Delhi HC severs guarantee interest from MMTC yellow peas award, holds a late dissent is not a second award

A division bench of Justice Avneesh Jhingan and Justice Shail Jain partly allowed MMTC Ltd appeal against an ICA majority award in favour of Australian exporter Aust Grain, severing 9 per cent interest on a USD 271,950 performance guarantee that the contract itself said would carry no interest, while rejecting every other objection, including that the dissenting opinion was signed 103 days after the majority.

A 2009 contract for 35,000 tonnes of Australian yellow peas has produced a reportable Delhi High Court ruling on how far an Indian court may go into an international commercial arbitration award seated in India. On 28 October 2026, a division bench of Justice Avneesh Jhingan, who wrote the judgment, and Justice Shail Jain partly allowed MMTC Ltd's appeal under Section 37 of the Arbitration and Conciliation Act, 1996, against a majority award of an Indian Council of Arbitration (ICA) tribunal that had gone largely in favour of Aust Grain Exports Pty Ltd. The bench struck out only one item: 9 per cent interest on a performance bank guarantee of USD 271,950, which clause 13(2) of the contract said would carry no interest at all. Every other ground, from arbitrators missing hearings to a dissenting opinion signed 103 days after the majority, failed.

Yellow peas, a two-week delay and a guarantee cashed in January 2010

MMTC, a public sector undertaking, floated a tender on 30 March 2009 for the supply of yellow peas. Aust Grain, an Australian company that exports agricultural commodities, won it, and the parties signed a contract on 16 April 2009 for 35,000 metric tonnes (plus or minus 10 per cent) at USD 259 per tonne, with shipment in September-October 2009. The seller first nominated the vessel MV Geeta; that nomination was cancelled on 8 October 2009 and MV Star Lily was nominated instead. Aust Grain asked for more time, and MMTC extended the shipment period to 15 November 2009 and then to 30 November 2009, each time stating that the extension was subject to the contractual terms and the applicable penalty.

Loading began on 23 November 2009 after delays attributed to weather and port congestion. The cargo was shipped on 27 November 2009 and arrived on 1 January 2010. MMTC invoked clause 20 of the contract, which provided that if the seller failed to ship as per the agreed schedule the buyer was entitled to a rebate of US$1 per tonne per day up to a maximum of two weeks, after which the buyer could take legal action and the bid and performance guarantees would be invoked and forfeited. On that basis MMTC claimed USD 14 per tonne on 31,924.572 tonnes, or USD 446,943.98. Aust Grain disputed the claim and pleaded force majeure. On 24 December 2009 MMTC released payment of USD 8,268,464.15 for the cargo, and on 12 January 2010 it invoked the performance bank guarantee (PBG) and appropriated USD 271,950.

The disputes went to a three-member ICA tribunal under clause 23, which fixed the venue at New Delhi and Indian law as the governing law. The arbitration ran for years; the tribunal was reconstituted more than once, and sittings during the COVID-19 pandemic were held by video conference with the parties' consent. The majority award was signed on 5 March 2021. The third arbitrator signed a dissenting opinion on 16 June 2021, and the ICA sent both to the parties on 22 June 2021. MMTC received them on 5 July 2021.

The majority rejected MMTC's claim no. 1 for compensation for delayed shipment, which stood at USD 861,963 before the tribunal. It allowed claim no. 2 for despatch money under clause 10(20) at USD 30,620 with 9 per cent interest from 18 January 2010 till the date of the award. On Aust Grain's side, counter-claim no. 1 for refund of the PBG of USD 271,950 was allowed with 9 per cent interest from 12 January 2010 till the award; counter-claim no. 2 for interest on the PBG was rejected in view of clause 13(2); and counter-claim no. 3 for interest on delayed payment of the invoice was allowed at USD 42,815. MMTC's Section 34 petition, filed on 4 October 2021, was dismissed by a single judge on 12 June 2023, who held that the procedural irregularities alleged were not material, that the award and dissent were in accordance with Section 31, and that the tribunal's view was plausible.

MMTC: an award two members signed, hearings one member missed, a dissent 103 days late

Before the division bench, senior advocate Arun Bharadwaj for MMTC argued that the arbitral proceedings suffered from procedural irregularities and that the majority award was contrary to Section 31 of the Act because all three members had not signed it. Material proceedings, he said, were conducted in the absence of one or more members and certain order sheets were not signed by all the arbitrators; Faze Three Exports Ltd v. Pankaj Trading Co., 2003 SCC OnLine Bom 1024, was cited for the proposition that every member of a multi-member tribunal must participate in the material proceedings. The dissent, signed 103 days after the majority, was said to offend Dakshin Haryana Bijli Vitran Nigam Ltd v. Navigant Technologies Pvt Ltd, (2021) 7 SCC 657, which requires the dissenting opinion to be delivered along with the final award and not after the tribunal has become functus officio. The result, MMTC argued, was two separate awards, one by the two majority members and one by the third.

On the merits, MMTC said the tribunal had wrongly treated its clause 20 claim as a claim for damages under Section 73 of the Indian Contract Act, 1872. Clause 20 provided a “rebate” for delay, whereas clause 21 dealt with “damages”; the rebate, it argued, did not depend on proof of actual loss, and the tribunal had ignored that each extension of the shipment period was granted subject to the contractual terms and penalty. South East Asia Marine Engineering and Constructions Ltd v. Oil India Ltd, (2020) 5 SCC 164, was relied on for the rule that an award contrary to the contract cannot stand. MMTC also pointed to an internal contradiction: the tribunal rejected counter-claim no. 2 for interest on the PBG by relying on clause 13(2), yet in its concluding part granted 9 per cent interest on the very same PBG amount from 12 January 2010. Finally, it argued that the inordinate and unexplained delay, together with the other defects, made the award liable to be set aside, citing the Delhi High Court division bench ruling in CRPF v. Fibroplast Marine (P) Ltd, 2022 SCC OnLine Del 1335.

Aust Grain: objections never raised before the tribunal are an afterthought

For Aust Grain, Puneet Dutt Tyagi argued that Section 37 does not permit re-appreciation of the tribunal's findings, that the award was reasoned and the view plausible, and cited Uttarakhand Purv Sainik Kalyan Nigam Ltd v. Northern Coal Field Ltd, Delhi Airport Metro Express Pvt Ltd v. DMRC, Power Grid Corporation of India Ltd v. SAP Circle, MMTC Ltd v. Vedanta Ltd and Ssangyong Engineering and Construction Co. Ltd v. NHAI. The objections to the tribunal's functioning were an afterthought: MMTC had participated with knowledge of the alleged irregularities and raised no objection, and under rule 58 of the ICA Rules of Arbitration a party who proceeds with knowledge of non-compliance and fails to object in writing is deemed to have waived the right. This was not a case of a member failing to sign the award; the presiding arbitrator and a co-arbitrator signed the majority award, and under rule 61 the majority decision is the decision of the tribunal. The ICA notified the parties on 22 June 2021 and delivered the signed copy on 5 July 2021, and a dissent, being only an opinion, was not affected by the 103-day gap.

On claim no. 1, Aust Grain said the tribunal rightly found that MMTC had sold the consignment at a higher price and failed to prove any actual loss, citing Fateh Chand v. Balkishan Das, Maula Bux v. Union of India, ONGC v. Saw Pipes Ltd and Kailash Nath Associates v. DDA; the shipment period had been extended by mutual consent and the goods shipped within it. There was no inconsistency on the PBG either, it argued: counter-claim no. 2 was a separate claim for interest and was rejected, whereas the interest in the operative part was consequential to the refund ordered under counter-claim no. 1. The delay was explained by the reconstitution of the tribunal and the pandemic. The bench recorded that no submissions other than these were pressed.

Seated in Delhi with an Australian party, so patent illegality is off the table

The bench began by fixing the character of the arbitration. Under Section 2(1)(f), an arbitration is an international commercial arbitration where at least one party is a body corporate incorporated outside India; Aust Grain is incorporated under Australian law. Clause 23 fixed the venue at New Delhi and Indian law as the governing law, so under Section 2(2) Part I of the Act applied. The court relied on Balaji Steel Trade v. Fludor Benin S.A., (2026) 5 SCC 802, and Amway (India) Enterprises (P) Ltd v. Ravindranath Rao Sindhia, (2021) 8 SCC 465, for this classification.

That classification had an immediate consequence. After the 2015 amendment, the ground of patent illegality in Section 34(2-A) is not available against an award in an international commercial arbitration seated in India. The bench quoted Patel Engineering Ltd v. North Eastern Electric Power Corporation Ltd, (2020) 7 SCC 167, tracing the ground to the Law Commission's 246th Report and its deliberate confinement to purely domestic awards, and Ssangyong, which held that the amended Section 34 applies to every petition filed on or after 23 October 2015 regardless of when the arbitration began. MMTC's petition was filed on 4 October 2021, so the amended provision governed and patent illegality was unavailable.

Two signatures plus a separate dissent is one award, not two

The Section 31 challenge failed on the text of the provision. Section 31(1) requires an award to be in writing and signed by the members of the tribunal; Section 31(2) says the signatures of the majority suffice so long as the reason for any omitted signature is stated. Here the majority award was signed by two members and the third signed a separate dissenting opinion. This, the bench said, was not a case of a missing signature. MMTC's argument that the minority opinion's statement that its author had gone through the majority award showed there were two awards was called misconceived: majority and minority views are opinions of the members, a difference of opinion does not amount to the passing of two awards, and under Section 29(1) the majority award is the award of the tribunal. Rule 61 of the ICA Rules said the same, and the bench cited Russell on Arbitration (21st edition) for the position that a member who does not assent need not sign and may set out his views in a dissenting opinion, which is for the parties' information and does not form part of the award.

Dakshin Haryana did not help MMTC. That decision was rendered in a case governed by Section 29A, inserted by the 2015 amendment, and Section 29A(1) by its express terms does not apply to an international commercial arbitration. The bench added a point of principle: a tribunal becomes functus officio only upon passing the award, and the opinion of two members matures into an award only after the third member's opinion determines whether the award is unanimous or by majority. The opening page of the award recorded it as a majority award by two members, showing that the members had deliberated and one had dissented. No statutory period is prescribed for recording a dissent, and a member in the minority is expected to take a reasonable time to write one.

Fibroplast Marine was distinguished as a case where a stipulated period had been fixed for the award and the proceedings continued beyond it with the parties participating; in the present case the tribunal had been reconstituted more than once and pandemic-era sittings were held by video conference with consent. The complaint that some hearings went ahead without all members, with zimini orders passed in their absence, had been rightly rejected by the single judge in keeping with the limited scope of interference where patent illegality is unavailable, and in any event those irregularities had no bearing on the outcome. The bench recorded that it is well settled that “every procedural irregularity and illegality does not warrant interference”.

Clause 20 was never triggered, and clause 21 was never pleaded

On the delayed-shipment claim, the bench set out what the tribunal had found. MMTC had claimed liquidated damages under clause 20 for a delay of fourteen days and damages under clause 21 for a delay of thirteen days. The tribunal recorded a factual finding that the shipment period had been rescheduled to 30 November 2009 by mutual consent, so that no loss or damage was caused by the change in schedule and clause 20 was not triggered. On clause 21, the tribunal found that the claim for damages was neither pleaded nor proved and that the terms “damages/LD” had been used vaguely in the statement of claim; absent a breach by Aust Grain, no case for liquidated damages or rebate was made out. These findings, the bench held, suffered from no legal or factual error, much less perversity, and in any case those were not even grounds available against an international commercial arbitration award.

Interest the parties had agreed to exclude is the one thing that fell

The appeal succeeded only on the PBG interest. Counter-claim no. 1, ordering refund of the USD 271,950 guarantee, was not under challenge. The tribunal had read clause 13(2), under which no claim was admissible against the buyer for interest on the performance guarantee regardless of when it was released, and had rejected counter-claim no. 2 for interest on that amount. Yet in its conclusion it directed that the PBG be refunded with 9 per cent interest from 12 January 2010 till the date of the award. At the hearing, Aust Grain's counsel fairly accepted that there was no explanation for this contradiction, but argued that the interest was severable.

The bench treated the error as more than a slip. Section 31(7) permits a tribunal to grant pendente lite interest unless the parties have otherwise agreed, and it was undisputed that under clause 13(2) the parties had agreed that the PBG amount would not carry interest irrespective of the period of release. The grant of interest, the court held, was “not a mere contradiction in the award but is contrary to the statutory provisions” and the agreed terms. The route to setting it aside ran through public policy. The explanation to Section 34(2)(b)(ii) confines conflict with the public policy of India to three situations, the third being conflict with the most basic notions of morality or justice. In Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, the Supreme Court held that an award is against justice only when it shocks the conscience of the court, giving the illustration of a claimant awarded Rs 45 lakh on a claim restricted to Rs 30 lakh without any reason. Here the tribunal had rejected the interest counter-claim and then, without reason or justification, granted the interest in its concluding part. In the peculiar facts, and without revisiting the facts or re-appreciating evidence, the bench held that the interest on the PBG fell within Section 34(2)(b)(ii).

Severance followed from Gayatri Balasamy v. ISG Novasoft Technologies Ltd, (2025) 7 SCC 1, where the Supreme Court held that the power to set aside an award includes the power to set aside a severable invalid portion, invoking the maxim that the greater power includes the lesser. In an international commercial arbitration Section 34(2-A) does not apply, the bench noted, but the remaining provisions of Section 34 apply in full force. The award of interest on the PBG was not intricately connected with the other claims and counter-claims and was severable, even from the direction to refund the PBG itself.

Order

The appeal, FAO(OS) (COMM) 210/2023, was partly allowed. The majority award dated 5 March 2021 was set aside to the limited extent of the award of interest at 9 per cent per annum on the performance bank guarantee of USD 271,950. The rest of the award, including the rejection of MMTC's delayed-shipment claim, the despatch money of USD 30,620 with interest, the refund of the PBG itself and the USD 42,815 for delayed invoice payment, was left undisturbed, as was the single judge's order of 12 June 2023 in all other respects. All pending applications were disposed of. The judgment, reserved on 5 October 2026 and pronounced on 28 October 2026, is marked reportable.