The Court upheld that an arbitral award can only be set aside for patent illegality and that included customs duty in pricing must be considered when calculating differentials in amounts owed.

JUDGMENT

Vibhu Bakhru, J.

Introduction

1. Bharat Sanchar Nigam Ltd. (hereinafter `BSNL') has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the `A&C Act') impugning an Arbitral Award dated 13.06.2019 (hereafter the `impugned award') delivered by an Arbitral Tribunal comprising of Justice (Retired) Vijender Jain, former Chief Justice of Punjab and Haryana High Court as the Sole Arbitrator (hereafter the `Arbitral Tribunal').

2. The impugned award was rendered in the context of disputes that had arisen between the parties in respect of the contract for supply and purchase of Polyethylene Insulated Jelly Filled Cables (PIJF Cables). In terms of the contract between the parties, M/s Vindhya Telelinks Pvt. Ltd. (hereinafter `VTPL') had agreed to supply PIJF Cables to BSNL. Since the element of copper constitutes the main raw material for manufacture of the PIJF Cables, the parties had agreed that the prices of the PIJF Cables to be supplied, would be suitably adjusted to accommodate the increase or decrease in the price of copper wire rod. BSNL had agreed to issue monthly circulars regarding the price of copper for the purpose of calculation of the price variation. It had issued provisional circulars and, provisional payments were made accordingly. Subsequently, after the supplies were completed, BSNL issued a final circular setting out the monthly base prices of copper for the period April 2005 to August 2006. VTPL had contested the calculation of the price of copper as fixed by BSNL and the said dispute is central to the controversy. It claimed that the price of copper as fixed was not comparable with the base price of copper as it was reduced by the element of customs duty, which was included in the base price of copper. VTPL, raised claims for the differential payments, which were allowed by the Arbitral Tribunal.

Factual Context

3. BSNL is a Public Sector Undertaking. It is engaged in providing telecom services in India except in Delhi and Mumbai. BSNL had issued a Notice Inviting Tender (NIT) dated 12.01.2005 inviting inquiries for the procurement of "120 LCKM PIJF Cables" [120 Lakh Conductor Kilometers of Polyethylene Insulated Jelly Filled Cables].

4. The Instructions to Bidders required the bidders to quote composite prices inclusive of all the levies and taxes but excluding octroi/entry tax, on the basis of the copper wire prices. Clause 9.8 of the Instructions to Bidders expressly provided that the prices would be quoted considering the price of copper wire as Rs.1,83,366/- Rs. The said clause is set out below:

"9.8 The prices will be quoted at copper wire prices of Rs.1,83,366/- (Rupees One Lac Eighty three thousand three hundred sixty six only) per MT excluding Excise Duty as on January 2005. Price variation will be applicable on copper as per standard Price variation table given in Section XI of the Bold Document."

5. Section XI of the Instructions to Bidders included a table setting out the corresponding increase and decrease in price for every increase/decrease of price of raw materials by Rs.100 per metric ton for PIJF cables of different sizes/specifications. Note (1) to the said table is relevant and is set out below:

"Note:(1) The price variation will be calculated on the Basic Price element of the approved rate and the same shall be used to arrive