O R D E R
% 14.09.2026 This matter is being taken up today as 11.09.2026 was declared holiday on account of BRICS Summit.
MANMEET PRITAM SINGH ARORA, J.
FAO(OS)(COMM)- 141/2026
1. The present appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 ['Act'], assailing the judgment dated 12.02.2026 passed by the learned Single Judge in OMP(COMM) No. 233/2025 ['impugned judgment'], whereby the Appellant's objections under Section 34 of the Act were dismissed and the arbitral award dated 28.08.2024, as modified vide addendum dated 22.11.2024, was upheld.
FACTUAL MATRIX
2. The dispute arises out of Contract No. TC/M/AGT-964 dated 03.03.2008 entered into between Appellant and a consortium including the
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Respondent for setting up Unit-I, namely the Hot Dip Galvanising Line ('HDGL'), and Unit-II, namely the Electrolytic Cleaning Line ('ECL') in the Bokaro Steel Plant ('BSP') of the Appellant ('Project').
3. The contract price, in terms of Clause 11 read with Appendix-1 of the General Conditions of Contract ('GCC'), for the Unit-I/HDGL was Euro 33,408,895/- and INR 223,78,09,443/-, and for the Unit-II/ECL was Euro 2,179,105/- and INR 21,79,105/-.
4. The dispute has arisen with respect to the Appellant's claim for recovery of shortfall in the minimum CENVAT1credit guaranteed ('MGCC') by Respondent for Unit-I/HDGL and Unit-II/ECL respectively, in terms of Clause 11 read with Appendix-1 of the GCC. As per the Appellant, this amount was INR 25,26,82,631/- for Unit-I/HDGL and INR 76,90,45,532/- for Unit-II/ECL.
5. As per the Appellant, the obligation of the Respondent to pass on the minimum CENVAT credit recorded in the GCC formed a material component of the contractual bargain. It relies upon a Memorandum of Understanding ('MoU') dated 04.03.2008 executed between the parties to clarify certain issues, including the consequences arising out of a shortfall in CENVAT credit.
6. The Project was commissioned in stages. The Unit-II/ECL was commissioned on 20.02.2017 and the Unit-I/HDGL on 26.06.2018. The Final Acceptance Certificate ('FAC') for the Unit-II/ECL was issued on 15.02.2019, whereas the FAC for the Unit-I/HDGL was issued on 05.05.2023.
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7. After completion of the relevant performance tests, the Respondent raised three [3] invoices dated 03.04.2017, 10.09.2018 and 30.10.2018. The aggregate value of the said invoices was INR 8,02,27,262.51/-.
8. The Appellant contended that, under Clause 14.5.6 of the GCC, it was entitled to recover any shortfall in the minimum guaranteed CENVAT credit ['MGCC']. It contended that the said Clause contemplated that the Respondent (i.e. contractor) would indicate the MGCC that can be availed by the Appellant (i.e. the employer) against the material supplied for the subject work. The Appellant contended that the clause contemplates that, in the event of a shortfall in the MGCC by the contractor, the shortfall amount shall be deducted by the employer from the invoices. Whereas, in the event of excess CENVAT credit, 50% of such 'excess' CENVAT amount would be payable to the employer.
9. The Appellant contended that it was entitled to avail CENVAT credit amounting to INR 32,95,87,163/-, whereas the CENVAT credit actually availed by the Appellant was INR 27,42,86,238/-. Thus, there was a shortfall of INR 5,53,00,925/- towards MGCC, and the Appellant was entitled to deduct this amount from the invoices raised by the Respondent.
10. Accordingly, on 09.03.2019, the Appellant issued a recovery advice letter informing the Respondent that the said shortfall amount would be recovered from Respondent's current or upcoming bills. This letter was duly served on the Respondent. However, no response was received from the Respondent to the said communication dated 09.03.2019. Therefore, on 11.03.2019, the Appellant, after deducting the MGCC shortfall of INR 5,53,00,925/- from the total invoice value of Rs.8,02,27,262.51/-, released a sum of INR 2,29,76,392.43/- to the Respondent.
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11. The Respondent disputed the legality of the said deduction of INR 5,53,00,925/-. It denied that the Appellant was entitled to make a deduction from the invoice value for the aforesaid shortfall.
12. The dispute remained unresolved and, on 21.10.2021, the Respondent invoked conciliation under the Standing Conference of Public Enterprises ('SCOPE') Rules. Since the parties were unable to arrive at a settlement, the Respondent terminated the conciliation proceedings on 14.01.2022 and thereafter initiated arbitration before the International Chamber of Commerce ('ICC').
13. The arbitration was referred to an Arbitral Tribunal comprising three
[3] members. The Respondent nominated Justice V.K. Jhanji as its arbitrator and the Appellant nominated Dr. Subir Bikas Mitra. Since the arbitration agreement did not provide for appointment of the presiding arbitrator, the ICC Court appointed Justice Madan B. Lokur as the President of the Arbitral Tribunal in terms of Article 13(3) of the ICC Rules.
14. Before the Arbitral Tribunal, the Appellant raised a preliminary objection to the maintainability of the claims on the ground of limitation. It was contended that, under Clause 12.1.6 of the GCC, the invoices2were payable within 45 days of their respective dates and that limitation had to be reckoned from the dates on which the payments fell due. The Appellant contended that the relevant invoices had become due between 2017 and 2018, whereas arbitration commenced only in March 2022. The Appellant further contended that negotiations or conciliation proceedings could not extend the period of limitation.
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15. The Arbitral Tribunal, however, rejected the objection and held that in terms of Clause 12.1.6 read with 12.1.7, all payments were regarded as advance payments until the date of final payment3. It held that the cause of action arose only on 09.03.2019, when the Appellant issued the letter to the Respondent to recover the shortfall amount, and since the Respondent/Claimant had invoked arbitration on 02.03.2022, the same was within the period of three [3] years from the date of cause of action.
16. With respect to the substantive claim4raised by Respondent related to recovery of INR 5,53,00,925/-, being the amount deducted by the Appellant towards the alleged shortfall in MGCC, the same was allowed by the Arbitral Tribunal in favour of the Respondent.
17. The Appellant had opposed the said claim and contended that the Respondent had expressly guaranteed a minimum amount of CENVAT credit and that the failure to provide such credit entitled the Appellant to recover the shortfall. It contended that the Appellant is entitled to exercise the 'guarantee' and seek recovery of the shortfall either from the Gross Contract Price or the Net Contract Price.
18. The Arbitral Tribunal rejected the submissions of the Appellant. The Arbitral Tribunal, on a reading of Clause 14.5.6 of the GCC, Note to Appendix 1 annexed to the contract and the contractual pricing mechanism, held that, if at all, any withholding, deduction or adjustment is to be made, it could only be from the Gross Contract Price and not from the Net Contract Price. The Arbitral Tribunal allowed the claim in favour of the Respondent. It placed reliance upon an earlier judgment of a Single Judge of this Court in
3 Refer to paragraph 55 of the Arbitral award
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SAIL v. Primetals Technologies India Pvt. Ltd.5 dated 12.03.2020 as upheld by the Division Bench of this Court in FAO (OS)(COMM) 125/2020 titled Steel Authority of India Limited (SAIL) v Primetals Technologies India Pvt. Ltd.6vide judgment dated 03.11.2020, which dealt with substantially similar contractual provisions and held that deduction could have only been made from the Gross Contract Price and not the Net Contract Price.
19. The Appellant contended that the decision rendered by the learned Single Judge in SAIL v. Primetals (March 2020) (supra) arose from a different contract; and reliance placed by the Arbitral Tribunal on the aforementioned judgment is misplaced and without any independent application of mind.
20. Another claim7raised by the Respondent before the Arbitral Tribunal was related to reimbursement of Excise duty of INR 1,08,26,859.36/-. The Respondent initially claimed a sum of Rs.1,30,18,825/- towards Excise duty allegedly paid in respect of Indigenous Plant and Equipment, which was not reimbursed by the Appellant.
21. The Respondent relied upon Article 2.1 of the contract and Clauses 11.2.1 and 14.1 and Appendix-1 of the GCC and contended that the Appellant is liable to reimburse the Respondent for all the taxes, duties and levies as contemplated in the contract, on the production of the documentary evidence.
22. The Appellant opposed the said claim, inter alia, on the ground that the underlying invoices ranged from 28.11.2009 to 07.12.2016 and were therefore
4 Claim 1
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barred by limitation. It further contended that certain Excise-duty vouchers had not been enclosed with the invoices, some Excise-duty vouchers were more than one [1] year old, and some goods were not CENVATABLE.
23. Since the claim involved approximately 1,100 invoices, the Arbitral Tribunal relied upon an Excel statement (i.e. spreadsheet) jointly prepared by the parties. The disputes were considered under four [4] broad categories8 whereafter a sum of INR 1,16,71,410.32/- was claimed by the Respondent. After deducting a sum of Rs.8,44,550.96/-, which the Arbitral Tribunal found had already been paid in excess by the Appellant, the Arbitral Tribunal awarded INR 1,08,26,859.36/- in favour of the Respondent towards reimbursement of the Excise duty.
24. While dealing with the said claim, the Arbitral Tribunal held that upon production of the necessary documentary proof of payment of duty, the Respondent was entitled to reimbursement in terms of the contract and concluded that the relevant supporting documents had been supplied by the Respondent with the invoices and rejected the Appellant's objection in that regard.
25. The Respondent had also claimed interest at the rate of 12% per annum on the amounts found payable. The Appellant opposed the said claim on the ground that the principal substantive claims were barred by limitation and were otherwise without merit; therefore, the Respondent is not entitled to claim interest. The Arbitral Tribunal awarded interest at the rate of 10% per annum relying of the judgment of SAIL v. Primetals (March 2020) (supra).
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26. The Respondent further claimed litigation and arbitration costs to the tune of Rs.1,56,28,140/-, which claim was also allowed by the Arbitral Tribunal.
27. After conclusion of the arguments, the Arbitral Tribunal passed the award dated 28.08.2024, subsequently modified under Section 33 of the Act by order dated 22.11.2024 (addendum).
28. Aggrieved by the said arbitral award, as modified, the Appellant filed a petition under Section 34 of the Act. The challenge was principally founded on the plea that the substantive Claims 1 and 2 were barred by limitation; that the Arbitral Tribunal had erroneously interpreted Clause 14.5.6 of the GCC and the contractual Price schedule; that the guaranteed CENVAT credit constituted an independent contractual commitment, and that the Arbitral Tribunal had mechanically relied upon the earlier judgment of the Single Judge in SAIL v. Primetals (March 2020) (supra) without independently addressing Appellant's submissions. Appellant also challenged the findings on reimbursement of Excise duty, interest and costs.
29. By judgment dated 18.02.2026 passed in OMP (COMM.) 233/2025, the learned Single Judge dismissed the Section 34 petition and declined to interfere with the arbitral award.
30. Mr. Jayant Mehta, learned senior counsel appearing for the Appellant has pressed arguments on the bar of limitation and interpretation of Clause 14.5.6 of the GCC to the extent it pertains to Claim 1. No arguments have been advanced qua award of Claim 2 or the award of interest or the award of costs.
30.1. He stated that the phrase 'minimum' and 'guaranteed' in Clause 14.5.6 of the GCC entitles the Appellant to receive the MGCC from the Respondent.
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30.2. He stated on instructions that there is no dispute with respect to the fact that the reason for the Respondent's inability to pass on the shortfall of MGCC of INR 5,53,00,925/- to the Appellant was on account of lowering of duty post award of contract, and not due to any default on the part of the Respondent in providing their relevant documents for enabling the Appellant to avail the credit.
30.3. He stated that the shortfall caused in the CENVAT credit passed on to the Appellant has to be made good by the Respondent from the invoiced amounts. He stated that the deduction of the shortfall can either be made from the Net Contract Price or from the Gross Contract Price.
31. Per contra, learned counsel for the Respondent submitted that no ground is made out for interference with the arbitral award passed by the Arbitral Tribunal, which has been affirmed by the learned Single Judge vide the impugned judgment, particularly since the view taken by the Arbitral Tribunal on Clause 14.5.6 of the GCC is a plausible view and a permissible view based on the material on record. It is, therefore, submitted that the present appeal is devoid of merit and is liable to be dismissed.
31.1. It is also contended that objections to Claim 2 were not pressed by the Appellant before the learned Single Judge.
CASE ANALYSIS
32. The Court has heard the learned counsel for the parties and has perused the record.
I. Scope of Interference
33. The jurisdiction of this Court under Section 37 of the Act, to interfere with an arbitral award is as limited as the scope of interference permissible under Section 34 of the Act and cannot exceed beyond it. Thus, if an award is
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not liable to be disturbed under Section 34 of the Act, the same cannot be interfered with in exercise of powers under Section 37 of the Act. The Court hearing an appeal under Section 37 of the Act cannot undertake an independent assessment of the merits of the award and is only required to ascertain that the Court under Section 34 of the Act has acted within its limit as prescribed under the Act. The scope of jurisdiction under Section 37 of the Act is not akin to normal appellate jurisdiction.
34. The limited scope of interference by the Court in Section 37 of the Act has been recently reiterated by the Supreme Court in its recent judgment Jan De Nul Dredging India Pvt Ltd. v. Tuticorin Port Trust9. In this judgment the Supreme Court has taken note of its earlier decisions in MMTC Limited
v. Vedanta Limited10, Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking11, and UHL Power Company Ltd. v. State of Himachal Pradesh12. The relevant paragraphs read as under: -
29. That being the position, the award of the Arbitral Tribunal was not liable to be disturbed under Section 34 of the Act and was rightly not disturbed. It is settled in law that the appellate powers under Section 37 are limited to the scope of Section 34 and cannot exceed beyond it. Certainly, therefore, if an award is not liable to be disturbed under Section 34 of the Act, the same could not have been interfered with in exercise of powers under Section 37 of the Act.
………..
35. The gist of the aforesaid decisions is that the jurisdiction of the court under Section 37 of the Act is akin to the jurisdiction of the court under Section 34 of the Act, and, therefore, the scope of interference by the court in appeal under Section 37 cannot go beyond the grounds on which challenge can be made to the award under Section 34 of the Act. Moreover, the courts exercising powers under Sections 34 and 37, do
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not act as a normal court, and therefore, ought not to interfere with the arbitral award on a mere possibility of an alternative view.
36. In other words, the scope of interference of the court with the arbitral matters is virtually prohibited, if not absolutely barred. The powers of the Appellate Court are even more restricted than the powers conferred by Section 34 of the Act. The appellate power under Section 37 of the Act is exercisable only to find out if the court exercising power under Section 34 of the Act, has acted within its limits as prescribed thereunder or has exceeded or failed to exercise the power so conferred. The Appellate Court exercising powers under Section 37 of the Act has no authority of law to consider the matter in dispute before the Arbitral Tribunal on merits so as to hold as to whether the award of the Arbitral Tribunal is right or wrong. The Appellate Court in exercise of such power cannot sit as an ordinary court of appeal and reappraise the evidence to record a contrary finding. The award of the Arbitral Tribunal cannot be touched by the court unless it is contrary to the substantive provision of law or any provision of the Act or the terms of the agreement.
(Emphasis Supplied)
35. Thus, while examining the order passed by the Court under Section 34 of the Act, this Court while exercising jurisdiction under Section 37 of the Act cannot interfere in the arbitral award on the mere possibility of an alternative view on facts or interpretation of the contract to reverse the findings of the arbitral tribunal. Where the view adopted by the arbitral tribunal is a possible and plausible view of the contractual provisions and the learned Single Judge has found no ground under Section 34 of the Act warranting interference, the Appellate Court cannot substitute its own view for the view of the arbitral tribunal, merely because a different interpretation may also be possible.
36. It is in the backdrop of the aforesaid limited scope of judicial interference under Section 37 of the Act, the challenges raised by the Appellant to the impugned judgment and impugned arbitral award have to be examined in this judgment.
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II. Impugned Judgment
37. The learned Single Judge has dismissed the Appellant's petition under Section 34 of the Act and has upheld the arbitral award dated 28.08.2024, as modified on 22.11.2024. The learned Single Judge has, inter alia, held that the Respondent's claim was within limitation, as the cause of action for Claim 1 arose only on 09.03.2019, when the Appellant deducted the shortfall amount of INR 5,53,00,925/- from the Net Contract Price; and that Clause 14.5.6 of the GCC read with the Note to Appendix-1 of the GCC provides that if at all, any withholding, deduction or adjustment is to be made, it could only be from the contract price mentioned at Serial no. 12 of the Summary Price Schedule13, i.e., the Gross Contact Price including the CENVAT credit and not from the Net Contract Price as per the Note to the Appendix 1 of the
GCC.
38. The learned Single Judge has further held that, despite the shortfall in MGCC passed on by the Appellant to the Respondent, the Net Contract Price received by the Respondent remained unchanged, since the Appellant itself retained the amount corresponding to the CENVAT shortfall by not reimbursing it to the Respondent. Relying upon the principle that interpretation of contractual terms falls primarily within the domain of the Arbitral Tribunal, the learned Single Judge held that the interpretation adopted by the Arbitral Tribunal was a plausible one and was not perverse, patently illegal or contrary to the public policy of India.
39. The relevant Clause 12 of the GCC dealing with Terms of Payment and Clause 14.5.6 of the GCC dealing with the Taxes and Duties, as well as the
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Note in the Appendix 1, relied upon by the Appellant in support of its contentions, is set out hereunder:
"12. Terms of Payment
12.1.6. The Employer shall release the payment to the Contractor within 45 days from the date of receipt of the complete and correct invoices and relevant documents.
12.1.7. All interim/ progress payments shall be regarded as payment is by way of advance against the final payment only and not as payment for work completed and shall not preclude
defective/imperfect/incomplete facilities to be removed. It will not be considered as an admission by the Employer of the due performance of the contract, or any part thereof by the Contractor nor shall it preclude, determine or affect in any way the powers of the Employer under these conditions or in any way vary or affect the contract.
14. Taxes & Duties
14.5.6. Contractors to indicate Minimum Guaranteed CENVAT Credit that can be availed by the Employer against materials supplies for subject work. In case of any shortfall in CENVAT Credit from that Guaranteed by the Contractor the shortfall shall be deducted by the Employer from the Contractor. In case of excess of CENVAT, 50% of the excess CENVAT amount will be paid
SUM OF SUMMARY PRICE SCHEDULES (for HDGL+ ECL)
…………
Note: All the necessary documents for availing the CENVAT credit shall be furnished, else balance shortfall shall be deducted from the contract price item serial no.12 above."
(Emphasis supplied)
III. Plea of Limitation
40. The Arbitral Tribunal, on reading Clause 12.1.6 of the GCC in conjunction with Clause 12.1.7 of the GCC, held that the crucial date for reckoning the limitation is the date when final payment is made (or refused)
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to the contractor (i.e. the claimant). The Arbitral Tribunal held that this is the date when the employer determines whether the claim of the contractor is justified or not. The Arbitral Tribunal concluded that since the Appellant had conveyed its decision to deduct the amount of INR 5,53,00,925/- on 09.03.2019 by issuing a recovery advice, the limitation period of three [3] years commenced from the said date. The Arbitral Tribunal held that since the Respondent took appropriate remedial steps within three [3] years, the said Claim 1 was within limitation period. The relevant paragraphs of the arbitral award read as under:
"Conclusion
74. The conclusion of the Tribunal in respect of the objection of limitation is that Clause 12.1.6 of the GCC must be read in conjunction with clause 12.1.7 of the GCC. If both the clauses are read conjointly, it is clear that the crucial date is the date when final payment is made (or refused) to a contractor, such as the Claimant. On that date, it is finally determined by the Employer such as the Respondent, whether a claim is justified or not.
75. Even if clause 12.1.6 of the GCC is read as a stand-alone provision, it is not possible to accept the 'deemed rejection' view canvassed by learned counsel for the Respondent, namely, a 'deemed rejection' at the end of 45 days after the invoices are submitted by the contractor/ Claimant. The language of clause 12.1.6 of the GCC does not warrant such a reading —it only obliges the Respondent to release the payment within 45 days and cannot be understood to mean that if the amount is not so released by the Respondent, then the claim is deemed rejected. This would be adding words to the Contract and even doing violence to its terms.
76. The submission of learned counsel gives no importance to the provision in the Contract and the GCC regarding negotiation and conciliation proceedings. The submission ignores the terms of the Contract which is not permissible as far as this Tribunal is concerned. If the view canvassed by learned counsel for the Respondent is accepted, it will place a contractor/ Claimant in a Catch-22 situation. In a given case, the negotiations may be protracted and fail only after the limitation period expires. On the other hand, if the contractor/ Claimant
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bypasses the negotiation process or invokes arbitration during the prolonged negotiation process, it may be denied relief for not adhering to the terms of the Contract. In the present arbitration, neither situation arises, fortunately for the Claimant, but could arise in a given case. The interpretation given by the Hon'ble Supreme Court to the expression
"cause of action" and a continuing cause of action, discussed above, is therefore apposite and binds the parties and the Tribunal
77. The Tribunal finds no merit in the submissions of learned counsel for the Respondent in denying the claim of the Claimant on the issue of limitation.
78. Considering the sequence of events and the bundle of facts mentioned above, it certainly cannot be said that the claim was made by the Claimant beyond the period of three years of the cause of action that occurred at the earliest on 9th March, 2019 or beyond the time limit prescribed under the Limitation Act, 1963."
41. Similarly, while adjudicating the objection of limitation qua Claim 2, the Arbitral Tribunal held that on a perusal of the emails dated 02.11.2021 and 14.02.2022 it was evident that the Respondent's claim for reimbursement of Excise duty was alive and under active consideration by the Appellant, and the claim was rejected only on 14.02.2022, and thus the right to sue accrued to the Respondent on 14.02.2022. The Arbitral Tribunal concluded that since the claim was filed immediately thereafter, the said Claim 2 was also within the limitation period. The relevant paragraphs read as under:
"79. The objection of limitation with regard to this claim is stated by the Respondent in the SOD in the following words:
That the Respondent states that Claim No. 1, as pleaded in the SOC, is barred by limitation, stands extinguished accordingly, and is therefore not admissible for adjudication thereon. That the bar of limitation applies to Claim No. 2 in like manner as aforesaid. The Invoices relevant to Claim No. 2, pertaining to reimbursement sought in respect of Excise Duty amounting to Rs. 1,30,18,825/- range from 28.11.2009 to 7.12.2016 in terms of their date and are therefore barred by limitation in view of
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Clause 12.1.6 of the GCC when viewed in conjunction with the applicable provisions of the Limitation Act, 1963.
80. … …. Consequently, it is necessary, for the purposes of the preliminary objection to refer to two communications sent by the Respondent to the Claimant which make the cause of action a continuing cause of action as far as the law is concerned. These two communications are an email dated 2ndNovember, 2021 and an email dated 14thFebruary, 2022.
81. The email dated 2ndNovember, 2021 reads as follows:
Your notice [Conciliation Notice under Article 10 of the Contract] was referred to our Project-finance. They are reviewing the calculations and are in touch with your local representative at Bokaro.
It is being expected that the matter will be resolved mutually without intervention of 3rd agency. Conciliation process may be initiated, if this effort for arriving at mutual agreement within a reasonable time is failed
82. The email dated 14thFebruary, 2022 reads as follows:
This is with reference to the meeting held on 08.02.2022 between Project Finance and representative of M/PFA the details of Service tax and Excise duty.
After Reconciliation, the total amount Payable against Service tax is Rs.11,88,937/-. (Details attached). Also, for Excise duty details of Invoices which are not paid alongwith the reasons are attached.
83. It is quite obvious from a plain reading of the aforesaid two emails that the claim made by the Claimant was kept alive by the Respondent and the right to sue accrued to the Claimant (as discussed above with reference to Claim No. 1) only on 14thFebruary, 2022. The arbitration proceedings commenced well within three years thereafter.
84. There is no substance in the preliminary objection taken by the Respondent with regard to Claim No. 2 and it is accordingly rejected."
42. Learned Single Judge has upheld the findings of the Arbitral Tribunal on the issue of limitation.
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43. The Appellant has contended that the cause of action for filing Claim 1 arose on expiry of 45 days after the invoices were raised by the Respondent and the same remained unpaid. As per the Appellant, the limitation had expired in October 2021, and since the Respondent failed to take steps for referring the disputes to arbitration within the said period, the invocation of arbitration on 02.03.2022 was barred by limitation.
44. We find no merit in the submission of the Appellant. The Arbitral Tribunal has given detailed findings on the issue of limitation. The findings on limitation returned by the Arbitral Tribunal qua Claim 1 on the basis of recovery advise dated 09.03.2019 issued by the Appellant and qua Claim 2 on the basis of Appellant's emails dated 02.11.2021 and 14.02.2022 is correct and merits no interference.
IV. Merits of Claim 1
45. The Arbitral Tribunal has allowed Claim 1 for sum of INR 5,53,00,925/- in favour of the Respondent.
46. The Appellant contended that the amount of INR 5,53,00,925/- was guaranteed by the Respondent. It was an independent 'item' in the Summary Price Schedule14. It contended that since the Appellant received partial amount and there was a shortfall of INR 5,53,00,925/- the Appellant was entitled to recover the said shortfall from the Respondent, whether from the Gross Contract Price or the Net Contract Price. It contended that the Arbitral Tribunal ought to have adjudicated on these contentions but instead the Tribunal merely applied the judgment of the Single Judge of this Court in
SAIL v. Primetals (March 2020) (supra), and there was no independent application in mind.
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47. The Arbitral Tribunal noted that the Clause 14.5.6 of the GCC relied upon by the Appellant for justifying the recovery of INR 5,53,00,925/- under Claim 1 was para materia to the contractual clause, which was under consideration in SAIL v. Primetals (March 2020) (supra). It also noted that parties before the Arbitral Tribunal and before the High Court in SAIL v. Primetals (March 2020) (supra) are same. The Arbitral Tribunal noted that in the said judgment, the High Court had upheld the interpretation of Clause 14.5.6 of the GCC to mean that the deduction on account of shortfall viz the guaranteed CENVAT credit has to be made from the Gross Contract Price and not from the Net Contract Price. It noted that the High Court had specifically rejected the contention of the Appellant herein that the shortfall can be deducted from the Net Contract Price and opined that such of submission of the Appellant is contrary to the plain language of the contractual clause. The Arbitral Tribunal noted that the aforesaid judgment of the Single Judge was challenged in appeal under Section 37 of the Act and was dismissed by the Division Bench vide judgment dated 03.11.2020 reported in SAIL v. Primetals (November 2020) (supra). The Arbitral Tribunal also noted that the SLP15filed by the Appellant against the judgment of the Division Bench was also dismissed on 03.02.2021. It also referred to another judgment of the Single Judge in Steel Authority of India Ltd. v, Larsen & Toubro Limited16 (2021), which was also upheld by the Division Bench.
47.1. The Arbitral Tribunal held that in view of the judgments passed by the High Court on this precise issue against the Appellant, there was no justification for the Appellant to withhold or deduct or adjust any amount from the dues of the Respondent. It held that deduction could have been made
14 At printed page 164 of the appeal
15 SLP No. 1567/2021
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only from the Gross Contract Price and not from the Net Contract Price. Accordingly, the Arbitral Tribunal allowed Claim 1 in favour of the Respondent.
48. The learned Single Judge after considering the submissions of the Appellant, found no merit in the same and recorded following reasons for upholding the award. The relevant paragraphs of the impugned judgment read as under: -
"10. The contention that in case of a shortfall in MGCC the petitioner was entitled to make a deduction from either the gross or the net contract value is noted to be rejected. The language of the note in Appendix-I clearly stipulates that deduction is to be made from the gross contract value. The gross contract price pertains to the work done and is inclusive of taxes and duties. The net contract price is arrived at after deducting MGCC and remains unaffected in spite of shortfall in MGCC. The non-reimbursed shortfall in MGCC remains with the petitioner. If deduction were to be made from the net contract value, the effect would be that on the one hand the shortfall in MGCC would not be reimbursed and on the other hand the net contact value would be reduced by deducting shortfall in MGCC which would not be permissible in the absence of specific conditions in the contract.
10.1 The position can be demonstrated by way of an example. The gross contract value inclusive of taxes and duties (as on the base date) was Rs.1,50,000/-. The MGCC component was Rs.35,000/-. The net contract value was Rs.1,15,000/-. In the event of a shortfall of Rs.5,000/- in MGCC, the respondent will reimburse Rs.30,000/- instead of Rs.35,000/-. The net contract value remains Rs.1,15,000/- and the non-reimbursed amount of Rs.5,000/- will remain with the petitioner."
49. Mr. Jayant Mehta, learned Senior Counsel contended that the interpretation of Clause 14.5.6 of the GCC as given by the Arbitral Tribunal and accepted by learned Single Judge fails to give any meaning to the words 'minimum guaranteed' in the said clause. He stated that the action of the 16 2021 SCC OnLine Del 4065
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Appellant in recovering the shortfall of INR 5,53,00,925/- is justified as this was part of the 'minimum guaranteed' amount assured by the Respondent. In response to our query, he submitted that it is irrelevant that the duties actually paid under the contract had reduced due to lowering of rate of duty, leading to less CENVAT credit becoming available to the Respondent and not due to any default of the Respondent.
49.1. He submitted that there was no allegation that Respondent had failed to provide the requisite documents to the Appellant for availing the CENVAT credit for the duty actually deposited or for any other default vis-à-vis obligation of taxes.
49.2. He submitted that there is no dispute that the clause, which was the subject matter in interpretation in SAIL v. Primetals (March 2020) (supra) was identical. He however reiterates that the Arbitral Tribunal ought to have independently adjudicated the claim and not merely followed the judgment of the High Court.
50. In our considered opinion, the submission of the Appellant that the Arbitral Tribunal erred in following the judgment of the Single Judge in SAIL
v. Primetals (March 2020) (supra) for adopting the interpretation of Clause 14.5.6 of the GCC is without any merits. The Appellate Tribunal was bound by the said judgment of the High Court and more so, since it had been further upheld in appeal.
51. In this regard, it would be relevant to refer to the judgment of Supreme Court in OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd.17holding that, after the 2015 amendments to the
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Act, under Section 34(2)(b)(ii) of the Act, an arbitral award would be contrary to the fundamental policy of Indian law where, inter alia, it disregards the orders of superior courts in India or the binding effect of a judgment of a superior court. The Supreme Court has explained that such disregard constitutes a contravention of the fundamental principles which form the basis for administration of justice and enforcement of law in the country. The relevant paragraphs of the judgment read as under: -
"55. The legal position which emerges from the aforesaid discussion is that after "the 2015 Amendments" in Section 34 (2)(b)(ii) and Section 48(2)(b) of the 1996 Act, the phrase "in conflict with the public policy of India" must be accorded a restricted meaning in terms of Explanation 1. The expression in "contravention with the fundamental policy of Indian law" bv use of the word "fundamental"
before the phrase "policy of Indian law" makes the expression narrower in its application than the phrase "in contravention with the policy of Indian law", which means mere contravention of law is not enough to make an award vulnerable. To bring the contravention within the fold of fundamental policy of Indian law, the award must contravene all or any of such fundamental principles that provide a basis for administration of justice and enforcement of law in this country.
56. Without intending to exhaustively enumerate instances of such contravention, by way of illustration. it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or the binding effect of the judgment of a superior court; and
(c) violating law of India linked to public good or public interest, are considered contravention of the fundamental policy of Indian law. However. while assessing whether there has been a contravention of the fundamenta1 policy of Indian law, the extent of judicial scrutiny must not exceed the limit as set out in Explanation 2 to Section 34(2)(b)(ii)."
(Emphasis supplied)
52. Accordingly, in view of the principle enunciated by the Supreme Court in OPG Power (supra), disregarding the binding effect of a judgment of a superior court falls within the illustrative instances of contravention of the
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fundamental policy of Indian law under Section 34(2)(b)(ii) of the Act making the award vulnerable to interference. The law settled by Supreme Court in National Highway Authority of India v Progressive- MVR (JV)18
with respect to the duty of the Courts hearing Section 34 petition in maintaining consistency of interpretation of identical contracts, more so, where one of the parties is common would also be applicable and legally justifies the decision of the Arbitral Tribunal to follow the interpretation of Clause 14.5.6 of the GCC given by the Single Judge in SAIL v. Primetals (March, 2020) (supra).
53. In the present case, the Arbitral Tribunal's discretion to interpret Clause 14.5.6 of the GCC was circumscribed by the existence of judicial precedents governing the same clause between same parties. The interpretation of the said contractual provision had already fallen for consideration between the same parties in SAIL v. Primetals (March 2020) (supra), which was thereafter affirmed by the Division Bench of this Court in SAIL v. Primetals (November 2020) (supra), and the SLP preferred was dismissed on 03.02.2021. The contractual provision considered in the aforesaid judgments was pari materia with Clause 14.5.6 of the GCC which fell for consideration in the present case before the Arbitral Tribunal. Since, the interpretation of the contractual provision had already been authoritatively settled by this Court in respect of the very same contractual stipulation, the Arbitral Tribunal was, therefore, not at liberty to disregard the binding interpretation rendered by this Court in proceedings arising from SAIL v. Primetals (March 2020) (supra) and adopt an interpretation contrary thereto. Once this Court had interpreted Clause 14.5.6 of the GCC, the Arbitral Tribunal was bound to give effect to the said interpretation.
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54. The Appellant has not been able to show any distinguishing fact which would enable the Arbitral Tribunal to take a view different from the Court in the cited precedents.
55. The Single Judge in SAIL v. Primetals (March 2020) (supra) had independently interpreted the said Clause, considered the submissions of the Appellant and had rejected the interpretation of the Appellant by observing that the understanding of the Appellant was contrary to the plain language of the Clause. There was therefore an affirmative determination by the Single Judge in SAIL v. Primetals (March 2020) (supra) with respect to the nature and scope of Clause 14.5.6 of the GCC and therefore the Arbitral Tribunal rightly observed that the legal issue arising for determination under Claim 1 is no longer res integra. In the said judgment it was not a case where the Single Judge had upheld the award merely as a plausible view instead the award was upheld on the finding that it was the correct interpretation of the Clause 14.5.6 of the GCC read with the Note to Appendix-1.
56. In these circumstances, the contention of the Appellant that the Arbitral Tribunal ought to have independently interpreted Clause 14.5.6 of the GCC cannot be accepted to the extent it suggests that the Arbitral Tribunal was free to arrive at a conclusion contrary to the interpretation already rendered by this Court. The Arbitral Tribunal could not, in the guise of independently interpreting the contractual provision, disregard the binding effect of the judgment of this Court between the same parties on the same contractual clause. Therefore, the Arbitral Tribunal could not adopt any different interpretation of the contractual stipulation which is no longer res integra.
57. The learned Single Judge has therefore rightly opined that the award in regard to Claim 1 requires no interference.
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58. We find no merit in the interpretation contended by the Appellant as the said submission ignores the words CENVAT credit in the clause. The Appellant is selectively reading the word 'minimum guaranteed' where as the relevant words are 'minimum guaranteed CENVAT credit'. In the contract, the parties had settled the Gross Contract Price for the Indian portion as INR 2,915,587,163/-, wherein the guaranteed amount of CENVAT credit was estimated as INR 32,95,87,163/-. and the Net Contract Price for the Indian portion, was therefore INR 2,586,000,000/-.
59. The parties had, at the time of the formation of the contract, expected that during the course of the execution the amount of Excise duty and Counter Veiling duty ['duty'] payable to the Government would be INR 32,95,87,163/-. The Respondent agreed to pay the said estimated duty to the Government and seek its reimbursement from the Appellant. Further Respondent agreed to pass on the CENVAT credit equal to the said INR 32,95,87,163/- to the Appellant. This was the basis of the obligation of the Respondent to pass on the minimum guaranteed CENVAT credit of INR 32,95,87,163/- to the Appellant.
60. However, during the course of the execution of the contract the rate of duty was reduced by the Government and therefore the actual duty paid by the Respondent and reimbursed by the Appellant was INR 27,42,86,238/-. There is no dispute that the Respondent duly passed on the CENVAT credit equal to INR 27,42,86,238/- to the Appellant.
61. Since, the duty reimbursed by the Appellant was only INR 27,42,86,238/-, Appellant saved INR 5,53,00,925/- and was never out of pocket of the said amount, in the first place. The contention of shortfall in receipt of CENVAT credit is therefore misconceived. The Appellant could
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have alleged that it suffered a shortfall if it had paid duty equal to the original estimated INR 32,95,87,163/- and not received CENVAT credit equal to the said amount. However, this is not the case, as Appellant only had to pay INR 27,42,86,238/- towards duty reimbursement to the Respondent and it has received CENVAT credit equal to the said amount.
62. The emphasis of the Appellant on the words 'minimum guaranteed' by ignoring the following words 'CENVAT credit' in the clause seeks to consider the amount of INR 32,95,87,163/- as an assured sum or a cash discount, which is not the intent of the contract. Infact, indeed if the Appellant is permitted to deduct INR 5,53,00,925/- it would lead to unjust enrichment.
63. We therefore find no merit in the submissions of the Appellant vis-à-vis of Clause 14.5.6 of the GCC.
V. Merits of Claim 2
64. The Appellant has not addressed any submissions on the merits of its challenge to Claim 2. This claim pertains to reimbursement of Excise Duty of INR 1,08,26,859.36/- in its written submissions, the Appellant contended that since it could not avail CENVAT credit in respect of several invoices as the goods supplied precluded Appellant from claiming CENVAT credit, therefore the said amount has been rightly withheld by the Appellant. It is alleged that the Arbitral Tribunal misinterpreted the terms of the contract while allowing
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evidence to payments of duties such as Excise Duties, the Respondent or its sub-contractor will be entitled to payment of the duty paid. The Arbitral Tribunal held that there was no dispute that the Excise Duty was duly paid by the Respondent or the sub-contractor and the relevant documents were produced before the Appellant proving the payment, while seeking reimbursement. The plea of deficiency of documents proving payment of Excise Duty was expressly rejected. The Appellate Tribunal held that the objection of the Appellant that it shall not make payment of the Excise Duty on the plea that the said duty is non-CENVATable has no basis in the contractual provisions agreed between the parties.
66. The Appellant has been unable to point out any error in the aforesaid observations of the Arbitral Tribunal in its written submissions or in the Ground (h) in the appeal. Challenge to the award of Claim 2 on merits also appears to not have been pressed before the learned Single Judge. It appears Claim 2 was challenged only on the ground of limitation.
67. Be that as it may, having perused the award of the Arbitral Tribunal, we find no error in the said award requiring interference by this Court. The interpretation of Clause 11.2.1 and 14.1 of GCC by the Arbitral Tribunal is correct and does not merit any interference.
68. For aforesaid reasons, we find no merit in the present appeal, and is, therefore, dismissed.
MANMEET PRITAM SINGH ARORA, J.
C.HARI SHANKAR, J.
SEPTEMBER 14, 2026/ dsn/AM/AJ
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