Steel Authority Of India Ltd. vs M/S. Feegrade & Co. Pvt. Ltd.
1999 Latest Caselaw 1082 Del

ORDER

Manmohan Sarin, J.

1. This is a petition under Section 9 of the Arbitration and Conciliation Act, 1996 filed by the petitioner Steel Authority of India, seeking an injunction of direction that the arbitral proceedings be deferred pending the adjudication of SLP, 13102-13-107/96 and SLP. 48330-4842/92 before the Supreme Court. The arbitration proceedings have arisen out of a claim made by the respondent for reimbursement of the case collected by the State Government under the Orissa Cess Act, 1962.

2. The case of the respondent before the Arbitral Tribunal, comprising Justice S. Ranganathan, Justice D.R. Khanna and Justice H.L. Aggarwal as arbitrators was that the cess amounts paid by it were reimbursable by the petitioner, the levy having been validated under the Cess and other Taxes on Minerals (Validation) Act, 1992.

3. Learned senior counsel for the petitioner, Dr. A.M. Singhvi, has submitted before me that the Apex Court in India Cements Ltd. Vs. State of Tamil Nadu (AIR 1990 SC 88) and Orissa Cements Ltd. Vs. State of Orissa has held that levy of cess was unconstitutional and outside the legislative competence of the State Legislature. This resulted in the passing of the Cess and Other Taxes on Minerals (Validation) Act, 1992. Subsequent, to the passing of the said Act, the Patna High court held that though taxes recovered before 4.4.1991 were not require to be refunded, it did not permit or authorise recovery or collection of tax after 4.4.1991 and that the tax recovered before that date was not to be refunded. In P. Kannadasan Vs. State of Tamil Nadu the Supreme Court upheld the Validation Act and further held that the Act permitted recovery of tax even after 4.4.1991 in case the tax related to the period prior to 4.4.1991 and was not recovered. Learned counsel points out tht the Division Bench of the Supreme court which decided P. Kannadasan's case (supra) has referred the mater to a larger Bench of three Judges.

4. In brief, the submission of learned counsel for the petitioner is that pending the hearing of the matter by the larger Bench of the Supreme Court, the proceedings before the Arbitrators should be kept in abeyance. Learned counsel submits that in case the decision in P. Kannadasan is reversed an it is held that the cess was not leviable then the respondent/claimant before the arbitrators could not claim the same from the petitioners. Counsel urged that question of the contractual liability of the petitioner under the Act would arise only after the decision of the larger Bench holding the cess to be legally leviable.

5. Learned counsel for the respondent question the maintainability of this petition on the ground that a similar prayer had been made before the arbitrators and the same had been declined. In other words, what is submitted is that petitioner having chosen to seek his remedy under Section 17 of the Arbitration and Conciliation Act and having failed there, cannot now come in a petition under Section 9 of the Act, seeking protection in the nature of stay of proceedings. Counsel for the petition submitted that the substance of his request before the arbitrators was for an adjournment and not for interim protection, as contemplated within Section 17 of the Act. Learned counsel further submitted that proceedings under Section 9 would lie in as much as the scope of interim protection under Section 9 of the Arbitration and Conciliation Act was much wider and would cover within its ambit the exercise of discretion by the court to grant stay of proceedings pending before the Arbitrator as an interim measure.

6. It may be noted that the prayer for adjournment had also been made before the arbitrators who have held as under :

"In the interest of justice, these arbitration proceedings should be adjourned for a short time, till May 1999. It is open to the respondents by that date to obtain orders of the Supreme Court either fixing a date of hearing of these appeals in which event the situation will be considered and necessary orders passed on the next date of hearing."

The arbitrators also observed that the arbitral proceedings could to be adjourned for a long time since it was not certain when the matter would be heard and decided by the Supreme Court. Learned senior counsel for the petitioner, Dr. Singhvi, submits that it is now in the interest of substantial justice that proceedings before the arbitrators are stayed.

7. Without going into the question of maintainability of the petition under Section 9, on account of respondent's contention that similar prayer under Section 17 has already been made, I am of the view that the main issue before the arbitrators is with regard to the claim of the respondents for reimbursement of cess from the petitioners in terms of the contract. Dr. Singhvi, very candidly states that the claim of the respondents is also being opposed on grounds such as limitation and the petitioner not being liable in terms of the contract to pay the same. These pleas are yet to be adjudicated upon. It is only when the arbitrators come to a conclusion that cess is reimbursable by the petitioner in terms of the contract, that the question of any payment being made by the petitioner would arise.

8. On a consideration of entire matter, I am of the view that it would not be expedient to direct stay of proceedings before the arbitrators on the ground that reference to a larger Bench of the Supreme Court in relation to the Cess and Other Taxes on Minerals (Validation) Act, 1992 is pending and ultimately the validity of the act may not be upheld. In the absence of any stay of the judgment in Kannadasan's case, upholding the validity of the Validation Act, no ground is made out for stay of arbitral proceedings which have already been adjourned in the past to accommodate the petitioner. It would be open for the petitioner to urge before the arbitrators all the pleas that it wishes to raise to oppose any direction for reimbursement of the cess in the present facts and circumstances.

9. The petition is dismissed with the aforesaid observations.