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2021 (3) TMI 1424 - HC - Indian LawsEnforcement of Arbitral Award - exchange rate for discharge of the amounts awarded in foreign currency - TDS on the awarded amounts - entitlement of charges for extending the Bank Guarantees. Whether there is any binding agreement between the parties whereby they have agreed that the amounts awarded in foreign currency would be computed at the exchange rate as prevalent on 15.09.2017? If not, the exchange rate to be applied for discharge of the amounts awarded in foreign currency? - HELD THAT - In the present case, the exchange rate as applicable on the date when the NTPC's Special Leave Petition was dismissed by the Supreme Court-that is, 22.09.2020-will be the relevant date for ascertaining the exchange rate applicable for determining the INR equivalent to the amounts awarded in foreign currency. However, according to Voith, as part payment had been received on 06.11.2018, the exchange rate applicable on that date may be considered for determining the awarded amounts paid by NTPC. Since the value of foreign currencies as on 22.09.2020 was higher than on 06.11.2018, this Court considers it apposite to bind Voith to its concession in this regard. The exchange rate as applicable on 06.09.2018 would be considered relevant for the amounts released on 06.11.2018 being the part payment released by NTPC in terms of the Niti Aayog Circular and the exchange rate as applicable on 22.09.2020 would be considered for discharging the remaining amount awarded in foreign currency. Whether it was open for NTPC to deduct TDS on the awarded amounts and whether the deduction of the said amount and deposit of the same with the Income Tax Authorities constitutes a discharge of the amounts awarded to the aforesaid extent? - HELD THAT - It is relevant to note that NTPC had deducted TDS in two tranches. It had deducted ₹ 2,58,55,348/- (₹ 1,32,10,961/- on the principal and ₹ 1,26,44,387/- on the interest) and had deposited the same on 07.12.2018. This amount was deducted at the time of remission of money in terms of the Niti Aayog Circular. The second tranche of ₹ 1,34,488/- was deducted by NTPC while depositing the balance amount. Out of the aforesaid amount ₹ 1,10,84,032/- was deducted on account of the principal amount and ₹ 23,50,456/- on account of interest. The said TDS was deposited on 07.01.2020 - this Court considers it apposite to direct that NTPC be credited to the extent of TDS amounting to ₹ 1,61,72,269/- (₹ 1,06,42,438/- plus ₹ 55,29,831/-) against TDS deducted and deposited by NTPC. The said amount would be considered as discharged by NTPC on the dates when these amounts were deposited to the credit of Decree Holder No. 1. Insofar as the remaining amount of TDS is concerned, NTPC is entitled to apply to the Income Tax Authorities for refund of the same. It is further directed that the Income Tax Authorities shall process NTPC's request for refunding of the TDS incorrectly deposited on the strength of this order. Whether Voith is entitled to charges for extending the Bank Guarantees, as claimed? - HELD THAT - This Court does not consider it apposite to entertain Voith's prayer for such charges. It is also relevant to mention that Voith had voluntarily furnished Bank Guarantees for release of the part of the awarded amount in terms of the Niti Aayog Circular. The Niti Aayog Circular does not provide for payment of any charges for furnishing Bank Guarantees. Voith had elected to receive payments in terms of the Niti Aayog Circular and therefore, this Court does not consider it apposite to accede to its prayer for Bank Guarantee Charges which were incurred by Voith for furnishing the Bank Guarantees against payments in terms of the Niti Aayog Circular. It was also pointed out that NTPC had released the payment under the Niti Aayog Circular while accepting the Advance BGs to cover part of the amount so released. It was submitted that in this view, the Advance BGs should also be considered as Bank Guarantees furnished in terms of the Niti Aayog Circular. This contention is merited. This Court does not consider it apposite to accede to the prayers for reimbursement of bank charges. The prayer made by Voith in this regard, is rejected. This Court considers it necessary to clarify that the calculations for discharge of the amount would be in accordance with the tabular statement in the Arbitral Award setting out the amounts awarded in different currencies. It is seen that the Arbitral Tribunal had deducted the advances and had computed the total amount payable after such deduction. Thus, the total amount as awarded after deduction of the advances would necessarily have to be considered as the awarded amount and the amounts paid by NTPC would be adjusted against the awarded amounts and the interest thereon. The amounts paid by NTPC are required to be first appropriated towards interest and the remaining against principal - NTPC shall recompute the shortfall payable by NTPC and shall pay the shortfall as computed. List on 26.03.2021 for reconciliation of the amount and for consideration of any further issues that arises in connection with the aforesaid calculations.
Issues Involved:
1. Exchange Rate for Award Payment 2. Deduction of TDS on Award Amounts 3. Reimbursement of Bank Guarantee Charges Issue-wise Analysis: 1. Exchange Rate for Award Payment: The primary question was whether there was a binding agreement between the parties to use the exchange rate as of 15.09.2017 for converting the awarded amounts in foreign currencies to Indian Rupees. The court referred to the Supreme Court's decisions in *Forasol v. Oil and Natural Gas Commission* and *Renusagar Power Co. Ltd. v. General Electric Co. Ltd.*, which established that the exchange rate applicable is the one prevailing on the date the challenge to the arbitral award is finally rejected. The court noted that NTPC’s contention of an agreed exchange rate based on the Minutes of the Meeting dated 11.09.2017 was unmerited. The Niti Aayog Circular, which was cited by NTPC, was only an ad hoc measure and not a final discharge of the arbitral award. Therefore, the court concluded that the exchange rate as on 22.09.2020 (the date the Supreme Court dismissed NTPC’s SLP) would apply, except for part payments made on 06.11.2018, for which the exchange rate on that date would be considered. 2. Deduction of TDS on Award Amounts: The court examined whether NTPC was entitled to deduct TDS from the payments made to Voith. Referring to the Supreme Court's decision in *All India Reporter Ltd. v. Ramchandra D. Datar* and other relevant cases, the court held that once a claim merges into a decree, it assumes the character of a judgment-debt, and deductions like TDS are not permissible. Although NTPC argued that Voith had accepted the payments without protest, the court found that Voith’s failure to object at the material time did not amount to acceptance of TDS deductions. The court directed that NTPC be credited for TDS amounting to ?1,61,72,269/- and allowed NTPC to seek a refund from the Income Tax Authorities for the remaining amount of TDS deducted. 3. Reimbursement of Bank Guarantee Charges: The court addressed whether Voith was entitled to reimbursement for the costs incurred in extending the bank guarantees. It was noted that the Advance BGs were extended as per court orders pending NTPC’s challenge to the arbitral award, and NTPC’s challenge was not insubstantial. Voith had also voluntarily furnished bank guarantees under the Niti Aayog Circular, which did not provide for reimbursement of such charges. The court found it inappropriate to accede to Voith’s request for reimbursement of bank guarantee charges and rejected this prayer. Additional Clarifications: The court clarified that the calculations for discharging the awarded amount should be based on the tabular statement in the arbitral award, which already deducted advances. Payments made by NTPC should first be appropriated towards interest and then towards the principal. NTPC was directed to recompute the shortfall and file the calculations within a week. Conclusion: The court set the relevant exchange rates for converting foreign currency awards to INR, ruled against TDS deductions on the awarded amounts, and denied Voith’s claim for bank guarantee charges. The parties were instructed to file their respective calculations, and the matter was listed for further reconciliation.
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