HC Finds No Merit in Sec. 34 Plea as Arbitral Tribunal’s ‘Nil’ Award Rendered Claims Irrelevant After-Tax Demand Quash

Case Details: Naresh Kumar Bajaj v. Bunge India (P.) Ltd. - [2024] 168 taxmann.com 139 (HC-Delhi)

Judiciary and Counsel Details

• Neena Bansal Krishna, J.
• Dhruv Mehta, Sr. Adv., Anubhav Ray, Ms Gayatri Verma & Abhishek, Advs. for the Petitioner.
• Saket Singh, Sr. Adv. & Sameer Patel, Adv. for the Respondent.

Facts of the Case

In the instant case, the petitioners entered into a Non-Compete Agreement (NCA) and Business Transfer Agreement (BTA) with the respondent. They sought a finding on the interpretation of the said agreements to determine contractual obligations, viz indirect tax (service tax) liability, and for payment of damages constituted as costs incurred by the petitioner in defending the assessment order. As per the said agreements, the entire responsibility for these costs rests with the respondent.

However, the Arbitral Tribunal passed a ‘Nil’ award on the ground that in view of the demand itself having been quashed, the exercise of adjudicating upon claims of petitioners had become academic.

The petitioners filed an instant petition under section 34 of the Arbitration and Conciliation Act, 1996, to challenge the said award.

High Court Held

The High Court noted that since in Agreement it was specifically mentioned that service Tax was not leviable on NCA fees, for erroneous acts of third party, respondent could definitely not be held liable for costs incurred in defending Notices before CESTAT.

The High Court held that the grounds agitated by the petitioners did not fall in either of categories of patent illegality or fundamental breach of Indian Law. Thus, there being no merit in petition filed under section 34, the same was to be dismissed.

List of Cases Referred to

• Rashlriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran (2012) 5 SCC 306 (para 43)
• Kedarnath Jute Mfg. Co. Ltd. v. The CIT (Central) Calcutta (1972) 3 SCC 252 (para 43)
• Deccan Paper Mills Company Limited v. Regency Mahavir Properties and others (2021) 4 SCC 786 (para 44)
• Bharat Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 1543 (para 45)
• MD, Army Welfare Housing Organization v. Sumangal Services (P) Ltd. (2004) 9 SCC 619 (para 45)
• Hindustan Zinc Limited v. Friends Coal Carbonization (2006) 4 SCC 445 (para 46)
• Associate Builders v. DDA (2015) 3 SCC 49 (para 46)
• Ssanyong Engineering & Construction Co. Ltd. v. NHAI (2019) 15 SCC 131 (para 46)
• Benarsi Krishna Committee & Ors. v. Karmyogi Shelters Pvt. Ltd. (2012) 9 SCC 496 (para 47)
• Associate Builders (supra); State of Goa v. Praveen Enterprises (2012) 12 SCC 581 (para 49)
• P.H. Pandian v. P. Veldurai & Anr. (2013) 14 SCC 685 (para 50)
• Harsharan Verma v. Charan Singh & Ors. (1985) 1 SCC 162 (para 50)
• Central Areca Nut & Cocoa Marketing & Processing Cooperative Ltd. v. State of Karnataka & Ors. (1997) 8 SCC 31 (para 50)
• K.N. Rajakumar v. V. Nagarajan and Ors. (2022) 4 SCC 617 (para 50)
• Reliance was also placed on Life Insurance Corporation of India and Anr. v. Ram Pal Singhy Bisen (2010) 4 SCC 491 (para 50)
• MMTC Limited v. Vedanta Ltd, (2019) 4 SCC 163 (para 69)
• ONGC v. Saw Pipes 2003 (5) SCC 705 (para 69)
• Hindustan Zinc Limited v. Friends Coal Carbonisation (2006) 4 SCC 445 (para 70).