Scope Of Review U/S 37 Is Limited To Ascertaining Compliance With S. 34 Of Arbitration Act: Delhi High Court

The Delhi High Court bench of Justices Rekha Palli and Saurabh Banerjee affirmed that the Court under section 37 of the Arbitration Act cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision Brief Facts The present appeal under Section 37 (1) (b) of the Arbitration and Conciliation Act, 1996 [the Act] read with Section 13 (1A) of the Commercial Courts Act, 2015 seeks to assail the order dated 22.08.2024 passed by the learned Single Judge. Vide the impugned order, the learned Single Judge has rejected the appellant's challenge to the arbitral award dated 20.05.2024 by way of a petition under Section 34 of the Act. The appellant issued a Notice Inviting Tender [NIT] on 03.04.2013 for supply of 24 Fibre Metal Free Optical Fibre Cable with double HDPE Sheath (G.652D) and accessories divided into Six Packages (Package 'A' to Package 'F'). The respondent submitted an invitation which was accepted and consequently, two Purchase Orders both dated 25.03.2014 were issued in favour of the respondent. As per the terms of the NIT, excise duty payable on the goods to be supplied by the respondent was fixed @10.30% by taking the classification of the goods to be supplied under ED Tariff Head 85.44. After the supplies were made, the respondent raised a claim against the appellant seeking reimbursement of the differential amount of excise duty paid on the goods supplied under the contract. It was the appellant's case that upon reclassification of the goods the respondent was required to pay excise duty @ 12.36%, as against the duty of 10.30% envisaged under the contract. The respondent's demand was resisted by the appellant on the ground that the change in classification of the goods would not amount to change in law and, therefore, the respondent could not seek reimbursement of the amount paid towards the enhanced duty. It is this dispute which led to invocation of arbitration proceedings by the respondent before the learned Arbitrator.The above, consequently led to passing off an arbitral award on 20.05.2024, wherein the learned Arbitrator accepted the respondent's plea and came to a conclusion that the demand raised by it was covered within the ambit of aforesaid Clause III.12.2(a) of the NIT as it was pertaining to the excise duty payable on the goods in issue. Being aggrieved thereby, the appellant filed the petition under Section 34 of the Act, which upon rejection by the learned Single Judge has led the appellant to approach this Court by way of the present appeal. Contentions The appellant submitted that both the learned arbitrator as also the learned Single Judge have failed to appreciate that the “change in taxes” was only on account of a change in classification of the goods, which in itself would not qualify as the “change in law” envisaged under Clause III.12.2(a) of the NIT and that, even otherwise, any change in law would require a statutory backing and it is only those eventualities that were included within the ambit of the NIT. That the certificate produced by the respondent in support of his plea that Excise Duty had been paid @ 12.36% was not verified. Court's Analysis The court, at the outset, discussed the scope of interference under section 37 of the Arbitration Act and observed that the scope of interference under Section 37 of the Act is extremely limited. Interference is called for only when it is absolutely necessary or when it shocks the conscience of the Court or when it is found that the arbitral award is in contravention of any prevailing law and/ or provisions of the Act and/ or any terms of the contract. The court while adverting the facts of the present case observed that the appellant has neither raised any dispute qua any of the invoices raised by the respondent nor has it amended any of the terms of the Purchase Orders. The only plea of the appellant both before the learned Single Judge and before us is that Clause III.12 of the Purchase Orders would not include a demand towards higher duty paid by the respondent due to change in classification of the goods.The court, however, found merit in the submission and observed that the expression, “change in taxes/ duties” can also pertain to the change in classification. In any event, this being a plausible view arrived at by the learned Arbitrator and upheld by the learned Single Judge calls for no interference in the present appeal under Section 37 of the Act, where the scope is as it is very minimal. The court concluded that In view of the aforesaid, no reason to interfere is found either with the impugned arbitral award or the impugned order passed by the learned Single Judge.Accordingly, the present appeal was dismissed. Case Title: Bharat Broadband Network Ltd v. Paramount Communications...

Scope Of Review U/S 37 Is Limited To Ascertaining Compliance With S. 34 Of Arbitration Act: Delhi High Court

Mohd Malik Chauhan

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