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SC: The Arbitrator has the jurisdiction to consider the counter claim relating to CENVAT credit.

BHARAT PETROLEUM CORPORATION LIMITED v. GO AIRLINES (INDIA) LIMITED, CIVIL APPEAL NO. 8227 2019

The bench comprising of Justice R.Banumathi, Justice A.S.Bopanna, Justice Hrishikesh Roy held that the Arbitrator has the jurisdiction to consider the counter claim relating to CENVAT credit thereby setting aside the order passed by the Arbitrator.

There was an agreement between the parties for aviation fuel supply in 2007 and 2009. between the parties under which the appellant – bharat petroleum Corporation Limited (BPCL) was to supply and sale of the aviation fuel to the respondent – Go Airlines (India) Limited. A dispute arises between the parties regarding the payment of outstanding dues in July 2009. As the payments were not made, the appellant invoked that arbitration clause and both the parties accepted Mrs. Justice (Retd.) Sujatha Manohar as a sole arbitrator.

The Arbitrator might reject the counter claim for CENVAT invoices as not arbitrable and the counter claim beyond the scope of reference to arbitration. But to reject the counter claim at the threshold on the ground that the Arbitrator has no jurisdiction would not be proper.

The Respondent made two counter claim in the arbitral tribunal. One counterclaim is for seeking an award directing the appellant to issue CENVAT invoices in favour of the respondent in respect of the aviation fuel supplied under the agreement.

Per contra, the appellant submitted that the counterclaim made by the respondent were beyond the scope of the arbitration agreement. The Arbitrator allowed the application filed by the appellant by holding that the counter claim made by the Respondent were beyond the scope and jurisdiction of arbitration.

The respondents filed an appeal in High court of Bombay where the high court held that the Arbitrator may be well within the rights to reject the counter claim on merits after the parties put forth their case. The High Court however held that the rejection of the counter claim at the threshold, was not justified in view of the arbitration agreement between the parties.

Rejection of the counter claim at the threshold, was not justified in view of the arbitration agreement between the parties.

The Supreme Court held that the application should be rejected atleast on the merits of the matter, rather not stating the tribunal has no jurisdiction.

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