IMPORTANT POINT
An arbitrator cannot award claims that contradict the explicit terms of the contract, as such awards exceed jurisdiction and violate the Arbitration and Conciliation Act, 1996.

JUDGMENT :

Sabyasachi Bhattacharyya, J.

1. The respondent in an arbitral proceeding has preferred the present challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as, “the 1996 Act”), against an award passed by the sole Arbitrator. Out of the several claims made by the claimant/present respondent, four items were allowed by the Arbitrator.

2. Claim no.1 pertained to 2596 numbers of Conductor Rail Support Insulators, Item no.2 relates to Value Added Tax (VAT) @ 4% on the sum awarded as the price of item no.1, claim no. 3 pertains to VAT @ extra 1% and item no.4 grants extra 1% VAT relating to claim no.1.

3. Learned counsel for the petitioner argues that the interest component awarded by the arbitrator is contrary to clause 15.4 of the tender document which specifically provides that no claim shall lie against the purchaser in respect of interest.

4. It is further contended that Section 31(7) of the 1996 Act binds the arbitrator to the contract between the parties. If the parties agree to non-imposition of interest, it is beyond the jurisdiction of the arbitrator to grant the same.

5. Section 28(3) of the 1996 Act, it is argued, stipulates that while making an award, the tribunal shall in all cases take into account the terms of contract and trade usages applicable to the transaction.

6. Insofar as claim no. 2 is concerned, it is argued that Clause 21 of the Special Conditions of Contract (SCC) contains a denial clause which precludes the supplier from any benefit due to change of any statutory levies, customs duty variation, etc. which comes after expiry of the original delivery period as per the Purchase Order/Letter Of Credit. The time for completion of the supply was extended at least five times and the VAT calculated under claim no. 2 pertains to a period after the expiry of the original delivery period. Thus, Clause 21 debars such claim.

7. It is contended by the petitioner that the petitioner railways had short closed the contract without any financial repercussion in terms of Clause 5 of the tender document. Clause 5 clearly contemplates +30% as the leeway by way of option clause. The short closure of 2596 items which comprises claim no.1 was within the said percentage and as such, the railway reserved the right to short close the same without even assigning any reason. Hence, the said short closure did not comprise of a breach of the agreement; rather, the same fell within the purview of the tender conditions. Such aspect was not considered by the Arbitrator at all.

8. It is contended that in view of the short closure clause and/or the short closure not being challenged by the petitioner, the Arbitrator acted de hors jurisdiction in granting the reliefs on the premise that such short closure was contrary to the contract.

9. Learned counsel cites Shri H.D. Vashishta vs. M/s. Glaxo Laboratories(I.) (P.) Ltd, reported at AIR (1979) SC 134 and Bhagat Singh and others Vs. Jaswant Singh, reported at AIR (1966) SC 1861 for the proposition that all material facts necessary to constitute a cause of action must be averred in the plaint and where a claim has never been made, no amount of evidence can be looked into in support of the same.

10. With regard to the proposition that the arbitrator cannot grant pendente lite interest if the agreement between the parties prohibits the same, learned counsel cites the unreported judgments in Civil Appeal Nos. 15545-15546 of 2017 (Sri Chittaranjan Maity Vs. Union of India), and APO 156 of 2018 arising out of AP 423 of 2009 (Union of India Vs. A.K. Mukherjee).

11. Learned counsel also cites M/s Rashtriya Chemicals & Fertilizers Ltd Vs. M/s Chowgule Brothers & Others, reported at AIR (2010) SC 3543 and Oil & Natural Gas Corporation Ltd Vs. SAW Pipes Ltd reported at AIR (2003) SC 2629 in support of the same contention.

12. Learned counsel relies on Civil Appeal Nos. 8817 of 2010 ( Oil & Natural Gas Corporation Vs. M/s Wig Brothers Builders & Engineers Pvt. Ltd)