Precedents Cited and Their Influence

• Electrosteel Steel Ltd. (Now ESL Steel Ltd.) v. ISPAT Carrier Pvt. Ltd., 2025 INSC 525
  • Held that a plea of nullity against an arbitral award may be raised under Section 47 CPC at execution, but the scope is “very narrow.”
  • Grounds are limited to jurisdictional infirmity or voidness—not errors of fact or law.
  • In Electrosteel, the award was found inexecutable because the Facilitation Council lacked jurisdiction post-approval of an IBC resolution plan binding all stakeholders under Sections 30–31 IBC.
  • Application here: The Court accepts maintainability but emphasizes the narrow window. Unlike Electrosteel, MMTC’s objection is not about inherent lack of jurisdiction but alleged internal fraud/ fiduciary breach—insufficient to transform the award into a nullity.
• Vasudev Dhanjibhai Modi v. Rajabhai Abdul Rehman, (1970) 1 SCC 670
  • Reaffirmed: Executing courts cannot go behind the decree; only decrees that are nullities (e.g., inherent lack of jurisdiction) can be assailed at execution.
  • Application here: The Court refuses to convert execution into a re-trial on facts/law or internal corporate governance disputes.
• Rahul S. Shah v. Jinendra Kumar Gandhi, (2021) 6 SCC 418
  • Warned against execution proceedings morphing into a “retrial”; Section 47 is to prevent multiplicity and secure expeditious realization of decrees.
  • Application here: The Court stresses that the Section 47 objections cannot be used to re-open the entire dispute or create fresh merits litigation.
• “Fraud unravels everything” line of cases (Lazarus Estates; S.P. Chengalvaraya Naidu; Indian Bank v. Satyam Fibres; United India Insurance v. Rajendra Singh; Ram Preeti Yadav)
  • Principle accepted: Fraud vitiates judicial acts, but it must be distinctly pleaded and proved; and the type of fraud matters (fraud on the court/tribunal vs. internal corporate misfeasance).
  • Application here: The Court distinguishes between alleging internal breach of fiduciary duty and establishing a fraud that makes the award a nullity or taints the arbitral process. MMTC’s allegations, even if investigated, do not on the present record cross the nullity threshold.
• Comparative corporate governance jurisprudence (Re Living Images; Dovey v. Cory; Sharp v. Blank; Maple Leaf Foods v. Schneider; Kerr v. Danier Leather)
  • Key ideas integrated:
    • Beware hindsight bias in judging directors’ conduct after the event.
    • “Range of reasonableness” and the business judgment rule: courts should not substitute their own view if the decision was one that reasonably competent directors could adopt.
  • Application here: The Court applies the business judgment rule to assess PSU decision-making under the LTA, finding no irrationality or collusion on the record.

Legal Reasoning

1) Maintainability under Section 47 CPC (narrow gate): The Court accepts that MMTC can raise execution-stage objections despite not securing relief under Section 34/37. However, guided by Electrosteel and Vasudev Dhanjibhai, the Court underscores that only nullity or jurisdictional infirmities are cognizable—errors of fact or law are not. The arbitral award here had already been restored by the Supreme Court in 2020; the Section 47 objection cannot be a collateral attack to re-try issues or import new factual allegations absent nullity.

2) What type of “fraud” counts at the execution stage: MMTC’s case is that its own officers colluded with Anglo to fix an inflated price (USD 300 PMT) for the fifth delivery period and over-commit on quantity. The Court treats this as alleged breach of fiduciary duty/internal fraud, not fraud on the arbitral tribunal or a jurisdictional defect. Even while reiterating that “fraud unravels everything” where proved, the Court holds that on the present record, MMTC has not made out even a prima facie case that would transform the award into a nullity or justify non-executability.

3) Application of the business judgment rule and avoidance of hindsight bias: The Court carefully evaluates the commercial decisions against their contemporaneous context and the LTA structure:

• Contractual architecture: The LTA (07.03.2007) pegged MMTC’s price to the price settled by the Empowered Joint Committee (EJC) for SAIL/RINL. The option to extend for two years (fourth and fifth delivery periods) was exercised in time via a 30.01.2007 MoU. Deliveries often preceded formal paperwork, consistent with past periods.
• Price formation: The EJC settled the relevant price at USD 300 PMT on 8–9 May 2008 (pre-Lehman collapse). An MMTC internal note (03.06.2008) recorded coking coal spot prices around USD 400 PMT and recommended continuing with the delivery period and quantity structure.
• Approvals and addendum: The SPCoD approved the terms on 06.10.2008 (while suggesting exploration of quantity reduction). Addendum No. 2 was signed on 20.11.2008; on the same day MMTC wrote seeking a price reduction, which the Court characterizes as a renegotiation attempt—not evidence of collusion.
• Performance conduct: 2,366 MT of the fifth-period coal was shipped on 30.10.2008 with the last fourth-period shipment, consistent with the ongoing commercial practice. Subsequent “carry-over” proposals between Anglo and MMTC were commercially rational and mirrored treatment with SAIL/RINL when viewed in light of each counterparty’s delivery period posture.
• Comparable supplier (BMA): MMTC lifted substantial quantities from BMA at comparable prices (USD 300/292 PMT for hard coking coal, USD 270 for soft) and even invoked BMA pricing before the arbitrators to dispute damages. This undermined MMTC’s later thesis that USD 300 PMT was facially collusive or indefensible.

On these facts, the Court holds that MMTC’s officers’ decisions lay within a defensible range of reasonableness and reflected commercial judgment under the LTA’s pricing linkage to SAIL/RINL—hardly the stuff of collusion. The Court quotes and adopts the business judgment rule and related standards from foreign jurisprudence (Maple Leaf; Kerr; Sharp), expressly cautioning against second-guessing through the lens of later market collapse or after-acquired information.

4) FIR does not stall execution: The FIR registered in July 2025—after prolonged arbitration and judicial scrutiny, and while the Supreme Court was already hearing the execution appeal—does not justify treating the award as inexecutable. An FIR merely sets in motion a criminal investigative process; it is not proof of fraud, nor does it retroactively taint the arbitral process or create a jurisdictional bar. The Court is alive to the timing and context of the FIR and refuses to let execution become hostaged to parallel criminal proceedings.

5) Execution is not a retrial: Invoking Rahul S. Shah, the Court emphasizes that Section 47 is intended to prevent multiplicity and expedite realization of decrees. It warns against the now too-frequent tendency to turn execution into a fresh merits battle—particularly in arbitration, where Section 36 expressly treats an award as a decree. Unless the strict nullity threshold is crossed, execution must proceed.

6) Order XXI Rule 29—no stay: With the underlying suit itself rejected under Order VII Rule 11 (and an appeal pending), there is no foundation for a Rule 29 stay of execution.

7) Policy message (“postscript”): The Court delivers an important institutional signal: if PSU or government decision-makers are perpetually exposed to ex post suspicion and liability based on hindsight, a chilling effect and policy paralysis will follow. While not condoning improper decisions, the Court requires “great caution and circumspection” and adequate proof before levelling and acting upon allegations of collusion or fiduciary breach years after the fact.

Impact and Implications

• Execution-stage challenges to arbitral awards: This decision consolidates the position that Section 47 CPC objections are available but strictly limited to nullity or inherent jurisdictional defects. Parties cannot use execution to reargue merits, attack commercial wisdom, or raise newly-minted factual narratives untethered to nullity.
• “Fraud unravels everything”—disciplined application: The Court distinguishes between fraud on the tribunal/court or a jurisdictional defect (potentially impeaching the award’s very existence) and internal corporate misfeasance allegations (which, without more, do not make an award a nullity). The latter, especially when raised post-finality, will not derail enforcement absent compelling proof.
• Business judgment rule in Indian adjudication: The explicit, reasoned application of the business judgment rule to PSU decision-making is a notable development. Courts will defer to informed commercial decisions that fall within a range of reasonable alternatives; they will guard against hindsight bias and refrain from substituting judicial discretion for managerial judgment.
• CBI FIRs and collateral criminal processes: Filing or pendency of an FIR—even one alleging conspiracy and PC Act offences—does not per se impede or stay arbitral award execution. Execution will not be mothballed merely because an investigation has begun post-finality.
• Order XXI Rule 29 CPC prudence: Execution stays pending suits between the decree-holder and judgment-debtor will be sparingly granted; if the predicate suit is rejected or otherwise infirm, Rule 29 will not aid the judgment-debtor.
• Practical guidance for litigants:
  • Raise all fraud and collusion contentions at the Section 34 stage; execution is not a second merits window.
  • To succeed under Section 47, demonstrate true nullity (e.g., inherent lack of jurisdiction, statutory bars like in Electrosteel/IBC context) rather than errors in commercial decision-making.
  • Do not expect post hoc criminal complaints or investigations to suspend award enforceability.