TaxTMI 
TaxTMI 
2026 (3) TMI 1440
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....appearing for the Respondent submits that the central issue before the learned Arbitral Tribunal, as also before this Court, is whether the Petitioner had taken any steps whatsoever to avail the input tax credit. It is submitted that all requisite documents were duly furnished to the Petitioner and that there was no deficiency on the part of the Respondent. 4. It is further submitted that the Petitioner, on the basis of the documents so furnished, had reimbursed the Respondent towards the amounts paid on account of CENVAT and VAT, which itself demonstrates that the Petitioner had accepted the sufficiency of the documents. He also places reliance upon paragraph nos. 104 and 105 of the Impugned Award to contend that the issue stands concluded in terms of the reasoning adopted therein. The said paragraphs are reproduced hereinbelow: "104. The Claimant's contention is valid in asserting that the Respondent's inability or failure to utilize the credit does not imply any default on the part of the Claimant. The Claimant argues that their obligations do not extend to ensuring the actual payment of taxes so that the credit for CENVAT, VAT, and VAT on Works Contract is p....
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....SC shows that amounts guaranteed towards CENPAT etc. were the commitment of the claimant. Further, Respondent was entitled to claim a credit against these payments made by the claimant on their behalf. Guaranteed CENVAT etc. were irrespective of final value of the contract on account of any variations due to items or their rates and that the shortfall in credit could be deducted. However, it is clear from the documents made available which have not been contested by the Respondent that payment of Rs. 16.46 crores has been made towards this particular item as against the minimum guarantee of Rs. 15,97,29,195/- on the revised contract. / is also notable that claiming of input credit is the responsibility of the employer in accordance with the extant regulations. It is further notable that input credit on VAT paid on Works contract was not available under the relevant regulations. This argument on behalf of the Claimant was not challenged by the Respondent. Even from the language of clause 19. 1.h of the invitation for Bid is can be seen that availability of input credit on VAT on ICT was uncertain as is indicated by the use of phrase if any in the second line of the clause as reprodu....
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....& T had in fact paid taxes amounting to Rs. 16,46.35,688/- and a credit to the aforesaid extent was available to SAIL, L&T had performed its obligations. In view of the above, the Arbitral Tribunal rejected SAIL's counter claim and rightly so. The contention that the impugned award is perverse or patently erroneous on this ground, is without any merit." 5. This Court has heard learned counsel for the parties and perused the impugned award as well as the material on record. 6. At the outset, it is apposite to note that this Court remains conscious of the limited scope of its jurisdiction while examining an objection petition under Section 34 of the Act. There is a consistent and evolving line of precedents whereby the Hon'ble Supreme Court has authoritatively delineated and settled the contours of judicial intervention in such proceedings. In this regard, a three-Judge Bench of the Hon'ble Supreme Court, after an exhaustive consideration of a catena of earlier judgments, in OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd. (2025) 2 SCC 417, while dealing with the grounds of conflict with the public policy of India and patent illegality, groun....
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....n conflict with the public policy of India. 45. At this stage, it would be pertinent to note that we are dealing with a case where the application under Section 34 of the 1996 Act was filed after the 2015 Amendment, therefore the newly substituted/added Explanations would apply [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. 46. The 2015 Amendment adds two Explanations to each of the two sections, namely, Section 34(2)(b)(ii) and Section 48(2)(b), in place of the earlier Explanation. The significance of the newly inserted Explanation 1 in both the sections is two-fold. First, it does away with the use of words: (a) "without prejudice to the generality of sub-clause (ii)" in the opening part of the pre-amended Explanation to Section 34(2)(b)(ii); and (b) "without prejudice to the generality of clause (b) of this section" in the opening part of the pre-amended Explanation to Section 48(2)(b); secondly, it limits the expanse of public policy of India to the three specified categories by using the words "only if". Whereas, Explanation 2 lays down the standard for adjudging whether there is a contravention with the fundamental po....
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....as not found in the 1996 Act. Yet, in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, in the context of enforcement of a foreign award, while construing the phrase "contrary to the public policy", this Court held that for a foreign award to be contrary to public policy mere contravention of law would not be enough rather it should be contrary to: (a) the fundamental policy of Indian law; and/or (b) the interest of India; and/or (c) justice or morality. ***** 55. The legal position which emerges from the aforesaid discussion is that after "the 2015 Amendments" in Section 34(2)(b)(ii) and Section 48(2)(b) of the 1996 Act, the phrase "in conflict with the public policy of India" must be accorded a restricted meaning in terms of Explanation 1. The expression "in contravention with the fundamental policy of Indian law" by use of the word "fundamental" before the phrase "policy of Indian law" makes the expression narrower in its application than the phrase "in contravention with the policy of Indian law", which means mere contravention of law is not enough to make an award vulnerable. To bring the contravention within ....
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.... (b) provisions of the 1996 Act; and (c) terms of the contract [See also three-Judge Bench decision of this Court in State of Chhattisgarh v. SAL Udyog (P) Ltd., (2022) 2 SCC 275]. The Court clarified that if an award is contrary to the substantive provisions of law of India, in effect, it is in contravention of Section 28(1)(a) of the 1996 Act. Similarly, violating terms of the contract, in effect, is in contravention of Section 28(3) of the 1996 Act. 68. In Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 this Court specifically dealt with the 2015 Amendment which inserted sub-section (2-A) in Section 34 of the 1996 Act. It was held that "patent illegality appearing on the face of the award" refers to such illegality as goes to the root of matter, but which does not amount to mere erroneous application of law. It was also clarified that what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to "public policy" or "public interest", cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality [See Ssangyong Engg. & Constru....
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.... arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse [See Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131]. 72. The tests laid down in Associate Builders v. DDA, (2015) 3 SCC 49 to determine perversity were followed in Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 and later approved by a three-Judge Bench of this Court in Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd., (2020) 7 SCC 167. 73. In a recent three-Judge Bench decision of this Court in DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd., (2024) 6 SCC 357, the ground of patent illegality/perversity was delineated in the following terms: (SCC p. 376, para 39) "39. In essence, the ground of patent illegality is available for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or so irrational that no reasonable person would have arrived at it; or the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrat....
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....h ought to be to respect the finality of the arbitral award as well as party's autonomy to get their dispute adjudicated by an alternative forum as provided under the law. 7. In the present case, the learned Majority Arbitral Tribunal has, upon appreciation of the material on record, returned a categorical finding, as noted in paragraph nos. 110 and 111 of the impugned Award, that the Petitioner had not taken any steps to avail the input tax credit, including by making an application before the concerned authorities. The relevant paragraphs of the Impugned Award are reproduced hereinbelow: "110. Moreover, the absence of any submitted documents by the Respondent is conspicuous. These documents were relevant to show that the guaranteed amount of credit could not be availed for any reason attributable to the Claimant. The Respondent's acknowledgment of the higher taxes paid and documents provided by the Claimant, underscores the validity of the Claimant's position. 111. In view of the above discussion, the Tribunal finds merit in Claimant's contentions and does not accept the argument of the Respondent that an amount of Rs. 8.85 crore was due towar....