Arbitral Award – Breach of International Contract – Measure for Damages

Judgment dated 18.8.2023 of the Supreme Court of India

Agreement dated 14.1.1986 between MMTC with Baker for purchase of US-origin sulphur for three years to be extended annually on ever green basis unless terminated by six months’ notice.   Clause 6 provided for the price to be settled half yearly.

The sulphur was purchased from 1986 to 1991.  

Instead of lifting 50,000 MT quantity of sulphur for January – July 1992 by the MMTC, it had informed Baker that the Government had de-canalised import of sulphur on 20.2.1992.   It was stated that the import from USA or Canada was not competitive, whereas, it was lower costs from the Gulf.

After exchange of notices, the Baker had invoked the arbitration for damages for breach of contract on failure to lift sulphur for January-June 1992 (first half), second half of 1992, two half of 1993 and 1994.

By the Award dated 7.2.1996, the Tribunal of 3-Arbitrators held the MMTC liable to pay damages for two distinct periods.  

The objections of MMTC to the said award were rejected by the learned Single Judge of the High Court of Delhi by the order dated 5.9.2001.

However, the Division Bench upheld the award of damages for January-June 1992 but set-aside the award for the balance period of second half of 1992, 1993 and 1994.

Baker had filed Civil Appeal in the Supreme Court.

HELD that the measure of damages has to be in accordance with Section 73 of the  Contract Act i.e. the market price of goods on the date of breach, less the contract price and it was not proved by Baker.  Therefore, the appeals were dismissed.

 H.J. Baker and Bros. Inc. Vs. The Minerals and Metals Trade Corporation Ltd (MMTC) – Civil Appeal No.2437 of 2010 with connected civil appeals