Dgs And D vs Eupharma Laboratories Ltd.
2006 Latest Caselaw 444 Del

JUDGMENT

Sanjay Kishan Kaul, J.

OMP No. 287/99

1. The petitioner invited tenders for supply of tablets Folic Acid and Ferrous Sulphate (large) in pursuance to an international competitive bidding process funded by the IDA/ World Bank Loans under the project of Ministry of Health and family Welfare called 'Child Survival and Safe Motherhood Project'. The invitation to bid provided that the bidders offering indigenous goods should quote net prices after taking into account in their bids any benefits available for supplies against IDA credits/IBRD loans through international bidding regarding deemed exports on the goods offered under the same. Thus quoted price for the goods was to be offered without without including in the price the component of excise duty in view of deemed export benefits. This particular aspect has formed subject matter of the disputes between the parties.

2. The contract was ultimately awarded to the respondent but there is prior history to the award of the said contract. The contract was awarded to a third party and the petitioner impugned the same in the writ proceedings before this court. The writ petition was allowed and the award to the M/s Sudershan Pharmaceutical was quashed on the ground that a valid license for manufacture was not available with the said third party and the third party was not qualified for the same. A direction was issued in the writ proceedings that the bid of the respondent be accepted on the same terms and conditions. The matter went up to the Apex Court but the Special Leave Petition was dismissed by the order dated 04.04.1994. After these proceedings, the contract was awarded to the respondent by the notification dated 24.05.1994 for a sum of Rs 1,81,51,292/-. The agreement contained an arbitration clause no.26 and since certain disputes arose between the parties, the same were referred to arbitration. The sole arbitrator Mr. N.N.Goswamy was appointed by the Indian Council for Arbitrations, who made and published his award on 05.05.1999 and the petitioner aggrieved by the same has filed the present objections under section 34 of the Arbitration and conciliation Act 1996 (herein after referred to as the said Act).

3. The arbitrator has considered the controversy between the parties and has recorded that it was not disputed that the petitioner had to issue the necessary certificate for deemed export benefits to the respondent as per the formal contract which was executed on 28.06.1994 since it was agreed that in terms thereof that a number of documents shall form part of the contract. The goods were supplied by the respondent in discharge of the obligations and the amounts were paid against the same. Apart from this goods worth Rs 10 lakh were supplied free as per the directions of the High Court.

4. The controversy arose before the arbitrator on account of the fact that as per the respondent, a total excise duty of Rs 23,89,460/- was paid and the respondent wanted the petitioner to discharge its obligations under the contract by issuing the respondent necessary payments certificates and/or necessary deemed export certificates to enable them to seek refund of the excise duty paid by them on the goods supplied under the international competitive bidding. The petitioner failed to issue the same. The respondent pleaded before the arbitrator that if it had not been represented to them by the petitioner that the bid was an international competitive bid to be funded by the multilateral agencies which would entitle the respondent to the necessary certificate of deemed export, the respondent would not have quoted only the net prices for the goods, but would have included the component of excise duty. The respondent thus claimed the aforesaid sum paid as excise duty along with interest. Apart from this, the respondent claimed a sum of Rs 30 lakh by way of damages.

5. The petitioner defended the claim and took the plea that there was no excise duty payable under the contract though it was a case of deemed exports and it was obligatory on the part of the petitioner to issue payments certificate. It appears that there were other disputes between the parties also giving rise to various awards and that is the reason the arbitrator has noted the fact that a consistent finding has been returned that the payments certificate to be issued under the export policy for the relevant period was to enable the supplier to claim duty drawbacks.

6. The petitioner also took a further plea that on the entire material including the High Court Judgment in the writ petition filed by the respondent being taken into account, the same gave rise to the World Bank taking a view that the contract was awarded to the respondent in a manner inconsistent with the guidelines and as such was mis-procured under Paragraph 1.11 of the guidelines. The World Bank refused to accept the contract and thus bid ceases to be a case of deemed exports and thus the petitioner was not liable to issue payments certificate.

7. The arbitrator found partially in favor of the petitioner by coming to the conclusion that once the World Bank refused to accept the contract it no longer remained a case of deemed exports and even if the payments certificate was issued, the same could not be availed of by the respondent. However the arbitrator also found that the petitioner was accepting supplies even after the bank had refused to accept the contract and had intimated the petitioner to that effect. This fact was never brought to the notice of the respondent and if the respondent had been so apprised, the respondent would have the option to either stop further supplies or quote fresh price including the excise duty. The arbitrator asked for bifurcation of the amounts and the respondent specified the amount of Rs 6,92,965/- as the amount of excise duty after the petitioner was informed about the decision of the World Bank. Tis figure was not disputed by the petitioner.

8. The arbitrator did not even award this amount but took into consideration the fact that in Rule 3 of the Customs and Excise Duties Drawback Rules 1971, the manner in which the drawbacks had to be determined is to be decided by a competent authority which meant that the entire amount was not payable. However the respondent has not filed any objections in this behalf. The arbitrator awarded only a sum of Rs 5 lakh apart from interest at the rate of 10 per cent per annum from 24.08.1995 till date of payment and cost of the proceedings.

9. It is needless to say that the objections cannot be entertained under the Act unless they fall within the parameters of Section 34(2) of the said Act as enunciated by the Apex Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. . Thus in order for the petitioner to succeed the objections must be brought within the said four corners. A reading of the objections show that not only do the objections not fall within the said parameters, but the grounds do not even read as an attempt to bring them within the said four corners.

10. There are ten grounds taken by the petitioner which only seek to emphasis that the arbitrator has not applied his mind to the case, has not given reasons, has failed to appreciate the evidence before the arbitrator including certain facts and has misunderstood the case. Absence of reasons and an extraneous consideration being taken is also pleaded. A reading of the award belies all these contentions. The arbitrator has given cogent reasons for awarding the amount and if at all has erred on the side of the caution. No fallacy can be found even with the reasoning of the arbitrator in coming to the conclusion that the petitioner would be entitled to re-compensate the respondent at least in respect of supplies received by the petitioner even after the World Bank had informed the petitioner, especially as the petitioner did not inform the respondent about such a decision of the World Bank. This fact came to light only during the arbitration proceedings.

11. This court does not sit as a court of appeal to re-appraise the material before the arbitrator. It is not an appeal from a decree and the scope of the scrutiny in arbitration proceedings is extremely limited. In appointing an arbitrator, parties chose a man who will decide the disputes between he parties and even if the court were to come to a different conclusion on the same set of facts, the same would not be a ground to interfere with the award.

12. In fact this legal position prevailed even under the earlier Indian Arbitration Act, 1940 and under the new Act, it is more restrictive in relation to the scope of interference.

13. In view of the aforesaid, I find no merit in the objections.

14. Dismissed.

IA No. 9877/1999 Dismissed.