Bombay High Court
House vs 2 Mr. T. Sita Ramaiah on 11 October, 2012
Bench: Anoop V.Mohta
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 1025 OF 2009
Hindustan Petroleum Corporation Ltd.
a Government of India Company,
registered under the Companies Act, 1956
having its registered office at Petroleum
House, 17, J. Tata Road, Churchgate,
Mumbai 400020 .. Petitioner
V/s.
1 TEMA India Limited, a company
having its office at B-607, BSEL Tech
Park, Sector 30A, Opp. Vashi Railway
Station, Vashi, Navi Mumbai 400705
2 Mr. T. Sita Ramaiah, Sole Arbitrator
having address at 201, Topaz,
Bhakti Park, Wadala East,
Mumbai-400 037. .. Respondents
Mr. Minoo Siodia with Mr. Kaushik N. Singh i/by M/s. Rustomji
& Ginwala for the Petitioner.
Dr. Virendra Tulzapurkar, Senior Advocate with Mr. Sandip
Parikh i/by M/s. Vigil Juris for Respondent No.1.
CORAM : ANOOP V. MOHTA, J.
RESERVED ON : 4 SEPTEMBER 2012.
PRONOUNCED ON : 11 OCTOBER 2012.
ORAL JUDGMENT :-
The Petitioner, original Respondent, has challenged the
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Award under Section 34 of the Arbitration and Conciliation Act,
1996 (for short, "the Arbitration Act") dated 2 March 2009
passed by the sole Arbitrator. The operative part of the Award
is as under :-
"(a) I direct the Respondent to release and
pay to the Claimant the amount of Rs.
2,66,48,000/- withheld by the Respondent out of
the bills payable to the Claimant.
(b) Not many arguments were made for
payment of interest. However, the rate claimed is
too high as per today's standards. I, therefore,
direct the Respondent to pay to the Claimant
interest at the rate of 8% p.a from the date of the
submission of the statement of claim i.e. 9th
September, 2008 till payment of the awarded
amount.
(c ) The arbitration proceedings were held
at the premises of the Respondent. I am not
awarding cost to either party in the arbitration and
I am directing both the parties to pay their own
costs.
(d) I am not inclined to pass any award or
direction in respect of the Claimant for loss of
profits as the same was neither pressed nor
substantiated or argued by either party. In any
event, to compensate the Claimant, I have already
awarded payment of interest. Hence, this claim is
rejected."
2 The basic events are as under :-
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The Petitioner as a part of its Green Fuels Project for its
refinery at Mumbai, required 28 stainless steel heat exchangers.
Tender enquiry for supply of 28 NOS S S Duplex Heat
Exchangers for GFEC Project was floated by M/s. Engineers
India Ltd. (EIL), the Project Management Consultants (PMC).
Respondent No. 1 emerged as L1 bidder for supply of all 12
items at a total basic cost of Rs.33,86,00,000/-.
3 On 18 July 2005, Purchase Order No. 5000233 - OQ-
48009 for total basic value of Rs.33,86,00,000/- was issued to
Respondent No.1. The CIF value of import content indicated in
the P. O. was Rs.26,65,00,000/-. Initially, the quotations were
obtained on the basis of two conditions (I) project rate of
customs duty against issue of PAC (Project Authority Certificate)
and (ii) Merit rate of customs duty. The Petitioner had reserved
the right to place Purchase Order based on any of the
conditions. The Petitioner was not in a position to submit PAC
and therefore, the P. O. was issued on basis of merit rate of
customs duty.
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4 On 11 May 2007, after supply of the Heat Exchangers, by
letter, the Petitioner asked Respondent No.1 to furnish
documentary evidence in support that they have actually
imported the materials. Respondent No.1 failed to do so, as
alleged. Hence, an amount of Rs.2,66,00,000/- was retained by
the Petitioner from the bills of Respondent No.1. The disputes
and differences arose between the parties and the same were
referred to Mr. T. Sita Ramaiah, as Sole Arbitration
(Respondent No.2 herein).
5 Respondent No.1 filed the claim Petition which was
replied by the Petitioner and also filed the counter claim.
Ultimately, the learned Arbitrator on 2 March 2009, by
considering the written submissions filed by the parties,
awarded the amount by observing as under :-
"20 Considering the aforesaid rival submissions,
I am not convinced with case of the Respondent
and the argument put forth for the reasons set out
above viz. That the prices were fixed and firm and
not subject to any variation due to change in
payment of customs duty as the said P.O. Was
admittedly issued on basis of merits rate of
customs duty. No PAC was issued to the Claimant
and clauses 1(v)(b) to (i) are hence, not
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applicable. The claimant has already submitted as
evidence by way of copies of Bills of Entry and
hence, the ground of non-submission of document
as a proof for the import of raw materials is also
not available to the Respondent. I am, therefore,
passing an award in favour of the Claimant."
6 There is no dispute with regard to the existence of
Arbitration Clause, appointment of Arbitrator and the
jurisdiction to decide the dispute between the parties. There is
also no dispute with regard to the terms and conditions of the
purchase order. The amount so calculated and withheld and
details thereof, is also not in dispute. The Respondent supplied
the Heat Exchangers as per the contract. No objection of any
kind with regard to the delivery, quantity and quality of the
goods supplied.
7 Both the learned counsel appearing for the parties
referred and read the various clauses of the agreement
specifically clause 1 (v) (a) and clauses 1 (v) (b) to (i). It is
clear from the clauses that referred by the learned Arbitrator
that clause (a) speaks of merits rate of customs duty and sub-
clause (b) speaks of project rate of customs duty, the other sub-
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clauses are extensions of sub-clause (b), which would be
applicable to the project rate of customs duty. The purchase
order was based on merits rate of customs duty. Therefore, the
prices and variation in customs duty cannot be read as
contended by the learned counsel appearing for the Petitioner
and as observed by the learned Arbitrator.
There is no dispute that PAC was not issued by the
Petitioner therefore, related clauses, just cannot be extended to
the merits rate of customs duty as provided in clause (a). The
CIF value of import was Rs.26,65,00,000/- (Rupees twenty six
crores sixty five lacs only) for the consideration of customs duty
in case the PAC is issued by the Respondents. The import
material components also provided in details. The Petitioner,
therefore, fully aware of the imported components and its
requirement while supplying the products in question. The
learned Arbitrator, therefore, taking overall view of the matter
decided the issues by interpreting the clauses by holding that
clauses 1(v)(b) to (i) are not applicable to the contract in
question. The learned Arbitrator has also rightly accepted the
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case of the Respondent-Claimant, based upon the clauses and
the submission that the price was fixed for all the purposes.
Once it is held that the agreement was to provide product
and/or material based upon the fixed price, the change or
variation in customs duty, in my view, should not affect the rate
so fixed.
The Petitioner by letter dated 11 May 2007 requested the
Respondent-Claimant to provide the documentary evidence.
Prior to that the Respondent by letter dated 16 March 2007,
though not required, still submitted the copies of the Bills of
Entry under which the materials were imported by the
Respondent-Claimant. As recorded, these Bills of Entry show
that the materials were duly imported and also the date of
import. Importantly, even as per the Petitioner, the details of
the imported material components have already been
mentioned, based upon which the Respondent-Claimant
proceeded and accepted the contract. The learned Arbitrator
right in observing that having once not issued the PAC, the
provisions as referred and relied by the learned counsel
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appearing for the Petitioner revolving around the same, are not
applicable. Therefore, the conclusion that the Petitioner has no
right to detain and/or retain the amount for want of documents,
apart from giving possible and proper interpretation to the
terms and conditions, in my view, just cannot be stated to be
perverse and/or illegal and/or contrary to the law.
I have already in Union of India Vs. M/s. Suraj
Infrastructures Pvt. Ltd., 1 maintaining similar types of award of
compensation on the ground of delay on the part of employer
observed as under:-
"26 The Apex Court in J.G. Engineers Private
Limited Vs. Union of India & Anr. 2 , referring to
Section 34 read with the provisions of Contract Act
observed as under:-
"Once it is held that the issues relating to who
committed breach and who was responsible for
delay were arbitrable, the findings of the
arbitrator that the contractor was not
responsible for the delay and that the
termination of contract is illegal are not open
to challenge."
1 Arbitration Petition No. 324 of 2009, dated 17 September 2012
2 (2011) 5 SCC 758
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In the result, the escalation price so awarded on the
basis of delay and consequential termination of
contract by the employer upheld.
11 The Apex Court has also recently in Rashtriya Ispat
Nigam Limited Vs. Dewan Chand Ram Saran 3 reiterated that
the possible view and the interpretation given by the Arbitrator,
need not be interfered by the Court.
12 I have also, in similar situation, observed in Hindustan
Petroleum Corporation Ltd. Vs. M/s. ISGEC & Anr. 4 that-
"11 Apart from above, there is no terms and
conditions referred and/or pointed out to show that
the Petitioner is entitled to withhold the amount in
any of such conditions and basically for want of the
documents. The Petitioner, therefore, in absence of
any contract clauses acted beyond the contract. The
withholding action, therefore, rightly observed by the
learned Arbitrator to be illegal. I am not inclined to
accept the case of the Petitioner that the contract
price was not fixed but subject to variation. The
submission is contrary to the plain reading of the
terms itself. The learned Arbitrator, therefore, having
once held that the contract price was fixed / lump
sum, which in the present facts and circumstances,
cannot be stated to be illegal and contrary
interpretation of the clauses. The reasoning in
support of grant of award in favour of the
Respondents, in my view, needs no interference."
3 (2012) 5 SCC 306
4 2012 (3) Bom. C,R. 243=2012(114) Bom. L.R. 1679
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13 In the present case, an additional factor is that there is no
clause and/or condition which permits the Petitioner-employer
to detain and/or retain the amount, in any such circumstances
and/or even otherwise. Therefore also, there was no question
of retaining such huge amount only for want of documents as
sought to be contended. The action was unauthorized and
illegal.
14 If there is no clause permits the Petitioner to retain and/or
withheld the amount, the burden lies upon them to justify their
action. Any retention of amount in such type of contract,
specifically when there was no dispute of whatsoever nature,
with regard to the quantity, quality and receipt of the goods,
itself is contrary to the terms and conditions and impermissible.
The Petitioner failed to discharge the basic burden in this
regard. It is not the case that the Respondent-claimant not
submitted their reply and details when asked for. The bills so
referred and submitted, if provides the basic details, including
quantity, material and the date of import, in my view, burden
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lies upon the Petitioner to show and prove that the customs
duty rates were decreased and/or changed at the relevant time.
The documents and/or evidence must be placed before the
Arbitrator at the relevant time during the course of the trial and
not later on. Therefore, the documents so placed on record
after conclusion of the trial, just cannot be taken note of in such
fashion, basically when the learned Arbitrator has interpreted
the clauses and given findings against them. The scope and
power of Court under Section 34 of the Arbitration Act is quite
limited in this regard. One cannot overlook the fact that this is
a commercial transaction with clear terms and conditions.
Both the parties based upon the same acted upon and the goods
were supplied accordingly.
15 In this background, the submission of the learned counsel
appearing for the Petitioner that the release of this amount
and/or payment of this amount to the Respondent would be
"Unjust Enrichment" is also unacceptable. The doctrine of
"quantum meruit" is also referred and relied. It is necessary to
note that having once agreed and accordingly the Petitioner
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supplied the goods on a foundation of the fixed price basis,
inclusive of customs duty, the variation, as sought to be
contended by the Petitioner is also untenable, considering the
terms and conditions of the contract. I am also of the view that
there is no question of unjust enrichment, as sought to be
contended by the learned counsel appearing for the Petitioner in
the present facts and circumstances of the case.
16 Therefore, taking note of rival contentions and the
submissions so made by the learned counsel appearing for the
parties and after reconsidering even the clauses so referred and
relied, I am inclined to observe that, in the present facts and
circumstances, the view taken by the learned Arbitrator based
upon the clauses, is a possible and plausible view. Therefore,
considering the commercial nature of transaction; and that
there is no dispute with regard to the quality, quantity and
supply of the goods; and that there is no provision in the
contract to retain/detain the amount in such fashion; and that
the Petitioner failed to discharge the burden to prove any
variation to the customs duty at the relevant time; and that the
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findings with the agreement to supply goods based upon the
fixed rate, no case to interfere with the award. The reasons so
given by the learned Arbitrator is well within the purview of law
and the record. There is no perversity. The interest so awarded
from the date of statement of claim i.e. from 9 September 2008
till payment, is also reasonable and correct.
Resultantly, the Petition is dismissed. Award is maintained
in all respect. There shall be no order as to costs.
(ANOOP V. MOHTA, J.)
