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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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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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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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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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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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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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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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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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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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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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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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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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“  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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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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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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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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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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