Power Grid Corporation Of India ... vs Abb Limited
2009 Latest Caselaw 3482 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+            OMP No.372/2009 & IA No.8585/2009

%                     Date of decision: 1st September 2009

POWER GRID CORPORATION OF
INDIA LTD.                                            ....Petitioner
                        Through:    Mr. A.T.M. Rangaramanujam, Sr.
                                   Advocate with Mr. Pawan Upadhyay &
                                   Mr. Anish K. Maggo, Advocates

                               Versus

ABB LIMITED                                           ... Respondent


                        Through: Mr. Jayant Nath, Sr. Advocate with Mr.
                                 Mukhopadhya & Mr. Ayush Agrawal,
                                 Advocates


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   No

2.    To be referred to the reporter or not?    No

3.    Whether the judgment should be reported         No
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1 This OMP under Section 34 of the Arbitration Act, 1996 with

respect to an arbitral award dated 11th January, 2009 has been

preferred along with the application for condonation of 57 days delay

in re-filing the OMP. The respondent/caveator in response to the

caveat appeared and stated on 26th August, 2009 that though no case

for condonation of delay in re-filing is made out but even if the OMP

was to be considered, no ground for issuance of notice is made out.

In the circumstances, the senior counsels for both parties were

heard on 26th August, 2009 and 27th August, 2009.

2 The respondent was the claimant before the arbitral tribunal.

Three claims of the respondent were for consideration before the

arbitral tribunal i.e. (i) on account of non-issuance of C Forms under

the Sales Tax Act; (ii) for recovery of Rs.20,03,792/- deducted by the

petitioner from the invoice of the respondent; and (iii) for

reimbursement of Service Tax.

3 The arbitral tribunal allowed all the three claims of the

respondent. The respondent had also claimed interest on the

amount claimed towards reimbursement of Service Tax. The same

was declined. The respondent was awarded interest at 10% per

annum on the amount of the Service Tax with effect from 13 th July,

2007 i.e. the date of the reference of disputes and on the amount of

Rs.20,03,792/-. Though the petitioner has in the OMP raised

grounds with respect to the award on all the three claims but the

contentions of the senior counsel for the petitioner were directed

only towards the award on account of non-issuance of C Forms.

Re.: non-issuance of C Forms

4. The award records and there is no challenge thereto, that in

response to a tender floated by the petitioner, M/s A.BB. Utilities

A.B, a foreign party was the lowest bidder; it, as permitted by the

agreement and as agreed, assigned the on shore supply and on shore

service part of the contract to the respondent, while retaining the

offshore supply part of the contract to itself. The C Forms were

demanded by the respondent with respect to the interstate sale of

goods made by the respondent to the petitioner under the On Shore

supply contract and also with respect to the goods invoiced by the

respondent but which were directly consigned by the sub-suppliers

of the respondent to the petitioner.

5 The arbitral tribunal allowed the said claim for three reasons.

Firstly it was held that the petitioner under the contract was bound

to issue the said C Forms. Secondly it was held that the petitioner

had issued the C Forms to the respondent for the financial year

2003-2004 and was estopped from denying the liability to issue C

Forms for the subsequent years. Thirdly, it was held that the

petitioner even under the law i.e. the Central Sales Tax Act was

liable to deliver the said C Forms to the respondent.

6. The arbitral tribunal with respect to the first of the aforesaid

reasons held that the initial bid pursuant whereto the contracts were

executed, was made by M/s. ABB Utilities AB, a foreign party bidder

within the meaning of the invitation for bids; that the respondent,

though an Indian company was an assignee of the said foreign bidder

and the same was held to be inconsequential inasmuch as under the

terms of the contract the ultimate responsibility for performance of

the parts of the contract with respect whereto the contract was

directly with an Indian company i.e. the respondent as an assignee of

the foreign bidder also, the ultimate responsibility for good

performance and for default was of the foreign bidder only. The

arbitral tribunal thus held that the clauses in the contract relating to

the foreign bidder and which provided for issuance of the said C

Forms would apply and not clauses relating to the Indian bidder (and

which did not provide for issuance of such C Forms). In fact the

arbitral tribunal held that even the clause relating to Indian bidders

did not prohibit or bar the issuance of such C Forms.

7. Though the arbitral tribunal has on a construction of the terms

of the contract held the respondent entitled to the C Forms, the

arbitral tribunal also found that the clarifications given by the

petitioner with respect thereto also placed the matter beyond the

scope of any ambiguity.

8. Qua the reason of estoppel, the arbitral tribunal found that

though the petitioner had in the first instance refused the C Forms

for the year 2003-2004 but subsequently issued the same; that the

petitioner by such conduct made the respondent alter its position to

its detriment i.e. by incurring the liability of penal rate of interest

and penalties which it otherwise would not have had to bear. The

arbitral tribunal further found that the petitioner had at no time

earlier denied the liability for issuance of the said C Forms and this

plea was taken for the first time in the arbitration, as an

afterthought. The arbitral tribunal in this regard also considered the

cross-examination of the witness of the petitioner wherein it was

admitted that there was no letter denying the liability of the

petitioner to issue C Forms under the contract.

9 The petitioner before the arbitral tribunal took a plea that the

C Forms for the year 2003-2004 had been issued by mistake. The

arbitral tribunal found that the plea of mistake had no substance.

10 On the third reason of liability of the petitioner to issue C

Forms under the Central Sales Tax laws, the arbitral tribunal found

that the respondent as well as the petitioner are registered dealers

within the meaning of the Central Sales Tax Act; that the High Court

of Andhra Pradesh within whose jurisdiction the sales were affected

has in Modern Proteins Ltd. Vs. Food Corporation of India

(1983) 52 Sales Tax Cases 403 held that even where the sales were

inclusive of sales tax, the registered dealer is liable to issue the C

Forms under the law. The arbitral tribunal found the said judgment

to be applicable to the facts of the case.

11 The arbitral tribunal noticed that the appeal preferred by the

respondent pertaining to assessment of Sales Tax for the year 2004-

2005 was pending and it was the contention of the respondent that if

the C Forms are issued before the disposal of the appeal, the

respondent shall make an attempt to have the assessment order set

aside and matter remanded for consideration in the light of C Forms

issued by the petitioner and which was likely to result in reduction of

Sales Tax and the liability for interest and penalties. The arbitral

tribunal in the circumstances held that if the petitioner fails to issue

the C Forms it would also be liable to pay damages to the respondent

levied by the department in this regard. Reliance was placed by the

arbitral tribunal on Hindustan Vegetables Oils Corporation

Limited Vs Progressive Industries (1995) 6 SCC 174 dicta of the

Supreme Court.

12 The senior counsel for the petitioner has urged that the

arbitral tribunal has not considered the letter dated 27th November,

2001 of the foreign bidder whose assignee the respondent is, to the

petitioner and wherein an unconditional acceptance was given of the

clauses of the contract and amendments thereto and the deviation,

alterations, objections thereto were withdrawn. It was argued that

there is no whisper at all of the said document in the award and had

the arbitral tribunal considered the said important document on

record of the arbitral tribunal, the finding with respect to the C

Forms would not have been reached. It is urged that non-

consideration of material evidence amounts to misconduct and which

even under the 1996 Act is a ground for setting aside of the award.

K.P. Poulose Vs. State of Kerala AIR 1975 Supreme Court 1259

laying down that an award ignoring the material documents amounts

to misconduct by the arbitrator is cited in this regard.

13 I however, do not find the said contention to be factually

correct. Though the arbitral tribunal has not given the date of the

letter but I find that in Para 26 of the award the said letter has been

dealt with. The arbitral tribunal has recorded that they are unable to

accept the contention of the petitioner that the clarifications stood

withdrawn; the arbitral tribunal held that the foreign bidder had

withdrawn the deviations from the tender conditions and not any

clarifications given by the petitioner. The senior counsel for the

petitioner has been unable to show that the reference in Para 26 of

the award is to any withdrawal other than that in the letter dated

27th November, 2001. Thus it cannot be said that the said

documents, even if material, has been ignored by the arbitral

tribunal.

14 The senior counsel for the petitioner has next handed over in

the court the copy of the affidavit by way of evidence of Mr. Milind B.

Belsare, witness of the respondent and has contended that even

though the said witness had nowhere deposed about the C Forms,

the arbitral tribunal has erred in granting the claim for C Forms in

favour of the respondent. This argument is met by the senior

counsel for the respondent by contending that the respondent had

besides the said witness examined two other witnesses also and one

of which had deposed with respect to the C Forms. The senior

counsel for the petitioner responds by stating that he has no idea

whether a total of three witnesses were examined by the respondent.

I may record that at this stage of the hearing, the option of calling

for the arbitral record was considered. However I am of the view

that since the pendency of a petition under Section 34 of the Act

makes the arbitral award inexecutable, no hard and fast rule can be

laid down for the court to before disposing of such petitions being

always required to call for the arbitral record. The party which

desires to challenge the arbitral award is required to place before

the court the copies of the arbitral records sought to be relied upon.

The petitioner in the present case has had ample opportunity. In fact

the petition was adjourned on the request of the petitioner on 30th

July, 2009, 11th August, 2009 and 26th August, 2009. The petitioner

has filed voluminous records stated to be forming part of the arbitral

record before this court. However the petitioner did not choose to

file the depositions of the witnesses of the respondent and chose to

at the time of hearing hand over the deposition of one of the witness

in the court. The petitioner, who by mere institution of the petition

succeeds in making the award inexecutable, cannot be permitted to

indulge in such dilatory practices of having the hearing adjourned

for calling for the arbitral record. Even otherwise, upon the

petitioner feigning ignorance of the other witnesses examined by the

respondent, no case was found for deferring the hearing of the

petition or of calling for the arbitral record. In a given case, where

the court for passing the judgment/order requires the arbitral

record, the same can be called for but no ground/contention raised

requires this court to call for the arbitral record for adjudication of

this petition.

15 The senior counsel for the petitioner also drew attention to

clause 45 titled "Taxes, Permits and Licences" in the "General

Conditions of Contract", whereunder the contractor has been made

liable for all non-Indian taxes, duties levies, assessed against the

owner or the contractor in pursuance to the contract as well as for

payment of all Indian dues, levies and taxes lawfully assessed against

the contractor for his personal interest and property only. However

in my view the same does not apply to the controversy in hand and in

any case expressly provides that the said clause shall be read in

conjunction with clause 22 of the invitation to bid and which clause

has been interpreted by the arbitral tribunal.

16 The senior counsel for the petitioner next drew attention to the

amendments in clause 22.2 of the contract. However the same

relates to the taxes payable on transaction between the contractor

and his nominee or assignee and his sub-contractor and has no

relevance to the controversy. Similarly, attention was invited to

amendment to clause 22.10 of the invitation to bid; the same

provides that the bidder shall include the Sales Tax on works

contract, turnover tax or any other tax under the Sales Tax Act for

services to be performed in owner's country as applicable, in their

quoted bid price and owner would not bear any liability on this account.

The said argument is met by the senior counsel for the respondent by

contending that the respondent is not calling upon the petitioner to bear

any liability for Sales Tax but is only calling upon the petitioner to

issue the C Forms which the petitioner is obliged to issue in terms

of clause 22.3 relating to foreign bidders as well as their assignee,

nominee and in relation to the supply portion of the contract. In

view of the express obligation in clause 22.3 of the contract,

considered by the arbitral tribunal, the reliance by the petitioner on

the amendment to clause 22.10 is of no avail. The senior counsel for

the petitioner has next drawn attention to the "Clarifications of

Technical and Commercial Bids and Review of Bidder's Proposed

Deviations and Alternative Solutions" paragraph 28.1.4 to 28.1.4.2.

However the same only provides for clarification meetings to be held

by the petitioner and has no relevance to the controversy at hand.

17. The senior counsel for the petitioner has placed reliance on

a) West Bengal Electricity Board Vs Patel Engineering

Co Ltd AIR 2001 Supreme Court 682 in support of the

proposition that instructions to bidders are to be adhered

to;

b) Basheshar Nath Vs. Commissioner of Income Tax AIR

1959 Supreme Court 149 laying down that for waiver there

must be an intentional relinquishment of a known right.

  c)   Rajasthan Mines and Minerals Ltd. Vs. Modern

       Engineering       Enterprises 1999       (3)   Arbitration    Law

       Reporter    350    (Supreme   Court)     in    support   of    the

proposition that where the award travels outside the

permissible territory and the arbitral tribunal exceeds its

jurisdiction in making the award or where the same is in

conscious disregard of the law or the provisions of the

contract, the same is to be set aside.

d). Durga Laxmi Builders Vs. Vice Chancellor University

of Delhi 2009 (6) AD (Delhi) 125 also to the effect that the

arbitral award is inconsistent with the contract, the same

is liable to be set aside.

e). Union of India Vs. A-1 Sanat & Co. Pvt. Ltd. 2009 (2)

Arbitration Law Reporter 520 (Delhi) again laying down

that award overriding the contractual terms is opposed to

public policy.

f). Kay Bee Alums P.Ltd. Vs. Union of India 2009 (2)

Arbitration Law Reporter 35 (Delhi) (DB) again holding

that the award contrary to the express terms of the

contract between the parties is liable to be set aside.

However neither of the said judgments persuade me to accept any of

the contentions of the petitioner.

18. Though none of the contentions of the petitioner with respect

to the award has been found tenable but I may record that the senior

counsel for the respondent has urged that the grounds argued are

not taken in the OMP and also that the petitioner suffers no

prejudice whatsoever by issuance of C Forms. On this query being

put to the petitioner, though the senior counsel for the petitioner

first sought to state that the petitioner would have to bear the tax

liability if issues the C Forms but subsequently on going through the

grounds taken in the OMP stated that though the petitioner will not

suffer any prejudice by issuing the C Forms and/or will not be

required to pay any tax but was contesting the same because

issuance of C Forms will result in loss to the public exchequer and

the petitioner being a public sector undertaking was obliged to

prevent the same and such an award in any case is contrary to public

policy. However I do not find any merit in the said contention. The

arbitral tribunal on an interpretation of the contract has held the

petitioner liable to issue the C Forms. The question of the same

being contrary to law or resulting in loss to the public exchequer is

not to come in the way in the present proceedings. If at all it is

found by the departments concerned that any tax has been evaded,

the concerned department is entitled to proceed separately with

respect thereto. Else the law is clear; the Supreme Court in BOC

India Limited Vs. Bhagwati Oxygen Ltd. 2007 (9) SCC 503 has

held that when the arbitrator has taken a plausible view for

interpretation of contract, it is not open to the court to set aside the

same on the ground of misconduct. To the same effect is the

judgment in State of UP Vs. Allied Construction 2003 (7) SCC

396 as well as in McDermott International Inc. Vs. Burn

Standard Co. Ltd. (2006) 11 SCC 181. The interpretation of the

contract by the arbitral tribunal is found to be a plausible one and

hence is not interferable by this court.

19. The senior counsel for the petitioner also could not tell as to

why the judgment of the Division Bench of Andhra Pradesh High

Court relied upon by the tribunal would not apply to the facts of the

case. The reliance placed on M/s. Ethiopian Airlines Vs. M/s. Stic

Travels (P) Ltd. AIR 2001 Supreme Court 2659 on the proposition

that the statute steps in aid of the agreement not in derogation of it

and when the agreement is silent against the public policy or any

party does not perform its obligation under such agreement, the

statute steps in to fill up such gaps and issues where necessary in

this regard is not understandable.

20. The findings of the arbitral tribunal qua estoppel and mistake

are findings of fact. The arbitral tribunal has held that mistake has

not been established and thus the principle of estoppel will apply.

The senior counsel for the petitioner referred to Sukumar

Chatterjee Vs. Kiran Chandra Mitter AIR 1964 Calcutta 439 on

the proposition that where the conduct constituting estoppel was

founded on a mistake of facts, the party is not estopped. But the said

proposition has no application, where mistake has not been

established as a fact, as held by the arbitral tribunal. It has been

held in M.P. Housing Board Vs Progressive Writers and

Publishers AIR 2009 SC 1585, Ispat Engineering and Foundry

Works, B.S. City, Bokaro Vs Steel Authority of India, B.S. City,

Bokaro (2001) 6 SCC 347 and DDA Vs Al Karma 22(1982) DLT 113

(DB) that in challenge to the award, the court cannot foray into

sufficiency or insufficiency of evidence.

21. The Supreme Court in Transmission Corporation of A.P.

Ltd. Vs Lanco Kondapalli Power (P) Ltd (2006) 1 SCC 540 though

in relation to interim relief observed in para 49 of the judgment that

conduct of parties is a relevant factor. If the parties had been acting

in a particular manner for a long time upon interpreting the terms

and conditions of the contract, pending final decision, ordering them

to continue doing so was held to be not arbitrary. Thus it cannot be

said that the view taken by the arbitral tribunal on the issue of

estoppel and mistake is a non-plausible one.

Re: Claim for deduction of Rs. 20,03,792/- from the invoice of the petitioner

22. The senior counsel for the petitioner did not address any

arguments on this aspect. However since in the OMP, in grounds (x)

to (xiii) challenge is made with respect thereto, it is felt appropriate

to deal with the same. The said claim was on account of cost of

constructing the site office under the On Shore services contract.

The respondent did not make payment of the said item in the invoice

of the respondent for the reason of the respondent having not

delivered the possession of the site office to the petitioner.

23. The arbitral tribunal found that lump sum price was payable

under the contract; that the respondent was required to construct

the site office and the initial advance was to be released by the

petitioner to the respondent only thereafter; that the price paid by

the petitioner to the respondent was shorter than the lump sum

agreed price by the said amount; that the said amount was thus

payable to the respondent.

24. Even in the grounds aforesaid in the OMP it is not disputed

that the petitioner under the contract was to pay the lump sum price

or that the said lump sum price has not been paid to the extent of the

amount aforesaid. Once that being the position, it cannot be said

that the amount is not payable for the reason of the site office having

not been delivered to the petitioner. Moreover nothing contrary to

substantial law, so as to be against the public policy is shown in the

said award.

Re: Reimbursement of Service Tax

25. The petitioner did not dispute the liability for Service Tax.

However the only argument is that the amount of the said Service

Tax is to be worked out. However that is precisely what was to be

done before the arbitral tribunal. The arbitral tribunal has worked

out the liability for service tax. Neither in the grounds in the OMP

nor during the course of hearing has it been shown as to which

amount included in the said computation is not

payable/reimbursable. Merely by raising a bogey of the calculations

being required to be done, this court in the exercise of jurisdiction

under Section 34 cannot be called upon to undertake such exercise.

The senior counsel for the respondent has drawn attention to the

certificate of the Chartered Accountant produced by the respondent

before the arbitral tribunal containing computation of service tax

and on the basis whereof the award with respect thereto has been

made. The petitioner has neither pleaded nor argued any defect in

the said computation.

26. Again though not urged, in the OMP ground has been taken

with respect to exorbitant rate at which interest has been awarded.

However interest has been awarded at the rate of 10% only and

cannot be said to be exorbitant or requiring interference by the

court.

27. Lastly, it is unfortunate that the petitioner, a public sector

company is persisting with the challenge to the issuance of the C

Forms. As observed by the arbitral tribunal also, the C Forms if

issued in time would avoid the liability for penalties and interest

being levied on the respondent and which also under the award have

been made reimbursable by the petitioner to the respondent. In fact

this was one of the grounds urged by the senior counsel for the

respondent for expeditious disposal of the petition inasmuch as any

further delay in this court would lead to a further liability on the

petitioner.

28. Accordingly, no case under Section 34 of the act having been

made out, the petition is dismissed. IA.No. 8585/2009 for

condonation of delay in refiling has become infructuous in the

circumstances, but to complete the formality, the delay in refiling is

condoned and application disposed of. Costs of Rs.35,000/- to the

respondent for these proceedings.

RAJIV SAHAI ENDLAW (JUDGE) September 1, 2009 J