International Chamber of Commerce (ICC) in London after the initial arbitration in India, is legitimate and allowed under Indian law. This issue has already been addressed and resolved in favor of the clause’s legitimacy?
Whether the contract’s two-tier arbitration clause, which allows for a second arbitration with the International Chamber of Commerce (ICC) in London after the initial arbitration in India, is legitimate and allowed under Indian law. This issue has already been addressed and resolved in favour of the clause’s legitimacy.

RULE:

In this scenario, the relevant rule is the two-tier arbitration clause included in the parties’ contract. This section provides for a two-stage arbitration process, with the first stage involving arbitration in India and the case proceeding to a second arbitration conducted by the International Chamber of Commerce (ICC) in London if either party is dissatisfied with the outcome. This regulation specifies the agreed-upon approach for resolving contract-related issues.

FACTS:

Centrotrade Minerals and Metals Inc. (Centrotrade), a US firm, has agreed to sell 15,500 DMT of copper concentrate to Hindustan Copper Ltd. (HCL) for delivery at Kandla Port in Gujarat, India.
The contract featured a two-tier arbitration clause: first-tier arbitration in India, followed by a second-tier arbitration held by the International Chamber of Commerce (ICC) in London if either party disagreed with the outcome.
A disagreement occurred regarding the quantity of copper concentrate given, prompting arbitration proceedings.
In the first-tier arbitration, the arbitrator assigned by the Indian Council of Arbitration issued a Nil Award.
Centrotrade requested second-tier arbitration, and the ICC arbiter in London delivered a decision in Centrotrade’s favor, awarding precise monetary amounts.
During the London arbitration, HCL filed a suit in a Rajasthan court challenging the arbitration clause, obtaining an interim stay that the Supreme Court ultimately overturned.
The implementation of the London award was initially permitted by a single judge of the Calcutta High Court, but a Division Bench overturned this decision.
The matter was heard by the Supreme Court, which issued two distinct judgments addressing the constitutionality of the two-tier arbitration clause and the procedural fairness of the arbitration.

HELD:

According to S.B. Sinha, J., the two-tier arbitration agreement was unlawful under Indian law, so the foreign judgment was not enforceable in India.
Tarun Chatterjee, J., decided that the two-tier arbitration process was lawful and admissible under Indian law, but procedural fairness was difficult throughout the London arbitration. HCL was not allowed to present its case before the ICC arbitrator.
The case was submitted to a higher court.
The first question, whether the two-tier arbitration agreement was lawful, was answered positively.
The matter is currently being evaluated for the second question, which concerns the enforcement of the London award, focusing on whether HCL was given a fair and adequate opportunity to respond.
The Court found no evidence to support Hindustan Copper Ltd.’s (HCL) contention that it was unable to present its case during the arbitration hearings. Under Section 48(b) of the Arbitration and Conciliation Act, the refusal ground is an impossibility, not difficulty in presenting one’s case. HCL had many opportunities to state its position but chose not to participate in the arbitration at first.
The Court rejected the claim that the London arbitrator should have resolved the issue of jurisdiction as a preliminary matter before examining the contract’s substantive issues. This was the first time this argument was offered, and it needed more substance.
The Court criticized one of the judges’ errors in the prior judgment, pointing out that the judge had misread some aspects of the arbitration proceedings and needed to correctly apply essential legal principles.
The Court determined that remanding the case to the ICC arbitrator for a new award was outside the enforcing court’s authority under Section 48 of the Arbitration and Conciliation Act.
As a result, Centrotrade’s appeal was permitted (Civil Appeal No. 2562 of 2006), and Chatterjee, J.’s judgment was reversed. The appeal filed by HCL (Civil Appeal No. 2564 of 2006) was denied.