Dismissed

Matrix Labs, Throug its Sole Proprietor Suresh Kulaindavel, v. Aark Pharmaceuticals

Madras HC18 Apr 2024Arb O.P(COM.DIV.)/101/2023

Case brief

AI extract

What is this about?

The Madras High Court dismissed a petition challenging an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, holding that the award was not perverse, based on evidence, and did not violate public policy.

What did the court decide?

The original petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 was dismissed, and A.No.1375 of 2023 was also dismissed.

Matrix Labs, Throug its Sole Proprietor Suresh Kulaindavel, Vs… — Arbitration | Madras HC (2024)

¶1

Arb.O.P.(Com.Div.)No.101 of 2023

¶2

IN THE HIGH COURT OF JUDICATURE AT MADRAS

¶3

Reserved On 23.02.2024 Pronounced On 18.04.2024

¶4

CORAM :

¶5

THE HONOURABLE MR.JUSTICE C.SARAVANAN

¶6

Arb.O.P.(Com.Div.)No.101 of 2023 and A.No.1375 of 2023

¶7

Matrix Labs

¶8

through its sole proprietor

¶9

Suresh Kulaindavel ... Petitioner

¶10

vs.

¶11

Aark Pharmaceuticals .. Respondent

¶12

Prayer: Original Petition is filed under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996, praying to set aside the Arbitral Award dated 31.10.2022 bearing No.ICC Case No.26492/HTG passed by Mr.Mahesh Rai in its entirety along with addendum dated 27.01.2023 and to direct the respondent to pay the costs and to grant such further reliefs.

¶13

For Petitioner : Mr.N.L.Rajah Senior Counsel for Mr.K.Senguttuvan

¶14

For Respondent : Mr.Vibu Nandhan

¶15

https://www.mhc.tn.gov.in/judis ____________ Page No. 1 of 46_

¶16

Arb.O.P.(Com.Div.)No.101 of 2023

¶17

Mr.Rahul Kumar Mr.Deepak Raj & Rohan C.Govind

¶18

ORDER

¶19

The petitioner is aggrieved by the Impugned Award dated 31.10.2022 passed by the Arbitral Tribunal. By the Impugned Award, the Arbitral Tribunal has awarded the following amounts to the respondent/claimant to st be paid by the petitioner/1 respondent :-

¶20

*Sl.No.*	*Amount*	*Particulars*
a	Rs.6,24,96,000	toward Repayment of the advance paid by AARK PHARMACEUTICALS to MATRIX LABS for the Rejected Test Kits (that is 1,48,800 test kits) along with compound interest at the rate of 16% per annum for the period from 29 June 2020 until repayment in full
b	-	compound interest at the rate of 16% per annum on the sum of INR 95,80,000 for the periodfrom 3 April 2020 to 3 February 2021
c	Rs.18,83,750	Total legal costs and disbursements
c	USD 60,000	MATRIX LABS to bear the total Costs of the Arbitration of USD 60,000 by way of reimbursement to AARK PHARMACEUTICALS of the sum of USD 60,000
d	MATRIX LABS SCINENCES PVT disbursements; an rejected.	and RARE METABOLICS LIFE LTD are to bear their own costs and d All other requests and claims are

¶21

Relevant Portion of the Arbitral Award reads as under:-

¶22

https://www.mhc.tn.gov.in/judis ____________ Page No. 2 of 46_

¶23

Arb.O.P.(Com.Div.)No.101 of 2023

¶24

“183. Having carefully considered all the evidence and submissions placed before it and for the reasons set out above,

¶25

the Tribunal hereby Determines and Orders that:

¶26

a) MATRIX LABS to make payment of INR 6,29,46,000 (Rupees Sixty-Two Million Four Hundred and Ninety Six Thousand Only) to AARK PHARMACEUTICALS toward repayment of the advance paid by AARK PHARMACEUTICALS for the Rejected Test Kits (that is 148,800 test kits) along with compound interest at the rate of 16% per annum for the period from 29 June 2020 until repayment in full;

¶27

b) MATRIX LABS to pay AARK PHARMACEUTICALS compound interest at the rate of 16% per annum on the sum of INR 95,80,000 FOR THE PERIOD FROM 3 April 2020 to 3 February 2021;

¶28

c) MATRIX LABS pay AARK PHARMACEUTICALS' total legal costs and disbursements of INR 18,83,750 and to bear the total Costs of the Arbitration of USD 60,000 by way of reimbursement to AARK PHARMACEUTICALS of the sum of USD 60,000;

¶29

d) MATRIX LABS and RARE METABOLICS LIFE SCINENCES PVT LTD are to bear their own costs and disbursements; and All other requests and claims are rejected.

¶30

https://www.mhc.tn.gov.in/judis ____________ Page No. 3 of 46_

¶31

Arb.O.P.(Com.Div.)No.101 of 2023

¶32

The petitioner herein was the first respondent before the Arbitral Tribunal in the Arbitral Proceeding in ICC Case No.626492/HGT which was instituted by the respondent / claimant before the said Arbitral Tribunal. The Arbitral Proceeding was conducted under the Rules of Arbitration of the International Chamber of Commerce in terms of Clause 12.2 of Ex.C2 Tripartite Master Distribution Agreement dated 23.03.2020 signed between the petitioner [the Importer], respondent - claimant [the Distributor] and M/s.Rare Metabolics Life Sciences Private Limited -[the Promoter], the 2^nd Respondent before the Arbitral Tribunal. M/s.Rare Metabolics Life Sciences Private Limited is not a party to this proceeding under Section 34 of Arbitration and Conciliation Act,1996.

¶33

Clause 12 of the Tripartite Master Distribution Agreement dated

¶34

23.03.2020 reads as under:-

¶35

“ 12. Choice of Law and Jurisdiction

¶36

12.1 This Agreement shall be governed by and construed in accordance with the laws of the Republic of India.

¶37

12.2 All disputes arising out of or in connection with this Agreement shall be settled by way of arbitration to be conducted in accordance with the rules of Arbitration of the International Chamber of Commerce

¶38

https://www.mhc.tn.gov.in/judis _____________

¶39

Page No. 4 of 46

¶40

Arb.O.P.(Com.Div.)No.101 of 2023

¶41

by an arbitrator appointed in accordance with the said rules. The language of arbitration shall be English and each Party shall have the right to have its legal advisers present throughout the arbitration. The venue of arbitration shall be Chennai, India. The arbitration award shall be final and binding on the Parties.

¶42

12.3 The Jurisdiction Chennai, Tamilnadu India .”

¶43

A dispute arose between the petitioner and the respondent under

¶44

Ex.C3 Tripartite Master Distribution Agreement dated 23.03.2020 signed between the petitioner [the importer], respondent-claimant [the Distributor] and M/s.Rare Metabolics Life Sciences Private Limited-[the Promoter].

¶45

In Ex.C2 Tripartite Agreement dated 23.03.2020, the “Promoter” M/s.Rare Metabolics Life Sciences Private Limited was stated to be engaged in the business of promoting and marketing of a wide range of Diagnostic tests that required specialized handling, and was desirous of appointing a “Distributor” for distribution of Specified Products on an exclusive basis.

¶46

Ex.C2 Tripartite Agreement dated 23.03.2020 further records that

¶47

https://www.mhc.tn.gov.in/judis _____________

¶48

Page No. 5 of 46

¶49

Arb.O.P.(Com.Div.)No.101 of 2023

¶50

the respondent herein had the requisite infrastructure, expertise and experience to organize the movement of the Specified Products and had obtained all the necessary approvals, licenses and clearances from the relevant authorities under the Applicable Laws including the Drugs and Cosmetics Act, 1940 and the rules made thereunder.

¶51

The respondent had thus expressed its desire to be appointed as the “Distributor” of the said M/s.Rare Metabolics Life Sciences Private Limited for the Specified Products, and the said M/s.Rare Metabolics Life Sciences Private Limited as the Promoter consented to appoint the respondent as the Distributor upon the terms and conditions in the Tripartite Agreement dated 23.03.2020.

¶52

The said M/s.Rare Metabolics Life Sciences Private Limited thus acted as the “Promoter” under the Ex.C2 Tripartite Agreement dated 23.03.2020. The respondent-claimant inturn was appointed as the “Distributor” of M/s.Rare Metabolics Life Sciences Private Limited.

¶53

https://www.mhc.tn.gov.in/judis ____________ Page No. 6 of 46_

¶54

Arb.O.P.(Com.Div.)No.101 of 2023

¶55

Thus, under Ex.C2 Tripartite Agreement dated 23.03.2020, the petitioner as an “Importer”, imported testing kits for testing Covid 19 after the outbreak of Covid 19 pandemic in India.

¶56

Under the Ex.C2 Tripartite Agreement dated 23.03.2020, the respondent AARK Pharmaceuticals on being appointed as the “Sole Distributor” of the said Promoter M/s.Rare Metabolics Life Sciences Private Limited, placed order on the petitioner for supply of testing kits to ICMR (Indian Council of Medical Research).

¶57

Clause 7.1 of the Ex.C2 Tripartite Agreement dated 23.03.2020 insulates the respondent (Distributor) with respect to claims by any person who may incur injury or loss as a result of the manufacture and delivery of the Specified Products in violation of the agreement and on account of any Adverse Event Occurrence, Product Complaints or disputes raised by a customers with regard to the use of the Specified Products.

¶58

Further as per clause 7.1 of Ex.C2 Tripartite Agreement dated

¶59

https://www.mhc.tn.gov.in/judis ____________ Page No. 7 of 46_

¶60

Arb.O.P.(Com.Div.)No.101 of 2023

¶61

23.03.2020 both the promoter - M/s.Rare Metabolics Life Sciences Private Limited and the petitioner - importer notwithstanding anything to the contrary in the Agreement and in no event were liable to the respondent -distributor for any incidental, indirect, exemplary, special or consequential damages whatsoever (including, but not limited to, lost profits, loss of goodwill, or interruption of business) that may be suffered or incurred by the respondent-Distributor as a result of the violation of the covenants under Ex.C2 Tripartite Agreement dated 23.03.2020.

¶62

The petitioner claims to have imported 10,00,000 testing kits from a supplier/manufacturer from Republic of China. The imports were in two tranches i.e., 3,00,000 testing kits on 16.04.2020 and 7,00,000 testing kits on 23.04.2020.

¶63

A sum of Rs.12,75,00,000/- is said to have been paid to the petitioner-importer for supply of initial 5,00,000 testing kits. Out of Rs.12,75,00,000/- a sum of Rs.9,60,00,000/- was paid directly by the respondent (the claimant-distributor) to the petitioner (the importer). The balance of Rs.3,15,00,000/- is said to have been directly paid to the

¶64

https://www.mhc.tn.gov.in/judis ____________ Page No. 8 of 46_

¶65

Arb.O.P.(Com.Div.)No.101 of 2023

¶66

petitioner/ (the importer) by the promoter namely M/s.Rare Metabolics Life Sciences Private Limited.

¶67

The negotiated price of each testing kits between the respondent (Claimant-Distributor) and ICMR was Rs.600 + 23.2% towards GST and import duty. Thus, the effective price of the supplies by the respondent (Claimant-Distributor) to the Director General of Medical Research was Rs.739.20 per testing kit.

¶68

Out of 3,00,000 testing kits imported earlier by the petitioner on 16.04.2020 after the outbreak of Covid 19 pandemic, the petitioner appears to have supplied 2,76,000 testing kits to ICMR through the respondent herein. Balance 24,000 testing kits are stated to have been supplied to the Government of Tamil Nadu.

¶69

A dispute is said to have in arise between the petitioner and the respondent and the promoter namely M/s.Rare Metabolics Life Scienes Private Limited. Under these circumstances, the promoter namely M/s.Rare Metabolics Life Sciences Private Limited along with the respondent,

¶70

https://www.mhc.tn.gov.in/judis ____________ Page No. 9 of 46_

¶71

Arb.O.P.(Com.Div.)No.101 of 2023

¶72

AARK Pharmaceuticals had filed O.M.P.(I)(COMM) 93 of 2020 against the petitioner/(importer) before the Delhi High Court for a direction for release of 7.24 Lakhs Covid 19 Rapid Test Kit and other Covid-19 related materials which were imported and/or are being imported from the People's Republic of China.

¶73

By an order dated 24.04.2020 in O.M.P.(I)(COMM) 93 of 2020,

¶74

the Delhi High Court had passed the following order:-

¶75

7. Be that as it may, since the kits/tests are required in the country on urgent basis in view of the worldwide pandemic, it is ordered as under:

¶76

(i) 2.24 lakh tests shall be delivered to ICMR, the moment it lands into India.

¶77

(ii) The total invoice value raised by the respondentimporter[petitioner herein] upon petitioner no. 1[respondent herein] is Rs. 20 crores plus GST i.e. Rs. 21 crore. The respondent has received Rs. 12.75 crores. The balance amount of Rs. 8.25 crores shall be first paid to the importer before any monies received from ICMR by Petitioner no. 1/ Petitioner no. 2 is adjusted for any other purpose. Such monies shall be paid to the respondent [petitioner herein] within 24 hours of it coming into the petitioner's bank account.

¶78

8. The respondent [petitioner herein] submits that it has received an order for supply of 50,000 kits/tests,

¶79

https://www.mhc.tn.gov.in/judis _____________

¶80

Page No. 10 of 46

¶81

Arb.O.P.(Com.Div.)No.101 of 2023

¶82

from the Government of Tamil Nadu, through an intermediary dealer viz. M/s Shan Biotech and Diagnostics, at the ICMR approved rate of @ Rs.600/- per test. Of this order, 24,000 has been supplied and 26,000 more are to be supplied. Let the same be supplied, the moment the kits/tests reach India, directly to the State Government of Tamil Nadu.

¶83

9. The Court is of the view that a profit mark-up of Rs. 155/-i.e 61% on the landed cost price of Rs. 245/- is much on the higher side and in any case more than sufficient for the seller, for the kits/tests to be made available in India for urgent extensive tests through the country, especially in these present extraordinary circumstances of the worldwide pandemic. The country is going through an unprecedented medical crisis affecting public order. People have been cloistered in their homes or constrained to stay wherever they were on 24th March 2020. The economy is virtually at a standstill for the last one month. There is an element of disquiet apropos one's safety. For people to be assured that the pandemic is under control and for governments to ensure and for agencies engaged in the frontline battle to safeguard people's health, more kits/tests should be made available urgently at the lowest cost, for carrying out extensive tests throughout the country. Public interest must outweigh private gain. The lis between the parties should give way to the larger public good. In view of the above, the kits/test should be sold at a price not beyond Rs. 400/- per kit/test inclusive of GST. 10. Mr. Jayant Mehta, the learned counsel for the petitioners, states upon instructions, that in the interest of the country he would not pursue the matter any further and would give up all further claims, in the case if the importer undertakes to sell the product at not more than Rs.400/- each, inclusive of GST. Indeed, both parties agree to the principle public interest should be

¶84

https://www.mhc.tn.gov.in/judis ____________ Page No. 11 of 46_

¶85

Arb.O.P.(Com.Div.)No.101 of 2023

¶86

paramount and the tests should be made available to the general public at the lowest cost possible Mr Nagrath, the learned counsel for the respondent submits, that the respondent is ready to and undertakes to supply the kits/tests at Rs.400/- each, plus GST i.e. at 40% lesser than the ICMR approved rate, directly to any Government or its agency or private entity duly approved to carry out these tests.

¶87

11. So, from the other 5 lakhs kits/tests, 50,000 shall be excluded for the State of Tamil Nadu and the remaining 450,000 would be available to the respondent to be disposed-off in terms of the above, directly to any Government or governmental agency or any private entity which has received due approval to carry out such tests.

¶88

“12. In view of the above, the petitioners agree not the pursue any claim apropos the other 5 lakh kits/tests.

¶89

13. The petition is disposed-off in terms of the above.

¶90

14. The order be uploaded on the website forthwith. Copy of the order be also intimated to the learned counsel for the parties through email.”

¶91

Pursuant to the directions of the Delhi High Court in O.M.P.(I)(COMM) 93 of 2020 dated 24.04.2020, the effective price of the

¶92

testing kit was reduced.

¶93

https://www.mhc.tn.gov.in/judis ____________ Page No. 12 of 46_

¶94

Arb.O.P.(Com.Div.)No.101 of 2023

¶95

From 7,00,000 testing kits that were later imported on 23.04.2020, about 2,24,000 testing kits were directly supplied to ICMR pursuant to the order dated 24.04.2020 of Delhi High Court in O.M.P.(I)(COMM) 93 of 2020. They were however later returned immediately.

¶96

According to the petitioner, the petitioner also re-exported 2,24,000 testing kits along with the balance 4,76,000 (7,00,000-2,24,000) back with difficulties to a buyer from Hong Kong on 15.05.2020 and on 29.05.2020 respectively.

¶97

As far as supply of 2,76,000 testing kits out of 3,00,000 testing kits (24,000 testing kits supplied directly to Government of Tamil Nadu) is concerned, ICMR returned only 1,48,800 testing kits.

¶98

It is the case of the petitioner that since 1,48,800 testing kits were

¶99

returned after the seals were broken, and therefore the petitioner could not re-export the consignments to the supplier.

¶100

https://www.mhc.tn.gov.in/judis ____________ Page No. 13 of 46_

¶101

Arb.O.P.(Com.Div.)No.101 of 2023

¶102

Thus, a dispute had arisen between the petitioner and the respondent in respect of 2,76,000 testing kits out of 3,00,000 testing kits that were imported by the petitioner imported earlier on 16.04.2020 prior to Order dated 24.04.2020 of the Delhi High Court in O.M.P.(I)(COMM) 93 of 2020. This was the subject matter of the arbitration by the Arbitral Tribunal under the Rules of Arbitration of the International Chamber of Commerce in ICC Case No.626492/HGT.

¶103

The grievance of the petitioner is that the petitioner could not reexpor t 1,48,800 testing kits as the seals of these testing kits had been tampered/broken. Hence, it is the case of the petitioner that the Arbitral Tribunal has erred in awarding the amounts to the respondent by confusing the averments of the petitioner in the counter filed before the Arbitral Tribunal.

¶104

That apart, it is submitted that paragraph 22 of the counter filed by the petitioner before the Arbitral Tribunal was mis-interpreted by the

¶105

https://www.mhc.tn.gov.in/judis ____________ Page No. 14 of 46_

¶106

Arb.O.P.(Com.Div.)No.101 of 2023

¶107

Arbitral Tribunal as a result of which, a patent illegality has been committed by the Arbitral Tribunal while passing the Impugned Award in favour of the respondent/ (the claimant).

¶108

It is further submitted that in Paragraph 22 of the counter, the petitioner has only mentioned about the re-export of 2,24,000 testing kits out of 7,00,000 testing kits imported later on 23.04.2020.

¶109

It is further case of the petitioner that the petitioner had returned a sum of Rs.1,15,80,000/- to the respondent and to the promoter namely M/s.Rare Metabolics Life Sciences Private Limited. Despite the same, the Tribunal has awarded the amount claimed by the respondent.

¶110

It is further submitted that there was no scope for confusing the re-exports made during the month of May of all 7,00,000 [ 4,76,000+ 2,24,000] testing kits imported by the petitioner after the Delhi High Court order.

¶111

https://www.mhc.tn.gov.in/judis ____________ Page No. 15 of 46_

¶112

Arb.O.P.(Com.Div.)No.101 of 2023

¶113

covering

¶114

That apart, the timeline between the import of the consignments

¶115

covering 2,76,000 testing kits supplied to ICMR and eventual return on 29.06.2020 made it impossible for the petitioner to re-export the consignment in the conditions in which they were returned. It is submitted tha t 1,48,800 testing kits out of 2,76,000 were returned by ICMR only on

¶116

29.06.2020 and were received by the petitioner only on 04.07.2020.

¶117

It is therefore submitted that the Arbitral Tribunal committed a grave error in awarding compensation to the respondent for 1,48,800 testing kits that were returned to the petitioner after breaking open the seal.

¶118

It is submitted that the Arbitral Tribunal ought to have considered

¶119

the proviso to Section 16(1) of the Sale of Goods Act, 1930. It is submitted that the goods sold through the respondent/ distributor could have not been returned by the respondent (claimant) to the petitioner.

¶120

Section 16(1) of the Sale of Goods Act, 1930 reads as under:-

¶121

"16(1) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for

¶122

https://www.mhc.tn.gov.in/judis ____________ Page No. 16 of 46_

¶123

Arb.O.P.(Com.Div.)No.101 of 2023

¶124

which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be reasonably fit for such purpose:

¶125

Provided that, in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose."

¶126

It is submitted that the respondent placed order of the testing kit

¶127

by its patent trade name. That apart, it is submitted that the Arbitral Tribunal did not have any evidence from the respondent/claimant that the petitioner had actually re-exported 1,48,800 testing kits which were returned by ICMR to the respondent/claimant on 29.06.2020 which were later received by the petitioner on 04.07.2020 .

¶128

That apart, it is submitted that at best the respondent herein was entitled to a sum of Rs. 4,87,00,000/- as detailed below, which also the Arbitral Tribunal has failed to consider:-

¶129

https://www.mhc.tn.gov.in/judis ____________ Page No. 17 of 46_

¶130

Arb.O.P.(Com.Div.)No.101 of 2023

¶131

*Particulars*	*Value in INR*	*Remarks*
Receipt of Advance	9,60,00,000	Advance received directly fromClaimant
Less: Cost of 127200 kits – Rs.420*1272200	5,34,00,000
Less: Additional IGST Paid	36,00,000	Additional GST as against the claimants advise of5%
Less: Interest incurred due to delayin receiptofadvance	1,03,00,000	Interest @ 18%
Sub-total	2,87,00,000
The cost of 148800 kits, returned by Claimant and received byR1*	6,24,00,000
The Cost recovered by the R1* ondisposal	-	Scrapped
Profit/(loss)	6,24,00,000
The cost of 224000 kits, returned by Claimant and received byR1*	9,40,00,000
The cost recoverable by the R1* ondisposalby exportingtoHK	9,40,00,000
The cost of freight incurred for inward of 0.5 Million kits and returnof0.224 million kits	75,00,000	Supporting Documents as evidence enclosed
Net FOREX Loss – the Forex loss incurred in the transaction of0.5Million Kits	75,00,000	Supporting Documents as evidence enclosed
Profit/(loss)	-1,50,00,000
SUMMARY
Relatingto127200	2,87,00,000
Relatingto148800	-6,24,00,000
Relatingto224000	-1,50,00,000
Total	-4,87,00,000

¶132

(*the petitioner herein)

¶133

In support of its plea, the petitioner has filed a written submission

¶134

on the grounds of challenge to the arbitral award as follows:-

¶135

https://www.mhc.tn.gov.in/judis ____________ Page No. 18 of 46_

¶136

Arb.O.P.(Com.Div.)No.101 of 2023

¶137

1. Breach of Contract - 100% advance was not paid which lead to an interest burden for the Petitioner.

¶138

Against the Law - The Arbitrator failed to invoke the proviso to Sec 16(1) of the Sale of Goods Act and failed to follow the Superior Court's ratio on identical issues.

¶139

Against the Public Policy of Indian Law - noncompliance judicial precedents.

¶140

Against the basic notion of Morality and Justice - The Arbitral award was awarded for a higher amount than the amount claimed by the Respondent.

¶141

5. Not a Speaking Order due to lack of application of mind

¶142

a. No reasons for not invoking the proviso to section 16 (1) of the Sale of Goods Act, has been provided in the Award

¶143

b. Non-application of the ratio laid down in the precedent and application of the decision followed by the ratio in the precedent.

¶144

c. Non-speaking with regard to the sub-issue determined in para 109(d). The Ld arbitrator failed to examine and compare the relevant document with that of the Purchase Order, rather arbitrarily considered only the submission made by the Respondent that ICMR rejected the kits as it failed to meet the description specified in the procedural order and had made a biased order in Para. 139 (e)(iv) of the Award.

¶145

d. For invoking clause 7.1 of the agreement, the preconditions are any claims by other person who incurred injury or loss and adverse event occurred to customer supported by complaint with regard to use and effect of the specified products, is mandatory; the Ld Arbitrator failed to refer any documents in this regard in the award.

¶146

https://www.mhc.tn.gov.in/judis ____________ Page No. 19 of 46_

¶147

Arb.O.P.(Com.Div.)No.101 of 2023

¶148

¶149

Grant of Interest and Rate of Interest - Grant of interest is illegal while the Respondent had breached the contract in the first place and there is no justification for the rate of interest.

¶150

7. Bias of the learned Sole Arbitrator

¶151

a. Absence of independent evaluation of the contours of the proviso to Sec 16(1)

¶152

b. Without adducing any evidence from the Respondent, the Ld Arbitrator passed the order arbitrarily.

¶153

c. The product was chosen by ICMR; not offered by the WONDFO or the Petitioner

¶154

d. The product approved by the ICMR was based on the name in the catalogue; nowhere any specifications were provided.

¶155

e. The Respondent didn't provide any material in support of the rejection; neither the covenants of the agreement which was breached or failed to comply nor with regard to any complaints by the customer.

¶156

It is submitted that none of the alternate submissions of the

¶157

petitioner were also considered by the Arbitral Tribunal.

¶158

It is submitted that not only the Arbitral Tribunal Impugned

¶159

Award has arrived improbable conclusion in the Impugned Award based on

¶160

the available facts but has also ignored the fundamental law.

¶161

https://www.mhc.tn.gov.in/judis ____________ Page No. 20 of 46_

¶162

Arb.O.P.(Com.Div.)No.101 of 2023

¶163

The learned Senior Counsel for the petitioner has placed reliance

¶164

on the following case laws:-

¶165

i. Aircon Beibars FZE vs. Heligo Charters Private Limited , MANU/MH/0495/2022;

¶166

ii. Associate Builders vs. Delhi Development Authority , MANU/SC/1076/2014;

¶167

iii. Eastern Mining Contractors (Private) Limited vs. The Premier Automobiles Limited , MANU/MH/0205/1962;

¶168

iv. Mideast Pipeline Products vs. Fernas Construction Co.Ltd , MANU/DE/1352/2018;

¶169

v. MMTC Ltd vs. Vedanta Limited , MANU/SC/0221/2019;

¶170

vi. Ssangyong Engineering & Construction Co. Ltd vs. National Highways Authority of India (NHAI) , MANU/SC/0705/2019

¶171

Mr.N.L.Rajah, the learned Senior Counsel for the petitioner has

¶172

also placed reliance on the decision of this Court in the case of M.Manohara Chetty and Others vs. C.Coomaraswamy Naidu and

¶173

Sons , MANU/TN/0688/1979 in so far as admission is concerned. A specific

¶174

reference is made to Paragraph 10 of the aforesaid order, which reads as

¶175

under:-

¶176

https://www.mhc.tn.gov.in/judis ____________ Page No. 21 of 46_

¶177

Arb.O.P.(Com.Div.)No.101 of 2023

¶178

"10. The law by no means regards admission as conclusive proof of the matters admitted. This is because to a Court of law admissions are but statements which do no more then suggest an interference as to some fact or facts in issue. (See Section 31 and 17 of the Indian Evidence Act, 1872). It is, therefore, important that the Court should examine any given admission inside out to see if it suggests any clear interference on the fact in issue against the party making it. For a Court to draw an adverse inference against a party on the basis of what he is stated to have admitted, the admission must be unequivocal. It must also be comprehensive. It must go the whole-hog, as it were, on the point at issue. If a party's admission falls short of the totality of the requisite evidence needed for legal proof of a fact in issue, such an admission would be only a truncated admission. It follows that in such a case it cannot support a valid judicial determination, unless it be that the Court is in a position to find other evidence before it to make up for the deficiencies in the admission."

¶179

The learned Senior Counsel for the petitioner has also placed reliance on the decision of this Court in the case o Chemplast Sanmar

¶180

Limited vs. Appellate Authority, Tamil Nadu Pollution Control Board and Others , [2008) 8 MLJ 1100. A specific reference was made to Paragraph Nos.23, 24 & 25, which reads as under :-

¶181

"23. In the decision Pullangoda Rubber Produce Co. vs. State of Kerala (supra), the Hon'ble Supreme Court dealt

¶182

https://www.mhc.tn.gov.in/judis ____________ Page No. 22 of 46_

¶183

Arb.O.P.(Com.Div.)No.101 of 2023

¶184

with a rebuttable presumption of admission. The Hon'ble Supreme Court has held in paragraph-5 as follows:-

¶185

"5... An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect."

¶186

24. In the decision Ranjit Singh vs. Union of India and Others (supra), the Hon'ble Supreme Court has held as under in Paragraphs 22 and 23:

¶187

"22. He filed a show-cause but, albeit after some time the said cause was available with the disciplinary authority before he issued the order of dismissal. Even if he had prepared the order of dismissal, he could have considered the show-cause as he did not leave his office by then. The expression "communication" in respect of an order of dismissal or removal from service would mean that the same is served upon the delinquent officer. (See State of Punjab vs. Amar Singh Harika)

¶188

23. Even otherwise also the jurisdiction of a disciplinary authority to consider the matter would remain with it till it goes out of its hands which would mean that the order is dispatched, as in the case of the order of suspension. (See Sultan Sadik v. Sanjay Raj Subba).

¶189

25. A learned Single Judge of this Court (Justice BALASUBRAMANIAN) in the discussion Manohara Chetty and Others vs. Coomaraswamy Naidu and Sons (supra) has held as under in Paragraph 10:

¶190

https://www.mhc.tn.gov.in/judis ____________ Page No. 23 of 46_

¶191

Arb.O.P.(Com.Div.)No.101 of 2023

¶192

"10. The law by no means regards admission as conclusive proof of the matters admitted. This is because to a Court of law admissions are but statements which do not more then suggest an inference as to some facts or facts in issue. (See Sections 31 and 17 of the Indian Evidence Act, 1872). It is therefore, important that the Court should examine any given admission inside out to see if it suggests any clear inference on the fact in issue against the party making it. For a Court to draw an adverse inference against a party on the basis of what he is stated to have admitted, the admission must be unequivocal. It must also be comprehensive. It must go the whole-hog, as it were, on the point at issue. If a party's admission falls short of the totality of the requisite evidence needed for legal proof of a fact in issue, such an admission would be only a truncated admission. It follows that in such a case it cannot support a valid judicial determination, unless it be that the Court is in a position to find other evidence before it to make up for the deficiencies in the admission."

¶193

On the other hand, it is the case of the respondent that out of 2,76,000 testing kits imported by the petitioner on 17.04.2020 that were delivered to ICMR on behalf of the respondent. 1,48,800 testing kits were returned to the petitioner on 29.06.2020 and that 1,27,200 testing kits were not returned to the petitioner. There was no claim for 1,27,200 testing kits.

¶194

https://www.mhc.tn.gov.in/judis ____________ Page No. 24 of 46_

¶195

Arb.O.P.(Com.Div.)No.101 of 2023

¶196

It is further submitted that 2,24,000 testing kits that were delivered pursuant to order dated 24.04.2020 of the Delhi High Court in O.M.P.(I)(COMM) 93 of 2020 were returned to the petitioner immediately on 26.04.2020 and since the amount was paid in advance before 2,76,000 testing kits were supplied, the petitioner was required to refund the amounts for 1,48,000 testing kits returned on 29.06.2020.

¶197

It is the submission of the respondent that the respondent paid a sum of Rs.9,60,00,000/- to the petitioner as advance and a further sum of Rs.3,15,00,000/- was paid by the promoter viz., Rare Metabolics Life Sciences Private Limited to the petitioner on 21.04.2020 as advance.

¶198

Thus, in all a sum of Rs.12,75,00,000/- (Rs.9,60,00,000 + Rs.3,15,00,000) was paid to the petitioner by the respondent/distributor and by the promoter viz., Rare Metabolics Life Sciences Private Limited for supply of 5,00,000 testing kits.

¶199

https://www.mhc.tn.gov.in/judis ____________ Page No. 25 of 46_

¶200

Arb.O.P.(Com.Div.)No.101 of 2023

¶201

It is the case of the respondent/distributor that a sum of Rs.1,15,80,000 [12,75,00,000 -11,59,20,000]was paid in excess for 2,76,000 /- kits supplied, which were delivered to the ICMR. The petitioner/importer thus refunded a sum of Rs.20,00,000/- to the promoter viz., Rare Metabolics Life Sciences Private Limited on 30.07.2020 and a further sum of Rs.95,80,000/- to the respondent/distributor on 03.02.2021 being the excess amounts paid against supply of 2,76,000 /- kits. It is therefore submitted that the petitioner was required to refund the amount paid in advance for 1,48,800 testing kits that were returned on 29.06.2020.

¶202

It is submitted that to realize its payment, the respondent initiated the arbitration proceedings which was presided by the Sole Arbitrator and based on the pleadings filed by the parties the Sole Arbitrator framed issues and based on the submissions of the both the parties, facts on record and applicable law, the Sole Arbitrator passed a reasoned award upon full consideration of facts, evidences presented by the parties, and has allowed the Respondent's claim.

¶203

https://www.mhc.tn.gov.in/judis ____________ Page No. 26 of 46_

¶204

Arb.O.P.(Com.Div.)No.101 of 2023

¶205

The learned counsel for the respondents submitted that the petitioner failed to satisfy any of the grounds for setting aside an award under Section 34 of the Arbitration and Conciliation Act, 1996. It is further submitted that the Petitioner also urges re-appreciation of evidence and merits that were already considered in the arbitration proceeding by the Arbitral Tribunal and by doing so the Petitioner attempts to seek a retrial of the dispute which it is therefore submitted that the present Petition does not meet the requisites of a challenge under Section 34 of the Act and ought to be dismissed " in limine".

¶206

It is further submitted that the petitioners contention that the terms of the Agreement were breached due to non-payment of advance amounts and that the Petitioner's most important defence has not been considered by the Sole Arbitrator is untenable and submitted that nonpayment of advance has no bearing on this Respondent's claims in the arbitration, which were inter alia for repayment of advances paid for the rejected kits, which were returned to the Petitioner.

¶207

https://www.mhc.tn.gov.in/judis ____________ Page No. 27 of 46_

¶208

Arb.O.P.(Com.Div.)No.101 of 2023

¶209

It is further submitted that the Sole Arbitrator has considered the

¶210

same at length under Issue No.1, at para 109 (b) and para 138 of the Award dated 31.10.2022. It is further submitted that the Petitioner did not raise any counter claim or seek any declaratory relief in this respect in the Arbitral Proceedings.

¶211

It is further submitted that the Sole Arbitrator also took note of the fact that regarding admission by the Petitioner's witness that it accepted the ICMRS decision on the Rejected Test Kits as it did not challenge the ICMR's decision for rejecting 1,48,80,000 testing kits. It is further submitted that the Arbitrator, having considered the positions of the parties and evidence tendered had held that there is no basis for the Petitioner to deny the Respondent refund for the sums paid towards the Rejected Test Kits.

¶212

It is further submitted that the Petitioner admitted in paragraph No.2.11 of its Closing Submissions, that Section 16(1) of the Sale of

¶213

https://www.mhc.tn.gov.in/judis ____________ Page No. 28 of 46_

¶214

Arb.O.P.(Com.Div.)No.101 of 2023

¶215

Goods Act,1930 does not apply in cases where an express representation as to the fitness of an article for any particular purpose exists.

¶216

It is further submitted that the Sole Arbitrator has considered the Petitioner's argument in detail and provided its reasons and analysis at Para Nos.145-156 of the Award that Clause 6.2 of the Agreement dated 23.03.2020 contains an express warranty from the Petitioner that the Test Kits would confirm to specifications of Contract. Furthermore, through Clause 7 of the aforesaid Agreement the Petitioner contracted and undertook to indemnify and hold this Respondent harmless and submitted that Section 16 of the Sale of Goods Act, 1930 concerns implied warranty and therefore has no bearing on the matter at hand.

¶217

It is submitted that the Petitioner has thus far not paid any of the sums due to the Respondent under the impugned Award dated 31.10.2022 and submitted that the present Petition is an attempt to delay payment and to obstruct enforcement of the Award and hence submitted that the present Petition is devoid of merits and deserves to be dismissed.

¶218

https://www.mhc.tn.gov.in/judis ____________ Page No. 29 of 46_

¶219

Arb.O.P.(Com.Div.)No.101 of 2023

¶220

The learned counsel for the respondent submitted that the scope

¶221

of challenge under Section 34 of the Act is very narrow. It is submitted that the Petitioner herein has not discharged the burden to show how they fall within the limited bracket for setting aside an arbitral award as per the amended Section 34 of the Act and has placed reliance on the following

¶222

decisions:-

¶223

i. MMTC LId v. Vedanta Ltd. , (2019) 4 SCC 163;

¶224

ii. Ssangyong Engineering & Construction Co. Ltd vs. National Highways Authority of India (NHAI) , (2019) 15 SCC 131

¶225

iii. PatelEngineering Ltd. v. NEEPCO , (2020) 7 SCC 167;

¶226

iv. The Project Director. NHAI V. M Hakim (2021) 9 SCC 1

¶227

The learned counsel for the respondent has also placed reliance

¶228

on the following decisions:-

¶229

i. McDermott International Inc. v. Burn Standard Co. Ltd. , (2006) 11 SCC 181;

¶230

ii. Sutlej Construction Ltd. v. UT of Chandigarh , (2018) 1 SCC 718

¶231

iii. Sheladia Associates Inc. V. TN Road Sector

¶232

https://www.mhc.tn.gov.in/judis ____________ Page No. 30 of 46_

¶233

Arb.O.P.(Com.Div.)No.101 of 2023

¶234

Project II, Represented by its Project Director 2019 SCC OnLine Mad 17883

¶235

I have considered the arguments advanced by the learned Senior

¶236

Counsel for the petitioner and the learned Counsel for the respondent.

¶237

Scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996 is very limited.

¶238

This Court can neither sit as a Court of appeal or re-appreciate the evidence placed before the Arbitral Tribunal or substitute the finding of the Arbitral Tribunal with its own conclusion on facts or evidence. In this connection, the decision of the Honourable Supreme Court in The Project Director, NHAI V. M. Hakim, (2021) 9 SCC 1 is invited wherein, it was held that the power to set aside an Arbitral Award under Section 34 of the Arbitration And Conciliation Act, 1996 does not include the authority to modify the award. It further held that an award can be 'set aside' only on limited grounds as specified in Section 34 of the Act and it is not an

¶239

https://www.mhc.tn.gov.in/judis ____________ Page No. 31 of 46_

¶240

Arb.O.P.(Com.Div.)No.101 of 2023

¶241

appellate provision. It further held that an application under Section 34 for setting aside an award does not entail any challenge on merits to an award.

¶242

The Honourable Supreme Court in Ssangyong Engineering and Construction Co Ltd versus National Highway Authority of India,

¶243

(2019) 15 SCC 131 has held that an award can be set aside on the ground of patent illegality under Section 34 (2-A) of the Arbitration And Conciliation

¶244

Act, 1996 only where the illegality in the award goes to the root of the

¶245

matter. It further held that erroneous application of law by an Arbitral

¶246

Tribunal or the re-appreciation of evidence by the Court under Section 34

¶247

(2-A) of the Arbitration and Conciliation Act, 1996 is not available.

¶248

The Court held that the above ground is available only where the view taken by the Arbitral Tribunal is an impossible view while construing the contract between the parties or where the award of the Tribunal lacks any reasons. The Court further held that an award can be set aside only if an arbitrator/arbitral Tribunal decide(s) the question beyond the contract or

¶249

beyond the terms of reference or if the finding arrived by the Arbitral

¶250

https://www.mhc.tn.gov.in/judis ____________ Page No. 32 of 46_

¶251

Arb.O.P.(Com.Div.)No.101 of 2023

¶252

Tribunal is based on no evidence or ignoring vital evidence or is based on documents taken as evidence without notice to the parties.

¶253

The Honourable Supreme Court in Patel Engineering Ltd V. NEEPC O, (2020) 7 SCC 167 held that patent illegality as a ground for setting aside an award is available only if the decision of the arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view.

¶254

The Honourable Supreme Court in McDermott International

¶255

Inc. v. Burn Standard Co. Ltd, (2006) 11 SCC 181 held that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is well within the arbitrator's jurisdiction to consider the same.

¶256

https://www.mhc.tn.gov.in/judis ____________ Page No. 33 of 46_

¶257

Arb.O.P.(Com.Div.)No.101 of 2023

¶258

The Honourable Supreme Court in Sutlej Construction Ltd. v.

¶259

UT of Chandigarh (2018) 1 SCC 718, held that when the award is a reasoned one and the view taken is plausible, re-appreciation of evidence is not allowed while dealing with the challenge to an award under Section 34 of the Arbitration And Conciliation Act, 1996 for setting aside an award. It further held that the proceedings challenging the award cannot be treated as a first appellate court against a decree passed by a trial court.

¶260

The Honourable Supreme Court in Sheladia Associates Inc. V.

¶261

TN Road Sector Project II, Represented by its Project Director, 2019 SCC OnLine Mad 17883 reminded itself of the Hodgkinson principle which has been explained by the Honourable Supreme Court in the oft-quoted and celebrated Associate Builders Case being Associate Builders V. Delhi Development Authority , (2015) 3 SCC 49. It held that Hodgkinson principle in simple terms means that the Arbitral Tribunal is the best judge with regard to quality and quantity of evidence before it. It further held that

¶262

if there is no infraction of Section 28(3) of the Arbitration And Conciliation

¶263

https://www.mhc.tn.gov.in/judis ____________ Page No. 34 of 46_

¶264

Arb.O.P.(Com.Div.)No.101 of 2023

¶265

Act, 1996 the question of challenge on the grounds of public policy does not arise.

¶266

The facts of the case indicate that the Tribunal has examined the

¶267

facts at length and had framed issues and answered it in favour of the respondent.

¶268

The petitioner as an importer of the testing kits had imported 10,00,000 of testing kits and had supplied 5,00,000 testing kits to ICMR for and on behalf of the respondent who was appointed as the distributor for promoter M/s.Rare Metabolics Life Sciences Private Limited, (the 2^nd respondent in the Arbitral Proceeding) under Ex.C2 Tripartite Master Distribution Agreement dated 23.3.2020 signed between them (i.e. the petitioner, the respondent and promoter M/s.Rare Metabolics Life Sciences Private Limited).

¶269

Initially, the petitioner had imported 3,00,000 test kits and had

¶270

https://www.mhc.tn.gov.in/judis ____________ Page No. 35 of 46_

¶271

Arb.O.P.(Com.Div.)No.101 of 2023

¶272

supplied 2,76,000 test kits to ICMR on 17.4.2020 for the respondent. About 24,000 test kits out of 3,00,000 were supplied to the government of Tamil Nadu. The petitioner had thereafter imported 7,00,000 test kits during the last week of April 2020.

¶273

Initially, the transaction was for Rs.30,00,00,000 /- at Rs.600 per

¶274

test kit. The respondent and the promoter M/s.Rare Metabolics Life Sciences Private Limited, together had paid and advance of Rs.12,75,00,000 /- to the petitioner.

¶275

Since balance payments were not received in advance for the balance supply of 2,24,000 test kit , the petitioner threatened not to supply the aforesaid quality to ICMR. Therefore, the promoter M/s.Rare Metabolics Life Sciences Private Limited, along with the respondent AARK Pharmaceuticals - (the claimant) filed in O.M.P.(I)(COMM) 93 of 2020 before the Delhi High Court and secured an order dated 24.04.2020 , Content of which has been extracted above.

¶276

https://www.mhc.tn.gov.in/judis

¶277

____________ Page No. 36 of 46_

¶278

Arb.O.P.(Com.Div.)No.101 of 2023

¶279

As a result of order dated 24.04.2020 of the Delhi High Court,

¶280

there was a downward revision in the price agreed between the parties under the Tripartite Master Distribution Agreement dated 23.3.2020. Both the petitioner and the respondents are also not in dispute on this issue. Thus, the contract for Rs.30,00,00,000/- was reduced to Rs.21,00,00,000/-.

¶281

Pursuant to the order dated 24.04.2020 of the Delhi High Court in

¶282

O.M.P.(I)(COMM) 93 of 2020, petitioner also supplied 2,24,000 test kits to ICMR. However, the entire consignment of 2,24,000 test kit was returned immediately by ICMR. According to the petitioner, in view of the return of 2,24,000 test kits by ICMR, the balance 4,76,000 (7,00,000-2,24,000) test kits were also later exported to a buyer from Hong Kong.

¶283

Later, ICMR, returned 1,48,000 test kits to the respondent which

¶284

were in turn were returned to the petitioner on 4.7.2020 . According to the petitioner, the petitioner was unable to the export 1,48,000 test kits as the package were opened.

¶285

https://www.mhc.tn.gov.in/judis ____________ Page No. 37 of 46_

¶286

Arb.O.P.(Com.Div.)No.101 of 2023

¶287

The cost price of the 2,76000/- Test kits @ Rs. 420 per kit,

¶288

amounts to Rs.11,59,20,000/- (Eleven Crore Fifty-Nine Lakhs Twenty Thousand Rupces). The amount paid by the Respondent and Rare Metabolic to the Petitioner was Rs.12,75,00,000/- . Therefore, the petitioner has repaid a sum of Rs.95,80,000/- on 03.02.2021 to the respondent herein namely AARK Pharmaceuticals and a sum of Rs.20,00,000/- on 30.07.2020 to M/s.Rare Metabolics Life Sciences Private Limited, (the promoter), amounting to Rs.1,15,80,000/- being the excess paid for the cost price for 2,76,000 Test kits. Thus, the refund of the aforesaid amount of Rs.1,15,80,000/- is on account of return of the downward revision of price of the Test Kits pursuant to order dated of Delhi High Court.

¶289

From the records that are available before this Court, there are indications that the petitioner has exported three shipments of Test Kits to the buyer in Hongkong as per Ex.R1-R7, as detailed below:-

¶290

https://www.mhc.tn.gov.in/judis ____________ Page No. 38 of 46_

¶291

Arb.O.P.(Com.Div.)No.101 of 2023

¶292

Shipping	Date	Invoice	Invoice Value	FOB Value in
Bill No.		Value in Rupees	in USD	Rupees
2681162	15.05.2020	2,29,34,475	305793	2,28,80,000.00
2693406	29.05.2020	14,81,04,264	1977360	14,78,50,128.30
2893468	29.05.2020	-	-	*14,78,50,128.00

¶293

Amount in US Dollar -1973966.9960 USD [ Calculated at Rs.74.900 per US Dollar]

¶294

The above exports can be co-related only to 7,00,000/- test kits imported by the petitioner during the 4th week of April 2020 out of which 2,24,000/- test kits were earlier supplied to ICMR and balance to other buyers in India. Though the details of the Bill of Entries/Entry for import of 7,00,000 Test Kits are not available, admitted case of the petitioner is that the petitioner exported them during the month of May as detailed above vide shipping bills mentioned above.

¶295

The records Ex . R1- 8 which were filed by the petitioner also establish that the petitioner had disputed with the customs department

¶296

https://www.mhc.tn.gov.in/judis _____________

¶297

Page No. 39 of 46

¶298

Arb.O.P.(Com.Div.)No.101 of 2023

¶299

regarding customs duty on imports. The Principal Commissioner indicates that the petitioner had earlier imported “SARS-COV-2 Antibody Test ( Covid-19 Test Kit) from China vide Bill of Entry No. 7460225 dated 16.04.2020. Proceedings came to be initiated by the Customs Department, Principal Commissioner of Customs ACC (Imports) which culminated in order dated 27.01.2021 of the Principal Commissioner of Customs ACC (Imports). The said order indicates that the petitioner had imported 15,0000 Nos. of Covid-19 Test Kits vide Bill of Entry and that out of 15,000 Nos. of Covid-19 Test Kits imported vide aforesaid Bill of Entry No.7460225 dated 16.04.2020, the petitioner has exported 8098 kits vide Shipping Bill No.5380454.

¶300

In the said proceeding, it was also the stand of the petitioner that 6360 Nos.of Kits were sold to ICMR through the promoters which was exempted for payment of duty @ 5% in terms of Notification No.45/2017 (CGST) dated 14.11.2017 and that 525 Kits were sold to a Chennai Company (Clinical Automation) and that only a small quantity of 17 Nos of test kits were held in their stock and thus differential duty payable by the

¶301

https://www.mhc.tn.gov.in/judis ____________ Page No. 40 of 46_

¶302

Arb.O.P.(Com.Div.)No.101 of 2023

¶303

petitioner was only on the balance 542 Nos of Test Kits . Para 21 of Ex.R.1 to Ex.R8 of the Principal Commissioner of Customs ACC(Imports) of order reads as under:-

¶304

The importer. on the other hand, has contended that they have imported 15,000 Nos of COVID.19 Kit vide Bill of Entry no. 7460225,dated I6.0+.2020, out of which 8098 kits were exported vide Shipping Bill No 53S0454 and that there existed revenue neutral situation as they were eligible for refund of duty pad to the government at the time of import. Further out of the balance quantity, 6360 Nos were sold to ICMR through M/s Rare Metabolics on which duty 59% was payable under Notification No 45/201 7(CGST) dated 14/1l/2017; that 525 nos were sold to Chennai Company (Clinical Automation) and only small quantity of 17 nos was held in their stock and thus differential duty was payable only on the balance 542 nos.

¶305

80. I n para 18.1 of Ex.R1-8 Order dated 27.01.2021 of Principal Commissioner of Customs ACC(Imports), detail of the exports of 8098 Nos. of Test Kits vide Shipping Bill No.5380454 dated 23.09.2020 is given. Para 18.1 of Ex.R1-8 order dated 27.01.2021 of Principal Commissioner of Customs ACC(Imports) reads as under :-

¶306

M/s Matrix Labs vide their written submission received in this office on 22.12.2020, submitted that in the said BoE No.7460225 dated 16/04/2020, they

¶307

https://www.mhc.tn.gov.in/judis ____________ Page No. 41 of 46_

¶308

Arb.O.P.(Com.Div.)No.101 of 2023

¶309

have imported 15,000 quantity of COVID-19 Test Kit out of which 8098 quantity of test kit has been exported vide Shipping Bill No. 5380454 dated 23/09/2020. Therefore, there existed a revenue neutral situation and that they were eligible for refund of tax amount paid to the government. In a catena of cases, the courts have from time and again held that the duty cannot be demanded when it is a revenue neutral situation. The Hon'ble Supreme Court in the case of Nirlon Ltd v Commissioner, 2015 (320) ELT 22 (SC) held that when the situation is revenue neutral the assessee could not have achieved any purpose to evade the duty.

¶310

81. The above export is after the Kits returned by ICMR to the respondent on 29.06.2020 and thereafter to the petitioner by the respondent on 04.07.2020. Thus, there are two sets of exports made by the petitioner during the month of May as in the table above from and out of 7,00,000 Test Kits imported during the 4 th Week of April 2020 and second export vide Shipping Bill No .5380454 dated 23.09.2020 of 8098 Nos. of Test Kits out of 15,000 of Testing kits. The petitioner had no other imports or exports.

¶311

82. The records also indicate that the petitioner had been promised to

¶312

return the balance as and when payment were received from the buyer on

¶313

https://www.mhc.tn.gov.in/judis

¶314

Page No. 42 of 46

¶315

Arb.O.P.(Com.Div.)No.101 of 2023

¶316

the export made by the petitioner. Therefore, even on this count, theory put

¶317

forward before this Court that the Impugned Award suffers from patent

¶318

illegality is not acceptable. Therefore, the impugned Award does not call for any interference.

¶319

83. There is nothing on record to show that there is a patent illegality in the impugned award or to infer a conclusion that the impugned award is in conflict with the public policy of India. The impugned award indicates that the evidence was examined and there was an admission by the petitioner to refund the amount on the returned 1,48,800 test kits.

¶320

84. The interpretation placed by the arbitral tribunal in so far as proviso to Section 16 (1) of the Sale of Goods Act, 1930, also does not call for any interference.

¶321

85. The argument that the Arbitral Tribunal has ignored vital

¶322

evidence also cannot be countenanced as the WhatsApp chats and admission in Ex. C27 e-mail dated 14.07.2020 wherein the petitioner has

¶323

https://www.mhc.tn.gov.in/judis ____________ Page No. 43 of 46_

¶324

Arb.O.P.(Com.Div.)No.101 of 2023

¶325

stated that he had communicated to the supplier for the process and are waiting for the same and that the petitioner has not denied any payment return but have to complete the process. In the said email, the petitioner has categorically stated that the petitioner had transferred to the supplier for the purchase of kits and was waiting for company formality to return the kits and there is no point in discussion about the interest charges.

¶326

86. The impugned order also records that the respondent was chasing for payment between July 2020 and January 2020 one for the payment through WhatsApp chat content of which has been extracted in the Impugned Award. In response to various WhatsApp chats, the petitioner has stated that the petitioner had not received any payment from the supplier namely Wondfo, and that only once that is completed payments will be made. The petitioner has promised to return the payments. However failed to make payments. Therefore I do not find any reasons to come to a conclusion that the impugned award either suffers from patent illegality or is in conflict with public policy of India.

¶327

https://www.mhc.tn.gov.in/judis ____________ Page No. 44 of 46_

¶328

Arb.O.P.(Com.Div.)No.101 of 2023

¶329

87. In the result, this original petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 has to fail. Therefore, this original petition is liable to be dismissed and is accordingly dismissed. Consequently, A.No.1375 of 2023 is dismissed. No costs.

¶330

18.04.2024

¶331

Index : Yes/No Neutral Citation : Yes/No kkd

¶332

C.SARAVANAN, J.

¶333

rgm/kkd

¶334

Pre-delivery Order in Arb.O.P.(Com.Div.)No.101 of 2023

¶335

https://www.mhc.tn.gov.in/judis ____________ Page No. 45 of 46_

Matrix Labs, Throug its Sole Proprietor Suresh Kulaindavel, v. Aark Pharmaceuticals

Case brief

What is this about?

What did the court decide?

Matrix Labs, Throug its Sole Proprietor Suresh Kulaindavel, v. Aark Pharmaceuticals

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

Chinnathambi Rajeswari Vs Assistant Commissioner of Income Tax

Al Qahir International Vs The Tuticorin Customs House

Tvl. Annasri Containers, Vs State Tax Officer (St)

M.Chinnapal Vs The Regional Transport Officer

Orkla India Private Limited Vs Assistant Commissioner St

Meenakshi Bar Vs The State Tax Officer