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2025 (3) TMI 422 - HC - Indian LawsApplication under Section 36 (2) of the Arbitration and Conciliation Act 1996 - prayer for unconditional stay of the award - agreements between the parties specifically provided for the treatment of the GST component included in the lease rentals tendered by the claimant s lessee to the respondent or not - entitlement to adjust all the money deposited into the designated account against the universal dues of the respondent against the claimant - alleged obligation of the respondent to make over the GST component of the lease rentals was subject to the claimant furnishing proof of deposit of the GST with the appropriate authorities - HELD THAT - This court holds that the petitioner has failed to discharge the onerous duty to prima facie satisfy from the records that the making of the award was vitiated by fraud and corruption. The threshold to prove fraud and corruption on the part of the learned Arbitrator in the making of the award would be much higher than a criticism of the findings of the learned Arbitrator. The petitioner would have to demonstrate unethical behaviour of the Arbitrator which surpassed all moral standards. An honest mistake or the incorrect appreciation of the terms of the contract cannot be either fraud or corruption. Moreover the petitioner has also failed to substantiate that the respondent had intentionally withheld documents in order to mislead the learned Arbitrator and had obtained the award by unfair means. The petitioner was permitted to produce documents and calculations including the sanction letter and the RBI circular which the petitioner failed to do. After closure of arguments a unilateral statement of account was sought to be produced which the learned Arbitrator held could not be looked into. The petitioner had failed to show prima facie that the respondent had deliberately in a premeditated way and with an intention to gain undue advantage had suppressed and concealed documents from the learned Arbitrator or had misled the learned Arbitrator into the making of the award. The calculation has been provided by the award holder. The law is well settled. An award debtor will have to secure the entire amount awarded which includes the principal as also interest. This court does not find any reason to grant unconditional stay of the award - The petitioner must secure the sum of Rs. 8, 40, 52, 832/- by furnishing a bank guarantee to the satisfaction of the learned Registrar Original Side Calcutta. The bank guarantee shall be kept renewed from time to time. There shall be unconditional stay of the award for a period of four weeks from date and the stay shall continue till disposal of the application under Section 34 of the Arbitration Conciliation Act 1996 upon compliance of this order. In case of default the stay shall be vacated. Conclusion - The petitioner was not entitled to an unconditional stay of the arbitration award. The petitioner was required to secure the awarded amount by furnishing a bank guarantee. The allegations of fraud and corruption were not substantiated and the arbitration award was upheld as valid. Petition disposed off.
1. ISSUES PRESENTED and CONSIDERED
The primary issues considered by the Court involved:
2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: The legal framework primarily involved the Arbitration and Conciliation Act, 1996, particularly Section 36(2) regarding the stay of arbitral awards. The Goods and Services Tax Act was also relevant for determining the obligations related to GST payments. Court's Interpretation and Reasoning: The Court examined whether the petitioner was justified in withholding the GST component from the lease payments deposited by Mahalaxmi Infra Contract Limited. The Court scrutinized the clauses of the Assignment for Assignment (AFA) and the Designated Account Agreement (DAA), particularly focusing on the obligations to transfer GST amounts to the respondent. Key Evidence and Findings: The Court noted that the petitioner had withheld a significant sum from the GST amounts received, contrary to the stipulations in the agreements. The petitioner argued that such amounts were adjusted against dues owed by the respondent, but the Court found this adjustment to be improper as per the agreements. Application of Law to Facts: The Court applied the principles of contract law and the GST Act to determine that the petitioner was obligated to transfer the GST amounts to the respondent, and the failure to do so constituted a breach of the agreements. The Court also considered the arbitration award's validity under the Arbitration and Conciliation Act, 1996. Treatment of Competing Arguments: The petitioner argued that the award was induced by fraud and corruption, claiming bias and unfair treatment by the Arbitrator. However, the Court found no substantial evidence to support these claims. The respondent's arguments, supported by the Arbitrator's findings, were upheld, emphasizing the proper application of GST obligations. Conclusions: The Court concluded that the petitioner had failed to demonstrate that the arbitration award was induced by fraud or corruption. The petitioner's withholding of GST amounts was deemed improper, and the arbitration award was upheld. 3. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: The Court emphasized, "The money that the respondent adjusted and appropriated from the designated account was not money that belonged to the claimant or money that the claimant could have used for its own purposes. The money that the respondent adjusted and appropriated from the designated account towards its other alleged dues from the claimant was money earmarked for being handed over to the claimant as a mere courier to carry it to the appropriate tax counters." Core principles established: The Court reaffirmed the principle that GST amounts collected by a service provider must be transferred to the designated authority and cannot be appropriated for other dues. The arbitration process must be free from fraud and corruption, with substantial evidence required to support such claims. Final determinations on each issue: The Court determined that the petitioner was not entitled to an unconditional stay of the arbitration award. The petitioner was required to secure the awarded amount by furnishing a bank guarantee. The allegations of fraud and corruption were not substantiated, and the arbitration award was upheld as valid.
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