Karnataka High Court
M/S R B Seth Shreeram Narasingdas vs Monitoring Committee on 21 July, 2026
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COMAP No. 523 of 2025
RESERVED ON 25.06.2026
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF JULY, 2026
PRESENT
THE HON'BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
AND
THE HON'BLE MRS. JUSTICE K.S. HEMALEKHA
COMMERCIAL APPEAL NO. 523 OF 2025
BETWEEN:
1. M/S R.B. SETH SHREERAM NARASINGDAS
A PARTNERSHIP FIRM
HAVING ITS OFFICE AT NO.1499/1
P.B.NO.38, KARIGANUR POST
HOSPET - 583 201
REPRESENTED BY ITS PARTNER
SHRI AJAY SARAF
S/O LATE GOVIND DAS AGARWAL
AGED ABOUT 58 YEARS
...APPELLANT
(BY SRI LAKAMAPURMATH CHIDANANDAYYA.,ADVOCATE)
AND:
Digitally
signed by K 1. MONITORING COMMITTEE
P SWETHA CONSTITUTED BY THE HON'BLE
Location: SUPREME COURT OF INDIA
High Court
of Karnataka KHANIJA BHAVAN, R.C. ROAD
BENGALURU - 560 001
REPRESENTED BY ITS CHAIRMAN
2. JUSTICE DEEPAK GUPTA (RTD)
D-1/48, 2ND FLOOR, VASANT VIHAR,
NEW DELHI -110 057
...RESPONDENTS
(BY SRI THOMAS VELLAPALLY, ADVOCATE)
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COMAP No. 523 of 2025
THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1-A) OF COMMERCIAL COURTS ACT , PRAYING TO ALLOW THE
APPEAL AND SET ASIDE THE ORDER DATED 28/07/2025 PASSED
BY THE LEARNED LXXXVI ADDL. CITY CIVIL AND SESSIONS JUDGE
COMMERCIAL COURT, BENGALURU (CCH-87) IN COM.A.P.
No.129/2024 DISMISSING THE PETITION FILED UNDER SECTION 34
OF THE ARBITRATION AND CONCILIATION ACT, VIDE ANNEXURE-A
& ETC.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT, COMING ON FOR PRONOUNCEMENT
THIS DAY, JUDGMENT WAS PRONOUNCED AS UNDER:
CORAM: HON’BLE MR. VIBHU BAKHRU, CHIEF JUSTICE
and
HON’BLE MRS. JUSTICE K.S. HEMALEKHAC.A.V. JUDGMENT
(PER: HON’BLE MR. VIBHU BAKHRU, CHIEF JUSTICE)
1. The appellant has filed this appeal under Section 37(1)(c) of
the Arbitration and Conciliation Act, 1996 [A&C Act] read with
Section 13(1A) of the Commercial Courts Act, 2015 [CC Act],
impugning the order dated 28.07.2025 [impugned order]. passed
by the learned LXXXVI Additional City Civil and Sessions Judge,
Commercial Court, Bengaluru [the Commercial Court], in Com.
A.P. No.129/2024. The appellant had filed the said petition under
Section 34 of the A&C Act seeking the setting aside of an arbitral
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award dated 03.07.2024 [the impugned award] passed by
Respondent No.2 [the Arbitral Tribunal]. The Arbitral Tribunal had
rendered the impugned award dismissing the appellant’s claim
petition with costs of `29,25,000/- and reserved liberty to the
claimant to apply for a refund of taxes, royalty, VAT, CST, and FDT
amounting to `3,47,43,367/-.
2. The learned Commercial Court delivered the impugned order
dismissing the appellant’s petition to set aside the impugned award.
PREFATORY FACTS
3. The appellant is a partnership firm registered under the Indian
Partnership Act, 1932. At the relevant time, the appellant was
engaged in the business of beneficiating iron ore at its plant situated
in Sankalapur Village, Kariganur Post, Hospet Taluk, Bellary District
(now Vijayanagar District), Karnataka.
4. Respondent No.1-Monitoring Committee [MC] is a body
constituted by the Hon’ble Supreme Court of India in
W.P.No.562/2009 (Samaj Parivartana Samudaya and others V.
State of Karnataka), pursuant to the recommendations of the
Central Empowered Committee [CEC], inter alia, for the sale of iron
ore extracted in the three districts of Karnataka to plants within the
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COMAP No. 523 of 2025
State by e-auction. By an order dated 18.04.2013 in the said writ
petition, the Hon’ble Supreme Court accepted the CEC’s
recommendation and permitted MC to sell sub-grade ore, subject to
the condition that the iron content of such ore be at least Fe 45%.
5. MC finalised standard bid documents governing the sale of
iron ore through e-auction, which included, inter alia:
a. Clause 3, prescribing the period within which the
successful bidder was required to lift the allotted
quantity;
b. Clause 9, providing that in the event a buyer failed to lift
the entire allotted quantity within the contract period,
the advance amount equivalent to the unlifted quantity
would be refunded to the buyer, with forfeiture of the
security deposit; andc. a condition that the sale was on “as is where is and no
complaint basis”.
6. MC issued an e-auction notice dated 24.08.2013 and put to
auction on 30.08.2013, inter alia, for Lot No.1R/SG (approximately
1,00,000 MT of sub-grade ore from the mining lease of M/s. Sandur
Manganese and Iron Ore Limited [SMIORE]). The appellant
participated in the e-auction, and its offer of `2,000/- per MT was
declared the highest. The bid was accepted by Letter of Acceptance
dated 02.09.2013 [LOA]. The appellant deposited the entire sale
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consideration of `26,61,00,000/-, inclusive of royalty, taxes, and
other statutory levies in advance.
7. Thereafter, the appellant lifted 47,441.20 MT of ore but did not
lift the balance quantity. The appellant claimed that the balance
material did not meet the minimum specification of Fe 45%. It
claimed that, since the iron content was below the minimum
specification, the balance quantity of 52,558.80 MT did not qualify
as sub-grade ore. M/s SGS India Pvt. Ltd. (following a meeting
dated 23.05.2014 between the Appellant and SMIORE) carried out
the chemical analysis of the balance material and reported that the
balance material had an Fe content of approximately 41.43%, which
was below the prescribed threshold. The appellant represented to
MC, by letter dated 14.08.2014, seeking short-closure of the
contract for Lot No.1R/SG and refund of the amount equivalent to
the unlifted quantity, in terms of Clause 9 of the bid document. The
appellant states that SMIORE also joined the appellant in the said
representation.
8. By order dated 31.01.2015, the MC rejected the aforesaid
representation on the ground that the sale was as a single lot and
on an “as is where is” basis. The appellant filed W.P.No.14134/2015
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COMAP No. 523 of 2025
(GM-MM_S) before this Court, which was dismissed with liberty to
invoke arbitration. Thereafter, the appellant approached the CEC’s
Chairman for the appointment of an arbitrator under Clause 19 of
the Bid Documents. Since no appointment was made within the
stipulated time, the appellant filed a petition (CMP No. 223/2016)
under Section 11 of the A&C Act. During the pendency of the said
CMP, the CEC’s Chairman unilaterally appointed Justice Anil Kumar,
a former judge of the Delhi High Court, as the Sole Arbitrator. The
appellant’s objection to the said appointment was overruled, and by
an arbitral award dated 20.05.2019, the learned arbitrator rejected
the appellant’s claims in their entirety.
9. The appellant challenged the said award under Section 34 of
the A&C Act (Com.A.S.No.129/2019) before the Commercial Court,
Bengaluru. By the order dated 09.12.2021, the Commercial Court
(CCH-86) set aside the award, inter alia, holding that:
a. the appointment of the learned Arbitrator during the
pendency of C.M.P.No.223/2016 was null and void; andb. the award was, in any event, contrary to the express
language of Clause 9 of the bid document. MC’s appeal
against the said order in Commercial Appeal No.
57/2022 was dismissed by a Division Bench of this
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COMAP No. 523 of 2025Court on 28.01.2022, thereby confirming the order of the
Commercial Court.
10. MC assailed the order dated 09.12.2021 before this court in
Commercial Appeal No. 57/2022. By judgment dated 28.01.2022, a
Division Bench of this Court dismissed the appeal and expressly
confirmed the order dated 09.12.2021, passed by the learned
Commercial Court was expressly confirmed.
11. MC approached the Supreme Court and filed a petition,
SLP(Civil) No.5255/2023, under Article 136 of the Constitution of
India seeking leave to appeal the order of the learned Commercial
Court and the order of this Court.
12. By order dated 05.12.2023, the Supreme Court appointed
Respondent No.2, Justice Deepak Gupta, former Judge of the
Supreme Court of India, as sole arbitrator and the Arbitral Tribunal
was constituted. The Supreme Court directed that the proceedings
be conducted on the basis of the existing arbitral record, testimonies
and material, uninfluenced by the observations of the Commercial
Court or of this Court.
13. It was contended on behalf of the MC before the learned
Arbitral Tribunal that the appellant lacked locus standi to maintain
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the claim as the correspondence invoking arbitration had been
issued on the letterhead of M/s. Rai Bahadur Seth Shreeram
Narasingdas Pvt. Ltd.
14. The Arbitral Tribunal delivered the impugned award dated
03.07.2024 and rejected the Appellant’s claims on, essentially, two
grounds. First, the Arbitrator found that the Appellant had transferred
its assets, including the beneficiation plant, to a Private Limited
Company, M/s Rai Bahadur Seth Shreeram Narasingdas Pvt. Ltd.,
and that the arbitration clause had been invoked on the letterhead of
the said Company and not of the appellant firm. Since the appellant
had not produced documents evidencing the transfer of the assets
to the said company, the Arbitral Tribunal drew an adverse inference
that the appellant firm had assigned all its assets and liabilities and
thus had no locus standi to maintain the claim.
15. Second, the Arbitral Tribunal held that on a conjoint reading of
Clause 9, Clause 15 (which reserves the right of termination to the
MC alone) and Clause 3 (which prescribes the contract period),
Clause 9 is triggered only when the MC terminates the contract, and
not when the bidder fails or refuses to lift the balance quantity.
However, the Arbitral Tribunal directed the MC to permit the
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Appellant to apply to the competent authority for a refund of taxes,
royalty, VAT, CST, and FDT amounting to `3,47,43,367/-.
16. Aggrieved by the impugned award, the appellant preferred a
petition (Com.A.P.No.129/2024) under Section 34 of the A&C Act,
before the Commercial Court, Bengaluru. The appellant assailed the
impugned award on multiple grounds, including that the finding on
locus standi was rendered without any issue having been framed in
that regard and was based on surmises; that the Arbitral Tribunal’s
interpretation of Clause 9 amounted to rewriting the contract; and
that the impugned award was contrary to Section 28(3) of the A&C
Act. MC contested the said petition and supported the findings and
conclusion of the Arbitral Tribunal.
17. By the impugned order dated 28.07.2025, the learned
Commercial Court dismissed Com. A.P.No.129/2024, holding: (i)
that the Arbitrator’s adverse inference regarding locus standi was
grounded in the appreciation of evidence, including admissions in
cross-examination, and did not warrant interference under the
limited scope of Section 34 of the A&C Act; and (ii) that the
Arbitrator’s interpretation of Clause 9, read conjointly with Clauses 3
and 15, was a plausible view that a court exercising jurisdiction
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under Section 34 of the A&C Act could not substitute for another
interpretation, even if such other interpretation were possible.
18. Being aggrieved by the said order dated 28.07.2025, the
appellant has preferred the present appeal.
SUBMISSIONS
19. The learned counsel appearing for the appellant contended
that the impugned award is vitiated by patent illegality as it
disregards the express terms of the contract. The learned counsel
also refers to Clause 9 of the terms and conditions of the e-auction
and submitted that it expressly provided that in the event the entire
quantity is not lifted, the advance amount equal to the value of the
unlifted quantity would be refunded to the buyer, and the security
deposit would be forfeited. He submitted that, therefore, the
advance consideration paid by the appellant could not be forfeited
on account of failure to lift a part of the quantities.
20. Insofar as the appellant’s locus standi is concerned, he
contended that the decision of the Arbitral Tribunal is perverse as
there is no dispute that appellant was the auction purchaser and
had deposited the money with the MC. Thus, the appellant’s locus
to seek a refund of the part of the consideration paid for the quantity
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of iron ore that was not lifted could not be questioned. He also
submitted that the onus to establish that the appellant did not have
any locus, as it had transferred its right to seek a refund of the
amount to another company, lay with MC. However, there was no
evidence to show that the appellant had transferred or assigned its
right to seek a refund to any other entity.
21. The learned counsel for the appellant also contended that the
remaining quantity of iron ore was of little value as it was not ore but
mud. The appellant could neither use it in its beneficiation plant nor
sell it. He submitted that the Fe content was below the specified
threshold required for use of the beneficiation plant, and, at the
material time, further sale of iron ore was prohibited. The Supreme
Court had permitted the sale of ore only for captive units; therefore,
the appellant could not resell the iron ore.
22. The learned counsel appearing for MC countered the said
submissions. He submitted that the scope of examination under
Sections 34 and 37 of the A&C Act is limited. He submitted that the
Arbitral Tribunal’s view under the impugned award is a plausible
view and therefore could not be interfered with under Sections 34 or
37 of the A&C Act. He also referred to decisions of the Supreme
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Court in Punjab State Civil Supplies Corporation Limited and
another v. Sanman Rice Mills and others1 and Jan De Nul
Dredging India Private Limited v. Tuticorin Port Trust2 in support
of his contention.
23. He referred to the Memorandum of Association [MoA] of M/s
Rai Bahadur Seth Shreeram Narasingdas Pvt. Ltd. and submitted
that the said company had been incorporated to take over the
assets of the appellant, and therefore, it has to be assumed that the
appellant had assigned its rights in respect of the subject claim to
the said company. He submitted that since the appellant had not
produced the Asset Transfer Agreement, the Arbitral Tribunal’s
decision to take an adverse view could not be interfered with. He
also contended that the terms of the e-auction were clear and that
the appellant had purchased the entire quantity as a single lot.
Thus, it was not open to the appellant to take delivery of part of the
lot with a high Fe content and leave the remaining quantity of lower
Fe value. He submitted that the Arbitral Tribunal had correctly
interpreted the terms and conditions of the e-auction and thus, the
present appeal is liable to be dismissed.
1
(2025) 13 SCC 789
2
(2026) 3 SCC 186
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REASONS AND CONCLUSIONS
24. At the outset, it is relevant to state that there is no cavil that
the scope of examination under Sections 34 and 37 of the A&C Act
is limited to examining whether an arbitral award is vitiated by patent
illegality or is liable to be set aside on other grounds as set out
under Section 34 of the A&C Act. In the present case, the
appellant’s contention that the impugned award is liable to be set
aside essentially rests on the contention that it is vitiated by patent
illegality.
25. In Punjab State Civil Supplies Corporation Limited and
another (supra), the Supreme Court had referred to earlier
decisions including MMTC Limited v. Vedanta Limited3, wherein
the court had observed that ” ‘patent illegality’ itself has been held to
mean contravention of the substantive law of India, contravention of
1996 Act and contravention of the terms of the contract”.
26. We may also note that in Delhi Airport Metro Express
Private Limited v. Delhi Metro Rail Corporation Limited4, the
Supreme Court had read the ground of patent illegality restrictively
and held that patent illegality as contemplated under Section 34
3
(2019) 4 SCC 163
4
(2022) 1 SCC 131
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(2A) of the A&C Act is one that strikes at the root of the matter and
an erroneous application would not be a sufficient ground to set
aside the arbitral award.
27. In Jan De Nul Dredging India Private Limited (supra), the
Supreme Court further observed at para 36 that the scope of
interference of the court with arbitral matters is virtually restricted
and an arbitral award cannot be interfered with unless “it is contrary
to the substantive provision of law or any provision of the Act or the
terms of the Agreement”.
28. Bearing the aforesaid in mind, we may now examine the
question whether the impugned award is liable to be set aside as
vitiated by patent illegality.
29. As noted above, the impugned award is founded on two
findings. First, that the appellant did not have any locus standi to
raise a claim, and second, that clause 9 of the terms and conditions
was inapplicable in cases where the bidder refuses to lift the
balance material.
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COMAP No. 523 of 2025
RE: LOCUS STANDI
30. The appellant is a partnership firm. It participated in the
e- auction and deposited `26,61,00,000/- (Rupees Twenty Six
Crores and Sixty One Lac only). The said amount comprised’ 20
crores for 1,00,000 metric tonnes of sub- grade iron ore at the rate
of `2,000/- per metric tonne, with the remaining amount on account
of royalty, taxes, etc. The appellant lifted 47,441.20 metric tonnes of
sub- grade ore and claimed a refund of `13,98,58,967/-, being the
cost of 52,558.80 metric tonnes of sub-grade ore which was not
lifted. Since the appellant is the auction purchaser and had
deposited the advance amount, there could be no issue as to its
locus standi to maintain the claim, unless it was established that the
appellant had alienated its interest. The issue regarding the
appellant’s locus arose because it was contended on behalf of MC
that the appellant had transferred all its rights and liabilities to a
private limited company named M/s Rai Bahadur Seth Shreeram
Narasingdas Pvt. Ltd. The letterhead of the said company had been
used in some of the communications, including in regard to the
request for appointment of the arbitrator. MC also referred to an
ICRA report dated 24.01.2017 (Exhibit CW- 1/R 1), which
mentioned that the appellant had been set up as a partnership firm
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in 1951 and that its corporate status was changed to a private
limited company with effect from 09.04.2015. MC also produced the
MoA of M/s. Rai Bahadur Seth Shreeram Narasingdas Pvt. Ltd
(Exhibit RW 1), which indicates that one of the objects of the
company was to take over the assets and liabilities of the firm.
However, concededly, MC did not produce any material to establish
that the appellant had transferred or assigned the subject claim to
the said company. The witness examined on behalf of the appellant
(CW-1) was cross-examined in this regard. He acknowledged that
some of the firm’s assets had been transferred to a private
company. However, unequivocally stated that the firm continued to
subsist. He also confirmed that the mining lease and the
beneficiation plant had been transferred by the firm to the said
company.
31. The Arbitral Tribunal, inter alia, had noted the responses of
cross-examination of CW-1. Paragraphs 38 and 39 of the impugned
award, which set out the responses of CW-1 are reproduced below:
“38. The respondent also relies upon the
answer to question no. 5 in the cross-
examination of CW-1 which reads as follows:
“Q.5 Please see the ICRA dated
24th January, 2017 which states
that the corporate status of the firm
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was changed to a private limited
company with effect from April 9
2005 (the said document is
produced today and the witness is
confronted with the same)?
Ans. Some of the assets of the
partnership has been converted
into a private limited company.
However, the partnership still
subsist. The ICRA report dated
24.01.2017 is exhibit CW-1/R1.”
The witness of the claimant admitted that
some of the assets of the partnership firm
were converted to Private Limited Company.
39. Question Nos. 85 to 87 and their
answers are also relevant which read as
follows:
“Q. 85. I put it to you that
17.09.2012 is the memorandum of
association of Rai Bahadur Seth
Shreeram Narasingha Das Put
Limited?
Ans. It is correct. The Memorandum is
exhibit RW 1/X.Q. 86. Is it correct the mining lease
and the beneficiation plant has been
transferred by the firm to the
company?
Ans. Some of the part of the
beneficiation plant has been
transferred by the firm to the
company.
Q. 87. What business is the firm
carrying on now after the transfer?
Ans. I have no idea now.”
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COMAP No. 523 of 2025
32. The Arbitral Tribunal drew an adverse inference against the
appellant, as the letter invoking arbitration was sent on the
letterhead of the company, M/s Rai Bahadur Seth Shreeram
Narasingdas Pvt. Ltd. and was signed on behalf of the company. In
this regard, the Arbitral Tribunal observed as under:
“This leaves no manner of doubt that the
arbitration clause was invoked by the
company. It could have done so only if all the
assets and liabilities of the beneficiation plant
have been transferred to it.”
33. Having concluded that the beneficiation plant had been
transferred, the Arbitral Tribunal held as under:
“45. An adverse inference has to be drawn
against the claimant that it has transferred
the entire beneficiation plant to the claimant.
Therefore, even if the claimant partnership
firm still exists, it has no right to file the
present proceedings. Merely because it
exists or continues to have some loans and
facilities is not sufficient to show that the
beneficiation plants still belong to the firm. It
may have other business but we are
concerned mainly with the beneficiation
plant.
46. In the Apex Court order, it is clearly laid
down that only the Steel Industries and
Beneficiation Plants can take part in the
auction. Therefore, the right to claim refund,
if any, will be of the entity which owns the
beneficiation plant. CW-1 admitted that a
part of the business of the beneficiation plant
had been transferred to the private company.
The witness could not give details of what
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was transferred. The document of transfer
executed between the partnership firm and
the private company has been withheld from
this Arbitral Tribunal. In view of the above
and especially the fact that the claimant has
withheld the most relevant documents, I hold
that beneficiation plant is no longer owned by
the partnership firm. Therefore, the claim is
not maintainable.”
34. There is no dispute that the appellant had transferred its
beneficiation plant to M/s. Rai Bahadur Seth Shreeram Narasingdas
Pvt. Ltd. In his cross-examination, CW-1, in response to question
No. 86, clearly stated that the firm had transferred the beneficiation
plant to the company. The Memorandum of Association of M/s. Rai
Bahadur Seth Shreeram Narasingdas Pvt. Ltd. also indicated that it
was formed with the principal object of taking over certain assets.
However, as noted above, there is no material on record to show
that the right to recover the advance amount had been transferred
to the said company. It is also material to note that on the strength
of the ICRA report, MC argued that the firm had been converted into
a company. Thus, the control and management of the company
were in the same hands as those of the appellant firm.
35. It is important to note that there was no averment made by
MC in its statement of objections to the effect that the appellant had
transferred all its assets and liabilities and thus had no right to
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recover any amount. The question of whether the appellant had
transferred all its assets and liabilities to another entity was not an
issue that arose from the pleadings of the parties.
36. The only objection raised by MC in its statement of objection
was that the statement of claim was not maintainable as the letter
dated 11.04.2016 was addressed by a different entity. The averment
made in this regard is reproduced below:
“It is further stated that the letter dated 11th
April, 2016 (Annexure 23 to the Statement of
Claim) is addressed by a different entity and
therefore it is submitted that this Statement
of Claim is not maintainable on this ground
alone.”
37. The appellant had controverted the said averment in the
rejoinder and had averred as under:
“That the Claimant reiterates the statement
made in Para 1 of the Statement of Claim
and denial of the same at Para 17 of the
Statement of Objection is totally incorrect
and without any basis. That the Claimant is
the firm and firm participated in the Tender
and Firm purchase the iron ore mineral and
therefore the claim is made by the firm
before this Hon’ble Tribunal.”
38. It is not MC’s case in its pleading that the appellant had
transferred all its assets and liabilities to the company, which
required the appellant to controvert that assertion. In this view, no
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adverse inference could be drawn against the appellant from
withholding the agreement for not producing the documents
showing the transfer of assets.
39. MC’s objection in its statement of objections was to the effect
that the arbitration was not invoked by the appellant firm but by a
company, and thus the appellant could not maintain any claim. The
Arbitral Tribunal has not rejected the appellant’s claims on the
ground that the appellant had not invoked the arbitration; the Arbitral
Tribunal rejected the appellant’s claims on the ground that it had no
locus to raise such claims. MC had not raised any such ground in its
pleadings.
40. There is no dispute that the appellant had transferred its mine
and the beneficiation plant. It is solely on the basis that the Arbitral
Tribunal concluded that the appellant had no right to claim the
refund, as is apparent from paragraphs 45 and 46 of the impugned
award. As noted above, the Arbitral Tribunal drew an adverse
inference against the appellant. The Arbitral Tribunal reasoned that
since the appellant had transferred the beneficiation plant, the right
to claim a refund, if any, would be of the entity which owns the
beneficiation plant. The Arbitral Tribunal further held that since only
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steel industries and beneficiation plants can participate in the
auction, the right to make a claim would be available only to the
entity owning such steel plant(s) or beneficiation plant(s).
41. There is no dispute that the appellant owned the beneficiation
plant on the date of the auction. There is no dispute that the
appellant – and not the company -participated in the auction and
deposited the funds. There is also no allegation that the appellant
was ineligible to participate in the auction on account of not owning
a beneficiation plant. MC does not dispute that the appellant was
eligible to, and did participate in the auction or that the appellant’s
claim was for a refund of the money it had deposited. There is no
basis for the assumption that such a claim could only be made if the
appellant continued to hold the beneficiation plant. The beneficiation
plant was an asset of the appellant-firm, and it was admittedly
transferred to another entity. However, the locus of the appellant to
make the claim is not based on its ownership of the beneficiation
plant. The appellant’s claim is merely for a refund of its deposit. Its
claim is for a chose in action and the conclusion that the appellant
has no locus to make such a claim because it has sold or assigned
one of its real assets, a beneficiation plant, is without any basis. It
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would be equally erroneous to hold that only the entity holding the
beneficiation plant could claim such a refund.
42. The Supreme Court had restricted the sale of ore for captive
use only. Thus, an entity that does not operate a steel plant or a
beneficiation plant would not be eligible to participate in the e-
auction. But there is no principle that requires it to continue
operating the plant to make a monetary claim. There is no basis to
assume that the sale or transfer of the plant would denude the entity
of its locus to make a monetary claim.
43. In our view, the Arbitral Tribunal’s conclusion that the
appellant had no locus to maintain the claim because it had
transferred the beneficiation plant is erroneous and vitiates the
impugned award.
RE: TERMS AND CONDITIONS OF THE AUCTION
44. The principal dispute on the merits is whether the appellant is
entitled to recover the value of unlifted iron ore under the terms and
conditions of the e-auction. It is MC’s case that the entire lot had
been auctioned as a single lot on an “as is where is” basis. Thus, it
was not open for the appellant to selectively take delivery of a part
of the lot with a higher Fe content and leave the balance.
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45. There is no dispute that the lot was auctioned on “as is where
is” basis. The relevant extract of the auction notice as set out in the
impugned award is reproduced below:
“Qnty 100000 (+/-10%) MT. type of ore Sub
Grade ROM, Bidding Basis concerned stack
pile (1R/SG) (Mixed with Oversized
Boulders). Bidder may used rock braker
while loading, in the presence of DMG
officials). M/s SMIORE ML. NO. 2580
Auction for entire lot is on- as is where is
basis- (AIWI) EMD of Rs. 15,00,000/- is
required to be deposited.”
46. As noted above, it is the appellant’s contention that it had
lifted 47,441.20 metric tonnes of sub-grade ore. However, it was
found that the Fe content in the remaining quantity was less than
45% and thus, it did not qualify as an iron ore. According to the
appellant, the remaining quantity was just mud. MC argued that the
entire lot was a homogeneous lot and the average Fe content was
higher than 41%. It is pointed out that the same is also established
from the tabular statement as set out in the impugned award. The
said statement indicates the Fe content of the quantity lifted by the
appellant and the Fe quantity of the remaining material based on the
analysis report furnished by the appellant. The said tabular
statement as set out in the impugned award is reproduced below:
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COMAP No. 523 of 2025
Material lifted/ Remaining Fe Content Total Fe
(M*T*S) (%) Content
Lifted 47,441.2 57.30% 2719329.59
(Remaining) 52,558.80 41.43% 21775111.084
Total 48.96% 4896840.674
47. The Arbitral Tribunal accepted MC’s contention that the entire
lot was a homogeneous lot and it was sold on “as is where is” basis.
Thus, the appellant could not selectively lift quantities with higher Fe
content and leave the balance. The Arbitral Tribunal’s view in this
regard cannot be faulted. It may not be open for the appellant to
reject the balance quantity of 52,558.80 metric tonnes as the terms
and conditions of the e-auction were unambiguous in this regard.
The appellant submitted a bid for the entire quantity as a singular lot
on an “as is where is” basis.
48. The principal question to be addressed was whether, under
the terms and conditions of the auction, the appellant was entitled to
the value of the remaining quantity if it did not lift the entire quantity
of iron ore as auctioned. In this regard, it is relevant to refer to the
auction’s terms and conditions, which are central to the dispute.
Clauses 1, 3, 8, 9 and 15 of the tender conditions are relevant and
are set out below:
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COMAP No. 523 of 2025
“1. Product & Indicative Specifications:
Specifications of iron ore mentioned in the e-
auction schedule are only Indicative. The
Iron ore is offered on “As is Where is and no
complaint basis”. Therefore firms may satisfy
themselves about the quality specifications
of the product (Chemical and Physical) and
acquaint themselves with other operational
aspects relating to logistics etc, (without in
any manner causing any hindrance to the
operations of MONITORING COMMITTEE)
before bidding. If bidder wishes they can
collect reasonable quantity of representative
samples from a designated place in
consultation with Monitoring Committee.
Monitoring Committee will not have any
binding on the results so obtained from the
samples collected. However for the purpose
of collecting of samples, the In-charge officer
of the mine/stock can be contacted and the
same can be collected in his presence.
“In case of supplies with Fe content less than
the Indicative specifications mentioned
above, there shall not be any claim from the
successful bidder.”
“Any dispute by any Lessee/Stock Yard
Holder regarding the Fe Grade/Floor Price
etc., should be given in writing to the
DMG/Moncom Convenor within 3 working
days after successful completion of the e-
auction. If on enquiry the objection raised by
the Lessee turns out to be frivolous/baseless
suitable action including levy of penalty will
be considered by the Monitoring Committee”.
“If any Lease holder raises objection/dispute
within 24 hours of the e-auction, either he
himself or his authorized representative
should be present on the notified date and
time or the third day after the e-auction at
11.00. A.M. for re- analysis. If the 3rd day
happens to be a Sunday or General Hollday,
re-analysis will be taken up on the following
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COMAP No. 523 of 2025
day at 11.00 A.M. No objection will be
accepted with regard to the procedure of
evaluating the Fe grade”.
** ** **
3. Contract period: The periods of contract
for various quantities of materials are as
given below. The period is reckoned from the
date of Acceptance letter Issued by the
MONITORING COMMITTEE.
QUANTITY OF IRON ORE PERIOD OF
BOOKED CONTRACT
UPTO 20000 WMT 20 CALENDAR DAYS
ADDITIONAL 5(FIVE)
CALENDAR DAYS FOR
EVERY 4000 WMT
Above 20000 WMT SUBJECT TO
MAXIMUM PERIOD OF
CONTRACT THAT IS
60 DAYS
The successful bidders have to lift the
allocated quantity under this contract within
the contractual period as mentioned above.
Time is the essence of the contract. The time
period given is firm and fixed. Any extension
of time may be granted in exceptional
circumstances at the sole discretion of the
MONITORING COMMITTEE. This contract
does not in any way grant the successful
bidder any right to claim extension of time.
The bidder shall acquaint him with the local
conditions and shall not complain on any
issue later.
** ** **
8. Security Deposit (SD): On issuance of
Acceptance Letter by the Monitoring
Committee, the EMD amounts,
corresponding to the Nos, of lots allotted,
paid by the successful bidder, will be
automatically converted Into Security
– 28 –
COMAP No. 523 of 2025
Deposit. The security deposit will not carry
any Interest.
The Security deposit will be returned only
after satisfactory performance of contract of
sale upon written request from the
successful bidder. In case, MONITORING
COMMITTEE is held liable to pay, any
claims to outside agencies due to lack of
diligence, skill or care in the performance of
duties of the successful bidder, such claims
will be recovered from the security deposit. If
the amount of such claims exceeds the SD
amount, the differential amount shall also be
paid by the successful bidder.
The Security deposit will be forfeited in case
successful bidder fails to comply with all or
any of the Terms & conditions regarding the
online auction or to lift allocated quantity
within the contract period.
9. PAYMENT: Full payment shall be made
for the entire allotted quantity in advance in
the form of Demand Draft within 21 (Twenty
one) days from the date of issuance of
acceptance letter. IN CASE OF NMDC,
DONIMALAI MATERIALS, THE PAYMENTS
SHALL BE MADE WITHIN 7 (SEVEN) DAYS
FROM THE DATE OF ISSUANCE OF THE
ACCEPTANCE LETTER. The advance
amount shall include the bid value, royalty,
sales tax, forest development tax (wherever
applicable) and any other statutory duties,
levies and taxes etc. In addition to the above,
the Party has to deposit in cash @ Rs.200/-
per tonne to meet the variance in royalty, or
other taxes, which may arise in future.
All payments are to be, made in the form of
Demand Draft: in favor of “MONITORING
COMMITTEE” drawn on a Scheduled
Commercial / Nationalized bank payable at
Bangalore. Bank charges if applicable shall
be borne by the successful bidder.
– 29 –
COMAP No. 523 of 2025
Failure to deposit above/any payments within
the stipulated period as per acceptance letter
may result in termination of contract without
any notice to the successful bidder and
forfeiture of SD. All such payments would be
non interest bearing and advance amount
would be adjusted against the material value
dispatched from time to time.
In the eventuality of buyers falling to lift entire
quantity within the contract period, the
advance amount equal to the value of the
unlifted quantity will be refunded to the buyer
and the security deposit will be forfeited.
** ** **
15. Right to Terminate: If the successful
bidder falls to perform the contract as per
terms and conditions as stipulated in our
acceptance letter, MONITORING
COMMITTEE reserves the right to terminate
the contract with immediate effect and forfeit
the Security deposit. Consequential losses
and additional expenditure If any incurred by
MONITORING COMMITTEE to carry on
operations or for making alternative
arrangement for the balance-period of
agreement would be to the account of the
successful bidder. MONITORING
COMMITTEE shall have the right to recover
the losses / expenditures from the security
deposit of the firm to the extent possible. The
successful bidder shall also replenish the
amount paid if any, in addition to the amount
recovered from the security deposit. In the
event of irregularities/illegalities or violation
of any acts or rules by the successful bidder
the Monitoring Committee shall have
unilateral right to terminate the contract
without any prior notice to the bidder.
– 30 –
COMAP No. 523 of 2025
49. It is clear from the above that the auction of the ore was on a
“no complaint basis” and thus the appellant could not make any
complaint regarding the quality of the ore. Therefore, the appellant’s
complaint regarding the Fe content of the auctioned lot is
unsustainable.
50. Clause 3 of the terms and conditions defines the term
‘Contract Period’. It is 20 calendar days for Iron ore booked for up to
20,000 metric tonnes and an additional 5 calendar days for every
4,000 metric tonnes, subject to a maximum period of the contract of
60 days.
51. The successful bidder was obliged to lift the allocated quantity
within the ‘contract period’. The contractor was to further apprise
himself of the local conditions and was precluded from making any
complaint in that regard.
52. Under clause 8 of the tender conditions, the bidder was
required to submit an EMD, which would be converted into an
interest-free security deposit. The security deposit would be
returned only on the satisfactory performance of the contract.
53. Clause 9 of the terms and conditions expressly provides that if
the buyers fail to lift the entire quantity within the contract period, the
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COMAP No. 523 of 2025
advance amount equal to the value of the unlifted quantity would be
refunded, and the security deposit would be forfeited.
54. In terms of clause 15 of the terms and conditions, MC
reserves the right to terminate the contract and forfeit the security
deposit if the bidder fails to perform the contract according to the
terms and conditions as stipulated in the acceptance letter.
55. There is no ambiguity in the terms and conditions of the
tender conditions. In the event, the bidder fails to perform its
obligations in terms of the acceptance letter, MC could terminate the
contract and forfeit the security deposit. It could also recover the
consequential losses and any additional expenditure incurred by it in
carrying on operations or in making an alternative arrangement for
the balance period of the arrangement. Thus, the liability of a bidder
who fails to perform its contract was limited to a) forfeiture of the
security deposit and b) any loss, damage or costs incurred by MC
as a consequence of the said breach.
56. In conformity with the said scheme, clause 9 of the terms and
conditions provided that if the buyer failed to lift the entire quantity, it
would be entitled to an amount equal to the value of the unlifted
quantity. There is no ambiguity in the language of the terms and
– 32 –
COMAP No. 523 of 2025
conditions. However, the Arbitral Tribunal found that clause 9 of the
terms is inapplicable on the ground that it would not make any
commercial sense if a bidder decided not to lift the material and also
claim the value of the unlifted material.
57. Paragraph 71 of the impugned award, which sets out the said
reasoning is reproduced below:
“71. Though on first blush, clause 9
supports the case of the claimant but on a
conjoint reading of all the clauses of the
contract, I am clearly of the view that the only
reasonable and commercial interpretation
which can be given is that if the contract is
terminated by the Monitoring Committee for
any reason whatsoever then the claimant
(bidder) will have the right to get the value of
the unlifted material. However, in case, the
bidder refuses to lift the balance material
then clause 9 will not be applicable. The
documents would make no commercial
sense if a party can decide not to lift the
material and also claim that it must get the
value of the unlifted material.”
58. The said view runs contrary to the unambiguous language of
clause 9 as well as the entire scheme of the terms and conditions of
e-auction. MC had specified the contract period, and the bidder was
given a limited window of time to lift the quantity of iron ore; if it
failed to lift the same, it would suffer the consequences. The
consequences being i) the security deposit would be forfeited; and
– 33 –
COMAP No. 523 of 2025
ii) that the MC could terminate the contract and also recover the loss
suffered by it as well as the costs incurred.
59. It would be contrary to the law of damages if, in such
circumstances, the non-defaulting party is entitled to (i) retain the
consideration for the quantity that is not lifted; (ii) forfeit the security
deposit, the purpose of which was to secure MC for due
performance of the contract; and (iii) claim any damages suffered by
it. In case of a breach of a contract, under Sections 73 and 74 of the
Indian Contract Act 1872, the non-defaulting party can recover
reasonable damages. In this case, the terms and conditions
expressly provide for the same. MC is entitled to forfeit the EMD and
also recover any damages that it has suffered on account of failure
on the part of the bidder to perform its obligations. There is no
ground, whatsoever to hold that the express terms of the auction do
not make commercial sense; thus necessitating the Arbitral Tribunal
to redraft it.
60. The learned counsel for MC submitted that, in the present
case, clause 9 of the terms and conditions would not make
commercial sense, as the entire quantity of 1,00,000 metric tonnes
was auctioned as a single lot. He submitted that the appellant could
– 34 –
COMAP No. 523 of 2025
not pick and choose the quantity which has a higher Fe content and
leave the remaining balance and claim a proportionate refund. This
would make the auction unworkable. However, we find no
substance in this contention. This proceeds on an erroneous
premise that clause 9 of the terms and conditions requires MC to
refund the consideration in proportion of the quantity that remained
to be lifted. The language of clause 9 is unambiguous. It does not
require that the advance amount, in proportion to the unlifted
quantity, be refunded; it clearly provides that the advance amount
equal to “the value” of the unlifted quantity would be refunded. Thus,
MC is required to ascertain the value of the un-lifted quantity and
refund that amount.
61. The Arbitral Tribunal’s interpretation of clause 9 runs contrary
to its plain language. A plain reading of the clause does not lead to
any absurdity that would require it to be construed as anything other
than what it reads. Thus, the Arbitral Tribunal’s conclusion is clearly
contrary to the plain language of the contract. Consequentially, our
conclusion to the aforesaid effect warrants the setting aside of the
impugned award on the ground of patent illegality.
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COMAP No. 523 of 2025
62. In view of the above, the present appeal is allowed, and the
impugned award and the impugned order are accordingly set aside.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(K.S. HEMALEKHA)
JUDGE
KPS
