TaxTMI 
TaxTMI 
2006 (4) TMI 528
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....elivery at Tundoo Unit. Therefore, the FOR price was Rs. 3,213 per MT for Vizag Unit and Rs. 2,383 per MT for Tundoo Unit. Clause 5 provided for price variation. Sub-clause (i) thereof provided for variation in prices of coke and sub-clause (ii) provided for variation in transportation cost. As we are concerned with the variation in price of coke, Clause 5(i) is extracted below :- "Price Variation : (i) For Metallurgical Coke : The Metallurgical coke price specified in para 3 above is based on the coal price ruling as on 8.11.1991 (The date of submission of the offer). In case there is any increase in the coal price by the Coal Companies w.e.f. 9.11.1991 and during the currency of contract period, you will be paid Rs. 1.65 per MT of Met. Coke for each Re.1/- per MT increase in coal (coking coal washery) price from the price ruling as on 8.11.1991 on production of documentary evidence." Clause 13 provided for settlement of disputes by arbitration. 3. Coke is the processed product of coal obtained by carbonization, that is heating coal without air. When burnt, Coke generates a higher temperature, than coal and produces very little smoke or ash and is used in blast furnaces. ....
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.... said claims was referred to an Arbitral Tribunal consisting of Ms. Justice Kanta Bhatnagar, Mr. B.D. Sharma and Mr. T.S. Vardya as arbitrators. 7. The respondent submitted a claim statement dated 20.5.1997 before the Arbitrators, where the amount claimed was slightly modified. Respondent claimed Rs. 21,47,947.56 in regard to supplies to Vizag Unit, and Rs. 21,18,355.92 in regard to supplies to Tundoo Unit, in all Rs. 42,66,303.48. Respondent also claimed interest at 21 per cent per annum from the due date till date of award and from the date of award till the date of payment. The appellant filed its statement of objections dated 11.7.1997 resisting the claim. The Arbitral Tribunal passed a reasoned award dated 17.1.1998, the operative portion of which is extracted below : 1. The claimant is entitled to the escalation in the supply price of their Met. Coke, in accordance with the price variation formula given in clause-5 of Annexure-1, relating to change in price of Coking Coal-Washery Grade-II upto 14.07.1992, and thereafter in the price of Coking Coal-Washery I. The base price for determining escalation is the price of coking Coal Washery Grade II ruling as on 8.11.1991.....
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.....7.92 cannot be considered as price increase of washery grade I. The price of washery grade I on 8.11.91 shall be considered as base price for increase in price. The amount payable to Friends Coke Carbonisation by Hindustan Zinc Ltd. is determined as under : 1. Vizag Unit 7,987.597 MT Rs. 4,77,806.10 2. Tundoo Unit 7248.040 MT Rs. 6,64,397.80 -------------------- Total Rs. 11,42,203.90 ============= M/s Friends Coal Carbonisation will be entitled to get according to terms of Contract, interest at 21% per annum on the above mentioned amount from the date on which the amount is due till date of award and will be entitled to get interest at 18% per annum on the above mentioned amount from date of award till realization." 10. The appellant accepted the said decision and paid Rs. 24,17,646/- to the respondent on 6.2.1999 calculated as follows : i) Amount due (to the extent upheld by the court) Rs. 11,42,203.90 ii) Interest thereon at 21% P.A. from due date till date of award Rs. 10,59,143.00 iii) Interest at 18% P.A. from date of award till date of payment Rs. 2,16,299.00 Total Rs. 24,17,646.00 The respondent, however, was not satisfied with....
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....w would include the Indian Contract Act, the Transfer of Property Act and other such laws in force. Suppose, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, the question would be \026 whether such award could be set aside. Similarly, under sub-section (3), the Arbitral Tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If the Arbitral Tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered. Similarly, if the award is a non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn't be set aside by the court. If it is held that such award could not be interfered, it would be contrary to the basic concept of justice. If the Arbitral Tribunal has not follow....
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....scalation in price, calculated as per the escalation clause (clause 5 of the purchase order) on the basis of the price difference between the actual price paid for the coal used and the base price of such coal on 8.11.1991. b) The respondent had used washery grade II in regard to the supplies from 18.12.1991 to 13.7.1992. Therefore, in regard to supplies during the said period, the price escalation, if any, had to be calculated with reference to base price and actual price of Washery Grade II. c) The respondent had used washery grade I in regard to the supplies from 14.7.1992. Therefore, in regard to supplies between 14.7.1992 till 20.7.1994 (date of last supply), the price escalation had to be calculated with reference to the difference between the base price and the actual price at which the respondent purchased washery grade I coal. d) The award of the Arbitral Tribunal was only in regard to the supplies made between 14.7.1992 to 20.7.1994 when the respondent used washery grade I. e) The interest payable on the amount found due shall be 21 per cent per annum from the date when the amount became due till the date of the award, and 18% per annum from the date of award ....
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....MT Total 3798.203 MT 15235.597 MT (ii) The contract price for supply of metallurgical coke was Rs. 2231/MT. If there was any increase in the price of coal used for producing the met. coke, the respondent was entitled to a price increase of Rs. 1.65 per MT for every Rs. 1/- per increase in the price per MT of such coal over and above the base price of such coal (price as on 8.11.1991). (iii) The price as on 8.11.1991 was Rs. 540.02 per MT for washery grade II coal and Rs. 654.42 per MT for washery grade I coal. (iv) The respondent purchased and used washery grade II coal for the supplies of coke made between 18.12.1991 to 13.7.1992; and purchased and used washery grade I coal for the supplies of coke made after 14.7.1992 up to 20.7.1994. (v) The Award of the Arbitral Tribunal grants the escalation only for the supplies between 14.7.1992 to 20.7.1994, when the respondent used washery grade I coal. (vi) The price of coal was Rs. 659.62 per MT in regard to washery grade II and Rs. 798.98 per MT in regard to washery grade I coal as on 14.7.1992 and the said price went up further thereafter from time to time. (vii) The appellant had, in fact, already ....
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.... grade II and the base price of washery grade II on 8.11.1991, multiplied by a factor of 1.65 was to be the escalation. Similarly, if washery grade I coal was used, the difference between the prevailing price of washery grade I coal and the base price of washery grade I coal on 8.11.1991 multiplied by a factor of 1.65, was the escalation. This meant that if the base price of washery grade II was 'A' (as on 8.11.1991) and base price of washery grade I was 'B' (as on 8.11.1991), and the actual price paid was X for washery grade II and 'Y' for washery grade I, then the escalation would be [Y-B] x 1.65 in regard to supplies between 14.7.1992 to 20.7.1994. But what the respondent did while submitting the calculations before the arbitrators was to take the prevailing market price of washery grade I coal and deduct the base price of washery grade II as on 8.11.1991 and multiply the difference by a factor of 1.65, that is claim [Y-A] x 1.65. 20. The award of the Arbitral Tribunal, as noticed above, holds that the respondent is entitled to price increase only in regard to 7248.040 MT of coke supplied to Tundoo Unit and 7,987.597 MT of coke supplied to Vizag Unit. These quantities indicate t....
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.... Therefore, neither the respondent nor the Arbitral Tribunal could assume that the contract price of Rs. 2231/- was based on the base price of washery grade II as on 8.11.1991. Having regard to the escalation clause, the price increase should be with reference to the coal that is used. It cannot be worked out by taking the difference between the higher cost of superior quality coal and lower base price of inferior quality of coal. 22. In the operative portion, the Arbitrators having correctly stated that the respondent will be entitled to price increase as per the escalation clause and that from 14.7.1992, the price escalation will be with reference to change in the price of washery grade I coal, acted in violation of the specific terms of the contract by stating that - "The base price for determining escalation is the price of coking coal washery grade II coal ruling as on 8.11.1991." This sentence should have actually been as follows: "The base price for determining escalation is the price of washery grade I coal ruling as on 8.11.1991, for determining escalation for supplies from 14.7.1992." A reading of the award shows that what was intended to be given was escalation in te....