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TMI Blog2025 (3) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt No.2105107000000140 maintained with, held and operated by the petitioner/bank. The petitioner was supposed to transfer the amount of indirect tax (CGST and SGST) to the respondent's account (assignor account), that was received from Mahalaxmi. Clause 2.3 (e) of AFA and clause 5.3 of the DAA, mandated such transfer. 5. Clause 2.3(e) of AFA stated as follows :- "2.3(e). In the event that the renter transfers to the assignee (by credit to the designated account) any amounts to be paid by the renter for the assignor, as the case may be, who was in indirect taxes, such amount shall be transferred by the assignee to the assignor, and the assignor shall ensure that the same is deposited with the relevant government/ regulatory authority, as aforesaid." 6. Clause 5.3 of the AFA stated as follows :- "5.3 The assignee shall on receipt of the receivables in the designated account shall first adjust the amount of the transferred interest that needs to be transferred to watch the receivables and post search appropriation, make the payment to the assignor to watch the following : * The amount of indirect tax that needs to be transferred to the assignor account as contemplated in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndent had to take necessary steps to inform and bring to the notice of the petitioner, details of the amounts deposited by Mahalaxmi. 11. The respondent had failed to comply with the requirements of the AFA and no written request was made by the respondent, identifying the details of any amount deposited as "excluded amount", together with transferred interest (in short TRI) during the tenure of the agreements, while the transferred interests were being deposited by Mahalaxmi and as such, respondent was estopped from demanding the purported claim by initiating an arbitration proceeding. The learned Arbitrator wrongly and illegally accepted the fictitious demand and computations thereof, made by the respondent towards payment of GST charges. 12. The claims for GST made by the respondent were baseless, lacked credibility and were not backed by cogent evidence. The making of the award was vitiated on the ground that the same was based on illegal demands made by the respondent, which were not corroborated by evidence and the learned Arbitrator proceeded to pass the award, in the absence of any evidence at all. Thus, the making of the award and the publication thereof, were induced by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the Indian Contract Act. The final submission was that, the learned Arbitrator had hurriedly published the award, by pre-judging the claim. This was contrary to the fundamental policy of India. 16. Mr. Satarup Banerjee, learned Advocate for the respondent, submitted that the merits of the award should not be a consideration while deciding a prayer for unconditional stay of the award. The prayer for unconditional stay of the award could be allowed only if the requirements of the second proviso to Section 36(3) of the said Act of 1996, were met. That, the arbitration agreement or the contract being the basis of the award or the making of the award were induced by fraud or corruption. It was not the petitioner's case that either the contract or the arbitration agreement was induced by fraud or corruption. The petitioner's entire allegation was that the making of the award and the way in which the learned Arbitrator proceeded in the matter, were perpetrated by fraud. Allegations of bias and leniency towards the respondent were made. 17. Mr. Banerjee relied on various documents before the court and the minutes of the meetings before the learned Arbitrator, in order to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conclusion of the respondent's rejoinder. 22. Reference was made to the various findings of the learned Arbitrator which were elaborately discussed in the award along with the submissions and documents produced by the respective parties. The contentions of the petitioner that, the adjustment of the GST amount prior to the insolvency proceeding would indicate that the respondent was well aware of such process of adjustment, had not raised any objection at the relevant stage and had allowed the sum payable to the petitioner under the loan agreements to be frozen at Rs. 18,41,06,736.35/-, were taken into account by the learned Arbitrator. 23. However, the learned Arbitrator applied the provisions of the Goods and Service Tax Act and came to the finding that, it was the obligation of the seller of the goods or the provider of the services to collect the GST from the client and pay to the authorities. It was an obligation that the seller of the goods or the provider of the services must discharge under the law and the exact quantum of tax which was extracted from the buyer was to be deposited at the appropriate counters of the government. The money that the petitioner adjusted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings was succinctly explained by this Court in Ram Chandra Singh v. Savitri Devi [Ram Chandra Singh v. Savitri Devi, (2003) 8 SCC 319] in the following words : (SCC p. 322b-d) "Fraud as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which induces the other person or authority to take a definite determinative stand as a response to the conduct of the former either by word or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of others in relation to a property would render the transaction void ab initio. Fraud and deceptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditated and the learned Arbitrator proceeded in a preconceived manner. The learned Arbitrator disregarded the defense case completely and ignored vital evidence. The learned Arbitrator refused to allow the petitioner to adduce vital evidence. 31. It was argued that the assignment agreement and designated agreement were both subservient to the loan agreements entered into between the petitioner and the respondent and the amounts deposited by Mahalaxmi were rightly appropriated to the petitioner, to service the dues payable by the petitioner to the respondent under the working capital consortium loan agreement. This vital fact, according to the petitioner, was ignored by the learned Arbitration. 32. The minutes of the meeting dated May 18, 2024, recorded as follows:- "...The respondent resumes its arguments and refers to its original loan agreement with the claimant. The document has not been disclosed nor has been appended to the pleadings. The respondent refers to a letter dated May 30, 2017 issued by the respondent to the claimant sanctioning a loan Rs100 crore. The respondent places a clause at page 29 of the sanction letter which provides that the respondent would have a rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been particularly remiss in such regard. Quite unprofessionally, in the middle of arguments, a particular document not on record is sought to be relied upon without such document having been disclosed or even prior notice in such regard having been issued to the other side. In similar vein, a statement of accounts, which has been unilaterally prepared by the respondent and is not a part of any correspondence exchanged with the claimant or any other person, is sought to be placed on behalf of the respondent after unusual leave was granted to the respondent to make further submission despite the conclusion of the claimant's rejoinder. Such unilateral statement of accounts has not been looked into..." 34. The award discloses that both parties agreed to the reference of the dispute to the learned Arbitrator. No dispute had been raised as to the existence of the arbitration agreement. At no stage of the reference, had the petitioner raised any claim that the dispute was not capable of adjudication in terms of the arbitration agreement between the parties. The arbitration clause was considered. Both the parties agreed before the learned Arbitrator that no witnesses would be cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of can condone the illegality committed by the respondent bank in acting contrary to the terms of an express agreement admittedly signed by it and seeking to adjust money out of an item of accounts that was clearly impermissible. All of the respondent's submission, including the authorities relied upon by it, speak of the right of a bank as a creditor to appropriate towards its dues any asset or property of a constituent which is a debtor, where money can also be regarded as an asset. But the key to the entire issue is in whether the money that the respondent bank has adjusted was money that belonged to the claimant or could be regarded as an asset or property or security or the like of the claimant. 34. It would be prudent in this context to understand the fundamental principle governing the goods and services tax. Under the law for the time being in force, a person who acquires any specified goods or obtains any specified service is required to pay a percentage of the price for the goods of services by way of goods and services tax. Now, the obligation to pay the tax is of the person who purchases the goods or the person who obtains the service. But because of the impract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th, the respondent herein was entitled to appropriate the entire amount of Rs.80, if the deposit was more than Rs.80; or, the entire deposit if the deposit was less than Rs.80. Similarly, if there was a shortfall in the receivables that could be adjusted and appropriated by the respondent in one month, any amount more than the quantum deposited on account of receivables in the subsequent months could be appropriated towards the previous dues on account of receivables. But if the renter paid the receivables component and the GST component, it was incumbent on the respondent, in terms of clause 2.3(e) of the assignment agreement, to transfer the GST component to the claimant. In any event, no case has been made out of any default on the part of the renter in any particular month." 40. The contention of the petitioner that, the respondent had waived the right to claim refund of the GST component which was deposited by Mahalaxmi, was also discussed and decided in Paragraph 50 of the award reads as hereunder:- "50. Waiver is judicially defined to be a voluntary relinquishment of a known right. Since there are notices on record demonstrating that the claimant, whether through its erst ..... X X X X Extracts X X X X X X X X Extracts X X X X
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