2014 (10) TMI 405 - SC - Companies Law

Dismissal of application u/s 34 of the Arbitration and Conciliation Act - Learned Arbitrator held that the clause relating to payment of taxes was deleted by the appellant s representative Mr. Ahlawat on 19.1.2007 and since work order was acknowledged, it is binding on the appellan - issue of deviation in price bid on 19.1.2007 - appellant, also challenged the arbitral award on the ground that the same is in conflict with the public policy of Indi - Held that - Appellant has accepted the liability of payment of excise duty, sales tax, service tax and other taxes and hence it cannot be held that the clause 4.9.1 of the Work Order is inconsistent with the terms and conditions of contract documents. Court, in the case of Oil and Natural Gas Corporation Ltd. (supra), observed that the term public policy of India is required to be interpreted in the context of jurisdiction of the Court where the validity of award is challenged before it becomes final and executable. The Court held that an award can be set aside if it is contrary to fundamental policy of Indian law or the interest of India, or if there is patent illegality. In our view, the said decision will not in any way come into rescue of the appellant. As noticed above, the parties have entered into concluded contract, agreeing terms and conditions of the said contract, which was finally acted upon. In such a case, the parties to the said contract cannot back out and challenge the award on the ground that the same is against the public policy. Even assuming the ground available to the appellant, the award cannot be set aside as because it is not contrary to fundamental policy of Indian law or against the interest of India or on the ground of patent illegality. High Court has rightly came to the conclusion that no ground exists for setting aside the award as contemplated under Section 34 of the Act. - Decided against appellant.

Summary

Issues Involved:
1. Validity of the Arbitration Award
2. Interpretation of Contract Terms
3. Alleged Patent Illegality and Perversity in the Award
4. Public Policy Considerations

Detailed Analysis:

1. Validity of the Arbitration Award:
The appellant challenged the arbitration award under Section 34 of the Arbitration and Conciliation Act, 1996, which was dismissed by the Single Judge and upheld by the Division Bench of the Calcutta High Court. The appellant contended that the award was perverse and contrary to law. However, the Supreme Court observed that the Arbitrator's decision is generally binding and can only be set aside if it is patently illegal or erroneous on its face. The Court reiterated that the Arbitrator is the final judge of facts, and the Court should not ordinarily substitute its interpretation for that of the Arbitrator.

2. Interpretation of Contract Terms:
The core dispute revolved around whether the price bid submitted by the appellant was inclusive or exclusive of taxes. The appellant argued that their bid was exclusive of taxes, and the respondent was liable to reimburse any taxes paid. However, the Arbitrator found that the clause relating to payment of taxes was deleted by the appellant's representative and that the work order, which was acknowledged by the appellant, was binding. The Supreme Court noted that the appellant had accepted the terms of the work order, which explicitly stated that the quoted rates were inclusive of taxes. The Court emphasized that the interpretation of the contract terms by the Arbitrator should not be interfered with unless it is patently erroneous.

3. Alleged Patent Illegality and Perversity in the Award:
The appellant claimed that the Arbitrator and the High Court failed to consider the offer, counter-offer, and letter of acceptance, leading to a serious error and patent illegality in the award. The Supreme Court, however, found that the Arbitrator had thoroughly examined the documents and the facts of the case, and there was no patent illegality in the award. The Court held that the Arbitrator rightly concluded that the appellant was responsible for the payment of taxes as per the terms of the work order.

4. Public Policy Considerations:
The appellant also challenged the award on the grounds that it was in conflict with the public policy of India. The Supreme Court referred to the case of Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., which held that an award could be set aside if it is contrary to the fundamental policy of Indian law, the interest of India, or if there is patent illegality. The Court found that the award did not violate any fundamental policy of Indian law or the interest of India and was not patently illegal. The Court emphasized that the interpretation of the contract is a matter for the Arbitrator, and the Court should not re-appreciate the evidence to arrive at a different conclusion.

Conclusion:
The Supreme Court dismissed the appeal, upholding the decisions of the High Court and the Arbitrator. The Court concluded that there was no merit in the appellant's contentions and that the award did not suffer from any patent illegality or perversity. The appeal was dismissed with no order as to costs.