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TMI Blog2024 (7) TMI 179X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.03.2017 to 18.06.2017). Hence, the learned Arbitrator has correctly awarded the amount to the respondent and find no infirmity with his reasoning. Service Charges - HELD THAT:- There are no infirmity with the findings of the learned Arbitrator. Since there was no contract between the parties for providing the welcome drink (including the wet tissues) to the passengers for the initial period of 6 months as held in the Interim Award (and upheld by the Hon ble Supreme Court), the learned Arbitrator s view that the petitioner was liable to pay production charges, service charges as well as service tax on the same is the correct view. No perversity can be attributed to the conclusion drawn by the learned Arbitrator in holding that in the letters, the respondent had explicitly mentioned that it would be claiming charges for the welcome drink (and wet tissues) in due time, and the same was not objected to by the petitioner in as much as it continued with the contract and kept extending. The service charges claimed by the respondent (under or about 17%) are much less than the charges stipulated in the contract, which ranged from 20-30%, which is duly noted by the learned Arbitrator - t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is a discretionary power vested with the arbitral tribunal. The learned Arbitrator held that in the present matter, the respondent tried to settle the matter, however, since negotiations failed, hearings had to be conducted - The costs granted by the learned Arbitrator are reasonable and granted after due consideration of different factors and in consonance with Section 31A of the Act, as discussed in the Final Award. There are no infirmity with the findings of the learned Arbitrator. The same is sound and credible. The petitioner has failed to make out any ground for interference with the award under Section 34 of the Act - petition dismissed. - HON'BLE MR. JUSTICE JASMEET SINGH For the Petitioner Through: Mr Shailender Saini and Ms Rashmi Malhotra, Advs. For the Respondent Through: Mr Naresh Thanai, Mr Abhilash Mathur and Ms Khushboo Singh, Advs. JUDGMENT JASMEET SINGH, J O.M.P. (COMM) 124/2022 1. This is a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, the Act ) challenging the Final Award dated 07.04.2021 (wrongly mentioned as 08.04.2021 in the petition) (hereinafter, Impugned Award ) passed in Arbitration No. 234/2019, whereby the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondent argued that the provision of a welcome drink was not specified in the tender document; (ii) it expressed reservations regarding reimbursement of charges for trains delayed by more than 2 hours; (iii) it stated that it had made a significant investment in establishing a base kitchen and infrastructure and was unwilling to terminate the contract. 7. Vide letter dated 13.02.2017, the respondent informed IRCTC that it would provide welcome drink to passengers in the event that the same is not provided by IRCTC or the Indian Railways, however it would charge for services as well as the production charges for the same. It also stated that in case the train was late, it would be entitled to charge Rs. 30/- plus service tax for additional meals that would be served to the passengers as per decision of Railway Board which formed part of the tender document. 8. Vide letter dated 22.02.2017 and reminder dated 28.02.2017, IRCTC asked the respondent to commence the supply and services of welcome drink with immediate effect. Vide letter dated 02.03.2017, the respondent agreed to commence the service from 05.03.2017, however, without prejudice to its rights and contentions raised i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices to be provided by the Claimant under the temporary license also included the Welcome drink to be supplied to the passengers? 2. Whether the claimant is entitled to claim GST on production charges/supply of meals post July 2017? 3. Whether alleged wastage of food on account of cancellation/non-turn up passengers is to be borne by the claimant? 4. Whether claimant is entitled to Rs. 2,42,847.08 as claimed in Annexure-I, II, and III? If not, as to what amount, if any, the claimant is entitled? 5. Whether claimant is entitled to interest, if any? If yes, at what rate and for what period? 6. Relief? 16. On 15.12.2020, the learned Arbitrator passed an Interim Award on the first three issues, deciding Issue Nos. 1 and 2 in favor of the respondent- claimant and Issue No. 3 against it. It was held by the learned Arbitrator that IRCTC could not have made any deductions with respect to provisioning of welcome drink as the same did not form part of the tender document. It also awarded the reimbursement of the GST deposited by the respondent to the authorities since the same was not included in the rates determined in Annexure-F of the tender document. It further rejected the claim towa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceeded in awarding the cost of supply of wet tissues which was not claimed before him. The petitioner has admitted that only Rs. 26,32,406.95 has been deducted on account of welcome drink, which is also acknowledged by the learned Arbitrator, however he has proceeded to award Rs. 37,47,824/- on account of total deduction made by the petitioner from the bills i.e. the amount including the cost of welcome drink and wet tissues. It is stated that the learned Arbitrator failed to consider that wet tissues did not form part of welcome drink and are a complete separate item which the respondent was required to supply. This is evident from the issues framed by the learned Arbitrator. It is stated that the two items have been mentioned separately in various communications between the parties placed before the learned Arbitrator, as was also evident from the cross-examination of RW-1, Shri R. Bhattacharya, Manager, IRCTC, West Zone who stated that the price of the two items i.e. wet tissue and welcome drink was Rs. 1.35 and Rs. 7.23 respectively, thereby, clearly treating the two as separate items. There was no evidence adduced by the respondent to substantiate that the welcome drink includ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the learned Arbitrator in its Statement of Claim (hereinafter, SOC ) that GST on production charges has not been paid by the petitioner. It is stated that the same was contradicted by the witness of the respondent who admitted the payment of GST on production amounting to Rs. 1,04,54,860.31 and payment of GST amounting to Rs. 21,57,401.86 on additional meals, which the learned Arbitrator failed to acknowledge. It is further submitted that the respondent never claimed production charges in the SOC. It is also stated that the production charges have already been paid to the respondent as the record reveals and also as admitted by the witness of the respondent in his cross- examination (CW-1) that the amount of Rs. 1,14,57,698.62 towards GST on production charges and supply of additional meals for the period from 01.07.2017 to 14.04.2018 has already been paid to the respondent. It is stated that the respondent has already received the amount of Rs. 1,26,12,262.17 towards GST on production charges for the period from 15.04.2017 to 05.07.2018 at the rate of 5%. 25. It is submitted that the issue regarding production charges/GST was neither pleaded nor pressed by the respondent for fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the passengers on the meal supplied by them. It was specifically pleaded by the respondent in its SOC that it has deposited GST on production charges and service charge with the concerned authorities and IRCTC availed benefit of the same. The summaries reflecting the amounts due to the respondent on the aforesaid accounts were annexed as Annexure I, II, and III with the SOC. Thus, the deduction of GST on production charges/meals supplied by the respondent and claimed in its bill is illegal and unsustainable. 31. The plea taken by the petitioner in its reply to the SOC was that since the production charges were inclusive of all taxes, GST over and above the production charges is not payable. The said plea was rejected by the learned Arbitrator by way of the Interim Award, which has now attained finality. It is stated that the reply to the SOC shows that no plea was taken by the petitioner that the production charges since were inclusive of taxes, therefore, while calculating GST, VAT should be deducted from the production charges. 32. It is submitted that the submission of the petitioner that production charges were inclusive of GST and hence the same stands paid, and the responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irrelevant to the decision which it arrives at; or (iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse. . 33. It must clearly be understood that when a court is applying the public policy test to an arbitration 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 has necessarily to 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. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. . 42.1 (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28 (1) (a) of the Act . . 42.2 (b) A contravention of the Arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression patent illegality . What is prohibited is for Courts to reappreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awards seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day. [ Ssangyong Engg. Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] 38. A perusal of the aforesaid two judgments shows that Section 34 of the Act has a limited scope, and the award passed by the arbitral tribunal warrants limited judicial interference. 39. In a nutshell, the award can be set aside on the ground of patent illegality if: a) the view taken by the arbitral tribunal is impossible or such that no reasonable person could arrive at it; b) if the arbitral tribunal exceeds its jurisdiction by going beyond the contract and adjudicating upon issues not referred to it; c) the finding of the arbitral tribunal is based on no evidence or it ignores material evidence. The illegality must go to the root of the matter and does not include mere erroneous application of law or a contravention of law which is unrelated to public policy or public interest. If two views are possible, the Court will not interfere with the view of the arbitral tribunal if it has taken one of the two views. Re-appreciation of evidence is also impermissible. 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d then claiming the two to be separate is thus contradictory. Similarly, the learned Arbitrator has also placed reliance upon the letters dated 10.02.2017 and 28.02.2017 wherein it is specifically mentioned in the brackets for welcome drink to include the tetra pack and refreshing tissue. 45. The learned Arbitrator rejected the testimony of RW-1 wherein he denied that welcome drink included wet tissue, as documents on record i.e. letters dated 10.02.2017, 22.02.2017 and 28.02.2017 categorically show otherwise. The learned Arbitrator also notes that this issue (regarding the two items being separate) was never raised by the petitioner at any stage of the proceedings except at the time of making the actual calculation of dues. 46. Hence, the learned Arbitrator s interpretation, based on documentary evidence, to suggest that the welcome drink was inclusive of wet tissue was a plausible one, and not so unreasonable to render the award perverse or patently illegal. 47. Before the learned Arbitrator as well, as before this Court, the petitioner contended that the respondent failed to adduce any evidence to substantiate that the wet tissues were actually provided to the passengers. In thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rator has travelled beyond the terms of the contract between the parties and has overlooked Section 28 (3) of the Act. 52. The issue regarding whether service charges are due to the respondent or not was also raised before the learned Arbitrator. After considering the submissions of both the parties, the learned Arbitrator rejected the argument of the petitioner that there was no contract between the parties warranting payment of service charges and held that vide the Interim Award, the supply of welcome drink was found not to form part of the contract for initial period of 6 months and therefore the respondent was entitled to production charges, service charges, as well as the service tax thereupon for the said initial period of 6 months. He iterated that the issue is regarding what should be the service charge. 53. The learned Arbitrator held that the respondent, in its response to the letter dated 10.02.2017, specifically mentioned that it agreed to the supply of services (welcome drink and wet tissue) against the production and service charges quoted separately. Vide letter dated 02.03.2017, the respondent also stated that it would be claiming charges for the aforesaid services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir conduct. C. On Service Tax 56. The petitioner has argued that the respondent has given up its claim for reimbursement of service tax when the issues were reframed. Nowhere is the rate of percentage of service tax indicated, and thus, the award is illegal on this account. 57. When the same argument was raised by the petitioner before the learned Arbitrator, he was of the view that only specific issues were dropped and no general issue regarding payment of service tax was either framed or dropped or reframed and thus he rejected the petitioner s argument that the issue of service tax was dropped by the respondent. The learned Arbitrator held that it was not correct to state that the issues between the parties were reframed on 18.11.2020, as contended by the petitioner. It is only that certain issues were dropped (as mentioned above) and the remaining issues were left to be decided in the original form. 58. I find no infirmity with this finding. There was no specific issue framed (or subsequently dropped) on the inclusion of service tax as far as the welcome drink was concerned. Since the dues on welcome drink were yet to be decided at the passing of the Interim Award, it is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction charges, service charge, service tax/GST to the knowledge of the respondent. 62. At the outset, the learned Arbitrator held that the issues related to the payment of GST were dealt with in detail in the Issue No. 1 in the Interim Award wherein it was concluded that the GST is admissible to the respondent on production charges, which means that the GST is payable over and above the production charges and the respondent is to be reimbursed of GST. The learned Arbitrator was of the view that the petitioner cannot now reopen the issue to argue that GST was not admissible to the respondent. 63. The learned Arbitrator noted that the petitioner deducted amounts of GST included in the bills raised by the respondent from time to time, and it is these sums deducted by the petitioner which have been claimed in the SOC. In the annexures to the SOC as well, summary of short payment is given, and net difference is claimed. He held that it is not correct to state that part of the GST has already been paid by the petitioner and only the difference is payable when the production charges were bifurcated by the petitioner with the assumption that the GST was inclusive of production charges. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned Arbitrator has duly recorded a finding to the contrary. I find no grounds to interfere with the findings of the learned Arbitrator to this extent. E. On Interest 67. The learned Arbitrator has exercised its powers under Section 31 (7) of the Act to grant interest to the awarded sum in the present case in favor of the respondent. He notes that under Section 31 (7) (a), he has the power to grant pre-arbitration period interest (which included the pre-reference period and pendente lite interest) and incorporate the same in the contract in case the parties fail to finalize an interest rate. Referencing Section 31 (7) (b), he states that the arbitrator has the power to grant a reasonable post-award interest. 68. The learned Arbitrator further stated that in the present case, there is no clause in the agreement for non-payment of any interest to the respondent. However, since welcome drink was found not to be a part of the contract, the learned Arbitrator found it equitable to grant interest over and above production charges. Referencing to Section 31 (7) of the Act, as well as Section 2(b) of the Interest Act, 1978, it held that since the maximum rate of interest being paid by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arbitration under Section 39 (1) of the Arbitration Act, a party can also approach the Court for the release of the award and the Court on inquiry can assess whether the costs demanded are reasonable under Section 39 (2). These costs would include the arbitrators' fees that have been previously agreed upon. However, even if there is no agreement between the parties and the arbitrator(s) regarding the fees payable to the arbitrator(s), any determination of costs relating to arbitrators' fees by the tribunal is a non-binding demand that has been raised by the tribunal. As has been discussed above, while costs, in general, are to be decided at the discretion of the tribunal or the Court because they involve a claim that one party has against another relating to resolution of a dispute arising from the arbitration agreement, fees of the arbitrators are not a claim to be decided between the parties. Rather, it is an independent claim that the arbitrator(s) have against the parties [Paras 110-111 of this judgment.] . It will be for the Court to decide whether the claim of the arbitrator(s) regarding their remuneration is reasonable . (emphasis supplied) 71. The letter bearing No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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