ORDER
A.P. Shah, J.
1. The petitioner Lubrizol (India) Limited is a public sector undertaking engaged in the manufacture, sale and development of chemical additives and speciality chemicals used for improving the performance of petroleum based lubricants and fuels and sixty per cent of its subscribed capital is held by the Government of India and balance forty per cent is held by Lubrizol Corporation, USA, the respondent herein. The respondent is a leading manufacturer of chemical additives in the world and has a technical collaboration with the petitioner for transfer of technology relating to the manufacture, sale and development of chemicals additives and speciality chemicals meant for improving of petroleum based lubricants and fuels.
2. On 18th January, 1988, a Technology Transfer Agreement (TTA) was entered into between the petitioner and the respondent effective from 1st January, 1988 for a period of seven years. Under the TTA, the respondent agreed (a) to provide technical
services and (b) to grant licence to use and practise its manufacturing technology, formulation technology and patent rights to the respondent for a two-fold consideration specified in Clauses 4.1 and 4.2 respectively, namely, for the technical services the petitioner agreed to pay to the respondent an amount equal to pay two and half per cent of the sales price of all products sold by the petitioner during the term of the agreement and for the rights in manufacturing technology, formulation technology and the patent rights, the petitioner agreed to pay an additional amount (styled royalty in correspondence) equal to three per cent of the net sales value of all the products covered by the aforesaid rights sold by the petitioner during the term of the agreement.
3. For the aforesaid purpose, the TTA defines the three relevant expressions- Net Sales Value, Sales Price and Landed Cost in Clauses 1.6, 1.11 and 1.3 respectively thus :—
” “Net Sales Value” of a product is defined by Clause 1.6 as meaning the sales price of the product minus the landed cost of any finished components purchased from the respondent that are transported into that product Landed cost shall be deducted from the Sales Price on “a first in first out” basis.
“Sales Price” of a product is defined by Clause 1.11 to mean the net F.O.R. factory price of the petitioner invoiced to customers of that product. Net F.O.R. factory price shall not include cash and trade discounts to customers, charges for sales or transaction taxes, storages, warehousing, wrapping or packing or any Central, State or Municipal Taxes, Union excise duties etc. all as separately shown on invoices.
“Landed Cost” of a finished component is defined by Clause 1.3 as meaning the C and F price invoiced by the respondent to the petitioner plus customs duties imposed upon the sale of such component.”
4. Since the TTA involved foreign collaboration as also foreign exchange outflow, approval of Government of India was required to be obtained for it and the same was accorded to it by the Government of India by their two letters dated 18th January, 1988 and 16th February. 1988 subject to the modifications of the terms as specified therein. In their letter dated 16th February, 1988 the Government particularly in regard to the royalty payable at three per cent expressly reiterated that “royalty will be payable on the basis of net ex-factory sales price of the product exclusive of excise duty and sales tax minus the landed cost of bought out components imported from the collaborator including ocean freight customs duty etc”.
5. During the currency of the TTA dispute arose between the parties on account consideration/royally as per clause 4.2. Initially the petitioner paid the royalty at 3% of the net sales value of the product after deducting the landed cost of imported component exclusive of additional customs duty levied and paid for the period from 1st January, 1988 to 30th September, 1990. But thereafter the petitioner altered the method of calculating the said royalty and started calculating the same at 3% of the net sales value of the product after deducting the landed cost of imported component inclusive of additional customs duty levied and paid on the ground that ‘remission of excise duty equivalent to certain portion of customs duty available after completion of manufacture was wrongly considered earlier as deduction from ‘landed cost'”. On that basis the petitioner adjusted an amount of Rs. 24,26,303/- against the royalty payment for the period from 1st January, 1988 to 30th September, 1990 and for subsequent quarters of the remaining term, the petitioner claimed to calculate the royalty as per
its altered method. The respondent made a grievance that under the terms at TTA additional customs duty was not liable to be included in the landed cost of Imported component and, therefore, the altered method of calculating royalty adopted by the petitioner is contrary to the specific terms of the contract
6. Clause 13 of the TTA provided for resolution of disputes by arbitration. Disputes between the parties were referred to arbitration. The petitioner appointed Shri V.D. Tulzapurkar, former Judge of the Supreme Court as their Arbitrator. The respondent appointed Shri V. Ananthanarayanan, Chartered Accountant. In terms of Clause 13 of the TTA, the President of the International Chamber of Commerce nominated Shri D.C. Singhania, Advocate. The parties filed their pleadings before the Arbitrators. The respondent alleged that the consideration/royalty for the licence to use and practise the respondent’s manufacturing technology, formulation technology and patent rights was payable at 3% of the net sales value of the product sold by the petitioner and that the net sales value was agreed to be the sales price of the product minus the landed cost of the finished components purchased by the petitioner from the respondent but then the additional duty of customs (countervailing duty) payable under section 3 of the Customs Tariff Act, 1975 was not to be included in the landed cost of such input or component on the basis that it was not a cost to the petitioner and that the amount of such duty paid by the petitioner was allowed as a rebate from the excise duty payable on the finished product manufactured from such imported materials. In other words, the respondents alleged that the payment of additional duty of customs was not an input or component cost to the petitioner. The respondent maintained that the altered method of calculating royalty adopted by the petitioner was contrary to the TTA, contrary to law governing MODVAT schemes which permit credit to the petitioner equivalent to the quantum of additional customs duty and was commerically unfair and unequitable. On the other hand, the petitioner emphatically denied that payment of additional customs duty was not an input or component cost to the petitioner or that the altered method of calculating royalty adopted by it was contrary to the TTA. or contrary to law governing MODVAT schemes introduced in the Central Excise and Saa Act, 1944 under Rules 57-A to 57-J or that it was commercially unfair or inequitable, as alleged by the respondent. The petitioner contended that during the course of audit of it accounts in 1990 a point was raised regarding the appropriateness of adjusting the MODVAT credit against the landed cost for the purpose of calculating the royalty payable to the respondent under Clause 4.2 of the TTA and the matter was internally examined and it was concluded that the petitioner had erroneously been adjusting the MODVAT credit in arriving at the landed cost
7. After hearing the parties the Arbitrators made two separate awards. Justice V.D. Tulzapurkar gave a minority award dated 24th February, 1996 in favour of the petitioner. The other award was given by Shri V. Ananthanarayanan and Shri D.C. Singhania dated 24th February, 1996. The Arbitrators Shri Ananthanarayanan and Shri Singhania directed the petitioner to make payment of the amount of Rs. 24,26,303/- to the respondent and further directed that for the subsequent period also royalty should be calculated on the basis of the landed cost less additional customs duty. The Arbitrators awarded interest at the rate of 12% per annum from the due date of royalty payment till the commencement of the arbitration proceedings and for subsequent period at the rate of 18% till the date of actual payment or till the date of decree whichever is earlier. The Arbitrators also directed the petitioner to compensate the respondent of whatever exchange variation has taken place for at the delayed payments or refund of the amount withheld by it
8. The Arbitrators Shri Ananthanarayanan and Shri Singhania noted in their award that the basic issue involved was interpretation of “landed cost” contained in Article 1.3 of the TTA. After examining the relevant provisions of the TTA containing the definition of “landed cost”, “sales price” and “net sales value”, the Arbitrators proceded to record their findings as follows :
“One cannot isolate a stage of process in a chain of transaction to arrive at the quantum surplus on which for the ultimate purpose i.e. calculation of royalty, a part of which is withheld through adjustment against the quarterly royalty instalment for September, 1990. Therefore, it would be incorrect to treat “Additional Duty” only for the purpose of definition of “Landed Cost” in Article 1.3 as “Customs Duty”, in the same breath obtain benefit of its credit under MODVAT as “Additional Duty” without considering such credit to arrive at the quantum surplus, which formed the base to calculate the quantum royalty, placing total reliance on judicial pronouncements and position under different statutes. Such approach creates “heads I win, tails you lose” situation which appears to be unjust. A wholistic view of the transaction has to be taken in order to reach a fair and just conclusion. The Annexure attached herewith using mock book entries would support the above discussions.
One could also review and analyse the entire transaction from a robust common sense point of view without going into the nitty gritty of judicial/ accounting considerations for the purpose of decision on the issues before us. The important point to be considered is the respondent when under the MODVAT Scheme finally got refund of additional customs duty, whether it still remained a part of “Landed Cost” as contended by it? Perhaps, in fact not, it would be observed that the respondent who paid the additional duty on import got credit for the exact amount against excise duty on finished product. One cannot dispute, in the procedure under the MODVAT Scheme a manufacturer entitles himself instant credit, simultaneously for additional customs duty (countervailing duty) against excise duty, for the inputs imported. Thus even holding the respondent’s interpretation of “landed cost” which would include “Additional Customs Duty” as correct, one cannot resist from saying since it got credit later in excise duty thereby reducing its final liability to the Government; the interpretation of “Landed Cost” in Article 1.3 of the TTA in fairness, in law, as well as justice and equity should only mean actual/ real landed cost and not assumed landed cost. Consequently, it follows that the credit obtained against excise duty would form part of ‘Sales Value”. The above exercise finds supports in the well and widely recognised cannot applied to issues like one before us that “what should matter is not the form but the substance of the matter.”
9. Having considered the submissions of Mr. Kapadia, Counsel for the petitioner and Mr. Dwarkadas, Counsel for the respondent, I have no hesitation to hold that the Arbitrators were clearly wrong in law in construing the contract. Under Clause 1.3 of the TTA landed cost was defined to mean the C and F price invoiced by the respondent to the petitioner plus customs duties imposed upon the sale of such components. On a plain reading of the definition it is clearly seen that the parties intended that the landed cost should be inclusive of customs duties imposed on the finished component. Customs duties mean and include basic duty/auxiliary duty and
additional duty. All the three heads of duty actually paid to the customs authorities will have to be added to the C and F price for computing the landed cost. There is nothing in the agreement which suggests that the additional duty or customs duty was liable to be excluded while reckoning the landed cost. In M/s. Khandelwal Metal and Engineering Works v. Union of India, reported in 1995(3) Supreme Court Cases 620, the Supreme Court has held that the charging section under which duties of customs are leviable is section 12 of the Customs Act, 1962 read with section 3(1) of the Customs Tariff Act, 1975. “Additional duty” which is mentioned in section 3(1) of the Customs Tariff Act, 1975, partakes of the same character as the customs duty since it is in addition to the duty which is leviable under section 12 of the Customs Act, 1962, the rates for which are prescribed section 2 of the Tariff Act, 1975. The Supreme Court also categorically held that the duty mentioned in section 3(1) of the Tariff Act, 1975 is not countervailing duty. Section 3(1) of the Tariff Act, 1975 provides a measure or the additional duty, which has to be “equal to the excise duty” leviable on a like articles if produced or manufactured in India, as defined in the Explanation to that section. The measure of a tax or duty cannot determine its nature or character. Thus it is clear that though called “countervailing duty” it is in essence customs duty as has been explained by the Supreme Court. In view of the authoritative pronouncement of law by the Supreme Court on the nature of the additional duty under section 3(1) of the Customs Tariff Act, 1975, it was not open for the Arbitrators to hold that the additional duty was not included in the customs duty as per Clause 1.3 of the TTA. The case of the respondent based upon reimbursement of the customs duty under the MODVAT Scheme has no relevance to the computation of landed cost. MODVAT credit scheme is in substance reimbursement of excise duty payable on any product, but the quantification thereof is co-related to or is measured by the additional duty actually paid on the imported component which has got incorporated in the end product manufactured and marked by Indian manufacturer. Merely because the quantification of such credit or relief is co-related to or measured by the additional customs duty actually paid on such component does not alter the true nature or character of that credit/relief. Therefore, landed cost will have to be reckoned inclusive of additional customs duty. In their award the Arbitrators observed that the parties would not have allowed the mistake to continue for a period of over 24 months unless they were satisfied about the correct understanding by the parties to the TTA that the expression “customs duty” used in Article 1.3 would not include “additional customs duty”. Thus the conduct of the parties do not admit that they intended that the expression “customs duty” would include “additional customs duty”. The observations are clearly erroneous in law. It is well settled that it is only when there is latent ambiguity extrinsic evidence in the shape of interpreting statement to which both the parties have concurred, should be admissible. If the meaning of the terms in the contract is clear, extrinsic evidence is not admissible. see: The Godhra Electricity Co. Ltd. v. The State of Gujarat .
10. The Arbitrators have proceeded on the erroneous notions of equity by using phrase “Heads I win tails you lose” to describe the contentions of the petitioner. The question of interpreting a legal document voluntarily entered into between two parties is a question of law and the document is required to be construed according to law and notions of equity cannot be imported for construing such a document. An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. He is a tribunal selected by the parties to decide
their disputes according to law and so is bound to follow and apply the law and if he
does not he can be set right by the Court provided his error appears on the face of the
award. see Seth Thawardas v. Union of India, . A
reference may also be made to the observations of Lord Justice Bankes in Czarnikow v.
Roth Schinidt & Co., 1992 (2) KB 478 at page 484 of the report which reads as follows :
“Among commercial men that are commonly called commercial arbitrations
are undoubtedly and deservedly popular. That they will continue their
present popularity I entertain no doubt, so long as the law retains
sufficient hold over them to prevent and redress any injustice on the part
of the arbitrators, and to secure that the law that is administered by an
arbitrator is in substance, the law of the land and not some home made
law of the particular arbitrator or the particular association. To release
real and effective control over commercial arbitrations is to allow the
arbitrator, or the Arbitration Tribunal, to be a law unto himself or themselves,
to give him or them a free hand to decide according to law or not according
to law as he or they think fit, in other words to be outside the law.”
11. In Orion Cia, Espanoia de Segaros v. Bellor Maats, 1962(2) KB 257, it was held that Arbitrators must in general apply a fixed and recognizable system of law which primarily and normally would be the law of England and that they cannot be allowed to apply some different criterion such as the view of the individual arbitrator or umpire on abstract justice or equitable principles which, of course, does not mean “equity” in the legal sense of the word at all.
12. There is thus no doubt to my mind that the Arbitrators committed an error of law in construing the contract. Their interpretation of the contract was wholly erroneous. The question now arises whether decision of the Arbitrators on this point is final despite being wrong in law. Mr. Dwarkadas strenuously urged that section 16(1)(c) may permit the Court to remit or set aside the award on the ground that there is an error of law apparent on the face of it, yet where a specific question of law has been referred to the arbitrator for decision, the fact that the decision is erroneous does not make the award bad on its face so as to permit its being set aside. Mr. Dwarkadas contended that where the parties to the dispute have specifically referred a question of law to the Arbitrator for his decision, the decision of the Arbitrator even if erroneous does not permit the Court to interfere with the award. He contended that in the present case a specific question of law of construction of the contract was referred to the Arbitrators for their decision and, therefore, the decision of the Arbitrators is binding on the parties and the Court cannot proceed to enquire whether the decision of the Arbitrators is according to law. Mr. Kapadia on the other hand contended that there was no specific reference to the Arbitrators of any question of law. The Arbitrators directed the parties to file their pleadings and it is during the course of hearing it emerged as an issue of interpretation of the document and, therefore, it cannot be said that the case is one where a specific question of law is referred to the Arbitrator.
13. Russel on the Law of Arbitration, Twentieth Edition, at page 22, states as under:-
“A pure question of law may be referred to an arbitrator and where such a question is specifically referred his award will not be set aside merely upon the ground that his decision is wrong.”
In this regard the earliest case to which reference can be made is the decision in Re. King And Duveen, 1913 2 K.B. 32 in which it was held by Channell, J., that where a specific question of law is referred to an Arbitrator for his decision, the award cannot be set aside on the ground of an error apparent on the face of the award
because the question of law was wrongly decided. This principle was reiterated by the House of Lords in Kelantan Government v. Duff Development Co. Ltd., 1923 All.E.R. (Rep.) 349 and F.R. Absalom Ltd. v. Great Western (London) Garden Village Society Ltd., 1933 All E.R. 616. In Durga Prasad Chamria v. Sewkishendas Bhattar, A.I.R. 1949 RC. 334 the Privy Council observed as under :
“However, that may be, their Lordships are satisfied that the two points of law as to which it is said that the arbitrator’s error vitiates the award were specifically referred to him to decide : and, if this is so, it would be contrary to well-established principles such as are laid down in re : King and Duveen, 1913(2) K.B. 32 and F.R. Absalom Ltd. v. Great West (London) Garden Village Society Ltd., 1933 AC 592, for a Court of law to interfere with the award even if the Court itself would have taken a different view of either of the points of law had they been before it.”
14. Turning to the decisions of the Supreme Court, reference may first be made to Seth Thawardas Pherumal v. Union of India (supra). In that case, the question was whether the award was bad on account of error of law apparent on the face of it, as provided in section 16(1)(c) of the Arbitration Act. Examining this contention, the Supreme Court observed as under at pages 472-73 :—
“This covers cases in which an error of law appears on the face of the award.
But in determining what such an error is, a distinction, must be drawn
between cases in which a question of law is specifically referred and those
in which a decision on a question of law is incidentally material (however
necessary) in order to decide the question actually referred. If a question of
law is specifically referred and it is evident that the parties desire to have a
decision from the arbitrator about that rather than one from the courts, then
the courts will not interfere, though even there, there is authority for the view
that the courts will interfere if it is apparent that the arbitrator has acted
illegally in reaching his decision, that is to say, if he has decided on
inadmissible evidence or on principles of construction that the law does
not countenance or something of that nature. See the speech of Viscount
Cave in Kelantan Government v. Duff Development Co., 1923 AC 385 at
page 409. But that is not a matter Which arises in this case.”
The Court further proceeded to examine whether in the facts of that case the Arbitrator
was specifically asked to construe Clause 6 of the contract or any part of the contract
or whether any question of law was specifically referred. The Court emphasised the
word “specifically” by pointing out that parties who made a reference to arbitration have
the right to insist that the Tribunal of their choice shall decide their dispute according to
law, so before the right can be denied to them in any particular matter, the Court must be
very sure that both sides wanted the decision of the arbitrator, on a point of law rather than
that of the courts, and that they wanted the decision on that point to be final. The Court
then proceeded to examine the various clauses of the contract and held that this is not
the kind of specific reference on a point of law that the law of arbitration requires. The
Court held that when a question of law is the point at issue, unless both sides
specifically agree to refer it and agree to be bound by the arbitrator’s decision, the
jurisdiction of the courts to set an arbitration right when the error is apparent on the
(ace of the award is not ousted. The mere fact that both parties submit incidental
arguments about a point of law in the course of the proceedings is not enough.
15. In Alopi Parshad & Sons Ltd. v. Union of India , the Supreme Court reiterated the observations in Seth Thawardas’s case and observed
that if a specific question is submitted to the arbitrator and he answered it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside. In the facts of the case, the Supreme Court agreeing with the High Court held that there is no foundation for the view that a specific reference submitting a question of law for the adjudication of the arbitrators, was made.
16. The Supreme Court reaffirmed this position in Union of India v. A.L. Pallia Ram , and observed that where questions of law are specifically referred to the arbitrator for his decision, the award of the arbitrator on those questions is binding upon the parties, for by referring specific questions the parties desire to have a decision from the arbitrator on those questions, rather than from the Court and the Court will not, unless it is satisfied that the arbitrator had proceeded illegally, interfere with the decision. After examining the facts of that case, the Court however came to the conclusion that no questions of law were referred to the arbitration, the decision whereof is binding upon the parties.
17. In Kapoor Nilokheri Co-operative Dairy Farm Society Ltd. v. Union of India , the Supreme Court agreed with the submission on behalf of the respondent Government of India that the appellants having specifically stated that their claims are based on the agreement and on nothing else and all that the arbitrator had to decide was as to the effect of the agreement, the arbitrator had really to decide a question of law i.e. of interpreting the document, the agreement dated May 6, 1953 and therefore, the decision is not open to challenge.
18. The above judgments were again considered exhaustively by a Bench of two Judges in M/s. Tarapore & Co. v. Cochin Shipyard Ltd., Cochin wherein it was held that even the question of jurisdiction of an arbitrator can be the subject matter of specific reference. If the parties agree to refer the specific question whether the dispute raised is covered by the arbitration agreement, it becomes a specific question of law even if it involves the jurisdiction of the arbitrator and if it is so, a decision of the arbitrator on specific question referred to him for decision, even if it appears to be erroneous to the Court is binding on the parties.
19. Thus there is a clear distinction between the case where disputes are referred to an arbitrator in the decision of which a question of law becomes material from the case in which a specific question of law has been referred to him for decision. The authorities make a clear distinction between these two cases inasmuch as in the former case the Court can interfere if and when any error of law appears on the face of the award, but in the latter case no such interference is possible upon the ground that it so appears that the decision upon the question of law is an erroneous one. The crucial question is to which category does the present case belong. Is it a reference in which a specific question of law was referred to the Arbitrators or is it a reference in which question of construction arose as being material in the decision of the dispute referred to arbitration. Lord Russell of Kiltowen in F.R. Absalom Ltd. (supra) succinctly brought about distinction between the two category of cases. It was observed at page 607 as under :
“x, it is, I think, essential to keep the case where disputes are referred to an arbitrator in the decision of which a question of law becomes material distinct from the case in which a specific question of law has been referred to him for decision. x x x x The authorities make a clear distinction between these two cases, and, as they appear to me, they decide that in the former case the Court can interfere if and when any error of law appears on the face of the award, but that in the latter case
no such interference is possible upon the ground that it so appears that the decision upon the question of law is an erroneous one.”
Then at page 610 it is observed as under :
“The primary quarrel between the parties was whether, if the value of work executed and materials on site up to and including March 11, 1929, had been truly assessed, the net value available for certification on that date was in excess of (as the contractor alleged) or less than (as the employer contended) the amount which had actually been certified upto and including that date x x x Those were the disputes in regard to the issue of certificates and the validity of the notice which were in general terms submitted to the arbitrator. No specific question of construction or of law was submitted. The parties had, however, been ordered to deliver pleadings, and by their statement of claim the contractor had claimed that the arbitrator should under his powers revise the last certificate issued so as to include therein the excess net value which they had alleged and which the arbitrator has found (though for a reduced amount) to have existed on March 11, 1929. It is at this point that the question of the construction of condition 30 arose as a question of law, not specifically submitted, but material in the decision of the matters which had been submitted. This question of law the arbitrator had decided; but if upon the face of the award he has decided it wrongly his decision is in my opinion open to review by the Court.”
20. In Seth Thawardas’s decision (supra), the Supreme Court explained that a reference requires the assent of “both” sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the Court under section 20 of the Act and the recalcitrant party can then be compelled to submit that matter under sub-section (4). In the absence of either agreement by “both” sides about the terms of reference, or an order of the Court under section 20(4) compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction. Therefore, when a question of a law is the point at issue, unless “both” sides “specifically” agree to refer it and agree to be bound by the arbitrator’s decision, the jurisdiction of the courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of the proceedings is not enough.
21. This distinction is also clearly brought out in the decision in A.L. Rallia Ram (supra). The Supreme Court observed that filing of pleadings pursuant to the directions of the arbitrators and agreeing to a trial of the dispute on the issues raised by the Arbitrators cannot be regarded as reference of specific questions implying an agreement between the parties that they intended to give up their right to resort to the courts even if the award was vitiated on account of an error apparent on the face thereof. The only permissible inference from the agreement recorded by the Arbitrators was that the parties agreed to have the dispute adjudicated on the issues raised and not to submit the issues raised for adjudication. Applying this ratio laid down by the Supreme Court to the facts of the present case, it is clearly seen that this is not a case where the parties specifically referred question of law for adjudication by the Arbitrators. It appears that after the petitioner had taken decision to rectify the mistake in calculating the amount of royalty payable to the respondent, the respondent wrote a letter dated 2nd August, 1991 to the petitioner protesting against the withholding of the amount of royally. In their letter they drew the attention of the petitioner to clause 13.3
of the TTA which provides for arbitration. They called upon the petitioner to render full payment under TTA as the petitioner had been computing it prior to November 14,
1990. It is further stated that if the petitioner believed that their latter position was the correct one, then their option under Clause 13.3 was to (1) initiate arbitration pursuant to Clause 13.1 and (2) deposit the amount they felt was in dispute in a special interest bearing account as specified in Clause 13.3 of the TTA. By their reply dated 9th August,
1991, the petitioner maintained that in arriving at the landing cost as envisaged in Clause 1.3 of the TTA, additional duty payable by the petitioner is required to be included in the customs duty. The petitioner categorically stated that neither question of interpretation of any clause under TTA nor any unilateral withholding of legitimate dues under TTA had been perpetrated by the petitioner under the TTA. Despite this clarification if the respondent is still aggrieved for whatever reason, they may take such action as is necessary under the circumstances. Thereafter the panel of Arbitrators was appointed in accordance with Clause 13 of the TTA. The Arbitrators called upon the parties to file their respective statement of claim and written statement. The parties filed their pleadings accordingly. It is true that before the Arbitrators the parties agreed that the only dispute involved between the parties relates to the construction of definition of “Landed Cost” under Clause 1.3 of the TTA. There is no evidence to show that any specific question was referred to the arbitrators for their decision. In the letters exchanged between the parties, there is no indication that the parties agreed to refer the question of construction of the agreement to the Arbitrators’ decision. On the other hand, by their letter dated 9th August, 1991 the petitioner clearly stated that neither question of law was involved nor there is unilateral withholding of the dues by the petitioner. In these circumstances, it is not possible to accept the argument of Mr. Dwarkadas that it was a case of specific reference to the arbitrators. As indicated by the Supreme Court in Rallia Ram’s (supra) mere filing of pleadings pursuant to the direction of the arbitration and agreeing to a trial of the dispute on the issues raised by the arbitration cannot be regarded as reference of specific questions implying an agreement between the parties that they intended to give up their rights to resort to the courts even if the award was vitiated on account of an error apparent on the face of the award. Such an agreement has to be established by cogent evidence. It cannot be inferred by reason of the fact that the parties incidentally raised their submissions on the question of law before the Arbitrators. In the absence of such reference, the jurisdiction of this Court cannot be said to be ousted even when the Arbitrators’ decision is erroneous on the face of the award.
22. In the result, petition succeeds. The award dated 24th February, 1996 passed by the Arbitrators Shri V. Ananthanarayanan and Shri D.C. Singhania is hereby set aside. No order as to costs.
23. Petition succeed.