Madras High Court
M/S.India Pistons Limited vs M/S.Inox Air Products Private ... on 8 September, 2022
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.
1/7
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
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.
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
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.
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
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
https://www.mhc.tn.gov.in/judis
