Court sets aside excessive interest rates & amount awarded for confiscated gold, upholds liability for unpaid invoices & insurance cover.

Glitter Overseas & Ors. Versus MMTC Limited

Glitter Overseas & Ors. Versus MMTC Limited - TMI Issues Involved:
1. Liability for unpaid invoices.
2. Responsibility for securing insurance cover.
3. Liability for confiscated gold.
4. Award of deferred payment interest.
5. Award of interest rates.
6. Costs of proceedings.

Issue-wise Detailed Analysis:

1. Liability for Unpaid Invoices:
The Arbitral Tribunal held Glitter Overseas (Glitter) liable for unpaid invoices, amounting to Rs. 1,02,62,076.88. The Tribunal found that Glitter was responsible for the due collection of 100% of the sale proceeds of the export. The Tribunal referred to Clause 4 of the Export Agreement and Clause 24 of the Hypothecation Agreement, which obligated Glitter to account for the realization of export proceeds. The Tribunal also cited a previous decision in Muzaffar Shah v. MMTC Limited, supporting MMTC's claim for non-realization of sale proceeds.

2. Responsibility for Securing Insurance Cover:
The Tribunal interpreted Clause 6 of the Export Agreement, concluding that MMTC was not responsible for securing an ECGC insurance cover unless called upon by Glitter. The Tribunal noted that the invoices prepared by Glitter did not include charges for ECGC cover, implying no such request was made. This interpretation was contrary to previous arbitral decisions in similar cases, but the Tribunal's view was considered a plausible one under Section 34 of the Arbitration and Conciliation Act (A&C Act).

3. Liability for Confiscated Gold:
The Tribunal found Glitter liable for the six kgs of gold confiscated by Indian Customs, awarding Rs. 3,21,45,351.43. Glitter failed to export the manufactured jewellery within the prescribed period, leading to the gold's seizure. However, the court found no basis for the quantified amount and set aside the award in excess of Rs. 31,26,326, the value of the gold at the material time.

4. Award of Deferred Payment Interest:
The Tribunal awarded Rs. 17,07,198/- as deferred payment interest based on dishonored cheques issued by Glitter. However, the court found no material evidence supporting the computation of this amount and set aside the award, noting that the underlying liability was not comprehensively adjudicated.

5. Award of Interest Rates:
The Tribunal awarded interest at the rate of 24% per annum on unpaid invoices, quantified at Rs. 5,98,58,350.74. The court found this rate extortionate and reduced the interest rate to a reasonable 12% per annum, acknowledging MMTC's concession.

6. Costs of Proceedings:
The Tribunal awarded costs quantified at Rs. 20,00,000/- in favor of MMTC. This aspect of the award was not contested and remains upheld.

Conclusion:
The court allowed the petition to the extent of setting aside the excessive interest rate, the quantified amount for confiscated gold beyond Rs. 31,26,326, and the award of Rs. 17,07,198/- for deferred payment interest. The remaining parts of the arbitral award were upheld.