TaxTMI 
TaxTMI 
2021 (3) TMI 1424
X X X X Extracts X X X X
X X X X Extracts X X X X
....996 (hereafter the "A&C Act'). In addition, Voith also prays that directions be issued to NTPC to forthwith pay it Rs. 2,88,31,380/-, which is the cost incurred by Voith to extend the Bank Guarantees furnished to NTPC. 2. The Award was passed in the context of disputes that had arisen between the parties in connection with an agreement for execution of a Hydro Electric Project to be constructed on the river Bhagirathi known as Loharinag Pala Hydro Electric Power Project (4 x 150 MW). 3. In terms of the Award, Voith was awarded a total sum of USD 10,688,455.95; EUR 3,341,171.32; and Rs. 153,495,177.90. The compensation awarded to Voith under various heads, as summarized by the Arbitral Tribunal, is set out below:- USD EUR INR A. Engineering 325,871.38 926,789.53 95,356,757.96 B. Material 12,547,850.37 2,992,800.66 186,932,479.79 C. Model Test - 639,203.14 - D. On-site Expenses - - 19,249,500.00 E. Off-site Expenses 871,962.20 915,069.97 259,235,689.53 F. Bank Guarantees - 229,472,02 377,004.62 Less Advance Received (3,057,228.00) -(2,362,164.00) -(407,656,254.00) Total 10,688,455.95 3,341,171.32 153,495,177.90 4. The Arbitral ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... As stated above, NTPC's petition to set aside the Award was dismissed. Pursuant to the dismissal of the petition under Section 34 of the A&C Act (in O.M.P. (COMM.) 16/3017), a Coordinate Bench of this Court, by orders dated 10.12.2019 and 17.10.2019 passed in EX. APPL. (OS) 960/2019, directed NTPC to (i) deposit the set of the Bank Guarantees which were issued during the performance of the contract as well as the Niti Aayog BG; and (ii) deposit the balance 25% of the awarded amount alongwith upto date interest with the Registrar General of this Court. The Judgment Debtor challenged the aforesaid order in EFA (OS) (COMM.) 21/2019. But, the Division Bench of this Court dismissed the said appeal by an order dated 17.12.2019. 9. Thereafter, in part compliance with the orders of this Court, NTPC deposited (i) both set of Bank Guarantees on 06.01.2020 and 05.02.2020; and (ii) a Demand Draft for a sum of Rs. 54,42,72,662 on 07.02.2020. 10. NTPC preferred an appeal-being FAO (OS)(COMM.) No. 329/2019-against the decision of this Court dismissing NTPC's application for setting aside the Award-O.M.P. (COMM.) 16/3017-under Section 34 of the A&C Act. The said appeal was dismissed by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he shortfall amount of Rs. 12,09,16,391.37 and thus, the applicable interest on this amount which was due on 15.09.2017 till 17.10.2019, amounts to Rs. 2,24,57,027.11. 17. He submitted that against the balance amount, which was due to be paid by NTPC in accordance with the order of this Court dated 17.10.2019, it had deposited only Rs. 56,42,71,662 on 06.01.2020. 18. He submitted that the amount due to Voith on 17.10.2019 was Rs. 74,86,34,859.42. A detailed calculation of the balance amount is set out as below: Remaining 25% amount as on 15 September 2017 INR 16,38,25,209.56; EUR 15,71,300.52; USD 37,37,271.86; GBP Interest on this remaining 25% amount INR 3,04,26,207.19; EUR 83,052.31; USD 1,97,536.42; GBP 1,287.86 Shortfall in the payment under the Niti Aayog Office Memorandum Rs. 12,09,16,391.27 Interest on the Shortfall under the Niti Aayog Office Memorandum Rs. 2,24,57,027.11 TOTAL AMOUNT IN INR AFTER TAKING INTO CONSIDERATION THE EXCHANGE RATE AS ON 17.10.2019 Rs. 74,86,34,859.42 19. In addition to the above, Mr. Mukhopadhaya further submitted that NTPC was also liable to pay Bank Guarantee Charges incurred by Voith for extending the Bank Guarantees. He submitted....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e said amount twice. She submitted that it is not disputed that the amounts were to be paid to foreign companies, but Voith had consciously opened the Escrow Account and accepted that the money be paid in Indian currency. 23. Lastly, she submitted that NTPC cannot be called upon to pay the cost of the Bank Guarantees. She submitted that the Advance Bank Guarantees were given by Voith to NTPC in terms of the contractual provisions and against advances made by NTPC. The said Bank Guarantees had been kept alive in view of NTPC's challenge to the Award. The Award did not contemplate payment of any charges for the bank guarantees till the same were returned. She submitted that the charges for the Niti Aayog BG would necessarily have to be borne by Voith as it had volunteered to furnish the said guarantees to avail the benefit of the Niti Aayog Circular. She submitted that in terms of the Niti Aayog Circular, Voith was required to furnish the Bank Guarantees against which 75% of the awarded amount could be released. She stated that Voith complied with the said condition by also accounting for the Advance BGs and furnished the Niti Aayog BG for the remaining amount. She contended tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bjections to recognition and enforcement of a foreign award was dismissed as the relevant date for determining the exchange rate to be applied for enforcing the awards made in foreign currency. 27. Ms. Anand did not dispute the above. She, however, rested NTPC's case on the ground that the parties had arrived at a settlement and Voith was bound by the same. According to NTPC, the parties had agreed that 15.09.2017 would be the cut-off date for determining the exchange rate. Ms. Anand relied on the Minutes of the Meeting dated 11.09.2017 and Voith's letter dated 16.11.2018, in support of her contention that the parties had agreed to the exchange rate as prevailing on 15.09.2017. The said contention is unmerited. A plain reading of the Minutes of the Meeting dated 11.09.2017 indicates that it does not record any agreement regarding the applicable exchange rate. The said minutes relate to the amounts that were required to be released in terms of the Office Memorandum of Niti Aayog dated 05.09.2016 (Niti Aayog's Circular). 28. More importantly, the Niti Aayog Circular was issued by Niti Aayog to provide measures for revival of the construction sector. The Niti Aayog Circu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder the Code of Civil Procedure". The Court further observed as under: "The rule that the decree must be executed according to its tenor may be modified by a statutory provision. But there is nothing in the Income Tax Act which supports the plea that in respect of the amount payable under a judgment-debt of the nature sought to be enforced, the debtor is entitled to deduct income tax which may become due and payable by the judgment-creditor on the plea that the cause of action on which the decree was passed was the contract of employment and a part of the claim decreed represented amount due to the employee as salary or damages in lieu of salary." 33. In Islamic Investment Company v. Union of India and Anr.: (supra), the Bombay High Court following the decision in All India Reporter Ltd. v. Ramchandra D. Datar (supra) rejected the contention that the Judgment Debtor (in that case, the Food Corporation of India) must be allowed to deduct TDS on the interest payable to a non-resident. The Court observed that: "when such amounts becomes part of a judgment-debt, they lose their original character and assume the character of a judgment debt. Once such an amount assumes the charact....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hoc payments under a mechanism evolved under the Niti Aayog Circular. 39. The contention that Voith had agreed to such deduction is also unmerited. Decree Holder no. 1 had accepted the said payments not only on its behalf but also on behalf of other Decree Holders and therefore, this Court finds it difficult to accept that the Decree Holder no. 1 had accepted and agreed to NTPC deducting tax at source. However, there is merit in the contention that Voith knew, as way back in 2018, that NTPC had deducted TDS and it does not appear that Voith had raised any objection to the same at the material time. 40. This Court is of the view that failure of Voith to object at the material time would not amount to accepting deduction and deposit of TDS as payment towards the awarded amount. 41. It is relevant to note that NTPC had deducted TDS in two tranches. It had deducted Rs. 2,58,55,348/- (Rs. 1,32,10,961/- on the principal and Rs. 1,26,44,387/- on the interest) and had deposited the same on 07.12.2018. This amount was deducted at the time of remission of money in terms of the Niti Aayog Circular. The second tranche of Rs. 1,34,488/- was deducted by NTPC while depositing the balance amoun....