STEEL AUTHORITY OF INDIA LIMITED Introduction
Nordic Intertrade As (
The Court whilst dismissing the challenge to the award, narrowly construed the 'patent error of law' exception, by ruling that this ground could only be availed of in limited circumstances, where the findings by the tribunal were "manifestly contrary to law". The Court explained that a plausible or even erroneous legal finding made by the tribunal would not warrant judicial review as judicial philosophy favoured a 'hands off' approach to annulment proceedings.
Factual Background
Nordic Intertrade AS ("Nordic"), a Norwegian company, entered into a contract to purchase steel from
The crux of the arbitral dispute was whether Nordic was liable to pay export duty on the steel purchased from SAIL. Export duty was levied by the Indian government after title to the goods passed to Nordic but before it physically crossed the ship's rails.
Nordic claimed it was not liable to pay any export duties as per the terms of the sales contract. SAIL disagreed by pointing to its invocation of clause 9 ("Red Clause") of the sales contract. Under the Red Clause, risk and title to the goods passed from SAIL to Nordic, which according to SAIL required Nordic to pay the export duty.
The definition of FOB as provided under the ICC INCOTERMS 2000 indicated that the risk of loss or damages to the goods passed to the buyer after the goods crossed the ship's rails. However, under the sales contract, risk and title in the goods passed to Nordic upon invocation of the Red Clause and upon receipt of the sale price by SAIL, regardless of the goods crossing the ship's rails. The question that arose was whether the sale contract would prevail over the INCOTERMS.
The tribunal held that the INCOTERMS did not and were not meant to exhaustively regulate the contractual relationship between the parties and that they were subordinate to the sales contract. As the export duty came to be levied after the passing of property to Nordic pursuant to invocation of the Red Clause, the arbitral tribunal found that it had to be borne by Nordic and not SAIL.
Nordic impugned the award before a single judge bench of the
The judge upholding the tribunal's decision found that its view was not contrary to the plain language of the Agreement and was not 'perverse or patently illegal'.
Nordic appealed this judgement before a Division Bench of
The court emphasised that a challenge to an award on the basis of the "patent errors of law" exception will only be satisfied if the tribunal made an egregious error and arrived at a conclusion wholly contrary to law.
Conclusion
The judgement marks a welcome break from the past Indian legal tradition of generously entertaining challenges to domestic awards. The ruling is comforting as it clearly indicates a positive change in judicial philosophy and approach to annulment proceedings to domestic awards.
Footnotes
1 FAO(OS)(COMM) 205/2017
The above is a generic analysis and should not be regarded as a substitute for specific advice based on the facts of a client's objectives and specific commercial agreements reached. Please do reach out to us at mail@zba.co.in for any queries.
ZBA
412 Raheja Chambers
400021
Fax: 226743 5013
E-mail: niloufer.lam@zba.co.in
URL: www.zba.co.in
© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source
