Boundaries reiterated for Section 34

By February 17, 2015 December 20th, 2019 No Comments
The present case[1]
arises out of the petition filed by the Petitioner under Section 34 of the
Arbitration and Conciliation Act, 1996 to assail the interim/ partial award
dated 04.04.2007 passed by a three member arbitral tribunal. The dispute
between the parties arose out of the differences pertaining to the quantum
of deduction that could be made from the fixed lump sum price of the project,
on account of exemption from customs duties and other indirect taxes (i.e. the
excise duty component of the indirect taxes) granted by the Government of India
in relation to the project. According to the Petitioner the agreed declared
amounts of the deductions, that were permissible under the contract, were
limited to Rs. 206.4 Crores as per Clause 4 of the ‘contract agreement’ between
the parties. While the Respondent has placed reliance on the Clause 13.1 of ‘General
Conditions of Contract’ which very clearly states that if any benefit arises
due to exemption in Custom Duty or Excise Duty to the claimant (Petitioner in
the present dispute), the said benefit should be passed on to the employer
(Respondent in the present dispute).

The learned arbitral tribunal, on the interpretation
of the clauses of the ‘General Conditions of Contract’ (hereinafter
“GCC”) along with the ‘contract agreement’ held that the Respondent is
entitled to deductions in excess of the said amount on the basis of the
“actual benefits” accrued to the Petitioner on account of exemptions.

The Hon’ble High Court upheld the
decision passed by the Learned tribunal and further dismissed the petition
filed by the Petitioner. Following reasons were given by the Hon’ble High Court
in support of its decision dated 05.01.2015.
If the intention of the parties, at the time of entering
into the contract was not to pass on the benefit, beyond Rs. 206.4 Crores to
the employer in case of grant of any tax/duty exemption at a later stage, they
would not have included Clause 13.1 in the GCC, which forms part of the
Contract. It was inserted with an aim to avoid any confusion as to who the
beneficiary will be, if during the existence/course of the contract, any
tax/duty exemption is granted by the Government.

It is settled law that if the arbitrator has applied
his mind to the pleadings, the evidence adduced before it, and the terms of the
contract, the court would not reappraise the matter as if it were an appeal. Interpretation
of contractual terms is a matter within the domain of the arbitrator. Even if
the interpretation adopted by the arbitrator is not the only possible view, it
being a plausible view, without any patent illegality in the conclusions drawn
by the arbitrator, it is beyond the scope of jurisdiction of this court under Section
34 of the Act to interfere with the award on this aspect.

Decided on:  05.01.2015 Decided by:  Delhi High Court

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