SC allows Dubai firms plea, rejects Vedanta stand against arbitration

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Jan 28 2010, 04:31am hrs
Rejecting the contentions of Vedanta Aluminium Ltd, a subsidiary of London Stock Exchange-listed Vedanta Resources, the Supreme Court has allowed a Dubai-based minerals trading firms plea to resolve a dispute over a contract for supply of bauxite through arbitration.

Trimex International EZE is claiming $6 lakh as damages from Vedanta and sought the appointment of a second arbitrator and the presiding arbitrator, as per the clause in a contract entered between the two parties for the supply of 45,000 tonne of bauxite in September 2007.

It further said that it had nominated a retired Karnataka High Court judge as the arbitrator from its side, a contention rejected by Vedanta on the ground that there was no concluded contract between the parties.

Supreme Court Judge, P Sathasivam, while allowing Trimexs plea, said the Dubai firm had made out a case for the appointment of an arbitrator and had appointed B N Srikrishna, a former Supreme Court judge, as the arbitrator to resolve the dispute between the parties in Mumbai.

However, he clarified that he had not expressed anything on the merits of the claim made by both the parties and whatever the conclusion be, it is confined to the appointment of an arbitrator.

Trimex, in its petition, said Vedanta has to pay damages to the tune of $6 lakh to the shipowners, besides the loss of profit incurred by it due to breach of the contract.

According to the trading company, it had no alternative other than to claim damages for non-performance of the contract, which resulted in the cancellation of five shipments of 45,000 metric tonne bauxite, besides 10% which was confirmed by Vedanta through an email on October 16, 2007.

However, Vedanta had denied all liabilities and also disputed the existence of the contract for supply of bauxite on the ground that the agreement between the parties was only at a draft stage and as such, no concluded contract, including the arbitration clause, had come into existence.

Trimex submitted that Vedanta's stand that no arbitration clause existed, was without substance and was only an attempt to drive Trimex to a civil suit, knowing well that it would take around 10-15 years before the matter arives at a conclusion.

Based on an acceptance by Vedanta, Trimex had concluded the deal with an Australian supplier and had also entered into a binding charter party agreement with a shipowner in Oslo in October 2007 for supplying bauxite consignments at Visakhapatnam, the petition stated.

However, nearly a month after accepting the offer, Vedanta had unilaterally sought the deferment of the shipments without bearing the financial implications of the cancellation of the charter party. According to the Charter Party Agreement and the international shipping practice, a charter party once entered cannot be cancelled except on reasons of default on the part of the ship-owners. The petitioner had duly informed Vedanta that it was unable to hold the shipment, it added.

On account of a breach of contract by Vedanta and its unwillingness to compensate for the change in delivery schedule, Trimex had terminated the contract in November 2007 and had reserved its rights to claim damages.