Arb.O.P.(Comm.Div.) No.330 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 08.09.2022
CORAM
THE HONOURABLE MR.JUSTICE SENTHILKUMAR
RAMAMOORTHY
Arb.O.P.(Comm.Div.) No.330 of 2022
M/s.India Pistons Limited,
Huzur Gardens,
Sembiam,
Chennai - 600 011.
Rep. by its Company Secretary,
Mr.K.Balaji ... Petitioner
vs.
M/s.INOX Air Products Private Limited
7th Floor, Ceejay House,
Dr.Annie Besant Road,
Worli - 400 018
Rep. by its Managing Director ... Respondent
PRAYER: Arbitration Original Petition filed under Section 11(5) of the
Arbitration and Conciliation Act, 1996, pleased to appoint a Sole Arbitrator
to constitute the arbitral tribunal to resolve the disputes that have arisen
between the petitioner and the respondent.
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https://www.mhc.tn.gov.in/judis
Arb.O.P.(Comm.Div.) No.330 of 2022
For Petitioner : Mr.Krishna Srinivasan
for M/s.S.Ramasubramaniam
For Respondent : Mr.Rahul Balaji
**********
ORDER
The petitioner and the respondent entered into a Memorandum of Understanding (MOU) dated 20.11.2020 for transfer of leasehold rights. Under clause 2 thereof, the total consideration was fixed at Rs.15,24,00,000/-. Clause 18 thereof provides for resolution of disputes by arbitration and the venue is fixed at Chennai. After the MOU was executed, the petitioner informed the respondent that lease transactions are considered as supplies and that GST would be applicable. The respondent was further informed that it would be entitled to input tax credit (ITC). The parties exchanged further correspondence whereby different options were proposed by the petitioner with regard to such GST liability. Eventually, by communication dated 30.03.2021, the respondent informed the petitioner that it is ready and willing to reimburse the GST only if the Advance Ruling 2/7 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.330 of 2022 Authority confirmed the eligibility of the respondent to full ITC. Since the Advance Ruling Authority ruled that the respondent would not be eligible for ITC, a dispute ensued. The petitioner issued notice dated 01.03.2022 under Section 21 of the Arbitration and Conciliation Act, 1996 and by reply dated 25.03.2022, the respondent proposed the names of two advocates for appointment as arbitrator. Thereafter, the parties could not reach an agreement and the petitioner presented this petition.
2. Learned counsel for the petitioner submits that the MOU undoubtedly contains an arbitration clause and that the dispute relating to whether the petitioner is entitled to pass on GST liability to the respondent should be considered and decided by a duly constituted arbitral tribunal. In fact, by referring to the reply dated 25.03.2022 from the respondent, he pointed out that the respondent admitted that the dispute is arbitrable by suggesting two alternative names for appointment as arbitrator. According to learned counsel, the respondent changed its stand on the issue with considerable ingenuity in the counter presented before this Court. 3/7 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.330 of 2022
3. Learned counsel for the respondent, on the other hand, contended that the admitted position between the parties is that the total consideration specified in the MOU did not exclude GST. In support of this contention, the e-mail of 11.03.2021 from the petitioner was referred to. According to learned counsel for the respondent, it is because the petitioner agreed that the MOU did not deal with GST that the petitioner engaged in correspondence to reach an agreement with regard to GST liability as evidenced by the e-mail of 23.03.2021. Therefore, it is submitted that GST liability is outside the scope of the MOU, as admitted by the parties.
4. From the rival contentions, it is clear that the focal point of the dispute is whether GST liability is dealt with in the MOU and whether a dispute pertaining thereto is within the scope of the arbitration clause. The arbitration clause is set out below:
"18. In the event of any dispute or differences, arising out of this MOU or in connection with and interpretation of this MOU, the same shall be referred for Arbitration conducted by a sole arbitrator appointed by both 4/7 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.330 of 2022 the Parties under the provisions of the Indian Arbitration and Conciliation Act, 1996 and any rules framed there under (including amendments / enactments thereof). The venue of arbitration shall be at Chennai and the language shall be English. Judgment on any Arbitration Award shall also be entered in a Court of competent jurisdiction at Chennai."
5. The arbitration clause uses the language "any dispute or differences, arising out of this MOU or in connection with and interpretation of this MOU". Such language has been interpreted in multiple judgments as conferring wide jurisdiction on the arbitral tribunal. The contentious issues between the parties is whether clause 2 of the MOU stipulates the entire consideration, including all taxes, or whether it is exclusive of GST. While the respondent contended that the petitioner admitted that the MOU did not deal with GST, the petitioner contends that the total consideration does not include GST. In view of the interpretations placed on the MOU by the contesting parties, it is not appropriate for this Court in exercise of jurisdiction under Section 11 to decide this controversy. 5/7 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.330 of 2022 Therefore, it becomes necessary to constitute an arbitral tribunal to decide this dispute by leaving it open to the contesting parties to raise all contentions before such arbitral tribunal.
6. Consequently, Arb.O.P.(Comm.Div.) No.330 of 2022 is allowed by appointing Mrs.Justice Chitra Venkatraman, retired Judge of this Court, as the sole arbitrator. The sole arbitrator is called upon to enter upon reference and adjudicate the dispute. It is open to the sole arbitrator to fix the fees and expenses in relation to such arbitration.
08.09.2022 rna Index : Yes / No Internet : Yes / No 6/7 https://www.mhc.tn.gov.in/judis Arb.O.P.(Comm.Div.) No.330 of 2022 SENTHILKUMAR RAMAMOORTHY,J rna Arb.O.P.(Comm.Div.) No.330 of 2022 08.09.2022 7/7 https://www.mhc.tn.gov.in/judis