//
you're reading...
legal issues

Section 34 of the Arbitration and Conciliation Act, – Disputes arose – Arbitrator passed award – filed petition to cancellation – High court declined – DB also rejected – Apex court held that As noticed above, the parties have entered into concluded contract, agreeing terms and conditions of the said contract, which was finally acted upon. In such a case, the parties to the said contract cannot back out and challenge the award on the ground that the same is against the public policy. Even assuming the ground available to the appellant, the award cannot be set aside as because it is not contrary to fundamental policy of Indian law or against the interest of India or on the ground of patent illegality.= CIVIL APPEAL NO.9048 OF 2014 (Arising out of Special Leave Petition (Civil) No.10849 of 2013) Swan Gold Mining Ltd. …Appellant (s) Versus Hindustan Copper Ltd. …Respondent(s) = 2014- Sept. Month – http://judis.nic.in/supremecourt/imgst.aspx?filename=41946

Section 34 of the Arbitration and Conciliation Act, – Disputes arose – Arbitrator passed award – filed petition to cancellation – High court declined – DB also rejected – Apex court held that As noticed above, the  parties  have  entered into  concluded  contract,  agreeing  terms  and  conditions  of  the   said contract, which was finally acted upon.  In such a case, the parties to  the said contract cannot back out and challenge the award  on  the  ground  that the same is against the public policy.  Even assuming the  ground  available to the appellant, the award cannot  be  set  aside  as  because  it  is  not contrary to fundamental policy of Indian law  or  against  the  interest  of India or on the ground of patent illegality.=

 

Learned Single  Judge

had dismissed the appellant’s petition under Section 34 of  the  Arbitration

and Conciliation Act (in short, ‘the Act’)  challenging  the  award  of  the

Arbitrator.=

On refusal  by  the  respondent  to

make payment in  respect  of  excise  duty  and  other  taxes  paid  by  the

appellant relating to the work executed, the arbitration clause was  invoked

and the dispute was referred to a sole  Arbitrator,  who  after  considering

the pleadings and evidence led by the parties, held that the  price  bid  of

the appellant was not exclusive of  applicable  taxes.

Learned  Arbitrator

held that the clause relating  to  payment  of  taxes  was  deleted  by  the

appellant’s representative Mr. Ahlawat on 19.1.2007  and  since  work  order

was acknowledged, it is binding on the appellant. =

Aggrieved  by  the

decision of the learned Single Judge, appellant preferred appeal before  the

Division Bench of the High Court, which although upheld  the  contention  of

the appellant relating to the evidence on the issue of  deviation  in  price

bid on 19.1.2007, dismissed the Appeal on the ground of terms  contained  in

NIT and Work Order being in consonance with each other.  Hence, this  appeal

by special leave by the Australian company. =

Section 34 of the Arbitration and Conciliation Act,  1996  corresponds

to Section 30 of the Arbitration Act, 1940 making a  provision  for  setting

aside the arbitral award.  In terms of sub-section (2) of Section 34 of  the

Act, an arbitral award may be set  aside  only  if  one  of  the  conditions

specified therein is satisfied.

The  Arbitrator’s  decision   is  generally

considered binding between the parties  and  therefore,  the  power  of  the

Court to set aside the award would be exercised  only  in  cases  where  the

Court finds that the arbitral award is on  the  fact  of  it   erroneous  or

patently illegal or in contravention  of the provisions of the Act.

It  is

a well settled proposition that the Court shall  not  ordinarily  substitute

its interpretation for that of the Arbitrator. Similarly, when  the  parties

have arrived at a concluded contract and acted on the basis of  those  terms

and conditions of the contract then substituting new terms in  the  contract

by the Arbitrator or by the Court would be erroneous or illegal.

13.   It is equally well  settled  that  the  Arbitrator  appointed  by  the

parties is the final judge of the facts. The finding of  facts  recorded  by

him cannot be interfered with on the ground that the terms of  the  contract

were not correctly interpreted by him. =

As noticed above, the  parties  have  entered

into  concluded  contract,  agreeing  terms  and  conditions  of  the   said

contract, which was finally acted upon.  In such a case, the parties to  the

said contract cannot back out and challenge the award  on  the  ground  that

the same is against the public policy.  Even assuming the  ground  available

to the appellant, the award cannot  be  set  aside  as  because  it  is  not

contrary to fundamental policy of Indian law  or  against  the  interest  of

India or on the ground of patent illegality.

22.  The  words  “public  policy”  or  “opposed  to  public  policy”,  find

reference in Section 23 of the Contract Act and also Section  34  (2)(b)(ii)

of the Arbitration  and  Conciliation  Act,  1996.   As  stated  above,  the

interpretation of the contract is   matter  of  the  Arbitrator,  who  is  a

Judge, chosen by the parties to  determine  and  decide  the  dispute.   The

Court is precluded from  re-appreciating  the  evidence  and  to  arrive  at

different conclusion by holding that  the  arbitral  award  is  against  the

public policy.

23.   We have given our anxious consideration in the matter.   In  our  view

the High Court has rightly came to the conclusion that no ground exists  for

setting aside the award as contemplated under Section 34 of the Act.

24.   For the reasons aforesaid, we do not find any merit  in  this  appeal,

which accordingly stands dismissed with no order as to costs.


2014- Sept. Month – http://judis.nic.in/supremecourt/imgst.aspx?filename=41946

REPORTABLE

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.9048 OF 2014
(Arising out of Special Leave Petition (Civil) No.10849 of 2013)
Swan Gold Mining Ltd. …Appellant (s)

Versus

Hindustan Copper Ltd. …Respondent(s)

JUDGMENT

M.Y. Eqbal, J.:

Leave granted.

2. This appeal by special leave is directed against the judgment and
order dated 19.9.2012 passed by the Division Bench of the Calcutta High
Court whereby appeal preferred by the appellant against the order of
learned Single Judge of the High Court was dismissed. Learned Single Judge
had dismissed the appellant’s petition under Section 34 of the Arbitration
and Conciliation Act (in short, ‘the Act’) challenging the award of the
Arbitrator.

3. The case of the appellant is that a notice inviting tender (NIT) was
issued by the respondent-Hindustan Copper Ltd. inviting offers for
operation of its Surda Mine and Mosabani Concentrator Plant. Respondent-
company was having several mines rich with natural resources being metallic
ores. The global tender floated by the respondent provided that it shall
be the responsibility of successful bidder for payment of all statutory
duties. The appellant-company submitted its technical and financial bids.
It is contended on behalf of the appellant that the NIT contained a techno
commercial bid and a separate price bid. Price bid of the appellant
provided that any Excise Duty/Service taxes or any levy presently
applicable or any variation or new levy in future to be reimbursed on
actual basis.

4. After negotiation and acceptance of the final price offer, on 3.3.2007
respondent issued a Letter of Intent to the appellant on the terms and
conditions of the NIT and other terms agreed during subsequent
discussions/negotiations. Finally, on 26.3.2007 a contract was executed
between the parties for re-commissioning and operation of the Surda Mine
and Mosabani Concentrator Plant. Thereafter, a work order was issued on
14.4.2007 and the appellant raised its Invoices on 31.12.2007, by which
reimbursement of basic excise duty and other duties payable by the
appellant to the Government was sought. On refusal by the respondent to
make payment in respect of excise duty and other taxes paid by the
appellant relating to the work executed, the arbitration clause was invoked
and the dispute was referred to a sole Arbitrator, who after considering
the pleadings and evidence led by the parties, held that the price bid of
the appellant was not exclusive of applicable taxes. Learned Arbitrator
held that the clause relating to payment of taxes was deleted by the
appellant’s representative Mr. Ahlawat on 19.1.2007 and since work order
was acknowledged, it is binding on the appellant.

5. The appellant challenged the award by way of filing petition under
Section 34 of the Arbitration and Conciliation Act before the Calcutta High
Court on the grounds inter alia of perversity and contrary to law. Learned
Single Judge of the High Court upholding the award and reasons assigned by
the learned Arbitrator, dismissed appellant’s petition. Aggrieved by the
decision of the learned Single Judge, appellant preferred appeal before the
Division Bench of the High Court, which although upheld the contention of
the appellant relating to the evidence on the issue of deviation in price
bid on 19.1.2007, dismissed the Appeal on the ground of terms contained in
NIT and Work Order being in consonance with each other. Hence, this appeal
by special leave by the Australian company.

6. Mr. Amarendra Sharan, learned senior counsel appearing for the
appellant assailed the award and the impugned order passed by the High
Court on various grounds. Learned counsel contended that the appellant is a
reputed Australian Mining Company and it submitted bid in response to NIT.
The price bid submitted by the appellant provided for “base price plus 55%”
and that any excise duty/service tax or any levy to be reimbursed on actual
basis. A meeting of the Tender Evaluation Committee of the respondent-
company with the bidders was held on 18.1.2007 and 19.1.2007 and the
respondent did not object to the price bid submitted by the appellant which
was exclusive of taxes. It is further contended by the senior counsel that
after opening of price bid, although the respondent made a request to lower
the bid price, there was no request to change provision relating to taxes
mentioned in the price bid by which respondent was liable to reimburse
taxes. The appellant-company submitted the revised bid on 27.1.2007 and
reduced the percentage from 55% to 50% (over the base price) and reiterated
its earlier offer of payment of taxes by the respondent. After further
negotiation and reduction of price bid to “base price plus 49%”, respondent
issued Letter of Intent on 3.3.2007 and the contract was signed between the
parties on 26.3.2007.

7. Learned senior counsel contended that on 14.4.2007 Work Order was
issued with its Clause 4.9, which provided for payment of taxes by the
appellant. For the settlement of disputes pertaining to taxes and duties,
appellant invoked clause 4.14 of NIT and sought appointment of Arbitrator
where it was claimed by the appellant that price bid submitted by the
appellant is exclusive of taxes and clause 4.9.1 of Work Order is
inoperative and void. This claim was dismissed by the Learned Arbitrator on
the ground that the clause relating to payment of taxes was denied by the
appellant’s representative Mr. Ahlawat on 19.1.2007 and since the work
order was acknowledged, it is binding on the appellant.

8. Mr. Sharan has submitted that there had never been any negotiation with
regard to the liability of payment of excise duties and taxes as the same
was finally concluded to the effect that the taxes shall be liable to be
reimbursed by the respondent. The negotiation was only with respect to the
percentage which was finally reduced to 49%. It is submitted that the
respondent gave a calculation which does not include taxes. All these
backgrounds have neither been considered by the Arbitrator nor by the High
Court. It was submitted that non consideration of the offer, counter offer
and letter of acceptance by the Arbitrator amounts to serious error and
patent illegality in the Award. NIT is only invitation to offer, which has
been superseded by subsequent offers and counter offers and hence, NIT
cannot become the contract. Lastly, Mr. Sharan contended that work order is
a unilateral document and there was no consensus ad idem on the Work
Order.

9. Mr. Sharan, learned counsel put heavy reliance on the decision of
this Court in the case of Oil and Natural Gas Corporation Ltd. vs. Saw
Pipes Ltd., (2003) 5 SCC 705, and submitted that if the Award is contrary
to the substantive provision of law, or the provisions of fact or against
the terms of contract, it would be patently illegal and could be interfered
under Section 34 of the Act. Mr. Sharan finally contended that the parties
have expressly agreed that the bid price shall be exclusive of the duty of
taxes, deviation from such contract will go to the root of the matter and
on that ground Award could be set aside if it is so unfair and
unreasonable. This will also be opposed to the public policy and required
to be adjudged void.

10. Per contra, Mr. P.P. Rao, learned senior counsel for the respondent,
firstly submitted that the Award cannot be set aside except where the Award
on the face of it suffers from patent illegality and perversity. As the
learned single Judge and the Division Bench after re-appreciation of the
entire facts and documents came to the conclusion that no ground exists to
set aside the Award, this Court should not interfere with the order of the
High Court.

11. Learned senior counsel drawn our attention to various documents
including NIT, initial bid proceedings of the meeting, revised bid, offer
and counter offers, on the basis of which the letter of intent was issued.
Finally, the Work Order was issued and a contract was signed by both the
parties. These documents would show that the appellant was made liable for
payment of duty and taxes, which were inclusive of the bid price arrived at
between the parties.

12. Section 34 of the Arbitration and Conciliation Act, 1996 corresponds
to Section 30 of the Arbitration Act, 1940 making a provision for setting
aside the arbitral award. In terms of sub-section (2) of Section 34 of the
Act, an arbitral award may be set aside only if one of the conditions
specified therein is satisfied. The Arbitrator’s decision is generally
considered binding between the parties and therefore, the power of the
Court to set aside the award would be exercised only in cases where the
Court finds that the arbitral award is on the fact of it erroneous or
patently illegal or in contravention of the provisions of the Act. It is
a well settled proposition that the Court shall not ordinarily substitute
its interpretation for that of the Arbitrator. Similarly, when the parties
have arrived at a concluded contract and acted on the basis of those terms
and conditions of the contract then substituting new terms in the contract
by the Arbitrator or by the Court would be erroneous or illegal.

13. It is equally well settled that the Arbitrator appointed by the
parties is the final judge of the facts. The finding of facts recorded by
him cannot be interfered with on the ground that the terms of the contract
were not correctly interpreted by him.

14. We have gone through the facts of the case and perused the documents
on the basis of which the Arbitrator gave the Award on 24.7.2009.

15. The respondent issued notice inviting tender (NIT) for the operation
of its mine. Clauses 4.9.1 to 4.9.5 of the NIT are extracted hereinbelow:-
“4.9.1. The rates quoted by the successful bidder shall be deemed to
be (inclusive) of the sales taxes, other taxes and service tax that the
successful bidder will have to pay in India & Abroad for the performance of
this contract. HCL will perform such duty regarding the deduction of such
taxes at source as per applicable laws.

4.9.2. The successful bidder shall also be responsible to bear and pay any
taxes, cess, fees and/or duties levied including but not limited to
interest, penalty and/or fine imposed by any authorities including revenue
authorities in India and/or abroad at any time even beyond the expiry of
the Contract period with respect of the work to be performed by the
successful bidder in accordance with the Contract.

4.9.3. The successful bidder shall also be responsible for filing
income tax return and/or complying with necessary procedure and/or
formalities as required or may be required under the fiscal laws of India
and/or abroad in respect of the work to be performed by the successful
bidder in accordance with the Contract.

4.9.4. Corporate Tax and/or Income Tax, if any applicable/levied in
India and/or abroad on the successful bidder and/or its personnel and/or on
the sub-contractors engaged by the successful bidder and /or the personnel
of such sub-contractors in respect of this contract will be the
responsibility of the successful bidder. All the necessary return and
other formalities will be the responsibility of successful bidder.

4.9.5. All other statutory levies including but not limited to Custom
Duties/Excise Duties, Sales Taxes, Works Contract and other levies of
whatsoever nature payable in accordance with the law of India,
levied/leviable on the successful bidder and/or its sub-contractors in
respect of performance of this contract shall be the responsibility of the
successful bidder or any of its sub-contractors.”

16. The appellant in response to NIT submitted its technical and
financial bids. Subsequent to submission of the technical bid and the
price bid, the parties entered into negotiation and thereafter a letter of
intent on the terms and conditions of NIT and the other terms agreed during
subsequent negotiations was issued. In the said letter of intent dated
3.3.2007, it was specifically mentioned that the execution of work shall be
on the terms of notice inviting tender (NIT) and other agreed
discussions/negotiations subsequently held between the parties. Finally
the Work Order was issued on 14.4.2007 in continuation with the letter of
intent dated 3.3.2007. The relevant portion of the work order is extracted
herein-below:-
“WORK ORDER
SUB:- Re-opening and operating of Sudra Mine & Mosaboni concentrator plant
at Indian Copper Complex, Ghatsila
Dear Sir,
With reference to the above subject, Hindustan Copper Limited is please to
issue work order to continuation with LOI dated 03-03-2007 to re-
commission, operate and maintain Surda Mine and Mosaboni concentrator plant
to supply and deliver copper concentrate at rates Rs 1,53,470.00 per ton of
mental in concentrate (Excluding Royality) to Maubhandar work of Indian
Copper Complex, produced from the operations of these units.

This Work shall be governed by the terms and conditions of the Expressions
of Interest of dated 21-09-2006, Notice Inviting Tender No. HC/HO/GM
(M&S)/SUDRA dated 11-12-2006 and the other agreed during subsequent
discussions/negotiations, and the final offer.”
(Emphasis given)

17. In the course of hearing, Mr. P.P. Rao, learned senior counsel
appearing for the respondent produced before us a xerox copy of the Work
Order dated 14.4.2007. Clause 4.9.1 quoted hereinabove specifically
mentions therein that the rate quoted by the appellant was inclusive of
sales tax, service tax and the other taxes. The representative of the
appellant signed the Work Order on each pages (20 pages) and acknowledged
and admitted the terms and conditions for the said work.

18. From the facts mentioned hereinabove, it is evident that the
appellant has accepted the liability of payment of excise duty, sales tax,
service tax and other taxes and hence it cannot be held that the clause
4.9.1 of the Work Order is inconsistent with the terms and conditions of
contract documents.

19. The learned Arbitrator has gone in detail of the dispute raised by
the appellant and rightly came to the conclusion that the responsibility on
the appellant is to abide by the terms and conditions of the Work Order.

20. We have also gone through the order passed by the High Court. The
Court rightly came to the conclusion that there is no patent illegality in
the Award passed by the Arbitrator which needs interference under Section
34 of the Act.

21. Mr. Sharan, learned senior counsel appearing for the appellant, also
challenged the arbitral award on the ground that the same is in conflict
with the public policy of India. We do not find any substance in the said
submission. This Court, in the case of Oil and Natural Gas Corporation
Ltd. (supra), observed that the term ‘public policy of India’ is required
to be interpreted in the context of jurisdiction of the Court where the
validity of award is challenged before it becomes final and executable.
The Court held that an award can be set aside if it is contrary to
fundamental policy of Indian law or the interest of India, or if there is
patent illegality. In our view, the said decision will not in any way come
into rescue of the appellant. As noticed above, the parties have entered
into concluded contract, agreeing terms and conditions of the said
contract, which was finally acted upon. In such a case, the parties to the
said contract cannot back out and challenge the award on the ground that
the same is against the public policy. Even assuming the ground available
to the appellant, the award cannot be set aside as because it is not
contrary to fundamental policy of Indian law or against the interest of
India or on the ground of patent illegality.

22. The words “public policy” or “opposed to public policy”, find
reference in Section 23 of the Contract Act and also Section 34 (2)(b)(ii)
of the Arbitration and Conciliation Act, 1996. As stated above, the
interpretation of the contract is matter of the Arbitrator, who is a
Judge, chosen by the parties to determine and decide the dispute. The
Court is precluded from re-appreciating the evidence and to arrive at
different conclusion by holding that the arbitral award is against the
public policy.

23. We have given our anxious consideration in the matter. In our view
the High Court has rightly came to the conclusion that no ground exists for
setting aside the award as contemplated under Section 34 of the Act.

24. For the reasons aforesaid, we do not find any merit in this appeal,
which accordingly stands dismissed with no order as to costs.

…………………………….J.
[ M.Y. Eqbal ]
…………………………….J
[Pinaki Chandra Ghose]
New Delhi
September 22, 2014

Advertisements

About advocatemmmohan

ADVOCATE

Discussion

Comments are closed.

Blog Stats

  • 1,811,040 hits

ADVOCATE MMMOHAN

archieves

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 1,863 other followers

Follow advocatemmmohan on WordPress.com