BOC INDIA LTD. v. BHAGWATL OXYGEN LTD

Citation: [2007] 3 S.C.R. 915

Court: Supreme Court of India

Bench: AR. LAKSHMANAN, TARUN CHATTERJEE

Case summary

BOC INDIA LTD. v. BHAGWATL OXYGEN LTD.pdf

Judgment text

BOC INDIA LTD. v. BHAGWATl OXYGEN LTD. MARCH 12, 2007 [DR. AR. LAKSHMANAN AND TARUN CHATIERJEE, JJ. ] •• Arbitration Act, 1940-Sections 30, 33 and 8-Works contract-Lump , sum price fvced-Party raising invoices against indigenous supply and realising excess amount-Claim of refund by other party-Award by· the arbitrator allowing the claim-Interference with-Held: Arbitrator took a plausible view on interpretation ofcontract-Award was not based upon an erroneous proposition of law or error of law appeared from the award or from any document-Award was passed considering the terms of contract, arbitration clause, materials on record and the statement of claim-Figure in dispute was only a mark upto which parties agreed to keep in contract for rendering of service-Thus, award calls for no interference. Appellant and NSKK entered into an agreement to facilitate the respondent to import components for setting up Oxygen plant.

Appellant and respondent entered into a contract for erection, installation and commission ofthe plant. Respondent issued purchase orders in favour of the appellant for supply, installation and commissioning of oxygen plant at a lump sum price of Rs. 347. 40 lacs. The fixed price was subject to variation of importation of the contract and exchange rates. Due to variation in exchange rate and customs duty, the lump sum price of Rs. 347. 40 lacs was increased to Rs. 4,62,60,543. Appellant submitted its bill inclusive of taxes as per the - )contract. In view of the arbitration clause respondent raised claims after payment. Since the appellant did not refund the amount, respondent filed an application for the appointment of an arbitrator under sections 8 and 33 of the Arbitration Act, 1940 and submitted its claim before the arbitrator under 12 heads. Appellant also submitted its counter claim.

Arbitrator was appointed and he passed an award in favour ofthe respondent allowing five claims ofthe ~. respondent. However, it rejected the counter claim ofthe appellant. Appellant -~ then filed an application for setting aside the award. Appellant raised objection that the award suffered errors apparent on the face ofit; and that the arbitrator erred in awarding the claim of the respondent for a sum of Rs. 17,95,710/- relating to claim no. 9 although the arbitrator held issue no. 4 in favour of the appellant. High Court rejected the objection filed and upheld the award. Aggrieved appellant filed an appeal. Division Bench of High Court dismissed the same. Hence the present appeal. Dismissing the appeal, the Court HELD: 1. 1. When the Arbitrator had taken a plausible view on interpretation ofcontract, it is not open to the court to set aside the award on ' . BHAGWATI OXYGEN LTD. [TARUN CHATTERJEE, J. ] 925 supplies which clearly indicates Rs.

50 lacs would be the advance at the rate of I0% against the date of order within 30 days and I0% advance within three months and 80% advance against proforma invoice before dispatch. Clause 4. 5 of the terms of payment provi. des for erection and commissioning which indicates Rs. 15 lacs in respect of which 10% advance against order, I0% advance on opening of site, 70% on pro rata on monthly basis, I0% on completion of erection and commissioning. The Arbitrator had taken into consideration the claim of the respondent on indigenous supplies. He had also taken into consideration the total value of the contract which was Rs. 347. 40 lacs. 21. A bare perusal of the award of the Arbitrator would show that he had considered the figure of 17,95,710/- which is included in the lump sum contract price as consideration payable to the respondent for services rendered by it towards importation of plants components. From the award it will also be evident that in respect of the claim of Rs.

17,95,710/- against indigenous supply attention was drawn to the works given in para 10 [a], 10 [b] and 10 [c] of the statement of claim. Ifwe assign individual value to the individual jobs, the total works out to Rs. 3,29,44,290/- leaving a balance of Rs. 17,95,710/ -. 22. The learneC: Arbitrator in his award also considered that the breakup was an admitted position which would appear from para IO[c] of the Statement ofClaim and the sum of Rs. 17,95,710/-, the appellant had recovered under the bill issued against indigenous supply and the respondent paid the amount without any objection. While the Arbitrator has considered the fact that the appellant had realised the differential amount of Rs. 17,95,710/- from the respondent against indigenous supply, it cannot be -said to mean that the value of indigenous supply had gone up from Rs. 50 lacs to Rs. 67,95,710/- as according to the terms ofthe contract the value of indigenous supply remained at Rs.

67,95,710/- and the appellant realised the differential amount of Rs. 17,95,710/- against indigenous supply. Accordingly the Arbitrator was justified in holding that the said sum of Rs. 17,95,710/- was on account of expenses that might have been incurred by the respondent in executing the contract. )• 23. In the case of Trustees of the Port of Madras v. Engineering Construction Corporation Ltd. , AIR (1995) SC 2423, while this Court dealing with a situation when an award can be set aside under Section 30 of the Arbitration Act held as under: .. "The above decisions make it clear that the error apparent on the face of the award contemplated by Section 16(1)(c) as well as Section 30(c) of the Arbitration Act is an error of law apparent on the face of th1~ award and not an error of fact. It is equally clear that an error of law on the face ofthe award means an error of law which can be discovered from the award itself or from a document actually incorporated therein.

A note of clarification may be appended viz. , where the parties choose ' . to refer a question of law as a separate and distinct matter, then th(: Court cannot interfere with the award even if the award lays down a1 wrong proposition of law or decides the question of law referred to it in an erroneous fashion. Otherwise, the well settled position is that an arbitrator "cannot ignore the law or mis-apply it in order to do what he thinks is just and reasonable. " (See Thawardas Perumal v. Union ofIndia (1955] SCR 48: (AIR 1955 SC 468). " 24. In paragraph 20 of the said decision this Court also held that the proposition that emerges is that in the case of a reasoned award, the Court can interfere if the award is based upon a proposition of law which is 1· unsound in law and that the erroneous proposition of law must be established to have vitiated the decision.

It has also been held in that decision that the error of law must appear from the award itself or from any document or note incorporated in it or appended to it. This Court also held that it was not permissible to travel and consider materials not incorporated or appended to the award. So far as the facts of the present case are concerned, we do not think that the award ofthe Arbitrator can at all be interfered with as the award . was not based upon either a proposition of law which is unsound or an erroneous proposition of law was established to have vitiated the decision. As noted herein earlier, the Arbitrator had considered all aspects of the matter including the terms of the contract and all the materials on record and the statement of claim and has come to a conclusion of fact.

Such being the position, we cannot but hold that the award was not based upon a propositiqn of law which is unsound or an error of law must have appeared from the award itself or from any document or note incorporated in the award or appended to it. • -1, 25. That apart, according to the Arbitrator, this figure was nothing but .. ' BOC INDIA LTD. ,.. BHAGWATI OXYGEN LTD. (TARUN CHATTERJEE. J. ] 927 a mark up wh. ich the parties agreed to keep in the contract for rendering of service towards importation of plant components from Japanese supplies. The appellant had realized this difference amount of Rs. 17 lacs from the respondent against indigenous supplies. Therefore, it was not the case that the arbitrator had misconducted himself in passing the award by ignoring to consider material documents, which had thrown light on the controversy raised by the parties.

As noted herein earlier, the arbitrator had looked into the terms of the contract, arbitration clause and the statement of claim of the respondent ~ disputed by the appellant. It was not the case that the arbitrator had decided ..... erroneously a question of law referred to him but on consideration of the terms of contract and statement of claim came to a conclusion that Claim No. 9 of the respondent should be awarded in its favour. Such being the position, we do not find any reason to interfere with the award of the arbitrator which was passed on consideration of all material put on record. 26. In this view of the matter, it is not open to the court to set aside the award on the ground that the learned Arbitrator had, while continuing with the proceeding, acted beyond his jurisdiction and violated the contract while awarding Rs. 17,95,710/- in the form of Award No. 9. In our view, this -) cannot be said to have an award, which is contrary to the contract entered into by the parties.

It is also not the case where the learned Arbitrator had failed to consider material documents produced by the parties for arriving at a right decision. On the other hand as noted herein earlier, we are of the considered view that the Learned Arbitrator had duly considered the statement ofclaim and the terms and conditions ofthe contract and the material documents produced by the parties, which were available on record, and came to conclusion rightly in favour of the respondent. The Learned Arbitrator also came to a conclusion that the aforesaid figure of Rs. 17,95,710/-, was included - ,J.. as lump sum contract price as consideration payable to the respondent for service rendered by them for importation of plants and components.

In any view of the matter, when the Arbitrator had taken a plausible view on interpretation of contract, it is not open to the court to set aside the award on the ground that the Arbitrator had misconducted himself in the proceedings and therefore, the award was liable to be set aside. J· 27. In ! ndu Engineering and Textile Limited v. Delhi Development Authority, [2001] 5 SCC 691 this court laid down a principal when the cou. rt. ·'"""" couId set aside an award in the exercise of its powers under Section 30 o(the Act. This court in the said decision held that when a plausible view had been taken by the arbitrator and unless the award of the arbitrator was vitiated by a manifest error on the face of the award or was wholly improbable or perverse, it was not open to the court to interfere with the award within the statutory interpretation set out in Section JO of the Act. 28. That apart, the amount of Rs.

17,95,710/- was recovered by the appellant under the bill issued against indigenous supplies and amount were paid without any objection by the respondent. Such being the position we are unable to agree with Mr. Sorabjee that the award was liable to be set-aside . . on the aforesaid ground. 29. We, therefore, do not find any merit in this appeal. The appeal is dismissed without any order as to costs. N. J. Appeal dismissed. .. ·~