2024 (8) TMI 24 - HC - Insolvency and Bankruptcy

Seeking enforcement of an arbitral award - deduction of amount awarded to the respondent against the counter claims - deduction of TDS on the amount payable to the decree holder under the arbitral award. Deduction of amount ₹ 2,62,93,252/- awarded to the respondent against the counter claims preferred by it before the Arbitral Tribunal from the amount of ₹ 5,51,95,198/- awarded to the petitioner, as the respondent is in liquidation following initiation of proceedings under the IBC 2016 - HELD THAT - The Arbitral Tribunal has itself, in the impugned award, set off the amount of ₹ 2,62,93,252/- against the amount of ₹ 5,51,95,198/- and has arrived at a difference of ₹ 2,89,01,946/-. What is sought to contend is essentially that the adjustment of the awarded amount to the respondent against the counter claims preferred by it, from the amount awarded to the petitioner, is impermissible. That, however, would require the petitioner to challenge the award, which has not been done till date - This submission is, therefore, rejected. Case that the respondent could not have deducted TDS from the amount of ₹ 2,89,01,946/- - HELD THAT - Plainly read, as the petitioner was working as a contractor for the respondent, and the money payable to the petitioner under the arbitral award were in the petitioner s capacity as such contractor, the deduction of TDS by the respondent from the petitioner would appear to be in sync with Section 194C (1) of the Income Tax Act, 1961. The respondent could not have deducted TDS from the amount of ₹ 9,15,93,846/- payable to the petitioner - It is informed that TDS already stands paid by the petitioner to the Income Tax Authorities as well as the Competent Authority under the Building and Other Construction Workers Welfare Cess Act, 1996. Petition disposed off.

Summary

Issues: Enforcement of arbitral award, deduction of TDS, liability of respondent, challenge to award

The judgment delivered by the Delhi High Court in OMP (ENF.) (COMM.) 246/2022 involved the enforcement of an arbitral award. The arbitral award specified the amounts to be paid by the respondent to the claimant and vice versa. The respondent had paid a certain amount to the petitioner after deducting TDS and another amount along with interest. The petitioner's counsel argued that the respondent should not have deducted the amount awarded to them against the counterclaims made by the respondent. However, the court noted that the Arbitral Tribunal had already set off the amounts and arrived at a final figure to be paid. The petitioner's challenge to this deduction was rejected as it required challenging the award itself.

Another issue raised was the deduction of TDS by the respondent from the amount payable to the petitioner under the arbitral award. The petitioner contended that TDS should not have been deducted as the amount payable constituted a judgment debt. The court referred to precedents and held that TDS should not be deducted from amounts awarded in arbitral proceedings. The court cited relevant judgments and clarified that judgment debts do not fall under the purview of TDS deductions. The court directed the petitioner to apply for a refund of the TDS amount already paid to the Income Tax Authorities and the Competent Authority under the Building and Other Construction Workers' Welfare Cess Act, 1996.

In conclusion, the court disposed of the petition by upholding the enforcement of the arbitral award, rejecting challenges to deductions made by the respondent, and directing the refund of TDS amounts to the petitioner in line with legal precedents and provisions.