AL JAZEERA STEEL PRODUCTS COMPANY SAOG versus MID INDIA POWER & STEEL LTD.

Citation: [2012] 4 S.C.R. 397 · Decided: 08-05-2012 · Supreme Court of India · Bench: S.S. NIJJAR · Disposal: Case Allowed

Judgment (excerpt)

[2q12] 4 S.C.R. 397 
AL JAZEERA STEEL PRODUCTS COMPANY SAOG 
A 
v. 
MID INDIA POWER & STEEL LTD. 
(Arbitration Petition No. 6 of 2009) 
MAY 08, 2012 
[SURINDER SINGH NIJJAR, J.) 
Arbitration and Conciliation Act, 1996: 
B 
ss. 11 (5) and (9) - Appointment of arbitrator - Sale- c 
purchase contract - Goods supplied found defecti11e and of 
poor quality - Held: The applicant has raised bona fide 
disputes arising out of or relative to the construction of the 
contract which contains the arbitration clause - The petition 
can not be said to be belated - Sole Arbitrator appointed and D 
all the disputes and differences that have arisen between the 
parties referred to arbitration. 
The applicant company, having its registered office 
in Sohar, Sultanate of Oman and the respondent, and 
Indian Company, entered into a sale purchase contract 
E 
dated 18.6.2008 whereunder the respondent was to 
supply to the applicant 2000 metric ton Prime Alloy Steel 
Billets of specific chemical composition and physical 
specifications as described in Article 3 of the contract. 
The respondent encashed the Letter of Credit opened by 
F 
the applicant. The goods supplied by the respondent 
were found defective. Since the disputes raised by the 
purchaser-company were not resolved, it filed the instant 
application for appointment of an arbitrator. The 
respondent claimed that the application was not G 
maintainable in view of the fact that the dispute sought 
to be referred to arbitration was "not a dispute arising out 
of contract" but rather a dispute which was deliberately 
planted post the completion of the contract; that the 
397 
H 
398 
SUPREME COURT REPORTS 
[2012] 4 S.C.R. 
A dispute about the defective goods was a belated attempt 
by the applicant to evade its liability under the contract; 
and that the applicant did not raise a proper claim which 
could be referred to arbitration. 
B 
Allowing the petition, the Court 
HELD: 1.1. The applicant has clearly raised bona fide 
disputes arising out of or relative to the construction of 
the contract which contains the arbitration clause. Article 
10 of the contract contemplates resolution of disputes 
C between the applicant and the respondent through 
arbitration, as per the procedure laid down under the 
Arbitration and Conciliation Act, 1996. [para 12] [405-F-G] 
1.2. The applicant through its e-mail dated 31.8.2008 
0 had informed the respondent about defective material. In 
the second e-mail on the same date, the applicant had set 
out the defects in the Billets and informed the respondent 
that it had stopped de-stuffing of containers. The 
respondent was called upon to take back the rejected 
E goods urgently and arrange to refund the amount paid 
at the earliest. In response to the said e-mail, the 
respondent on 1.9.2008 indicated its concern and deeply 
regretted the inconvenience caused to the applicant. The 
applicant was also assured that the problem would be 
sorted out to the entire satisfaction of the applicant. 
F Thereafter, the respondents proposed a joint inspection, 
which according to the applicant was never arranged. On 
the other hand, the respondent claims that the applicant 
had rebuffed all the efforts made by the respondents to 
resolve the issue. The applicant was intent on claiming 
G the refund. These facts and circumstances are sufficient 
to show that the bona fide disputes have arisen between 
the parties, which are within the scope and ambit of the 
arbitration clause and need to be resolved through 
arbitration. [para 15-16] [406-G-H; 407-A-D] 
H 
AL JAZEERA STEEL PRODUCTS COMPANY SAOG v. MID 
399 
INDIA POWER & STEEL LTD. 
2. The disputes having arisen in September, 2008 
A 
and the application having been filed on 4.2. 2009, the 
petition can not be said to be belated. [para 16] [407-D] 
3.1. A bare perusal of the arbitration clause (Clause 
10 of the contract) is sufficient to indicate that it covers 
8 
all disputes and differences of any kind arising between 
the parties. The applicant has clearly raised a number of 
issues, which can be summarized as: (a) failure of the 
respondent to remove the defective Billets supplied by 
the respondent and lying at applicant's premises; (b) 
failure to remit the amount drawn by respondent against C 
the Letter of Credit; (c) failure to pay interests and costs 
incurred by the applicant; (d) failure to pay warehousing 
charges @ USO 20 per Metric Ton per day on and from 
1.10.2009 till the actual removal o

Excerpt shown. Read the full judgment & AI analysis in Lexace.