9911796707
TMI Blog2013 (8) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... of any person whether employee of Lessee or any third party - it is clear that same would not apply for creation of fund arising out of dis-allowance of claim for depreciation made by Assessing Officer - Clause 14 has to be interpreted as whole to ascertain intent of parties and not few words in isolation - Decided in favour of petitioner. Whether claim made for creation of fund by respondents in statement of claim was beyond scope of reference - Held that:- Arbitration agreement did not require party to state nature of claim and dispute which such party proposed to make in arbitration proceedings for which notice is issued invoking arbitration agreement, such party cannot be precluded from making any additional claim or claims not notified in such notice in arbitration proceedings - Following decision of Ms. Veena Naresh Seth vs. Seth Industries Limited [2010 (10) TMI 931 - BOMBAY HIGH COURT] - Decided against petitioner. Whether cause of action as claimed in statement of claim filed by respondents survived - Held that: - claim for depreciation which was disallowed by Assessing Officer and on setting aside such order by Income Tax Appellate Tribunal, there was no demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er clause 16 of lease agreement or not - Held that:- due to negative inflow in this particular transaction there may not be actual payment of income tax. Petitioner cannot plead that though depreciation claim is disallowed and that would affect over all deduction claimed by respondents unless respondents shows actual payment of income tax on individual transaction, respondents cannot raise demand - Decided against petitioner. Whether respondents could have raised demand for increased rentals or for creation of fund with view to secure claims of respondents irrespective of respondents having suffered any loss due to disallowance of depreciation by assessing officer - Held that:- there is no merit in submission of petitioners on this issue that only in event of respondents paying any income tax due to disallowance of depreciation on this individual transaction, respondents could have demanded said amount from petitioners and not otherwise - Decided against petitioner. Whether claims for creation of fund so as to secure respondents’ from any liability which may arise due to disallowance of depreciation, respondents could claim only such amount which would be required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners seek to challenge award dated 19th July, 2011 made by the learned arbitrator allowing claims made by the respondents. The petitioners were original respondents before the learned arbitrator. Respondents herein were original claimants. 2. FACTUAL MATRIX :- (a) On 7th February, 1994, Tata Finance Ltd. which stood amalgamated with the respondents herein (hereinafter referred to as the said Agreement) entered into an agreement of lease with the Gujarat Electricity Board (Predecessor of the petitioners herein) whereby the respondents agreed to lease in favour of the said Gujarat Electricity Board suit property for a period of 72 months on the terms and conditions setout therein. Under the said agreement Gujarat Electricity Board was liable to pay lease rentals every month based on an asset cost of Rs.1,000/- fixed at Rs.19.95 per month per thousand payable monthly in advance. Parties thereafter executed supplementary lease schedules in respect of the the said equipments. The said Board started paying lease rentals to the respondents from April 1994 at the rate prescribed under the said agreement. Some of the relevant clauses of the said agreement which would have be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be complied with or observed in respect of the use and operation of the Equipment to entitle the Lessor to obtain such relief. Clause 14 The Lessee shall indemnify and keep indemnified the Lessor, at all times, against any loss or seizure of the Equipment under distress, execution or other legal process or destruction or damage to the Equipment by fire, accident or other cause, from any claim or demand arising out of the storage, installation, use or operation of the Equipment or any risk of liability for death or loss of limb of any person whether employee of the Lessee or of third party and hold the Lessor harmless, against all losses, damages, claims, penalties, expenses, suits, or proceedings of whatsoever nature made, suffered or incurred consequent thereupon and for this purpose take out such workmen s compensation third party insurance cover as may be necessary, customary to the practice in the business carried on by the Lessor or as may be directed by the Lessor, in that behalf. Clause 18.1 That upon occurrence of any of the events specified in clauses 18.1 to 18.1.7 of the Lease Agreement, the Lessor will be entitled to, without prejudice to their other rights under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led an appeal against the said order dated 16th February, 2001 before the Income Tax Appellate Tribunal. (d) In the month of February, 2000, the agreement dated 7th February, 1994 expired due to efflux of time. (e) On 11th November, 2000, the respondents raised debit notes for sum of Rs.5,05,33,367/- and Rs.2,51,50,372/- upon the petitioners for payment. (f) On 26th March, 2004, the petitioners paid to the respondents the residual value of the equipment covered by the said agreement amounting to Rs.6,49,328.75. It is case of the petitioners that by accepting the said residual value of the equipment from the petitioners by the respondents, the respondents transferred the said equipment to the petitioners. (g) On 17th May, 2005, the respondents vide their advocate's letter called upon the petitioners to pay lump sum amount of Rs.16,29,41,781/- with interest thereon and to deliver to the respondents the said equipment given to the petitioners under the said agreement. It was stated that in case of non compliance with the said notice within the notice period of 14 days, the said letter may be treated as a notice invoking arbitration under clause 20.9 of the said agreement. (h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ejected the said application filed by the petitioners. (l) The respondents examined a witness. Petitioners did not examine any witness. The learned arbitrator framed 24 points for determination. On 19th July, 2011 the learned arbitrator rendered an award directing the petitioners to pay a sum of Rs.15,76,68,108/- with simple interest at the rate of 30% per annum from 12th December, 2006 to the respondents till payment. It was declared that the liability to pay the said amount would be joint and several and the petitioners herein shall decide who amongst themselves was to pay the added sum. The learned arbitrator directed the respondents to keep that amount in a fixed deposit in a nationalized bank till such adjudication process was finally completed. It was further provided that in the event of the respondents finally succeeding and 100% depreciation is being allowed, the respondents herein shall return to the petitioners who paid the amount alongwith interest accrued thereon within two weeks from the date of final order. It was further provided in the said award that if in the final order disallowance of depreciation is upheld, the respondents herein would then be entitled to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel placed reliance on the judgment of this court reported in AIR 1942 Bombay 302. It is submitted that in the impugned award, the learned arbitrator did not provide for payment of the amount to the respondents but asked for the deposit in the bank account with a direction that the right of respondents to receive the said amount would arise only when the final award disallowing depreciation is passed. The award thus demonstrates patent error of law on the face of it. The finding of the learned arbitrator that the cause of action and also dispute is disallowance of depreciation and on the other hand renders the finding that the claim is based on order dated 12.12.2006 is contradictory and inconsistent. If the order allowing depreciation is set aside, the cause of action based on that order comes to an end and if the final order disallowing depreciation is passed, new cause of action will arise. The award thus demonstrates patent illegality on the face of it. The respondent did not suffer any loss because of depreciation allowance having been disallowed by the Assessing Officer as the respondent was still suffering loss which would not attract any income tax liability even if such di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of part payment and/or acknowledge of debt, the learned arbitrator has considered such payment as part payment/acknowledgment of debt though it was payment of residual amount by which the said property stood transferred in favour of the petitioners. The learned arbitrator failed to appreciate that the respondents having accepted from the petitioners residual value of the equipment liability of Rs. 6,49,328.75 and thereby transferring the equipment to the petitioners, there was complete accord and satisfaction of the claim if any of the respondent. Thus no claim could have been made by the respondents at all against the petitioners in respect of the said amount. The agreement itself would stand terminated. The learned arbitrator had no jurisdiction to award any amount in favour of the respondent in view of such accord and satisfaction and termination of agreement. The award is without jurisdiction. The award shows patent error of law. The concept of jural relationship applies only when the debt is acknowledged but for the different amount then what is actually due. The payment of residual amount in terms of the contract was unconditionally accepted by the respondents and was not tow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in support of her plea that the cause of action arose when the income tax officers disallowed the depreciation and the respondents would be entitled to claim lease rentals, if any based thereon. Paragraph 10 of the said judgment reads thus : 10. The seventh ground on which the award is challenged is that the claim made by the Respondent was barred by the law of limitation. According to the learned Counsel reference was made after the income-tax officer made the order on 31st March, 2000 and the amount of lease rental due from 27th September 1996 onwards were claimed. I find that the learned arbitrator has correctly held that the cause of action arose when the Income-tax Officer disallowed the depreciation and the Respondent would be entitled to claim lease rental from the year 1996. Admittedly, no interest has been claimed on that amount. I, therefore, do not find any infirmity in the finding recorded by the learned arbitrator on this count. (l) In support of the plea that by making claim under indemnity clause, only if the indemnified has incurred liability and their liability is absolute is entitled to call upon the indemnifier to save him from that liability and to pay it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiff on the personal covenant reserving his rights under the security. Therefore, the liability of the plaintiff under the personal covenant is absolute and unconditional, and he would have no answer to a suit filed by the mortgagee under that covenant. Mr. Tendolkar suggests that if such a suit were filed the Court would, under Section 68, Sub-section (2), of the Transfer of Property Act, exercise its discretion and stay the suit until the mortgagee had exhausted all his available remedies against the mortgaged property or the mortgagee had abandoned his security. I do not propose to speculate as to what the Court might do in the event of this suit being filed. If the plaintiff is sufficiently substantial--and I am told he is--the mortgagee may content himself with obtaining a personal decree against him and give up his security, I, therefore, hold that the plaintiff is entitled to be indemnified by the defendant against all liability under the mortgage and the deed of further charge. 9. Turning to the prayers of the plaint, the plaintiff wants a declaration that he is entitled to be indemnified by the defendant. I do not think he is so entitled as the defendant has nev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticular paragraph 52 in support of his plea that intervention of the court is envisaged only in circumstances like in case of fraud or bias by the arbitrators, violation of natural justice etc. This court cannot correct errors of the arbitrators. Para 52 of the said judgment in case of Mcdermott International Inc. (supra) reads thus :- 52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. (b) There need not be any separate provision in the agreement for a party to make claim for creation of security and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 14 of the lease agreement and such claim was within the provisions of lease agreement and not de hors it. For making a claim for creation of fund under indemnity clause, respondents were not required to prove any loss suffered by the respondents. However, as a matter of fact, the respondents had suffered a negative inflow which in effect amounted the respondents to suffer a loss. It was not necessary that respondents would have sufferred a loss in view of dis-allowance of depreciation of claim in so far as transaction between the petitioners and the respondents is considered individually. Due to such disallowance of depreciation of claim respondents could ask the petitioners to indemnify and/or to pay such amount as the assessing officer in the assessment order appropriated the refund due and payable to the respondents arising out of other transactions due to disallowance of depreciation. It is submitted that even if the respondents had suffererd over all loss, the assessing officer had by disallowing such claim for depreciation has reduced the amount of loss claimed by the respondents which otherwise respondents could have carried forward in subsequent assessment years as p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in excess of his jurisdiction. 17. I do not read the judgment to hold as an absolute proposition that the claim made in arbitration must in every case be limited to the claim stated in the notice/letter invoking arbitration. Indeed in many, if not most cases, the letter/notice of invocation of the arbitration agreement does not stipulate and crystallize the claims. The judgment does not set out the arbitration agreement that applied between the parties therein. It does not indicate the nature of the arbitration agreement. If Mr. DeVitre s submission is accepted, it would denude the arbitral tribunal of the power to even allow an amendment to a statement of claim. Mr. DeVitre s submission would be valid only in those cases where the arbitration agreement stipulates a demand for a reference of the disputes to the arbitral tribunal to be preceded by a notice and further provides that the claim in the arbitration shall be limited to those raised in such notice. This is not an unusual provision in arbitration agreements. Such limitations are found in several arbitration agreements. Clause 12 of the Memorandum of Understanding which contains the arbitration agreement between the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ribunal was final but by reason thereof the jurisdiction of this Court to exercise its power under Article 136 of the Constitution of India was not and could not have been excluded. 14. Article 136 of the Constitution of India confers a special power upon this Court in terms whereof an appeal shall lie against any order passed by a Court or Tribunal. Once a Special Leave is granted and the appeal is admitted the correctness or otherwise of the judgment of the Tribunal becomes wide open. In such an appeal, the court is entitled to go into both questions of fact as well as law. In such an event the correctness of the judgment is in jeopardy. 15. Even in relation to a civil dispute, an appeal is considered to be a continuation of the suit and a decree becomes executable only when the same is finally disposed of by the Court of Appeal. 16. The starting point of limitation for filing a suit for the purpose of recovery of the excess amount of freight illegally realised would, thus, begin from the date of the order passed by this Court. It is also not in dispute that the respondent herein filed a writ petition which was not entertained on the ground stated hereinbefore. The responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the ordinary civil law the judgment of the appellate court alone can be put to execution. Having regard to the doctrine of merger as also the principle that an appeal is in continuation of suit, we are of the opinion that the decision of the Constitution Bench in S.S. Rathore (supra) was to be followed in the instant case. (f) The learned counsel also placed reliance upon the judgment of Patna High Court in case of Mukhdeo Singh and another vs. Harakh Narayan Singh and others reported in AIR 1931 Patna 285 on the issue of successive cause of action and in particular on page 291 which reads thus :- ............... Where therefore a party has recurring or successive causes of action whether under the terms of contract or by operation of law, each cause of action will in my opinion give a fresh start to the period of limitation and the mere fact that a party has not availed himself of the earlier cause of action, will not prevent him from availing himself of a later one. It is in this connexion that it becomes material to consider how far the mortgagee is entitled to waive his right to exercise an option given to him under the bond. Now there is a good deal of conflict in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far in this Court This view has undoubtedly this advantage than it does not entitle the debtor to go behind his own stipulation giving the creditor an option in the matter of bringing the suit. I fully recognize that the Courts should have no hesitation in applying the statute of limitation where it clearly applies, but where there are two possible views under this statute, one tending to deprive a person of his just dues and the other entitling him to recover them, there is no reason I do not see why one should not lean in favour of the view which does not entail any hardships or lead to any unjust consequences. My other ground for adhering to the cursus curiae of this Court is substantially what has been pointed out recently by a Full Bench of this Court in Babu Tribeni Prasad v. Ram Asray Prasad MANU/BH/0111/1931 and what has been expressed by Mukerjee, J., in the case of Kedar Nath Hazra v. Manindra Chandra Nandy in these words: The Courts must always hesitate to overrule decisions which are not manifestly erroneous and mischievous, which have stood for many years unchallenged and which from their nature may reasonably be supposed to have affected the conduct of a large por ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in any event after order of Income Tax Appellate Tribunal remanding back to the assessing officer vide order dated 22nd December 2005, assessing officer passed fresh order disallowing claim for depreciation. Learned arbitrator had rightly allowed the application of the respondents for amendment of the statement of claim. It is submitted that the learned arbitrator was thus right in holding that each successive order disallowing depreciation gave a fresh cause of action and thus claim was not barred by law of limitation. During the pendency of the arbitration proceedings, the appeal filed by the respondents against the order of assessing officer disallowing claim for depreciation was pending. Learned counsel submits that judgment on this issue relied upon by the petitioners are not applicable to the facts of this case. It is submitted that the learned arbitrator was right in taking cognizance of the subsequent order passed by the Income Tax Appellate Tribunal remanding the matter back to the Assessing Officer for passing fresh order and also the order passed by the Assessing Officer on remand again disallowing the claim for depreciation. It is submitted that it was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment entered into between the parties was finance transaction or lease is concerned, it is submitted by Mr. Purohit that the respondents had claimed to be owners of the suit equipment all through out as is clear from the lease agreement and had accordingly claimed depreciation. Petitioners never claimed ownership in respect of the said equipments and had not claimed depreciation in their income tax returns. Petitioners did not produce any documents on record before the learned arbitrator to demonstrate that the petitioner had acted contrary to the said lease agreement and had claimed ownership and depreciation allowance in its income tax returns. It is submitted that learned arbitrator was right in rejecting the claims made by the petitioner by rendering a finding that it was not contended by the petitioners till date of filing of arbitration reference that the transaction between the parties was not lease transaction. Mr. Purohit further submits that the learned arbitrator is also right in rendering a finding that the lease agreement entered into between the parties or clause 16 therein is not void as canvassed by the petitioners. (j) On the issue of method of calculations of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners did not submit any calculation and thus could not make any grievance in that regard. It is submitted that even after passing of the benefits of change in income tax rate, the respondents still had to recover substantial amount from the petitioners. (m) On the issue as to whether the respondents were entitled to make any claim against the petitioners though no loss was suffered by the respondents is concerned, Mr. Purohit the learned counsel for the respondents submits that the respondents had paid income tax on group accounting basis after taking into consideration total income, expenditure etc. and it was irrelevant for the purpose of considering whether any liability had arisen in the individual transaction of the company or whether the company as a whole had or had not paid the tax. It is submitted that merely because the respondent as a whole may not suffer any loss because of various other transactions or the reasons, that would not make the respondents disentitle to make claim against the petitioners. It is submitted that the learned arbitrator has rendered finding of fact on this issue which is not perverse and thus shall not be interfered with by this court under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar (supra) which is also relied upon by Mr. Purophit in support of his submission. Ms. Phene distinguished the judgment relied upon by Mr. Purohit. It is submitted that even if the appeal filed by the respondents was pending before the Income Tax Appellate Tribunal, when notice invoking arbitration agreement was issued, fact remains that there was no stay of the order passed by the Assessing Officer disallowing depreciation claim and the said notice was admittedly issued after three years from the date of order passed by the Assessing Officer and also Commissioner of Income Tax (Appeals), claims were time barred. It is submitted that the limitation would not stop during the pendency of the appeal. In any event, the Income Tax Appellate Tribunal having set aside the assessment order disallowing depreciation allowance, claim based on the earlier assessment order became infructuous and ought to have been dismissed by the learned arbitrator. It is submitted that the entire basis of the claim made against the respondent was totally illegal and thus there was no question of the petitioners applying for clarification of the impugned award under section 33 of the Arbitration and Conciliati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e depreciation and thus even though in the notice, the respondents had only demanded money, the same was based on the factum of disallowance of depreciation. The respondents could always plead and support an alternate case. It is held that the creation of fund is a well accepted position in law which an indemnified can resort to against the indemnifier. The learned arbitrator held that the question of creation of security arises squarely out of clause 14. The learned arbitrator placed reliance upon the judgment of this court in case of Gajanan Parelkar (supra). The learned arbitrator held that cause of action for demand for money as well as for creation of fund arose under the same agreement and out of same circumstances. 8. On perusal of the statement of claim made by the respondents, it is clear that the respondents had initially prayed for creation of fund in view of the pendency of appeal before the Income Tax Appellate Tribunal filed by the respondents. It is the case of the respondents that under clause-14 of the Lease Agreement, respondents were entitled to seek creation of fund. It is not in dispute that respondents did not invoke any other provision of the lease agreemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to ascertain the intent of parties and not few words in isolation as read by the learned arbitrator. In my view, petitioners are right in their submission that learned arbitrator has misapplied Clause-14 to the claim of the respondents for creation of fund arising out of disallowance of claim of depreciation by the assessing Officer. Applying Clause-14 to such claims made by the respondents in my view demonstrates patent illegality on the face of the award. 9. The next question that arises for consideration is whether claim made for creation of fund by the respondents in statement of claim was beyond the scope of reference in view of the respondents not having demanded any creation of such fund in notice dated 17th May 2005 invoking arbitration agreement. On perusal of the arbitration clause, it is clear that it does not stipulate any condition that only such demand which is referred under notice invoking arbitration clause can be referred to arbitration. Dispute had arisen between the parties in view of disallowance of depreciation by the assessing officer. Unless there was any such specific provision in the agreement which was required to be followed as condition precedent fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pending before the Income Tax Appellate Tribunal on the date of issuance of notice invoking arbitration clause and filing the statement of claim before the learned arbitrator by the respondents. In this context, reference to Section 124 of the Contract Act would be relevant which is extracted as under 124. "Contract of indemnity" defined : A contract by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by the conduct of any other person, is called a "contract of indemnity". Learned arbitrator recorded a finding that creation of fund is well accepted position in law which an indemnified can resort to against the indemnifier. On perusal of Section 124 of the Contract Act, it is clear that if promisee suffers any loss by conduct of the promisor or by conduct of any other person in respect of which indemnity is furnished by the promisee would be entitled to indemnify such loss against the promisor. In case of Gajanan Parelkar Vs. Moreshwar (supra) this Court has construed Sections 124 and 125 of the Contract Act. It has been held that if the indemnified has incurred a liability and that liability is absolute, he is entitl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciation the same cause of action remains, otherwise a party would have to file, then withdraw, then again file a claim and so on depending on the order prevailing which would lead to multiplicity of proceedings and would result in incurring unnecessary costs by both parties to defend such claims and there would be complete uncertainty. The learned arbitrator held that same claim continues, the cause of action being the same till the final decision. 12. It is not in dispute that after filing statement of claim on 9th December 2005, by an order dated 22nd December 2005, Income Tax Appellate Tribunal had set aside the dis-allowance of depreciation and it remanded the matter back to Assessing Officer for reconsideration. Learned arbitrator on this issue has rejected the contention of the petitioner that in view of the order dated 22nd December 2005, claim made before the learned arbitrator did not survive. Learned arbitrator has held that after such order of remand by the Income Tax Appellate Tribunal, Assessing Officer has passed a fresh order on 12th December 2006 disallowing the depreciation and the appeal arising out of such order was filed by the respondents before the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng officer disallowing depreciation. It is held that claim of the respondents in the statement of claim would indicate that they had a right or entitlement to vary the lease rentals, by increasing the same, under the terms of the lease agreement and lease summary schedule by reason of disallowance of the depreciation by the Income Tax Authority. It is held that the statement of claim itself indicates that the appeal filed by the respondents was pending and that in the event of respondents succeeding in the appeal, the petitioners would not be liable to pay the increased rentals. It is held that the adjudication process would be an ongoing process and there may and would be variations by virtue of subsequent orders but so long as an order disallowing depreciation remains the cause of action based on the lease agreements and the lease summary schedule would remain. With these reasonings rendered by the learned arbitrator, plea of the limitation raised by the petitioners is rejected. The learned arbitrator held that if the claim is premature, it can t be time barred and if time barred, it can t be premature. 16. It is not in dispute that for the assessment year 1994-95, by an order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the residual amount which was payable under the lease agreement, the petitioners have acknowledged that the jural relationship i.e. contract was still alive and so long as jural relationship was alive and claim was made during the existence of the contract and/or within three years after termination, if any, of the contract, the claim would be within time. The learned arbitrator has held that reference to the arbitration was not based only on the order dated 1st April, 1998 but on the respondents right under the lease agreement and lease summary schedule to increase rentals on a disallowance of depreciation. 17. In my view, payment of residual amount of 26th March, 2004 by the petitioners to the respondents would not extend period of limitation. Cause of action had already begun on 31st March, 1997 when the Deputy Commissioner disallowed depreciation for the assessment year 1994 95 and on 31st March, 1998 when the said claim was disallowed for the assessment year 1995 96. Merely because appeal was filed by the respondents before the Commissioner of Income Tax or before the Income Tax Appellate Tribunal, limitation would not stop. In my view, pendency of appeal would not save ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng himself of a later one. In this case, the notice invoking arbitration agreement claim filed before the learned arbitrator by the respondents clearly indicates that respondents had already availed of cause of action already having arisen in favour of the respondents due to disallowance of the claim of depreciation in the year 1997 98. Limitation would stop on receipt of such notice dated 17th May, 2005 by the petitioners herein and arbitration proceedings had already commenced in respect of such dispute. It is thus clear that on the date of receipt of notice dated 17th May, 2005, claim arising out of disallowance of depreciation on 31st March, 1997 and 31st March, 1998 has already became time barred. The respondents opposed the plea of petitioners that such claim was premature on the ground that liability of the respondents arising out of such disallowance of depreciation was not crystalised in view of pendency of appeal before the Income Tax Appellate Tribunal and cause of action had not arisen. Even the learned arbitrator has held that cause of action had already arisen when the claim for depreciation was disallowed by the assessing officer and merely because appeal was pendi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the judgment may not be of much relevance once Supreme Court granted special leave and decided to hear the matter on merits. It is held that appeal is continuation of suit. In my view, respondents having raised plea that in view of pendency of appeals firstly before the Commissioner of Income Tax (Appeals) and thereafter before Income Tax Appellate Tribunal which proceedings were in continuation of the assessment proceedings limitations had not commenced could not have opposed the plea of the petitioners that the claims were premature. In my view, the said judgment of the Supreme Court is of no assistance to the respondents. 20. In my view merely because assessing officer passed fresh order disallowing depreciation on 12th December, 2006 would not revive the time barred claim in respect of which notice invoking arbitration was already issued on 17th May, 2005 on the basis of cause of action having accrued on 31st March, 1997 and 31st March, 1998 for assessment years 1994 95 and 1995-96 respectively and statement of claim was already filed. In my view, if according to the learned arbitrator cause of action had not arisen in view of the pendency of appeal before the Appellat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration of this court is whether there was any accord and satisfaction in view of the respondents accepting residual amount from the petitioners during the pendency of appeal before the Income Tax Appellate Tribunal. It is not in dispute that respondents had filed appeal before the Income Tax Appellate Tribunal on 10th May, 2001. On 26th March, 2004 pursuant to the demand raised by the respondents, petitioners made payment of residual amount under the sanction letter/lease agreement. Respondents had issued proforma invoice in favour of the petitioners. The said amount was accepted unconditionally by the respondents without reserving their rights to make any demand arising out of order passed by the assessing officer on 31st March, 1997 and 31st March, 1998 and their rights of claiming additional lease rentals during the pendency of appeal before Income Tax Appellate Tribunal. In my view, in view of the respondents having accepted residual value unconditionally and by issuing proforma invoice in favour of the petitioners, the respondents could not raise any demand subsequently based on the letter of sanction/agreement against the petitioners. In my view, the learned arbitrator w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of the lease agreement. 26. On the issue as to whether lease agreement or clause 16 thereof was void or not, the learned arbitrator rejected this submission made by the petitioners by interpreting clause 16 of the lease summary schedule with clause 2.4 of the lease agreement. 27. In my view, both parties had acted upon the same lease agreement. The lease agreement was a commercial document signed by two companies through their authorised signatories after reading the contents thereof. No such plea thus could be raised by the petitioners that any of the provisions of such agreement were void. In any event, the learned arbitrator can not declare any provisions of the contract as void. In my view there is no merit in the submission of the petitioners that any of the provisions of the contract of the lease agreement was void or ought to have been declared void by the learned arbitrator. 28. On the issue as to whether there was any calculation error or there was any calculation formula for computation of the lease rentals by the respondents or not, the learned arbitrator rejected this submission made by the petitioners and held that submission of the petitioners was in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers to say what the change in the tax rate and how the lease rentals were to be reduced by it. It is further held that on a change in the rate of tax, it was the option of the respondents whether to make change or not in lease rentals and such demand for change could not be made by the petitioners as a matter of right. It is held that though the respondents wanted to examine the witness to show what the change in rate of tax and the costs of money was, however the same was opposed by the petitioners. It is held that the petitioners failed to discharge the burden of proof laid on them. Though the respondents had supplied the figures showing the effect of change in tax rates, petitioners had not supplied any figures. The learned arbitrator held that the witness examined by the respondents had given details and particulars how depreciation had been considered into the lease rentals and there was no contrary evidence. The learned arbitrator also rejected the submission of the petitioners that there was no extra financial burden. The learned arbitrator also held that whether the respondent company as a whole had or had not paid tax was irrelevant for the purpose of considering whether a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed the entire loss for the relevant assessment year which could be carried forward in the subsequent assessment year in accordance with the provisions of Income Tax Act, 1961. Due to disallowance of depreciation on an individual transaction it would have overall effect on the other income and/or loss claimed by the respondents in their income tax returns. Mr.Purohit is right in his submission that even if no additional tax liability is determined by the income tax department on the individual transaction between parties, disallowance of depreciation of individual transaction may affect the respondents financially. The learned arbitrator has accepted this submission of the respondents that various amounts which were refundable to the respondents were appropriated by the Income Tax Department in view of disallowance of depreciation. In my view, thus there is no merit in the submission of the petitioners on this issue that only in the event of respondents paying any income tax due to disallowance of depreciation on this individual transaction, respondents could have demanded the said amount from the petitioners and not otherwise. 34. Next question arises for consideration of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther interest at the rate of 30% per annum was exorbitant or not, the learned arbitrator held that the claim was now based on order dated 12th December, 2006 and thus the interest could be only on that date as per contractual rate. The learned arbitrator accordingly directed the petitioners to pay a sum of Rs.15,76,68,108/- at the rate of 30% per annum from 12th December, 2006 till payment. It is held that liability to pay would be joint and several and the petitioners themselves shall decide who amongst themselves was to pay the awarded sum. 36. As far as rate of interest allowed by the learned arbitrator is concerned, Mr.Purohit, learned counsel appearing for the respondents fairly submits that if this court comes to the conclusion that award rendered by the learned arbitrator allowing principle amount is correct, respondents have no objection if this court considers reasonable interest on the principle amount though contract provided for compound interest at the rate of 30%. Submission of the petitioners on the other hand is that since no amount is due and payable by the petitioners, the question of awarding any interest did not arise and in any event, since no default was com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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