1 aral14228-11 vai IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION ARBITRATION APPEAL (LODGING) NO.14228 OF 2011 Go Airlines (India) Limited ....Appellant ....Ori.Respondent V/s. Bharat Petroleum Corporation Limited ....Respondent ....Ori.Claimant Mr.Milind Sathe, Senior Counsel with Mr.Ashish Kamat i/b Crawford Bayley & Co. for the Appellant. Mr.Mustafa Doctor with Ms.Viloma Shah i/b Hariani & Co. for the Respondent. CORAM : S.J. VAZIFDAR, J. DATE : 7TH DECEMBER, 2011. P.C. :- 1. Admit. With the consent of the parties, the appeal is heard finally. 2. This is an appeal against the order of the learned arbitrator dated 18.4.2011, allowing the respondent’s application under section 16 of the Arbitration and Conciliation Act, 1996. The application raised a preliminary objection as to the jurisdiction of the arbitral tribunal to entertain the appellant’s counter claim. 3. The parties had entered into an agreement dated 1.1.2007 2 aral14228-11 for supply of aviation fuel by the respondent to the appellant. In view of the contentions raised on behalf of the respondent, it is necessary to note that the agreement was for the period 1.1.2007 to 31.3.2009 which was extended for the period 1.4.2009 to 31.3.2011. 4. The respondent invoked the arbitration agreement and raised a claim for interest for the delayed payments for the fuel supplied from 1.4.2007 to 7.9.2009. 5. The appellant raised a counter claim alleging that the respondent had failed to issue cenvat credit invoices in respect of the fuel supplied. The appellant alleged that as a result thereof, it was unable to claim cenvat credit resulting in a loss to it. Clauses 7(ii) and 12 of the agreement read as under :- “7. Inovicing and Payment Terms: (ii) Ιnvoices in Indian Rupees containing the date of delivery, locations, Aircraft Registration no., Grade, Quantity of Fuel, Unit Price taxes and duties (applicable on the date of delivery) with delivery ticket attached shall be submitted to Buyer’s local office for payment at Buyer’s designated office. ................ 12. Disputes: In the event of any dispute arising between the two parties, relating to the various terms and conditions set forth in this Agreement and/or one or more Location Contract(s), the two parties undertake to resolve the differences by mutual consultation. In the event of their inability to resolve the disputes, the parties herein undertake to refer such disputes to an Arbitrator nominated by mutual consent. If however, the parties fail to decide the Arbitrator by mutual consent, as aforesaid, the Seller and Buyer 3 aral14228-11 will each nominate an Arbitrator of their choice and the two arbitrators so nominated shall choose a third arbitrator. The award of the arbitrator/s so appointed shall be final and conclusive and binding on all the parties to the agreement subject to the provisions of the Indian Arbitration and Conciliation Act 1996 or any statutory modification or reenactment thereof and the rules made there under for the time being in force shall apply to the arbitration proceedings under the clause. The arbitration shall take place in Mumbai and shall be in the English language.” 6. The respondent contended that the counter claim was beyond the jurisdiction of the arbitral tribunal and accordingly raised the preliminary objection under section 16 of the said Act. 7. The respondent contended that the appellant had raised the issue of cenvat credit invoices for the first time by its letter dated 5.5.2010. By this letter, the appellant called upon the respondent to raise cenvat invoices for supply of the fuel for the period 2005 onwards, stated that the recent finance bill for the period 2010-2011 had imposed service tax on domestic air travel and that the appellant needed the cenvat invoices for its supplies from the beginning. The appellant stated that non-availability of cenvat credit had resulted in huge financial loss to it. The only question therefore is whether this claim falls within the jurisdiction of the arbitration tribunal. The learned arbitrator held that it does not. The learned arbitrator held in paragraphs 8, 9 and 10 :- “8. According to the respondent this counter claim arises under the terms of the agreement between 4 aral14228-11 the parties and is therefore within the scope of the arbitration agreement and can be raised by way of a counter claim. The respondent relies upon clause 7 (ii) of the agreement between the parties. Clause 7 deals with `Invoicing and Payment Terms’. Under clause 7 (ii) it is provided as follows : “Invoices in Indian rupees containing the date of delivery, locations, Aircraft Registration number, Grade, Quantity of Fuel, Unit Price, taxes and duties (applicable on the date of delivery) with delivery ticket attached shall be submitted to Buyer’s local office for payment at Buyer’s designated office.” Invoices have accordingly been submitted by the claimant to the respondent giving the particulars set out in the said clause and the respondent has paid the same. The need for Cenvat credit invoices arose only after the imposition of service tax on domestic air travel in 2010 on respondent’s own showing. Therefore this claim cannot be considered as under clause 7 of the agreement. 9. The respondent contends that in the alternative, issuing such invoices is an implied term of the contract. Since the need for Cenvat invoices arose much after the agreement, such an implied term cannot be considered as within the contemplation of parties. This is not therefore a dispute which arises under the contract. The claimant has however, stated that had the request been made prior to the time of making the invoice these particulars could have been incorporated. It was not possible to do so now as the requisite data was not available with the claimant. 10. Clause 12 which deals with disputes provides : “In the event of any dispute arising between the two parties relating to the various terms and conditions set forth in the agreement and / or one or more Location contract (s), the two parties undertake to resolve the differences by mutual consultation. In the event of their inability to resolve the disputes, the parties herein undertake to refer such disputes to an Arbitrator nominated by mutual consent ....” In the present case prior to the commencement of the present arbitration there was no mutual consultation regarding 5 aral14228-11 this dispute because the dispute was raised for the first time after the commencement of the present arbitration. The dispute also does not pertain to the terms and conditions set forth in the agreement. Therefore this dispute is beyond the scope of the present arbitration.” 8. At the outset, I must mention that I have proceeded on the basis that if two views are possible on the construction of the clauses of an agreement, the Court will not substitute its views for that of the arbitrator. I have also proceeded on the basis that for the purpose of deciding the question of jurisdiction, the arbitration is not confined to the pleadings and is also entitled to consider the other material including the written submissions. 9. It is necessary to note at the outset that the respondent’s application under section 16 of the said Act was allowed on the ground that the arbitral tribunal lacked inherent jurisdiction to consider the appellant’s counter claim. I did not think it necessary, therefore, to permit Mr.Doctor to refer to the merits of the matter. If the arbitrator had no jurisdiction to consider the claim on merits, it would be unnecessary and impermissible for this Court in an appeal under section 37 of the said Act to consider the same. If on the other hand it is found that the arbitrator had jurisdiction to consider the claim, it is the arbitrator and not the Court especially in an appeal under section 37 of the said Act to consider the merits of the matter. While I have held in the appellant’s favour to the effect that the arbitrator had jurisdiction to consider the counter claim, I do not for a moment suggest that the respondent’s 6 aral14228-11 contentions on merits are without substance. Indeed, it is unnecessary for me to even consider the rival contentions on the merits of the case. 10. The liability to pay excise duty in respect of the transactions pertaining to the sale of fuel existed at least from 1.1.2004 i.e. prior to the agreement between the parties. The credit with respect to the central levies specified in the Canvat Rules, 2004 to the extent of the excise duty paid by the earlier manufactures, vendors was available at the material time. The persons entitled to the credit could avail of it for various purposes specified in Cenvat Rules, 2004, The cenvat details were therefore, liable to be given by the respondents. Clause 7(ii) requires the invoices issued by the respondent to contain inter-alia the tax and duties available on the date of delivery. Whether the details have to be given in terms of separate cenvat invoices or whether the details were to be furnished in the main invoices issued by the respondent for the sale of the fuel is another matter which the arbitrator must decide. All the issues in connection therewith such as whether the details had been furnished and the effect of not furnishing them are for the arbitrator to decide. 11. The learned arbitrator however, observed that the need for cenvat credit invoices arose only after the imposition of the service tax on the domestic air travel in the year 2010 and that therefore, the claim cannot be considered under clause 7 of the agreement. The appellant’s need for cenvat credit invoices pertains to 7 aral14228-11 the merits of the matter and not to the jurisdiction of the arbitrator. If the respondent’s submission to the effect that the cenvat credit invoices were required by the appellant only with respect to its liability to pay the service tax on the domestic air travel and that the appellant could derive no benefit from the cenvat credit invoices for any other purpose is upheld, the claim may be rejected on merits. The acceptance or rejection of such a claim would be within the jurisdiction of the arbitrator. An answer to this issue, however, does not affect the jurisdiction of the arbitrator to decide the same. 12. Mr.Sathe, stated that the appellant can always avail of the benefit of the cenvat credit invoices for other purpose. I cannot express any opinion on that issue. Whether the appellant could avail of the benefit of the cenvat credit invoices or not pertains to the merits of the matter and falls within the jurisdiction of the arbitrator. The learned arbitrator has not held that clause 7(ii) does not require the respondent to furnish the details regarding the cenvat credit. Indeed whether or not it was necessary for the respondent to furnish the details and to what extent and in what matter must also be decided by the learned arbitrator. 13. Mr.Doctor submitted that the claim for cenvat credit invoices was a mere afterthought and that it has been raised only to delay the arbitration proceedings. It may well be so, but that too is an aspect for the learned 8 aral14228-11 arbitrator to consider. 14. Similarly, it is for the arbitrator to decide whether the pleadings are sufficient to sustain the claim. This does not pertain to the issue of inherent jurisdiction of the arbitral tribunal. Suffice it to note that the arbitral tribunal has jurisdiction to consider the claim and also to reject it on any ground including on the ground that the pleadings are inadequate to sustain the claim. 15. In the circumstances, the appeal is allowed. The order of the arbitral tribunal is set-aside. The learned arbitrator has jurisdiction to consider the counter claim relating to the cenvat credit. There shall be no order as to costs. The court fees shall be paid within two weeks from today.