Safiya Malik

The High Court of Himachal Pradesh Division Bench of Chief Justice G.S. Sandhawalia and Justice Ranjan Sharma dismissed, under Section 37 of the Arbitration and Conciliation Act, 1996, an appeal by Himachal Pradesh Power Corporation Ltd. and upheld the arbitral award in favour of Orange Business Service India Technology Pvt. Ltd. The dispute concerned customs duty on imported IT equipment for an ADB-funded ERP project. The Court held that HPPCL’s failure to provide the requisite exemption certificate at the time of import rendered it liable to reimburse ₹1 crore plus 10% interest. The Bench found the Tribunal’s award consistent with contractual terms and free from patent illegality.

The dispute arose between Himachal Pradesh Power Corporation Ltd. (HPPCL), a state government undertaking, and M/s Orange Business Service India Technology Pvt. Ltd., a company engaged in IT infrastructure services. HPPCL had invited bids for installation and commissioning of IT infrastructure, including a Data Centre and Disaster Recovery Centre, for its ERP implementation. Orange’s bid was accepted in September 2011, and a formal agreement was executed in October 2011 for a contract value of approximately ₹19.61 crore.

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Under the contract, Orange was required to complete the project within specified timelines and was responsible for handling imported materials at its own expense at the point of import. Clause 14.2 of the agreement obligated the employer, HPPCL, to bear and promptly pay all customs and import duties for plant and equipment to be incorporated into the facilities. Clause 21.4 required the contractor to handle customs formalities subject to the employer’s obligations.

Orange imported the required equipment for the project in late 2011 and early 2012, paying customs duty at the time of import. It repeatedly requested HPPCL to provide exemption certificates under Notification No. 84/97-Customs, which granted duty exemption for projects financed by international agencies such as the Asian Development Bank, but the certificates were provided only in June 2012 after the goods had been imported. Consequently, Orange’s applications to the customs authorities for refund of duties were rejected.

The contractor sought reimbursement of ₹1,00,30,984 from HPPCL for the customs duty it had paid, along with interest. HPPCL disputed liability, arguing that the contractor had acted prematurely in importing the goods without awaiting exemption and that the liability for duty rested on the contractor.

The dispute was referred to a three-member Dispute Board, which by majority held Orange entitled to reimbursement with interest. HPPCL’s notice of dissatisfaction led to arbitration. A two-member majority of the Arbitral Tribunal upheld Orange’s claim and directed reimbursement with interest at 10% per annum.

HPPCL challenged the arbitral award before a Single Judge, who upheld it. On further appeal under Section 37 of the Arbitration and Conciliation Act, 1996, the Division Bench of the Himachal Pradesh High Court affirmed the arbitral award, holding HPPCL liable to reimburse the customs duty due to its failure to provide exemption certificates at the time of import.

The Division Bench recorded that “the contractor having paid the duty and the corporation having not raised any objection to the import or duty paid without undue delay… the obligation was to pay the custom duty and reimburse the same on the undisputed amount.” The tribunal rejected the dissenting view that import should not have occurred without exemption certificates.

The Court referred to e-mails of October 2011 requesting exemption certificates, and noted the customs authority’s rejection of refund claims due to non-production of certificates at the time of import. It recorded that “for their own inefficiency as such two certificates No. 17 and 18 have been issued at the belated stage on 14.06.2012 as the goods already stood imported in January, 2012.” The Court further noted that acceptance certificates were issued after successful installation and commissioning, and “thus, the Corporation having been satisfied with the supply installation commissioning of the project, now cannot turn around and shake-off its liability on account of its own inefficiency.”

The Bench referred to Supreme Court judgments clarifying limited scope under Section 37. It observed that “the jurisdiction of the Appellate Court dealing with an appeal under Section 37 against the judgment in a petition under Section 34 is more constrained than the jurisdiction of the Court dealing with a petition under Section 34.”

Citing Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking (2023) 9 SCC 85, UHL Power Company Ltd. v. State of Himachal Pradesh (2022) 4 SCC 116, and Reliance Infrastructure Ltd. v. State of Goa, AIR 2023 SC 2280, the Court recorded that arbitral awards should not be interfered with in a cavalier manner, and a possible view taken by the tribunal should ordinarily be upheld.

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The Division Bench held: “we are of the considered opinion, as put forth by the learned Senior Counsel for the respondent, that there is no illegality in the awards passed by the majority view of the Arbitral Tribunal dated 07.10.2017 and upheld by the learned Single Judge on 08.10.2018.” It recorded that “the claim of the corporation, as noticed was on account of the fact that it had paid custom duty of Rs. 1,00,30,984/- and was liable to be reimbursed the same along with interest.”

“In such circumstances, we are of the considered opinion that the Arbitral Tribunal and the learned Single Judge has rightly upheld the said award and held that the contractor cannot be saddled with the liability to pay custom duty.” It concluded that “a reasonable view having been taken on the consideration of the terms of the contract and the materials placed before the Arbitrators and the conclusion drawn by the Tribunal is a reasonable and possible conclusion, which a prudent man would arrive at and therefore keeping in view the principles laid down by the Apex Court, as discussed above, we do not find any plausible reason as to interfere.”

Accordingly, the Division Bench dismissed the appeal along with pending applications.

Advocates Representing the Parties

For the Appellant: Mr. Shashi Shirshoo, Advocate
For the Respondents: Mr. Devashish Bharuka, Senior Advocate with Mr. Ravi Bharuka, Advocate (through V.C), Mr. Diwan Singh Negi and Mr. Devi Singh Verma, Advocates

Case Title: Himachal Pradesh Power Corporation Ltd. v. M/s Orange Business Service India Technology Pvt. Ltd.
Neutral Citation: 2025: HHC:32554
Case Number: Civil Arb. Appeal No. 01 of 2019
Bench: Chief Justice G.S. Sandhawalia; Justice Ranjan Sharma