Calcutta High Court Upholds ₹2.05 Crore Arbitral Award Against SAIL Over Wrongful Iron Ore Contract Termination

The Calcutta High Court has upheld an arbitral award directing Steel Authority of India Limited (IISCO Steel Plant) to pay more than ₹2.05 crore to Balaji Industrial Products Limited.

The court found no ground to interfere with the arbitrator's conclusion that SAIL had wrongfully terminated a contract for the supply of 60,000 metric tonnes of iron ore.

A division bench of Justices Debangsu Basak and Md. Shabbar Rashidi held that the arbitrator's findings represented a plausible view of the evidence and disclosed no perversity or patent illegality.

Observing that the contract imposed reciprocal obligations on both parties, the court held,

"The contract between the parties had reciprocal obligations. Appellant had the obligations to provide 60,000 metric tonnes of materials to the respondent. Appellant had the responsibility of having 60,000 metric tonnes of materials ready for delivery and uplift within 90 days from the date of the first payment. The quantity of materials promised by the appellant as ready for delivery was not available for delivery in view of the situation prevailing at the concerned mines."

The dispute arose from a tender floated by SAIL on January 12, 2005, for the sale of 60,000 metric tonnes of run-of-mine iron ore in two tranches. Balaji emerged as the successful bidder and received a Letter of Intent on February 26, 2005.

It deposited ₹24.21 lakh towards the security deposit and earnest money. It also paid ₹2.52 crore for the first tranche and received the first delivery order on March 16, 2005.

Balaji alleged that labour unrest at SAIL's mines repeatedly disrupted deliveries. It claimed SAIL had not disclosed those problems before executing the contract. SAIL, however, argued that Balaji failed to lift the entire first tranche and did not pay for the second tranche.

The arbitrator ordered SAIL to pay ₹13.19 lakh for failing to deliver the remaining 1,564.780 metric tonnes despite receiving its full price. SAIL was also directed to refund the ₹24.21 lakh security deposit and pay ₹1.67 crore towards Balaji's additional procurement costs. SAIL's counterclaims were rejected.

Affirming the award, the court observed, "The inference by learned Arbitrator that, in such factual matrix, of termination of the contract by the appellant was bad in law cannot be faulted."

The court found that labour unrest had existed before the contract was executed and that SAIL failed to keep the contracted quantity ready for delivery. It therefore dismissed the appeal.

For Appellant (Steel Authority of India Limited – IISCO Steel Plant): Senior Advocate Dhruhba Ghosh and Advocates Arijit Basu, Ajeyaa Choudhury.

For Respondent (Balaji Industrial Products Limited): Senior Advocate Jishnu Saha and Advocates Sulogna Mukherjee, Tanay Agarwal, Darshana Sett.