TaxTMI 
TaxTMI 
2023 (8) TMI 1227
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....et aside and certain claims were allowed. This appeal by Konkan Railway Corporation Limited challenges the legality of the order passed by the Division Bench of the High Court while exercising jurisdiction under Section 37 of the Act. 2. The short facts relevant for the purpose of this appeal are as follows: The Respondent's tender for construction of a bridge at KM 50/800, on the Katra- Laole section of Udhampur-Srinagar-Baramulla rail link, said to be the highest railway bridge in the world, was accepted by the Appellant, leading to the execution of the contract on 24.11.2004. 3. While the contract was in execution, disputes arose between the parties and through an agreement dated 28.02.2012, a Standing Arbitral Tribunal was constituted for resolution of disputes. The respondent raised 35 claims which were clubbed and classified as twelve disputes. The present proceedings arise out of the decision of the Arbitral Tribunal deciding three disputes, being Dispute I (relating to Claim 9), Dispute III (relating to Claims 12, 22 and 28), and Dispute IV (relating to Claims 13, 23 and 29). 4. The Arbitral Tribunal by its award dated 15.11.2014 considered the three disputes and r....
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.... including turn over tax on works contract, octroi, royalty, toll tax, Duties/Levies as well as services and any other tax levied by central govt., state govt. or local bodies, as applicable 15 days prior to the date of opening of tender shall be considered to be included in the percentage rates quoted by tenderer/s in the Schedule of Items, Rates & Quantities. In case of any increase/decrease in the taxes during the period from 15 days prior to the date of opening of tender to the completion of the work, the net increase/decrease for the balance portion of the work shall be borne/recovered by the Corporation. The prevailing rate of Works Contract Tax (WCT) in J & K states to be deducted at source is 4.2% for the registered firms with state taxation department from firms not having the registration, the rate is 8.2%. Clause 5.1.3 Corporation shall deduct the sales tax/Turn Over Tax or any other tax from the Contractor's bill at the rate as applicable as per rules framed by concerned Govt./Local bodies from time to time and remit it to concerned department and shall issue a certificate regarding Tax/levies so deducted on demand by the contractor." 7.1. Clauses 7....
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....tral Tribunal noted that the contract only provided for generic price variation based on a standardised formula. It also found that Clause 7.1.2 specifically barred cognizance of "any sort of fluctuations in taxes and other market conditions for any individual item for the purpose of making adjustments in payments". Accordingly, the Arbitral Tribunal held that the claim for recouping increased tax liability for individual or specific items, in this case, the imposition of entry tax, could not be reimbursed under Clauses 7.1.1 and 7.1.2. 8.2 The Tribunal reasoned that the contractor was aware of these conditions at the time when the prices were quoted, and therefore, the claim could not succeed under Price Variation clauses. 8.3 As regards the claim for Toll Tax which formed part of Dispute IV, the Tribunal adopted the same interpretation of the contractual clauses and rejected the claim. 9. Decision of the High Court under Section 34 of the Act: The Respondent's challenge to the Arbitral Award under Section 34 of the Act was considered and dismissed by the Single Judge of the High Court by its order dated 17.01.2019. The High Court concluded that there were two possible vi....
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....et aside the Award, and allow claims covered under Disputes III and IV. 11. This judgment of the Division Bench of the Hight Court led to the present civil appeal before us. 12. Submissions on behalf of the Appellant: Mr Shyam Divan, Senior Advocate, along with Mr Amlaan Kumar, Mr Musharaf Shaikh, Ms Rukhmini Bobde, Ms Soumya Priyadarshinee, Mr Ankit Ambasta, Mr Amit Kumar Shrivastava, Advocates, and Mr Vishal Prasad, AOR appeared on behalf of the Appellants. They submitted that the Division Bench of the High Court exceeded its limited jurisdiction under Section 37 of the Act by reinterpreting the contract and substituting its view for the Arbitral Tribunal's, assuming the role of a court of appeal. They relied on UHL Power Company Limited v. State of Himachal Pradesh (2022) 4 SCC 116 and South East Asia Marine Engineering and Constructions Limited v. Oil India Limited (2020) 5 SCC 164 for this purpose. 12.1 Next, they submitted that the parties agreed to a lump-sum contract price payable to the Respondent-Contractor. The Contractor split the agreed prices into several components and indicated the division in the 'Schedule of Items and Rates - Bill of Quantities', wh....
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....poration, the Arbitral Tribunal impermissibly rewrote the terms of the contract. Instead of harmonising the provisions of the contract, it inserted new terms and contradictions to it. 13.2 The respondents submitted that the Division Bench of the High Court was well within its jurisdiction under Section 37 of the Act to partially set aside the Award. To substantiate their submissions, they relied on Adani Power (Mudra) Limited v. Gujarat Electricity Regulatory Commission and Ors. (2019) 19 SCC 9, Radha Sundar Dutta v. Mohd Jahadur Rahim & Ors. (supra), Satyanarayana Construction Company v. Union of India and Ors. (2011) 15 SCC 101, and Delhi Development Authority v. R.S. Sharma and Company, New Delhi. (2008) 13 SCC 80. 14. Analysis: At the outset, we may state that the jurisdiction of the Court under Section 37 of the Act, as clarified by this Court in MMTC Ltd. v. Vedanta Ltd. (2019) 4 SCC 163, is akin to the jurisdiction of the court under Section 34 of the Act.^1 Scope of interference by a court in an appeal under Section 37 of the Act, in examining an order, setting aside or refusing to set aside an award, is restricted and subject to the same grounds as the challenge unde....
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.... important to extract the relevant portion of the Award, where the Tribunal considered and interpreted the contractual clauses pertaining to Disputes III and IV: "40. A careful reading of the relevant provisions of the contract shows that claimant will not be entitled to reimbursement of Entry Tax paid by it. Clause 5.1.2 of Special Conditions provides that sales tax or turnover tax on works contract or other tax on the amount billed to respondent, levied or increased during the execution of the work; shall be borne by the respondent. For example, if the price of goods sold is Rs. 2000/- and at the time of contract, the goods were not subject to Sales Tax, but subsequently during the execution of the work, the State subjected such sale of goods to Sales Tax, at the rate of 5%, the contractor will be entitled to receive under clause 5.1.2, the Sales Tax at 5% on the price of Rs. 2000/-. Similarly, if Works Contract Tax is increased from the rate of 4.2% prevailing at the time of making the contract, the contractor will be entitled to the higher rate, by claiming the difference. Therefore, what clause 5.1.2 deals with is taxes "chargeable" by the contractor on the bills rais....
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.... findings of the Arbitral Tribunal. The reason for upholding the decision of the Tribunal is not that the Single Judge exercising jurisdiction under Section 34 of the Act is in complete agreement with the interpretation of the contractual clauses by the Arbitral Tribunal. The Learned Judge exercising jurisdiction under Section 34 of the Act kept in mind the scope of challenge to an Arbitral Award as elucidated by a number of decisions of this Court. Section 34 jurisdiction will not be exercised merely because an alternative view on facts and interpretation of contract exists. In its own words, the conclusion of the Single Judge Bench of the High Court is as follows: "10. ... The ambiguity does not come from clause 5.1.1, but from the fact that there are other clauses in the contract, such as clauses 7.1.1 and 7.1.2. One way to look at the co-existence of these clauses is to treat clauses 7.1.1 and 7.1.2 merely as an exclusion for working out price variation, since it is specifically provided for in clause 5.1.2. Equally, there is another way of looking at these three clauses, and that is : clauses 7.1.1 and 7.1.2 make it clear that no increase in tax in the case of any com....
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....is concerned about the jurisdiction that the Section 34 Court exercised while considering the challenge to the Arbitral Award. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal's view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. If this is the principle applicable to exercise of jurisdiction under Section 34 of the Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an Award, much less the decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. This is where the Division Bench of the High Court committed an error, in re-interpreting a contractual clause while exercising jurisdiction under Section 37 of the Act. In any event, the decision in Radha Sundar Dutta (supra), relied on by the High Court was decided in 1959, and it pertains to proceedings arising under the Village Chaukidari Act, 1870 and Bengal Patni Taluks Regulation of 1819. Reliance on this judgment particularly for interfering with the concurrent interpretations of the contractual clause by th....
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...., as an alternative to adjudication by the courts or a public forum established by law. Parties by mutual agreement forgo their right in law to have their disputes adjudicated in the courts/public forum. Arbitration agreement gives contractual authority to the Arbitral Tribunal to adjudicate the disputes and bind the parties." 23. The conclusion of the Division Bench of the High Court that the Award is liable to be set aside on the ground of perversity is incorrect, as it overlooks the principle laid down in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49, where this Court held: "32. A good working test of perversity is contained in two judgments. In Excise and Taxation Officer-cum- Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312] , it was held: (SCC p. 317, para 7) "7. ... It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law." In Kuldeep Singh v.....