MYSORE CEMENTS LTD. versus SVEDALA BARMAC LTD.

Citation: [2003] 2 S.C.R. 1028 · Decided: 12-03-2003 · Supreme Court of India · Bench: DORAISWAMY RAJU · Disposal: Dismissed

Judgment (excerpt)

A 
B 
·MYSORE CEMENTS LTD. 
v. 
SVEDALA BARMAC LTD. 
MARCH 12, 2003 
[DORAISWAMY RAJU AND SHIVARAJ V. PATIL, JJ.) 
Arbitration and Conciliation Act, 1996-Sections 30, 36, 73 and 74-
Agreement between :two contracting parties in dispute-During pendency of 
C conciliation proceedings-Facts still disputed-Petition for execution of 
'Memorandum of Conciliation' and 'Letter of Comfort'-Plea that the 
conciliation proceeding amounted fO settlement agreement and hence 
enforceable as arbitral award-High Court dismissed the petition-On appeal, 
held: The agreement cannot be accorded status of settlement agreement as it 
does not fulfill essential legal pre-requisites of Section 73 and hence not liable 
D to be executed-Every agreement during pendency of conciliation proceeding 
does not automatically acquire status of settlement agreement within the 
meaning of Section 73 for being enforced as decree of Court: 
Appellant-company entered into contract with the respondent-
company for supply and commissioning of rock crushing machines. On 
E failure of machines to do the required work, appellant served a notice for 
arbitration on the respondent-company. However, at the request of the 
respondent, appellant agreed for conciliation. In the first round of 
conciliation proceeding 'Memorandum of Conciliation' was signed by both 
the parties and authenticated by the conciliators, wherein it was settled 
p that the respondent would modify the working of machine within a 
stipulated period. The appellant-company was also required to provide 
some facilities for the modification work. Respondent-Company also issued 
'Letter of Comfort' on the same date providing therein to compensate the 
appellant if they failed to complete the modification work within stipulated 
time. In another round of conciliation further time was granted for 
G modification work. Again the respondent failed to complete the 
modification work. Parties met but the concmation proceedings were called 
off as they did not reach any consensus. 
Appellant issued legal notice demanding refund of the price of the 
H machines and its associated equipments alongwith interest @ 24% per 
1028 
MYSORE CEMENTS LTD. v. SVEDALA BARMAC LTD. 
J 029 
annum, damages for the loss incurred due to non-functioning of the A 
machines, and for compensation in view of the 'Memorandum of 
Conciliation' and 'Letter of Comfort'. Thereafter, he filed execution 
petition for enforcement of 'Memorandum of Conciliation' and 'Letter 
of Comfort'. High Court dismissed the petition holding that the decisio.n 
of conciliators was not a decision within the rneaning of Section 74 of 
Arbitration and Conciliation Act, 1996; and that even if the decision is B 
assumed to be decision under Section 74, there was no finding whereby. 
the Conciliators had fixed any compensation to be paid to the appellant 
in case of failure of completion of work within stipulated period. 
· Appellant also filed claim before arbitrators on remaining issues not C 
covered within the reference of conciliation. However, the issue of 
compensation had not been raised in the arbitration proceedings. 
In appeal to this Court appellant contended that under Section 74 
read with Sections 30 and 36 of the Act, settlement agreements are 
enforceable as if they are arbitration awards; that in a sense a conciliation D 
settlement is analogous to a compromise agreement or consent order which 
is enforced by using the machinery of the court; that ,the settlement 
agreement !n the present case satisfied all the requirements of Section 73 
of the Act. 
Respondent contended that enforcement of the 'Letter of Comfort' 
in execution proceedings is itot permissible unless there is a conciliation 
settlement in terms of and .as required in Section 73 of the Act; that there 
was nothing to show that the 'Letter of Comfort' is incorporated in the 
settlement agreement; that there was no termination of conciliation 
proceedings under Section 76A by the .signing of the settlement agreement 
by the parties on the date of agreement; that 'Letter of Comfort' is only 
E 
F 
an interim arrangement; that wh.ere statute prescribed a procedure for 
doing something the same course must be followed and the procedure 
prescribed must be adhered to; that since the 'Letter of Comfort' and 
'Memorandum of Conciliation' do not meet requirements of Section 73, 
they cannot be given status of settlement agreements under Section 74 to G 
enforce them as an arbitral

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