Samho Gunyoung Co. Ltd. vs Flakt (India) Ltd. & Ors.
2009 Latest Caselaw 2467 Del

 *        IN THE HIGH COURT OF DELHI AT NEW DELHI

                              Date of Reserve: July 01, 2009
                             Date of Order: July 03, 2009
+ OMP 338/2009
%                                        03.07.2009
    SAMHO GUNYOUNG CO. LTD.        .... Petitioner
               Through : Mr. Debo K. Deori, Adv.

     Versus

     FLAKT (INDIA) LTD. & ORS.                .... Respondent
                   Through:

     JUSTICE SHIV NARAYAN DHINGRA


1.   Whether reporters of local papers may be allowed to see
     the judgment?

2.   To be referred to the reporter or not?

3.   Whether judgment should be reported in Digest?

     JUDGMENT

1. By this petition under Section 34 of the Arbitration

and Conciliation Act, the petitioner has assailed an award of

the Tribunal dated 15th January, 2009 whereby the Tribunal

allowed the claim of the respondent in respect of balance

amount of milestone payment to the tune of USD72,730/- and

INR39,04,510.03 and also allowed a claim of USD18,045/- and

INR2,66,460/- against vat and service tax not refunded.

Tribunal awarded 12% interest on these amounts from the

date they became due and payable, in case the amounts were

not paid within 15 days of the passing of award, till realization.

The Tribunal also directed the petitioner to pay balance 25% of

the retention money of the claim and costs of arbitration

proceedings.

2. The respondent/claimant had entered into a sub-

contract with the petitioner, called as 'TVS sub-contract' and

the petitioner had deducted an amount of USD72,730/- and

INR39,04,510.03 out of the payments due towards the

respondent and had also not refunded vat and service tax in

terms of contract and had not paid remaining retention money

to the tune of 25% which resulted into invocation of the

Arbitration agreement by the respondent and passing of the

award by the Tribunal in favour of the respondent. The

contention of the counsel for the petitioner is that the sub-

contract entered into between the petitioner and the

respondent though was a lumpsum contract inclusive of all

taxes, royalty, custom duties (other than custom duties, i.e.,

basic custom duty, CVD and SAD of specified imported items

which were not payable under the special exemption

notification under the Customs Act, 1962 as described in terms

of payment, Annexure-4), excise duty and other duties, still the

petitioner was entitled to make deductions in case of an

eventuality of deviation in the custom duty rates. The

petitioner contended that it was entitled to deduct the amount

on account of exemption of custom duty enjoyed by

respondent under different notifications. The contracted

lumpsum price entitled the petitioner to make recoveries of the

amounts recovered from the petitioner by Samsung, on back-

to-back basis.

3. The learned Arbitral Tribunal considered the

contract between the parties and the specific clauses

regarding custom duty and came to conclusion that the

petitioner's assumption that the fixed lumpsum price under the

sub-contract was variable as per custom duty, was factually

not correct. It was observed that there was no component of

custom duty in the fixed lumpsum price agreed under the

contract nor there was any incidence of custom duty charged

and paid to the Government thereafter in respect of any of the

imports into the country under the contract. The Tribunal also

observed that the petitioner neither pleaded nor proved if any

amount towards the exemption of custom duty was adjusted

by the principal contractor (Samsung) from amount payable to

the petitioner. It was also observed that the petitioner had

failed to produce on record the invoices raised by Samsung on

them having a component of custom duty, unlike the invoices

raised by the respondent on the petitioner. The Arbitral

Tribunal thus came to conclusion that the petitioner was not

entitled to deduct the amount from the bills of respondent and

allowed the claim of the respondent regarding these

deductions. There is no dispute that the claimant/respondent

was entitled for vat and service tax refund and during the

arbitration proceedings, the petitioner had admitted a part of

the claim and undertaken to release the said amount to the

respondent/claimant at the earliest and as and when the same

was received by the petitioner from the principal director.

4. It is not disputed that the retention money to the

tune of 25% was not paid to the claimant/respondent because

of the alleged adjustments made by the petitioner and the

Tribunal allowed the claim to that extent as well.

5. The petitioner has assailed the award on the ground

that the Tribunal had not treated the parties with equality and

acted against the elementary principle of natural justice and

fair play. It is also submitted that the Tribunal had not given

reasons or justification for the conclusions arrived at and there

was no link between the material placed on record before the

Tribunal by the petitioner and the conclusions arrived at. It is

also submitted that the Tribunal failed to appreciate that 'TVS

sub-contract' agreement was entered on 6th June, 2003, i.e.

after Samsung (principal employer) had negotiated the price

with the respondent. The respondent did not disclose to the

Tribunal as to when the price was negotiated by Samsung and

when Samsung asked the respondent no. 1 to enter into firm

sub-contract with the petitioner. Thus, the award given by the

Tribunal was unfair.

6. The petitioner and the respondent had entered into

a written contract between them. Samsung was not a party to

the contract. It was for the petitioner to consider the contract

carefully at the time of entering into it. If the petitioner had

entered into a contract at the instance of Samsung (principal

employer), that cannot be a ground to hold that the contract

between the petitioner and the respondent was a back-to-back

contract and whatever deductions were made by Samsung

from the petitioner's bills are liable to be borne by the

respondent. The contract between the petitioner and the

respondent is an independent contract and is governed by its

own terms and conditions. Unless and until the contract

provided that it was a back-to-back contract and all deductions

made by Samsung from the petitioner would be the

responsibility of the respondent, the petitioner could not make

those deductions from the respondent. The learned Arbitral

Tribunal considered the terms of the contract between the

parties and taking into account the terms of the contract

passed the award.

7. It is settled law that under Section 34 of Arbitration

and Conciliation Act, this Court does not sit as an appellate

court over the decision of the Arbitral Tribunal and cannot re-

appreciate the evidence and arrive at a different conclusion.

The Arbitral Tribunal is a judge of the facts and of law and has

right to interpret the contract between the parties. This Court

cannot substitute its own opinion against the opinion of the

Arbitral Tribunal regarding quality, quantity and appreciation of

the evidence, import of the documents and interpretation of

the contract between the parties. The Court can interfere only

under the circumstances as enumerated under Section 34 of

the Arbitration and Conciliation Act 1996. The petitioner in this

case had challenged the award only on vague and unspecified

grounds. Though the award analysed the contract between

the parties and gave detailed reasoning, still it is alleged that

the award is an unreasoned award. The award has considered

what were the relevant documents effective between the

parties and required to be considered, still the allegation is

made that the Arbitral Tribunal had not considered the

documents. The proceedings before the Arbitral Tribunal as

filed by the petitioner show that both the parties were given

equal and adequate opportunity to present their case before

the Tribunal, still the allegations are made by the petitioner

that the Tribunal did not treat the parties equally.

8. I find that none of the grounds made by the

petitioner in the petition is tenable. I also find that the

challenge to the award made by the petitioner is not

sustainable under Section 34 of the Arbitration and Conciliation

Act. The petition is hereby dismissed.

July 03, 2009                     SHIV NARAYAN DHINGRA J.
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