2020 (11) TMI 77 - HC - Indian Laws

Court upholds Arbitrator's contract interpretation, dismisses appeal. Limited jurisdiction under Section 37.

Steel Authority Of India Limited (Sail) Versus Primetals Technologies India Private Limited (formerly known as siemens val Metals Technologies Pvt. Ltd.

The court dismissed the appeal and accompanying stay application, upholding the Arbitrator's interpretation of contract terms, including deductions for ... Grant of Arbitral Award - Section 37 of the Arbitration and Conciliation Act, 1996 read with Section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 - CENVAT Credit - 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 - HELD THAT:- The Supreme Court in the case of Associate Builders v. Delhi Development Authority [2014 (11) TMI 1114 - SUPREME COURT] 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, 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. Issues Involved:1. Exemption Application2. Condonation of Delay3. Appeal under Section 37 of the Arbitration and Conciliation Act, 19964. Interpretation of Contract Terms5. Deduction of Shortfall in CENVAT Credit6. Reimbursement of CST Paid by Subcontractors/VendorsIssue-wise Detailed Analysis:1. Exemption Application:The court allowed the exemption application, subject to just exceptions, and disposed of the application accordingly.2. Condonation of Delay:The court condoned the delay of 8 days in filing the present appeal for the reasons stated in the application and disposed of the application.3. Appeal under Section 37 of the Arbitration and Conciliation Act, 1996:The appeal was filed under Section 37 of the Arbitration and Conciliation Act, 1996, against the final order and judgment dated 16th March 2020, passed by the learned Single Judge. The Single Judge had dismissed the objections filed by the Appellant under Section 34 of the A&C Act against the arbitral award dated 15th October 2019, which allowed the claims of the Respondent.4. Interpretation of Contract Terms:The primary issue revolved around the interpretation of the terms of the contract, specifically Clause 14.5.6 of the General Conditions of Contract (GCC). The Appellant contended that the shortfall in the minimum guaranteed CENVAT credit should be deducted from the net contract price, while the Respondent argued it should be deducted from the gross contract price. The learned Arbitrator and the Single Judge both concluded that the deduction should be made from the gross contract price at serial No.12, not from the net contract price at serial No.15.5. Deduction of Shortfall in CENVAT Credit:The Appellant argued that the award and the judgment overlooked the principles of law and public policy, and that the Arbitrator's interpretation of Clause 14.5.6 was irrational and arbitrary. The Respondent countered that the Arbitrator's interpretation was correct and within his jurisdiction. The court upheld the Arbitrator's interpretation, stating that the Arbitrator had not exceeded his jurisdiction and had not rewritten the contract terms. The court emphasized that its jurisdiction under Section 37 is limited and it cannot substitute its opinion for that of the Arbitrator.6. Reimbursement of CST Paid by Subcontractors/Vendors:The learned Single Judge examined the terms of the contract and concluded that the Respondent was entitled to reimbursement of the CST paid by its subcontractors/vendors. The court found no reason to interfere with the Arbitrator's conclusion that the price agreed upon included all taxes to be reimbursed to the Respondent, even if some input taxes were paid by subcontractors/vendors.Conclusion:The court dismissed the appeal and the accompanying stay application, finding no merit in the Appellant's contentions. The court upheld the Arbitrator's interpretation of the contract terms and the deductions related to the shortfall in CENVAT credit, as well as the reimbursement of CST paid by subcontractors/vendors. The court reiterated that its jurisdiction under Section 37 is limited and it cannot interfere with the Arbitrator's findings unless there is a manifest or patent error.