| Headnote |
Arbitration and Conciliation Act, 1996: s.34 – Application for setting aside award – Scope of interference – Held: In an application under s.34, the court is not expected to act as an appellate court and re-appreciate the evidence – The scope of interference would be limited to grounds provided under s.34 of the Arbitration Act – The interference would be so warranted when the award is in violation of “public policy of India”, which has been held to mean “the fundamental policy of Indian law” – A judicial intervention on account of interfering on the merits of the award would not be permissible – However, the principles of natural justice as contained in s.18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award – The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice” – It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground – An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter – However, an illegality with regard to a mere erroneous application of law would not be a ground for interference – Equally, re-appreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award. Arbitration and Conciliation Act, 1996: s.34 – Arbitral Tribunal passed the award in favour of SICAL holding that there was a change in law and thereby granting reliefs as prayed for by SICAL – It directed conversion of Container Terminal of TPT from royalty model to revenue share model – The finding of the Arbitral Tribunal was based on a premise that when TPT entered into a contract with SICAL there was an existing policy, which provided royalty to be factored into the cost while fixation of tariff and that subsequently, the GoI changed its policy on 29 th July, 2003 thereby providing that royalty payment/revenue sharing will not be factored into/taken into account as cost for fixation/revision of tariff by TAMP; and that there was subsequent change in policy on 31 st March, 2005 by which part of royalty was permitted to be factored into the cost – According to the Arbitral Tribunal, there was a change in policy, which amounted to change in law, which, in turn, adversely affected SICAL – Award of Arbitral Tribunal challenged by TPT before the District Judge – District Judge dismissed the s.34 petition – TPT successfully challenged before the High Court – Aggrieved SICAL filed instant appeals – Held: When the bid document was notified and when SICAL submitted its bid and LoI was issued to it, there were no guidelines in vogue – Even the guidelines of February 1998 do not provide for royalty being factored as cost while fixation of tariff – On the contrary, the tariff order of 1999 specifically clarifies that it has left the royalty issue to be decided by TPT and the GoI – It has specifically clarified that the approval by TAMP should not be interpreted to be amounting to any implicit approval of royalty-related issue – Further, the tariff order issued on 20 th September, 2002 specifically rejects the claim of SICAL for factoring any royalty as cost while tariff/price fixation – SICAL has challenged the said order before the High Court by way of writ petition, which petition has been allowed – It is also not in dispute, that on account of interim order passed by the High Court dated 8 th November, 2002, SICAL is still continuing to charge at rates notified in the 1999 tariff order – In this scenario, the finding of the Arbitral Tribunal, that there was a law when the Agreement was entered into between the parties, which provided royalty as a pass-through and that the said law has been changed for the first time in 2003 and subsequently again changed in 2005, is a finding based on ‘no evidence’ – Had the Arbitral Tribunal perused the tariff orders of 1999 and 2002, it would have found that in the 1999 tariff order TAMP has specifically observed that its approval of the tariff should not be construed as its implicit approval of royalty-related issue and the 2002 tariff order specifically states that royalty was not permitted to be factored in the cost while determining tariff – The Arbitral Tribunal has totally failed to take into consideration this aspect of the matter – As such, since the finding of the Arbitral Tribunal, that there was an existing law to the effect that the royalty payable shall be permitted as a pass-through in cost while fixation of tariff, is based on ‘no evidence’ and the finding, that there was a change in law in 2003 and 2005 is based on without taking into consideration the relevant evidence, would come in the realm of perversity as explained by this Court in paragraph 31 of the Associate Builders – The findings are based on ‘no evidence’ and ‘ignorance of vital evidence’ in arriving at its decision. Arbitration and Conciliation Act, 1996: s.34 – Whether the Arbitral Tribunal was justified in passing an award thereby substituting ‘royalty payment module’ to the ‘revenue-sharing module’ – A contract duly entered into between the parties cannot be substituted unilaterally without the consent of the parties – The intention of the parties could be gathered from the documents on record – SICAL made representation to TPT seeking a relief under the terms of Article 14.3 of the Agreement – TPT informed SICAL that the issues raised by it were under examination – However, TPT refused to consider SICAL’s application for relief since, according to it, the issue raised by SICAL was pending before the High Court – SICAL filed writ petition before High Court – High Court allowed the writ petition clarifying that the petition pending before the High Court had nothing to do with the representation under Article 14 of the License Agreement and remanded the matter to TPT for consideration afresh – TPT rejected the claim of SICAL – TPT has specifically observed that any change in the Agreement cannot be done without prior approval of the GoI – SICAL wrote to TPT invoking arbitration under Article 15.3 of the License Agreement – TPT strenuously contested the claim of SICAL with regard to prayer for change from ‘royalty payment mode’ to ‘revenue sharing mode’ – It could, thus, be seen that SICAL wanted the Agreement to be amended so as to change the ‘royalty payment method’ to ‘revenue- sharing method’ – TPT was always opposed to it – The intention of TPT is apparent from its various communications and its stand before the Arbitral Tribunal, that it was not agreeable for amendment of the Agreement from ‘royalty payment method’ to ‘revenue-sharing method’ – However, ignoring the stand of TPT, by the impugned Award, the Arbitral Tribunal has thrust upon a new term in the Arbitration: An Arbitral Tribunal is not a Court of law – Its orders are not judicial orders – Its functions are not judicial functions – It cannot exercise its powers ex debito justitiae. |
