Bombay High Court

National Co-Operative Consumer'S ... vs Mirah Dekor Pvt Ltd Formerly Known As ... on 3 November, 2025

 2025:BHC-OS:19899

                                                                        CARBP.1380.2019.doc


                                      IN THE HIGH COURT OF JUDICATURE AT BOMBAY

                                          ORDINARY ORIGINAL CIVIL JURISDICTION

                                COMMERCIAL ARBITRATION PETITION NO.1380 OF 2019
                                                   WITH
                                      NOTICE OF MOTION NO.2464 OF 2019
                                                     IN
                                COMMERCIAL ARBITRATION PETITION NO.1380 OF 2019

                       National Co-operative Consumer's
                       Federation of India Limited                                  ...Petitioner
                             Versus
                       Mirah Dekor Pvt. Ltd.
                       (Formerly Known as Mirah Dekor Limited)                      ...Respondent


                             Mr. Bhavik Manek a/w. Mr. Pranav Chavan i/b Mahesh Menon
                             & Co. for the Petitioner.

                             Ms. Sharan Jagtiani a/w. Mr. Mutahhar Khan, Mr. Vishal
                             Mehta and Ms. Prachy Mody i/b M/s. MV Law Partners for the
                             Respondent.


                                           CORAM            : SOMASEKHAR SUNDARESAN, J.

                                           Reserved on     : MARCH 19, 2025
                                           Pronounced on : NOVEMBER 3, 2025


                       JUDGEMENT :

Context and Factual Background:

1. This is a Petition filed under Section 34 of the Arbitration and

Conciliation Act, 1996 ("the Act"), mounting a challenge to an arbitral

award dated May 31, 2019 ("Impugned Award") awarding the Digitally signed by AARTI AARTI GAJANAN

PALKAR Date:

2025.11.03 12:36:48 NOVEMBER 3, 2025 +0530 Aarti Palkar

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Respondent, Mirah Dekor Private Limited (" Mirah") a sum of Rs. ~1.36

crores along with interest at the rate of 12% per annum on a sum of Rs.

~57.58 lakh from April 1, 2010 until realisation; and on a sum of Rs.

~78.58 lakh from April 1, 2011 until realisation. A further sum of Rs.

50,000 along with interest at 12% per annum, from the date of the

award has been awarded.

2. The Petitioner, National Co-operative Consumers' Federation of

India Ltd. ("Federation") has been directed to pay the amounts so

awarded directly to the Income-Tax Authorities forthwith, subject to

appeals filed by Mirah, with proof of payment being shown within 15

days of payment. This direction was in view of an order of the Joint

Commissioner of Income-Tax attaching any payments due to Mirah of

up to Rs. 17 crores.

3. Mirah supplies various consumer items including food stuff to

government and non-government clients. The Federation is an apex

body of consumer co-operatives. Mirah has been empanelled by the

Federation as a supplier of groceries. The Federation has been

delivering groceries to ashrams, schools and hostels of the Tribal

Development Department, Nashik ("TDD"). The arrangement was that

Mirah would directly deliver the groceries to TDD under instructions

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from the Federation while TDD would pay the Federation, which would

deduct its margin and pay over the receipts to Mirah.

4. Mirah's bid was selected pursuant to a tender for 2009-10 and

the parties executed an agreement dated June 19, 2009, which was

supplemented on June 23, 2009. Another agreement dated November

19, 2010 also covered the same subject of supply - these are collectively

referred to, for convenience as "the Agreement". The three constituent

agreements cover the supplies made by Mirah to TDD on behalf of the

Federation, during the years 2009-10, 2010-11 and 2011-12.

5. Mirah would raise invoices from time to time, and the Federation

would pay the same after deducting its fixed margin of 1.5%. In

addition, for the two financial years 2009-10 and 2010-11, tax was

deducted at source ("TDS") in the aggregate sum of Rs. ~1.37 crores.

The reason for such deduction provided by the Federation was that

TDD had effected TDS at 2% on Mirah's bills under Section 194-C of

the Income-Tax Act, 1961 ("IT Act"). Whether TDD's deduction of TDS

amounts was even necessary under law is disputed, but the facts are

that such deductions were made and paid over to the Revenue to the

Federation's credit. Multiple letters were issued by Mirah to the

Federation in May 2011 asking to be paid amounts corresponding to the

TDS deductions.

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6. The Federation confirmed to Mirah by a letter dated June 2, 2011

that it would pay an amount of Rs. ~1.36 crores once its tax

assessments were completed. There is a gap of Rs. ~1 .31 lakh between

the amounts claimed by Mirah and the amounts admitted by the

Federation.

7. Mirah wrote multiple letters in June 2011 and July 2011

following up, which again met with the reply that TDD had deducted

the amounts involved and had issued certificates of deduction in Form

16-A under the IT Act. Federation stated that once its tax assessment

was completed, the amounts would be paid. Mirah took the stance that

if the Federation availed of the TDS effected by TDD, those payments

were made by TDD to the Federation's account, and therefore the

Federation was in receipt of the sums. The Federation indicated that

its head office was being pursued to complete tax assessments quickly.

Mirah followed up with the Federation's head office too. The head

office indicated that the amounts were indeed taken credit for and were

shown as such in the provisional Form 26AS of the Federation under

the IT Act (the form relating to the tax returns of the recipient of

amounts after TDS). Once assessment was completed, the

"provisional" status would turn to "final" after which the credit being

available to the Federation for such amount, would become absolutely

certain.

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8. This stand-off continued and eventually led to arbitration.

Mirah's stance in the arbitration was that under Section 153 of the IT

Act, tax assessments were to be completed within a period of two years.

Mirah also contended from the material on record that the tax

assessment status for the Federation indicated that a refund was due.

Mirah would contend that deductions by TDD attributable only to

disputed quality or quantity of the supplies would not be payable by the

Federation onwards to Mirah. Since TDS amounts accrued to the

benefit of the Federation - despite deduction by TDD, they were paid to

the Income-Tax Authorities to the credit of the Federation - these

amounts could constitute payments made by TDD to the Federation.

9. On a separate note, the Office of the Joint Commissioner of

Income-Tax had issued a notice to the Federation on February 19,

2018, directing the Federation to directly pay the Income-Tax

Authorities, any amount owed and payable by the Federation to Mirah,

which led to Mirah seeking the relief of directing the Federation to

make payment of the amount claimed directly to the Income-Tax

Authorities, to the credit of Mirah.

10. The Federation would contend that the claim was barred by

limitation since the amounts owed for the years 2009-10 and 2010-11

had been due on April 1, 2010 and April 1, 2011 respectively. In the

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same breath, the Federation took the stance that only the amounts

actually received by the Federation would be payable to Mirah, and

unless the Federation was paid, the right to claim did not even arise. It

was contended that the amounts showing in the Form 26AS as TDS

amounts paid by TDD covered all vendors across the board and not just

Mirah. That apart, it was contended that TDD would be a necessary

party since all deliveries had been made directly to TDD on behalf of

the Federation.

Impugned Award

11. The Learned Arbitral Tribunal ruled that the claim was not

barred by limitation. Mirah had invoked arbitration by notice dated

October 20, 2014. Pursuant to this letter, the Managing Director of the

Federation was appointed by Mirah as the arbitrator in line with the

Agreement. However, the Managing Director did not initiate

proceedings at all. Eventually, the Learned Arbitral Tribunal was

constituted by this Court under Section 11 of the Act in disposal of a

Section 11 Application by two parallel orders dated February 2, 2018.

12. The Learned Arbitral Tribunal found that by letters dated July

25, 2011, January 18, 2012 and February 8, 2012 and its internal letter

dated November 27, 2014, the Federation admitted its liability to the

extent of Rs. ~1.36 crores. The Learned Arbitral Tribunal also ruled

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that the Federation claimed on the one hand that the claim was

premature since no amount would be payable unless tax assessments

were completed, and that they were yet to be completed. Yet, in the

same breath the Federation could not contend that the claim was

barred by limitation. This position, coupled with the continual

acknowledgment of liability, indicating that the cause of action of

fighting against denial of payment had not arisen, was held to be

mutually destructive, and the Learned Arbitral Tribunal was satisfied

that the claim was not barred by limitation.

13. The Learned Arbitral Tribunal interpreted Clause 6 of the

Agreement, which provided for the Federation deducting a sum of 1.5%

towards the Federation's margin from the total amount received by the

Federation. The Agreement also provided that " any other deductions

made" by TDD would be deducted from Mirah's bills. The Agreement

provided for a detailed framework of quality check and control and was

persuaded to not include TDS amounts within the scope of deductions

made by TDD in making payments to the Federation. The Learned

Arbitral Tribunal held that it was imperative for the Federation to

complete it tax assessments and if they were not completed, that could

mean that Mirah would never be paid its rightful dues.

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14. The Learned Arbitral Tribunal concluded that TDD was not a

necessary party at all to the proceedings since the issue involved was of

interpreting the Agreement and the implications for treatment of TDS.

15. The Learned Arbitral Tribunal was persuaded to hold that the

sum of Rs. ~57.58 lakhs due on April 1, 2010 and the sum of Rs. ~78.58

lakhs, aggregating to Rs. ~1.36 crore was payable. This amount

corresponds to the amount admitted as being payable in the

correspondence from the Federation, indeed also claiming that the

payment would be made after tax assessments were completed.

16. Disallowing a claim for interest at 18% per annum compounded,

the Learned Arbitral Tribunal granted simple interest at 12% per

annum. Costs claimed at Rs. 1 lakh, without any evidence to show the

payment, were disallowed. Expenses incurred in the sum of Rs. 50,000

was allowed.

17. Taking note of the notice from the Joint Commissioner of

Income-Tax asking for payments of up to Rs. 17 crores, if released by

the Federation to Mirah, must be paid directly to the Income-Tax

Authorities, the Learned Arbitral Tribunal directed that the amounts

awarded be paid by the Federation to the Income-Tax Authorities to

Mirah's credit.

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Analysis and Findings:

18. I have heard Mr. Bhavin Manik, Learned Advocate for the

Federation and Mr. Sharan Jagtiani, Learned Senior Advocate for

Mirah at length and with the benefit of their verbal arguments and

written submissions permitted to be filed after the hearing was

concluded, examined the material on record. I have also examined the

Impugned Award and the approach of the Learned Arbitral Tribunal.

TDS as a Concept:

19. Notwithstanding the enthusiasm with which a multitude of

points were presented by each side before the Learned Arbitral

Tribunal and before this Court, the fact of the matter is that the issues

that came up for adjudication fall in a rather narrow compass.

20. It is trite law that when tax is deducted by a deductor, who is

liable to make payment to a deductee, the amount deducted by the

deductor is required to be deposited with the Revenue. The deduction

is actually tax owed by the deductee, which is appropriated on behalf of

the Revenue by the deductor, and paid over to the Revenue. The

payment of tax in this process, is a payment of tax owed by the

deductee to the Revenue. The deductor is only an instrumentality of

the State to deduct and pay over the tax amount owed by the deductee

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to the Revenue. The deductee would then get benefit of such tax paid.

As such the TDS amount paid over to the Revenue is the amount paid

over for and on behalf of the deductee.

21. Therefore, the entitlement to credit for the money so deposited

belongs to the deductee. In other words, it is simply a cash flow

arrangement mandated by the statute. The payments are, for all

purposes, payments made by the deductor to the deductee, but instead

of paying the deductee who would then pay it to the Revenue towards

tax, the amount is paid by the deductor to the Revenue but to the credit

of the deductee. The documents that evidence such credits are the tax

deduction certificate issued by the deductor (Form 16A) and the

certificate of entitlements of the deductee (Form 26 AS).

22. When seen in the light of this first principle of tax law, all

amounts admittedly deducted by TDD and paid to the Revenue, are

amounts for which the Federation had credit. The title to benefits

flowing from such amounts is evidenced by the Form 16A and the Form

26AS. The Federation would have to pay a correspondingly lesser

amount in its total tax bill. Whether the tax assessment results in

payment of tax or refund of excess tax paid is totally irrelevant.

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Deductions by TDD and their effect:

23. Therefore, the sole point for consideration is really what the

Agreement provided for in respect of reductions in payment to Mirah

by the Federation. Towards this end, Clause 6 of the Agreement is

noteworthy. This provision stipulated that the Federation would pay

over to Mirah, "an amount after deducting 1.5% discount (margin of

NCCF) from the total amount received" from TDD. Any other

deductions made by TDD were to be deducted from the bills of Mirah.

24. Plainly put, should there be any deduction made by TDD, under

the Agreement, the Federation would be insulated from it - such

deductions could obviously be attributed by TDD to quality or quantity

disputes or any other dispute over any portion of Mirah's bills. On

facts, admittedly there has been no cause for any such deduction. This

solely leaves for consideration, the treatment to be accorded to the TDS

amounts. Clause 6 provides for an obligation on the Federation to pay

the amount received from TDD, after deducting 1.5%, which is the

Federation's margin.

25. The Federation is protected from any other deduction effected by

TDD - that risk was to be borne solely by Mirah. The risk and reward

for the Federation was assured - a margin of 1.5% while the risk and

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reward for Mirah was to supply the groceries and earn the proceeds,

subject only to the deduction of 1.5% margin of the Federation.

26. Against this backdrop, and the first principles of tax law which

would unequivocally point to the amount of TDS deducted by TDD

accruing to the benefit of the Federation, it is evident to me that the

TDS amount is an integral part of the amount received by the

Federation. It is trite law that the total amount (including the TDS) is

the income of the Federation and therefore, it is amount received by the

Federation. Therefore, the Learned Arbitral Tribunal's view that other

deductions referred to in Clause 6 would entail deductions on the

ground of quality and quantity for which there had been a framework

provided for in the Agreement is a credible and accurate reading of the

Agreement.

27. The Learned Arbitral Tribunal has examined witnesses, parsed

the record, appreciated the evidence led by the parties, and returned

findings in the matter. The Learned Arbitral Tribunal has also noticed

that the amounts of TDS effected by TDD in respect of amounts paid to

the Federation were in the aggregate across all vendors. Therefore, the

Learned Arbitral Tribunal has only awarded the admitted and

acknowledged amount of Rs.~1.36 crores. These findings are

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completely plausible and not at all perverse and therefore are safe from

any interference by the Section 34 Court.

28. It is now trite law that if the Section 34 Court finds that the

arbitral award returns a plausible and just outcome and if even implied

reasons are discernible from the analysis by the Learned Arbitral

Tribunal, the arbitral award should not be interfered with. This

standard is well met by the Impugned Award, on the facet of TDS

amount being an amount received by the Federation. Therefore Mirah

being entitled to get the amount received by the Federation, subject to a

discount of 1.5% towards the Federation's margin, is a correct finding.

Therefore, no cause for interference is made out.

Limitation:

29. First, limitation being a mixed question of fact and law, it is

noteworthy that the Learned Arbitral Tribunal has returned a finding

that the claim was not barred by limitation. Second, Mirah has been

chasing the Federation right since 2011. The Federation has not denied

the obligation to pay the amount, but has even admitted that the

amount is payable - the only hitch posed by the Federation was that

the amount would be payable upon completion of tax assessments. The

non-payment after follow up led to issuance of an invocation notice on

October 20, 2014, appointing the managing director of the Federation

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as the arbitrator. The Federation simply did not act upon the request,

insisting as it did, that the time to pay had not arisen.

30. On April 12, 2017, the second invocation was effected, followed

by an application under Section 11 of the Act. There is nothing on

record to indicate that the Federation took the stand that the filing of

the Section 11 Application was barred by limitation. The Learned

Arbitral Tribunal was appointed by consent. That Article 137 of the

Limitation Act, 1963 would apply to applications filed under Section 11

of the Act is the law that is now well declared by Courts. The Section 11

Application was allowed on February 2, 2018 across both the references

for the entire period of the supply. Therefore, the invocation was made

within time, and the Section 11 was not opposed as not being made

within time, and indeed there are admissions of liability by the

Federation in the interregnum. Therefore, the view of the Learned

Arbitral Tribunal on the facet of limitation is not perverse and being a

plausible view, there is no case made out for taking a different view.

Standard of Review:

31. In Dyna Technologies1, the Supreme Court held thus:

"24. There is no dispute that Section 34 of the Arbitration Act lim- its a challenge to an award only on the grounds provided therein or

Dyna Technologies Private Limited v. Crompton Greaves Limited - (2019) 20 SCC

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as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have cat- egorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays per- versity unpardonable under Section 34 of the Arbitration Act."

[Emphasis Supplied]

32. Applying the aforesaid standard, which is but one of the multiple

iterations of the principle laid down by the Supreme Court, namely,

that even an alternate interpretation may sustain the arbitral award, in

my opinion, no case is made out for interference with the Impugned

Award, which is consistent with the first principles of tax law on

treatment of TDS amounts.

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33. Therefore, the Petition is dismissed. The 'Notice of Motion' too is

accordingly disposed of.

34. Considering that a Learned Single Judge had protected the