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Issues: (i) Whether delay in pronouncement of the arbitral award or allegations of bias furnished a ground to set aside the award under section 34 of the Arbitration and Conciliation Act, 1996; (ii) Whether, on a proper construction of Clause 7.1 of the lease deed, the liability to bear service tax on rent fell on the lessor or the lessee.
Issue (i): Whether delay in pronouncement of the arbitral award or allegations of bias furnished a ground to set aside the award under section 34 of the Arbitration and Conciliation Act, 1996.
Analysis: No factual or legal foundation was established for bias. Although delay in pronouncement of the award was a matter of concern, delay by itself did not justify interference where the award was detailed, reasoned, and dealt comprehensively with the issues. The validity of the award had to be tested on its merits and reasoning, not merely on the time taken to pronounce it.
Conclusion: The challenge on the grounds of bias and delay failed and did not vitiate the award.
Issue (ii): Whether, on a proper construction of Clause 7.1 of the lease deed, the liability to bear service tax on rent fell on the lessor or the lessee.
Analysis: Clause 7.1 used broad language covering property taxes and other outgoings in respect of the premises, including future levies and increases. The words were wide enough to include service tax, and the expression could not be confined ejusdem generis to property tax alone. The statutory character of service tax as an indirect levy did not determine inter se liability between contracting parties. The liability depended on the contract, and section 64A of the Sale of Goods Act supported the principle that the parties' intention governs allocation of a future tax burden. The arbitral view was also consistent with the Supreme Court decisions recognising contractual shifting of tax liability.
Conclusion: The service tax liability under Clause 7.1 was correctly held to be that of the petitioner lessor, and no ground for interference under section 34 was made out.
Final Conclusion: The arbitral award was upheld in full, and the petition challenging it was rejected with costs.
Ratio Decidendi: Where the contract contains wide language assigning taxes, cesses, levies, and other outgoings in respect of the premises, the contractual intention governs allocation of service tax liability notwithstanding its indirect-tax character, and a reasoned award will not be set aside merely because its pronouncement was delayed.
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