Bombay High Court
Hindustan Petroleum Corporation Ltd vs G. R. Engineering Pvt. Ltd on 18 June, 2025
2025:BHC-OS:8905
CARBP.984.2018 - FINAL - June 17, 2025.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMMERCIAL ARBITRATION PETITION NO. 984 of 2018
Hindustan Petroleum Corporation Limited ...Petitioner
Versus
G. R. Engineering Private Limited ...Respondent
Mr. Zal Andhyarujina Sr. Advocate a/w Mr. Vijay Purohit, Ms. Ishani
Khanwilkar, Ms. Nitika Bangera, vis. Niyati Bogayta i/b P & A Law
Offices Adv. For Petitioner.
Mr. Haresh Jagtiani, Sr. Adv. a/w Mr. Suprabh Jain, Mr. Pushpvijay
Kanoji, Mr. Pranay Kamdar i/b Suprabh Jain Adv. For Respondent.
CORAM : SOMASEKHAR SUNDARESAN, J.
RESERVED ON : January 29, 2025
PRONOUNCED ON : June 18, 2025
JUDGEMENT:
Context and Background:
1. This Petition under Section 34 of the Arbitration and Conciliation Act,
1996 (“the Act”) challenges an arbitral award dated May 2, 2018 (” Impugned
Award”) passed in favour of the Respondent, G.R. Engineering Private
Limited (“GRE”) by an arbitral tribunal allowing a claim against the
Petitioner, Hindustan Petroleum Corporation Ltd. (“HPCL”).
Digitally
signed by
AARTI
Page 1 of 39
AARTI GAJANAN
GAJANAN PALKAR June 18, 2025
PALKAR Date:
2025.06.18 Aarti Palkar, PS
12:27:20
+0530
::: Uploaded on - 18/06/2025 ::: Downloaded on - 19/06/2025 00:11:17 :::
CARBP.984.2018 - FINAL - June 17, 2025.doc
2. HPCL invited bids and awarded GRE a contract to construct twelve
“mounded bullets” to store liquified petroleum gas at HPCL’s refinery at
Mahul (“Project”). Specific elements of the mounded bullets were to conform
to the usage of reinforced cement concrete (” RCC”) of “M30 grade”. The
Project was to be completed by December 5, 2007 but was completed on
February 2, 2010. Disputes and differences between the parties arose out of
HPCL computing liquidated damages in the payments due on invoices raised
by GRE. HPCL also withheld various other amounts on the payments made
to GRE, which led to the arbitration proceedings.
3. The Impugned Award holds in GRE’s favour on various counts. The
Learned Arbitral Tribunal held that the amount withheld by HPCL on
account of Civil Works (Rs. 1,99,07,227); under-insurance (Rs. 25,64,026);
Customs Duty variation (Rs. 86,38,491.50); Service Tax (Rs. 3,08,85,583);
normalising ‘Dished Ends’ (Rs. 5,00,000); and liquidated damages (Rs.
5,83,67,973) ought not to have been withheld. The Impugned Award directed
the payment of such sums by HPCL to GRE. The Impugned Award also
awarded interest at the rate of 7% per annum from the date of filing of the
claim (September 6, 2012) until the date of actual payment.
4. The core challenge to the Impugned Award is based on alleged
perversity in the findings on the following counts, namely:-
Page 2 of 39
June 18, 2025
Aarti Palkar, PS::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
(a) Manner of dealing with the facts relating to the Civil Works, with
particular regard to consideration of a report by an expert not
introduced by HPCL as a witness, as also the contention that
disputes relating to Civil Works was not arbitrable;
(b) Denial of Liquidated Damages in the teeth of the contract
between the parties; and
(c) Manner of dealing with the claims in relation to under-
insurance, service tax and Customs Duty.
5. Each of these heads is dealt with below. I have heard, at length, Mr.
Zal Andhyarujina, Learned Senior Counsel on behalf of HPCL and Mr.
Haresh Jagtiani, Learned Senior Counsel on behalf of GRE, and examined
the record with their assistance, bearing in mind the scope of Section 34 of
the Act.
Withholding on Civil Works:
6. HPCL withheld an amount of Rs. ~1.99 crores on the premise that the
Civil Works carried out did not conform to the M30 standard. HPCL’s
challenge to the Impugned Award in this regard can be summarised thus:-
(a) Various government agencies are entitled to inspect the Project
and point out discrepancies in the execution, and recommend
Page 3 of 39
June 18, 2025
Aarti Palkar, PS::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.docrecoveries. HPCL is entitled to effect withholding of amounts. In
such event, under Clause 8.b of the General Conditions of
Contract (“GCC”), GRE is not entitled to raise any dispute.
According to HPCL, the withholding was done pursuant to the
recommendation of its own vigilance department, which is a
“government agency”. Therefore, this facet of the matter was not
arbitrable. HPCL finds fault with the Learned Arbitral Tribunal
having rejected an application under Section 16 of the Act in this
regard;
(b) In the course of the arbitration, a report dated May 18, 2009
prepared by one Prof. R.S. Jangid of IIT, Mumbai (” Jangid
Report”) was relied upon by GRE and the Learned Arbitral
Tribunal took it on record as HPCL’s witness despite HPCL not
having introduced such document as its evidence. Instead, HPCL
sought to rely on the report dated June 18, 2009 of another IIT
Professor, Prof. Ravi Sinha (“Sinha Report”) and another report
by Prof. Sinha and Prof. Alok Goyal (also of IIT) dated March 5,
2010 (“Sinha Goyal Report”), which were the only two expert
reports sought to be relied upon by HPCL;
(c) The Sinha Report has been wrongly interpreted to hold that the
Civil Works met the stipulated standard while the Jangid Report
Page 4 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
is being relied upon as HPCL’s evidence when that report was
actually introduced into the record by GRE and not by HPCL;
(d) The stipulated standard of M30 was a strict standard and any
deviation was not acceptable at all, and therefore the Impugned
Award falls outside the scope of the contract between the parties;
(e) The Impugned Award wrongly interprets evidence in the form of
cross-examination to refer to “as-built drawings” of the
mounded storage bullets, to hold that the requirement of
meeting the M30 standard had been met; and
(f) Clause 5.k of the GCC provided that acceptance of sections of the
Civil Works would not constitute a waiver of any portion of the
contract between the parties and would not absolve GRE.
Therefore, absence of complaints by HPCL during the stage-wise
inspection of the Project would not absolve GRE of the
requirement to meet the M30 standard and HPCL’s failure to
object earlier was wrongly held in the Impugned Award as being
relevant.
7. A careful examination of the material on record, in my opinion, leads
to an inexorable conclusion that none of the aforesaid contentions lends itself
to acceptance.
Page 5 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
8. It is apparent that there was no specific government agency that made
any recommendation for withholding of the amount under the head of Civil
Works. Clause 8.b explicitly provides that the Project was subject to
inspection by various “Government agencies of Government of India”. Upon
inspection by such agencies, if it were pointed out that the contract work had
not been carried out according to the tender conditions and if any recoveries
were recommended, the same shall be recovered from running bills, and no
dispute on such account could be raised and subjected to arbitration. The
provision is explicit in its terms. If any agency of the Government of India
were to conduct an inspection and make a recommendation to withhold any
amount, the provision would kick in. Admittedly, no external agency of the
Government of India was at all involved in HPCL’s decision to withhold the
amount.
9. HPCL seeks to attribute the withholding of amounts, to a view taken by
HPCL’s own vigilance department invoking its reporting relationship with
the Central Vigilance Commission (“CVC”). It is apparent that the vigilance
department of HPCL is nothing but an internal department of HPCL. Merely
because guidelines of the CVC would have to be followed by HPCL’s vigilance
department, it would not follow that vigilance department of HPCL is an
inspection agency of the Government of India for purposes of Clause 8.b of
the GCC. Evidently, the scope of Clause 8.b of the GCC covers agencies of the
Page 6 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
Government of India that would be entitled to conduct inspection of the Civil
Works – this could be agencies with competence to conduct inspection of
civil works, such as industrial safety inspectors or petroleum regulatory
agencies and the like. I am not persuaded that a dispute between the parties
can simply be placed even outside the scope of a solemn arbitration
agreement for no reason other than the premise that HPCL has a vigilance
department.
10. That apart, the Impugned Award finds that there is not even a report
from HPCL’s vigilance department recommending a retention from the
running bills. Therefore, even if HPCL were to contend that its own vigilance
department is an agency of the Government of India, the other ingredient of
the need for a recommendation of retention by such agency is sorely missing.
11. Consequently, in my opinion, the Learned Arbitral Tribunal was not
wrong in rejecting the contention that the dispute on account of withholding
of amount on the premise of non-compliant Civil Works is not even
arbitrable.
12. The next objection in relation to Civil Works is that the Learned
Arbitral Tribunal was wrong in permitting the Jangid Report to come into the
zone of adjudication, since it is only the Sinha Report that HPCL desired to
press into evidence. The Learned Arbitral Tribunal having treated the
Page 7 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
Jangid Report as HPCL’s evidence, Mr. Andhyarujina contends, is completely
perverse and has led to a patently illegal process in adjudicating the matter. I
am unable to agree that this presents a ground for interference with the
Impugned Award.
13. It is apparent, HPCL was desirous of having the mounded bullets
examined by IIT, Mumbai. This led to Prof. Jangid examining the matter.
Evidently, no such inspection and consequential preparation of the Jangid
Report would have been possible unless HPCL enabled access and there had
been interaction with HPCL and GRE by Prof. Jangid. That led to a draft
report from Prof. Jangid, which both the parties had access to. It is apparent
that HPCL was not happy with the findings in the Jangid Report. This
appears to have led to Prof. Sinha and Prof. Goyal being asked to repeat the
exercise – potentially, only at the request of HPCL.
14. Since HPCL chose not to introduce the contents of the Jangid Report,
and GRE legitimately had access to the Jangid Report, evidently, GRE sought
to press it into service as constituting material contrary to HPCL claims . It is
trite law that strict rules of procedure in evidence law are not to be expected
in arbitration proceedings, where the focus has to be on the substance of the
claims and determination -of where the truth lies, rather than get bogged
down by procedure and manner of introducing evidence. If the Jangid
Page 8 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
Report – in fact, the first report from IIT, Mumbai – was inconvenient and
not acceptable to HPCL, the inspection by Prof. Jangid being a fact-finding
exercise, the Learned Arbitral Tribunal cannot be faulted for taking into
consideration the contents of the same.
15. It was open to HPCL to seek permission of the Learned Arbitral
Tribunal and put questions to confront Prof. Jangid once the Jangid Report
was let into the scope of adjudication. However, it appears that HPCL
advisedly took the view that opposing introduction of the Jangid Report and
relying purely on the fact that GRE could not confirm Prof. Jangid’s signature
on it would be strategically adequate. That apart, the Learned Arbitral
Tribunal has not considered the Jangid Report to the exclusion of the Sinha
Report or in conflict with the Sinha Report. Merely allowing the Jangid
Report into the mix of material on record to enable a just consideration of
what transpired when the mounded bullets were inspected, is not something
that can be found fault with.
16. The Sinha Report too has been considered by the Learned Arbitral
Tribunal as returning a finding on GRE’s technical compliance. The Sinha
Report, in Chapter 2 titled “Structure Description” explicitly states that “the
tank mound has been constructed using M30 concrete”. It goes on to state
that all the horizontal members i.e. the beams and the slabs are designed
Page 9 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
using M30 concrete. The basement raft as well as the walls has been
constructed from the same grade of concrete. This is a clear and explicit
finding, which cannot be wished away. It would be impossible to find fault
with the assessment of evidence by the Learned Arbitral Tribunal.
17. The Jangid Report is also consistent with the aforesaid finding. It
holds that ready mix concrete of M30 grade had been used for constructing
the structure and that it was executed under the supervision of EPCM
Consultant, part of the Engineers India Ltd. (” EIL”) which designed the
structure. It also notes that the quality of the concrete was monitored at
various stages such as cube testing at the concrete plant as well as at the site
during construction. The report concludes that “the quality of RCC as well
as sand used in the LPG Mounded structure conforms to that specified in its
design.” The observed concrete strength from various tests was found to
satisfy the design graded of M30 concrete and no sign of distress was
observed on the constructed LPG mounded structure to give any doubt about
the quality of the concrete. The structure was held to be safe and stable with
ability to withstand the design load. This is what HPCL was evidently
unhappy with, since it did not endorse the stance adopted by HPCL, which
perhaps led to a request for a second opinion from IIT, Mumbai.
Page 10 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
18. It was clear during the hearing that the material on record does not
contain any evidence as to what led to the second opinion being sought – the
Sinha Report is dated one month after the Jangid Report. Be that as it may,
arbitral proceedings are meant to enable focus on substantial justice without
being bogged down by procedural processes. This is not to indicate that in
arbitration, one could do away with the basic requirements of a just process.
However, what is to be remembered is that the process followed by the
Learned Arbitral Tribunal was not unjust. I am not satisfied that HPCL has
made out a case that the Learned Arbitral Tribunal has erred or caused
injustice by letting a firm and clear finding from a professor of IIT Mumbai,
and that too upon being commissioned by HPCL, into the zone of
adjudication. The only reason for Prof. Jangid to get involved was that HPCL
had invited IIT, Mumbai to conduct the study. The Jangid Report was not to
the liking of HPCL but since it was a fact-finding report, its contents were not
at all irrelevant – on the contrary, its findings are indeed relevant. If HPCL
had reason to disagree with the Jangid Report, it was open to HPCL to seek
issuance of summons to Prof. Jangid and to confront his findings by putting
questions to him. Evidently, nothing of that sort was done, and HPCL
advisedly chose to rely on a procedural argument that unless HPCL
introduced the Jangid Report, it could not have been considered.
Page 11 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
19. The Learned Arbitral Tribunal could have accepted the Jangid Report
as a report introduced into evidence by GRE (instead of HPCL). This would
have hardly made any difference. The objective of the adjudication was to
arrive at the truth and to get to a finding of fact. It was not necessary to get
bogged down by the label of which party was introducing the evidence. In the
facts and circumstances of the case, no infraction has been caused by the
introduction of the Jangid Report.
20. As stated above, even the Sinha Report has contents that are consistent
with the Jangid Report. Therefore, I am not convinced that the standard of
perversity or patent illegality has been attracted for this Court to interfere
with Impugned Award. In fact, in the cross-examination of Prof. Sinha
during the arbitral proceedings, it became apparent that Prof. Sinha was
unaware of the Jangid Report authored by his own college. It is apparent
from the material on record that GRE’s case is that one day after the Jangid
Report i.e. May 19, 2009, fresh core samples were taken for review by Prof.
Sinha and the result of testing done on May 19, 2009 was not acceptable to
HPCL, which led to a second investigation by Prof. Sinha on June 1, 2009. A
revised report was issued which was said to not have been shared with GRE
despite repeated requests.
Page 12 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
21. Quite apart from these, the analysis and findings of the Learned
Arbitral Tribunal in this regard are quite lucid, rational and plausible. It
would be inappropriate for me to consider taking another view since the
scope of jurisdiction under Section 34 of the Act is not appellate in character
– even an appellate court ought not to substitute the wisdom of the court
below with its view merely because another view is possible. In the facts of
the matter at hand, the Learned Arbitral Tribunal has noted that during
construction, there had been no objection or grievance. That apart, the Sinha
Report has returned a finding that there is no evidence of GRE having cut
corners with the standard of concrete used. GRE, according to the Sinha
Report, indeed used concrete of M30 standard . Despite use of concrete of
the standard stipulated, if the outcome was that the strength of the retaining
wall was below the M30 grade, the Sinha Report has indicated that it could be
due to inadequacies and deficiencies in the technical specifications prescribed
in the tender. Therefore, it has been reasonably concluded that GRE could
not be blamed.
22. The Impugned Award notes that GRE has repeatedly offered to effect
remedies should HPCL be of the view that the outcome is of below M30
standard despite concrete of M30 grade having been used. However, HPCL
has neither accepted the proposal nor had any remedies carried out at the
hands of any other contractor. It was noted that the mounded bullets had
Page 13 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
been used without any repair for seven years. The Learned Arbitral Tribunal
has noted that the Jangid Report is based on core tests, which according to
Prof. Sinha are most reliable to determine the actual strength. Noting that
the stipulation of the standard is to ensure that the structure is safe and
stable, and that the structure was indeed used without any remedial
measures being taken, the Learned Arbitral Tribunal has concluded that in
the light of the positive finding that GRE had not cut corners by deliberately
economising on the standard of concrete deployed, there can be no basis to
effect a retention of amounts on the premise that the Civil Works are not up
to the stipulated standard.
23. More importantly, the Impugned Award has also relied on the factual
position that HPCL had certified to the Chief Controller of Explosives of the
Petroleum and Explosives Safety Organisation (the regulatory agency tasked
with ensuring industrial safety in storage, handling and use of petroleum
products in India) that the structure is in conformity with the stipulated
safety standards. Therefore, taking the two reports, the certifications
provided by HPCL itself to the regulators (who in fact had the powers to
inspect the mounded bullets) and the fact that no remedial measures have in
fact been effected as a corollary to a view that the mounded bullets were sub-
standard, the Learned Arbitral Tribunal has also noted that no basis has
Page 14 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
been shown to arrive at the quantification of the amount withheld at Rs.
~1.99 crores.
24. I do not agree with HPCL’s contention that the Impugned Award does
not give any reasons to dismiss the argument that payment ought to be made
only for work actually done. I find that the Impugned Award is at pains to
point out that the Sinha Report has returned a finding that no corners were
cut and the concrete deployed was indeed of the M30 grade. The work
actually carried out is the effort put in and there is a clear finding of fact that
no corners were cut. Therefore, this would indeed constitute reasons for
rejecting the contention that GRE ought not to be paid the full amount.
25. I find that the holistic view of the Learned Arbitral Tribunal in relation
to the Civil Works is logical and rational and eminently plausible and
defensible. In my opinion, no case has been made out warranting any
interference with the same. The finding of the Learned Arbitral Tribunal that
the withholding of amounts on the premise of the Civil Works not being in
conformity with the contract is untenable, in my opinion, does not call for
any interference.
Page 15 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
Denial of Liquidated Damages:
26. HPCL’s contention is that the Project was for a value of Rs. 116 crores
and was to be completed in fifteen months reckoned from September 6,
2006, the date of issuance of the Letter of Intent. The deadline, therefore,
was December 5, 2007. This period was meant to include the mobilisation
and demobilisation period. Under the contract, any delay in completion of
the work would attract liquidated damages at the rate of 0.5% of the total
contract value for every week of delay subject to the maximum of 5% of the
total contract value. Indeed, GRE could seek an extension of time by
applying two months prior to the scheduled expiry of the contract and HPCL
had to respond to the request at least 30 days prior to the expiry of the
contract.
27. GRE sought extensions from time to time and HPCL accorded them,
issuing four “change orders” extending the deadline, but asserting in every
single one of them that the change of deadline was without prejudice to the
two provisions that contained the liquidated damages clause – Clause 5.d and
Clause 10 of the GCC, and also stating that all terms and conditions of the
contract remain the same and unchanged. HPCL contended in the
arbitration that by such conditionality, despite the extension of deadline,
time remained the essence of the contract, and the liquidated damages could
Page 16 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
not be considered waived. Thereafter, HPCL issued a letter dated August 4,
2008, explicitly asserting that GRE’s request for waiver of liquidated
damages was rejected.
28. Mr. Andhyarujina would contend that all through the relevant time,
there was no objection raised by GRE. A year later, on August 17, 2009,
HPCL had complained to GRE that because of the delay on GRE’s part, its
investment of more than Rs. 100 crores was lying idle without any returns.
Eventually the Project was completed on February 4, 2010 i.e. more than two
years beyond the original deadline. Therefore, HPCL’s case is that since all
terms and conditions remained the same, and the right to collect liquidated
damages had always been reserved, that right was never impacted by the
extensions of deadline. It is also contended that even when it was made clear
on August 4, 2008 that the request for waiver of liquidated damages was
refused, there was no contemporaneous protest from GRE.
29. Computing liquidated damages at the rate of 0.5% per week, HPCL’s
finance department appears to have computed such damages and hit the cap
of 5% of the contract value, to withhold the full amount of liquidated
damages of Rs. 5,83,67,973. HPCL would also argue that GRE had provided a
bank guarantee for the amount, which indicated that GRE had agreed that
this was liable to be recovered. Therefore, it was contended that HPCL’s
Page 17 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
deduction of Rs.~5.83 crores towards liquidated damages when paying GRE’s
bills was a valid deduction.
30. The Learned Arbitral Tribunal has taken a view that nothing is payable
towards liquidated damages by GRE – primarily on the premise that HPCL is
required to prove its losses “in a more concrete fashion”. The Learned
Arbitral Tribunal has held that liquidated damages may be awarded only to
the extent of the loss actually proven. According to the Learned Arbitral
Tribunal, HPCL did not seriously urge the aspect of loss of return on
investment (of Rs. 100 crores) towards the Project. The Learned Arbitral
Tribunal has commented that had HPCL shown (for example) that the delay
led to loss of production and alternate purchases had to be made at a higher
price, it could have shown that it suffered damage and losses, and therefore
have been entitled to claim liquidated damages.
31. Mr. Jagtiani on behalf of GRE would submit that the jurisdiction under
Section 34 of the Act not being one of appellate review, this Court should give
the Learned Arbitral Tribunal a lot of play in the joints in coming to an
otherwise correct view. He would submit that in one sense the Learned
Arbitral Tribunal has a “right to be wrong” but unless the Impugned Award is
in conflict with the fundamental policy of the law of India or in conflict with
the most basic notions of morality or justice, the award would not be in
Page 18 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
conflict with public policy of India and is not liable to be set aside. Mr.
Jagtiani would contend that the Learned Arbitral Tribunal has interpreted
the contract to mean that time was not of the essence of the contract and had
come to this conclusion on appraisal of various facts, various provisions of
contract and in reliance upon judgements of the Supreme Court and this
Court to support his findings.
32. Mr. Jagtiani would contend that since the Learned Arbitral Tribunal
had satisfied itself in reliance upon judgements of the Supreme Court and of
this Court, that for a claim on liquidated damages to be successful, actual loss
must be proved, the Learned Arbitral Tribunal is right in holding that without
proving loss liquidated damages cannot be claimed by simple reliance upon a
clause in the contract. He would contend that such findings could be
regarded as neither against public policy nor perverse.
33. I have given my anxious consideration to the issue, particularly since
the articulation of the analysis by the Learned Arbitral Tribunal is skimpy.
The Impugned Award simply records the summary of contentions of each
party and what was said by each side. It is recorded that HPCL relied upon
nine other clauses of the GCC and that it relied upon multiple judgements.
However, I find that the conclusion in relation to the issue of liquidated
damages is devoid of any analysis of these contentions of the parties. While
Page 19 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
reliance by HPCL upon multiple provisions of contract and on case law is
recorded, there is simply no analysis on why, in the Learned Arbitral
Tribunal’s view, such contentions are worthy of rejection. Neither the clauses
nor the case law are dealt with and discussed by the Learned Arbitral
Tribunal. I have examined the Impugned Award bearing in mind the fact
that the arbitrator was a person technically qualified on the subject matter of
the Project and not an expert in law, and therefore must be given a bigger
play in the joints to arrive at conclusion without the need for intricate or
clinical analysis of law.
34. However, it is difficult not to notice that the Learned Arbitral Tribunal
has been vague in setting out what has weighed with the Learned Arbitral
Tribunal and in what manner. First, the Learned Arbitral Tribunal
acknowledges that in any contract, if there is a delay, “there will be some loss
of investment”. Second, the Learned Arbitral Tribunal has gone on to say
that HPCL “is supposed to prove his loss in a more concrete fashion” . Third,
the Learned Arbitral Tribunal has stated that the “aspect of loss of
investment was not seriously urged” by HPCL. The Learned Arbitral
Tribunal has asserted that “liquidated damages can only be awarded to the
extent of the loss which he proves” and concluded that losses caused to HPCL
has not been adequately proved.
Page 20 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
35. I have tried to juxtapose the contentions made by Mr. Andhyarujina
and Mr. Jagtiani with the flow of thinking recorded in the Impugned Award.
In sharp contrast with the clear articulation of issues in relation to the
standard of M30 concrete recorded in the Impugned Award, there is hardly
any deliberation in relation to liquidated damages. The four statements set
out in the preceding paragraph is all that the Learned Arbitral Tribunal has
had to say in the matter (in two short summary paragraphs). Despite the
contentions of the parties having been recorded over three pages, there is
hardly any deliberation over why which contention is acceptable and which
one is not.
36. I am unable to accept Mr. Jagtiani’s contention that the Learned
Arbitral Tribunal has interpreted the contract to mean that time was not of
the essence of the contract and that this conclusion has been arrived at on
appraisal of facts and various provisions and judgements. There is no
analysis of either the provisions of the contract pressed into service by HPCL
or of any judgements cited by the parties to support the findings. On the
facet of liquidated damages, it is not apparent that there are articulated
reasons in the Impugned Award. The absence of reasons is what manifest
arbitrariness is about. Regretfully, despite adopting a light-touch approach
and giving full leeway to the Learned Arbitral Tribunal for not being legally
trained, I am not convinced that the Impugned Award passes muster on the
Page 21 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
touchstone of absence of manifest arbitrariness in relation to its handing of
liquidated damages.
37. It is not as if HPCL had simply stated that all other conditions of the
contract remained unchanged when it granted time to complete performance.
This is what the Learned Arbitral Tribunal has stated. On each occasion,
HPCL highlighted and specifically stated that the extension was without
prejudice to Clause 5.d and Clause 10 of the GCC, which stipulate liquidated
damages. GRE did not raise any protest. Much is made about the letter dated
August 4, 2008, which GRE states was unsolicited and HPCL asserts was
pursuant to a solicitation of a waiver of liquidated damages. Even on this
issue – of whether there was a request for a waiver by GRE – there is no
finding in the Impugned Award.
38. GRE contended that assuming these clauses still applied, HPCL had
not proven losses. The Learned Arbitral Tribunal has not even returned a
finding that it was assuming that liquidated damages were not waived. GRE
asserts that the Learned Arbitral Tribunal has interpreted the contract to
mean that time was not of the essence, but the Impugned Award is silent in
this regard.
39. Liquidated damages are meant to be a reasonable pre-estimate of
damages and losses, arrived at by the contracting parties exercising their
Page 22 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
autonomy, for application when it is difficult to prove actual loss. In my
opinion, it was necessary for the Learned Arbitral Tribunal to return a finding
on whether it was difficult to prove the damages, particularly, when the
Learned Arbitral Tribunal had stated at the threshold of the two-paragraph
conclusion that there would always be some loss of investment, owing to a
delay. The Learned Arbitral Tribunal has gone on to give an example of an
operational loss – alternate purchases being made at a higher price, instead
of production, even while opening the purported reasoning with an
acknowledgement that there would be a loss of investment.
40. The Impugned Award records that according to GRE it sought an
extension of time four times “with a request to waive liquidated damages”
and that HPCL had “accordingly issued revised purchase orders without
rejecting the request of the Claimant to waive liquidated damages” . Even a
plain reading of the four change orders would show that this contention is
wrong on the face of the record – every single change order explicitly records
that the consent to keep the contract alive beyond December 5, 2007 (the
contracted delivery date) was without prejudice to, among others, Clause 5.d
and Clause 10 of the GCC (which are the very provisions governing liquidated
damages).
Page 23 of 39
June 18, 2025
Aarti Palkar, PS::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
41. Seen from this perspective, I am not persuaded to accept the defence of
the Impugned Award mounted by Mr. Jagtiani. It is apparent that the
Learned Arbitral Tribunal has simply allowed GRE’s claim that no liquidated
damages were payable at all, without according reasons. There is not even
any consideration to each and every “change order” explicitly making a
reference to the contractual provisions on liquidated damages as not being
waived. It could well be that the parties reiterated with each change order
that it would be difficult to prove loss arising due to delay with precision and
therefore the iteration of the two clauses on liquidated damages were
underscored – evidently with no contemporaneous protest. There is nothing
to analyse the claim of GRE asserting that only the allegedly unsolicited
change order of August 4, 2008 made a retrospective change to the position.
42. I have also considered whether I should treat the Impugned Award as
one with “inadequate” reasoning as opposed to being “devoid of” reasoning –
greater leeway being available with the former. Towards this end, I have
examined the judgement of the Supreme Court in Kailash Nath1, which is
primarily relied upon by both sides to present submissions on what is
necessary in the context of the need to prove losses when dealing with
liquidated damages.
1
Kailash Nath Associates vs. DDA – (2015) 4 SCC 136
Page 24 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
43. Kailash Nath was rendered in the context of a forfeiture of earnest
money in an auction of land by the Delhi Development Authority in relation
to one party that was inconsistent with the treatment given to other parties.
In Kailash Nath, the Supreme Court noted that the forfeiture of earnest
money took place long after the agreement to sell that land to another party
at a higher price was reached. In that context, it was also seen as a forfeiture
without any loss being shown. In that context, the law on compensation for
breach of contract under Section 74 of the Indian Contract Act, 1872 was
declared in the following manner:-
43.1. Where a sum is named in a contract as a liquidated amount payable by
way of damages, the party complaining of a breach can receive as reasonable
compensation such liquidated amount only if it is a genuine pre-estimate of
damages fixed by both parties and found to be such by the court. In other
cases, where a sum is named in a contract as a liquidated amount payable by
way of damages, only reasonable compensation can be awarded not
exceeding the amount so stated. Similarly, in cases where the amount fixed is
in the nature of penalty, only reasonable compensation can be awarded not
exceeding the penalty so stated. In both cases, the liquidated amount or
penalty is the upper limit beyond which the court cannot grant reasonable
compensation.
Page 25 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
43.2. Reasonable compensation will be fixed on well-known principles that
are applicable to the law of contract, which are to be found inter alia in
Section 73 of the Contract Act.
43.3. Since Section 74 awards reasonable compensation for damage or loss
caused by a breach of contract, damage or loss caused is a sine qua non for
the applicability of the section.
43.4. The section applies whether a person is a plaintiff or a defendant in a
suit.
43.5. The sum spoken of may already be paid or be payable in future.
43.6. The expression “whether or not actual damage or loss is proved to have
been caused thereby” means that where it is possible to prove actual damage
or loss, such proof is not dispensed with. It is only in cases where damage or
loss is difficult or impossible to prove that the liquidated amount named in
the contract, if a genuine pre-estimate of damage or loss, can be awarded.
43.7. Section 74 will apply to cases of forfeiture of earnest money under a
contract. Where, however, forfeiture takes place under the terms and
conditions of a public auction before agreement is reached, Section 74 would
have no application.
[Emphasis Supplied]
Page 26 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
44. The law declared in Paragraph 43.6 as extracted above must not be lost
sight of. It is only in cases where damage or loss is difficult or impossible to
prove that the liquidated amount named in the contract, if a genuine pre-
estimate of damage or loss, can be awarded. Kailash Nath was pressed into
service by both sides. A view was canvassed that Kailash Nath has rendered
an absolute standard that liquidated damages clauses would never be
regarded as a pre-estimate of losses without actual proof of losses. I have
done my best to examine if the Impugned Award would be immune from
interference bearing in mind Section 34 of the Act. I am constrained to note
that one would have expected the Learned Arbitral Tribunal to deal with
whether it is difficult or impossible to prove the loss in the instant case. One
would have expected the Learned Arbitral Tribunal to then deal with whether
the amount of 0.5% per week of delay, which is capped at 5% of the contract
value, is reasonable, if it is difficult to prove the loss.
45. Indeed, there is no consideration whatsoever on the causation of delay
and which party was responsible for the delay – the matter appears to have
been argued simply on the basis of the contractual provision and implications
of the law declared in, among others, Kailash Nath. The Learned Arbitral
Tribunal has analysed none of the case law. The Learned Arbitral Tribunal
has indeed held that some loss on investment is bound to occur due to the
delay, but has not dealt with whether it was difficult or impossible to prove
Page 27 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
such loss. Purporting to deal with a loss on capital allocated for investment,
the Learned Arbitral Tribunal has given an example of operational revenue
loss. The Learned Arbitral Tribunal has held out an ambiguous standard of
the need to prove loss in “a more concrete fashion” and held that HPCL has
“not seriously urged” its contention of suffering losses, without even
indicating what in HPCL’s contentions was not concrete and how seriousness
was meant to be discerned. The perceived absence of concreteness could be a
pointer to the difficultly in proving the precise loss arising out of a delay of
over two years.
46. For all the aforesaid reasons, regrettably, I am constrained to set aside
this portion of the Impugned Award as being perverse and manifestly
arbitrary for want of reasoning, and also being contrary to the fundamental
policy of the law of India in relation to liquidated damages. This portion of
the Impugned Award i.e. Paragraph 7 (under the heading ” Findings and
Conclusions”) is liable to be quashed and set aside.
47. Without meaning to add more length to this judgement, it would be
only apt to say that by now it is trite law that if any portion of an arbitral
award deserves to be set aside, the Section 34 Court could do so if it is
completely severable and its contents are not inseparably intertwined with
the other components of the arbitral award found to be valid and legal. The
Page 28 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
law on partial setting aside of portions of an arbitral award is now
emphatically declared by a five-judge Constitutional Bench of the Supreme
Court in Gayatri Balasamy2 – Part II of the majority judgement (Per. Sanjiv
Khanna, CJI -paragraphs 33 to 36) and in the concurring contents of the
separate judgement (Per. K.V. Vishwanathan J – paragraphs 142 to 152).
48. I have examined the Impugned Award from this perspective and I note
that nothing in the component of the Impugned Award dealing with the
challenge to the retention of liquidated damages that is being set aside in this
judgement is interlinked and interconnected with the rest of the Impugned
Award. Such partial setting aside will have no bearing or impact on the other
portions of the Impugned Award.
Claims relating to Insurance, Service Tax and Customs Duty:
Insurance:
49. The contract between the parties stipulates the requirement that GRE
ought to obtain insurance to the satisfaction of HPCL on terms provided in it.
Under Clause 6.e.1.vii of the GCC, within two weeks of the award of the
contract, the Works, Plant and Equipment was to be insured until final
completion against loss or damage by accident, fire or any other cause.
Under Clause 6.e.2 of the GCC, GRE was to maintain any other insurance as
2
Gayatri Balasamy vs. M/s ISG Novasoft Technologies Limited – 2025 INSC 605
Page 29 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
required in law or stipulated by HPCL. Neither clause stipulates the amount
for which insurance was to be taken.
50. It is HPCL’s contention that the two-week deadline to take the
insurance on the Works, Plant and Equipment for loss by accident, fire or any
other cause was September 20, 2006. It is HPCL’s case that after follow up
and reminders on various site visits, fire insurance was taken on June 22,
2007 for a sum of Rs. 50 crores. On August 20, 2008, HPCL asked GRE to
take insurance for the entire Project value i.e. Rs. 116 crores, which was
obtained on August 22, 2008. On August 29, 2008, HPCL informed GRE
that obtaining fire insurance was inadequate compliance and a “marine cum
erection” insurance policy (“MCE Policy”) ought to be taken. GRE obtained a
quote for an MCE Policy and forwarded it to HPCL by September 11, 2008.
On January 20, 2009, HPCL declared that GRE had failed to comply with the
requirement of maintaining insurance. HPCL retained an amount of Rs.
25,64,026 on this count.
51. GRE would contend that the quantum of insurance is not mentioned in
the contract. HPCL and EIL gave oral instructions to take insurance cover of
Rs. 50 crores, which was taken. When HPCL asked GRE to enhance it to Rs.
116 crores, it was promptly complied with. Throughout the life of the
contract, there was no loss or damage leading to an occasion to make an
Page 30 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
insurance claim. HPCL has deducted an estimate of the insurance premium
that would have been payable for the insurance policy although HPCL itself
did not dip into its pocket to take insurance during that period. Finally, GRE
contends that there is no provision in the contract to retain such amounts.
52. The core issue is whether HPCL was entitled to withhold Rs. ~25.64
lakh on account of breaches in relation to being adequately insured in time.
Before considering the challenge to the Impugned Award which holds that
HPCL was not entitled to retain the monies it deducted under this head, I
must mention that the Impugned Award is not wrong in rejecting HPCL’s
contention that this component of GRE’s claim was not arbitrable.
53. In a nutshell, HPCL’s contention is that the Clause 1.5 of the GCC
provides that on discrepancy, inconsistency, error or omission in the
contract, the decision of EIL or HPCL or the site-in-charge would be final and
binding on GRE, which would have to abide by it, and such decision would
not be arbitrable. Clause 5.a.10 of the GCC also contains a similar provision
in relation to any expressions, interpretations, statements, calculations of
quantities, supply of material rates etc. and the site-in-charge or EIL would
take a final and binding decision. The arbitration clause, in turn, provides
that disputes and differences other than those on which decision of any
person is final and binding would be arbitrable. The Learned Arbitral
Page 31 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
Tribunal has rightly noticed that there was no dispute between the parties for
a final and binding decision of EIL to have been rendered and has found that
there was no final and binding decision.
54. That apart, I find that HPCL’s proposition is extreme, unreasonable
and not borne out by the provisions of the contract. The contract did not
provide for a specific value of insurance. The value of insurance was a matter
of consultation between the parties, and based on the consultation, insurance
was taken as and when indicated. The dispute is about HPCL withholding
what it believes would have been the premium payable had the insurance
been taken on time. There was no reference to EIL on this matter at the
relevant time. The Learned Arbitral Tribunal has rightly noted that the
arbitration clause does not exclude the subject of insurance. The Learned
Arbitral Tribunal is right in holding that the dispute about the retention of
insurance premium on the premise of delayed compliance with taking
insurance, is arbitrable.
55. It is seen that the insurance was to be taken by GRE in consultation
with HPCL. The parties indeed consulted with each other and that resulted
in insurance being taken, first for Rs. 50 crores, and then for Rs. 116 crores.
The process of consultation can be an ongoing one and therefore, the two-
week deadline was arguably an indicative procedural provision and not
Page 32 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
necessarily a provision that had a hard-coded deadline. That apart, if the
contract did not provide for the specific consequence of withholding such
amount, for that specific provision being breached, the element of restitution
of parties to their respective positions or the element of damages would need
to be examined.
56. HPCL’s claim is that it was entitled to withhold the amount
attributable to insurance premiums for a policy value of Rs. 116 crores for the
period during which such coverage was not available. The Learned Arbitral
Tribunal’s finding that none of the provisions pressed into service indicate a
value for the insurance contract cannot be faulted. If the parties did not
agree to the value of the insurable interest, it would follow that the
computation of insurance premium that would have had to be paid, had
insurance been taken in two weeks, would fall in the realm of conjecture.
57. Evidently, the contract did not provide for a penalty of this nature. The
computation of the insurance premium that would have been paid is
conjectural as explained above. That apart, as and when HPCL indicated the
value of the insurance to be taken, GRE indeed obtained insurance. It is
difficult to conclude that despite insurance being a requirement covered by
the consideration value, GRE cut corners to save on the quantum of
insurance premium.
Page 33 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
58. On an overall analysis of the Impugned Award, one cannot find fault
with the approach to the subject by the Learned Arbitral Tribunal in this
regard. There is nothing perverse in this component of the Impugned Award,
which is a well-reasoned articulation of an eminently plausible view.
Therefore, it calls for no interference by this Court.
Service Tax:
59. HPCL refused to pay an amount of Rs. 3,08,85,583 to GRE pursuant to
a claim relating to reimbursing GRE with financial implications arising out of
newly-introduced imposition of service tax on the contract.
60. In a nutshell, the contract provided that should there be any variation
in applicable taxes and duties on materials in the works or services
performed by GRE or imposition of new levies due to subsequent legislation,
the financial implications of such variation shall be reimbursed by HPCL at
actuals. The base date for ascertaining variation would be the date of
submission of the last price bid – December 6, 2005.
61. HPCL’s contention is that although a new Section 65(105)(zzzza) was
introduced into the Finance Act, 1994 with effect from June 1, 2007
(pursuant to a notification dated May 22, 2007), the very same services were
already amenable to service tax under Section 66 read with Section 65(105)
Page 34 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
(zzd) read with Section 65(39)(a) of the Finance Act, 1994. Under these three
provisions, HPCL would contend, the Project was taxable as of December 6,
2005. Therefore, HPCL would contend, there was no financial implication
for HPCL to accommodate GRE for.
62. GRE’s contention is that service tax on indivisible works contracts on a
turnkey basis was introduced for the first time on June 1, 2007, which is
evidently after December 6, 2005 and therefore the financial implications
need to be covered by HPCL.
63. The Learned Arbitral Tribunal has taken a plausible reasonable view
based on an explicit ruling on this very question by the Supreme Court in the
case of L&T Ltd.3 declaring the law in this regard. Having examined the
decision in L&T Ltd. and reading the analysis in the Impugned Award in this
context, there would be no point in embarking on a prolix iteration of the
issue any further. Suffice it to say, the Learned Arbitral Tribunal cannot be
faulted for not second-guessing what the Supreme Court has explicitly
declared.
64. HPCL has tried to contend that the contract between the parties could
be regarded as a divisible contract and the new provision only covered
indivisible contracts. Such a contention would not take the matter any higher
3
Commissioner, Central Excise and Customs, Kerala vs. L&T Ltd. – (2016) 1 SCC 170
Page 35 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
since HPCL has simply relied on attribution of values to components of the
work, despite the contract explicitly providing in Clause 2.2 of the Special
Conditions of Contract that the contract was an indivisible contract. The
parties were ad idem that the contract was a composite indivisible contract.
To move away from that to make such submissions is untenable and wasteful
expenditure of resources.
Customs Duty:
65. HPCL retained another sum of Rs. 86,38,491.50 towards its claims on
account of Customs Duty variation. This component too is related to the
financial implications of new taxes imposed after the same base date i.e.
December 6, 2005. A notification dated March 1, 2006 imposed additional
duty at 4% on BQ Steel Plates which was used in the construction at the
Project.
66. The primary dispute between the parties is HPCL’s stance that the
additional duty has no financial implication for GRE since it would get credit
for the corresponding amount under the Central Value Added Tax. The
Learned Arbitral Tribunal has examined the matter and come to the view that
the contract did not provide for examining any corresponding benefits that
may be available from the imposition of additional taxes after the base date.
This is an eminently plausible view. For example, it would be arguable that
Page 36 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
every new indirect tax after the base date, would also lead to a higher
allowable expenditure in the books of accounts kept for computing taxable
income for income-tax computation, and thereby reduce the income to be
offered to tax. It could then be argued that such reducing in direct tax
should also be factored into computing “financial implications”. It is a
reasonable and plausible view that when interpreting the contract one must
look to the language of the contract and not extrapolate other hypothetical
consequences outside of the contract.
67. Therefore, I have no reason to interfere with the plausible view taken
by the Learned Arbitral Tribunal. It would be impossible to hold that these
findings are perverse or contrary to the fundamental policy of Indian law.
68. The Learned Arbitral Tribunal has left the actual precise computation
of financial implications under Customs Duty for the parties to compute
based on the declaration made in the Impugned Award. According to the
Learned Arbitral Tribunal, the computation must be based on exchange rates
in the bills of entry and not on the exchange rates as of the base date. HPCL
has suggested that this renders the Impugned Award unintelligible. I cannot
agree. Clearly this element has been declared by the Learned Arbitral
Tribunal in a specific manner. All that the parties have to do is pull out the
bills of entry and examine the actual computation based on the exchange
Page 37 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
rates prevailing on the date of the entry of the goods and computation of
Customs Duty on that basis. There is nothing unintelligible in this regard to
warrant any intervention in terms of Section 34 of the Act.
Conclusions:
69. In the result, the following conclusions are made, and corresponding
directions are issued:
(a) The Impugned Award calls for no interference except insofar as
it relates to the element of liquidated damages i.e. essentially the
contents of Paragraph 7 (under the heading ” Findings and
Conclusions”) dealing with the issue of Liquidated Damages,
which is quashed and set aside for being devoid of reasons;
(b) The arbitration agreement between the parties subsists insofar
as it relates to liquidated damages and the parties are free to
have this element subjected to dispute resolution afresh by way
of arbitration;
(c) No fault can be found with the findings returned on the facets of
Civil Works, under-insurance, Service Tax and Customs Duty.
Nothing contained in relation to these facets calls for any
interference by this Court in exercise of the jurisdiction under
Section 34 of the Act; and
Page 38 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::
CARBP.984.2018 – FINAL – June 17, 2025.doc
(d) Any amounts deposited in this Court along with accruals shall be
released to GRE after deducting the element of liquidated
damages forthwith, and in any event within a period of four
weeks from today.
70. The Petition is finally disposed of in the aforesaid terms. Considering
that each side has prevailed in some facet of the matter, I have been
persuaded not to impose costs.
71. Before parting, I must record my appreciation for the efforts of
Learned Advocates and Learned Senior Counsel for both sides in restricting
their verbal arguments and in providing concise written notes on
submissions within the agreed time limits and the page length committed to
in the Case Management Hearing. This approach has been of immense
assistance in allocation of judicial time to various segments of this Court’s
docket. In this matter, both sides have kept their presentation crisp, clear
and specific with accurate references to the voluminous material on the
record. The delay beyond the conventional three-month period in delivery of
this judgement is attributable solely to the Bench.
72. All actions required to be taken pursuant to this order, shall be taken
upon receipt of a downloaded copy as available on this Court’s website.
[SOMASEKHAR SUNDARESAN J.]
Page 39 of 39
June 18, 2025
Aarti Palkar, PS
::: Uploaded on – 18/06/2025 ::: Downloaded on – 19/06/2025 00:11:17 :::