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SUPREME COURT OF INDIA
R. BANUMATHI, A.S. BOPANNA, HRISHIKESH ROY, JJ.
BHARAT PETROLEUM CORPORATION LIMITED - Appellant
VERSUS
GO AIRLINES (INDIA) LIMITED - Respondent
CIVIL APPEAL NO. 8227 2019 (Arising out of SLP(C) No.5563 of 2012)
Decided On : 23-10-2019
Arbitration and Conciliation Act, 1996 – Section 16 – Arbitration – Agreement for Aviation Fuel Supply – Jurisdiction of Arbitrator to consider counter claim relating to CENVAT credit – Once a claim is made, defendant has a right to make a counter claim – Whether or not counter claim is part of reference and whether it is arbitrable and whether disputes are traceable to contractual rights or obligations or wholly outside contract could be determined only after enquiry by Arbitrator – Merely because respondent did not specify nature of claims against BPCL in letter, that may not be a ground to reject counter claim of CENVAT invoices at threshold – Whether counter claim regarding CENVAT invoices is outside terms of arbitration agreement and whether it is arbitrable or outside scope of reference to arbitration could be seen only after enquiry by Arbitrator – It may be that after enquiry, Arbitrator might reject counter claim for CENVAT invoices as not arbitrable and counter claim beyond scope of reference to arbitration – But to reject counter claim at threshold on the ground that Arbitrator has no jurisdiction would not be proper – High Court, has rightly set aside order of Arbitrator – Impugned judgment of High Court in Arbitration Appeal affirmed and present appeal dismissed. (Paras 14, 15, 19, 23 and 25)
Facts of the case:
An Agreement for Aviation Fuel Supply dated 01.01.2007 was entered into between parties under which appellant-Bharat Petroleum Corporation Limited (BPCL) was to supply and sale of Aviation fuel to the respondent-Go Airlines (India) Limited. Present appeal arises out of the judgment dated 07.12.2011 passed by High Court of Bombay in Arbitration Appeal (Lodging) No.14228 of 2011 in and by which High Court allowed appeal filed by respondent-Go Airlines by holding that Arbitrator has jurisdiction to consider counter claim relating to CENVAT credit thereby setting aside order passed by Arbitrator. Points falling for consideration are whether counter claim regarding CENVAT invoices was beyond scope of reference to arbitration and whether High Court was right in holding that Arbitrator had jurisdiction to consider counter claim regarding CENVAT invoices raised by respondent.
Findings of Court:
Questions whether the issue regarding CENVAT invoices was outside the terms of agreement or whether CENVAT invoices relates to the agreement dated 01.01.2007 and 01.04.2009 and whether it is arbitrable and whether it falls beyond scope of reference to arbitration and such other related questions, are to be determined only during enquiry.
Result : Appeal dismissed.
Key Points: - Arbitration question: whether counter claim relating to CENVAT invoices falls within the terms of the arbitration agreement and is arbitrable (!) (!) (!) (!) - Jurisdiction issue: whether Arbitrator has authority to entertain counter claims under Section 16 of the Act when the claim concerns CENVAT invoices and taxes (!) (!) - Reference scope: distinction between all disputes vs. specific disputes and how a counter claim may be allowed or rejected depending on the exact reference to arbitration (!) (!) - Threshold vs. merits: whether a threshold denial of a counter claim is proper or if the matter should be decided after enquiry (!) (!) - Facts on invoicing terms: clause 7(ii) requires invoicing including taxes/duties, relevant to the dispute over CENVAT invoices (!) (!) - Arbitration clause structure: arbitration reference process and appointment, and its impact on jurisdiction over counter claims (!) (!)
JUDGMENT
R. BANUMATHI, J.
Leave granted.
2. This appeal arises out of the judgment dated 07.12.2011 passed by the High Court of Bombay in Arbitration Appeal (Lodging) No.14228 of 2011 in and by which the High Court allowed the appeal filed by the respondent-Go Airlines by holding that the Arbitrator has the jurisdiction to consider the counter claim relating to CENVAT credit thereby setting aside the order passed by the Arbitrator.
3. Brief facts which led to filing of this appeal are as under:-
An Agreement for Aviation Fuel Supply dated 01.01.2007 was entered into between the parties under which the appellant-Bharat Petroleum Corporation Limited (BPCL) was to supply and sale of Aviation fuel to the respondent-Go Airlines (India) Limited. Initially, the agreement was entered into for the period from 01.01.2007 to 31.03.2009. By virtue of the second agreement dated 01.04.2009, another Aviation Fuel Supply Agreement was entered into between the appellant and the respondent for the period from 01.04.2009 to 31.03.2011. On 06.07.2009, the appellant issued letter to the respondent along with the statement giving details of invoices and requesting inter alia that the payment of outstanding dues as well as the interest amount of Rs.1.45 crores be released immediately. In reply to the said letter, the respondent by its e-mail dated 06.07.2009 stated inter alia that the outstanding interest was Rs.1.41 crores and not Rs.1.45 crores as mentioned in the said letter dated 06.07.2009. As the payments were not made, the appellant-BPCL put the respondent-Airlines on “Cash and Carry” terms on account of default in making payment for supply of fuel and interest on delayed payment.
4. Dispute arose between the parties when the appellant raised a claim for interest for the delayed payments of the fuel supplied during the period from 01.04.2009 to 31.03.2011. The respondent did not accept any amount payable towards interest. Since the dispute in respect of the liability and payment of interest on delayed payment could not be resolved through mutual correspondence between the parties, the appellant vide its notice dated 25.03.2010 invoked arbitration clause i.e. Clause No.12 of the agreement dated 01.01.2007 suggesting the name of Mrs. Justice (Retd.) Sujatha Manohar as the sole Arbitrator. The respondent vide its letter dated 27.04.2010 agreed to the dispute being referred for arbitration and accepted Mrs. Justice (Retd.) Sujatha Manohar as the Arbitrator. In the said letter, respondent stated that they are sure that the learned Arbitrator would be able to adjudicate the issues appropriately considering the respondent’s various claims against appellant-BPCL. The appellant raised a claim for an aggregate sum of Rs.1,95,21,032/- with interest at the rate of 18% per annum from the date of presentation of the said claim till payment and/or realization.
5. The respondent filed its statement of defence denying the claims made by the appellant and it also raised two counter claims before the Arbitrator seeking an award directing the appellant to issue CENVAT invoices in favour of the respondent in respect of the Aviation fuel supplied under the agreement; in the alternative prayed for an award for a sum of Rs.11,60,44,466/- plus Rs.4,31,45,967/- being interest, as well as further interest on the principal amount computed at the rate of 15% per annum with effect from 01.10.2009 till payment. In its second claim, the respondent demanded damages for alleged imposition of “Cash and Credit” terms by the appellant with effect from 04.07.2009 when the appellant refused to supply the Aviation fuel to the respondent except on “Cash and Credit” terms.
6. The appellant filed its reply to the respondent’s counter claim denying the claim of the respondent and inter alia stated that the counter claim filed by the respondent was beyond the scope and jurisdiction of the A
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