Bharat Petroleum Corp. Ltd. vs Go Airlines(India) Ltd.

3. Brief facts which led to filing of this appeal are as under:-

4. Dispute arose between the parties when the appellant raised a claim for interest for the delayed payments of the fuel supplied during the period from 01.04.2009 to 31.03.2011. The respondent did not accept any amount payable towards interest. Since the dispute in respect of the liability and payment of interest on delayed 2 payment could not be resolved through mutual correspondence between the parties, the appellant vide its notice dated 25.03.2010 invoked arbitration clause i.e. Clause No.12 of the agreement dated 01.01.2007 suggesting the name of Mrs. Justice (Retd.) Sujatha Manohar as the sole Arbitrator. The respondent vide its letter dated 27.04.2010 agreed to the dispute being referred for arbitration and accepted Mrs. Justice (Retd.) Sujatha Manohar as the Arbitrator. In the said letter, respondent stated that they are sure that the learned Arbitrator would be able to adjudicate the issues appropriately considering the respondent’s various claims against appellant- BPCL. The appellant raised a claim for an aggregate sum of Rs.1,95,21,032/- with interest at the rate of 18% per annum from the date of presentation of the said claim till payment and/or realization.

5. The respondent filed its statement of defence denying the claims made by the appellant and it also raised two counter claims before the Arbitrator seeking an award directing the appellant to issue CENVAT invoices in favour of the respondent in respect of the Aviation fuel supplied under the agreement; in the alternative prayed for an award for a sum of Rs.11,60,44,466/- plus Rs.4,31,45,967/- being interest, as well as further interest on the principal amount computed at the rate of 15% per annum with effect 3 from 01.10.2009 till payment. In its second claim, the respondent demanded damages for alleged imposition of “Cash and Credit” terms by the appellant with effect from 04.07.2009 when the appellant refused to supply the Aviation fuel to the respondent except on “Cash and Credit” terms.

7. The appellant also filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 inter alia submitting that the 4 counter claim filed by the respondent was beyond the scope and jurisdiction of the Arbitrator and that the respondent demanded the CENVAT invoices from the appellant for the supplies made from the year 2005 onwards for the first time only by letter dated 05.05.2010 i.e. after the commencement of the arbitration. The respondent filed its reply to the said application filed under Section 16 of the Act inter alia stating that the counter claim filed by the respondent was well within the scope and jurisdiction of the Arbitrator.

8. The learned Arbitrator vide order dated 18.04.2011 allowed the application filed by the appellant under Section 16 of the Act inter alia holding that the counter claim relating to CENVAT invoices is beyond the scope and jurisdiction of the Arbitrator and rejected that part of the counter claim. Insofar as the counter claim of the respondent praying for damages for the alleged imposition of “Cash and Credit”, the learned Arbitrator held that the same is maintainable before the Arbitrator.

9. Being aggrieved by the order of the Arbitrator dated 18.04.2011, the respondent filed appeal before the High Court of Bombay under Section 37 of the Act. The High Court vide impugned judgment dated 07.02.2011 allowed the appeal preferred by the respondent and set aside the order of the Arbitrator dated 5 18.04.2011 by holding that the Arbitrator has jurisdiction to entertain the counter claim filed by the respondent relating to non-furnishing of invoices for CENVAT credit. Insofar as the observations of the Arbitrator, the High Court held that the learned Arbitrator may be well within the rights to reject the counter claim on merits after the parties put forth their case. The High Court however held that the rejection of the counter claim at the threshold, was not justified in view of the arbitration agreement between the parties. Being aggrieved, the appellant-BPCL has filed this appeal.

25. In the result, the impugned judgment of the High Court of Bombay dated 07.12.2011 in Arbitration Appeal (Lodging) No.14228 of 2011 is affirmed and this appeal is dismissed. The observations of the High Court in the impugned order in para No. (10) as to the availability of CENVAT credit allegedly specified in the CENVAT Rules, 2004 may not be considered as expression of opinion on the merits of the matter. The learned Arbitrator shall proceed with the matter on its own merits and in accordance with law. No costs.

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