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TMI Blog2023 (4) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... ,16,160/-, which has been arrived at fixing a $ rate at Rs.31.61? - HELD THAT:- It is easy to say that there is no clause in the final purchase order regarding the liability that arises on account of variation in Foreign Exchange rate. However, when the parties had clearly negotiated with their open eyes and did not meet eye to eye on this aspect and finally, consciously omitted to include clause 1.4.4 pertaining to exchange rate in the final draft Purchase Order, this Court finds that the said clause would have been omitted only because of the 1st respondent's persistence with its stand that any variation on account of Foreign Exchange rate would be to the appellant's account. Therefore, this Court is unable to accept the argument advanced by the learned Senior counsel for the appellant in this regard that since the Purchase Order does not contain any clause fixing the liability on the appellant, the express words used in the Purchase Order terming the contract as a firm price contract should be respected and the amount of Rs.17,23,16,160/- (Rupees Seventeen Crores twenty three lakhs sixteen thousand and one hundred and sixty only) alone would bind the parties. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the High Court U/s. 34 of the Act is itself very limited and more supervisory in nature, this Court exercising jurisdiction U/s.37 as an Appellate Court is further circumscribed to interfere in the absence of the above set out features or factors that alone would warrant interference. This Court has gone through the order passed by the learned Single Judge and does not find any of the circumstances available, in order to term the same as patently illegal or the award being opposed to public policy going unnoticed by the learned Single Judge. Admittedly, in this case there is no allegation of fraud or bias. Therefore, this Court exercising powers U/s. 37 of the Act does not see or find any reason whatsoever to set aside the order by the learned Single Judge rejecting the challenge to the majority award of the Arbitral Tribunal. In short, this Court does not find the majority award or the order of the learned Single Judge to shock the conscience of the Court - Appeal dismissed. - O.S.A.No.51 of 2011 - - - Dated:- 24-3-2023 - Honourable Mr.Justice S.S.Sundar And The Honourable Mr.Justice P.B.Balaji For the Appellant : Mr.N.C.Ramesh, Senior Counsel for Mr.T.Sivaprakasa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent filed a counter denying the liability sought to be saddled on them, by the appellant on both heads viz., (1) Foreign Exchange variation and (2) Interest on unadjusted advance. 7. The 1st respondent contended that from the Purchase Order it was very clear that the appellant had agreed to pay the cost of the imported equipments in CIF value (in U.S.$) and therefore the appellant alone was liable to absorb the excess amount that arose on account of the variation in Foreign Exchange rate. The 1st respondent also stated that they never agreed to the exchange rate being firm at Rs.31.61 for 1 U.S. $ throughout the contract period. In so far as the second claim with regard to interest on unadjusted advance, the 1st respondent denied its liability to meet the same. All other claims made besides the two claims on account of Foreign Exchange rate variation and interest on adjusted advance were stated by the 1st respondent to be non-arbitrable and outside the scope of the arbitration proceedings. 8. Apart from the above objections, the 1st respondent also contended that there were delays occasioned only due to the acts of omissions and commissions on the part of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s account? 6. Whether the claims made by the claimant Board against the 1st respondent on account of interest on Foreign Exchange rate variation and custom duty variation are beyond the scope of arbitration agreement between the parties? 7. Whether claimant is entitled to an award against the 1st respondent for a sum of Rs.3,20,00,104/- together with interest at 22% from the date of claim namely 23.07.2000 till the date of award and future interest on the said amount at 24% from the date of award till the date of realization. 8. Whether the claimant is entitled to recover from the 1st respondent , the interest on unadjusted portion of advance paid to the 1st respondent as per the Annexure-II of the claim statement? 9. Whether the claims made by the claimant Board for the interest on unadjusted portion of advance paid to the 1st respondent is outside the provision of POH No.219 dated 28.03.1995 and maintainable? 10. Whether the claimant is entitled to an award against the 1st respondent for a sum of Rs.75,83,725/- on the claim made upto 23.07.2000 towards interest on unadjusted advance amount, till the date of award and future interest at the rate of 24% fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the counter claim of the 1st respondent to the tune of Rs.7,23,428/- together with interest totalling in all Rs.9,00,130/- in and by the majority award, it was held that the 1st respondent was alone liable to bear the charges incurred for getting the validity of the bank guarantees extended and the 1st respondent was not entitled to recover the same from the appellant. However, interestingly in and by a minor award, the third Arbitrator for various reasons assigned came to the conclusion that the appellant was entitled to refund to the tune of Rs.17,23,16,160/- from the 1st respondent. In so far as the claim under the interest on unadjusted portions of advance the said minority award found that the claimant was entitled to the same. In so far as the counter claim made by the 1st respondent, the minority award also concurring with the majority award, rejected the counter claim. 14. Aggrieved by the denial of the claims, by a majority award passed by the Arbitral Tribunal, the appellant filed Arbitration Original Petition in 727 of 2003 before this Court. The 1st respondent supported the majority award and sought for dismissal of the Original Petition filed U/s. 34 of the Arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and that subject to the decision of the Arbitral Tribunal alone the appellant opened the Letter of Credit. (8) The learned Single Judge ought to have seen that there is no specific clause in the contract that provided for the appellant to bear the difference in Foreign Exchange rate. (9) The Arbitral Tribunal as well as the learned Single Judge erred in not giving significance to the mentioning of value of 1 U.S. $ at Rs.31.61 in the contract and failed to see that the only object of mentioning it was because the contract was a firm price contract. 17. Heard Mr.N.C.Ramesh, learned Senior counsel for Mr.T.Sivaprakasam appearing for the appellant and Mr,T.V.Ramanujan, learned Senior Counsel for MR.C.Jagadish appearing for the 1st respondent . 18. Having heard the leaned Senior counsel on either side, this Court feels that there are only two major points that will have to be addressed viz., (A) whether the contract was indeed a firm price contract and if so, whether the appellant was justified in making the claim for refund, seeking excess amounts paid to the 1st respondent , over and above the contract value of Rs.17,23,16,160/-, which has been arrived at fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following items of equipments (1) Turbine parts such as runner, shift, guide bearing, turbine sealing, (2) Governor, (3) Main Net valve (spherical valve) optionally 4) Generator, 5) Excitation system and 6) Spare parts of generator and excitation system, Governor. Inlet valve (optionally) turbine partly including runner from the overseas supplier. Exchange rate considered in one U.S. Dollar =Rs.31.61 (Indian Rupees) as on 16.05.1994. Customs duty at the rate of 20% on CIF value as applicable for initial setting up of Power Project. The COIF value of the imported equipment in USD 25,06,860/- (US Dollars twenty five lacs six thousand eight hundred and sixty only) and in addition USD 3,11,000/- (US Dollars three lacs eleven thousand only) in MIV (spherical valve) is imported will remain FIRM during the currency of the contract. You have agreed to furnish backup guarantee as indicated below in addition to your own guarantee for complete supply and subsequent performance of the equipment. It is also noted that the turbine of CKD Blansko, Czech Republic. As agreed you have to furnish backup guarantee from the Czech supplier for satisfactory performance of the equipment. The offer f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in AIR 1933 Privy Council 233 , for the proposition that construction of a contract must depend on only the intention of the parties when it was made and not based on subsequent conduct of any party. 2. Rajasthan State Industrial Development and Investment Corporation and another Vs. Diamond Gem Development Corporation Limited and another, reported in (2013) 5 SCC 470 , for the proposition that a contract being a creature of an agreement between two or more parties, interpretation of the same should be on the basis of literal meaning, in the absence of any ambiguity and should be in a manner so as to not vary the terms and that such interpretation should be without outside aid and strictly without altering the nature of the contract. 3. Numaligarh Refinery Ltd Vs. Daelim Industrial Co. Ltd , reported in (2007) 8 SCC 466 for the proposition that the Court has power to set right things when the Arbitrator has acted without jurisdiction, by giving an interpretation to a clause of the agreement, running wholly contrary to law. 4. Thawardas Pherumal and another Vs. Union of India , reported in AIR 1955 SC 468 , for the proposition that when a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .N.G.C. Ltd Vs. Garware Shipping Corporation Limited , reported in (2007) 13 SCC 434 , ii) Security Printing and Minting Corporation of India Ltd Vs. Gandhi Industrial Corporation , reported in (2007) 13 SCC 236 iii) Delhi Development Authority Vs. M/s. R.S.Sharma Co., New Delhi , reported in 2008 4 LW 401 (SC), and iv) ONGC Vs. Western Geco Internation Ltd , reported in (2014) 9 SCC 263 for throwing light on scope of Sections 34 and 37 of the Act. 26. Learned Senior counsel finally relied on the judgment of the Hon'ble Supreme Court in Samee Khan Vs. Bindu Khan , reported in (1998) 7 SCC 59 for the interpretation of the word ALSO . 27. Per contra, the learned Senior counsel for the 1st respondent supported the majority award of the Arbitral Tribunal and contended that no interference was warranted as the majority award of the Arbitral Tribunal was reasonable and probable in the circumstances of the case, especially in the light of evidence adduced by the parties before the Arbitral Tribunal. Learned Senior counsel also drew the attention of this Court to Ex.C.16, C55 and C60 and persuaded this Court to see that the negotia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot set aside an award on the ground of being opposed to public policy unless the award shocks the conscience of the Court and it would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the Arbitrator, to do what it considers to be justice. 4. Welspun Specialty Solutions Limited Vs. Oil and Natural Gas Corporation Limited , 2022(2) SCC 382 , for the proposition that Court should not interfere unless illegality of the award goes to the root of the matter and any illegality of a trivial nature could not be held to be opposed to public policy. 5. Associate Builders Vs. Delhi Development Authority , reported in 2015(3) SCC 49 , for the proposition that the High Court cannot interfere when a possible view is taken by the Arbitrator given the facts and circumstances of the case. 6. MMTC Limited Vs. Vedanta Limited , reported in 2019(4) SCC 163 , for the proposition that in the absence of violation of fundamental policy of Indian Law, any patent illegality resulting in contravention of Substantive Law of India, contravention of the Arbitration and Conciliation Act, 1996, and contravention of the terms ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self that a sum of Rs.17,23,16,160/- was arrived at taking the value of 1$ at Indian Rupee 31.61. Tabulation value available and forming part of the Purchase Order also sets out the amount in U.S $ at Rs.24,53,460/- and corresponding value in INR to be at Rs.11,04,16,525/- and costs of indigenous equipments at Rs. 6,18,99,635/-. Adding up the two figures in INR, the amount arrived at is Rs.17,23,16,160/-. The value of 1 $ equivalent to Rupees 31.61 was taken into account as on the date of the Purchase Order viz., 28.03.1995. The Court has gone through the entire Purchase Order and does not find any specific clause to deal with Foreign Exchange variation and the consequent liability arising therefrom. In this context, some of the exhibits which have been relied on and referred to by both the learned Senior Counsel would assume relevance. Ex.C16 is a letter of acceptance issued by the appellant in favour of the 1st respondent on 24.02.1995. Admittedly, this document was before the final Purchase Order dated 28.03.1995. It is seen from Ex.C16 that there is a mention of prices being FIRM for the entire duration of the contract. It is also mentioned As agreed by you, no Foreign Exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st, the value of 1 $ as on the date of the Purchase Order was freezed at Rs.31.61. In Ex.C20 draft Purchase Order, despite there being a specific clause 1.4.4, extracted herein above, pertaining to exchange rate, the said clause has been omitted from the final Purchase Order. This fact has been admitted to by both parties as well as both the learned Senior counsel appearing for the parties. This Court can draw the inference from the removal or omission of the said clause that only after discussions and deliberations the parties chose to omit the said clause. If this clause was indeed retained in the final Purchase Order, the dispute would have never arisen. The parties had negotiated on this particular aspect not once or twice but across several meetings and exchange of letters, including the corrections to the draft Purchase Order before drawing up the final Purchase Order. 31. It is easy to say that there is no clause in the final purchase order regarding the liability that arises on account of variation in Foreign Exchange rate. However, when the parties had clearly negotiated with their open eyes and did not meet eye to eye on this aspect and finally, consciously omitted to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have been any necessity to mention that the prices are FIRM in so far as CIF value in U.S.Dollars . Merely because the calculation is provided in the table and total cost of Rs. 17,23,16,160/- is arrived at, it does not mean that the parties had agreed on even the Foreign Exchange rate to be INR 31.61 for 1 U.S.$. The only interpretation that this Court is able to give and arrive at is that the parties had only agreed that the value mentioned in U.S.$ was FIRM, without factoring variation in Foreign Exchange rate. It is also very relevant to fall back to the second page of the Purchase Order under the heading Commercial-Section 1-Acceptances, where the parties never chose to mention the Foreign Exchange rate as 1 $ = INR 31.61. Even in Table A, CIF value in U.S. Dollars is mentioned specifically wherever applicable, apart from mentioning INR price after conversion of such CIF value. 34. This Court keeping in mind the fact that the entire discussions and negotiations between the parties was only on this specific issue of variation in Foreign Exchange rate and the resultant conduct of the parties viz., agreeing to omit the specific clause 1.4.4 under the exchange rate in the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t has also rejected the challenge to the said majority award. 36. No doubt there are judgments of the Hon'ble Supreme Court as well as this Court regarding relevancy of a minority award. This Court is conscious of the fact that a minority view can also ultimately be the correct view. This Court is not in quarrel with regard to the ratio laid down by the Hon'ble Supreme Court as well as this Court regarding dissenting opinion of a minority Arbitrator also being relevant and the same can be relied upon. However, when the majority award is based on materials placed before the Arbitral Tribunal, proper appreciation of evidence on record and ultimately arriving at a certainly plausible view, then in such circumstances the relevancy of the minority award may be inconsequential. No Court can say that the minority award should be accepted and the majority award should be over turned. Infact, the Hon'ble Supreme Court in the case of Project Director, National Highways No.45 E and 220, National Authority of India Vs. M.Hakeem and another , reported in 2021 (9) SCC 1 , has held that Sec.34 of the Act is modelled on UNCITRAL Model Law on International Commercial Arbitratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as follows: 37. Appealable orders. (1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: (a) granting or refusing to grant any measure under section 9; (b) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a Court from an order granting of the arbitral tribunal. (a) accepting the plea referred in sub-section (2) or sub-section (3) of section 16; or (b) granting or refusing to grant an interim measure under section 17. (3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court. 41. A reading of Sec.37 does not expressly curtail the powers of this Court exercising jurisdiction as an Appellate Court. However, there are series of judgments of the Hon'ble Supreme Court as well as this Court regarding the jurisdiction of this Court and powers vested in it while exercising Appellate jurisdiction U/s. 37 of the Act. 42. The Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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