Fear of Hindsight Allegations Causes ‘Policy Paralysis’; SC Warns Sec 47 Objections Should Not Become ‘New Trial’

The Supreme Court of India has dismissed an appeal filed by MMTC Limited (MMTC) that sought to block the enforcement of a multi-million dollar arbitral award, holding that the public sector undertaking failed to establish even a prima facie case of fraud that would render the award inexecutable.

The bench comprising Justice Sanjay Kumar and Justice K.V. Viswanathan, upheld a Delhi High Court order dated 09.05.2025. The High Court had dismissed MMTC’s objections filed under Section 47 of the Code of Civil Procedure, 1908 (CPC), and an application under Order XXI Rule 29 seeking a stay of the enforcement proceedings.

The core issue before the Supreme Court was whether objections alleging fraud and collusion, filed under Section 47 of the CPC, could be entertained during the enforcement stage after the arbitral award had already been challenged and upheld right up to the Supreme Court.

Background of the Dispute

The case originated from a Long Term Agreement (LTA) dated 07.03.2007 between MMTC and Anglo American Metallurgical Coal Pvt. Limited (Anglo). On 24.09.2012, Anglo invoked arbitration, claiming damages for a quantity of coal that MMTC failed to lift. The damages were calculated based on the difference between the contracted price of US$ 300 Per Metric Tonne (PMT) and the market price of US$ 126 PMT.

On 12.05.2014, a 2:1 majority arbitral award was passed in favor of Anglo for US$ 78.720 million, along with interest and costs.

This award then navigated a lengthy litigation process:

• 10.07.2015: MMTC’s challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) was dismissed by a learned Single Judge of the Delhi High Court.
• 02.03.2020: A Division Bench of the High Court allowed MMTC’s appeal under Section 37 of the A&C Act and set aside the arbitral award.
• 17.12.2020: The Supreme Court allowed Anglo’s civil appeal, setting aside the Division Bench’s judgment and restoring both the arbitral award and the Single Judge’s decision.
• 29.07.2021 & 19.04.2022: A review petition and a clarification application filed by MMTC were disposed of by the Supreme Court, with a limited modification reducing the interest rate.

Following the finality of the award, Anglo initiated enforcement proceedings. On 20.07.2022, MMTC deposited a sum of Rs. 1,087 crores with the Delhi High Court.

However, on 10.01.2024, MMTC filed objections under Section 47 of the CPC, alleging for the first time that the award was a product of fraud and collusion between its own erstwhile employees and Anglo. This objection, along with a stay application, was dismissed by the High Court on 09.05.2025, leading to the present appeal. During the pendency of the Supreme Court appeal, the CBI registered an FIR on 21.07.2025 based on MMTC’s complaints.

Arguments of the Parties

MMTC’s Submissions (Appellant): Led by Additional Solicitor General Mr. N. Venkataraman, MMTC contended:

1. Fraud: The primary contention was that MMTC officials, in collusion with Anglo, “contracted the price of coal for the 5th delivery period at US$ 300 PMT,” which was three times the previous period’s price, despite the market recession following the “collapse of the Lehman Brothers.”
2. Delayed Discovery: The fraud allegedly could not be discovered earlier because the concerned official, Shri Ved Prakash, “remained at the helm of affairs till 29.02.2020,” controlling the arbitral and court proceedings.
3. Maintainability: Relying on the judgment in Electrosteel Steel Limited vs. ISPAT Carrier Private Limited, MMTC argued that a “plea of nullity qua an Arbitral Award can be raised in a proceeding under Section 47 of CPC,” although within a narrow compass.
4. Fraud Vitiates All: Citing principles from Lazarus Estates Ltd. v. Beasley, it was argued that “Fraud unravels everything,” and no judgment obtained by fraud can be allowed to stand.
5. CBI FIR: The registration of an FIR by the CBI on 21.07.2025 supported the allegations of a criminal conspiracy.

Anglo’s Submissions (Respondent): Represented by Senior Advocate Mr. Neeraj Kishan Kaul, Anglo countered:

1. Not Maintainable: The A&C Act is a “complete Code,” and Section 5 bars judicial intervention not expressly provided. Allowing Section 47 objections “would effectively open a second round for challenging the Award.”
2. No Fraud on Merits: The fraud alleged was a “fraud on itself” (by MMTC’s employees on MMTC), not a fraud on the Arbitral Tribunal, and these objections were never raised in the prior decade of litigation.
3. Contractual Obligation: The LTA (2007) and a subsequent MoU (30.01.2007) obligated MMTC to purchase 4,66,000 MT. Crucially, the price was “pegged to the price fixed” for SAIL and RINL by the Government’s Empowered Joint Committee (EJC).
4. Price Fixation: The EJC fixed the price with SAIL/RINL at US$ 300 PMT in May 2008, before the Lehman Brothers collapse in September 2008. The Addendum No. 2 (20.11.2008) merely firmed up terms; the price was already locked by the EJC mechanism.
5. Parallel Contract: MMTC had a parallel contract with another supplier, BMA, for the same period and lifted coal at similar prices (US$ 300 PMT and US$ 292.5 PMT) “without demur.”
6. Illogical Collusion: Mr. Kaul argued it was illogical to allege collusion, stating, “had there been criminal conspiracy/fraud, the common course of human conduct… would be to lift the coal at the agreed price, pay the amount, and share the booty,” not to “litigate for the last 15 years.”

Supreme Court’s Analysis and Decision

The Supreme Court, while “not inclined to dismiss the objections only on maintainability,” proceeded to examine the merits to determine if a prima facie case of fraud existed.

Justice Viswanathan’s judgment invoked the “Business Judgment Rule,” stating that the court’s duty is to “enquire whether on the available evidence… the course adopted by the director was one reasonably competent directors could have adopted.” The Court cautioned against falling into “the trap of being too wise after the event.”

Upon applying these principles, the Court found MMTC’s allegations unconvincing, highlighting several “irresistible deductions”:

• The LTA and the MoU (30.01.2007) had already fixed the quantity and the price mechanism, linking it to the SAIL/RINL price.
• The EJC fixed the US$ 300 PMT price before the 2008 financial collapse.
• The argument that Shri Ved Prakash facilitated a “friendly fight” was “not convincing” because “when Mr. Ved Prakash was at the helm, the Section 37 proceedings were prosecuted by MMTC successfully.”
• The existence of a parallel contract with BMA at similar prices was not disputed.
• Anglo’s argument regarding the illogic of colluding parties litigating for 15 years had “no convincing explanation from the appellant.”
• Regarding the newly filed FIR, the Court held: “A First Information Report by itself is only a document to set in motion a legal process. It is the version of one party and by itself we are not able to… declare that the award upheld by this Court should be rendered inexecutable.”

Conclusion: The Court concluded that MMTC had failed to demonstrate a prima facie case of fraud. “We are not able to conclude, on the material furnished before us, that the Senior Managerial personnel… acted in a manner as no reasonable personnel/director in the circumstances would have acted,” the judgment stated.

Finding that the decisions taken by MMTC officials fell within the “range of reasonableness,” the Supreme Court found no merit in the objections and dismissed the appeal.

In a “postscript,” the Court warned against the “chilling effect” of second-guessing administrative decisions with hindsight, noting that “Decision making will be avoided. Policy paralysis will descend. All this will in the long run prove detrimental… to the nation itself.”