9911796707
TMI Blog2013 (8) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 bearing on the subject matter of this petition are extracted as under :- Clause 2.2 That in the event of the Lessee being in arrears of such lease rentals, such arrears of lease rentals shall carry service charges at the rate of 30% per annum on the compounding basis with monthly rests from the due dates specified in supplementary lease schedules attached / to be attached till date of actual payment. Clause 2.4 The Lessor shall be entitled to vary the lease rental charges at any time during the continuance of this Agreement in the event o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 the Agreements to terminate the Lease. Clause 18.2 That upon termination of the Lease, the Lessor will be entitled, inter alia, to :- (a) to remove and re-possess the said equipment: (b) to recover the entire amount of Lease rentals for the unexpired residue of the term of six years; (c) to recover the cost of all repairs and maintenance of the said equipment to maintain it in good working order and condition and all costs, charges and expenses that may be incurred by them in re-possessing the said equipment; (d) to sell, release and/or d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccepting 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) On 14th July, 2005, the respondents appointed the learned sole arbitrator. By letter dated 20th July, 2005 the petitioners disputed their liability. (i) On 9th December, 2005, the respondents filed statement of claim interalia praying for an order and direction against the petitioners to create a fund and to deposit in a designated bank account under the respondent's authority and control the amount of Rs.17,44,46,521/- alleged to be due as on 17th November, 2005 with interest thereon at the rate of 30% per annum from 18th November, 2005 till such deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lves 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 appropriate the amount with accrued interest against their claim. The learned arbitrator also awarded cost in favour of the respondents and against the petitioners herein in the sum of Rs.27 lacs. Rival submissions on behalf of the parties :- 3. Ms.Phene, learned counsel appearing for the petitioners made following submissions :- (a) Demand raised by the respondents relating to depreciation disallowance and arbitration agreement invoked by the respondents for adjudication in respect of such demand was premature. In view of the fact that on the date of such dema ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reciation 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 disallowance of depreciation. The finding of the learned arbitrator that even if the respondent did not pay any extra amount, by way of income tax, due to disallowance of depreciation and even if no loss is suffered by the respondent due to such disallowance, the respondent is still entitled to recover huge amount of money from the petitioners as a result of disallowance is perverse and contrary to the terms of the contract. A direction to deposit sum of Rs.15.76 Crores by the learned arbitrator without respondent making any payment of income tax would result into undue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 towards any part payment in respect of the claim arising out of disallowance of the depreciation and would not amount to any acknowledgment of alleged debt or liability. (h) The principles of Contra Proferentem was applicable to the contract in question as the same was drafted by the respondents and contained various lacunaes and ambiguities. (i) There was serious calculation mistake in the amount of claim made by the respondent which was demonstrated before the learned arbitrator by the petitioners. The rate of interest at the rate of 30% awarded by the learned arbitrato ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 off, reliance is placed on the judgment of this court in the case of Gajanan Parelkar Vs. Moreshwar, AIR 1942 Bombay 302. The relevant paragraphs of the said judgment reads thus : "7. It is true that under the English common law no action could be maintained until actual loss had been incurred. It was very soon realized that an indemnity might be worth very little indeed if the indemnified could not enforce his indemnity till he had actually paid the loss. If a suit was filed against him, he had actually to wait till a judgment was pronounced, and it was only after he had sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 never denied the indemnity nor challenged his right to be indemnified. 10. The order that I will make will, therefore, be that the defendant be ordered to procure from the mortgagee a release of the plaintiff from all liability under the deed of mortgage and further charge. I give him three months' time to do so. In default of his doing so, the defendant to pay into Court the amount required to pay off the whole amount due to the mortgagee under the mortgage and further charge and that the amount so brought into Court to be utilised for the purpose of paying off the said mortgage an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 arose under indemnity clause recorded in clause 14 of the lease agreement. It is submitted that demand for money by the respondents and creation of fund, both arose under the same agreement and out of the same set of circumstances. Relief sought by the respondents for creation of security arose out of the dispute due to disallowance of depreciation. The claim thus made by the respondents for creation of fund was neither contrary to the provisions of lease agreement nor was beyond the scope of reference. (c ) Though respondents had not called upon the petitioners in its notice invoking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dually. 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 per provisions of Income Tax Act, 1961. Petitioner therefore cannot raise such plea that unless actual loss was suffered by the respondent or income tax was actually paid due to disallowance of depreciation, cause of action for recovery of such claim or for creation of fund did not arise. (d) Merely because the order passed by the assessing officer disallowing claim for depreciation had been subsequently set aside by the Income Tax Appellate Tribunal and the matters were remanded back to the assessing officer for reconsideration, cause of action which had arisen in view of such disallowan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral 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 parties herein, does not place any such limitation. 18. There is nothing in the Arbitration and Conciliation Act, 1996, or in principle, which requires the notice invoking the arbitration to state the claims proposed to be made in the reference. A notice merely indicating the disputes or that disputes have arisen and invoking the arbitration clause is sufficient unless the arbitration agreement itself requires the invocation to be in a particular manner. Mr. DeVitre's submission is, therefore, not well founded. 21. Moreover, the original Petitioner did not, in reply to the notices both date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrectness 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 respondents were, thus, also entitled to get the period during which the writ petition pending, excluded for computing the period of limitation. In that view of the matter, the civil suit was filed within the prescribed period of limitation. 20. A distinction furthermore, which is required to be noticed is that whereas in terms of Article 58 the period of three years is to be counted from the date when 'the right to sue first accrues'; in term's of Article 113 thereof, the period of limitation would be counted from the date 'when the right to sue accrues'. The distinction between Article 58 and Article 113 is, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ........... 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 the decisions of the various High Courts in this country as to what would constitute a waiver and what would not. It has been held in several cases that mere abstaining from bringing a suit does not amount to a waiver, and some of these cases were relied on by the learned advocate for the appellant. All those cases however were decided under Article 75, Limitation Act, and it is clear that if it is held in cases falling under that article, that mere abstention from suing amounts to a waiver, that would nullify the main provision in that article which is to the effect that the time would ordinarily begin to run fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 portion of the community in matters relating to rights of property: Young v. Robertson 4 Macqueen 314. " I have already said that I am unable to hold that the view which has been held in this Court so far, is manifestly erroneous and it is obvious that it is the very opposite of being unjust or mischievous. I shall now briefly allude to one of the terms of the bond with which we are concerned in the present appeal. It is provided there that the entire money will be repayable by the mortgagor if there is default in payment of any one (koi ek) of the instalments. Now the fact that emphasis is laid on any one of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents 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 thus not necessary for the respondent to withdraw the earlier arbitration proceedings and reinvoke arbitration agreement and file fresh statement of claim. The learned counsel further submits that there is inconsistency in the plea raised by the petitioners that the claim was premature or the same was time barred. It is submitted that in the facts of this case, both these pleas raised by the petitioner were untenable and were thus rightly rejected by the learned arbitrator. (h) On the issue raised by the petitioners that the acceptance of residual value from the petitioners by the respondent, there was complete accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the amounts into two sets of debit notes issued by the respondents, it is submitted by Mr. Purohit that the respondents had presented their calculation formula for computation of revised lease rentals and if according to petitioners some other formula could have been adopted, petitioners were free to present the same for consideration of the learned arbitrator which the petitioners failed. The learned arbitrator was thus right in rejecting the said submissions made by the petitioner. (k) On the issue of doctrine of Contra Proferentem canvassed by the petitioners, Mr. Purohit submits that there was no ambiguity in the lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant 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 section 34. On the issue whether any payment of income tax was made by the respondent or not, it is submitted by Mr. Purohit that the respondent had led evidence of Mr. Kapoor who had proved the claims which statement of Mr. Kapoor had not been dislodged by the petitioners in their cross examination. The respondents had correctly maintained PNPT rate and had rightly increased the quantum of finance amount to the extent of depreciation loss to them. It is submitted by Mr. Purohit that there is no provision in the lease agreement that the claim was dependent on the orders passed by the income tax authorities. (n) On the is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted 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 Conciliation Act, 1996. REASONS AND CONCLUSION 6. On the issue as to whether claim made by the respondents for creation of fund would fall under clause 14 of the lease agreement or not and whether such claim was beyond the scope of clause 14 or not, the learned arbitrator held that clause 14 was wide in its scope and could not have been given any narrow interpretation as sought by the petitioners. It is held that under clause 14 of the lease agreement, petitioners were bound to indemnify the respondents amongst other things, against all losses, damages, claim, penalties, expenses, suit or proceedings of whatsoever nature made, suffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey 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 agreement in support of their claim for creation of fund except clause-14. Learned arbitrator has on interpretation of Clause-14 held that such clause was wide and covered all events wherein all losses, damages, claims, penalties, expenses, suits or proceedings of whatsoever have been made, suffered or incurred consequent thereto and this would even apply in respect of the suit equipment. On plain reading of Clause-14 in my view, it is clear that the petitioners had agreed to keep the respondents indemnified against any loss or seizure of the equipment under distress, execution or other legal process or destruction or damage to the equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for referring the claim to arbitration, respondent could make such claims not notified in notice before the learned arbitrator. I do not find any such provision in the agreement in question. In my view, Mr Purohit, learned counsel appearing for the respondents is right in his submission that though respondents have demanded the payment of entire amount based on dis-allowance of depreciation in the notice issued on 17th May 2005, respondents were not precluded from claiming the smaller relief in the statement of claim for creation of fund so as to secure the liability of the respondents if any. In my view, learned arbitrator has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 entitled to call upon the indemnifier to save him from that liability and to pay it off. In my view, learned counsel appearing for the petitioner is right in her submission that unless the liability of the respondents was absolute respondents could not have invoked the alleged indemnity under Clause-14 of the agreement of lease against the petitioners for creation of fund. Claim for creation of fund was made before the learned arbitrator in statement of claim. Appeal was pending before the Income Tax Appellate Tribunal. Even according to the respondents, their claims were not crystallized and absolute on the date of filing of statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Commissioner of Income Tax (Appeal) and the same was pending. 13. In my view, claim for depreciation which was disallowed by the Assessing Officer and on setting aside such order by the Income Tax Appellate Tribunal, there was no demand of any income tax from the Income Tax Department. Cause of action did not survive. If the respondents were entitled to invoke arbitration by virtue of Assessing Officer's disallowance of depreciation, the respondents could have done so separately. Proceedings which had become infructuous by virtue of initial order of dis-allowance of depreciation having been set aside, such proceeding could not have been conti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 dated 31st March, 1997, the Deputy Commissioner had disallowed depreciation. By an order dated 31st March, 1998 depreciation claimed for assessment year 1995 - 96 came to be disallowed. By orders dated 16th February, 2001 and 28th February, 2001 Commissioner of Income Tax (Appeal) dismissed appeals filed by the respondents against orders dated 31st March, 1998 and 31st March, 1997 respectively. Respondents had already filed an appeal on 10th May, 2001 before Income Tax Appellate Tribunal. During the pendency of the proceedings before Commissioner of Income Tax (Appeals), the respondents had issued debit note on 11th October, 2000 demanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sidual 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 and/or extend limitation. Residual amount paid on 26th May, 2004 was not by way of part payment in respect of claim arising out of depreciation thus would not extend limitation. The said payment would even otherwise not extend limitation as the same was not within a period of three years from the date of accrual of cause of action which was 31st March, 1997 and 31st March, 1998 for the assessment year 1994 - 95 and 1995 - 96 respectively. Limitation does not be extend by making any part payment against a time barred claim. The learned arbitrator has held that the order disallowing depreciation have been already passed hence cause of action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pending would not mean that cause of action has not arisen. The learned arbitrator has rejected the plea of the petitioners that claim was premature. The learned arbitrator has held that claim which is premature cannot be time barred and the time barred claim cannot be premature however has failed to appreciate that even if a claim may not be premature but it can still be time barred. In my view, the respondents once having invoked arbitration clause, proceeded on the basis that cause of action had arisen on the basis of disallowance of depreciation claim by the assessing officer in 1997 - 98, respondents could not have been permitted to take ple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew 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 Appellate Authority, the learned arbitrator could not have rejected the plea of the petitioners that the claims were premature. In my view, the learned arbitrator was bound to reject time barred claims made by the respondents. By allowing such time barred claims, the learned arbitrator committed patent illegality and the award is in conflict with public policy. Reliance thus placed by the respondents on the judgment of the Supreme Court in case of Union of India vs. West Coast Paper Mills Ltd. (supra) is of no assistance to the respondents. 21. As far as judgment of Supreme Court in case of Mcdermott International Inc. (supra) relied upon by the resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hts 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 was not correct in holding that there was no accord and satisfaction of the claims. 24. On the issue as to whether agreement entered into between the petitioners and the respondents was financial transaction or lease, the learned arbitrator held that though transaction was entered into as far back as on 7th February, 1994 till filing of the reference, the petitioners had not contended that the transaction between the parties was not a lease transaction. It is also held that submission was contrary to the terms of the written agreement between the parties particularly clauses 3.5, 5 and 6. The learned arbitrator rejected this submission advanced b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 incorrect that both the sets of debit note were prepared on the same basis. It is held that if the petitioners felt that there was some other formula which ought to have been adopted, the petitioners were free to present the same but had chosen not to do so. The formula thus under clause 16 only could be applied. 29. Petitioners have raised an issue about calculation mistake in the amount claimed by the respondents which has been awarded by the learned arbitrator. In my view, the learned arbitrator had given ample opportunity to the petitioners to demonstrate and submit correct calculation. Though respondents submitted revised calculation, petitioners ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange 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 any liabilities had arisen in an individual transaction of the company. It is held that the rights and liabilities under the individual transaction are to be governed by the terms of the individual agreements and if the liability or loss arises in an individual transaction, the concerned party cannot escape the liability/loss on the ground that the company as a whole has not paid tax. The learned arbitrator observed that the company as a whole may not suffer loss because of various other transactions/reasons, however the same would not affect the position of individual transactions where liability/loss has been incurred. The learned arbitrator rendered a f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 this court is as to 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 to be paid by the respondents or respondents could ask for creation of fund by claiming increase in rental with retrospective effect with interest at the rate of 30% per annum in accordance with provisions of lease agreement. The learned counsel appearing for the petitioners pointed out that though amount of Rs.15,76,68,108/- included only Rs.3,14,88,595/- towards notional income tax implications, the learned arbitrator directed the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 committed by the petitioners in making payment of revised rentals, the learned arbitrator could not have awarded interest from retrospective effect and that also by way of interest on interest and at penal rate. Ms.Phene also invited my attention to the fact that claim of interest awarded by the learned arbitrator w.e.f. 12th December,2006 at the rate of 30% per annum was on Rs.15,76,68,108/- which was already inclusive of penal interest and thus the learned arbitrator has awarded interest on interest. In my view, since award of principle amount itself by the learned arbitrator is illegal, the learned arbitrator could not have awarded interest thereon. In any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X
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