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TMI Blog2024 (4) TMI 1007X X X X Extracts X X X X X X X X Extracts X X X X ..... include the authority to modify the award. It further held that an award can be 'set aside' only on limited grounds as specified in Section 34 of the Act and it is not an appellate provision. It further held that an application under Section 34 for setting aside an award does not entail any challenge on merits to an award. The Honourable Supreme Court in Ssangyong Engineering and Construction Co Ltd versus 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 further held that 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 Court held that the above ground is available only where the view taken by the Arbitral Tribunal is an impossible view while construing the contract between the parties or where the award of the Tribunal lacks any reasons. The records also indicate that the petitioner had been pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before it and for the reasons set out above, the Tribunal hereby Determines and Orders that: a) MATRIX LABS to make payment of INR 6,29,46,000 (Rupees Sixty-Two Million Four Hundred and Ninety Six Thousand Only) to AARK PHARMACEUTICALS toward repayment of the advance paid by AARK PHARMACEUTICALS for the Rejected Test Kits (that is 148,800 test kits) along with compound interest at the rate of 16% per annum for the period from 29 June 2020 until repayment in full; b) MATRIX LABS to pay AARK PHARMACEUTICALS compound interest at the rate of 16% per annum on the sum of INR 95,80,000 FOR THE PERIOD FROM 3 April 2020 to 3 February 2021; c) MATRIX LABS pay AARK PHARMACEUTICALS' total legal costs and disbursements of INR 18,83,750 and to bear the total Costs of the Arbitration of USD 60,000 by way of reimbursement to AARK PHARMACEUTICALS of the sum of USD 60,000; d) MATRIX LABS and RARE METABOLICS LIFE SCINENCES PVT LTD are to bear their own costs and disbursements; and All other requests and claims are rejected. 3. The petitioner herein was the first respondent before the Arbitral Tribunal in the Arbitral Proceeding in ICC Case No.626492/HGT which was instituted by the respondent / cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs and Cosmetics Act, 1940 and the rules made thereunder. 8. The respondent had thus expressed its desire to be appointed as the Distributor of the said M/s.Rare Metabolics Life Sciences Private Limited for the Specified Products, and the said M/s.Rare Metabolics Life Sciences Private Limited as the Promoter consented to appoint the respondent as the Distributor upon the terms and conditions in the Tripartite Agreement dated 23.03.2020. 9. The said M/s.Rare Metabolics Life Sciences Private Limited thus acted as the Promoter under the Ex.C2 Tripartite Agreement dated 23.03.2020. The respondent-claimant inturn was appointed as the Distributor of M/s.Rare Metabolics Life Sciences Private Limited. 10. Thus, under Ex.C2 Tripartite Agreement dated 23.03.2020, the petitioner as an Importer , imported testing kits for testing Covid 19 after the outbreak of Covid 19 pandemic in India. 11. Under the Ex.C2 Tripartite Agreement dated 23.03.2020, the respondent AARK Pharmaceuticals on being appointed as the Sole Distributor of the said Promoter M/s.Rare Metabolics Life Sciences Private Limited, placed order on the petitioner for supply of testing kits to ICMR (Indian Council of Medical Research ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have in arise between the petitioner and the respondent and the promoter namely M/s.Rare Metabolics Life Scienes Private Limited. Under these circumstances, the promoter namely M/s.Rare Metabolics Life Sciences Private Limited along with the respondent, AARK Pharmaceuticals had filed O.M.P.(I)(COMM) 93 of 2020 against the petitioner/(importer) before the Delhi High Court for a direction for release of 7.24 Lakhs Covid 19 Rapid Test Kit and other Covid-19 related materials which were imported and/or are being imported from the People's Republic of China. 19. By an order dated 24.04.2020 in O.M.P.(I)(COMM) 93 of 2020, the Delhi High Court had passed the following order:- 7. Be that as it may, since the kits/tests are required in the country on urgent basis in view of the worldwide pandemic, it is ordered as under: (i) 2.24 lakh tests shall be delivered to ICMR, the moment it lands into India. (ii) The total invoice value raised by the respondent-importer[ petitioner herein] upon petitioner no. 1[respondent herein] is Rs. 20 crores plus GST i.e. Rs. 21 crore. The respondent has received Rs. 12.75 crores. The balance amount of Rs. 8.25 crores shall be first paid to the importer bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned counsel for the respondent submits, that the respondent is ready to and undertakes to supply the kits/tests at Rs. 400/- each, plus GST i.e. at 40% lesser than the ICMR approved rate, directly to any Government or its agency or private entity duly approved to carry out these tests. 11. So, from the other 5 lakhs kits/tests, 50,000 shall be excluded for the State of Tamil Nadu and the remaining 450,000 would be available to the respondent to be disposed-off in terms of the above, directly to any Government or governmental agency or any private entity which has received due approval to carry out such tests. 12. In view of the above, the petitioners agree not the pursue any claim apropos the other 5 lakh kits/tests. 13. The petition is disposed-off in terms of the above. 14. The order be uploaded on the website forthwith. Copy of the order be also intimated to the learned counsel for the parties through email. 20. Pursuant to the directions of the Delhi High Court in O.M.P.(I)(COMM) 93 of 2020 dated 24.04.2020, the effective price of the testing kit was reduced. 21. From 7,00,000 testing kits that were later imported on 23.04.2020, about 2,24,000 testing kits were directl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount claimed by the respondent. 30. It is further submitted that there was no scope for confusing the re-exports made during the month of May of all 7,00,000 [ 4,76,000+ 2,24,000] testing kits imported by the petitioner after the Delhi High Court order. 31. That apart, the timeline between the import of the consignments covering 2,76,000 testing kits supplied to ICMR and eventual return on 29.06.2020 made it impossible for the petitioner to re-export the consignment in the conditions in which they were returned. It is submitted tha t 1,48,800 testing kits out of 2,76,000 were returned by ICMR only on 29.06.2020 and were received by the petitioner only on 04.07.2020. 32. It is therefore submitted that the Arbitral Tribunal committed a grave error in awarding compensation to the respondent for 1,48,800 testing kits that were returned to the petitioner after breaking open the seal. 33. It is submitted that the Arbitral Tribunal ought to have considered the proviso to Section 16(1) of the Sale of Goods Act, 1930. It is submitted that the goods sold through the respondent/ distributor could have not been returned by the respondent (claimant) to the petitioner. 34. Section 16(1) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of its plea, the petitioner has filed a written submission on the grounds of challenge to the arbitral award as follows:- 1. Breach of Contract - 100% advance was not paid which lead to an interest burden for the Petitioner. 2. Against the Law - The Arbitrator failed to invoke the proviso to Sec 16(1) of the Sale of Goods Act and failed to follow the Superior Court's ratio on identical issues. 3. Against the Public Policy of Indian Law - noncompliance judicial precedents. 4. Against the basic notion of Morality and Justice - The Arbitral award was awarded for a higher amount than the amount claimed by the Respondent. 5. Not a Speaking Order due to lack of application of mind a. No reasons for not invoking the proviso to section 16 (1) of the Sale of Goods Act, has been provided in the Award b. Non-application of the ratio laid down in the precedent and application of the decision followed by the ratio in the precedent. c. Non-speaking with regard to the sub-issue determined in para 109(d). The Ld arbitrator failed to examine and compare the relevant document with that of the Purchase Order, rather arbitrarily considered only the submission made by the Respondent that ICMR re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vs. C.Coomaraswamy Naidu and Sons , MANU/TN/0688/1979 in so far as admission is concerned. A specific reference is made to Paragraph 10 of the aforesaid order, which reads as under:- 10. The law by no means regards admission as conclusive proof of the matters admitted. This is because to a Court of law admissions are but statements which do no more then suggest an interference as to some fact or facts in issue. (See Section 31 and 17 of the Indian Evidence Act, 1872). It is, therefore, important that the Court should examine any given admission inside out to see if it suggests any clear interference on the fact in issue against the party making it. For a Court to draw an adverse inference against a party on the basis of what he is stated to have admitted, the admission must be unequivocal. It must also be comprehensive. It must go the whole-hog, as it were, on the point at issue. If a party's admission falls short of the totality of the requisite evidence needed for legal proof of a fact in issue, such an admission would be only a truncated admission. It follows that in such a case it cannot support a valid judicial determination, unless it be that the Court is in a position to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference against a party on the basis of what he is stated to have admitted, the admission must be unequivocal. It must also be comprehensive. It must go the whole-hog, as it were, on the point at issue. If a party's admission falls short of the totality of the requisite evidence needed for legal proof of a fact in issue, such an admission would be only a truncated admission. It follows that in such a case it cannot support a valid judicial determination, unless it be that the Court is in a position to find other evidence before it to make up for the deficiencies in the admission. 43. On the other hand, it is the case of the respondent that out of 2,76,000 testing kits imported by the petitioner on 17.04.2020 that were delivered to ICMR on behalf of the respondent. 1,48,800 testing kits were returned to the petitioner on 29.06.2020 and that 1,27,200 testing kits were not returned to the petitioner. There was no claim for 1,27,200 testing kits. 44. It is further submitted that 2,24,000 testing kits that were delivered pursuant to order dated 24.04.2020 of the Delhi High Court in O.M.P.(I)(COMM) 93 of 2020 were returned to the petitioner immediately on 26.04.2020 and since the amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught to be dismissed in limine . 50. It is further submitted that the petitioners contention that the terms of the Agreement were breached due to non-payment of advance amounts and that the Petitioner's most important defence has not been considered by the Sole Arbitrator is untenable and submitted that nonpayment of advance has no bearing on this Respondent's claims in the arbitration, which were inter alia for repayment of advances paid for the rejected kits, which were returned to the Petitioner. 51. It is further submitted that the Sole Arbitrator has considered the same at length under Issue No.1, at para 109 (b) and para 138 of the Award dated 31.10.2022. It is further submitted that the Petitioner did not raise any counter claim or seek any declaratory relief in this respect in the Arbitral Proceedings. 52. It is further submitted that the Sole Arbitrator also took note of the fact that regarding admission by the Petitioner's witness that it accepted the ICMRS decision on the Rejected Test Kits as it did not challenge the ICMR's decision for rejecting 1,48,80,000 testing kits. It is further submitted that the Arbitrator, having considered the positions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director 2019 SCC OnLine Mad 17883 58. I have considered the arguments advanced by the learned Senior Counsel for the petitioner and the learned Counsel for the respondent. 59. Scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996 is very limited. 60. This Court can neither sit as a Court of appeal or re-appreciate the evidence placed before the Arbitral Tribunal or substitute the finding of the Arbitral Tribunal with its own conclusion on facts or evidence. In this connection, the decision of the Honourable Supreme Court in The Project Director, NHAI V. M. Hakim, (2021) 9 SCC 1 is invited wherein, it was held that the power to set aside an Arbitral Award under Section 34 of the Arbitration And Conciliation Act, 1996 does not include the authority to modify the award. It further held that an award can be 'set aside' only on limited grounds as specified in Section 34 of the Act and it is not an appellate provision. It further held that an application under Section 34 for setting aside an award does not entail any challenge on merits to an award. 61. The Honourable Supreme Court in Ssangyong Engineering and Construction Co Ltd versus National H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sector Project II, Represented by its Project Director, 2019 SCC OnLine Mad 17883 reminded itself of the Hodgkinson principle which has been explained by the Honourable Supreme Court in the oft-quoted and celebrated Associate Builders Case being Associate Builders V. Delhi Development Authority , (2015) 3 SCC 49. It held that Hodgkinson principle in simple terms means that the Arbitral Tribunal is the best judge with regard to quality and quantity of evidence before it. It further held that if there is no infraction of Section 28(3) of the Arbitration And Conciliation Act, 1996 the question of challenge on the grounds of public policy does not arise. 67. The facts of the case indicate that the Tribunal has examined the facts at length and had framed issues and answered it in favour of the respondent. 68. The petitioner as an importer of the testing kits had imported 10,00,000 of testing kits and had supplied 5,00,000 testing kits to ICMR for and on behalf of the respondent who was appointed as the distributor for promoter M/s.Rare Metabolics Life Sciences Private Limited, (the 2nd respondent in the Arbitral Proceeding) under Ex.C2 Tripartite Master Distribution Agreement dated 23.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 12,75,00,000/- . Therefore, the petitioner has repaid a sum of Rs. 95,80,000/- on 03.02.2021 to the respondent herein namely AARK Pharmaceuticals and a sum of Rs. 20,00,000/- on 30.07.2020 to M/s.Rare Metabolics Life Sciences Private Limited, (the promoter), amounting to Rs. 1,15,80,000/- being the excess paid for the cost price for 2,76,000 Test kits. Thus, the refund of the aforesaid amount of Rs. 1,15,80,000/- is on account of return of the downward revision of price of the Test Kits pursuant to order dated of Delhi High Court. 76. From the records that are available before this Court, there are indications that the petitioner has exported three shipments of Test Kits to the buyer in Hongkong as per Ex.R1-R7, as detailed below:- Shipping Bill No. Date Invoice Value in Rupees Invoice Value in USD FOB Value in Rupees 2681162 15.05.2020 2,29,34,475 305793 2,28,80,000.00 2693406 29.05.2020 14,81,04,264 1977360 14,78,50,128.30 2893468 29.05.2020 - - *14,78,50,128.00 * Amount in US Dollar -1973966.9960 USD [ Calculated at Rs. 74.900 per US Dollar] 77. The above exports can be co-related only to 7,00,000/- test kits imported by the petitioner during the 4th week of April 2020 out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... small quantity of 17 nos was held in their stock and thus differential duty was payable only on the balance 542 nos. 80. In para 18.1 of Ex.R1-8 Order dated 27.01.2021 of Principal Commissioner of Customs ACC(Imports), detail of the exports of 8098 Nos. of Test Kits vide Shipping Bill No.5380454 dated 23.09.2020 is given. Para 18.1 of Ex.R1-8 order dated 27.01.2021 of Principal Commissioner of Customs ACC(Imports) reads as under :- M/s Matrix Labs vide their written submission received in this office on 22.12.2020, submitted that in the said BoE No.7460225 dated 16/04/2020, they have imported 15,000 quantity of COVID-19 Test Kit out of which 8098 quantity of test kit has been exported vide Shipping Bill No. 5380454 dated 23/09/2020. Therefore, there existed a revenue neutral situation and that they were eligible for refund of tax amount paid to the government. In a catena of cases, the courts have from time and again held that the duty cannot be demanded when it is a revenue neutral situation. The Hon'ble Supreme Court in the case of Nirlon Ltd v Commissioner, 2015 (320) ELT 22 (SC) held that when the situation is revenue neutral the assessee could not have achieved any purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X
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