The Arbitral Tribunal's interpretation of contract clauses is upheld, confirming that allegations of simple fraud do not render the claims non-arbitrable under Section 34 of the Arbitration and Conciliation Act.

JUDGMENT :

R.I. CHAGLA, J.

1. By this Commercial Arbitration Petition, the Petitioner has sought the setting aside of the impugned award dated 21.04.2021 together with impugned order dated 20.07.2020 (deciding preliminary issue against the Petitioner) passed by the Arbitral Tribunal.

2. The Arbitral Tribunal by the impugned award has awarded to the Respondent/Claimant an amount of Rs. 22,06,47,321/- payable by the Petitioner herein together with interest at the rate of 7.25 % from the date of the Award till final payment and/or realization.

3. Further by the impugned order dated 20.07.2020 the Arbitral Tribunal has decided preliminary issue “whether the dispute involves allegations of serious fraud by the Claimant thereby rendered the dispute non-arbitrable?” against the Petitioner herein. Thus, the Arbitral Tribunal held that at the higher the allegation in the statement of Defence is a case of simple fraud and not a case of serious allegations of fraud thus held that the claims are arbitrable.

4. By an order dated 01.01.2022 passed by this Court in the above 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 per the guidelines issued from time to time. Accordingly, the Petitioner places orders for specific quantities of coal to be supplied to each of its TPS according to the specific requirement of that particular TPS.

(ii) The Respondent/Claimant is in the business of importing, dealing in and selling coal for industrial purpose.

(iii) Notifications were issued by the Government of India which determined the Basic Customs Duty (“BCD”) and Countervailing Duty (“CVD”) for procurement of coal including steam coal imported from Indonesia. The said notifications are as under:

(a) On 01.06.2011 - Notification No. 46/2011-Cus was issued whereunder BCD was 0% and CVD was 6% for procurement of coal from ASEAN countries, including for steam coal imported from Indonesia.

(b) On 17.03.2012 - General Notification No. 12/2012 was issued whereunder steam coal attracted BCD at 2% and CVD at 2%.

(c) On 31.12.2012 - Notification No. 64/2012 was issued amending Notification No. 46/2011-Cus w.e.f. 01.01.2013 to provide ‘Nil’ BCD and 6% CVD on coal exported from Indonesia to India.

(iv) The Petitioner issued Letter of Award (LoA) on 30.07.2013 in Respondent’s favour for awarding the tender for supply of 1.148 MMT of Coal to Bhusawal Thermal Power Station (TPS). The Respondent has tendered as per the LoA Performance Bank Guarantee (PBG) of Rs. 59.33 crores of Standard Chartered Bank for the Bhusawal TPS on 06.08.2013

(v) A Contract for supply of 11,48,000 MT to Bhusawal TPS was executed on 30.08.2013 whereunder the contract period began on 30.07.2013.

(vi) The Petitioner issued LoA on 23.09.2013 in the Respondent’s favour for awarding the tend