Case: National Highways Authority Of India Vs. M/S Jsc Centrodostroy

Arbitral Tribunal awarded to the respondent-claimant following sums under dispute No. 2:- ?10.1 The Claimant shall be paid by the Respondent an amount of Rs. 63,58,368/- on account of additional cost incurred on the Bank Guarantees furnished to the Respondent in terms of the Contract.10.2 The Claimant shall also be paid by the Respondent a sum of Rs. 43,84,987/- towards interest on the above amount for period upto the date of this award i.e. 28.02.2013.10.3 Post award interest shall be payable in addition on the awarded sum of Rs. 63,58,368/- at the rate of 12% per annum (simple) from the date of award to the actual date of payment of the said sum. No post award interest may, however, be paid in case the sums awarded under 10.1 and 10.2 above are paid within 90 days of the date of the award.?6. The award passed by the Arbitral Tribunal proceeds on the ground that the additional costs as a result of revision in service tax which the respondent-claimant was required to bear, were covered under Clause 70.8 of COPA. It was observed that service tax was not an input to the indices used in Prices Adjustment Formulae in Clause 70.3. It concluded as under:- ?The claim in question is for reimbursement of additional costs resulting from change in Central Law which came into effect after the base date as defined in Sub-Clause 70.8. In terms of the Sub-clause, such costs are not payable separately if the same have already been taken into account in indexing of the inputs in Price Adjustment Formulae under Sub-clause 70.3. The Claimant has placed on record a letter dated 24.01.2008 from the Economic Advisor, Ministry of Commerce and Industry, confirming that Service Tax was not an input into indexing of Whole Sale Price Indices, used in India.?7. The award passed by the Arbitral Tribunal was challenged by the appellant by filing OMP No.623 of 2013 under Section 34 of the Arbitration and Conciliation Act, 1966 before the High Court of Delhi. By order dated 21.10.2013 Single Judge of the High Court dismissed said petition. In an appeal arising therefrom i.e. in FAO(OS)588 of 2013, the Division Bench of the High Court by its judgment and order dated 20.12.2013, which is presently under challenge, affirmed the view taken by Single Judge and dismissed the appeal. 8. The facts leading to the present appeal arising out of FAO(AS)590 of 2013 are more or less identical. In that matter identical claims were raised on two counts but arising out of a different contract by the very same claimant. The Arbitral Tribunal granted Rs.8,84,969/- in respect of dispute no. 1 with interest @ 12% per annum under identical two heads as found in the earlier case. Similarly, in respect of dispute no.2, the Arbitral Tribunal awarded Rs.42,35,385/- with interest @ 12% per annum. 9. In NHAI v. ITD Cementation India Ltd.(Supra) impact of Clauses 70.1 to 70.7 on one hand and 70.8 of COPA was considered and the view taken by the Arbitral Tribunal as affirmed by the High Court was accepted. In that case impact as a result of increase in the rates of royalty and issue whether the Arbitral Tribunal was right in observing that the case was covered under Clause 70.8 of COPA were considered by this court. The view taken by the Arbitral Tribunal was found to be consistent with the terms of the contract and challenge at the instance of National Highways Authorities of India was negated. 10. The fact that there had been revision in the rates of service tax from time to time was not disputed by the appellant. Ms. Indu Malhotra, learned Senior Counsel appearing for the appellants in both the matters, however, submitted that only those claims which were constructional inputs alone would be eligible to be covered under Clause 70 of COPA. In her submission, the service tax on bank guarantee could have been avoided by the claimant, if the bank guarantee was replaced by tendering cash and that the facility of bank guarantee was optional and at the discretion of the claimant. Similarly, money advances were given for the benefit of the claimant and any cost associated with such benefit would not come within the scope of Clause 70.8. Mr. Biswajit Das, learned Advocate appearing for the respondent-claimant in both the appeals however, submitted that the bank guarantees were required to be given under the contract itself and such requirement was stipulated by the appellant primarily to reduce its financial risk and to bind the claimant for its performance or protecting the money advanced to the respondents. In his submission, furnishing a performance bank guarantee @ 10% of the contract price was a mandatory condition of the contract under Clauses 10.1 and 10.2 of COPA. Though at some stage the option of performance bond was mentioned in COPA, such option was withdrawn making performance security to be compulsorily in the form of an unconditional bank guarantee. Such requirement being directly referable to essential conditions and arising out of the terms of the Contract, according to him the matter was definitely within the ambit of Clause 70.8 of COPA.11. Having considered rival submissions, we are of the view that the assessment made by the Arbitral Tribunal in the instant case as affirmed by the High Court was definitely within its jurisdiction. It has consistently been laid down by this Court that construction of the terms of a Contract is primarily for an Arbitrator or Arbitral Tribunal to decide and unless the Arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for. Viewed thus, we do not see any reason or justification to interfere in the matter. The view that the increase in rates of service tax in respect of bank guarantee and insurance premium is directly relatable to terms of the contract and performance under the Contract is certainly a possible view.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]11. Having considered rival submissions, we are of the view that the assessment made by the Arbitral Tribunal in the instant case as affirmed by the High Court was definitely within its jurisdiction. It has consistently been laid down by this Court that construction of the terms of a Contract is primarily for an Arbitrator or Arbitral Tribunal to decide and unless the Arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for. Viewed thus, we do not see any reason or justification to interfere in the matter. The view that the increase in rates of service tax in respect of bank guarantee and insurance premium is directly relatable to terms of the contract and performance under the Contract is certainly a possible view.