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2024 (7) TMI 294 - HC - Indian LawsChallenge to Arbitral Award - challenge to the impugned Award passed by the Arbitral Tribunal is primarily on the ground that the Arbitral Tribunal has rewritten the contract by awarding tax component even though the contract were inclusive of tax - HELD THAT - The Hon'ble Supreme Court in Ssangyong Engineering and Construction Co. Ltd. Vs. National Highway Authority of India 2019 (5) TMI 1879 - SUPREME COURT , has held that an Award can be set aside on the ground of patent illegality under Section 34(2-A) of the Arbitration And Conciliation Act, 1996 only where the illegality in the Award goes to the root of the matter. It is further held that finding of erroneous application of law by an Arbitral Tribunal or the re-appreciation of evidence by the Court under Section 34(2-A) of the Arbitration and Conciliation Act, 1996 is not available. The Hon'ble Supreme Court further held that the above ground is available only where the view taken by the Arbitral Tribunal is plausible while construing the Contract between the parties or where the Award of the Tribunal lacks justifiable reasons. The Hon'ble Supreme Court further held that an Award can be set aside only if an Arbitrator/Arbitral Tribunal decides the question beyond the Contract or beyond the terms of reference or if the finding arrived by the Arbitral Tribunal is based on no evidence or ignoring vital evidence or is based on documents taken as evidence without notice to the other side. This view is applicable to the facts of the case. In South East Asia Marine Engineering and Constructions Limited (SEAMEC Limited) Vs. Oil India Limited 2020 (5) TMI 242 - SUPREME COURT , the Hon'ble Supreme Court has reiterated that if the interpretation of Contract by Arbitral Tribunal is perverse and is not a possible interpretation, the Award passed by the Arbitral Tribunal, is liable to be set aside. The facts on record indicate that the total value of contract inclusive of other miscellaneous expenses incurred by the respondent-claimant was Rs. 21,74,95,091/-. Out of the aforesaid amount, the petitioner had earlier paid a sum of Rs. 6,94,36,884/- to the respondent-claimant - The respondent-claimant claimed the balance Rs. 14,80,58,207/- Rs. 11,19,22,870/- Rs. 3,61,35,337/- . An amount of Rs. 3,61,35,337/- allegedly borne by the respondent-claimant towards miscellaneous expenses incurred by the respondent-claimant during supply and execution of the contracts signed between the petitioner and the respondent-claimant - The Arbitral Tribunal after considering the overall facts and circumstances of the case allowed only a sum of Rs. 11,19,22,870/- to the respondent-claimant and has rejected the counter-claim of the petitioner for a sum of Rs. 2,61,35,337/-. The counter-claim of the petitioner was towards the amount paid by the petitioner to the respondent's subcontractor( s)/vendors and towards alleged damage suffered by the petitioner. It cannot be stated that there was any error committed by the learned Arbitrator while awarding the amounts claimed. Therefore, on this account it cannot be stated that the Award passed by the learned Arbitrator was perverse or amounts to any patent illegality to warrant interference. This Arbitration Original Petition is dismissed.
Issues Involved:
1. Rewriting of contracts by Arbitral Tribunal. 2. Non-stamping of contracts. 3. Abandonment of contract. 4. Non-evidence by respondent-claimant. 5. GST applicability before enactment. 6. Counter-claim rejection. 7. Time essence of contracts. 8. Inter-linkage of contracts. 9. Force-majeure applicability. 10. Equipment testing and defects. 11. Fraudulent invoices and invalid GST number. 12. Performance and bank guarantees. 13. Damages and rental charges for containers. 14. Contract rescission. 15. Return of claimant's equipment. Detailed Analysis: 1. Rewriting of Contracts by Arbitral Tribunal: The petitioner argued that the Arbitral Tribunal rewrote the contract by awarding the tax component despite the contracts being inclusive of tax. The Tribunal's decision to include the tax component was contested as a deviation from the original contract terms. 2. Non-stamping of Contracts: The petitioner contended that contracts at Sl.Nos.3 to 7 were not stamped, violating Section 35 of the Indian Stamp Act, 1899. The Tribunal should have considered the non-stamping issue, but the Supreme Court's decision in "Interplay between Arbitration Agreements under the Arbitration and Conciliation Act, 1996 and the Indian Stamp Act, 1899" was cited, affirming that the contracts were acted upon by both parties. 3. Abandonment of Contract: The petitioner claimed the respondent-claimant abandoned the contract midway, leading to a Supplementary Contract on 01.06.2017. The Tribunal concluded that the abandonment and subsequent Supplementary Contract were valid, and payments to sub-contractors were acknowledged. 4. Non-evidence by Respondent-Claimant: The petitioner argued that the respondent-claimant did not provide evidence before the Tribunal, making the Award perverse. The Tribunal found the evidence sufficient and reasoned, dismissing the petitioner's claim of perversity. 5. GST Applicability Before Enactment: The petitioner highlighted that GST was charged for invoices before its enactment on 01.07.2017, indicating a patent illegality. The Tribunal considered this a minor inconsistency, not materially affecting the Award, and noted the petitioner failed to provide specifics of excess billing. 6. Counter-claim Rejection: The petitioner's counter-claim of Rs. 25,79,31,371/- was rejected by the Tribunal. The Tribunal found the counter-claim unsupported by sufficient evidence and upheld the respondent-claimant's claims. 7. Time Essence of Contracts: The Tribunal concluded that time was not the essence of the contracts dated 01.12.2016 and subsequent contracts, citing delays due to external factors like customs clearance. The petitioner's argument that time was the essence was dismissed. 8. Inter-linkage of Contracts: The Tribunal found the seven contracts inter-linked rather than separate, affecting the overall performance and obligations of the parties. The petitioner's argument of independent contracts was rejected. 9. Force-majeure Applicability: The Tribunal considered the force-majeure clause relevant to the delay caused by the detention of containers by the Special Intelligence and Investigation Branch, supporting the respondent-claimant's position. 10. Equipment Testing and Defects: The Tribunal addressed whether the equipment supplied was tested and found defective. It concluded that the equipment was tested and no significant defects were proven, supporting the respondent-claimant's claims. 11. Fraudulent Invoices and Invalid GST Number: The Tribunal dismissed the petitioner's claim of fraud due to invalid GST numbers on invoices, considering it an avoidable mistake rather than fraud. 12. Performance and Bank Guarantees: The Tribunal noted the respondent-claimant had executed a Bank Guarantee and the petitioner was permitted to invoke it for Rs. 1,01,20,000/-. The Tribunal found no error in the awarded amounts related to performance guarantees. 13. Damages and Rental Charges for Containers: The Tribunal concluded the respondent-claimant was not liable for damages and rental charges for six containers left at the petitioner's premises, rejecting the petitioner's claims. 14. Contract Rescission: The Tribunal found the respondent did not rescind the contract unjustifiably, supporting the continuity and obligations under the contracts. 15. Return of Claimant's Equipment: The Tribunal addressed the non-return of six containers worth Rs. 54,28,000/- by the petitioner, ruling in favor of the respondent-claimant. Conclusion: The Tribunal's conclusions were found to be well-reasoned and supported by evidence. The High Court upheld the Tribunal's Award, dismissing the petitioner's claims of patent illegality and perversity. The Arbitral Tribunal was deemed the best judge of the evidence and contractual terms, and no interference was warranted under Section 34 of the Arbitration and Conciliation Act, 1996. The Arbitration Original Petition was dismissed, allowing the respondent-claimant to enforce the Award.
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