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TMI Blog2020 (11) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... purported to be in conflict with the public policy of India. The Court also considered different types of heads falling under the scope of public policy in India, which inter alia includes patent illegality. It was further observed that the Arbitral Tribunal must decide the dispute between the parties in terms of the contract and the construction of the terms of the contract is primarily for an Arbitrator to decide and must not be interfered with, unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do. In the said judgment, the Court has further observed that when a Court is applying the public policy test to an arbitral award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts must necessarily pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Appeal dismissed. - FAO (OS) (COMM) 125/2020 - - - Dated:- 3-11-2020 - HON BLE MR. JUSTICE MANMOHAN AND HON BLE MR. JUSTICE SANJEEV NARULA Appellant Through: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the price of each item would include a) Basic Price, b) Excise Duty (ED) and c) Central Sales Tax (CST). The contract consisted of a summary price schedule which delineates the total amount chargeable by the Respondent and the minimum guaranteed CENVAT credit to be paid by the Respondent to the Appellant as ₹ 33,06,70,252/-. During the continuation of the work under the contract, Respondent raised invoices seeking inter alia reimbursement of the input sales tax paid on purchases and of sales tax paid by sub-contractors/vendors, while executing the contractual work. The CENVAT credit passed on to the Appellant was ₹ 19,70,32,185/-, as against the guaranteed amount of ₹ 33,06,70,252/-. The Appellant refused to make any payment to the Respondent until necessary documents were submitted by the latter to confirm that the entire guaranteed amount towards CENVAT credit would be passed on to the Appellant. The Appellant claimed that in terms of the price schedule as set out in the contract, it was entitled to deduct the shortfall in CENVAT credit from the net contract price at serial No.15 of the summary price schedule. On the other hand, Respondent s stance was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 34 of the A C Act, the learned Single Judge dismissed the objections and upheld the award, except to the extent that the awarded costs were reduced to 50% and further, the interest rate was reduced from 14% to 10%. Contentions of the parties 9. Mr. V. Lakshmikumaran, learned counsel for the Appellant submits that both the award and the impugned judgment are patently erroneous as they overlook the settled principles of law governing the exercise of jurisdiction under Section 34 of the A C Act. The award and the impugned judgment are in conflict with public policy, having rewritten the terms of the General Conditions of Contract (hereinafter referred as GCC ), rendering important clauses of the GCC nugatory , thus, violating fundamental policy and basic notions of justice. He further argued that the reasoning in the impugned judgment and the award detrimentally impacts the public exchequer and deserves to be set aside. The award is patently illegal as is manifest by a bare perusal of Arbitrator s reasoning or the lack thereof. Mr. V. Lakshmikumaran further referred to Clause 14.5.6 of the GCC and argued that the said clause is unambiguous and its plain and literal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his Tribunal, profit, if any, it would have earned had there been no shortfall in the minimum guaranteed CENVAT credit or loss it has suffered in view of the shortfall. To reiterate, it has also failed to demonstrate unassailingly, that the Claimant had earned profit due to such shortfall. In the above conspectus, the imputation of the Claimant that the withholding of the payment of its RA Bill No.34 on the purported ground of shortfall in the Minimum Guaranteed Amount of CENVAT Credit tantamounts to attempted double deduction to its prejudice cannot be brushed aside as wholly unfounded. He submitted that the aforesaid extract makes it evident that the learned Arbitrator has decided the issue on an erroneous presumption that since the shortfall amount has not been collected from the Appellant, it has suffered no loss on that account. He submitted that this is factually incorrect, and the Respondent has in fact collected this shortfall, albeit not in the garb of CENVAT credit. He submitted that in any event, there was no such condition of no loss laid down in Clause 14.5.6 for making a deduction from recovery of shortfall in minimum guaranteed CENVAT credit. 11. Mr. V. Lak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t while exercising appellate power to review the judgment of the learned Single Judge that decides the objections under Section 34 of the A C Act, is extremely limited. As an appellate court, we would be inclined to intervene only in a situation wherein there is a manifest or patent error in the award and the view taken by the learned Single Judge. We would not like to substitute our opinion even if there is another plausible view then what has been taken by the learned Single Judge at the first instance. The Supreme Court in the case of Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 has elaborately laid down the scope of jurisdiction of the Court to interfere with the arbitral award while exercising power under Section 34 of the A C Act. The Supreme Court had observed that only the grounds specifically provided in Section 34 of the A C Act can be relied upon to interfere with an arbitral award and held that the Court would be justified in interfering with the merits of the award only when it is purported to be in conflict with the public policy of India. The Court also considered different types of heads falling under the scope of public policy in India, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the Appellant was entitled to deduct the amount due from the gross contract price or the net contract price. The opposing stances of the parties gave rise to disputes that squarely fell within the domain of interpretation of the terms of the contract. This aspect is precisely and exclusively within the realm of the jurisdiction of the arbitral tribunal and law on this issue is no longer res integra, as has been summarized in Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran (2012) 5 SCC 306, as follows: 43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract . That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator. 44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63: (2009) 4 SCC (Civ) 16] and which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f any shortfall in the CENVAT credit as against the minimum guaranteed CENVAT Credit, the same shall be deductible from the amount payable to the contractor. However, since this clause does not specify the amount from which the said shortfall would be deductible, the answer to this quandary lies in the note at the bottom of the summary price schedule appended to the contract. A plain reading of this note makes it evident that the only logical interpretation of the phrase 'contract price' for the purpose of Clause 14.5.6 of the contract is that any deduction on account of shortfall viz. the guaranteed CENVAT credit had to be made from the gross contract price at serial No.12 and not from the net contract price at serial No.15. 18. In the light of this position, I find no merit in Mr. Sethi's primary contention that the sum of ₹ 5,01,47,631/- towards the admitted shortfall in CENVAT credit was required to be deducted from the net contract price mentioned at serial no.15 of the summary price schedule and not from the gross contract price mentioned at serial no.12 thereof. In fact, the petitioner's submission that a deduction from the gross contract price at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the Respondent, and merely because some input taxes were not paid directly by the Respondent but by its subcontractors/vendors in respect of the goods used in the execution of the contract, would not be a tenable ground for the Appellant to refuse reimbursement thereof to the Respondent. 17. We do not find any perversity in the afore-noted analysis and conclusion. We also cannot say that the learned Arbitrator has travelled beyond his jurisdiction or has taken a view contrary to the terms of the contract or rewritten the terms of the contract, as Mr. Lakshmikumaran has sought to put it. We cannot substitute our opinion in place of the interpretation given by the learned Arbitrator. Mr. Lakshmikumaran repeatedly urged that the Appellant has no problem with respect to the observations of the learned Arbitrator regarding the deduction to be made. He submitted that as long as deductions are held to be permissible, irrespective of the amount against which the same are to be made viz. gross contract price or net contract price, Appellant would be satisfied with the findings. He urged that the Court must clarify this aspect. This submission of Mr. Lakshmikumaran gives the impression ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed on the rate of tax/ duty and procurement price. In reply to Question No.18 in cross-examination, that if the quantity of materials used varies from the quantity envisaged in the billing schedule submitted by the Claimant, whether the guaranteed amount of CENVAT credit would also vary, the witness replied that the factor of variance between the envisaged quantity and actual quantity, would be taken care of in the procurement price factor. The Respondent's witness, RW-1, in reply to Question No. 44, in his cross-examination, admitted that the amount of ₹ 19,70,32,185/- had been availed by the Respondent as CENVAT credit and that it had also reimbursed the said amount to the Claimant. The witness also admitted that, against ₹ 19,70,32,185/-, the adjusted CENVAT credit had been computed by the Respondent at ₹ 28,05,22,621/- by giving effect to tax variation Clause 14.6. The witness answered in the affirmative to the question, whether the minimum guaranteed CENVAT amount mentioned in the Summary Price Schedule of the Contract was not a firm amount and was subject to positive or negative variations depending upon the prevalent rate of tax/ duty. The witnes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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