The court emphasized that arbitrators must operate within the contractual provisions; awards can be overturned if arbitrators act beyond their jurisdiction, particularly regarding deductions not explicitly permitted in contracts.

JUDGMENT :

AVNEESH JHINGAN, J.

1. This petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short "the Act") challenging the arbitral award dated 24.05.2024.

FACTS

2. A conspectus of the facts necessary for disposal of the case is that the parties to the lis executed a contract on 12.10.2007 (for brevity "the contract") for installation of the "Power Supply Facility (package-II) for 700 TPD ASU-4 in Oxygen Plant no. II" at Bhilai Steel Plant (for short "BSP"). The work was to be completed by the petitioner within fifteen months and was for a price of Rs.18,45,54,310/-. The contract was executed, the commission certificate and the final acceptance certificate were issued on 20.06.2012 and 12.12.2013 respectively. The petitioner submitted final invoices on 12.02.2019 and Rs.1,07,61,378/- was deducted for shortfall in minimum guaranteed CENVAT credit (for short "MGCC"). Upon failure of conciliation attempts, arbitration proceedings under clause 6 of the General Conditions of the Contract (for short "GCC") were invoked on 07.02.2022.

3. The only dispute involved in the present petition is vis-a-vis claim nos.3 and 4 framed by the arbitrator, which read as under:

“3. Whether the Claimant is entitled to the declaration from this Hon"ble Tribunal that the amount of Rs.1,07,61,378 deducted by the Respondent on account of shortfall of guaranteed CENVAT is bad in law ?

4. Whether the Claimant is entitled to reimbursement of Rs.1,07,61,378 deducted by the Respondent on account of shortfall of guaranteed CENVAT ?”

4. The issues were decided against the petitioner/claimant. Hence, the present petition.

SUBMISSION OF THE PETITIONER

5. Learned counsel for the petitioner contends that the arbitrator travelled beyond the terms of the contract. In the absence of clause permitting deduction for shortfall in MGCC the arbitrator erred in upholding the deduction. The contention is that clause 14.5.2 of the contract provides only for non-reimbursement of excise duty. It is submitted that the award was passed without application of mind and that the arbitrator relied upon a non-existent clause providing that in case of excess CENVAT, the petitioner would be entitled to 50%thereof.

SUBMISSION OF THE RESPONDENTS

6. Per contra, the petitioner violated the terms of the contract. Upon failure of the petitioner to pass on the MGCC as provided under Article 2.1 of the contract, the respondents were entitled to deduct the amount of shortfall in MGCC. It is argued that Article 2.1 of the contract overrides the GCC. Further that, as per the petitioner, the shortfall in MGCC was due to variation in the rate of taxes but neither clause 14.6.2 was complied with by submitting proof of variation in the rate of taxes within the stipulated time nor such evidence was adduced before the arbitrator. It is canvassed that under clauses 14.6.1, 14.6.2 and 14.6.3, the contract price can be adjusted only in case of variation in the rate of taxes leviable on finished equipments and not on raw materials, parts, component, intermediate components, assemblies, sub-assemblies etc.

6.1 It is emphasized that the scope of interference is limited to the grounds available under Section 34 of the Act. The view taken by the arbitrator is plausible and no case is made out for interference by this court.

RELEVANT CLAUSES OF THE CONTRACT

7. Before proceeding further, it would be relevant