Mr. Sharan, learned senior Counsel appearing for the Appellant, also challenged the arbitral award on the ground that the same is in conflict with the public policy of India. We do not find any substance in the said submission. This Court, in the case of Oil and Natural Gas Corporation Ltd. (supra), observed that the term 'public policy of India' is required to be interpreted in the context of jurisdiction of the Court where the validity of award is challenged before it becomes final and executable. The Court held that an award can be set aside if it is contrary to fundamental policy of Indian law or the interest of India, or if there is patent illegality. In our view, the said decision will not in any way come into rescue of the Appellant. As noticed above, the parties have entered into concluded contract, agreeing terms and conditions of the said contract, which was finally acted upon. In such a case, the parties to the said contract cannot back out and challenge the award on the ground that the same is against the public policy. Even assuming the ground available to the Appellant, the award cannot be set aside as because it is not contrary to fundamental policy of Indian law or against the interest of India or on the ground of patent illegality.
The words "public policy" or "opposed to public policy", find reference in Section 23 of the Contract Act and also Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996. As stated above, the interpretation of the contract is matter of the Arbitrator, who is a Judge, chosen by the parties to determine and decide the dispute. The Court is precluded from re-appreciating the evidence and to arrive at different conclusion by holding that the arbitral award is against the public policy.REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.9048 OF 2014
(Arising out of Special Leave Petition (Civil) No.10849 of
2013)
Swan Gold Mining Ltd.
Versus
Hindustan Copper Ltd.
M.Y. Eqbal, J.:
Citation: 2014(4)ARBLR1(SC), [2014]122CLA444(SC), 2014(11)SCALE33
Dated;September 22, 2014
This appeal by special leave is directed against the
judgment and order dated 19.9.2012 passed by the Division
Bench of the Calcutta High Court whereby appeal preferred
by the appellant against the order of learned Single Judge of
the High Court was dismissed.
Learned Single Judge had
dismissed the appellant’s petition under Section 34 of the
1
Page 1
Arbitration
and
Conciliation
Act
(in
short,
‘the
Act’)
challenging the award of the Arbitrator.
3. The case of the appellant is that a notice inviting tender
(NIT) was issued by the respondent-Hindustan Copper Ltd.
inviting offers for operation of its Surda Mine and Mosabani
Concentrator
Plant.
Respondent-company
was
having
several mines rich with natural resources being metallic ores.
The global tender floated by the respondent provided that it
shall be the responsibility of successful bidder for payment of
all statutory duties.
The appellant-company submitted its
technical and financial bids. It is contended on behalf of the
appellant that the NIT contained a techno commercial bid
and a separate price bid. Price bid of the appellant provided
that any Excise Duty/Service taxes or any levy presently
applicable or any variation or new levy in future to be
reimbursed on actual basis.
2
Page 2
4. After negotiation and acceptance of the final price offer,
on 3.3.2007 respondent issued a Letter of Intent to the
appellant on the terms and conditions of the NIT and other
terms agreed during subsequent discussions/negotiations.
Finally, on 26.3.2007 a contract was executed between the
parties for re-commissioning and operation of the Surda Mine
and Mosabani Concentrator Plant. Thereafter, a work order
was issued on 14.4.2007 and the appellant raised its Invoices
on 31.12.2007, by which reimbursement of basic excise duty
and other duties payable by the appellant to the Government
was sought. On refusal by the respondent to make payment
in respect of excise duty and other taxes paid by the
appellant relating to the work executed, the arbitration
clause was invoked and the dispute was referred to a sole
Arbitrator, who after considering the pleadings and evidence
led by the parties, held that the price bid of the appellant was
not exclusive of applicable taxes.
Learned Arbitrator held
that the clause relating to payment of taxes was deleted by
the appellant’s representative Mr. Ahlawat on 19.1.2007 and
3
Page 3
since work order was acknowledged, it is binding on the
appellant.
5.
The appellant challenged the award by way of filing
petition under Section 34 of the Arbitration and Conciliation
Act before the Calcutta High Court on the grounds inter alia
of perversity and contrary to law.
Learned Single Judge of
the High Court upholding the award and reasons assigned by
the
learned
Arbitrator,
dismissed
appellant’s
petition.
Aggrieved by the decision of the learned Single Judge,
appellant preferred appeal before the Division Bench of the
High Court, which although upheld the contention of the
appellant relating to the evidence on the issue of deviation in
price bid on 19.1.2007, dismissed the Appeal on the ground
of terms contained in NIT and Work Order being in
consonance with each other. Hence, this appeal by special
leave by the Australian company.
4
Page 4
6.
Mr. Amarendra Sharan, learned senior counsel appearing
for the appellant assailed the award and the impugned order
passed by the High Court on various grounds. Learned
counsel contended that the appellant is a reputed Australian
Mining Company and it submitted bid in response to NIT. The
price bid submitted by the appellant provided for “base price
plus 55%” and that any excise duty/service tax or any levy to
be reimbursed on actual basis.
A meeting of the Tender
Evaluation Committee of the respondent-company with the
bidders was held on 18.1.2007 and 19.1.2007 and the
respondent did not object to the price bid submitted by the
appellant which was exclusive of taxes.
It is further
contended by the senior counsel that after opening of price
bid, although the respondent made a request to lower the bid
price, there was no request to change provision relating to
taxes mentioned in the price bid by which respondent was
liable to reimburse taxes. The appellant-company submitted
the revised bid on 27.1.2007 and reduced the percentage
from 55% to 50% (over the base price) and reiterated its
5
Page 5
earlier offer of payment of taxes by the respondent.
After
further negotiation and reduction of price bid to “base price
plus 49%”, respondent issued Letter of Intent on 3.3.2007
and the contract was signed between the parties on
26.3.2007.
7.
Learned senior counsel contended that on 14.4.2007
Work Order was issued with its Clause 4.9, which provided for
payment of taxes by the appellant.
For the settlement of
disputes pertaining to taxes and duties, appellant invoked
clause 4.14 of NIT and sought appointment of Arbitrator
where it was claimed by the appellant that price bid
submitted by the appellant is exclusive of taxes and clause
4.9.1 of Work Order is inoperative and void. This claim was
dismissed by the Learned Arbitrator on the ground that the
clause relating to payment of taxes was denied by the
appellant’s representative Mr. Ahlawat on 19.1.2007 and
since the work order was acknowledged, it is binding on the
appellant.
6
Page 6
8. Mr. Sharan has submitted that there had never been any
negotiation with regard to the liability of payment of excise
duties and taxes as the same was finally concluded to the
effect that the taxes shall be liable to be reimbursed by the
respondent. The negotiation was only with respect to the
percentage which was finally reduced to 49%. It is submitted
that the respondent gave a calculation which does not
include taxes. All these backgrounds have neither been
considered by the Arbitrator nor by the High Court. It was
submitted that non consideration of the offer, counter offer
and letter of acceptance by the Arbitrator amounts to serious
error and patent illegality in the Award. NIT is only invitation
to offer, which has been superseded by subsequent offers
and counter offers and hence, NIT cannot become the
contract. Lastly, Mr. Sharan contended that work order is a
unilateral document and there was no consensus ad idem on
the Work Order.
7
Page 7
9.
Mr. Sharan, learned counsel put heavy reliance on the
decision of this Court in the case of Oil and Natural Gas
Corporation Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705,
and submitted that if the Award is contrary to the substantive
provision of law, or the provisions of fact or against the terms
of contract, it would be patently illegal and could be
interfered under Section 34 of the Act.
Mr. Sharan finally
contended that the parties have expressly agreed that the
bid price shall be exclusive of the duty of taxes, deviation
from such contract will go to the root of the matter and on
that ground Award could be set aside if it is so unfair and
unreasonable. This will also be opposed to the public policy
and required to be adjudged void.
10. Per contra, Mr. P.P. Rao, learned senior counsel for the
respondent, firstly submitted that the Award cannot be set
aside except where the Award on the face of it suffers from
patent illegality and perversity. As the learned single Judge
and the Division Bench after re-appreciation of the entire
8
Page 8
facts and documents came to the conclusion that no ground
exists to set aside the Award, this Court should not interfere
with the order of the High Court.
11. Learned senior counsel drawn our attention to various
documents including NIT, initial bid proceedings of the
meeting, revised bid, offer and counter offers, on the basis of
which the letter of intent was issued. Finally, the Work Order
was issued and a contract was signed by both the parties.
These documents would show that the appellant was made
liable for payment of duty and taxes, which were inclusive of
the bid price arrived at between the parties.
12. Section 34 of the Arbitration and Conciliation Act, 1996
corresponds to Section 30 of the Arbitration Act, 1940 making
a provision for setting aside the arbitral award. In terms of
sub-section (2) of Section 34 of the Act, an arbitral award
may be set aside only if one of the conditions specified
therein is satisfied.
The Arbitrator’s decision
is generally
9
Page 9
considered binding between the parties and therefore, the
power of the Court to set aside the award would be exercised
only in cases where the Court finds that the arbitral award is
on the fact of it
erroneous or patently illegal or in
contravention of the provisions of the Act. It is a well settled
proposition that the Court shall not ordinarily substitute its
interpretation for that of the Arbitrator. Similarly, when the
parties have arrived at a concluded contract and acted on the
basis of those terms and conditions of the contract then
substituting new terms in the contract by the Arbitrator or by
the Court would be erroneous or illegal.
13. It is equally well settled that the Arbitrator appointed by
the parties is the final judge of the facts. The finding of facts
recorded by him cannot be interfered with on the ground that
the terms of the contract were not correctly interpreted by
him.
10
Page 10
14. We have gone through the facts of the case and perused
the documents on the basis of which the Arbitrator gave the
Award on 24.7.2009.
15.
The respondent issued notice inviting tender (NIT) for
the operation of its mine. Clauses 4.9.1 to 4.9.5 of the NIT
are extracted hereinbelow:-
“4.9.1.
The rates quoted by the successful
bidder shall be deemed to be (inclusive) of the sales
taxes, other taxes and service tax that the successful
bidder will have to pay in India & Abroad for the
performance of this contract. HCL will perform such
duty regarding the deduction of such taxes at source
as per applicable laws.
4.9.2. The successful bidder shall also be responsible
to bear and pay any taxes, cess, fees and/or duties
levied including but not limited to interest, penalty
and/or fine imposed by any authorities including
revenue authorities in India and/or abroad at any time
even beyond the expiry of the Contract period with
respect of the work to be performed by the successful
bidder in accordance with the Contract.
4.9.3. The successful bidder shall also be responsible
for filing income tax return and/or complying with
necessary procedure and/or formalities as required or
may be required under the fiscal laws of India and/or
abroad in respect of the work to be performed by the
successful bidder in accordance with the Contract.
4.9.4. Corporate Tax and/or Income Tax, if any
applicable/levied in India and/or abroad on the
successful bidder and/or its personnel and/or on the
sub-contractors engaged by the successful bidder
and /or the personnel of such sub-contractors in
11
Page 11
respect of this contract will be the responsibility of the
successful bidder. All the necessary return and other
formalities will be the responsibility of successful
bidder.
4.9.5. All other statutory levies including but not
limited to Custom Duties/Excise Duties, Sales Taxes,
Works Contract and other levies of whatsoever nature
payable in accordance with the law of India,
levied/leviable on the successful bidder and/or its sub-
contractors in respect of performance of this contract
shall be the responsibility of the successful bidder or
any of its sub-contractors.”
16. The appellant in response to NIT submitted its technical
and financial bids. Subsequent to submission of the technical
bid and the price bid, the parties entered into negotiation and
thereafter a letter of intent on the terms and conditions of
NIT
and
the
other
terms
agreed
during
subsequent
negotiations was issued. In the said letter of intent dated
3.3.2007, it was specifically mentioned that the execution of
work shall be on the terms of notice inviting tender (NIT) and
other agreed discussions/negotiations subsequently held
between the parties. Finally the Work Order was issued on
14.4.2007 in continuation with the letter of intent dated
3.3.2007. The relevant portion of the work order is extracted
herein-below:-
12
Page 12
“WORK ORDER
SUB:- Re-opening and operating of Sudra Mine & Mosaboni
concentrator plant at Indian Copper Complex, Ghatsila
Dear Sir,
With reference to the above subject, Hindustan Copper Limited
is please to issue work order to continuation with LOI dated 03-
03-2007 to re-commission, operate and maintain Surda Mine
and Mosaboni concentrator plant to supply and deliver copper
concentrate at rates Rs 1,53,470.00 per ton of mental in
concentrate (Excluding Royality) to Maubhandar work of Indian
Copper Complex, produced from the operations of these units.
This Work shall be governed by the terms and conditions of the
Expressions of Interest of dated 21-09-2006, Notice Inviting
Tender No. HC/HO/GM (M&S)/SUDRA dated 11-12-2006 and the
other agreed during subsequent discussions/negotiations, and
the final offer.”
(Emphasis given)
17. In the course of hearing, Mr. P.P. Rao, learned senior
counsel appearing for the respondent produced before us a
xerox copy of the Work Order dated 14.4.2007. Clause 4.9.1
quoted hereinabove specifically mentions therein that the
rate quoted by the appellant was inclusive of sales tax,
service tax and the other taxes. The representative of the
appellant signed the Work Order on each pages (20 pages)
and acknowledged and admitted the terms and conditions for
the said work.
13
Page 13
18. From the facts mentioned hereinabove, it is evident that
the appellant has accepted the liability of payment of excise
duty, sales tax, service tax and other taxes and hence it
cannot be held that the clause 4.9.1 of the Work Order is
inconsistent with the terms and conditions of contract
documents.
19. The learned Arbitrator has gone in detail of the dispute
raised by the appellant and rightly came to the conclusion
that the responsibility on the appellant is to abide by the
terms and conditions of the Work Order.
20. We have also gone through the order passed by the
High Court.
The Court rightly came to the conclusion that
there is no patent illegality in the Award passed by the
Arbitrator which needs interference under Section 34 of the
Act.
14
Page 14
21. Mr. Sharan, learned senior counsel appearing for the
appellant, also challenged the arbitral award on the ground
that the same is in conflict with the public policy of India. We
do not find any substance in the said submission. This Court,
in the case of Oil and Natural Gas Corporation Ltd.
(supra), observed that the term ‘public policy of India’ is
required to be interpreted in the context of jurisdiction of the
Court where the validity of award is challenged before it
becomes final and executable. The Court held that an award
can be set aside if it is contrary to fundamental policy of
Indian law or the interest of India, or if there is patent
illegality. In our view, the said decision will not in any way
come into rescue of the appellant.
As noticed above, the
parties have entered into concluded contract, agreeing terms
and conditions of the said contract, which was finally acted
upon. In such a case, the parties to the said contract cannot
back out and challenge the award on the ground that the
same is against the public policy. Even assuming the ground
available to the appellant, the award cannot be set aside as
15
Page 15
because it is not contrary to fundamental policy of Indian law
or against the interest of India or on the ground of patent
illegality.
22. The words “public policy” or “opposed to public policy”,
find reference in Section 23 of the Contract Act and also
Section 34 (2)(b)(ii) of the Arbitration and Conciliation Act,
1996. As stated above, the interpretation of the contract is
matter of the Arbitrator, who is a Judge, chosen by the parties
to determine and decide the dispute. The Court is precluded
from re-appreciating the evidence and to arrive at different
conclusion by holding that the arbitral award is against the
public policy.
23. We have given our anxious consideration in the matter.
In our view the High Court has rightly came to the conclusion
that no ground exists for setting aside the award as
contemplated under Section 34 of the Act.
16
Page 16
24. For the reasons aforesaid, we do not find any merit in
this appeal, which accordingly stands dismissed with no order
as to costs.
..................................J.
[ M.Y. Eqbal ]
..................................J
[Pinaki Chandra Ghose]
New Delhi
September 22, 2014
No comments:
Post a Comment