Bombay High Court
Hindustan Dorr Oliver Ltd. vs Jet Airways (India) Limited on 1 November, 2012
Bench: Anoop V.Mohta
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMPANY PETITION NO. 350 OF 2012
Hindustan Dorr Oliver Ltd., A Company ) ... Petitioners.
duly registered under the Companies )
Act, 1956 and having its registered office )
at Dorr-Oliver House Chakala, Andheri (E)
Mumbai -400 099. )
V/s.
Jet Airways (India) Limited ) ... Respondent.
A Company incorporated under the )
Companies Act, 1956 and having its )
registered office at "Siroya Centre", )
Sahar Airport Road, Andheri (E). )
Mumbai -400 099 )
---
Mr. Niranjan Vaghela i/by M/s. Pandya & Co. for the
Petitioners.
Mr. E.P. Bharucha, Sr. Counsel a/with Ms. Sheetal Sabnis, Ms.
I.Sen i/by Gagrats for the Respondents.
---
CORAM : ANOOP V. MOHTA, J.
DATE : 01ST NOVEMBER, 2012
ORAL JUDGMENT :
1 Heard finally by consent.
2 The Petitioner, the owner of the commercial premises
which were let out to the Respondent Company, the Licensor,
has invoked Sections 433(e) & 434 of the Companies Act, 1956
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(for short, the Companies Act) basically on the ground that the
Respondent Company not cleared the service tax liability.
3 We have dealt with the aspect of service tax on renting
in the case of Retailers Association of India (RAI) vs.
Union of India & Ors.,1 where a Notification was issued on
22nd May, 2007 which was followed by a circular dated 4 th
January, 2008 of the Ministry of Finance in the Union
Government. In para 3 it is observed thus :
"3. Following the decision of the Delhi High Court,
the Finance Act, 2010 substituted the provisions of
sub-clause (zzzz) with effect from 1 June, 2007. As
amended, the provision now stipulates that the
expression taxable service means any service
provided or to be provided :
'To any person, by any other person, by
renting of immovable property or any
other service in relation to such renting,
for use in the course or for furtherance of,
business or commerce."
The challenge in this batch of Petitions
before the Court is to the constitutional validity
1 2011 (5) Mh.L.J. 660
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of the imposition of a service tax under sub-
clause (zzzz) of clause (105) of section 65 read
with section 66 of the Finance Act of 1994 as
amended."
The service tax is indirect tax. It is made retrospectively
applicable to the commercially rented / licensed premises.
The basic liability is of the service provider, the owner, unless
agreed otherwise.
4 The Petitioners and Respondent entered into a leave and
licence agreement on 22nd December, 2006 for the premises
for a period of five years. The relevant terms of the agreement
are as under :
"1. That the License Fee payable for the
balance period of the lock in including notice period
of 3 months (namely from 1st July 2009 to 31st
January 2010) at the rate of Rs. 14,75,000/-
(Rupees Fourteen Lakhs Seventy Five Thousand
only) per month by "JET" to "HDO" will be adjusted
by "HDO" against the interest free Security Deposit of
Rs.88,50,000/-(Rupees Eighty Eight Lakhs Fifty
Thousand only) furnished by "JET" to "HDO" at the
time of signing the Agreement;
6. "JET" shall claim no compensation against
"HDO" for its voluntarily surrendering the "Licensed
Premises" before the expiry of its term in terms of
the "Leave & License Agreement"."
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5 On 9th July, 2009, the parties entered into a last
Memorandum of Understanding (MOU), as the Respondent
Company vacated the premises six months prior to the expiry
of the agreement. Admittedly, the Petitioners have adjusted
the licence fees payable out of deposit of the amount of Rs.
88,50,000/-. There was no deduction of any amount towards
the service tax even on that date for the basic reason that there
was no agreement whatsoever between the parties with regard
to the payment /liability of the service tax.
6 Further, there is a letter dated 21st July, 2009 addressed
by the Petitioner to the Respondent and the relevant part of
the letter reads thus :
"I/We, further confirm that I/We have no claim
whatsoever against Jet Airways (India) Limited in
respect of the above and undertake not to raise
and/or cause to be raised any claim in future."
7 The concept of the service tax has come into force from
01st June, 2007. A challenge was raised to the retrospective
demand and it is pending in Supreme Court. The service tax
is not a direct tax. It is an indirect tax. The party in a given
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case, therefore, may agree to pay the service tax as per the
terms and conditions of the agreement. Admittedly, there was
no such specific agreement with regard to the payment of the
service tax. Principally the Petitioner who had let out the
premises was liable for such service tax and not the
Respondent.
8 Considering the scope and purpose of Section 433 of
the Companies Act for winding up of a Company, the basic
requirement is that the amount should be due and payable
and crystallized on the first date of the statutory demand
raised and even on the date of filing of such a winding up
proceedings. Considering the above position on record, I am
not inclined to accept the statement made by the learned
counsel appearing for the Petitioner that the amount due and
payable was crystallized on the relevant date and even today.
The clauses so referred above including the memorandum of
understanding and the correspondence makes the things very
clear that the Respondent-Company never admitted the
liability of service tax. It is not even the case of the
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Petitioner that there was any specific written agreement with
regard to the service tax. The contention revolves around
the invoices issued as the Respondent Company on certain
occasions made a part payment of the service tax as at that
time they were occupying premises, is in no way can be stated
to be binding agreement, as is sought to be contended by the
learned counsel for the Petitioner. If there is no agreement and
no admitted liability and if basically the service tax is an
indirect tax, I am not inclined to accept, in view of the
agreement between the parties and even considering the lock
in period referred that it is sufficient to hold that the
Respondent Company is liable for the service tax, as
contended.
9 In Writ Petition No. 198 of 2012 between Tata
Advanced Materials Ltd. vs. Tooltech Global Engineering
Pvt. Ltd., decided by me on 17th October, 2012, I have made a
reference to the observations of the Apex Court that the Apex
Court recently in IBA Health (India) Private Limited vs.
Info-Drive Systems SDN BHD,2 while dealing with the
2 2010 (10) SCC 553
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concept of bonafide dispute, referring to winding up Petition
under the Companies Act, the Apex Court has elaborated that
the amount due and payable should be clear and outstanding
on the date of the demand. If any amount, though
crystallized, liable to be paid subject to contingencies and/or
certain conditions, that just cannot be stated to be the amount
due and payable by the Company.
10 We are not concerned with the rival contentions and
the dispute so raised by and between the parties. Here it is
sufficient to dismiss the Petition as there are disputed
questions of facts and the law though revolving around the
documents referred and relied by the learned counsel
appearing for the Petitioner which in no way can assist to
settle and/ or crystallize the amount of service tax as claimed
from the Respondent.
11 Resultantly, the Petition is dismissed. No costs.
(ANOOP V. MOHTA, J)
