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TMI Blog2023 (4) TMI 120X X X X Extracts X X X X X X X X Extracts X X X X ..... The 1st respondent herein was one amongst many persons who offered bids. As the 1st respondent's bid was the lowest, the appellant issued a letter of acceptance on 24.02.1995, followed by the Purchase Order on 28.03.1995. 4. The disputes between the parties arose on primarily one issue as to whether who was liable to pay/meet the difference in Foreign Exchange rate-U.S. $ vis-a-vis Indian Rupee. It is the case of the appellant that the contract awarded to the 1st respondent was a fixed/firm price contract and the words and phrases used in the contract in so many words clearly indicated that there could be no bargain with regard to the total price of Rs.17,23,16,160/-, which was agreed between the parties. Yet another issue that was not reconcilable between the parties was whether the appellant was entitled to claim interest on unadjusted portion of advance paid to the 1st respondent for delay occasioned beyond the delivery period and completion period agreed to in the contract. 5. Even though the agreement did not contain an arbitration clause, in the meeting between the parties on 29th and 30th of October 1998, the appellant as well as the 1st respondent unilaterally and vol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , and other miscellaneous claims. To this, the claimant filed an additional reply statement denying the liability on all counts. 11. It is to be noted that with the mutual consent of the appellant as well as the 1st respondent, a three member Arbitral Tribunal was constituted and taking into account the respective pleadings of the parties, the Arbitral Tribunal framed the following issues: " 1. Whether the 1st respondent agreed to the Exchange rate to be FIRM at Rs.31.61 Per U.S.$ throughout the period of contract, i.e., whether the 1st respondent has accepted that their prices of imported equipments are FIRM irrespective of exchange rate variation and whether the exchange rate variation is to the account of the 1st respondent or claimant. 2. Whether the claimant Board as per the purchase order dated 28.03.1995 agreed to pay the price of imported equipment in C.I.F value of U.S.$ and whether the exchange rate variation is to the account of claimant Board or the 1st respondent ? 3. Who is liable, whether the claimant or 1st respondent to pay the excess amount arising out of the difference in exchange rate variation of U.S $ vis-a-vis Indian Rupee prevailing at the time of imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scope of the Arbitration agreement? 14. Whether the claimant is entitled to recover the cost of the Arbitration proceedings? 15. To what relief the parties are entitled in this Arbitration proceedings? 12. In view of the objections taken by the appellant, the Tribunal chose to decide issues 4,6,12 and 13 as preliminary issues, besides also framing an additional issue viz., " Whether the counter claim of 1st respondent for Rs.9,24,82,047/- against the claimant Board is beyond the scope of arbitration agreement and whether this Tribunal has jurisdiction to decide the same" 13. Answering the preliminary issues and the additional issue framed, the Arbitrary Tribunal held that the Tribunal has no jurisdiction to decide claims arising out of customs duty variation and interest on excess amount and ultimately found that the counter claim was not arbitrable and the Tribunal had no jurisdiction to decide the counter claim. However, issue No.12 with regard to the question as to who should bear the cost incurred for the extension of bank guarantees, the Tribunal held that the claim for refund of Rs.7,23,428/- together with interest, totalling in all Rs.9,00,130/- made by the 1st resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mil Nadu Generation and Distribution Corporation Limited has preferred the above Original Side Appeal on the following grounds: (1) The learned Single Judge has failed to appreciate that the contract was a 'firm price' contract and ought not have held that the appellant had to bear the variation in Foreign Exchange rates. (2) The learned Single Judge ought not to have made a distinction between "total price and firm price" in coming to a conclusion that the 1st respondent was not liable to meet the variation in Foreign Exchange rates. (3) The learned Single Judge failed to see that the Arbitral Tribunal is not entitled to add any words to the contract which would amount to creating a new contract altogether and that the Arbitral Tribunal should act only within the terms of the contract. (4) The learned Single Judge has not even considered the arguments with regard to the parties agreeing that even the prices of spares were also made firm during the period of contract. (5) The learned Single Judge ought to have interfered U/s. 34 (2) of the Arbitration and Conciliation Act, 1996. (6) The learned Single Judge failed to take into account the draft Purchase Order an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons Valley Power House VI HE project, at total price of Rs.17,23,16,160/- (Rupees Seventeen Crores, twenty three lakhs sixteen thousand one hundred and sixty only). The prices are FIRM for indigenous equipment and CIF value in U.S. Dollar. The price comprises Ex-works price, freight & Insurance, Excise Duty and Central Sales Tax on the indigenous equipment, Customs duty on the CIF Value (USD) of imported equipment. The prices accepted which are indicated below are after allowing a discount of 4% on quoted all inclusive FOR (D) price including taxes and duties, of your offer. The broad split up prices of various supply of items are indicated in Table-A. The CIF value in US Dollars indicated is to be kept firm during the period of Contract. The prices of spares are also firm during the period of Contract." 20. Learned Senior counsel pointed out that if it was not a "firm price" contract, the parties would not have arrived at a total price at all viz., Rs.17,23,16,160/- and that the clause viz., "the price are firm for indigenous equipment and CIF value in U.S. Dollars" read with the further clause that " the CIF value in U.S.Dollars indicated is to be kept firm during the peri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of time. He also argued that the mere fact there is no specific clause in the Purchase Order stating that the appellant would have to bear the difference in Foreign Exchange rate would only go to show that the 1st respondent alone was liable to meet the difference in Foreign Exchange rate and not the appellant. The learned Senior counsel also contended that one another bid was made by Bharat Heavy Electricals Limited and the appellant's bid alone was accepted since it was slightly lower than the bid given by BHEL and if the liability of on account of Foreign Exchange variation was cast upon the appellant, the appellant would not have even agreed to accept the offer as it would become unworkable for the appellant, which is a State owned Electricity Board. The learned Senior counsel also referred to Sec.28(3) of the Act, which runs thus : " 28. Rules applicable to substance of dispute.- ............. 3.In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction." 23. It is the contention of the learned Senior counsel that the majority award did not follow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng opinion of a minority Arbitrator can be relied upon by the party seeking to set aside the award in order to buttress its submissions U/s. 34 of the Act and also that the Court is not precluded from considering the findings and conclusions of the dissenting opinion of the minority member of the Arbitral Tribunal. 8. The Board of Trustees of Chennai Port Trust Vs. Chennai Container Terminal Pvt Ltd, 2014 (1) CTC 573, for the proposition regarding relevancy of opinion of minority award and to reinforce the argument that the learned Single Judge while dealing with the application U/s.34 of the Act is not barred from referring to minority view. 24. Learned Counsel also relied on the judgments of the Hon'ble Supreme Court in the case of V.G.George Vs. Indian Rare Earths Ltd and another, reported in 1999 (2) Arb.L.R. 46 (SC); Nabha Power Limited Vs. Punjab Spcl Limited, reported in (2018) 11 SCC 508; State of Orissa Vs. Sudhakar Das (Dead) by Lrs, reported in 2000 (2) Supreme 119; Food Corporation of India Vs. Chandu Construction and another, reported in (2007) 4 SCC 697 and Satya Jain Vs. Anis Ahmed Rushdie reported in (2013) 8 SCC 131 for the propositions regarding interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following judgments: 1. Haryana Tourism Limited Vs. Kandhari Beverages Limited, reported in (2022) 3 SCC 237, for the proposition that the High Court U/s. 37 of the Act cannot enter into merits of claim and that the same is impermissible in exercise of powers U/s. 37. 2. UHL Power Company Ltd Vs. State of Himachal Pradesh, reported in 2022(4) SCC 116, for the proposition that (i) the jurisdiction of an Appellate Court hearing an appeal U/s. 37 of the Act is even more circumscribed than the scope of the High Court deciding challenge to an award U/s. 34 of the Act, which by itself is already narrow. (ii) When there are two plausible interpretations of terms and conditions of contract, no fault can be found, if the Arbitral Tribunal accepts one interpretation as against the other and that such course adopted by the Arbitral Tribunal cannot be set aside by the High Court even U/s. 34 of the Act. (iii) The mandate U/s.34 of the Act is to respect finality of the Arbitral award and if the Courts were to interfere with the Arbitral award in usual course on factual aspects, then the very object and purport behind parties opting for alternate dispute resolution would itself stand fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssecting and reassessing factual aspects of the case to come to a conclusion that the award needs intervention and by dubbing the award to be vitiated by perversity or patent illegality and that such an approach would lead to corrosion of the very object of the Act itself. 28. This Court has carefully considered the submissions made by the learned Senior counsel on either side, besides also going through the materials placed before us by way of voluminous typed sets and also the several judgments relied on by the learned Senior counsel on either side to buttress their respective submissions. (a) In so far as the interpretation of the contract and to determine whether the contract in question was a "firm price" contract the Purchase Order would be the most important and relevant document. We have already extracted the relevant clauses of the Purchase Order. This Court, at the very outset does not have any difficulty in holding that the contract was indeed a "firm price" contract. However, the dispute arises with regard to the monetary value of the contract. It is not in dispute that the parties have fixed the total price at Rs. 17,23,16,160/- which comprises of indigenous equipme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "prices are firm for indigenous equipment and CIF value in US Dollars" has been inserted by way of a hand written inclusion. (3) A new clause has been inserted mentioning "The CIF value in U.S. Dollars indicated is to be kept FIRM during the period of contract. The prices of spares are also FIRM during the period of contract." (4) Most importantly, a specific clause 1.4.4 under the heading exchange rate which read as follows has been struck off and the same does not find a place in the final purchase order. The said struck off clause 1.4.4 reads thus: "1.4.4. Exchange Rate: 1 U.S Dollar equal to Rs.31.61 (buying rate) as on date of supplementary price bid (16.05.1994) is the basis of accepted prices. Any variation in exchange rate within the contractual delivery period or any extension thereof will be paid against evidence." 30. In examining the real intention between the parties, with specific reference to the final Purchase Order, this Court is able to gather from various documentary evidence that prior to the final Purchase Order being accepted and signed, parties were primarily deliberating on one issue viz., the variation in exchange rate in so far as cost of imported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been included at such a place in the contract. As already indicated, this Court does not have any difficulty whatsoever in finding that the purchase order dated 28.03.1995 is only a "firm price" contract. However, at the same time it is to be noted that the contract comprises of two parts: (1) costs of indigenous equipments and (2) costs of imported equipments 33. In so far as the indigenous equipments are concerned, there can be no difficulty at all. The prices are mentioned in INR value and there is clear mention that the prices are FIRM for indigenous equipments. This is not disputed by the learned Senior counsel for the 1st respondent also. However, it is only the application of the clause that the prices are FIRM to the imported equipment creates confusion. The clause in the final Purchase Order clearly mentions that the prices are FIRM for CIF value in U.S.Dollars. There is also reiteration that CIF value in U.S Dollars indicated is to be kept FIRM during the period of contract. The next sentence mentions that the prices of spares are also FIRM during the period of contract. If the parties had actually deliberated and agreed that value of 1 U.S $ at INR 31.61 was fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not only in so far as the Indian Rupee is concerned but also with regard to the currencies across the World. The purchasing power of 1 U.S. $ is based on various economical and financial considerations. It is not as if the parties were ignorant of this. Throughout the pre-negotiation stage, this issue was being raised and sent back and forth without any amicable resolution, not only before the finalization of Purchase Order but even thereafter, post the contract period also. 35. This Court has also gone through the various decided cases relied on by the respective learned Senior counsel and conscious of the ratio laid down by the Hon'ble Apex Court and this Court. From the elaborate discussions made herein above, this Court has already found that though the contract can be termed as " firm price" contract, the "firm price" was only in U.S. $ value and not in INR. This being the position, the Court has also perused the majority award as well as the minority award of the Arbitral Tribunal. This Court finds that the majority award has taken a very plausible view of the matter, interpreting the contract in the light of the various documents exhibited by the parties. The learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntention of the parties throughout the pre-negotiation stage, as well as at the time of finalizing of the Purchase Order which would only lead to the irrefutable conclusion that the 1st respondent never agreed for absorbing the difference in Foreign Exchange value. 38. This Court also does not find any violation of Sec.28(3) of the Act as strongly canvassed by the learned Senior counsel for the appellant. While deciding and making an award the Arbitral Tribunal certainly has to take into account the terms and conditions set out in the contract. However, in cases like these where there are grey areas, it is well open to the Arbitral Tribunal to fall back on the exchange of correspondence between the parties, intention of the parties as expressed therein, all of which culminated in the final contract being drawn. Even on this view of the matter, this Court does not find that the majority award of the Arbitral Tribunal suffers from any infirmity on the ground of violation of the Sec.28(3) of the Act. 39. For all the above reasons, this Court answers Point A against the appellant and in favour of the 1st respondent. Point B: 40. This Court is conscious of the powers vested in it in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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