9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (10) TMI 1462 - HC - Indian LawsLiability to pay the outstanding differential VAT amount of 0.5% for 62 invoices issued by the Petitioner under the Agreement dated 03.02.2010 along with interest accrued thereon - validity and applicability of the Government Resolution dated 23.05.2013 (and earlier 2012 resolution) - HELD THAT - The calculation in the form of a Chart placed on record by the learned Government Pleader tallies with the Chart produced by the writ-applicants at Page-245 of the paper-book. This Court in its order dated 17.08.2021 recorded that an amount of Rs. 4, 47, 16, 002/- is payable towards interest i.e. towards outstanding differential VAT amount of 0.5% for the 62 invoices issued by the writ-applicant no.1-Firm arising from the agreement dated 03.02.2010. However the litigation can be put an end by asking the State to pay the balance amount of Rs. 96, 86, 040/- towards interest. Concept of interest - HELD THAT - When interest is awarded by the Court our normal feeling is that it is so awarded by way of penalty or punishment. But interest in all cases is not granted by way of penalty or punishment - this writ-application is allowed to the extent of directing the Respondent No. 3 to make the balance payment of Rs. 96, 86, 040/- towards interest. Let this payment be made within a period of six weeks from the date of receipt of this order.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Court in this matter are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Liability of Respondents to pay outstanding differential VAT amount and interest Relevant legal framework and precedents: The claim arises under the terms of the Agreement dated 03.02.2010, the applicable VAT laws including the Value Added Tax Act, and the Government Resolutions dated 23.05.2013 and 23.05.2012. Section 38 of the VAT Act prescribes the statutory interest rate on delayed payments. The Supreme Court decision in Alok Shanker Pandey v. Union of India (2007 AIR SC 1198) elucidates the principle that interest is not a penalty but compensation for withholding money due. Court's interpretation and reasoning: The Court recognized the Petitioners' entitlement to the differential VAT amount of Rs. 2,94,81,844/- as per the Agreement and Government Resolutions. The Respondents had acknowledged the claim was under active consideration for over five years without any fault found against the Petitioners or the contract. The Court found the prolonged delay in decision-making by the State Purchase Committee unreasonable and unjustified. Key evidence and findings: The Petitioners produced 62 invoices reflecting the differential VAT amount, supported by the Government Resolutions and correspondence evidencing repeated requests for payment since 2016. The Respondents admitted the claim was pending but failed to take timely action. Application of law to facts: The Court applied the contractual terms and the Government Resolutions to hold that the Respondents were liable to pay the outstanding VAT differential amount. The delay in payment warranted the awarding of interest as per legal principles to compensate the Petitioners for the withholding of funds. Treatment of competing arguments: The Respondents argued that the matter was under active consideration and that the tender terms barred interest payments. The Court rejected these as insufficient justification for the delay and held that the Petitioners' right to payment was clear. Conclusions: The Respondents were directed to pay the principal amount forthwith and to address the interest claim. Issue 2: Appropriate rate and quantum of interest payable Relevant legal framework and precedents: Section 38 of the VAT Act prescribes interest at 6% on delayed payments. The tender document's Clause 18 states no interest shall be paid on due payments. However, the Supreme Court in Alok Shanker Pandey clarified that interest compensates for the time value of money and is not a penalty. The Court's earlier order imposed 9% interest with escalation to 18% for further delay. Court's interpretation and reasoning: The Court acknowledged the Respondents' contention regarding the statutory 6% rate and the tender clause but emphasized equitable principles and the need to compensate the Petitioners for the extensive delay. The Court noted that the State had already paid interest at 9% for the period 2020-21 but had not accounted for the prior years. Key evidence and findings: Both parties submitted charts calculating interest amounts. The Court found the calculations largely consistent, with the State conceding an interest amount of Rs. 1,23,39,376.16 for the entire period from 2016 to 09.09.2021. The State had paid Rs. 26,53,336/- for 2020-21, leaving a balance of Rs. 96,86,040/- outstanding. Application of law to facts: The Court applied the principle that interest is compensation for withholding funds and not a penalty. It found the tender clause excluding interest on due payments inapplicable to delayed payments beyond the due date. The Court directed payment of the balance interest amount at 9% within six weeks. Treatment of competing arguments: The Respondents' reliance on the tender clause and statutory interest rate was balanced against the Petitioners' entitlement to fair compensation. The Court favored equitable relief over strict contractual interpretation that would unjustly prejudice the Petitioners. Conclusions: The Respondents were ordered to pay the outstanding interest of Rs. 96,86,040/- at 9%, rejecting the tender clause as a bar to interest on delayed payments. Issue 3: Effect of Petitioners' withdrawal from arbitration Relevant legal framework and precedents: Arbitration clauses generally bind parties to resolve disputes through arbitration. Withdrawal may affect procedural rights but does not necessarily extinguish substantive claims. Court's interpretation and reasoning: The Court noted that the Petitioners had invoked arbitration before filing the writ but withdrew thereafter. The Court did not find this withdrawal to bar the Petitioners from pursuing their claims before the High Court under Article 226. Key evidence and findings: No fault or procedural bar was found arising from the withdrawal. The writ application was entertained on merits. Application of law to facts: The Court exercised its constitutional jurisdiction to ensure justice and directed payment accordingly. Treatment of competing arguments: The Respondents did not press this point as a bar to claims but raised it to challenge the writ's maintainability. The Court prioritized substantive justice. Conclusions: The Petitioners' withdrawal from arbitration did not preclude their entitlement to payment and interest. Issue 4: Interpretation of tender clause excluding interest on due payments Relevant legal framework and precedents: Contractual clauses excluding interest on due payments must be interpreted in light of the entire contract and applicable law. Interest on delayed payments is generally compensatory, not penal. Court's interpretation and reasoning: The Court distinguished between payments made on the due date and payments delayed beyond that date. Clause 18 was held not to exclude interest on amounts overdue due to the Respondents' inaction. Key evidence and findings: The tender document and Clause 18 were examined. The Court found no explicit waiver of interest on delayed payments beyond the due date. Application of law to facts: The Court applied equitable principles to ensure Petitioners were compensated for the loss of use of funds. Treatment of competing arguments: The Respondents' strict contractual interpretation was rejected in favor of fairness. Conclusions: Clause 18 does not bar interest on delayed payments. Issue 5: Delay in decision-making by Respondents and consequences Relevant legal framework and precedents: Administrative delay in payment of dues without justification attracts interest and may warrant judicial intervention. Court's interpretation and reasoning: The Court expressed concern over the Respondents' five-year delay in deciding the claim. It described the delay as "quite disturbing and a matter of concern" and emphasized the adverse impact on the Petitioners' business. Key evidence and findings: Multiple representations by Petitioners over five years without decision; Respondents' admission of delay; State Purchase Committee's failure to convene timely meetings. Application of law to facts: The Court imposed interest at 9% initially, escalating to 18% for further delay, as a measure to incentivize prompt decision-making and compensate the Petitioners. Treatment of competing arguments: The Respondents' plea of active consideration was rejected as insufficient justification for delay. Conclusions: The Respondents were directed to expedite payment and compensate for delay with interest. 3. SIGNIFICANT HOLDINGS "Interest is not a penalty or punishment at all, but it is the normal accretion on capital. For example if A had to pay B a certain amount, say ten years ago, but he offers that amount to him today, then he has pocketed the interest on the principal amount. Had A paid that amount to B ten years ago, B would have invested that amount somewhere and earned interest thereon, but instead of that A has kept that amount with himself and earned interest on it for this period. Hence equity demands that A should not only pay back the principal but also interest thereon to B." The Court established the principle that delayed payment of contractual dues attracts interest as compensation for withholding funds, notwithstanding contractual clauses excluding interest on due payments. The Court held that the Respondents were liable to pay the outstanding differential VAT amount of Rs. 2,94,81,844/- along with the balance interest of Rs. 96,86,040/- at 9% within six weeks. The Court emphasized that administrative delay without reasonable cause is unacceptable and justifies imposition of enhanced interest rates to protect the rights of suppliers. The Petitioners' withdrawal from arbitration did not affect their entitlement to payment and interest under the writ jurisdiction.
|
