Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9048 OF 2014

(Arising out of Special Leave Petition (Civil) No.10849 of

2013)

Swan Gold Mining Ltd. …Appellant (s)

Versus

Hindustan Copper Ltd. …

Respondent(s)

JUDGMENT

M.Y. Eqbal, J.:

Leave granted.

2.This appeal by special leave is directed against the

judgment and order dated 19.9.2012 passed by the Division

Bench of the Calcutta High Court whereby appeal preferred

by the appellant against the order of learned Single Judge of

the High Court was dismissed. Learned Single Judge had

dismissed the appellant’s petition under Section 34 of the

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Page 2 Arbitration and Conciliation Act (in short, ‘the Act’)

challenging the award of the Arbitrator.

3. The case of the appellant is that a notice inviting tender

(NIT) was issued by the respondent-Hindustan Copper Ltd.

inviting offers for operation of its Surda Mine and Mosabani

Concentrator Plant. Respondent-company was having

several mines rich with natural resources being metallic ores.

The global tender floated by the respondent provided that it

shall be the responsibility of successful bidder for payment of

all statutory duties. The appellant-company submitted its

technical and financial bids. It is contended on behalf of the

appellant that the NIT contained a techno commercial bid

and a separate price bid. Price bid of the appellant provided

that any Excise Duty/Service taxes or any levy presently

applicable or any variation or new levy in future to be

reimbursed on actual basis.

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Page 3 4. After negotiation and acceptance of the final price offer,

on 3.3.2007 respondent issued a Letter of Intent to the

appellant on the terms and conditions of the NIT and other

terms agreed during subsequent discussions/negotiations.

Finally, on 26.3.2007 a contract was executed between the

parties for re-commissioning and operation of the Surda Mine

and Mosabani Concentrator Plant. Thereafter, a work order

was issued on 14.4.2007 and the appellant raised its Invoices

on 31.12.2007, by which reimbursement of basic excise duty

and other duties payable by the appellant to the Government

was sought. On refusal by the respondent to make payment

in respect of excise duty and other taxes paid by the

appellant relating to the work executed, the arbitration

clause was invoked and the dispute was referred to a sole

Arbitrator, who after considering the pleadings and evidence

led by the parties, held that the price bid of the appellant was

not exclusive of applicable taxes. Learned Arbitrator held

that the clause relating to payment of taxes was deleted by

the appellant’s representative Mr. Ahlawat on 19.1.2007 and

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Page 4 since work order was acknowledged, it is binding on the

appellant.

5. The appellant challenged the award by way of filing

petition under Section 34 of the Arbitration and Conciliation

Act before the Calcutta High Court on the grounds inter alia

of perversity and contrary to law. Learned Single Judge of

the High Court upholding the award and reasons assigned by

the learned Arbitrator, dismissed appellant’s petition.

Aggrieved by the decision of the learned Single Judge,

appellant preferred appeal before the Division Bench of the

High Court, which although upheld the contention of the

appellant relating to the evidence on the issue of deviation in

price bid on 19.1.2007, dismissed the Appeal on the ground

of terms contained in NIT and Work Order being in

consonance with each other. Hence, this appeal by special

leave by the Australian company.

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Page 5 6. Mr. Amarendra Sharan, learned senior counsel appearing

for the appellant assailed the award and the impugned order

passed by the High Court on various grounds. Learned

counsel contended that the appellant is a reputed Australian

Mining Company and it submitted bid in response to NIT. The

price bid submitted by the appellant provided for “base price

plus 55%” and that any excise duty/service tax or any levy to

be reimbursed on actual basis. A meeting of the Tender

Evaluation Committee of the respondent-company with the

bidders was held on 18.1.2007 and 19.1.2007 and the

respondent did not object to the price bid submitted by the

appellant which was exclusive of taxes. It is further

contended by the senior counsel that after opening of price

bid, although the respondent made a request to lower the bid

price, there was no request to change provision relating to

taxes mentioned in the price bid by which respondent was

liable to reimburse taxes. The appellant-company submitted

the revised bid on 27.1.2007 and reduced the percentage

from 55% to 50% (over the base price) and reiterated its

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Page 6 earlier offer of payment of taxes by the respondent. After

further negotiation and reduction of price bid to “base price

plus 49%”, respondent issued Letter of Intent on 3.3.2007

and the contract was signed between the parties on

26.3.2007.

7. Learned senior counsel contended that on 14.4.2007

Work Order was issued with its Clause 4.9, which provided for

payment of taxes by the appellant. For the settlement of

disputes pertaining to taxes and duties, appellant invoked

clause 4.14 of NIT and sought appointment of Arbitrator

where it was claimed by the appellant that price bid

submitted by the appellant is exclusive of taxes and clause

4.9.1 of Work Order is inoperative and void. This claim was

dismissed by the Learned Arbitrator on the ground that the

clause relating to payment of taxes was denied by the

appellant’s representative Mr. Ahlawat on 19.1.2007 and

since the work order was acknowledged, it is binding on the

appellant.

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Page 7 8. Mr. Sharan has submitted that there had never been any

negotiation with regard to the liability of payment of excise

duties and taxes as the same was finally concluded to the

effect that the taxes shall be liable to be reimbursed by the

respondent. The negotiation was only with respect to the

percentage which was finally reduced to 49%. It is submitted

that the respondent gave a calculation which does not

include taxes. All these backgrounds have neither been

considered by the Arbitrator nor by the High Court. It was

submitted that non consideration of the offer, counter offer

and letter of acceptance by the Arbitrator amounts to serious

error and patent illegality in the Award. NIT is only invitation

to offer, which has been superseded by subsequent offers

and counter offers and hence, NIT cannot become the

contract. Lastly, Mr. Sharan contended that work order is a

unilateral document and there was no consensus ad idem on

the Work Order.

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Page 8 9.Mr. Sharan, learned counsel put heavy reliance on the

decision of this Court in the case of Oil and Natural Gas

Corporation Ltd. vs. Saw Pipes Ltd. , (2003) 5 SCC 705,

and submitted that if the Award is contrary to the substantive

provision of law, or the provisions of fact or against the terms

of contract, it would be patently illegal and could be

interfered under Section 34 of the Act. Mr. Sharan finally

contended that the parties have expressly agreed that the

bid price shall be exclusive of the duty of taxes, deviation

from such contract will go to the root of the matter and on

that ground Award could be set aside if it is so unfair and

unreasonable. This will also be opposed to the public policy

and required to be adjudged void.

10.Per contra, Mr. P.P. Rao, learned senior counsel for the

respondent, firstly submitted that the Award cannot be set

aside except where the Award on the face of it suffers from

patent illegality and perversity. As the learned single Judge

and the Division Bench after re-appreciation of the entire

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Page 9 facts and documents came to the conclusion that no ground

exists to set aside the Award, this Court should not interfere

with the order of the High Court.

11.Learned senior counsel drawn our attention to various

documents including NIT, initial bid proceedings of the

meeting, revised bid, offer and counter offers, on the basis of

which the letter of intent was issued. Finally, the Work Order

was issued and a contract was signed by both the parties.

These documents would show that the appellant was made

liable for payment of duty and taxes, which were inclusive of

the bid price arrived at between the parties.

12.Section 34 of the Arbitration and Conciliation Act, 1996

corresponds to Section 30 of the Arbitration Act, 1940 making

a provision for setting aside the arbitral award. In terms of

sub-section (2) of Section 34 of the Act, an arbitral award

may be set aside only if one of the conditions specified

therein is satisfied. The Arbitrator’s decision is generally

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Page 10 considered binding between the parties and therefore, the

power of the Court to set aside the award would be exercised

only in cases where the Court finds that the arbitral award is

on the fact of it erroneous or patently illegal or in

contravention of the provisions of the Act. It is a well settled

proposition that the Court shall not ordinarily substitute its

interpretation for that of the Arbitrator. Similarly, when the

parties have arrived at a concluded contract and acted on the

basis of those terms and conditions of the contract then

substituting new terms in the contract by the Arbitrator or by

the Court would be erroneous or illegal.

13.It is equally well settled that the Arbitrator appointed by

the parties is the final judge of the facts. The finding of facts

recorded by him cannot be interfered with on the ground that

the terms of the contract were not correctly interpreted by

him.

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Page 11 14. We have gone through the facts of the case and perused

the documents on the basis of which the Arbitrator gave the

Award on 24.7.2009.

15. The respondent issued notice inviting tender (NIT) for

the operation of its mine. Clauses 4.9.1 to 4.9.5 of the NIT

are extracted hereinbelow:-

“4.9.1. The rates quoted by the successful

bidder shall be deemed to be (inclusive) of the sales

taxes, other taxes and service tax that the successful

bidder will have to pay in India & Abroad for the

performance of this contract. HCL will perform such

duty regarding the deduction of such taxes at source

as per applicable laws.

4.9.2. The successful bidder shall also be responsible

to bear and pay any taxes, cess, fees and/or duties

levied including but not limited to interest, penalty

and/or fine imposed by any authorities including

revenue authorities in India and/or abroad at any time

even beyond the expiry of the Contract period with

respect of the work to be performed by the successful

bidder in accordance with the Contract.

4.9.3.The successful bidder shall also be responsible

for filing income tax return and/or complying with

necessary procedure and/or formalities as required or

may be required under the fiscal laws of India and/or

abroad in respect of the work to be performed by the

successful bidder in accordance with the Contract.

4.9.4.Corporate Tax and/or Income Tax, if any

applicable/levied in India and/or abroad on the

successful bidder and/or its personnel and/or on the

sub-contractors engaged by the successful bidder

and /or the personnel of such sub-contractors in

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Page 12 respect of this contract will be the responsibility of the

successful bidder. All the necessary return and other

formalities will be the responsibility of successful

bidder.

4.9.5.All other statutory levies including but not

limited to Custom Duties/Excise Duties, Sales Taxes,

Works Contract and other levies of whatsoever nature

payable in accordance with the law of India,

levied/leviable on the successful bidder and/or its sub-

contractors in respect of performance of this contract

shall be the responsibility of the successful bidder or

any of its sub-contractors.”

16.The appellant in response to NIT submitted its technical

and financial bids. Subsequent to submission of the technical

bid and the price bid, the parties entered into negotiation and

thereafter a letter of intent on the terms and conditions of

NIT and the other terms agreed during subsequent

negotiations was issued. In the said letter of intent dated

3.3.2007, it was specifically mentioned that the execution of

work shall be on the terms of notice inviting tender (NIT) and

other agreed discussions/negotiations subsequently held

between the parties. Finally the Work Order was issued on

14.4.2007 in continuation with the letter of intent dated

3.3.2007. The relevant portion of the work order is extracted

herein-below:-

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Page 13 “ WORK ORDER

SUB:- Re-opening and operating of Sudra Mine & Mosaboni

concentrator plant at Indian Copper Complex, Ghatsila

Dear Sir,

With reference to the above subject, Hindustan Copper Limited

is please to issue work order to continuation with LOI dated 03-

03-2007 to re-commission, operate and maintain Surda Mine

and Mosaboni concentrator plant to supply and deliver copper

concentrate at rates Rs 1,53,470.00 per ton of mental in

concentrate (Excluding Royality) to Maubhandar work of Indian

Copper Complex, produced from the operations of these units.

This Work shall be governed by the terms and conditions of the

Expressions of Interest of dated 21-09-2006, Notice Inviting

Tender No. HC/HO/GM (M&S)/SUDRA dated 11-12-2006 and the

other agreed during subsequent discussions/negotiations, and

the final offer.”

(Emphasis given)

17.In the course of hearing, Mr. P.P. Rao, learned senior

counsel appearing for the respondent produced before us a

xerox copy of the Work Order dated 14.4.2007. Clause 4.9.1

quoted hereinabove specifically mentions therein that the

rate quoted by the appellant was inclusive of sales tax,

service tax and the other taxes. The representative of the

appellant signed the Work Order on each pages (20 pages)

and acknowledged and admitted the terms and conditions for

the said work.

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Page 14 18.From the facts mentioned hereinabove, it is evident that

the appellant has accepted the liability of payment of excise

duty, sales tax, service tax and other taxes and hence it

cannot be held that the clause 4.9.1 of the Work Order is

inconsistent with the terms and conditions of contract

documents.

19.The learned Arbitrator has gone in detail of the dispute

raised by the appellant and rightly came to the conclusion

that the responsibility on the appellant is to abide by the

terms and conditions of the Work Order.

20.We have also gone through the order passed by the

High Court. The Court rightly came to the conclusion that

there is no patent illegality in the Award passed by the

Arbitrator which needs interference under Section 34 of the

Act.

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Page 15 21.Mr. Sharan, learned senior counsel appearing for the

appellant, also challenged the arbitral award on the ground

that the same is in conflict with the public policy of India. We

do not find any substance in the said submission. This Court,

in the case of Oil and Natural Gas Corporation Ltd.

(supra), observed that the term ‘public policy of India’ is

required to be interpreted in the context of jurisdiction of the

Court where the validity of award is challenged before it

becomes final and executable. The Court held that an award

can be set aside if it is contrary to fundamental policy of

Indian law or the interest of India, or if there is patent

illegality. In our view, the said decision will not in any way

come into rescue of the appellant. As noticed above, the

parties have entered into concluded contract, agreeing terms

and conditions of the said contract, which was finally acted

upon. In such a case, the parties to the said contract cannot

back out and challenge the award on the ground that the

same is against the public policy. Even assuming the ground

available to the appellant, the award cannot be set aside as

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Page 16 because it is not contrary to fundamental policy of Indian law

or against the interest of India or on the ground of patent

illegality.

22.The words “public policy” or “opposed to public policy”,

find reference in Section 23 of the Contract Act and also

Section 34 (2)(b)(ii) of the Arbitration and Conciliation Act,

1996. As stated above, the interpretation of the contract is

matter of the Arbitrator, who is a Judge, chosen by the parties

to determine and decide the dispute. The Court is precluded

from re-appreciating the evidence and to arrive at different

conclusion by holding that the arbitral award is against the

public policy.

23.We have given our anxious consideration in the matter.

In our view the High Court has rightly came to the conclusion

that no ground exists for setting aside the award as

contemplated under Section 34 of the Act.

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Page 17 24.For the reasons aforesaid, we do not find any merit in

this appeal, which accordingly stands dismissed with no order

as to costs.

…………………………… .J.

[ M.Y. Eqbal ]

…………………………… .J

[Pinaki Chandra Ghose]

New Delhi

September 22, 2014

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