Bharat Petroleum Corporation Limited vs Go Airlines (India) Limited

01.04.09 to 31.03.11 – Respondent did not accept any amount payable towards interest –Appellant vide notice dtd. 25.03.10 invoked arbitration clause – Agreed by the respondent vide letter dtd. 27.04.10 – Appellant raised claim for Rs.1,95,21,032/- with interest @ 18% p.a. from the date of presentation of the claim till payment and/or realization – Denying the claims, the respondent also raised two counter claims and sought award directing the appellant to issue CENVAT invoices in its favour for the aviation fuel supplied under the agreement – Appellant also filed application u/s.16 – Allowed by the Arbitrator– High Court allowed the appeal by the respondent – Held: Merely because the respondent did not specify the nature of claims against BPCL in the letter dtd. 27.04.10, may not be a ground to reject the counter claim of CENVAT invoices at the threshold – Questions whether the issue regarding CENVAT invoices was outside the terms of agreement or whether CENVAT invoices relates to the agreement dtd. 01.01.07 and 01.04.09; whether it is arbitrable and falls beyond the scope of reference to arbitration and such other related questions, are to be determined only during the enquiry – After enquiry, the Arbitrator might reject the counter claim for CENVAT invoices as not arbitrable and the counter claim beyond the scope of reference to arbitration, but to reject the counter claim at the threshold on the ground that the Arbitrator has no jurisdiction would not be proper – High Court rightly set aside the order of the Arbitrator – Judgment of the High Court, affirmed – However, observations of the High Court in the impugned order in para no.(10) as to the availability of CENVAT credit allegedly specified in the 2004 Rules may not be considered as expression of opinion on the merits of the matter – Arbitrator to proceed with the matter on its own merits and in accordance with law – CENVAT Credit Rules, 2004.

Dismissing the appeal, the Court

HELD: 1.1 Clause 12 provides for reference of dispute to an Arbitrator nominated by mutual consent. If the parties fail to decide the Arbitrator by mutual consent, each party will nominate an Arbitrator of their choice and the Arbitrators so nominated shall choose the third Arbitrator. Merely because the respondent did not specify the nature of claims against BPCL in the letter dated 27.04.2010, that may not be a ground to reject the counter claim of CENVAT invoices at the threshold. Whether the counter claim regarding CENVAT invoices is outside the terms of arbitration agreement and whether it is arbitrable or outside the scope of reference to arbitration could be seen only after enquiry by the learned Arbitrator. [Para 19][1053-A-D]

1.2 The questions whether the issue regarding CENVAT invoices was outside the terms of agreement or whether CENVAT invoices relates to the agreement dated 01.01.2007 and 01.04.2009 and whether it is arbitrable and whether it falls beyond the scope of reference to arbitration and such other related questions, are to be determined only during the enquiry. It may be that after enquiry, the Arbitrator might reject the counter claim for CENVAT invoices as not arbitrable and the counter claim beyond the scope of reference to arbitration. But to reject the counter claim at the threshold on the ground that the Arbitrator has no jurisdiction would not be proper. The High Court, in our view, has rightly set aside the order of the learned Arbitrator dated 18.04.2011. The parties have inter alia raised various contentions. Not inclined to consider those contentions at this stage. Lest, expressing any opinion on such contentions might prejudicially affect the parties either in the proceedings before the Arbitrator or any other proceedings that may be initiated by the parties. In the result, the impugned judgment of the High Court of Bombay dated 07.12.2011 in Arbitration Appeal (Lodging) No.14228 of 2011 is affirmed. The observations of the High Court in the impugned order in para No. (10) as to the availability of CENVAT credit allegedly specified in the CENVAT Rules, 2004 may not be considered as expression of opinion on the merits of the matter. The learned Arbitrator shall proceed with the matter on its own merits and in accordance with law. [Paras 23-25][1055-C-G]

State of Goa v. Praveen Enterprises (2012) 12 SCC

581 : [2011] 10 SCR 1026 - referred to.