Arbitral award enforcement allowed with TDS deduction under Section 194C but not under Construction Workers Welfare Cess Act

Delhi HC disposed of petition seeking enforcement of arbitral award. Court rejected petitioner's challenge to set-off of Rs. 2,62,93,252 awarded to respondent against counter claims from Rs. 5,51,95,198 awarded to petitioner, noting arbitral tribunal had already made this adjustment arriving at difference of Rs. 2,89,01,946. Court held respondent's TDS deduction under Section 194C Income Tax Act 1961 was permissible as petitioner worked as contractor. However, court found TDS deduction from Rs. 9,15,93,846 impermissible as petitioner had already paid TDS to authorities and under Building and Other Construction Workers Welfare Cess Act 1996.

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Issues: Enforcement of arbitral award, deduction of TDS, liability of respondent, challenge to award

The judgment delivered by the Delhi High Court in OMP (ENF.) (COMM.) 246/2022 involved the enforcement of an arbitral award. The arbitral award specified the amounts to be paid by the respondent to the claimant and vice versa. The respondent had paid a certain amount to the petitioner after deducting TDS and another amount along with interest. The petitioner's counsel argued that the respondent should not have deducted the amount awarded to them against the counterclaims made by the respondent. However, the court noted that the Arbitral Tribunal had already set off the amounts and arrived at a final figure to be paid. The petitioner's challenge to this deduction was rejected as it required challenging the award itself.

Another issue raised was the deduction of TDS by the respondent from the amount payable to the petitioner under the arbitral award. The petitioner contended that TDS should not have been deducted as the amount payable constituted a judgment debt. The court referred to precedents and held that TDS should not be deducted from amounts awarded in arbitral proceedings. The court cited relevant judgments and clarified that judgment debts do not fall under the purview of TDS deductions. The court directed the petitioner to apply for a refund of the TDS amount already paid to the Income Tax Authorities and the Competent Authority under the Building and Other Construction Workers' Welfare Cess Act, 1996.

In conclusion, the court disposed of the petition by upholding the enforcement of the arbitral award, rejecting challenges to deductions made by the respondent, and directing the refund of TDS amounts to the petitioner in line with legal precedents and provisions.

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