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2012 DIGILAW 746 (BOM)

Hindustan Petroleum Corporation Ltd. v. ISGEC

2012-04-04

ANOOP V.MOHTA

body2012
Judgment The present Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 against the award dated 4 November 2009. 2 The operative part of the award is as under:- “(a) I direct the Respondent to release and pay to the Claimant the amount of Rs.60,93,323/-withheld by the Respondent with respect to Claim 1. (b) With respect to Claim 2, I am of the opinion that the deduction made by the Respondent is in order and the claim is rejected. (c) With respect to Counter Claim by the Respondent, since Claim 1 is decided in favour of the Claimant, the counter Claim by the Respondent is rejected. (d) I direct the Respondent to pay to the Claimant interest at the rate of 8% p.a. from the date of “my appointment as Arbitrator” i.e. 15th May, 2008 till the date of payment of the awarded amount. (e) The arbitration proceedings were held at the premises of the Respondent, I am not awarding cost to either party for the arbitration and I am directing both the parties to pay their own costs.” 3 On 4 August 2004, a global tender enquiry was floated for reactors with SS Cladding for Green Fuel Project. On 14 September 2004, the Respondents submitted the bid. 4 On 5 January 2005, the Petitioner as a part of its Green Fuels Project for its refinery at Mumbai, required Reactors with SS Clading. Tender enquiry for supply of 3 NOS REACTORS for GFEC Project was floated by M/s. Engineers India Ltd. (EIL), the Project Management Consultants (PMC). Respondent No.1 emerged as a bidder for supply of all 3 items at a total basic cost of `14,50,10,000/-. 5 On 1 June 2005, Purchase Order No. 5000098-OQ-48009 for total basic value of `14,50,10,000/-was issued to Respondent No.1 inclusive of built in import content of maximum CIF amount of `8,16,00,000/-. After supply of the Reactors, the Petitioner had asked Respondent No.1 to furnish documentary evidence in support that they have actually imported the materials. Respondent No.1 submitted statement of imported items showing that they have imported goods worth `5,97,53,869.98 against import content of `816 lakhs. Respondent No. 1 admitted that they had not imported some material but they procured from indigenous sources. Respondent No.1 submitted statement of imported items showing that they have imported goods worth `5,97,53,869.98 against import content of `816 lakhs. Respondent No. 1 admitted that they had not imported some material but they procured from indigenous sources. The Petitioner on the balance amount of `2,18,46,130/-(218 lakhs) withheld the custom duty amounting to `60,93,323/-(60 lakhs) as the Respondents had not furnished documentary evidence for import and also admitted that they had imported items only amounting to `597.54 lakhs. 6 The disputes and differences between the parties were referred to Mr. T. Sita Ramaiah, a Sole Arbitrator. (Respondent No.2.) On 29 January 2009, statement of Claim was filed by Respondent No.1. On 18 February 2009, the Petitioner filed its reply. On 6 August 2009, the written submission filed by Respondent No.1. On 26 August 2009, the Petitioner filed its written submission. The counterclaim of the Respondents was for variation in custom duty as stated therein. On 4 November 2009, the learned Arbitrator after hearing the parties made and published the award. Hence the present Petition. 7 Respondent No.1 led evidence in support of their claim. The Petitioner did not lead any evidence to support their defence, as well as, the counter claim and/or for the alleged loss. The learned Arbitrator after giving full opportunity has passed the reasoned order in the following terms. “Award: 29. Considering the aforesaid rival submissions, I am not convinced with the submissions of the Respondent with respect to Claim No.1. The price was on the basis of merit rate of customs duty and firm and fixed and only a maximum cap was agreed for the purpose of customs duty variation. As stated above, there was no variation in the rate of custom duty, but the value reduced because of the Claimant importing lesser quantity of imported materials and using more indigenous materials whereby the CIF content value was reduced. In my view, the Respondent cannot claim the benefit of such reduction under the terms of the contract. I am therefore, passing the award in favour of the Claimant. 30. With respect to Claim No.2, I am in favour of the submissions made by the Respondent since there was actually delay on the part of the Claimant and this clause was in the knowledge of both the parties while entering in to the contract. The damages have been fixed as a pre-estimated liquidated amount. 30. With respect to Claim No.2, I am in favour of the submissions made by the Respondent since there was actually delay on the part of the Claimant and this clause was in the knowledge of both the parties while entering in to the contract. The damages have been fixed as a pre-estimated liquidated amount. Deduction of the amount should really have been done much earlier by the Respondent from the payment under the earlier P.O., but it was then not known to the Respondent that the Claimant had not supplied certain parts. It is always open to the Respondent in such eventuality to appropriate and recover its dues from other payments due to the Claimant. Since, the deduction was made under different P.O. On 10th January, 2008, whereas the last items were supplied on 4th July 2006, the Respondent should have informed the Claimant about the deduction before actually doing so particularly when there was a gap of about one and half years.” 8 The relevant parts of clause 6 of “Statement of agreed variations to general purchase conditions” are reproduced as under: “a. “Quoted prices are inclusive of built in import content of maximum CIF amount of Rs.816 Lakhs based on merit rate of Custom duty including custom duty etc. thereon. Supplier to provide item wise details within two weeks hereof.” b. “The quoted prices shall remain firm and fixed except statutory variation in C.D.. The prices shall remain firm and fixed on account of Foreign exchange variation also.” c. “Statutory variation, if any, in the rate of custom duty shall be admissible only upto a maximum period of 2/3rd of the contractually delivery period.” d. Any increase in price due to increase, in the rate of custom duty, due to any reason, whatsoever, beyond the above specified period i.e. 2/3rd of contractual delivery period shall be to supplier’s account. However, any decrease in custom duty rate at the time of actual clearance of imported materials shall be passed on to Owner. e. The CIF value (I) indicated by the supplier shall be deemed to be the maximum value (s) for the purpose of payment of variation in custom duty and/or other statutory variations, if any, thereon. However, any decrease in custom duty rate at the time of actual clearance of imported materials shall be passed on to Owner. e. The CIF value (I) indicated by the supplier shall be deemed to be the maximum value (s) for the purpose of payment of variation in custom duty and/or other statutory variations, if any, thereon. f. Variation in price due to custom duty rate will be dealt with separately against documentary evidence after receipt of equipment/material at site.” 9 After going through the above clauses, considering the nature of inviting contract/tender and accepting the tender based upon the fixed prices by mentioning “a CIF value of `816 lacs, it is clear that was nothing but a restriction on the Petitioner’s liability for any variation in the rate of customs duty. The phrase “maximum CIF amount of `186 lacs” therefore, needs to be read in the background of the other clauses and the agreement. It is also clear that the Respondents quoted “lump sum” price which was a firm/fixed price, barring statutory variations in the rate of customs duty as per clause 22 of the GPC read with Clause 6 of the agreed variation and as rightly noted by the learned Arbitrator. There was nothing to debar to bring in, the imported components. The value of imported components was neither fixed nor mandatory. In such type of fixed price contract, the supplier like Respondents always take risk to bring in the imported components at its costs and specifically when it was permissible for them to do so. The CIF value given by the claimant, just cannot be overlooked. The Petitioner was concerned with the variation, even if any, as per the above clause, due to prevailing customs duty rate. It was specifically agreed that any increase in price due to increase in the rate of custom duty, due to any reason whatsoever, beyond the above specified period i.e. 2/3rd of contractual delivery period should be to the supplier’s account. It was also agreed that quoted price remained fix and except the variation in customs duty; and on account of Foreign Exchange Variation. The agreed clause with the quoted price of inclusive of built in import content of maximum CIF amount based on import rate of customs duty, thereon is also relevant factor. It is not the case that the Respondents failed to supply item wise details, as asked for. The agreed clause with the quoted price of inclusive of built in import content of maximum CIF amount based on import rate of customs duty, thereon is also relevant factor. It is not the case that the Respondents failed to supply item wise details, as asked for. It is also not in dispute that the Respondents have agreed to supply the material as per the contract. The Petitioner, accordingly made the full payment also, except the deduction in question, for want of alleged documents. There was nothing on record to show that the goods were defective or there was less supply. No issue about the customs or excise Department’s notice of any default or evasion. 10 The basic burden was upon the Petitioner to support their case of such wrongful deduction. In view of above clauses which are clear and as there are no ambiguity, the interpretation so given by the learned Arbitrator, considering the nature of contract in question, read with clauses, cannot be stated to be perverse and/or contrary to the law. There is nothing pointed out on record that it was mandatory for the Respondents to provide the details in every such matters though permitted by the Petitioner to use imported components. The requirement was only the fixed lump sum amount. There is no case that there were variation in the customs duty rate and/or Foreign Exchange duty rates. No clauses and/or conditions pointed out which mandate the Respondents to receive the payment on production of such documents. The learned Arbitrator has considered that the deduction was wrongfully made, not on account of decrease in customs duty rates but on account of lower rate imported components, which was contrary to clause 6. There is nothing pointed out that the value of imported component was subject to any mandatory inspection and/or scrutiny by the Petitioner, on the contrary, was within the discretion of the Respondents basically when admittedly the contract price was inclusive of customs duty. In this case there was no question of unjust enrichment, as contended. 11 Apart from above, there is no terms and conditions referred and/or pointed out to show that the Petitioner is entitled to withhold the amount in any of such conditions and basically for want of the documents. The Petitioner, therefore, in absence of any contract clauses acted beyond the contract. 11 Apart from above, there is no terms and conditions referred and/or pointed out to show that the Petitioner is entitled to withhold the amount in any of such conditions and basically for want of the documents. The Petitioner, therefore, in absence of any contract clauses acted beyond the contract. The withholding action, therefore, rightly observed by the learned Arbitrator to be illegal. I am not inclined to accept the case of the Petitioner that the contract price was not fixed but subject to variation. The submission is contrary to the plain reading of the terms itself. The learned Arbitrator, therefore, having once held that the contract price was fixed / lump sum, which in the present facts and circumstances, cannot be stated to be illegal and contrary interpretation of the clauses. The reasoning in support of grant of award in favour of the Respondents, in my view, needs no interference. 12 The learned counsel appearing for the Respondent has strongly relied on Jigar Vikamsey Vs. Bombay Stock Exchange Limited (2010(1) Bom. C.R. 908)to show that even if two views are possible on a interpretation of general clause, that would not be a justification in interfering with the award specifically when the view so taken is possible and plausible. There is no case of perversity or illegality. 13 So far as the claim No.2 is concerned, as the same was dismissed by the reasoned order holding it to be within the scope and power of the Petitioner and as there is no counter challenge, the award to that extent needs no interference. 14 So far as the counter claim is concerned, as noted, the Petitioner failed to prove the loss of any account. The Petitioner not even filed the affidavit of evidence to prove the loss. Mere averments of the losses itself are not sufficient. The defence and material to support the same is necessary on record specifically, when the other side is denying and making a case that there was no loss suffered. In the present case, the Petitioner has already deducted the amount. The Arbitrator has also accepted the said deduction through claim No.2 treated it to be correct and valid. The defence and material to support the same is necessary on record specifically, when the other side is denying and making a case that there was no loss suffered. In the present case, the Petitioner has already deducted the amount. The Arbitrator has also accepted the said deduction through claim No.2 treated it to be correct and valid. 15 Therefore, the loss even if any, the Petitioner has already deducted accordingly by treating it to be liquidated damages and as there is no counter challenge, in my view, the Arbitrator has rightly decided the issue and it should rest there. 16 The learned Arbitrator after considering the rival contentions and the merits of the matter, awarded 8% interest from 15 May 2008 i.e. the date of his appointment till the date of payment of awarded amount. The deduction if held to be illegal, ought to have been awarded from the date of deduction itself. But as there is no challenge made by the Respondents and considering the background, the grant of interest rate from the date so awarded, in no way, stated to bad in law. Therefore, there is no question of interference even with the same and so also the issue of costs, as ordered/directed both the parties to pay their own. 17 Resultantly, the Petition is dismissed. The award so passed is maintained. There shall be no order as to costs.