Madhya Pradesh High Court
Bharat Sanchar Nigam Ltd vs M/S Optel Telecommunication Ltd. on 8 March, 2018
Equivalent citations: AIR 2018 MADHYA PRADESH 201, (2018) 4 MPLJ 393
HIGH COURT OF MADHYA PRADESH : AT JABALPUR
Arbitration Appeal No. 22 / 2010
Bharat Sanchar Nigam Limited .................. Appellant
- V/s -
M/s Optel Telecommunication Ltd ................. Respondent
Present : Hon'ble Shri Justice Hemant Gupta, Chief Justice.
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Shri Sanjay K. Agrawal, Advocate for the appellant.
Shri H.K. Upadhyay, Advocate for the respondent-
Official Liquidator.
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Whether Approved for Reporting : Yes
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Law Laid down :
The learned Arbitrator is bound by the terms of Agreement. Therefore, an award
rendered by such an arbitrator cannot be sustained if an Arbitrator has traveled
beyond the terms of the agreement to hold that there was an oral agreement prior to
placing of Advance Purchase Order, which was accepted by the respondents.
The terms of the contract stand crystallized with the issuance of Advance Purchase
Order and acceptance of the same. The Arbitral Tribunal has to take into account
the terms of the contract while deciding and making an award. The terms of the
contract are sacrosanct and an award cannot be rendered against the terms of the
contract. If the terms of the contract have been interpreted then the decision of the
Arbitrator would not be interfered with in proceedings under Section 34 of the Act .
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Significant Paragraph Nos: 10 to 17
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JUDGMENT(Oral)
08/03/2018 The challenge in the present appeal is to an order passed by the II Additional District Judge, Jabalpur on 15.03.2010 whereby an appeal under Section 34 of the Arbitration and Conciliation Act, 1996 (for 2 A.A. No. 22 / 2010 short "the Act") directed against an Award of an arbitrator dated 02.02.2002, was dismissed.
2. The appellant was part of Department of Telecommunication, Government of India before it was incorporated as a Government Company on 15.09.2000. The appellant published a tender for supply of Optical Fibre Cable (for short "the Cable") for the year 1996-97 on 22.03.1996. The lowest rate for supply of cable was 5% higher than the rates of the year 1995-96 which was not finalized and the tender was scrapped. Thereafter, as per the respondent, there was a meeting in Delhi on 09.09.1996 wherein, the appellant considered placement of orders for the Cables at the provisional rates indicated in the Annexure but these rates are going to be reduced marginally due to reduction in the custom duty in respect of cables in the last budget. It is thereafter, an advance purchase order was issued on 20.09.1996 to the respondent which reads as under:-
"A.P.O. NO CT/APO/028/96-97 Dated 20.9.96 File No.: 80-6/96 MMC/OPTEL/984 To, M/s Optel Telecommunication Ltd., 147 Zone I, Maharana Pratap Nagar, Bhopal - 462011 Subject: Placement of Advance Purchase Order for the supply of 2800 Kms of Optical fibre cables and accessories.
Dear Sirs, On behalf of President of India, an Advance Purchase Order (A.P.O.) is hereby placed on you for the supply of the subject items. This A.P.O. is being placed under the following terms and conditions:-3 A.A. No. 22 / 2010
1. The A.P.O. is likely to be converted into detailed P.O. after your acceptance of the A.P.O. and furnishing performance, bank guarantee for Rs.68,00,000/-. The said B.G. shall be furnished by you from the nationalised/Schedule bank strictly in accordance with the DOT format. The B.G. should be accompanied with a photo copy and be valid for 2 years.
2. Total Provisional value of the order shall be Rs.27,78,17,496.60 as per annexure "A". The prices given in the annexure "A" are subject to adjustment to the prices to be finalised by DOT for the year 1996-97 and are inclusive of ST, ED, & Other statutory duties/levies etc and F & I, packing & forwarding charges. The value of the order may get changed at the time of placement of detailed P.O. due to engineering of routes.
3. x x x
13. You are requested to convey your unequivocal/unconditional acceptance of this Advance Purchase Order along with performance Bank guarantee within a period of 20 days from the date of placement of this APO. In case unconditional acceptance of the APO along with performance bank guarantee is not received by 9.10.1996, the Advance Purchase Order shall be treated as withdrawn without any further communication from this office."
3. In response to such communication, the respondent conveyed its acceptance on 23.09.1996. The said communication reads as under:-
"Optel Telecommunications Limited (A Govt. of M.P. Undertaking) NO: OPTEL: MKTG:101: 23 Sept 96 Asstt Director General (CT) Telecom Commission Sanchar Bhavan 20, Ashoka Road NEW DELHI 110 001 Kind Attn: Shri N R Gupta 4 A.A. No. 22 / 2010 ACCEPTANCE OF APO NO CT/APO/028/96-97 DATED 20 SEPT 96 Dear Sir, We are extremely thankful for your Advance Purchase Order No. CT/APO/028/96-97 dated 20.9.96 for supply of 2,800 Kms of Optical Fibre Cable and Accessories.
2. We are pleased to convey our acceptance of the above referred APO. As desired, please find enclosed Bank Guarantee No IFB/BPL/96-97/77 dated 28 Sept 96 of State Bank of India, Industrial Finance Branch, Bhopal for an amount of Rs 68,00,000/-. We are also enclosing the delivery schedule in respect of 2,800 Kms of Optical Fibre Cable.
3. We would now request you to kindly favour us with the Purchase Order at the earliest.
We thank you once again for releasing this order and would like to assure you that we will come upto your expectation in meeting your requirements.
Yours faithfully, for OPTEL TELECOMMUNICATIONS LTD., Sd/-
(Ashok Agrawal) General Manager (Comm) Encl : As above"
4. It is thereafter, a purchase order for supply of 2800 kilometers OF-Cable was placed on the respondent on 04.10.1996, the relevant clauses 4 and 7 of prices read as under:-
"4. Purchaser's Reference: i) This office letter no. 80-6/96
-MMC dated 9.9.96
ii) A.P.O. NO CT/APO/028/96-97 dated 20.9.96.
7. Prices: Total Provisional value of the order shall be Rs 27,78,17,496.60 as per annexure "A". The Provisional unit prices given in the annexure "A" are subject to adjust-
ment to the prices to be finalised by DOT for the year 1996-97 and are inclusive of 5 A.A. No. 22 / 2010 ED, ST & other statutory duties/levies etc and Packing & Forwarding charges, Freight & Insurance charges.
Any increase in taxes and other statutory duties/levies after the expiry of the delivery date shall be to the contractors account. However benefit of any decrease in these taxes/duties shall be passed on to the purchaser by the supplier."
5. It is also not in dispute that tenders were invited by the Department of Telecommunication in October, 1996 for supply of cable and in pursuance of such tender, the price was finalized. As per the appellant, a sum of Rs.8,07,31,381/- was paid in excess than the price mentioned in the advance purchase order than the rates so received in the tender process. The respondent herein disputed the said amount by taking recourse to arbitration proceedings in terms of the Act. The learned Arbitrator answered the reference in favour of the respondent and found that the demand raised by the appellant is not tenable and that the Respondent is entitled to refund of the amount deducted. The learned Arbitrator primarily relied upon the letter dated 09.09.1996 and the meeting which has taken place in the month of September, 1996 to hold that the rates adjustments was to be done only in the amount of the Excise Duty, therefore, the demand raised by the appellant is not tenable. The relevant findings of the Arbitrator reads as under:-
"33. In the present case admittedly a meeting of the officials of the parties to the case was held in the earlier part of the month of September 1996 at Sanchar Bhawan Delhi (sic). In the said meeting it was decided that the 6 A.A. No. 22 / 2010 respondent would place an order to the petitioner to supply 2800 Kms. of OF-cable by 31.12.96 to meet the urgent requirement of respondent of the said commodity. It was further decided that the order could be placed at provisional priced based on Tender No. 11-
24/95 M.M.T. (OF) opened earlier on 6.4.95 and the said provisional prices shall be marginally reduced due to reduction in duties in the last budget. Thus in the present case, first, in the said meeting an agreement was arrived at orally pertaining to supply of OF-cable by the petitioner to the respondent.
34. In pursuance of the said oral agreement arrived at in the said meeting, the petitioner wrote the letter (Ex. A-1) dated 6.9.96 that he was willing to supply the said quantity of OF-cable. On receipt of the said letter Deputy Director General (M.M.9) of the non-applicant wrote the letter dated 9.9.96, (Ex.A-2) in which it was mentioned that the department was considering to place an order for supply of the said quantity of OF-cable at the provisional rate mentioned in the said letter (based on tender opened on 6.4.95), which would be reduced marginally due to reduction in custom duty in the last budget. The petitioner accepted the said terms and conditions mentioned in the said letter (Ex. A-2) dated 9.9.96 by writing letter of the same date (9.9.96) (Ex. A-
3) and requested to place the order (in accordance with the said agreed terms).
43. As has already been discussed above, there is an indirect reference of D.O. No.80-6/96 MMC/OPTEL (Letter dated 9.9.96-Ex.A-2) in the Advance Purchase Order also by mentioning the words "File No.80-6/96 MMC OPTEL". There is a specific mention of the said letter No. 80-6/96 MMC dated 9.9.96 (Ex. A-2) written for the respondent to the petitioner, in the Purchase Order. If the offer made in the said letter had already been rescinded and there was a novation of contract, then there was absolutely no necessity or there was no occasion for making a mention or reference of the said 7 A.A. No. 22 / 2010 letter. This mention or reference in the purchase order (Ex. A-6) clearly goes to indicate that the parties to the said contract, i.e. the parties to the case, kept the offer made in the said letter, alive. There is also a reference of letter written by the petitioner on 6.9.96 (Ex.A-1) which was so written after the oral agreement was arrived at in the meeting held in Sanchar Bhawan, in the earlier part of the month of September 1996. Had this correspondence and agreement arrived at in the said meeting had nothing to do with the allegedly new contract, there was further no occasion or necessity to make a mention or reference of letter written by the petitioner on 6.9.96 (Ex.A-1), either.
44. This circumstance along with other circumstances, go to indicate that the oral agreement arrived at in the meeting as well as the agreement arrived at, by the correspondence, was not rescinded but was kept alive."
6. After returning such findings, the stand of the appellant was rejected. The learned District Judge in appeal maintained the Award rendered by the Arbitrator.
7. The argument of learned counsel for the appellant is that the terms of the agreement have to be culled down on the basis of advance purchase order issued on 20.09.1996 which was accepted by the respondents on 23.09.1996. It is on the basis of acceptance of the terms of the advance purchase order; the purchase order was issued on 04.10.1996. Therefore, the terms of the agreement have to be determined on the basis of the three letters and not the earlier communication dated 9.9.1996.
8. It is also contended that the respondent has offered to reduce prices vide communication dated 06.09.1996, which reads as under:- 8 A.A. No. 22 / 2010
"Dated : 6th Sept. 1996.
Dear Sh. Khan, Thank you very much for the kind courtesy extended to me when I visited you today.
I am now writing to you to confirm that we can offer you following quantities of OFC by December '96.
a) 1000 Kms. of 12 Fibre Cable within 15 days of your P.O. as most of this is ready with us for shipment.
b) Upto the end of December '96 approximately the following further quantities can be supplied.
i. 1000 Kms. of 6 Fibre Cables
ii. 500 Kms. of 12 Fibre Cables
iii. 300 Kms. of 24 Fibre Cables.
In addition to the above we are in position to supply around 300 Kms. of OFC per month from January '97 to March '97.
Should the Department of Telecom feel that some reduction in prices is called for, we could consider the same. We hope that you find the above offer to you satisfaction and will place your orders immediately, which we assure you, will receive our best attention."
9. It is in response to the said letter, the communication dated 09.09.1996 was addressed to the respondent, which reads as under:-
"D.O. No.80-6/96-MMC 9th September, 1996.
Dear Shri Acharya, Kindly refer to your letter dated 6th September, 1996 addressed to Member (P). You have confirmed about the supply of 2800 kms of Optical Fibre Cables by December, 1996.
2. The Department is considering placement of orders for this quantity of Optical Fibre Cables at the provisional rates indicated in the Annexure. These rates are going to be reduced marginally due to reduction in the Custom Duty in respect of 9 A.A. No. 22 / 2010 optic fibre in the last budget. Your confirmation about the acceptance of the price is requested by this evening to enable this office to process the case further for placement of orders."
10. The question to be examined is whether the correspondence prior to issuance of advance purchase order can be referred to, to determine the terms of the contract or the terms as is mentioned in the advance purchase order alone will determine the terms of the contract and the payment of the price of the cables. The learned Arbitrator has referred to the previous communication and the alleged oral agreement on the basis of the fact that the said communications are from the same file. However, the price on the basis of which advance purchase order was issued does not permit any adjustment of the duties as found by the Arbitrator but the offer is inclusive of Sales Tax, Excise Duty and other statutory duties/levies etc. However, the only adjustment is to the prices to be finalized by the Department of Telecommunication for the year 1996-97 which was under contemplation at that stage. The respondent has accepted such terms of the price in its communication dated 23.09.1996. In the purchase order dated 04.10.1996, there is a reference to the letters issued by the respondent dated 06.09.1996 and the acceptance letter issued by the respondent on 23.09.1996 and also the letter dated 09.09.1996 and the advance purchase order dated 20.09.1996 and thereafter the price was communicated as contained in clause 7 as reproduced above. The clause pertaining to price is clear and categorical that the provisional value is Rs.27,78,17,496.60 but it is subject to adjustment to the prices to be finalized by the Department of 10 A.A. No. 22 / 2010 Telecommunication for the year 1996-97 and are inclusive of Sales Tax, Excise Duty and other statutory duties/levies etc. Therefore, the communications in the earlier letter dated 09.09.1996 stands superseded by the express terms of advance purchase order dated 20.09.1996 as accepted by the respondents on 23.09.1996. The prices as finalized in pursuance of the tender process initiated and finalized for the year 1996- 97 alone would be payable by the appellant to the respondent and not the provisional value subject to adjustment of the duty as mentioned by the appellant in the communication dated 09.09.1996.
11. Learned counsel for the respondent has referred to a Division Bench judgment of this Court in A.A. No.23/2016 (Madhya Pradesh Road Development Corporation Limited Vs. M/s Jabalpur Corridor (India) Pvt Ltd.) decided on 21.12.2016 wherein, the Court held that the Court does not exercise appellate jurisdiction, on the contrary the jurisdiction available to this Court is akin to revisional jurisdiction and is a supervisory jurisdiction. It held as under:-
"21. Before adverting to consider the dispute and the question involved in this appeal in detail, it would be appropriate to take note of the principles governing exercise of jurisdiction by this Court in a proceeding under section 37, of the Act of 1996. It is a well settled principle of law that the jurisdiction available to this Court and the scope of interference under section 37 is extremely limited. This Court does not exercise appellate jurisdiction, on the contrary the jurisdiction available to this Court is akin to revisional jurisdiction and is a supervisory jurisdiction. In the modern day commercial litigation and looking to the development of the law of arbitration and resolution of arbitral dispute it has to be kept in mind that parties have opted for arbitration and it is understood 11 A.A. No. 22 / 2010 by them that they have entered into the arbitration agreement with full knowledge of the risks attached to such proceedings and the limited recourse available to them by way of appeals or approach to Courts of law."
12. However, I find that such judgment is not helpful to the arguments raised. The price is made out from the communication dated 20.09.1996 accepted by the respondent on 23.09.1996 and in the purchase order issued by the appellant on 04.10.1996. In such letters, there is no reference that there will be only adjustment of duty and not of the price. All these three letters are categorical that the provisional price would be adjusted in terms of the rates to be finalized for the year 1996-97 by the Department of Telecommunication. Therefore, the finding recorded by the learned Arbitrator that the oral agreement prior to 20.09.1996 will determine the terms of contract between the parties is against the express terms of the three letters mentioned above. The communication dated 06.09.1996 by the respondent and that of the appellant dated 09.09.1996 are the part of the exchange of the letters for arriving at the terms of the contract. Such letters are not the terms of the Contract. The terms of the contract having been crystallized on 20.09.1996, it is the terms mentioned therein which will govern and applicable to the parties and not the offers and counter offers made at an earlier stage of the discussions. The learned Arbitrator has thus traveled beyond the terms of the agreement.
13. The Supreme Court in a judgment reported as (2003) 5 SCC 705 (Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.) held that the terms of the Contract cannot be ignored by an Arbitrator. The 12 A.A. No. 22 / 2010 Arbitral Tribunal constituted under the Arbitration and Conciliation Act, 1996 cannot render Award in contravention of the terms of an agreement. The relevant extract from the judgment reads as under :-
"12. Hence, the jurisdiction or the power of the Arbitral Tribunal is prescribed under the Act and if the award is dehors the said provisions, it would be, on the face of it, illegal. The decision of the Tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract. In exercising jurisdiction, the Arbitral Tribunal cannot act in breach of some provision of substantive law or the provisions of the Act.
13. The question, therefore, which requires consideration is -- whether the award could be set aside, if the Arbitral Tribunal has not followed the mandatory procedure prescribed under Sections 24, 28 or 31(3), which affects the rights of the parties. Under sub-section (1)(a) of Section 28 there is a mandate to the Arbitral Tribunal to decide the dispute in accordance with the substantive law for the time being in force in India. Admittedly, substantive law would include the Indian Contract Act, the Transfer of Property Act and other such laws in force. Suppose, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, the question would be -- whether such award could be set aside. Similarly, under sub-section (3), the Arbitral Tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If the Arbitral Tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered. Similarly, if the award is a non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn't be set aside by the court. If it is held that such award could not be interfered, it would be contrary to the basic concept of justice. If the Arbitral 13 A.A. No. 22 / 2010 Tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34.
14. The aforesaid interpretation of the clause (v) would be in conformity with the settled principle of law that the procedural law cannot fail to provide relief when substantive law gives the right. The principle is -- there cannot be any wrong without a remedy. In M.V. Elisabeth v. Harwan Investment & Trading (P) Ltd., 1993 Supp(2) SCC 433 this Court observed that where substantive law demands justice for the party aggrieved and the statute has not provided the remedy, it is the duty of the court to devise procedure by drawing analogy from other systems of law and practice. Similarly, in Dhannalal v. Kalawatibai (2002) 6 SCC 16 this Court observed that wrong must not be left unredeemed and right not left unenforced.
15. The result is -- if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which could be interfered under Section 34. However, such failure of procedure should be patent affecting the rights of the parties. (Emphasis supplied) ***** *****
22. ....... Take for illustration a case wherein there is a specific provision in the contract that for delayed payment of the amount due and payable, no interest would be payable, still however, if the arbitrator has passed an award granting interest, it would be against the terms of the contract and thereby against the provision of Section 28(3) of the Act which specifically provides that "Arbitral Tribunal shall decide in accordance with the terms of the contract". Further, where there is a specific usage of the trade that if the payment is made beyond a period of one month, then the party would be required to pay the said amount with interest at the rate of 15 per cent. Despite the evidence being produced on record for such usage, if the arbitrator refuses to grant such interest on the ground of equity, such award would also be in violation of sub-sections (2) and 14 A.A. No. 22 / 2010 (3) of Section 28. Section 28(2) specifically provides that the arbitrator shall decide ex aequo et bono (according to what is just and good) only if the parties have expressly authorised him to do so. Similarly, if the award is patently against the statutory provisions of substantive law which is in force in India or is passed without giving an opportunity of hearing to the parties as provided under Section 24 or without giving any reason in a case where parties have not agreed that no reasons are to be recorded, it would be against the statutory provisions. In all such cases, the award is required to be set aside on the ground of "patent illegality".
****** ******
73. It is to be reiterated that it is the primary duty of the arbitrators to enforce a promise which the parties have made and to uphold the sanctity of the contract which forms the basis of the civilized society and also the jurisdiction of the arbitrators. Hence, this part of the award passed by the Arbitral Tribunal granting interest on the amount deducted by the appellant from the bills payable to the respondent is against the terms of the contract and is, therefore, violative of Section 28(3) of the Act.
74. In the result, it is held that:
(A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:
(i) .......
(2) The court may set aside the award:
(i) ...........
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act.
However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.
15A.A. No. 22 / 2010
(c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(Emphasis supplied) (3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged:
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act.
(B).................."
14. In another judgment reported as Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, the Court held that an Arbitral Tribunal must decide in accordance with the terms of the contract. The Court held as under:-
"42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three subheads:
42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act, which reads as under:
"28. Rules applicable to substance of dispute.--(1) Where the place of arbitration is situated in India--
(a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;" 16 A.A. No. 22 / 2010
42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality -- for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside. 42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute.-- (1), (2) * * * (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do."
15. The learned Arbitrator has not adhered to the terms of the contract which he was bound to take into consideration in terms of Section 28 of the Act. Therefore, award rendered by such an arbitrator cannot be sustained as an arbitrator is bound by the terms of the agreement and cannot travel beyond the terms of the agreement to hold that there was an oral agreement prior to placing of Advance Purchase Order, which was accepted by the respondents.
16. Learned counsel for the respondent refers to another judgment in Civil Appeal No.11126/2017 (HRD Corporation (Marcus Oil and Chemical Division) Vs. GAIL (India) Limited (Formerly Gas 17 A.A. No. 22 / 2010 Authority of India Ltd.) decided on 31.08.2017. We find that the said judgment does not take a different view than what has been taken in Associate Builder's case. Firstly, HRD Corporation case dealt with the Act as amended by Central Act No.3 of 2016. However, we are concerned with the Act prior to the amendment on 31.12.2015. Still further, it has been held that after the amendment of Section 28(3), the construction of the terms of the contract is primarily for the Arbitrator to decide unless it is found that such a construction is not a possible one. Relevant extract reads as under:-
"18. Shri Divan is right in drawing our attention to the fact that the 246th Law Commission Report brought in amend- ments to the Act narrowing the grounds of challenge co-ter- minus with seeing that independent, impartial and neutral ar- bitrators are appointed and that, therefore, we must be careful in preserving such independence, impartiality and neutrality of arbitrators. In fact, the same Law Commission Report has amended Sections 28 and 34 so as to narrow grounds of chal- lenge available under the Act. The judgment in ONGC v. Saw Pipes Ltd, (2003) 5 SCC 705, has been expressly done away with. So has the judgment in ONGC v. Western Geco International Ltd., (2014) 9 SCC 263. Both Sections 34 and 48 have been brought back to the position of law contained in Renusagar Power Plant Co Ltd. v. General Electric Co., (1994) Supp (1) SCC 644, where "public policy" will now include only two of the three things set out therein, viz., "fun-
damental policy of Indian law" and "justice or morality". The ground relating to "the interest of India" no longer obtains.
"Fundamental policy of Indian law" is now to be understood as laid down in Renusagar (supra). "Justice or morality" has been tightened and is now to be understood as meaning only basic notions of justice and morality i.e. such notions as would shock the conscience of the Court as understood in As-18 A.A. No. 22 / 2010
sociate Builders v. Delhi Development Authority, (2015) 3 SCC 49. Section 28(3) has also been amended to bring it in line with the judgment of this Court in Associate Builders (supra), making it clear that the construction of the terms of the contract is primarily for the arbitrator to decide unless it is found that such a construction is not a possible one. "
17. As per Section 28(3) of the Act which was subject matter of interpretation in Associate Builder's case, the Arbitral Tribunal is required to decide the dispute in accordance with the terms of the contract. The terms of the contract stand crystallized with the issuance of Advance Purchase Order on 20.09.1996 which was accepted on 23.09.1996. The purchase order was issued on 04.10.1996. Still further, as per the amended provision, an Arbitrator has to take into account the terms of the contract while deciding and making an award. Therefore, the terms of the contract are sacrosanct and an award cannot be rendered against the terms of the contract. If the terms of the contract have been interpreted then the decision of the Arbitrator would not be interfered with in proceedings under Section 34 of the Act. In other words, if the reading of the Advance Purchase Order dated 20.09.1996 read with acceptance letter dated 23.09.1996 and Purchase Order dated 04.10.1996 are interpreted in a manner which is permissible in law, such an award could not be interfered with. But, the decision of the Arbitrator to take into consideration the alleged oral agreement, prior to crystallization of the terms of the purchase order, are not related to the terms of the contract, but, beyond the terms of the contract and, therefore, such award cannot be sustained.
19A.A. No. 22 / 2010
18. In view thereof, I find that the award rendered by the Arbitrator and the order passed by the learned Additional District Judge both are not sustainable in law and are hereby set aside. The present appeal is accepted.
(HEMANT GUPTA) CHIEF JUSTICE psm-
Digitally signed by PREM SHANKAR MISHRA Date: 2018.03.13 23:32:19 -07'00'