NRE Coke Ltd & Anor v Coeclerici Asia (PTE) Ltd

An arbitral tribunal does not breach its duty of fairness merely because it makes an immediate consent award after a party defaults on a settlement agreement expressly providing for that procedure. The agreed procedure must be assessed in its contractual and procedural context. Section 68 intervention requires a breach of the tribunal’s duty, a serious irregularity and substantial injustice. The threshold is deliberately high, reflecting the policy of finality in arbitration. A party that has a reasonable opportunity to address an issue cannot later complain that it failed to use that opportunity. Where a tribunal has considered the points raised and the parties’ agreement leaves no realistic basis for a different result, substantial injustice is not established.

Gujarat NRE Coke Limited and Shri Arun Kumar Jagatramka challenged an arbitration award under sections 68(2)(a) and 68(2)(c) of the Arbitration Act 1996. The award followed their failure to make settlement payments under a Payment Agreement. That agreement acknowledged the debt and provided that, on default, Coeclerici Asia (PTE) Limited could obtain an immediate consent award without pleadings or hearings.

The claimants argued that the tribunal had denied them a reasonable opportunity to present defences concerning an implied term, Indian exchange-control requirements and capacity. The central issue was whether the procedure adopted amounted to a serious irregularity causing substantial injustice.

1. The claim was dismissed. The tribunal’s procedure was neither irregular nor unfair, and the high threshold for intervention under section 68 was not met.

2. Section 68 requires the applicant to establish a breach of section 33 or the agreed procedure, a serious irregularity, and substantial injustice. The statutory threshold is deliberately high. Intervention is justified only in an extreme case where the tribunal’s conduct is far removed from what could reasonably be expected from arbitration and justice calls for correction.

3. The Payment Agreement was a freestanding agreement made by sophisticated commercial parties. It expressly and irrevocably entitled Coeclerici to an immediate consent award on default, without pleadings or hearings. The claimants thereby undertook to consent to the award when they failed to make the agreed payments. Section 33 remained mandatory, but its duty of fairness operated in the context of the parties’ agreement. The tribunal gave the parties a reasonable opportunity to put forward their case and considered the objections raised.

4. The tribunal was not required to allow the claimants to develop new defences as if the arbitration were at an earlier stage. There was no breach of section 33 or of the applicable LMAA procedure.

5. The court nevertheless considered substantial injustice. It held that the proposed implied term making payment conditional on Indian exchange-control approval was fanciful in the context of an obligation to pay United States dollars in Singapore. The proposed defence based on Indian exchange-control law was also inconsistent with the applicable conflict-of-laws principles because there was no contractual obligation to make payment in India. The incapacity point had not been substantiated.

6. Even if further submissions had been allowed, the tribunal would not have been likely to reach a significantly different outcome.

This was a first-instance challenge to an arbitration award dated 14 February 2013. No appellate history is stated in the judgment.