2015 (1) TMI 254 - HC - Companies Law

Recourse against arbitral award u/s 34 of the Arbitration and Conciliation Act, 1996 - Difference pertaining to the quantum of deduction on exemption from customs duties and other indirect taxes granted by the Government of India in relation to the project The Tribunal was of the view that the respondent is entitled to deductions in excess of the amount on the basis of the actual benefits accrued to the petitioner on account of exemptions - Held that - The Award merely seeks to interpret the contractual clauses - in such a situation, the scope of interference by the Court in proceedings under Section 34 of the Act is extremely limited - the Court would interfere with the interpretation of a contractual clause as adopted by the Arbitral Tribunal, only if the adopted interpretation is such that it goes contrary to the express contractual terms; is such that no reasonable person would adopt, or; is patently perverse or absurd - In National Thermal Power Corporation V R.S. Avtar Singh & Co. and Anr. 2001 (9) TMI 1120 - DELHI HIGH COURT it has been held that when the view adopted by the arbitrator is a plausible view, then the court cannot interfere with the decision made. Thus, the court would interfere with the arbitral award, if the interpretation adopted in the making of the award is neither plausible, nor reasonable, and is in conflict with the terms of the contract agreement - If the interpretation adopted by the arbitrator is not the only possible view, it being one of the several plausible views - without any patent illegality in the conclusions drawn by the arbitrator, it is beyond the scope of jurisdiction of this court under section 34 of the Act, to interfere with the award. If the saving on account of payment of taxes and duties exceeds the amount declared by the petitioner (of ₹ 1,290,000,000/- and ₹ 774,000,000/-), such saving on account of taxes and duties has to be passed on to the employer, i.e. the respondent - whether, or not, the petitioner indeed had to bear any amount of indirect taxes as claimed by it, is a matter of detail and would, at the highest, entitle the petitioner to adjustment to that extent - if the arbitrator has applied his mind to the pleadings, the evidence adduced before it, and the terms of the contract, the court would not reappraise the matter as if it were an appeal - Interpretation of contractual terms is a matter within the domain of the arbitrator - even if the interpretation adopted by the arbitrator is not the only possible view, it being a plausible view-without any patent illegality in the conclusions drawn by the arbitrator, it is beyond the scope of jurisdiction of this court u/s 34 of the Act to interfere with the award on the aspect Decided against petitioner.

Summary

Issues Involved:
1. Interpretation of Clause 4 of the Contract Agreement.
2. Applicability of Clause 13.1 of the General Conditions of Contract (GCC).
3. Priority and interplay between the Contract Agreement and GCC.
4. Legality and enforceability of the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Interpretation of Clause 4 of the Contract Agreement:
The core dispute revolves around the interpretation of Clause 4 of the Contract Agreement, which stipulates the fixed lump sum price for the project, including taxes and duties. The petitioner argued that their liability to reimburse the respondent was capped at INR 2064 million, encompassing both customs duty and other indirect taxes. They contended that this clause should prevail over any other provisions, including Clause 13.1 of the GCC, which mandates the passing of any tax exemption benefits to the employer. The Tribunal, however, interpreted that Clause 4 does not limit the liability in the event of exemptions but rather applies when there is no exemption. The Tribunal concluded that Clause 4 must be read alongside Clause 13.1 of the GCC, which specifically deals with exemptions and adjustments of the lump sum price due to changes in tax liabilities.

2. Applicability of Clause 13.1 of the General Conditions of Contract (GCC):
Clause 13.1 of the GCC explicitly states that any benefit from exemption or reduction in customs duties, excise duties, or other taxes must be passed on to the employer. The petitioner argued that Clause 4 of the Contract Agreement superseded this provision, but the Tribunal held that Clause 13.1 is a specific provision addressing tax exemptions and must be given effect. The Tribunal emphasized that the general provision in Clause 4 must give way to the specific provisions of Clause 13.1, which directly deals with the situation of tax exemptions.

3. Priority and Interplay Between the Contract Agreement and GCC:
The petitioner argued that the Contract Agreement should take precedence over the GCC, citing Clause 1.6 of the GCC, which outlines the priority of documents. They contended that the Contract Agreement, being a special provision, should override the general conditions of the GCC. However, the Tribunal noted that Clause 4 itself states that the total cost is "subject to adjustment in accordance with the provisions of GCC." This indicates that the parties intended for the GCC provisions, including Clause 13.1, to apply. The Tribunal found that both Clause 4 of the Contract Agreement and Clause 13.1 of the GCC must be read together to give effect to the entire contract.

4. Legality and Enforceability of the Arbitral Award Under Section 34 of the Arbitration and Conciliation Act, 1996:
The petitioner challenged the arbitral award under Section 34, arguing that the Tribunal's interpretation was patently illegal and contrary to the express terms of the Contract Agreement. The court, however, held that the scope of interference under Section 34 is extremely limited. The court would only interfere if the interpretation adopted by the Tribunal was implausible, patently perverse, or absurd. The court found that the Tribunal's interpretation was a plausible one and that it had applied its mind to the pleadings, evidence, and terms of the contract. The court emphasized that it is not within its jurisdiction to reappraise the matter as if it were an appeal, and thus, dismissed the objections raised by the petitioner.

Conclusion:
The court upheld the arbitral award, finding that the Tribunal had correctly interpreted the contractual clauses in question. Clause 4 of the Contract Agreement and Clause 13.1 of the GCC were found to be complementary, with Clause 13.1 specifically addressing the issue of tax exemptions. The Tribunal's interpretation was deemed plausible and within the scope of its authority, leading to the dismissal of the petitioner's objections under Section 34 of the Arbitration and Conciliation Act, 1996.