TaxTMI 
TaxTMI 
2023 (4) TMI 120
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...., together with associated accessories. 3. The 1st respondent herein was one amongst many persons who offered bids. As the 1st respondent's bid was the lowest, the appellant issued a letter of acceptance on 24.02.1995, followed by the Purchase Order on 28.03.1995. 4. The disputes between the parties arose on primarily one issue as to whether who was liable to pay/meet the difference in Foreign Exchange rate-U.S. $ vis-a-vis Indian Rupee. It is the case of the appellant that the contract awarded to the 1st respondent was a fixed/firm price contract and the words and phrases used in the contract in so many words clearly indicated that there could be no bargain with regard to the total price of Rs.17,23,16,160/-, which was agreed between the parties. Yet another issue that was not reconcilable between the parties was whether the appellant was entitled to claim interest on unadjusted portion of advance paid to the 1st respondent for delay occasioned beyond the delivery period and completion period agreed to in the contract. 5. Even though the agreement did not contain an arbitration clause, in the meeting between the parties on 29th and 30th of October 1998, the appellant ....
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....aiming interest on delayed payments beyond 15 days of receipt of materials, and other miscellaneous claims. To this, the claimant filed an additional reply statement denying the liability on all counts. 11. It is to be noted that with the mutual consent of the appellant as well as the 1st respondent, a three member Arbitral Tribunal was constituted and taking into account the respective pleadings of the parties, the Arbitral Tribunal framed the following issues: " 1. Whether the 1st respondent agreed to the Exchange rate to be FIRM at Rs.31.61 Per U.S.$ throughout the period of contract, i.e., whether the 1st respondent has accepted that their prices of imported equipments are FIRM irrespective of exchange rate variation and whether the exchange rate variation is to the account of the 1st respondent or claimant. 2. Whether the claimant Board as per the purchase order dated 28.03.1995 agreed to pay the price of imported equipment in C.I.F value of U.S.$ and whether the exchange rate variation is to the account of claimant Board or the 1st respondent ? 3. Who is liable, whether the claimant or 1st respondent to pay the excess amount arising out of the di....
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....d to make the claim mentioned in para 5 of the Additional Counter Statement dated 25.02.2001 against the claimant and whether such claims are arbitrable and within the scope of the Arbitration agreement? 14. Whether the claimant is entitled to recover the cost of the Arbitration proceedings? 15. To what relief the parties are entitled in this Arbitration proceedings? 12. In view of the objections taken by the appellant, the Tribunal chose to decide issues 4,6,12 and 13 as preliminary issues, besides also framing an additional issue viz., " Whether the counter claim of 1st respondent for Rs.9,24,82,047/- against the claimant Board is beyond the scope of arbitration agreement and whether this Tribunal has jurisdiction to decide the same" 13. Answering the preliminary issues and the additional issue framed, the Arbitrary Tribunal held that the Tribunal has no jurisdiction to decide claims arising out of customs duty variation and interest on excess amount and ultimately found that the counter claim was not arbitrable and the Tribunal had no jurisdiction to decide the counter claim. However, issue No.12 with regard to the question as to who should bear ....
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....xercising powers not vested in it U/s. 34 of the Act. 16. Aggrieved by the dismissal of the Arbitration Original Petition, confirming the majority award of the Arbitral Tribunal the appellant, Tamil Nadu Generation and Distribution Corporation Limited has preferred the above Original Side Appeal on the following grounds: (1) The learned Single Judge has failed to appreciate that the contract was a 'firm price' contract and ought not have held that the appellant had to bear the variation in Foreign Exchange rates. (2) The learned Single Judge ought not to have made a distinction between "total price and firm price" in coming to a conclusion that the 1st respondent was not liable to meet the variation in Foreign Exchange rates. (3) The learned Single Judge failed to see that the Arbitral Tribunal is not entitled to add any words to the contract which would amount to creating a new contract altogether and that the Arbitral Tribunal should act only within the terms of the contract. (4) The learned Single Judge has not even considered the arguments with regard to the parties agreeing that even the prices of spares were also made firm during....
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....to specification HE 1972, subsequent correspondences your offer, supplementary price bid and revised price bid, I, acting for and on behalf of and by the order and direction of TNEB accept your offer for supply of 1 X 30 MW generating machinery indoor switch-gear and accessories for the Parsons Valley Power House VI HE project, at total price of Rs.17,23,16,160/- (Rupees Seventeen Crores, twenty three lakhs sixteen thousand one hundred and sixty only). The prices are FIRM for indigenous equipment and CIF value in U.S. Dollar. The price comprises Ex-works price, freight & Insurance, Excise Duty and Central Sales Tax on the indigenous equipment, Customs duty on the CIF Value (USD) of imported equipment. The prices accepted which are indicated below are after allowing a discount of 4% on quoted all inclusive FOR (D) price including taxes and duties, of your offer. The broad split up prices of various supply of items are indicated in Table-A. The CIF value in US Dollars indicated is to be kept firm during the period of Contract. The prices of spares are also firm during the period of Contract." 20. Learned Senior counsel pointed out that if it was not a "f....
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....C33 and C55 to show that at all points of time, the parties had clearly agreed and understood that the total price would be Rs.17,23,16,160/- and nothing more. He also put forth a contention that specific deliberations were held regarding this issue and the appellant never agreed to bear the difference in Foreign Exchange rate at any point of time. He also argued that the mere fact there is no specific clause in the Purchase Order stating that the appellant would have to bear the difference in Foreign Exchange rate would only go to show that the 1st respondent alone was liable to meet the difference in Foreign Exchange rate and not the appellant. The learned Senior counsel also contended that one another bid was made by Bharat Heavy Electricals Limited and the appellant's bid alone was accepted since it was slightly lower than the bid given by BHEL and if the liability of on account of Foreign Exchange variation was cast upon the appellant, the appellant would not have even agreed to accept the offer as it would become unworkable for the appellant, which is a State owned Electricity Board. The learned Senior counsel also referred to Sec.28(3) of the Act, which runs thus : ....
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....006) 4 SCC 445, for the proposition that when an award is contrary to the terms of the contract, it would be open to interference by the High Court U/s. 34(2)(b)(ii) of the Act as being patently illegal and also opposed to the public policy of India. 7. Dakshin Haryana Bijli Vitran Nigam Limited Vs. Navigant Technologies Private Limited, reported in (2021) 7 SCC 657, for the proposition that dissenting opinion of a minority Arbitrator can be relied upon by the party seeking to set aside the award in order to buttress its submissions U/s. 34 of the Act and also that the Court is not precluded from considering the findings and conclusions of the dissenting opinion of the minority member of the Arbitral Tribunal. 8. The Board of Trustees of Chennai Port Trust Vs. Chennai Container Terminal Pvt Ltd, 2014 (1) CTC 573, for the proposition regarding relevancy of opinion of minority award and to reinforce the argument that the learned Single Judge while dealing with the application U/s.34 of the Act is not barred from referring to minority view. 24. Learned Counsel also relied on the judgments of the Hon'ble Supreme Court in the case of V.G.George Vs. Indian Rare E....
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....ior counsel also argued that the power of this Court exercising jurisdiction U/s. 37 of the Act was narrower than the powers available U/s. 34 of the Act and therefore in the absence of the order of the learned Single Judge being patently illegal or the findings of the learned Single Judge holding that the award was not opposed to public policy, it could not be called for interference U/s. 37 of the Act. The learned Senior counsel placed reliance on the following judgments: 1. Haryana Tourism Limited Vs. Kandhari Beverages Limited, reported in (2022) 3 SCC 237, for the proposition that the High Court U/s. 37 of the Act cannot enter into merits of claim and that the same is impermissible in exercise of powers U/s. 37. 2. UHL Power Company Ltd Vs. State of Himachal Pradesh, reported in 2022(4) SCC 116, for the proposition that (i) the jurisdiction of an Appellate Court hearing an appeal U/s. 37 of the Act is even more circumscribed than the scope of the High Court deciding challenge to an award U/s. 34 of the Act, which by itself is already narrow. (ii) When there are two plausible interpretations of terms and conditions of contract, no fault can be found, ....
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....le. 8. Project Director, National Highways No.45 E and 220, National Authority of India Vs. M.Hakeem and another, reported in 2021 (9) SCC 1, for the proposition that even U/s.34 of the Act awards can be set aside on very limited grounds. 9. Delhi Airport Metro Express Private Limited Vs. Delhi Metro Rail Corporation Limited, reported in 2022 (1) SCC 131, for the proposition that U/s.34 challenge cannot be on the merits of the award; There is a disturbing tendency of Courts to set aside Arbitral awards after dissecting and reassessing factual aspects of the case to come to a conclusion that the award needs intervention and by dubbing the award to be vitiated by perversity or patent illegality and that such an approach would lead to corrosion of the very object of the Act itself. 28. This Court has carefully considered the submissions made by the learned Senior counsel on either side, besides also going through the materials placed before us by way of voluminous typed sets and also the several judgments relied on by the learned Senior counsel on either side to buttress their respective submissions. (a) In so far as the interpretation of the contract and....
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....ndent was not agreeable to the appellant's condition that there would be no variation in the exchange rate during the entire period of contract. 29. Exs.C20 and C21 are germane to note the intention of the parties. In and by a draft Purchase Order the appellant had forwarded to the 1st respondent, making changes by hand. Some of the important changes that this Court notices between the draft Purchase Order and the final Purchase Order are as follows: (1) "All inclusive prices" has been replaced with "total price". (2) The words "prices are firm for indigenous equipment and CIF value in US Dollars" has been inserted by way of a hand written inclusion. (3) A new clause has been inserted mentioning "The CIF value in U.S. Dollars indicated is to be kept FIRM during the period of contract. The prices of spares are also FIRM during the period of contract." (4) Most importantly, a specific clause 1.4.4 under the heading exchange rate which read as follows has been struck off and the same does not find a place in the final purchase order. The said struck off clause 1.4.4 reads thus: "1.4.4. Exchange Rate: 1 U.S Dollar equal to Rs....
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...., the express words used in the Purchase Order terming the contract as a " firm price" contract should be respected and the amount of Rs.17,23,16,160/- (Rupees Seventeen Crores twenty three lakhs sixteen thousand and one hundred and sixty only) alone would bind the parties. 32. This Court is also unable to accept the argument canvassed by the learned Senior counsel for the appellant that the word "ALSO" appearing after the prices of spares would only indicate that the prices of the equipment, whether indigenous or imported would be FIRM and that otherwise the word "ALSO" would not have been included at such a place in the contract. As already indicated, this Court does not have any difficulty whatsoever in finding that the purchase order dated 28.03.1995 is only a "firm price" contract. However, at the same time it is to be noted that the contract comprises of two parts: (1) costs of indigenous equipments and (2) costs of imported equipments 33. In so far as the indigenous equipments are concerned, there can be no difficulty at all. The prices are mentioned in INR value and there is clear mention that the prices are FIRM for indigenous equipments. This is no....
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.... In addition to the above, it is also seen from Ex.C60, though after the contract period itself i.e., on 29.10.1998, the parties met and concluded by way of a minuted meeting in writing, that the issue regarding Foreign Exchange variation is not resolved by mutual agreement and therefore the parties decided to refer the said dispute for arbitration along with the other issue of payment of interest on unadjusted advance. This also clearly indicates that the parties were also firm in their respective contentions. It is common knowledge that the value of 1 U.S. $ keeps varying or fluctuating everyday. It is not only in so far as the Indian Rupee is concerned but also with regard to the currencies across the World. The purchasing power of 1 U.S. $ is based on various economical and financial considerations. It is not as if the parties were ignorant of this. Throughout the pre-negotiation stage, this issue was being raised and sent back and forth without any amicable resolution, not only before the finalization of Purchase Order but even thereafter, post the contract period also. 35. This Court has also gone through the various decided cases relied on by the respective learned Senior....
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....his Court holds that if the minority award is accepted and the majority award is overturned, it would only result in modifying the very award under challenge, which is impermissible. In any event this Court has already found that the conclusion arrived at by the Arbitral Tribunal in and by an majority award is well reasoned and does not call for any interference. On the contrary, the reasoning of the third Arbitrator rendering the minority award cannot be sustained since the conclusions arrived at in the minority award are not keeping in mind the letter and spirit of the negotiations between the parties, the intention of the parties throughout the pre-negotiation stage, as well as at the time of finalizing of the Purchase Order which would only lead to the irrefutable conclusion that the 1st respondent never agreed for absorbing the difference in Foreign Exchange value. 38. This Court also does not find any violation of Sec.28(3) of the Act as strongly canvassed by the learned Senior counsel for the appellant. While deciding and making an award the Arbitral Tribunal certainly has to take into account the terms and conditions set out in the contract. However, in cases like these ....