TMI Blog2023 (11) TMI 493X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion and not to CVD concession. The Arbitral Tribunal has also considered the notifications which were issued prior to the Supply Contracts and found that no concessional Customs Duty applicable on coal. Clause 5.2 of the Contract was made to cover import of coal under Notification No. 12/2012 and if concessions became available on BCD during the period of the contract to such imports, they would be applicable. In view of the interpretation of the Arbitral Tribunal on Clause 5.2 and that CVD not being covered by the said Clause, it was irrelevant as to when the said Circular had been issued i.e. prior to or during the contractual period. In any event the Arbitral Tribunal had noted that the parties chose not to lead oral evidence and having done so, there was nothing on record to show as to when the said Circular dated 03.10.2013 was issued. There is much merit in the submission of the Respondent that the Petitioner cannot now call back the Circular which according to the Petitioner was not in existence on the date of the execution of the contract. It is settled law that the Arbitral Tribunal is empowered to interpret the contract and the Court cannot interpret contracts fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were impermissible. I find no error in the Arbitral Tribunal holding that presuming that this issue was to be considered the Petitioner has failed to prove damages suffered as no evidence was produced in this regard. The deduction of Rs. 1.12 crores by way of liquidated damages is under Clause 15.1 of the Chandrapur Contract. There is much merit in the contention on behalf of the Respondent that the Petitioner needs to prove loss caused by alleged breach of short supply beyond permissible limits of Clause 8.7 of the Chandrapur Contract - The finding of the Arbitral Tribunal that damage/loss caused is a sine qua non for the applicability of Section 74 of the Contract Act and in view of there being no proof of any damage / loss, the Petitioner had not suffered any loss cannot be faulted. Time Limitation - HELD THAT:- The Arbitral Tribunal has upon proper appreciation of the material on record rightly held that the claims of the Respondent were within limitation. The Arbitral Tribunal has considered there were part payments made by the Petitioner to the Respondent between October and November, 2015. Thereafter the Chief Engineer (FMC) of the Petitioner had rejected the Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove Commercial Arbitration Petition, this Court was of the opinion that the Commercial Arbitration Petition can be heard and disposed of at the admission stage. This was whilst considering the application of the Respondent herein for withdrawal of the awarded amount deposited by the Petitioner in this Court pursuant to the order dated 16.12.2021. Accordingly, directions were issued to the Counsel for the parties for placing on record brief written notes of arguments and compilation of judgments if any, within a period of four weeks from the date of the said order. Thereafter a further extension had been sought for filing written notes of arguments by the Counsel for the Respondent on 22.06.2023 and which extension of time was granted and thereupon the written notes of arguments have been filed on behalf of the Petitioner as well as the Respondent. 5. It is necessary to advert the brief facts which were before the Arbitral Tribunal and considered in passing of the impugned award as under : (i) The Petitioner has various Thermal Power Stations (TPS) in the State of Maharashtra. The Petitioner requires to utilize foreign coal alongwith domestic coal in certain proportions as pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the 1st payment (90% through LC) for invoice submitted by the Respondent for Chandrapur TPS on 31.12.2013. This payment included the BCD component. xii) The Petitioner addressed a letter on 01.03.2014 to the Respondent raising the issue of availing concessional BCD. By this time, approximately 47.44% of the final quantity was supplied to Bhusawal TPS and 38% of the final quantity was supplied to Chandrapur TPS. xiii) The Respondent replied to the Petitioner s letter dated 01.03.2014 by their letter dated 14.03.2014 disputing the contents thereof and on the grounds that (a) the contracts prevailing customs duty was 2%, which was in fact paid by the Respondent to the authorities, (b) No new concession became available post contract and (c) the contracts record that no concessional customs duty is applicable on coal. xiv) The Petitioner addressed letter dated 19.03.2014 stating that the Respondent had not responded to letter dated 01.03.2014. It was stated that the BCD on coal was 0% and the Petitioner was entitled to avail the benefit. Accordingly, the Petitioner will recover/deduct BCD amounts from Respondent s outstanding payments. xv) On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Chandrapur TPS and Khaparkheda TPS. xxvi) The Respondent addressed several letters to the Petitioner for releasing balance payments which were outstanding against the contracts. xxvii) The Respondent addressed a letter to the Petitioner on 22.01.2015 requesting it to accept the quantity tolerance for supplies made under the Chandrapur Contract TPS and accept the final invoice. xxviii) On 31.03.2015, the Petitioner made part payment of Rs. 34,31,00,903/- to the Respondent after delay of more than 12 months from due date of payment. xxix) The Respondent by letter dated 08.05.2015 requested the Petitioner for the deductions towards BCD to be released. xxx) The Respondent addressed another letter dated 30.06.2015 to the Petitioner requesting for the deductions towards BCD to be released. xxxi) The Petitioner by its letter dated 10.09.2015 relied on its previous letter dated 09.10.2014 and rejected the claim of the Respondent for the invoice towards full MIR quantity to be paid. xxxii) Thereafter the Petitioner made further part payment on 09.10.2015 of a sum of Rs. 16,92,61,241/- and on 23.10.2015 made further part payment of Rs. 16,80,27,750 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tes being non-arbitrable on account of serious fraud allegedly committed by the Respondent. xlii) The impugned Award was passed on 21.04.2021 directing the Petitioner to pay the Respondent a sum of Rs. 22,06,47,321/- alongwith interest @7.25% p.a. from the Award date till payment. xliii) On 20.08.2021, the present Commercial Arbitration Petition was filed. xliv) The Civil Appeal against this Court s Order on DRI findings in the Supreme Court was withdrawn on 24.01.2023 6. Mr. Pankaj Sawant, learned Senior Counsel appearing for the Petitioner has made submissions on the Issue No. 1 which is with regard to the recoveries of 2% BDC. He has submitted that the Arbitral Tribunal has erroneously held that reliance on the Circular issued on 21.10.2013 is misplaced as it is merely clarificatory in nature and that too with regard to CVD which is not covered by Clause 5.2 of the contract. He has submitted that the Arbitral Tribunal ought to have considered that Clause 5.2 is squarely attracted in the present case on the basis of the Circular dated 21.10.2013 issued by the Government of India. The Petitioner has submitted that prior to the Circular dated 21.10.2013, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able in law. Moreover, there is no evidence to suggest that obtaining Forms A-1 would have cost more than 2% BCD exemption that was not claimed. 10. Mr. Sawant has submitted that as per Clause 10 of Annexure III of the ASEAN Notification, an AIFTA certificate of origin could even be obtained retroactively in exceptional cases and no longer than 12 months from the date of shipment. He has submitted that the Claimant could have availed the benefit of this provision by making an application for the AIFTA certificate for the remaining goods to be shipped after the enforcement of the Notification No. 41/2013. 11. Mr. Sawant has submitted that the Claimant did not produce any evidence to suggest that they had ever applied for the AIFTA certificate of origin. Therefore, this clearly indicates the approach of the Claimant, thereby, causing further loss of public money. 12. Mr. Sawant has submitted that the Arbitral Tribunal ought to have taken into consideration the fact that a concession of BCD having become available (in practical terms), then it was an obligation on the part of the Claimant under Clause 5.2 to avail of such concession, which the Claimant failed to do so. He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty on Contracts that the law does not approach the task of construction with too nice a concentration on individual words. The mercantile contract should be construed in a business fashion and in a manner that would make good commercial sense. He has placed reliance upon Chitty on Contracts, 27th Edn., Vol. I 1994, and in particular paragraph 45 regarding contracts in standard form and paragraph 12.013 regarding onerous or unusual terms. He has also referred to paragraph 12.040 regarding intention of parties wherein the Author has commented that one must consider the meaning of the words used, not what one may guess to be the intention of parties. Further, the law does not approach the task of construction with too nice a concentration on individual words with regard to dealing with mercantile Contracts, the author has stated that the commercial documents must be constructed in a business fashion and there must be ascribed to the words a meaning that would make good commercial sense . 17. Mr. Sawant has also placed reliance upon the decision of the Supreme Court in Rajasthan State Industrial Development and Investment Corporation vs. Diamond and Gem Development Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oticing that it has been over-ruled by a 3-Judge Bench in H.M. Kamaluddin Ansari; and iv) State of Gujarat v. Amber Builders, (2 Judges) paras 19 to 21 holds that Gangotri Enterprises is per incuriam because it relies upon Raman Iron Foundry which has been specifically over-ruled by a 3-Judge Bench in H.M. Kamaluddin Ansari. 20. Mr. Sawant has submitted that the Petitioner being a Public Sector Undertaking is considered a State according to Article 12 of the Constitution of India. As the funds involved in the contracts in question are public money, the terms of the contracts have been designated to protect the public interest and ensure that the work is carried out with care and diligence. 21. Mr. Sawant has thereafter made submissions with regard issues Nos. 2 to 5 being beyond the scope of reference. He has submitted that the Claimant s entitlement is limited to Claim No. 1, as per the High Court s order dated 30.10.2018. Moreover, the Counsel representing the Claimant made a clear statement that the Claimant s claim is restricted to the 2% difference that had been deducted by the Petitioner. He has referred to the statement made by the Counsel on behalf of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal ought to have considered the said clause 8.7 of Schedule-A while deciding the Issue No. 2, which states that The seller shall note that if any excess quantity beyond contractual quantity considering tolerance of +2% is received at the TPS: the payment for such quantity shall not be made . He has submitted that the Arbitral Tribunal ought to have considered that clause 8.7 of Schedule-A is an express prohibition in the contract and that if the claim is granted then the same will be contrary to the express prohibition in the contract. He has submitted that on the same principles of business-like interpretation , common sense interpretation and purposive interpretation of the contract (as per the supreme Court decisions already quoted above), it is clear that the tolerance levels of +/- 2% is to be applied separately qua each TPS. 25. Mr. Sawant has submitted that if the Claimant s argument on interpretation of clauses 8.7 and 8.11 is to be accepted, then it would lead to an absurd situation viz. that the Claimant would be free to deliver the entire quantity at the original TPS location (and zero quantity at the new TPS location) and still claim that there is no excess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... likely to result from the breach of it, there is no question of proving such loss. He has submitted that the Arbitral Tribunal has erred in holding that liquidated damages has not been proved by leading evidence. 29. Mr. Sawant has made submissions with regard to Issue No. 4 - short payment under Contract No. 2041 dated 30.08.2023. He has submitted that reconciliation proceedings are not yet concluded as the Claimant have made various alterations in view of the disputed amount which is yet to be identified. The Respondent denies that an amount of Rs. 21,76,555/- is due and payable under the Bhusawal Contract. 30. Mr. Sawant has in respect of Issue No. 7 Limitation, submitted that the cause of action first arose on 19.03.2014, when the Petitioner informed the Claimant that the Petitioner would be recovering the said amounts from the payments against the Contract. Therefore, on the basis of the same, the Arbitration reference commenced by arbitration notice dated 31.08.2017 which is barred by Limitation and therefore on this ground also all the claims of the Claimant needs to be set aside. He has submitted that alternatively, all deductions/recoveries made three years prior t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to the relevant portion of Schedule-B in respect of the price break up relating to 2% BCD. 35. Mr. Nankani has submitted that the Petitioner s challenge to the impugned Award and interim order are based on the premise that the Arbitral Tribunal had incorrectly interpreted the terms of the Supply Contracts. He has submitted that there are a plethora of judgments which have defined the limited contours or the restricted remit of a Court when a Petition is adjudicated under Section 34 of the Arbitration and Conciliation Act, 1996 (Arbitration Act). Regarding the question of interpretation of contracts, it is settled law that the Arbitrator is empowered to interpret the contract. This means that no Court can interpret the contract for the Arbitrator. The interpretation and construction of a contract is therefore primarily for the Arbitrator to decide. 36. Mr. Nankani has submitted that there is no ground made out by the Petitioner of patent illegality. The Award is not against public policy. The Award is also not perverse. The Award is a reasoned speaking award. He has submitted that the Arbitral Tribunal is a sole master of the quality and quantity of evidence and the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... classification and levy of duty. The Circular is executive and not legislative in nature. It has been held in large number of cases including in Jayant Dalal vs. Commissioner (1997) 10 SCC 402 that the said Circular is binding only on the Department and not on the Assessee. Being clarificatory in nature, the same only confirms the law as it existed at the onset. 40 Mr. Nankani has submitted at the beginning of the contractual period, coal attracted 3 rates of basic customs duty. 10% as per Customs Tariff, 2% as per Notification 12/2013 Cus. and Nil as per Notification 46/2011 as amended on 31.12.2012. There was no change in the rate of BCD after the contractual period started to run. Hence, Clause 5.2 of the Contract is not attracted. The parties chose to apply the concessional rate of the basic customs duty @ 2%. There has been no change in the rate of BCD during the contractual period. He has submitted that the parties chose not to lead oral evidence. Having chosen not to lead oral evidence, the Petitioner cannot reply upon or call back the said Circular dated 03.10.2013 which was not in existence on the date of execution of the contract. 41. Mr. Nankani has submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it has to be obtained pre-shipment. Moreover, since the procedure and machinery as per ASEAN Trade Rules for obtaining Form A-1 required the exporter to apply for the Form A-1 pre-shipment, it was not possible to make this happen midway. 45. Mr. Nankani has addressed the other issue raised by Mr. Sawant during arguments and which relates to Claim Nos. 2 to 5 being beyond the scope of reference. He has submitted that the Arbitral Tribunal has correctly interpreted that Section 11 of the Arbitration Act does not require the Chief Justice or his designate to identify the disputes or refer them to the Arbitral Tribunal for adjudication. Hence, the order dated 30.10.2018 passed in the Section 11 Application referring the disputes to arbitration could not have restricted the Respondent from making its claims as per its notice of invocation dated 31.08.2017. The operative part of the said order dated 30th October, 2018 did not exclude any claims. The Arbitral Tribunal has also appreciated that since the Chief Engineer (FMC) had already rejected the Respondent s Claim Nos. 2 and 3, there could be no question of the Respondent again going to the same authority for adjudication of thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce limit under Clause 8.7 of the Chandrapur Contract to the quantity of 80,000 MT (1600 MT), the Petitioner alleged that there was shortage beyond 1600 MTs, and non-performance of the entire contract or part thereof and that the Petitioner was entitled to deduct liquidated damages under Clause 15.1 of the Chandrapur Contract. He has submitted that this calculation of +/-2% with reference to 80,000 MT is erroneous. The tolerance limit of +/-2% had to be calculated on the total quantity of 9,56,500 as per the Chandrapur Contract. The tolerance limit cannot independently or on stand-alone basis, be applied to diverted quantity of 80,000 MT since it is part of the ordered quantity under the Chandrapur Contract. There is undisputedly no separate contract for 80,000 MT diverted to Khaparkheda. He has accordingly submitted that there is no merit to the challenge of the Petitioner to the Arbitral Award on this issue. 49. Mr. Nankani has thereafter addressed the issue of liquidated damages. He has submitted that the Arbitral Tribunal has held that since there was no shortfall more than permissible limits under the Supply Contracts, the deductions effected by the Petitioner by way of Liq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined and adjustments were carried out, which happened only upon joint reconciliation of accounts which was completed by the parties on 24.05.2017 in relation to Bhusawal Contract and on 22.03.2017 in relation to Chandrapur Contract. Hence, the Arbitral Tribunal has rightly held that the claims of the Respondent were within limitation. 52. Mr. Nankani has submitted that the notice of arbitration is dated 31.08.2017 and in view of part payments made by the Petitioner to the Respondent between October and November, 2015, these factors have been rightly taken into consideration by the Arbitral Tribunal including as aforementioned the Joint Reconciliation of Accounts completed by the parties on 24.05.2017 in case of Bhusawal Contract and on 22.03.2017 in respect of the Chandrapur Contract in which the amounts deducted (and now claimed) were also finalized and net amount post adjustments payable to the Respondent have been mentioned. Further, the Petitioner has accepted the Respondent s claim No. 4 i.e. short payment under BTPS Contract for Rs. 21,76,555/- and paid the same to the Respondent on 26.08.2021. Hence, there is no merit in the challenge to the Arbitral Award on the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch according to the Petitioner was not in existence on the date of the execution of the contract. 56. It is settled law that the Arbitral Tribunal is empowered to interpret the contract and the Court cannot interpret contracts for the Arbitrator. The interpretation and construction of a contract is primarily for the Arbitrator. The Arbitrator s view on the interpretation of the Clauses of the contract, is a possible view and hence calls for no interference under Section 34 of the Arbitration and Conciliation Act, 1996. Thus, in my view there is no merit in the challenge to the finding of the Arbitral Tribunal with regard to issue No. 1. The Arbitral Tribunal having interpreted the aforementioned clauses which this Court finds is a possible interpretation cannot be a ground of challenge under Section 34 of the Arbitration Act. 57. The decisions of the Supreme Court relied upon by the Respondent namely Ssangyong Engineering Construction Co. Ltd. (supra); Delhi Airport Metro Express Pvt. Ltd. (supra) and UHL Power Company Ltd. (supra) are apposite. 58. With regard to the Petitioner s contention of Issue Nos. 2 to 5 being beyond this Court s reference and thus, not arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to have coal diverted to the Khaperkheda TPS. The Arbitral Tribunal by interpreting Clause 8.7 has considered the expression ordered quantity/contracted quantity which meant the tolerance of +/ -2% was against contracted quantity if fully ordered or against the ordered quantity. The parties were required to follow the procedure under Clause 35 of the Contract and no independent contract was entered into between the parties for the purpose of diversion of quantity. 61. The Arbitral Tribunal in my view has correctly accepted the contention of the Respondent that the tolerance limit of +/- 2% under Clause 8.7 of the contract cannot independently or on stand alone be applied to the diverted quantity of 80,000 MT since it is a part of the ordered quantity and the tolerance limit of +/-2% necessarily would have to be calculated on the total quantity of coal supplied to the Chandrapur TPS. There is no separate contract for 80,000 MT diverted to Khaperkheda TPS. Thus, the Respondent had made the related deduction under Clause 8.7 of the Chandrapur Contract on the basis that there was no shortage of coal supplied to Khaperkheda TPS. 62. In any event the Arbitral Tribunal s interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could have been sought only after joint reconciliation of accounts which were completed by the parties on 24.05.2017 in relation to the Bhusawal Contract and on 22.03.2017 in relation to the Chandrapur Contract. The Notice invoking the arbitration has been issued by the Respondent/Original Claimant on 31.08.2017. Hence I find no merit in the challenge of the Petitioner to the findings of the Arbitral Tribunal on the issue of limitation. This apart from the settled law that a Court whilst considering a Petition filed under Section 34 of the Arbitration Act cannot re-appreciate evidence. 65. Apart from these challenges to the impugned award which have been raised in written and oral arguments on behalf of the Petitioner, there are no other challenges raised to the impugned Award. Further, I do not find any error in the impugned order dated 20.07.2020 by which the Arbitral Tribunal had rejected the submission of the Petitioner that the dispute before the Arbitral Tribunal involves a case of serious fraud and thus not arbitrable. The Arbitral Tribunal had upon appreciation of the material on record arrived at a finding in the impugned order dated 20th July, 2020 that the dispute is ..... 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