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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 ..... espondent assigned the right, title and interest of the rent payable by Mahalaxmi Infra Contract limited (in short Mahalaxmi), under Master Lease Agreement (hereinafter referred to agreement) dated December 31, 2016, to the petitioner, under the AFA dated September 29, 2020. 4. In furtherance to the AFA the parties entered into the DAA. Mahalaxmi was to deposit the lease rentals, which included applicable GST, directly in the escrow account 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 aforesa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause 5.3 thereof were ignored. The learned Arbitrator failed to take into consideration the purport and meaning of clause 2.7 of the AFA. 10. A combined reading of the aforementioned clauses would clearly indicate that the respondent was under a contractual obligation to make a written request or send an intimation in advance, to the petitioner in respect of transfer of proceedings/amount, deposited in the designated account. The respondent 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had ignored the fact that the lien clause applied to all receivables (including retained interest). The creation of the AFA, was to serve the debt due to the petitioner under the original loan agreements and the petitioner had every right to receive the entire rental deposited by Mahalaxmi towards servicing the loan agreement. The learned Arbitrator disregarded the right of the petitioner to exercise lien under the loan agreement and also 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 contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e records. Neither were such documents ever disclosed nor any notice was issued to the respondent, indicating that reliance would be placed on such documents. The statement of accounts which had been unilaterally prepared by the petitioner and was not a part of the correspondence exchanged between the parties, were not accepted. 21. The minutes recorded that unusual leave was granted to the petitioner to make further submissions, despite 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage." 29. In Venture Global Engineering LLP vs. Tech Mahindra Limited reported in (2018) 1 SCC 656 deliberation on the meaning of fraud was as follows:- "76. The expression "fraud", what it means and once proved to have been committed by the party to the lis against his adversary then its effect on the judicial 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not the petitioner's case that either the arbitration agreement or the contract was induced by fraud or corruption. The entire allegation of the petitioner is against the learned Arbitrator and the process of making of the award. The sum and substance of the submissions of Mr. Ghosh was that the learned Arbitrator proceeded in an unfair and biased manner in order to hurriedly allow the claim of the respondent. The decision was premeditated 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, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into the designated account. It is the assertion of the respondent that since the adjustments had taken place prior to when the Form C was filed, the adjustment is deemed to have been accepted and no question arises of the same being re-opened now. 3. Though the arbitrator had made it clear in course of the preliminary hearing that all documents that the parties sought to rely on must be disclosed along with the pleadings, the respondent 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 parti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cordance with the law. 38. The said paragraphs of the award are quoted below :- "33. Despite the long and arduous submission and written notes of the respondent, there is an element of sympathy which is due to the respondent. The desperation on its part to which in at every straw may be attributed to the obvious loss it was suffered on account of the claimant. However, no amount of loss suffered by the respondent on account of the claims 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitrator in the following manner. "40. Clause 2.7 of the assignment agreement would come into play if the renter did the deposit the total monthly quantum required of it into the designated account. For instance, if the renter, Mahalaxmi, was required in terms of the renting schedule to deposit Rs.80 on account of receivables and Rs.20 on account of GST in a month; and the renter failed to deposit the entire amount of Rs.100 in any month, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced, which the learned Arbitrator held could not be looked into. 43. 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. 44. The law is well settled. An award debtor will have to secure the entire amount awarded, which includes the principal as also interest. This court does not find any reason to grant unconditional stay of the award. 45. The petitioner must secure the sum of Rs. 8,40,52,832/- by furnishing a bank guarantee to the satisfaction of the learned Registrar Original Side, Calcutta. The bank guarantee shall be kept renewed from time to time. There shall be unconditional stay of the award for a period of four weeks from date and the stay shall continue till disposal of the application under Section 34 of the Arbitration Conciliation Act, 1996, upon compliance of this order. In case of default, the stay shall be vacated. 46. All observations made are tentative and the applicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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