Court Partially Allows Petition on Arbitral Award Reimbursement

The court partly allowed the petition, setting aside the arbitral award for the reimbursement of Service Tax and interest. The reimbursement of Environmental Compensation Cess and the costs of arbitration were upheld. Each party was directed to bear its own costs.

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Issues Involved:
1. Reimbursement of Service Tax (Claim No. 1)
2. Reimbursement of Environmental Compensation Cess (ECC) (Claim No. 2)
3. Interest on Claims (Claim No. 3)
4. Costs of arbitration (Claim No. 4)

Detailed Analysis:

1. Reimbursement of Service Tax (Claim No. 1)
The petitioner challenged the arbitral award concerning the reimbursement of Service Tax paid by the respondent (CEC). The Arbitral Tribunal partly allowed this claim, awarding Rs. 1,38,58,095/- for Service Tax paid directly by CEC to the Service Tax Department under the Reverse Charge Mechanism. However, the Tribunal denied the claim for Rs. 3,63,89,858/- paid by CEC to its sub-contractors, as no demand was raised by the Service Tax Authorities on CEC. The Tribunal's interpretation was that Clause 37(i) of the GCC and Clause 14 of the Instructions to Bidders entitled CEC to reimbursement if three conditions were met: payment of Service Tax to the department, a demand raised by the department, and satisfaction of the Engineer-in-Charge. The court, however, found this interpretation flawed, stating that Clause 37(i) referred to Service Tax "in respect of this Contract" and not for services availed from third-party providers. Therefore, the court set aside the award of Rs. 1,38,58,095/- for Claim No. 1.

2. Reimbursement of Environmental Compensation Cess (ECC) (Claim No. 2)
The petitioner accepted the arbitral award concerning the reimbursement of ECC. The Arbitral Tribunal awarded Rs. 3,14,06,709/- to CEC, based on Clause 38 of the GCC and a Certificate from CEC's Statutory Auditor confirming the payment of ECC during the period from November 2015 to August 2018. This claim was not contested further by the petitioner.

3. Interest on Claims (Claim No. 3)
The Arbitral Tribunal awarded interest at the rate of 10% per annum on the amounts awarded for Claims No. 1 and 2. The petitioner contested the award of interest, arguing that it was contrary to the terms of the Agreement. However, the court noted that the petitioner could not point to any specific clause in the Agreement that proscribed the award of interest. Consequently, the interest awarded on the amount of Rs. 1,38,58,095/- (Claim No. 1) was also set aside, as the principal amount itself was not upheld.

4. Costs of Arbitration (Claim No. 4)
The Arbitral Tribunal awarded Rs. 15,00,000/- as costs of arbitration in favor of CEC. This aspect of the award was not specifically contested in the petition.

Conclusion:
The court partly allowed the petition, setting aside the arbitral award concerning the reimbursement of Rs. 1,38,58,095/- for Service Tax (Claim No. 1) and the corresponding interest. The award for the reimbursement of ECC (Claim No. 2) and the costs of arbitration (Claim No. 4) were upheld. Each party was directed to bear its own costs.

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