MMTC LTD Vs. RASHTRIYA ISPAT NIGAM LIMITED VISAKHAPATNAM

JUDGEMENT

(1.) This Arbitration Application has been taken out under Section 11 (5) & (6) of the Arbitration and Conciliation Act, 1996 (for short, "the Act") read with Scheme for Appointment of Arbitrators, 2006, seeking for constitution of a panel of three arbitrators in terms of Clause 13.2.2 of the agreement dated 06.02.2004 for adjudicating the disputes between the parties.

(2.) The case of the applicant, in brief, is as follows: MMTC-the applicant entered into an agreement No.PUR 3.66.043/007, dated 06.02.2004 with Rashtriya Ispat Nigam Limited-the respondent for sale of Low Ash Metallurgical (LAM) Coke. The applicant sold 2,39,951 M.Ts. of LAM Coke to the respondent between October, 2004 and August, 2006. Clause 7 of the agreement deals with the charges and payments. The price consists of two components viz., variable cost of Rs.5856 + fixed conversion cost including a margin @ Rs.1244/-, thus making it a total ofRs.7,100/- per M.T. Some disputes cropped up between the parties with regard to conversion factor. According to the applicant, the respondent has to pay Rs.24.03 Crores, of which Rs.18.94 Crores is on account of erroneous application of conversion factor. The applicant also claimed further sums under the following heads: <FRM>JUDGEMENT_350_LAP_2010Html1.htm</FRM> The applicant demanded the respondent to pay the amounts due through several letters. There was no response from the respondent and therefore, the applicant took up the matter at the ministry level. The efforts made by the applicant to get the matter settled at the ministry level with the respondent did not yield any fruitful result. The applicant under letter dated 05.06.2008 sought the consent of the respondent for referring the dispute to Permanent Machinery of Arbitration as per the guidelines issued by the Department of Public Enterprise. The respondent under letter dated 05.07.2008 sought for the details of Permanent Machinery of Arbitration. The respondent took the stand under letter No.PUR 3.66.0043/9350, dated 23.09.2008 that all payments admissible as per the terms of the agreement for the supplies made were released and that no amounts were withheld. Thereby disputes arose between the parties. The applicant invoked arbitration clause in the agreement by nominating its arbitrator under letter dated 11.12.2008 and further called upon the respondent to appoint its arbitrator as per Clause 13.2.2 of the agreement. The respondent expressed its inability to appoint its arbitrator under letter No.PUR.3.66.043, dated 03.02.2009 citing the Office Memorandum No.53/3/10/94-Cab, dated 24.01.1994 and Office Memorandum No.53/3/10/94-Cab(CL), dated 21.03.1995 and 27.03.1995. According to the applicant, the said Office Memoranda are not part of the contract and they have been issued only on the administrative side so as to resolve the disputes between the PSEs amicably and to avoid litigation expenses. The said Memoranda do not in any way place an absolute embargo or curtail the right of the applicant in seeking to enforce the arbitration clause in the agreement. Hence, this application under sub-sections (5) & (6) of Section 11 of the Act r/w. the scheme for appointment of arbitrators, 2006, with the prayer stayed supra.

(3.) Notice to the respondent came to be ordered on 17.11.2009. The respondent entered appearance through a counsel and filed counter-affidavit.