Force Majeure Must Be Proved By Cogent Evidence, Not Mere Newspaper Reports: Delhi Commercial Court Refuses To Set Aside Arbitral Award

The Court observed that newspaper clippings, in the absence of supporting evidence, constitute hearsay and are insufficient to establish facts forming the basis of a force majeure claim.

The District Judge (Commercial Court)-01, Patiala House Courts, New Delhi, was dealing with a petition under Section 34 of the Arbitration and Conciliation Act, 1996 filed by TCI Freight ("TCIF") challenging an arbitral award passed in disputes arising out of transportation services rendered to Indian Oil Corporation Limited ("IOCL").

Background

The dispute arose from agreements executed for transportation of polymers from IOCL's Panipat refinery to various destinations across the country. TCIF was engaged to provide transportation to different locations in Andhra Pradesh, Madhya Pradesh and West Bengal.

TCIF contended that it faced severe disruptions in transportation services due to political unrest during the Telangana movement in Andhra Pradesh and adverse weather conditions affecting routes in Madhya Pradesh. According to TCIF, these circumstances amounted to force majeure events, resulting in delays in deliveries and non-placement of vehicles. Despite repeated requests seeking waiver of penalties imposed by IOCL, deductions amounting to Rs. 60.27 lakh were made towards non-placement, delayed delivery and late submission of acknowledgement(s).

Subsequently, arbitration proceedings were initiated by TCIF for waiver of the deducted amounts.

Arbitral Award

The Sole Arbitrator rejected TCIF's claims, holding that it had failed to establish the existence of force majeure conditions through reliable evidence.

Among other findings, the Arbitrator noted that:

· TCIF had not challenged the calculation or legality of the penalties imposed;

· The claimant failed to establish force majeure conditions in the concerned regions;

· Reliance was placed primarily on newspaper reports without producing direct evidence or witnesses;

· Correspondence addressed to IOCL largely sought waiver of penalties and revision of freight rates rather than invoking force majeure in accordance with the contract;

· TCIF failed to comply with the contractual mechanism governing force majeure claims; and

· The claims were barred by limitation.

Court's Findings

Dismissing the Section 34 petition, the Court reiterated the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996 and observed that it could not re-appreciate evidence as an appellate forum.

The Court agreed with the Arbitrator's conclusion that newspaper reports alone could not establish force majeure conditions. It noted that the burden was on TCIF to prove the existence of such circumstances through cogent evidence and relevant factual material.

The Court further observed that even though the IOCL's witness had generally acknowledged disturbances in Andhra Pradesh during a particular period, such admission by itself was insufficient to establish that transportation operations had become impossible or that non-placement of vehicles was solely attributable to political unrest.

According to the Court, TCIF was required to produce evidence demonstrating the actual impact of the alleged disturbances on its contractual obligations, including material showing that transportation could not be arranged despite reasonable efforts.

The Court also endorsed the Arbitrator's finding that the communications relied upon by TCIF were primarily requests for waiver of penalties and enhancement of freight rates rather than proper invocation of the force majeure clause.

On the issue of limitation, TCIF argued that the Arbitrator had wrongly treated an internal waiver note as the starting point for limitation. While the Court agreed that the internal note itself had not been communicated to TCIF, it held that TCIF was admittedly aware by May 2015 that its request for waiver had substantially been rejected. Consequently, even reckoning limitation from that date, the invocation of arbitration in September 2018 was held to be beyond the prescribed three-year period.

Finding no perversity, patent illegality or ground warranting interference under Section 34, the Court dismissed the petition and upheld the arbitral award.

Case Title: TCI Freight v. Indian Oil Corporation Ltd.

Case No.: OMP (COMM.) No. 132/2024

For Petitioner: Ms. Amita Sehgal, Mr. Rahul Garg and Mr. Ishpreet Singh, Advs.

For Respondent: Ms. Vineeta Meharia, Senior Counsel, Mr. Amit Meharia, Ms. Tannishtha Singh and Mr. Vibhor Victor, Advs.

Click here to Read/Download Order