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2023 (5) TMI 424 - HC - Indian LawsValidity of Arbitral Award - main ground for challenging the award is that the learned Arbitral Tribunal while passing the award has not taken into consideration any evidence led by the parties, particularly, by the petitioner - Violation of principles of natural justice - goods which were got manufactured from the third parties, known as Bought Out Products (BOP) i.e., materials, parts and equipments, etc. procured for the project by the claimant from the approved sub-contractors, the petitioner refused to reimburse the Excise Duty and CST. HELD THAT:- As far as, Section 34 of the Act is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may not interfere on merits. The Court may only interfere on the limited ground provided under Section 34(2)(b)(ii) of the Act i.e. of the award is against the public policy of India. As per the legal position clarified through decisions of this Court that violation of Public Policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of justice of India, conflict with justice or morality and existence of patent illegality in the arbitral award. The concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice and reasonableness. As per the Section 34 of the Act, the award of the learned Arbitral Tribunal can be challenged on the ground if the award is contrary to the public policy, patent illegality and passed without any evidence. In the instant case, the main ground for challenging the award is that the learned Arbitral Tribunal while passing the award has not taken into consideration any evidence led by the parties, particularly, by the petitioner. The genesis of the dispute is to determine whether the petitioner was contractually liable to pay aforesaid amount i.e. Rs. 3,89,92,930/- in respect of the taxes, levies and duties towards BOP to the respondent - The learned Arbitral Tribunal, while interpreting the Clause 14 of the Contract, reached on the conclusion that the petitioner is obligated to pay the taxes and duties and there is no difference between the payment of taxes and duties in respect of manufactured goods and BOP. Taking view of the reason assigned in the interpretation, there are no error or illegality in the said interpretation of the learned Arbitral Tribunal. The learned Arbitral Tribunal has also rejected the arguments of the applicant regarding the applicable taxes and duties and held that “the moment taxes and duties become applicable in respect of supplies to the respondent, they are reimbursable under Clause 14.1. That clause does not state that such taxes and duties were to be payable by the claimant directly to the Government. The expression “applicable” is to be understood in the context of manufacturing of goods and not with reference to the person. The sub-contractor while paying excise duty had passed on the burden to the claimant and the claimant therefore, became entitled to the payment or reimbursement thereof from the respondent.” The learned Arbitral Tribunal rightly interpreted the term “at actuals” as “none of the contractual provisions qualify for the respondent’s obligation as confining to manufactured products only. On the contrary, the language is wide and all encompassing and includes BOP as well. The expression “actual” in this context refers the taxes, duties and levies actually paid to the exchequer.” Therefore, as per the contract, there is no distinction between the respondent and the sub-contractor. The Schedule 7 does not in any way affect the tax liability of the petitioner towards the respondent. The Schedule 7 merely stated an estimate amount which may be paid to the petitioner and was not based on the actuals. The learned Arbitral Tribunal has rightly rejected the argument of the applicant on the aspect that reimbursement of taxes on account of BOP supplies was not made by the petitioner on 4th March, 2015 and 15th May, 2015. The petitioner acknowledged reimbursement of taxes and duties for BOP and such liability was not disputed/refuted by the petitioner. In Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited, [2021 (9) TMI 1479 - SUPREME COURT], the Hon’ble Supreme Court held that The limited grounds available to Courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the Courts. There is a disturbing tendency of Courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and therefore, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. Hence, the law which has been settled by the Hon’ble Supreme Court is that the scope of interference with an arbitral award under Section 34 of the Act is fairly limited and narrow. The Court shall not sit in an appeal while adjudicating a challenge to an award which is passed by an Arbitrator, the master of evidence, after due consideration of facts, circumstances, evidence and material before him. There are no reason to interfere in the impugned award as there is no perversity or illegality or error in the said award - petition dismissed.
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