Bombay High Court
M/S Sino Ocean Ltd vs M/S Salvi Chemical Industries Ltd on 13 December, 2017
Bench: K.R. Sriram
This Order is modified/corrected by Speaking to Minutes Order dated 22/12/2017
1 901.chs.76.2013 exal.263.2012.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CHAMBER SUMMONS NO. 76 OF 2013
IN
EXECUTION APPLICATION (LODG.) NO. 263 OF 2012
IN
ARBITRATION AWARD OF SHRI SALIL M. SHAH
M/s. Sino Ocean Limited .. Applicant
IN THE MATTER BETWEEN :
M/s. Sino Ocean Limited .. Claimant
Vs.
M/s. Salvi Chemical Industries Ltd. .. Respondent
Shri Rahul Narichania, senior advocate a/w. Shri P. Ranjan i/b M/s. Halai
and Co. for applicant/claimant.
Shri S.J. Mishra a/w. Ms. Pushpa Tiwari i/b SRS Legal for respondent.
CORAM : K.R.SHRIRAM, J.
DATE : 13TH DECEMBER 2017
P.C.
1 This chamber summons is taken out by applicant for various reliefs.
Due to passage of time, only prayer clause (a) with a rider as below and
prayer clause (f) remain to be considered. Prayer clause (a) reads as under :-
"(a) that from the funds deposited into Court by the Respondent, this
Hon'ble Court be pleased to order and direct the Prothonotary &
Senior Master, High Court, Bombay to pay to the Claimant in US $
currency the decretal amount of US $ 6,57,850/- together with interest
at 8% from 13th April 2009 to 5th July 2010 and further interest on the
total amount @ 8% till payment and/or realization by making
payment into the Claimant's Bank Account, viz., SINO OCEAN
LIMITED, BANK OF INDIA, HONGKONG BRANCH, RUTTONJEE
CENTRE, 2ND FLOOR, 11 DUDDELL STREET, HONG KONG
Shraddha Talekar PS 1/21
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(ACCOUNT NNO.; 0 2 3 3 0 3 7 2 3 0) SWIFT CODE :
BKIDHKHHXXX."
Though the prayer is for payment of US $ 657,850/- together with
interest at 8% from 13th April 2009 to 5th July 2010 and further interest on
the total amount at 8% per annum till payment and/or realization by making
payment into the claimant's bank account, on or around 31st July 2013, a
sum of US $ 662,362/- has been paid over by Prothonotary and Senior
Master, High Court, Bombay to claimant. According to claimant, this
amount as on 31st July 2013 had increased to US $ 900,107/- and that left a
short fall of US $ 237,475/- which, as on 23rd November 2017, has increased
to US $ 319,816/- and it keeps increasing at the rate of US $ 144 per day
until payment/realization.
Prayer clause (f) reads as under :-
"(f) that in the event of the Respondent failing to comply with prayer
clause (c)(ii) above,
(i) this Hon'ble Court be pleased to order and direct the
attachment of the movable and immovable assets of the
Respondent.;
(ii) that this Hon'ble Court be pleased to order and
direct the arrest and detention the Directors of the
Respondent in civil prison for failure of the Respondent in
depositing the balance decretal amount to the Claimant.;
(iii) that this Hon'ble Court be pleased to order and
direct the Directors of the Respondent to be present in Court
for ascertaining as to what debts are due to the Respondent
and for production of their books of accounts and documents
Shraddha Talekar PS 2/21
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pertaining to the properties.;
(iv) that this Hon'ble Court be pleased to attach the
immovable properties and movable properties standing in the
name of the Respondent as per Schedule to the Execution
Application.;
(v) that this Court be pleased to order and direct the
Respondent to disclose on oath within 7 days hereof the
current list of assets both movable and immovable of the
Respondent."
2 Though it reads in the event of respondent's failing to comply with
prayer clause (c)(ii), since the Prothonotary and Senior Master has already
remitted the amount available with him leaving a shortfall, according to Shri
Narichania, counsel for claimant, prayer clause (f) has to be moulded to read
in the event of respondent failing to pay them balance amount of US $
319,816/- increasing at the rate US $ 144 per day from 24th November 2017,
Items (i) to (v) of prayer clause (f) be granted.
I am inclined to agree with Shri Narichania.
3 The facts in brief are :-
Consignments of Sodium Saccharin were shipped to respondent in
pursuance of three sales contracts dated 6th May 2008, 2nd June 2008 and 16th
July 2008. The contract dated 6th May 2008 was for a total quantity of 20
MT at a unit price of US $ 20.4 per kg, the total contract value being US $
409,000. The contract dated 2nd June 2008 was for a quantity of 7 MT at a
Shraddha Talekar PS 3/21
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4 901.chs.76.2013 exal.263.2012.doc
unit price of US $ 21.30 with a total contract value of US $ 149,100. The
contract dated 16th July 2008 was for a quantity of 20 MT at a unit price of
US $ 19.25 with a total contract value of US $ 385,000. Subsequently, on
24th September 2008 an agreement was entered into and signed between the
parties. The record of the agreement is reduced to a document which is
styled as an "Agenda Of Meeting" (AOM). The agreement between the
parties as reflected in the document was that respondent had agreed to give a
discount of US $ 4.5 per kg. to respondent towards each of the above three
shipments/invoices. The disputes arose as to whether the discount was given
or not given but the fact is goods were shipped by the claimant and received
by respondent.
4 As respondent did not make payment, petitioner filed a petition for
winding up of respondent under the provisions of Companies Act, 1956. The
said petition was disposed by an order dated 7 th April 2010 whereby
respondent was directed to deposit a sum of Rs.1,50,00,000/- with the
Prothonotary and Senior Master, High Court, Bombay within a period of
four weeks and dispute between the parties was referred to arbitration. The
order of course also provided for consequences of default which is not
relevant because the amount of Rs.1,50,00,000/- was deposited by
respondent. The Arbitrator published an Award dated 21 st February 2011 in
Shraddha Talekar PS 4/21
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favour of claimant. Operative part of the Award reads as under :-
"AWARD
(1) The Respondents are directed to pay to the Claimants, the sum
of US $ 658,150 with interest thereon @ 8% from 13th April 2009 to 5th
July 2010 and at the same rate on the total amount from 6 th July 2010
till payment and/or realisation. The Respondents are also directed to
pay to the Claimants, the sum of Rs.8,00,000/- as costs of the
Arbitration. The said amount of Rs. 8,00,000/- to be paid within a
period of 6 weeks from the date of the award.
(2) The Claimants are directed to pay to the Arbitral Tribunal, the
sum of Rs. 5,000/- towards stamp paper, stenographer charges,
printing and miscellaneous expenses. The aforesaid sum of Rs. 5,000/-
to pay to the Arbitral Tribunal within a period of 3 weeks from the
date of the Award."
5 Immediately, claimant filed a petition under Section 9 of the
Arbitration and Conciliation Act, 1996 (the said Act). In the meanwhile,
respondent also challenged the Award by filing a petition under Section 34
of the said Act. This Court, in its order dated 13th June 2011 while deciding
the application of claimant under Section 9 of the said Act at the ad-interim
stage, was pleased to direct respondent to deposit the additional amount as
required under order dated 7th April 2010. On 22nd July 2011, respondent,
without prejudice to their rights and contentions, deposited a sum of
Rs.1,46,40,725/- with the Prothonotary and Senior Master, High Court,
Bombay. Further sums were also deposited, i.e., Rs. 35,00,000/- on 23 rd
August 2011 and Rs. 10,00,000/- on 17th September 2012.
Shraddha Talekar PS 5/21
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6 The petition filed by respondent under Section 34 of the said Act
came to be dismissed. Impugning that order, respondent preferred an intra-
Court Appeal being Appeal No. 670 of 2011 which came to be dismissed by
an order dated 16th August 2012. While dismissing the Appeal, the Division
Bench of this Court modified the Award whereby the amount of US $
658,150/- as awarded, came to be reduced to US $ 657,850/-, a reduction of
US $ 300/-. Against this order of dismissal of appeal by the Division Bench,
respondent preferred a Special Leave Petition No.33571 of 2012 before the
Supreme Court of India. The Special Leave Petition came to be dismissed
summarily by an order dated 26th November 2012.
7 After respondent reached a dead end, in its challenge to the Award,
the present chamber summons was taken up for hearing on 7 th May 2013.
Respondent agreed, without prejudice to their rights and contentions, for
payment of the amounts deposited by them with the Prothonotary and
Senior Master to claimant, except an amount of Rs.10 lakhs, which,
according to respondent, would cover the Tax that they had to deduct (TDS)
on the interest component awarded by the Arbitrator. This Court was pleased
to pass the following order on 7th May 2013 :-
"1 Heard.
2 Without prejudice to the rights and contentions of both the
parties, the following order is passed by consent as a present
Shraddha Talekar PS 6/21
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arrangement between the parties:
i) The Prothonotary and Senior Master, High Court,
Bombay is directed to retain/withhold a sum of
Rs.10,00,000/- from the amounts deposited in Court by
the Respondent and remit forthwith the balance amount
together with all accrued interest that is admittedly due
to the Applicant in US $ currency into the Applicant's
bank account viz. Sino Ocean Limited, Bank of India,
Hongkong Branch, Ruttonjee Centre, 2nd floor, 11
Duddell Street, Hong Kong A/c No.0233037230, Swift
Code: BKIDHKHHXXX in accordance with law.
ii) All issues between the parties in the Chamber
Summons are expressly kept open and will be decided at
the final hearing of the Chamber Summons.
iii) Chamber summons to come up for hearing on 17th
June 2013.
iv) Liberty to apply.
(emphasis supplied)
Subsequently, Prothonotary and Senior Master remitted, on 31st July
2013, a sum of US $ 662,362/-.
8 According to Shri Narichania, payments made by respondent with the
Prothonotary and Senior Master are not payments in terms of Order 21 Rule
1 of the Code of Civil Procedure, 1908 (CPC) which prescribes specific
modes for satisfaction of a money decree but it is only a deposit made for
stay of execution pending dismissal of the challenge to the Award to avoid
payment of decretal amount. Therefore, according to Shri Narichania,
respondent has to pay a further sum of US $ 319,816/- as on 23 rd November
2017 and the said amount, from 24th November 2017, is increasing at US $
Shraddha Talekar PS 7/21
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144 per day until payment/realization. Shri Narichania also relied upon a
judgment of the Delhi High Court in Hindustan Construction Corpn. Vs.
Delhi Development Authority1.
Shri Narichania also submitted that there is nothing in the Income Tax
Act which supports the plea that in respect of the amount payable under a
judgment-debt of the nature sought to be enforced, the debtor is entitled to
deduct income-tax. Shri Narichania further submitted that if the amount is
paid as interest to a non-resident in the usual course of business then at the
time of credit of such amount to the account of the payee, the payer would
be bound to deduct income tax at the rate in force. However, when such
amounts becomes part of a judgment debt, they lose their original character
and assume the character of a judgment debt. Once such an amount assumes
the character of a judgment debt, the decree passed by the Civil Court must
be executed subject only to the deductions and adjustments permissible
under the Code of Civil Procedure and therefore the question of deducting
any tax at source does not and cannot arise. Shri Narichania, in support of
his submission, relied upon a judgment of a Single Judge of this Court in
Islamic Investment Company vs Union Of India (UOI) And Anr.2.
9 Per contra, Shri Mishra appearing for respondent submitted that the
1 2002 DGLS (AHC) 1851
2 2002 (4) BOMCR 685
Shraddha Talekar PS 8/21
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legislative intent in enacting sub-rules 4 and 5 of Order XXI Rule 1 sub-
clause (b) is clear to the pointer that interest should cease to run on the
deposit made by the judgment debtor and notice given or on the amount
being tendered outside the Court. Applying the same principle, Shri Mishtra
submitted that in this case, respondent had deposited Rs.1,50,00,000/- on
28th April 2010, Rs.1,46,40,725/- on 22nd July 2011, Rs. 35,00,000/- on 23rd
August 2011 and Rs. 10,00,000/- on 17th September 2012 which would
mean the amounts have been paid under the Award by the judgment debtor
and the rates of exchange to be applied, should be the date on which these
amounts were deposited. Mr. Mishra added, when those rates are applied,
that would result in claimant having to refund a sum of US $ 12,387.52 to
respondent. It will be useful to reproduce the statements given by Shri
Narichania for claimant and Shri Mishra for respondent.
(I) The statement given by Shri Narichania reads as under :-
M/s Sino Ocean Ltd.,
Amount to be received from M/s Salvi Chemicals
Amount (in US $)
Particulars Opening Balance Interest Balance
Opening Balance 657,850.00 -- 657,850.00
as on 13.04.2009
Add: - Simple
Interest @ 8% p.a.
for 448 days i.e.,
from 13.04.2009 to
05.07.2010 657,850.00 64,595.00 722,445.00
Shraddha Talekar PS 9/21
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Add: - Simple
Interest @ 8% p.a.
for 1122 days i.e.,
from 06.07.2010 to
31.07.2013 722,445.00 177,662.00 900,107.00
Balance payable as 900,107.00
on 31.07.2013
Less : - Amount
paid by M/s Salvi
Chemicals on
31/7/2013 662,362.00
Amount due as on 237,475.00
31.07.2013
Add: - Simple
Interest @ 8% p.a.
for 1575 days i.e.,
from 31.07.2013 to
23.11.2017
237,475.00 82,071.00 319,816.00
Balance due as on
23.11.2017 319,816.00
Note: Actual amount remitted to Sino Ocean Ltd., account with Bank of India, Hong
Kong Branch : 1037230 USD 2007002270-01 on 31/7/2013 : USD 6,62,362:00 -
23.04 = 6,62,338:96
II) The statement given by Shri Mishra for respondent (corrected by Court)
reads as under :-
STATEMENT OF CALCULATION AMOUNT DUE UNDER
AWARD AS ON 31.5.2016
Sr. Particulars Corrected Amount in Corrected
No. Amount US$ Amount
Shraddha Talekar PS 10/21
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1. Principle amount under 657850.00
the Award
3. Add : Interest on 54790.79
US$657850 at 8% p.a.
from 13.04.2009 to
27.04.2010
(380 days)
4. Total 712640.79
5. Less : Rs.1,50,00,000/- 54790.79 336322.87*
Paid on 28.04.2010 281532.08
(Rs.1,50,00,000/-
divided by 44.60 i.e. the
rate of USD$ on the date
of payment.
* The said part payment
is firstly adjusted
towards interest of US$
54790 and balance rate
of USD as on 17.09.2012
i.e. amount is adjusted
towards the principle
(657850-281532.08
=376317.92)
6. Total 376317.92
7. Add : Interest on USD 5691.16
376317.92 at 8% p.a.
from 28.4.2010 to
5.7.2010 (i.e. the date of
award)
(69 days)
8. Decretal amount as on 382009.08
the date of Award
5.7.2010
9. Add : Interest on USD 31425.12 -31900.37
376317.92 (382009.08)
at 8% p.a. from 6.7.2010
to 21.7.2011 (i.e. one day
prior to next payment on
22.7.2011)
(381 days)
10. Total 413434.20 (413909.45)
11. Less : 37116.28 (37591.53 329969.01
Shraddha Talekar PS 11/21
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Less : Rs.1,46,40,725/- 292852.73 292377.48)
Paid on 22.7.2011
(Rs.1,46,40,725/-
divided by 44.37 i.e. the
rate of USD$ on the date
of payment.
* The said part payment
is firstly adjusted
towards interest of
37116.28(37591.53) and
balance amount
292852.73(292377.48) is
adjusted towards the
principle ( 376317.92 -
292852.73= 83465.19 )
(376317.92 -292377.48
= 83940.44)
12. Total 83465.19 (83940.44)
13. Add : Interest on USD 585.39 (588.73)
83465.19(83940.44) at
8% p.a. from 22.7.2011
to 22.8.2011 (i.e. the date
of award)
(32 days)
14. Total 84050.58 (84529.17)
15. Less : Rs.35,00,000/- 585.39 (588.73 78882.12
paid on 23.8.2011 78296.73 78293.39)
(Rs.35,00,000/- divided
by USD 44.37 =
78882.12
The said part payment is
firstly adjusted towards
interest(588.73) and
balance amount of USD
78296.73(78293.39) is
adjusted towards
principle
(83465.19 - 78296.73 =
5168.46)
(83940.44 - 78293.39=
5647.05)
16. Total 5168.46 (5647.05)
Shraddha Talekar PS 12/21
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17. Add : Interest on USD 442.93 (483.94)
5168.46 (5647.05) at 8%
p.a. 23.8.2011 to
16.9.2012 (391 days)
18. Total 5611.39 (6130.99)
19. Less : Rs.10,00,000/- 18518.52
paid on 17.9.2012
(10,00,000 divided by
54.00 I.s. the rate of
USD as on 17.9.2012).
The said payment is
adjusted towards interest
20. Total - 12907.13 -12387.52
10 Shri Mishra relied upon a judgment of the Apex Court in Forasol Vs.
Oil & Natural Gas Commission3 to submit that in an action to recover an
amount payable in a foreign currency, one of the dates for selection by the
Court as the proper date for fixing the rate of exchange at which the foreign
currency amount has to be converted is the date when the decretal amount is
paid or realized. Shri Mishra submitted that since respondent has deposited
from time to time the decretal amount with the Prothonotary and Senior
Master, the date on which those amounts were deposited will be the proper
date for fixing the rate of exchange and it is immaterial when claimant got
the money in their bank accounts.
In effect, what counsel for respondent Shri Mishra submitted was it is
3 1984 AIR SC 241
Shraddha Talekar PS 13/21
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too bad that the dollar rate fluctuated to such an extent that claimant got
almost 40% less than what they were entitled to. Shri Mishra also relied
upon a judgment in Bharat Heavy Electricals Ltd. Vs. R.S. Avtar Singh &
Co. 4 to submit that as per the provisions of Order 21 Rule 1 of the CPC, the
moment respondent deposited the decretal amount with the Prothonotary
and Senior Master, their responsibility is over and any risk on currency
fluctuation would be to the account of claimant. Shri Mishra also submitted
even though these amounts were deposited from time to time, claimant
never made an application to the Court to permit them to withdraw the
amount and therefore cannot ask for anything more than what they have
received.
11 Indisputably, the amounts deposited by respondent from time to time
was not in satisfaction of a decree or an Award. It must be noted that the
Arbitrator has awarded payments in United States Dollars, which was the
currency in which respondent was to pay to claimant under the sale contract
and the claim was also preferred. Under the award, as coverred by the
Division Bench, respondent was to pay US $ 657,850/-. Respondent did not
pay but kept challenged the award.
The first amount of Rs.1,50,00,000/- was deposited when the winding
4 2013 AIR (SC) 252
Shraddha Talekar PS 14/21
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up petition was filed to show respondent's bona-fide. After the Award went
against respondent, respondent first challenged the Award and in the
meanwhile when claimant filed a petition under Section 9 of the said Act,
pursuant to an order passed by this Court, respondent deposited a further
sum of Rs.1,46,40,725/- and later Rs. 35,00,000/- and Rs. 10,00,000/-.
Respondent lost its challenge to the Award before the Single Judge, carried
the same on intra-court Appeal where again they lost and carried the same to
the Apex Court where their challenge was dismissed. At no point of time,
respondent paid any amount in satisfaction of the decree but the amounts
were deposited only to avoid execution or any action being taken against
respondent. Respondent never accepted the decree and therefore, the
deposits made by respondent can never be accepted as payment in
satisfaction of award or decree. It should be kept in mind that the first
amount of Rs.1,50,00,000/- was deposited only to avoid a winding up
petition being admitted against respondent. Even when respondent
consented to release all amounts except Rs. 10,00,000/-, it is recorded in the
order dated 7th May 2013 "by consent as a present arrangement". It was
only protem, not final
12 The amounts deposited by respondent, were not the decretal amount.
As stated earlier, the first amount of Rs.1,50,00,000/- was deposited on 28 th
Shraddha Talekar PS 15/21
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April 2010, even before the arbitration was commenced. After the Award
was given, respondent challenged the award but on an application made by
petitioner, deposited a sum of Rs.1,46,40,725/- on 22 nd July 2011. Further
amounts were deposited later on 23 rd August 2011 and on 17th September
2012.
13 Therefore, the amounts deposited by respondent under the orders of
this Court cannot, by any stretch of imagination, be termed as payments as
envisaged in Order 21 Rule 1 of CPC and as such the judgment debt. As per
Order 21 Rule 1 of CPC, the modes of payment of a money decree are : (a)
by depositing into the Court whose duty it is to execute the decree, or send
to that Court by postal money order or through a bank; or (b) out of Court,
to the decree-holder by postal money order or through a bank or by any
other mode wherein payment is evidenced in writing; and (c) otherwise as
the Court, which made the decree, directs. A deposit of any amount by a
judgment debtor in the Court to purchase peace by way of stay of execution
or to show bonafides for preventing an order of winding up is not a payment
of decretal amount in terms of Order 21 Rule 1 of CPC which prescribes
specific modes for the satisfaction of a money decree.
14 The payment made by the decree holder under Rule 1 of Order 21 of
Shraddha Talekar PS 16/21
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CPC and a deposit made by the judgment debtor in Court for obtaining stay
of execution of decree are altogether different courses adopted by the
judgment debtor. Payment under Order 21 Rule 1 of CPC satisfies a decree
holder whereas, a deposit in the Court to avoid execution keeps the amount
beyond the reach of the decree holder and leaves him waiting for its release.
The deposit of the decretal amount or any amount as part of the Award by a
judgment debtor as a condition for obtaining stay of the execution of the
decree cannot be treated at par as payment to the decree holder. The
rationale behind this view is that a judgment debtor who files an Appeal to
challenge a decree or an award and applies for stay of execution pending
disposal of his appeal seeks to avoid payment of decretal amount to the
decree holder and as such, upon getting stay of execution, even on deposit
of decretal amount or non-remittance of deposited amount, succeeds in
preventing payment of decretal amount to decree holder. I find support in
the judgment of Hindustan Construction Corpn. (supra).
15 Further, nothing prevented respondent to apply to the Court or to
apply to the Reserve Bank of India to permit them to open a dollar account
or to have the rupees deposited converted into dollars and invested by the
Prothonotary and Senior Master in a special dollar account or remit the
award amount into an escrow account in claimant's country, i.e., Hongkong,
Shraddha Talekar PS 17/21
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to be released if ordered by this Court.
16 In the circumstances, claimant is well within its right to claim the
difference in the amounts payable as on date of payment/realization and the
amounts received, which works out to US $ 319,816/- as on 23 rd November
2017 increasing at US $ 144 per day.
17 So far as the balance amount of Rs. 10 lakhs which is lying invested
with the Prothonotary and Senior Master towards TDS, this Court in Islamic
Investment Company (supra) has held that there is nothing in the Income
Tax Act which supports the plea that in respect of the amount payable under
a judgment-debt of the nature sought to be enforced, the debtor is entitled to
deduct income-tax. The Court has also held that if the amount is paid as
interest to a non-resident in the usual course of business then at the time of
credit of such amount to the account of the payee, the payer would be bound
to deduct income tax at the rate in force. However, when such amounts
becomes part of a judgment debt, they lose their original character and
assume the character of a judgment debt. Once such an amount assumes the
character of a judgment debt, the decree passed by the Civil Court must be
executed subject only to the deductions and adjustments permissible under
the Code of Civil Procedure and therefore the question of deducting any tax
Shraddha Talekar PS 18/21
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at source does not and cannot arise. Paragraphs 8 and 9 of Islamic
Investment Company (supra) read as under :-
"8 Before the Supreme Court, the issue was that if the amount
payable to Datar was treated as salary, it would have attracted
deduction of tax at source under Section 18 of the Income-tax Act.
While considering this issue the Supreme Court observed that a
substantial part of the claim decreed, represented compensation for
wrongful termination of employment and it would be difficult to
predicate of the claim sought to be enforced what part thereof if any
represented salary due. However, the Supreme Court observed as
follows :-
"Granting that compensation payable to an employee by an
employer for wrongful termination of employment be
regarded as in the nature of salary, when the claim is
merged in the decree of the Court, the claim assumes the
character of a Judgment debt, and to judgment debts
Section 18 has not been made applicable. The decree
passed by the Civil Court must be executed subject to the
deductions and adjustments permissible under the Code of
Civil Procedure. The Judgment-debtor may, if he has a
cross-decree for money, claim to set-off the amount due
thereunder. If there be any adjustment of the decree, the
decree may be executed for the amount due as a result of
the adjustment. A third person who has obtained a decree
against the judgment-creditor may apply for attachment of
the decree and such decree may be executed subject to the
claim of the third person : but the judgment-debtor cannot
claim to satisfy, in the absence of a direction in the decree
to that effect the claim of a third person against the
judgment-creditor, and pay only the balance. The rule that
the decree must be executed according to its tenor may be
modified by a statutory provision. But there is nothing in the
Income Tax Act which supports the plea that in respect of
the amount payable under a judgment-debt of the nature
sought to be enforced, the debtor is entitled to deduct
income-tax which may become due and payable by the
judgment-creditor on the plea that the cause of action on
which the decree was passed was the contract of
employment and a part of the claim decreed represented
amount due to the employee as salary or damages in lieu of
salary.
9 Having regard to this observation, I am of the view that the
argument of the learned. Counsel on behalf of the Food Corporation
Shraddha Talekar PS 19/21
This Order is modified/corrected by Speaking to Minutes Order dated 22/12/2017
20 901.chs.76.2013 exal.263.2012.doc
of India that since the amount of Rs. 10,31,344/- has admittedly been
paid on account of interest, it retains its character as interest and
therefore the Food Corporation of India must be allowed to deduct
interest thereon at the rate in force is not tenable. There is no doubt
that if the amount is paid as interest to a nonresident in the usual
course of business then at the time of credit of such amount to the
account of the payee or at the time of payment thereof in cash, or by
issue of a cheque or draft the payer would be bound to deduct income
tax at the rate in force. However, as observed by the Supreme Court
when such amounts becomes part of a judgment debt they lose their
original character and assume the character of a judgment debt. Once
such an amount assumes the character of a judgment debt, the decree
passed by the Civil Court must be executed subject only to the
deductions and adjustments permissible under the Code of Civil
Procedure. The learned Counsel for the Food Corporation of India
has not been in a position to point out any provision under the Income
Tax Act or under Section 195 in particular or under the Code of Civil
Procedure where the amount of the interest payable under a decree is
deductible from the decretal amount on the ground that it is an interest
component on which tax is liable to be deducted at source."
18 Therefore, the question of deduction of any income tax at source by
respondent also does not arise. This amount of Rs.10,00,000/- plus
accumulated interest also should be remitted by the Prothonotary and Senior
Master into the same account of claimant as was done earlier. Of course,
credit will be given to respondent for this amount remitted based on the
exchange rate prevailing on the date of remittance. It is open to respondent
also to write to the Prothonotary and Senior Master to immediately remit to
claimant amount in US dollars equivalent to Rs. 10,00,000/- plus
accumulated interest.
It is also stated by Shri Narichania that the cost of Rs.8 lakhs awarded
in the arbitration is yet to be paid by respondent.
Shraddha Talekar PS 20/21
This Order is modified/corrected by Speaking to Minutes Order dated 22/12/2017
21 901.chs.76.2013 exal.263.2012.doc
19 Therefore, respondent is directed to pay to claimant balance of the
decretal amount, i.e., US $ 319,816/- increasing at the rate of US $ 144 per
day from 24th November 2017 until payment and/or realization together with
Rs.8 lakhs being costs payable under the arbitration award. Respondent to
also pay interest at 8% p.a. on the amount of Rs.8,00,000/- from the date it
became due as per award (6 weeks from 21st February 2011-date of award).
Respondent to pay costs of Rs. 1,00,000/- for this application to
claimant. These amounts to be paid within four weeks from today.
In the event, these amounts are not paid, the reliefs sought in prayer
clause (f) as moulded above, will get triggered.
20 Chamber summons disposed accordingly.
(K.R. SHRIRAM, J.)
Shraddha Talekar PS 21/21
