An arbitral tribunal cannot disregard a binding judicial interpretation of an identical contractual clause.

The dispute arose from a 2008 contract for setting up two units at the Bokaro Steel Plant.

SAIL deducted ₹5,53,00,925 from amounts payable to Primetals, claiming a shortfall in the minimum guaranteed CENVAT credit (MGCC).

Primetals challenged the deduction in arbitration and also claimed reimbursement of excise duty.

The tribunal allowed both claims; the Section 34 challenge was dismissed by the Single Judge.

SAIL appealed under Section 37, pressing limitation and the interpretation of the MGCC clause in relation to Claim 1.

1. Whether Primetals’ claim for recovery of the MGCC deduction was barred by limitation.

2. Whether the tribunal’s interpretation of Clause 14.5.6 and the Note to Appendix 1—permitting any MGCC shortfall adjustment only against the Gross Contract Price, and not the Net Contract Price—warranted interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.

Under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, a court exercising appellate jurisdiction under Section 37 cannot exceed the limited grounds available under Section 34 or reappraise the merits merely because another view is possible; a plausible arbitral interpretation ordinarily stands.

Under Section 34(2)(b)(ii), disregarding a binding judgment of a superior court may contravene the fundamental policy of Indian law, subject to the statutory limits on review.

The Court also relied on the need for consistency in interpreting identical contractual provisions where a party is common.

Clause 12.1.6, read with Clause 12.1.7, was applied to determine when the payment dispute crystallised; the tribunal found that the relevant cause of action arose when SAIL communicated its recovery decision on 9 March 2019.

The Court held that the tribunal’s limitation finding was supported by the contract and the record: the disputed deduction was communicated on 9 March 2019, and arbitration was invoked within three years, so the claim was timely.

On the merits of Claim 1, the contractual provision was pari materia with one previously interpreted by the Delhi High Court between the same parties, and that interpretation had been affirmed on appeal.

The tribunal therefore did not err by following that interpretation; the adjustment could be made only against the Gross Contract Price, not the Net Contract Price.

The Court also noted that SAIL reimbursed duty only to the extent actually paid after the duty reduction and received corresponding CENVAT credit; it had not suffered the alleged shortfall and would be unjustly enriched if allowed to retain the deduction.

SAIL did not press oral submissions on Claim 2, and the Court found no basis for interference with the tribunal’s excise-duty award.

It also upheld Claim 2 and dismissed SAIL’s Section 37 appeal.