Arbitrators Need Not Discuss Every Document Or Contractual Clause In Award: Delhi High Court

The Delhi High Court has recently held that an arbitral award must be read fairly and as a whole, and arbitrators are not required to discuss every document or contractual clause separately, provided their reasoning is clear and reflects a permissible interpretation of the dispute.

A Division Bench of Justice Anil Kshetarpal and Justice Bharat Parashar made the observation while partly allowing an appeal filed by MMTC Limited against Chauhan Jewellers and its partners in a ₹57.74 lakh dispute concerning five gold jewellery export consignments.

The Court set aside the arbitral award's rejection of claims relating to two consignments while upholding its findings concerning the remaining three.

The Court observed,

“Furthermore, an Award must be read fairly and as a whole. Arbitrators are not required to write exhaustive awards or to discuss every document and contractual clause in isolation. The decisive question is whether the pathway to the learned Tribunal's conclusion is discernible and reflects a permissible view of the dispute.”

The dispute arose from a financing arrangement under which government undertaking MMTC supplied gold and extended credit to Chauhan Jewellers for manufacturing and exporting gold jewellery.

Under agreements dated October 9, 1990, Chauhan Jewellers was required to manufacture and export jewellery, while MMTC would receive payments from overseas buyers and adjust its financing advances, interest and charges.

The dispute concerned five consignments exported between July 1993 and June 1994, identified as CJ-25, CJ-26, CJ-27, CJ-31 and CJ-1.

MMTC claimed ₹57,74,349 as of June 26, 1997, alleging delayed payments, incomplete recovery of export proceeds and non-realisation of payment for jewellery returned from Dubai.

On April 26, 2016, a three-member arbitral tribunal rejected MMTC's entire claim and directed the return of property title deeds deposited as security.

MMTC challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. After a Single Judge dismissed its challenge on March 7, 2017, MMTC approached the Division Bench under Section 37.

It argued that Chauhan Jewellers remained contractually liable to repay advances with interest, irrespective of whether MMTC recovered payments from foreign buyers.

Chauhan Jewellers maintained that MMTC controlled export shipments and collections, and that the disputed losses arose from its own decisions and failures.

The Court clarified that arbitrators need not examine every contractual clause separately, but must assess each claim on its own facts and contractual obligations, without overlooking the borrower's repayment liability.

It observed, “The answer depends on the reasons for rejecting each claim. The absence of a separate discussion of every clause of the Hypothecation Agreement does not vitiate the Award if the Tribunal's factual finding supplies a complete answer to the claim. Equally, the Tribunal could not dispose of every contractual claim simply by observing that MMTC was the named exporter. Each of the five consignments must therefore be examined in its own factual and contractual setting.”

Examining the tribunal's findings, the High Court upheld the rejection of claims concerning CJ-25 and CJ-26, finding that the delay in receiving payments was attributable to MMTC's handling of the consignments.

Similarly, it upheld the rejection concerning CJ-31, where the unpaid amount was attributed to MMTC's departure from agreed payment arrangements and its subsequent conduct.

However, the Court found that the tribunal had wrongly treated MMTC's claim concerning CJ-27 as one involving short payment, instead of interest on delayed payment.

Regarding CJ-1, it held that the tribunal had overlooked contractual provisions permitting MMTC to recover advances directly from Chauhan Jewellers without first recovering the returned jewellery.

Holding that the errors concerning CJ-27 and CJ-1 constituted patent illegality under Section 34(2A) of the Arbitration and Conciliation Act, the Court partly allowed MMTC's appeal.

It set aside the arbitral award dated April 26, 2016, and the Single Judge's judgment dated March 7, 2017, only to the extent they rejected those two claims and directed immediate return of the property title deeds.

The Court upheld the rejection of claims concerning the remaining three consignments and clarified that no monetary amount was awarded to MMTC.

It left open MMTC's right to retain or enforce the property security, clarifying that title deeds already returned need not be deposited again.

For Appellant (MMTC Limited): Advocates Ashok Chhabra, Kunal Jaggi.

For Respondents (Chauhan Jewellers & Ors.): Advocates Surendra Chauhan, Priyanka Priyadarshni.