2024 (5) TMI 407 - SC - Indian Laws

Reimbursement of additional expenditure incurred due to an increase in the rates of royalty and associated sales tax on soil, sand and crushed stone aggregates - Non-payment for executed work of embankment with soil/pond ash for the initial 150 mm depth stripped in accordance with the requirements of the contract - Reimbursement of additional costs incurred due to an increase in the forest transit fee rates - scope of interference in a petition under Section 34 of the Arbitration Act - HELD THAT - This Court, in the case of UHL POWER COMPANY LTD. VERSUS STATE OF HIMACHAL PRADESH AND STATE OF HIMACHAL PRADESH VERSUS UHL POWER COMPANY LTD. 2022 (1) TMI 307 - SUPREME COURT held that the jurisdiction of the Court under Section 34 is relatively narrow and the jurisdiction of the Appellate Court under Section 37 of the Arbitration Act is all the more circumscribed. The Division Bench held that the imposition of a tax or upward revision of an already existing tax or levy through subsequent legislation is admittedly akin to the levy of additional royalty. The Division Bench relied upon a decision of the same Court in the case of the NATIONAL HIGHWAYS AUTHORITY OF INDIA VERSUS M/S ITD CEMENTATION INDIA LIMITED 2015 (4) TMI 1096 - SUPREME COURT . The Division Bench in the impugned judgment held that the claim made on account of the increase in royalty, sales tax, forest transit fee, etc., was covered in favour of the respondent by the said decision. Whether the claim for the construction of embankment forms part of the activity of clearing and grubbing and was not payable as embankment work? - HELD THAT - The Division Bench held that nothing is shown that indicates that the construction of the embankment can be said to have been done in a manner where the lower part of the embankment is made only by carrying out the activity of backfilling. The High Court also noted that the appellant sought to make deductions after initially paying the amounts for the embankment. The Division Bench was right in holding that the majority opinion of technical persons need not be subjected to a relook, especially when the learned Single Judge had also agreed with the view taken by the Arbitral Tribunal. The learned Single Judge and the Division Bench of the High Court have examined the challenge to the award within four corners of limitation imposed by Sections 34 and 37 of the Arbitration Act. The view taken by the Arbitral Tribunal, the learned Single Judge and the Division Bench cannot be found fault with. There are no merits in the appeal - appeal dismissed.

Summary

Issues Involved:
1. Reimbursement of additional expenditure due to increased royalty and associated sales tax on materials.
2. Non-payment for executed work of embankment with soil/pond ash for the initial 150 mm depth.
3. Reimbursement of additional costs due to increased forest transit fee rates.

Summary:

Issue 1: Reimbursement of Additional Expenditure Due to Increased Royalty and Sales Tax
The appellant awarded a contract to the respondent for the Allahabad Bypass Project. Disputes arose and were referred to an Arbitral Tribunal. The Tribunal awarded Rs.2,69,91,248/- to the respondent for increased costs due to higher royalty and sales tax rates till 31st December 2008, with interest at 12% per annum. The appellant challenged this under Section 34 of the Arbitration and Conciliation Act, 1996, but the Single Judge upheld the award, relying on a precedent. The Division Bench also dismissed the appeal under Section 37, referencing the same precedent. The Supreme Court concurred with the lower courts, noting that the Arbitral Tribunal's interpretation of contract clauses 70.1 to 70.8 was reasonable and consistent with the principles laid down in previous rulings.

Issue 2: Non-payment for Executed Work of Embankment
The Arbitral Tribunal awarded Rs.3,47,35,522/- to the respondent for the embankment work, with a price adjustment and interest at 12% per annum. The appellant contested this, arguing that the work was part of clearing and grubbing activities. The Single Judge and Division Bench upheld the Tribunal's majority decision, which found the respondent entitled to the amount. The Supreme Court affirmed this, emphasizing that the Tribunal's interpretation of the contract and factual findings were within its jurisdiction and not subject to interference under Sections 34 and 37 of the Arbitration Act.

Issue 3: Reimbursement of Additional Costs Due to Increased Forest Transit Fee Rates
The Tribunal awarded Rs.3,77,74,427.39/- to the respondent for increased forest transit fees, with interest at 12% per annum. The Single Judge and Division Bench upheld this award, and the Supreme Court found no reason to interfere, noting that the Tribunal's decision was based on a reasonable interpretation of the contract and consistent with established legal principles.

Conclusion:
The Supreme Court dismissed the appeals, finding no merit in the appellant's challenges. The Arbitral Tribunal's awards and the lower courts' judgments were upheld, with no order as to costs.