Ministry of Road Transport and Highways v. M/S. A K Shivhare Infrastructure Pvt Ltd

15. It would be the specific case of the learned Counsel for the Appellant that the calculations forming the basis on which the RFP was floated were entirely premised upon the SOR, 2016. This position, according to the Appellant, is clearly borne out from a conjoint reading of the Technical Note dated 15.09.2017, Clause 19.1.[2] of the Agreement, and the SOR, 2016.

16. Learned counsel for the Appellant would contend that a plain reading of the aforesaid clauses contained in the relevant documents leads to the inescapable conclusion that the Agreement did not, at any stage, exclude the element of GST.

17. Learned Counsel for the Appellant would further place reliance on Clause 6.1.[2] of the Agreement, which records a disclaimer to the effect that the Contractor (the Respondent herein) has acknowledged and accepted its satisfaction with regard to the correctness and sufficiency of the Contract price.

18. Learned Counsel for the Appellant would further submit that Clause 1.[4] of the Agreement expressly stipulates the order of priority amongst the various documents forming part of the contractual framework, in the event of any conflict or discrepancy arising between them.

CONTENTIONS OF THE RESPONDENT:

19. Learned Senior Counsel for the Respondent would commence her submissions by contending that the present appeal assails concurrent findings of the learned Arbitral Tribunal and the learned Single Judge of this Court. It would be thus urged by the learned Senior Counsel for the Respondent that there is no infirmity in either the Arbitral Award or the Impugned Judgment.

20. She would further submit that all relevant factors were duly considered by the learned Arbitral Tribunal, and the learned Single Judge rightly declined to interfere therewith, keeping in view the extremely limited scope under Section 34 of the A&C Act. Learned Senior Counsel for the Respondent would further submit that the issues raised essentially pertain to the interpretation of contractual terms, which fall squarely within the domain of the Arbitral Tribunal, and consequently, neither the Arbitral Award nor the Impugned Judgment warrants interference by this Court in exercise of its jurisdiction under Section 37 of the A&C Act.

21. Learned Senior Counsel for the Respondent would place particular reliance upon the Work Order dated 28.02.2018 and submit that, when read in conjunction with the Respondent‟s Letter dated 20.12.2017 seeking clarification regarding the applicable SOR, it leads to the reasonable conclusion that the Appellant‟s understanding at the relevant time was that the accepted rate was exclusive of the GST component.

22. Learned Senior Counsel for the Respondent would further contend that the aforesaid Work Order, having been signed by the Chief Engineer, who is also the competent authority to execute the Agreement, unequivocally reinforces the contention that the contractual understanding between the parties was that the quoted price was exclusive of GST.

23. Learned Senior Counsel for the Respondent would also contend that the SOR, 2017, had come into force on 29.08.2017, and therefore, when read in the context of Article 28 of the Agreement, which defines Base Date, the applicable SOR must necessarily be construed as the SOR of 2017 and not the SOR of 2016. ANALYSIS:

24. This Court has heard both parties at length and has undertaken a detailed consideration of the pleadings and documents, Impugned Judgement and Arbitral Award.

25. At the outset, we note that the learned Single Judge, on an appreciation of the arguments raised before him and after having considered the Arbitral Award, has held as follows: ―B. On merits - regarding the respondent’s claim for GST

15. The question which required adjudication by the Arbitral Tribunal on merits is whether the contract amount of ₹65.62 crores quoted by the respondent was to be construed as exclusive of GST, as claimed by the respondent, or was inclusive of GST, as claimed by MoRTH.

16. The tender in the present case was issued on 08.09.2017. Although this was after the enactment of the GST regime, which came into force on 01.07.2017, the tender document admittedly did not contain any specific provision with regard to payment of GST. The estimated amount of the work was stated to be ₹77.30 crores. The respondent’s bid was for the substantially lower sum of ₹65.62 crores, which was accepted and the Letter of Award was issued on 05.12.2017. The respondent sought a clarification with regard to the payment of GST by a letter dated 20.12.2017, relying upon an amendment to the SOR issued by Government of Madhya Pradesh on 16.10.2017 with effect from 29.08.2017. The amendment provided that the SOR would be exclusive of GST. Although no reply was sent by MoRTH to this letter, the parties entered into the Contract on 26.02.2018 for the contractual sum of ₹65.62 crores.

17. Clause 19.1.[2] of the Contract reads as follows: - ―19.1.[2] The Contract Price includes all duties, taxes, royalty, and fees that may be levied in accordance with the laws and regulations in force as on the Base Date on the Contractor’s equipment, Plant, Materials and supplies acquired for the purpose of this Agreement and on the services performed under this Agreement. Nothing in this Agreement shall relieve the Contractor from its responsibility to pay any including any tax that may be levied in India on profits made by it in respect of this Agreement.‖

18. Two days thereafter, on 28.02.2018, MPRDC, which was the implementing agency of MoRTH, issued a Work Order to the respondent, the Work Order contained a provision regarding the ―Contract Amount‖, which reads as follows: - ―2. Contract Amount: Rs. 65,62,00,000/- (Rupees sixtyfive crores sixty-two lakhs only) excluding GST.‖

19. Work under the Contract was completed on 25.09.2019. Interim payments were made in the meantime without GST, but the respondent’s final bill was submitted on 18.08.2020, raising a claim of ₹8,30,25,083/- on account of GST. MoRTH made the payment on 15.12.2020, but did not pay the GST amount. The respondent raised claims for GST by letters dated 05.01.2022 and 09.02.2022, and ultimately invoked arbitration by the aforesaid communication dated 18.05.2022.

20. The principal contention of Ms. Sharma is that the tender documents and the estimated value of the tender of ₹77.30 crores were based upon the SOR issued by Government of Madhya Pradesh in 2016. The said SOR expressly provided that the rates were inclusive of all taxes. She submits that the Arbitral Tribunal has erroneously come to the conclusion that the rates submitted by the respondent were exclusive of GST, relying only upon the Work Order dated 28.02.2018, which contained a typographical error to this effect.

21. The findings in the impugned award on this aspect are that the SOR was revised by the Public Works Department with effect from 29.08.2017, before the bids were called on 08.09.2017 with an estimated value of ₹77.30 crores. The Arbitral Tribunal has held that the ―Base Date‖ was 26.09.2017, being 28 days prior to last date for submission of bids, when GST was already in force. The Arbitral Tribunal has also noticed the contents of the Work Order, wherein it has been expressly stated that the contract amount was fixed at ₹65.62 crores excluding GST. The respondent’s request for clarification dated 20.12.2017 was not answered until the issuance of the Work Order, which expressly stipulated that GST would be payable upon the contract value. The conclusions of the Arbitral Tribunal are contained in paragraphs 18.14 and 18.15 of the award, which read as follows: - ―18.14 All the above sequences clearly lead to the interpretation that GST was not included in the rates quoted by the claimant which the respondent has himself subsequently clarified clearly in the work order dated 28 Feb 2018, issued under the signatures of the Chief Engineer who himself signed the contract and knows clearly the contention/interpretation of the contract that the quoted rales of the claimant are without GST. This cannot be treated as clerical and topographically error as being slated by the respondent in his counter arguments now before the AT. The respondent remained silent on this issue and submitted such reply in the SOD only.

18.15 GST is on the completed finished work and has to be paid by the one who availed the final services which in this case is the respondent for whom the claimant was working. The provisions on all taxes liability of the claimant under clause 19.1.[2] (page 255 of the SOC) is limited to payment of taxes on materials. machines, services availed by the claimant. So GST payment liability by the claimant does not exist which has clearly been stated in MP PWD SOR 2017 stating rates are without GST. So taking shelter by the respondent that all tax provision in the contract made in the contract based on June 2016 SOR when GST did not exist at all, is absurd, hence GST is not included in the quoted rates of the claimant and GST payment is not the liability of the claimant. Moreover, as per GST provisions, GST has to be paid by the one who availed the final services which in this case is the respondent. So all taxes provisions in the contract and GST provisions are totally different. That is why the Chief Engineer, who signed the contract clearly specified that GST is not included in the accepted amount in the work order issued by him to commence the work after acceptance of the contract. Even the respondent stated in his arguments that as per Schedule 2 of GST Act, work contract is supply of services and the person who has been given services is liable to pay GST. In the present case the claimant has given services to the respondent, so the respondent who has been given the services by the claimant, has to pay the entire GST amount due and not by the claimant as now wrongly being interpreted by the respondent while rejecting the rightful due claim onGST of the claimant.‖

22. The aforesaid analysis proceeds on an interpretation of the contractual terms, which is a matter within the domain of the Arbitral Tribunal. The interference of the Court under Section 34 of the Act is warranted only if such interpretation is found to be arbitrary, perverse or irrational. In the present case, the Arbitral Tribunal’s conclusion that the tender document, issued after the amendment to the SOR on 29.08.2017 was based upon the said SOR, cannot be held to be arbitrary or perverse. This conclusion of the Arbitral Tribunal is fortified by the reference to the Work Order issued contemporaneously with the Contract, wherein the Chief Engineer of MPRDC, has clearly stated that the contract amount is exclusive of GST.

23. Having regard to these facts, I did not find any case for interference with the award on merits also.

24. This being the only substantive claim raised before the Arbitral Tribunal, in addition to claims for interest and costs, no other issue requires adjudication. MoRTH’s counter claim was also only for costs, which has been consequently rejected by the Arbitral Tribunal. Conclusion

25. In view of the aforesaid, the petition is dismissed, but with no order as costs. All pending applications also stand disposed of.‖

26. The core issue in the present matter concerns the correctness of the Arbitral Award, particularly insofar as it grants reimbursement of GST, along with interest and costs, as noted hereinabove.

27. We are mindful of the limits of our jurisdiction while adjudicating a challenge under Section 37 of the A&C Act. The scope of interference in an Appeal under Section 37 of the A&C Act is extremely limited and has been set out by the Hon‟ble Supreme Court in various judgments. In a recent judgment, Punjab State Civil Supplies Corpn. Ltd. v. Sanman Rice Mills[9], the Hon‟ble Supreme Court summarized the settled position as follows: ―11. Section 37 of the Act provides for a forum of appeal inter-alia against the order setting aside or refusing to set aside an arbitral award under Section 34 of the Act. The scope of appeal is naturally akin to and limited to the grounds enumerated under Section 34 of the Act.

12. It is pertinent to note that an arbitral award is not liable to be interfered with only on the ground that the award is illegal or is erroneous in law that too upon reappraisal of the evidence adduced before the arbitral trial. Even an award which may not be reasonable or is non-speaking to some extent cannot ordinarily be interfered with by the courts. It is also well settled that even if two views are possible there is no scope for the court to reappraise the evidence and to take the different view other than that has been taken by the arbitrator. The view taken by the arbitrator is normally acceptable and ought to be allowed to prevail.

13. In paragraph 11 of Bharat Coking Coal Ltd. v. L.K. Ahuja, it has been observed as under: ―11. There are limitations upon the scope of interference in awards passed by an arbitrator. When the arbitrator has applied his mind to the pleadings, the evidence adduced before him and the terms of the contract, there is no scope for the court to reappraise the matter as if this were an appeal and even if two views are possible, the view taken by the arbitrator would prevail. So long as an award made by an arbitrator can be said to be one by a reasonable person no interference is called for. However, in cases where an arbitrator exceeds the terms of the agreement or passes an award in the absence of any evidence, which is apparent on the face of the award, the same could be set aside.‖

14. It is equally well settled that the appellate power under Section 37 of the Act is not akin to the normal appellate jurisdiction vested in the civil courts for the reason that the scope of interference of the courts with arbitral proceedings or award is very limited, confined to the ambit of Section 34 of the Act only and even that power cannot be exercised in a casual and a cavalier manner.

15. In Dyna Technology Private Limited v. Crompton Greaves Limited, the court observed as under: ―24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.‖

16. It is seen that the scope of interference in an appeal under Section 37 of the Act is restricted and subject to the same grounds on which an award can be challenged under Section 34 of the Act. In other words, the powers under Section 37 vested in the court of appeal are not beyond the scope of interference provided under Section 34 of the Act.

17. In paragraph 14 of MMTC Limited v. Vedanta Limited, it has been held as under: ―14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court 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. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.‖

18. Recently a three-Judge Bench in Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking referring to MMTC Limited (supra) held that the scope of jurisdiction under Section 34 and Section 37 of the Act is not like a normal appellate jurisdiction and the courts should not interfere with the arbitral award lightly in a casual and a cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle the courts to reverse the findings of the arbitral tribunal. *** CONCLUSION:

20. In view of the above position in law on the subject, the scope of the intervention of the court in arbitral matters is virtually prohibited, if not absolutely barred and that the interference is confined only to the extent envisaged under Section 34 of the Act. The appellate power of Section 37 of the Act is limited within the domain of Section 34 of the Act. It is exercisable only to find out if the court, exercising power under Section 34 of the Act, has acted within its limits as prescribed thereunder or has exceeded or failed to exercise the power so conferred. The Appellate Court has no authority of law to consider the matter in dispute before the arbitral tribunal on merits so as to find out as to whether the decision of the arbitral tribunal is right or wrong upon reappraisal of evidence as if it is sitting in an ordinary court of appeal. It is only where the court exercising power under Section 34 has failed to exercise its jurisdiction vested in it by Section 34 or has travelled beyond its jurisdiction that the appellate court can step in and set aside the order passed under Section 34 of the Act. Its power is more akin to that superintendence as is vested in civil courts while exercising revisionary powers. The arbitral award is not liable to be interfered unless a case for interference as set out in the earlier part of the decision, is made out. It cannot be disturbed only for the reason that instead of the view taken by the arbitral tribunal, the other view which is also a possible view is a better view according to the appellate court.

21. It must also be remembered that proceedings under Section 34 of the Act are summary in nature and are not like a full-fledged regular civil suit. Therefore, the scope of Section 37 of the Act is much more summary in nature and not like an ordinary civil appeal. The award as such cannot be touched unless it is contrary to the substantive provision of law; any provision of the Act or the terms of the agreement.‖

28. Upon a careful consideration of the record of the present Appeal, together with the applicable law, we are of the considered view that the present Appeal merits interference.

29. We are of the view that a significant document, namely, the Technical Note dated 15.09.2017, has been completely ignored. This document is referred to by the learned Tribunal in its list of dates in the award, but despite the same, the learned Tribunal has gone ahead to hold that based on a conspectus of the facts, the interpretation accorded to Contract by the Chief Engineer was a valid one, and resultantly, the element of GST would have to be treated to be absent from the bid submitted by the Respondent, making the Appellant liable to reimburse the said amount to the Respondent.

30. In support of its conclusion, the learned Tribunal also holds that the Chief Engineer being the same person who had signed the RFP, also being the signatory to the Work Order would be well placed to know the manner in which the said Agreement was to be interpreted, and resultantly, keeping in mind the sequence of events, the SOR, 2017 was to be made applicable, whereby the tender rate, as quoted would have to be treated to be without including GST in the same.

31. As already adverted to earlier, the technical note dated 15.09.2017, has not been accorded any consideration whatsoever. The relevant Clauses of the said technical note are extracted hereinbelow for convenience: ―2. The estimate is based on Schedule of Rates, June 2016 applicable for Public Work Department for Road and Bridge Works in the State of Madhya Pradesh. It is presumed that while forwarding the proposal, Chief Engineer, MPRDC, Madhya Pradesh has [illegible] about the adequacy & workability and correctness of the rates and leads, respectively adopted in the estimate.‖ xxxxx ―6. Rates and leads: The estimate is based on Schedule of Rates, June 2016 applicable for Public work, Department Road & Bridge in the State of Madhya Pradesh. It is presumed that while forwarding the proposal, Chief Engineer, MPRDC, Madhya Pradesh has satisfied himself about the adequacy & workability and correctness of the rates and leads, respectively adopted in the estimate.‖

32. As is manifest, upon a reading of the same, it clearly states that the foundation for the entire RFP was the SOR, 2016. This aspect cannot be ignored or overlooked.

33. The learned Tribunal has, in effect, relied on the signing of the Work Order by the Chief Engineer, read together with Clause 19.1.[2] of the Agreement, to conclude that the Appellant understood the applicable SOR to be that prevailing on the “Base Date”. Since this Base Date fell after the introduction of the GST regime and after the enforcement of the 2017 SOR, the learned Tribunal held that the SOR, 2017 would govern the RFP and the Agreement.

34. However, where the learned Tribunal errs, in our opinion, is the fact that the technical note dated 15.09.2017, which is clearly in the nature of a clarification and which is not denied, being a document which is issued post the RFP, would have to necessarily be held to be incorporated into the RFP, particularly in view of clause 2.8.[3] governing any such clarification. This is also in line with the calculations of the rates stipulated in the Tender. Clause 2.8.[3] of the RFP reads as follows: ―2.8.[3] The Authority may also on its own motion, if deemed necessary, issue interpretations & clarifications to all Bidders. All clarifications & interpretations issued by the Authority shall be deemed to be part of the Bidding Documents. Verbal clarifications and information given by Authority or its employees or representatives shall not in any way or manner be binding on the Authority.‖

35. This document, being technical note dated 15.09.2017, to our mind does not require any inferential treatment to determine what would be the reference SOR for the purposes of understanding the foundational premise of the rates as quoted in the RFP.

36. The learned Tribunal, on the other hand, has, in ignorance of the express foundational basis stipulated in the technical note, sought to adopt a route, which, in our opinion, contrary to the express clarification, is an inferential manner of dealing with the entire dispute.

37. Once the foundational basis for the RFP has been spelt out in clear terms, there appears no reason for the learned Tribunal to, in our opinion, have undertaken the exercise of reverse engineering the entire exercise from the signing of the Work Order, coupling it to the conspectus of the facts and seek to interpret clause 19.1.[2] of the Agreement in a manner completely contrary to the RFP, post clarification, wherein the SOR, 2016 would hold the field.

38. We are of the opinion that the starting point leading to the passage of the Arbitral Award appears to be the Work Order itself. The Work Order, in any event, is not the actual agreement between the parties, which is determinative of the relationship inter-se them. The Work Order appears to be a piece of surplusage and is not mentioned as a document that may be treated as a part of the Agreement or the RFP.

39. In fact, it is the specific case of the Appellant that the “Work Order” was not even a part of the Agreement. The Appellant has also argued that the said Work Order did not also form a part of the documents mentioned in the order of priority. The aspect of whether the Work Order was or was not a part of the Contract has not even been considered and on the contrary, has formed the primary basis for concluding against the Appellant herein.

40. Clause 19.1.[2] of the Agreement reads as follows: ―The Contract Price includes all duties, taxes, royalty, and fees that may be levied in accordance with the laws and regulations in force as on the Base Date on the Contractor's equipment, Plant, Materials and supplies acquired for the purpose of this Agreement and on the services performed under this Agreement. Nothing in this Agreement shall relieve the Contractor from its responsibility to pay any tax including any tax that may be levied in India on profits made by it in respect of this Agreement.‖

41. The learned Tribunal has sought to contend that the primary consideration is to be accorded to the said Clause, as it reads, assuming that the clarification via the technical note stating expressly the basis for the RFP, did not exist.

42. In the event that the said technical note was to be taken into account, it is manifest that the learned Arbitral Tribunal could not have reached the conclusion that it did. In the event that the said Technical Note had been considered, it would be apparent that the inclusion of the taxes and duties would have to necessarily be considered to be of foremost importance while giving consideration to the said clause.

43. The conclusion reached by the learned Arbitral Tribunal and subsequently affirmed by the learned Single Judge, is clearly erroneous. Their conclusion disregards the express terms of the Agreement and the foundational premise of the RFP. By excluding an element that had been explicitly incorporated, the learned Arbitral Tribunal has clearly erred, meriting our interference under Section 37 of the A&C Act.

44. The conclusion of the learned Arbitral Tribunal is plainly contrary to the very foundation on which the RFP was issued. Once the parameters had been expressly and unambiguously stipulated, the learned Arbitral Tribunal could not, by implication, adopt an interpretation that effectively nullified such express clarifications. It further appears that both the learned Arbitral Tribunal and, in consequence, the learned Single Judge attached undue significance to the Work Order dated 28.02.2018, wherein the words “excluding GST” were mentioned, almost in the nature of a post-script. This, to our mind, would also constitute a clear deviation from the express terms of the RFP and Clause 19.1.2, when construed harmoniously.

45. It is untenable to accept the argument that the said Work Order dated 28.02.2018 could override or supersede the express provisions of the Agreement and the foundational basis upon which it rested. Further, the same would in fact, constitute a substantial amendment to the foundational basis of the RFP, namely the SOR of 2016 and the adoption of the SOR of 2017, by implication, to our mind, without having been the subject matter of an amendment being effected as per the terms and conditions of the RFP and the Agreement, could not be held to be incorporated into these documents.

46. In our considered opinion, the learned Single Judge erred in holding that the exercise undertaken by the learned Arbitral Tribunal was merely an “interpretation of contractual terms, which falls within the exclusive domain of the Arbitral Tribunal”.

47. We are firmly of the view that, in fact, the learned Arbitral Tribunal overlooked the relevant clauses and foundational documents, and instead relied predominantly on the sequence of subsequent events to arrive at the conclusion that GST was altogether excluded from the transaction.

48. We are of the view that the learned Arbitral Tribunal‟s failure to take into account the relevant terms and conditions of the documents, which form the very foundation of the Contract, amounts to a clear disregard of the accepted terms as between the parties. Such disregard, as consistently held by the Hon‟ble Supreme Court in a catena of judgments, including Rashtriya Chemicals & Fertilizers Ltd. v. Chowgule Bros.10, constitutes patent illegality. In Rashtriya Chemicals (supra), the Hon‟ble Supreme Court made some relevant observations, which read as under: ―20. That brings us to the question whether an arbitrator can make an award contrary to the terms of the contract executed between the parties. That question is no longer res integra having been settled by a long line of decisions of this Court. While it is true that the courts show deference to the findings of fact recorded by the arbitrators and even opinions, if any, expressed on questions of law referred to them for determination, yet it is equally true that the arbitrators have no jurisdiction to make an award against the specific terms of the contract executed between the parties.

21. Reference may be made, in this regard, to the decision of this Court in SAIL v. J.C. Budharaja, where this Court observed: ―15. … [that] it is settled law that the arbitrator derives authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be an arbitrary one[;that] [t]his deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action. … ***

17. … It is true that interpretation of a particular condition in the agreement would be within the jurisdiction of the arbitrator. However, in cases where there is no question of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the agreement, the award would be arbitrary, capricious and without jurisdiction. Whether the arbitrator has acted beyond the terms of the contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the court. The arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error.‖ It was further observed: (SCC p. 131, para 16) ―16. Further, the Arbitration Act does not give any power to the arbitrator to act arbitrarily or capriciously. His existence depends upon the agreement and his function is to act within the limits of the said agreement.‖

22. In W.B. State Warehousing Corpn. v. Sushil Kumar Kayan, again this Court observed: ―11. … If there is a specific term in the contract or the law which does not permit the parties to raise a point before the arbitrator and if there is a specific bar in the contract to the raising of the point, then the award passed by the arbitrator in respect thereof would be in excess of his jurisdiction.‖

23. In Bharat Coking Coal Ltd. v. Annapurna Construction, this Court reiterated the legal position in the following words: ―22. There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record.‖

49. A similar principle was reiterated in PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust11, wherein the Hon‟ble Supreme Court, relying upon Ssangyong Engg. & Construction Co. Ltd. v. NHAI12, held that an arbitral tribunal lacks jurisdiction to rewrite or modify the terms of a contract mutually agreed upon by the parties, and any deviation from the express provisions of the contract amounts to patent illegality. The Court emphasized that unilateral alteration of contract terms, or foisting a bargain never agreed upon, constitutes a breach of the most basic notions of justice, shocks the conscience of the Court, and falls within the exceptional category justifying judicial interference. The Court further clarified that the arbitrator‟s jurisdiction is confined strictly within the four corners of the agreement, and consequently, any award based on terms dehors the agreement is inherently without jurisdiction and void. The relevant paragraphs of PSA Sical Terminals (supra) are extracted herein below:

―84. After referring to various international treaties on arbitration and judgments of other jurisdictions, this Court in Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, observed thus: (SCC pp. 199-200, para 76) ―76. However, when it comes to the public policy of India, argument based upon ―most basic notions of justice‖, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013 — in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry's change in the base indices from 1993- 1994 to 2004-2005. Further, in order to apply a linking factor, a circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party's consent. Indeed, the circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.‖ (emphasis supplied)

85. As such, as held by this Court in Ssangyong Engg. & Construction Co. Ltd., the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, rewriting a contract for the parties would be breach of fundamental principles of justice entitling a court to interfere since such case would be one which shocks the conscience of the court and as such, would fall in the exceptional category.

87. It has been held that the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.

88. It will also be apposite to refer to the following observations of this Court in Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. ―43. 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 power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference.‖

89. It has been held that 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. It has been held that the jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference.

90. In that view of the matter, we are of the considered view, that the impugned award would come under the realm of ―patent illegality‖ and therefore, has been rightly set aside by the High Court.‖

50. The Hon‟ble Supreme Court has consistently reaffirmed this view, recently in Indian Oil Corpn. Ltd. v. Shree Ganesh Petroleum13, while drawing upon Associate Builders v. DDA14 and PSA Sical Terminals (supra). It was reiterated that an arbitral award can only be set aside on the limited grounds provided under Section 34 of the A&C Act, and that courts cannot interfere with the merits of the award. However, an award would be liable to interference if it falls within the ambit of „public policy of India‟ or amounts to patent illegality. The Court emphasized that since an arbitral tribunal is a creature of contract, it is bound by the terms of that contract. Any award ignoring or violating the express contractual stipulations would fall within the realm of patent illegality and thus be open to judicial interference. The relevant paragraphs of Indian Oil Corpn. Ltd. (supra) read as under:

act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.‖ ***

51. In PSA Sical Terminals, this Court clearly held that the role of the arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction. (emphasis supplied)

51. We are also of the view that the opinion of the learned Tribunal in so far as it relates to the alleged non-response by the Appellant to the letter dated 20.12.2017 in respect of the applicable SOR/ inclusion of GST, bears no significance. The RFP clearly provided for a pre-bid meeting. It also provided for the manner in which any clarifications were to be raised. Clause 1.[3] of the RFP sets out the entire schedule and as is apparent, the last date for queries as per the same was on 29.09.2017. Admittedly, the Administrative Approval and the Technical Note predated this date and in case the Respondent had any query in respect of the clarification issued via the technical note and the basis of the administrative approval, it could quite easily have raised the same within time.

52. Reference may also be had to the date of the Pre-bid meeting, which was also on 29.09.2017, and which too post-dated the receipt of the information in respect of the foundational basis of the RFP.

53. The Respondent, quite clearly, has chosen not to raise any issue in respect of the same and appears to have acted on the basis of these documents.

54. What appears to have transpired is that, at a later date, based on the SOR of 2017, issued by the Government of Madhya Pradesh, which in our opinion cannot be pinned to the present RFP or contract, in view of the specific technical note pegging the same to the SOR of 2016, the Respondent has attempted to portray a different understanding from the date on which, as per the RFP, the entire basis for proceeding further already stood clarified and accepted. This appears to have been set into motion on 20.12.2017, when the Respondent herein issued a letter setting out their interpretation regarding the application of GST to the rates quoted in the tender, while also seeking a clarification in that regard from the Appellant. Admittedly, no clarification as sought from the Appellant had been provided.

55. Reference may also be had to Clauses 2.19 and 3.[5] of the RFP, which provides that any correspondence not contemplated by the RFP is impermissible. In view of the same, we are of the opinion that the Appellant was under no obligation to provide a reply and no credence should be given to the fact that there was no response given to the said letter. In view of the express clarification as set out in the Technical Note, nothing further was required, and, in any event, the Parties had already proceeded based on the clear understanding as per the clarification issued.

56. The fact that there was no response to the said letter also appears to have been accepted by the Respondent to mean that the earlier understanding was in fact correct, which is borne out from the fact that the Respondent despite having received no payment in respect of the GST paid by him despite submitting a bill incorporating the same, chose to raise this as an issue belatedly in January 2022. The final bill was paid on 15.12.2020, without GST.

57. In view of the foregoing discussion, we are of the opinion that both the Arbitral Award as well as the Impugned Judgment are legally unsustainable. It is an admitted position that all other payments due to the Respondent stand duly discharged. Consequently, nothing further remains payable to the Respondent under the Agreement or otherwise.

58. The Appellant has not advanced any arguments in respect of the Counter Claim and has only contested the award in favour of the Respondent and we are limiting our Judgment to that alone.

59. Accordingly, the present Appeal is allowed. The Arbitral Award dated 23.11.2023, insofar as it directs payment of Rs. 7,72,05,133/towards reimbursement of GST with interest of Rs. 2,54,77,694/- and costs, as well as the Impugned Judgment of the learned Single Judge upholding the same, are hereby set aside.

60. The present Appeal, along with all pending applications, if any, stands disposed of in the above terms.

61. No order as to costs.

ANIL KSHETARPAL (JUDGE)

HARISH VAIDYANATHAN SHANKAR (JUDGE) SEPTEMBER 9, 2025/rk/sm/ds