TMI Blog2021 (3) TMI 1424X X X X Extracts X X X X X X X X Extracts X X X X ..... considers it apposite to bind Voith to its concession in this regard. The exchange rate as applicable on 06.09.2018 would be considered relevant for the amounts released on 06.11.2018 being the part payment released by NTPC in terms of the Niti Aayog Circular and the exchange rate as applicable on 22.09.2020 would be considered for discharging the remaining amount awarded in foreign currency. Whether it was open for NTPC to deduct TDS on the awarded amounts and whether the deduction of the said amount and deposit of the same with the Income Tax Authorities constitutes a discharge of the amounts awarded to the aforesaid extent? - HELD THAT:- It is relevant to note that NTPC had deducted TDS in two tranches. It had deducted ₹ 2,58,55,348/- (₹ 1,32,10,961/- on the principal and ₹ 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 ₹ 1,34,488/- was deducted by NTPC while depositing the balance amount. Out of the aforesaid amount ₹ 1,10,84,032/- was deducted on account of the principal amount and ₹ 23,50,45 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es would necessarily have to be considered as the awarded amount and the amounts paid by NTPC would be adjusted against the awarded amounts and the interest thereon. The amounts paid by NTPC are required to be first appropriated towards interest and the remaining against principal - NTPC shall recompute the shortfall payable by NTPC and shall pay the shortfall as computed. List on 26.03.2021 for reconciliation of the amount and for consideration of any further issues that arises in connection with the aforesaid calculations. - OMP (ENF.) (COMM.) 64/2018, IA No. 5231/2018, EA 960/2019, EA 194/2020, EA 196/2020, EA 988/2020 and EA 1236/2020 - - - Dated:- 19-3-2021 - HON BLE MR JUSTICE VIBHU BAKHRU For the Decree Holders : Mr Ciccu Mukhopadhaya, Senior Advocate with Mr Omar Ahmad, Mr Ishan Gaur, Mr Vikram Shah, Mr Amol Gupta and Ms Simran Khorana, Advocates. For the Judgment Debtor : Ms Pinky Anand, Senior Advocate with Ms Sangeeta Bharti, Mr Ashish Kumar and Ms Saudamini Sharma, Advocates. JUDGMENT VIBHU BAKHRU, J. 1. By this order, this Court shall dispose of the application filed by the Decree Holders-Ex. Appl. (OS) 988/2020-whereby the Decree Hold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Award. The Arbitral Tribunal also awarded pre-award interest at the rate 8.5% per annum, compounded annually, on the amount of INR 153,495,177,90 from 08.05.2013 till the date of the Award. The Arbitral Tribunal also awarded post-award interest from the date of the Award till the date of payment at the same rates. NTPC was further directed to return all Advance Bank Guarantees furnished by Voith. 5. NTPC challenged the aforesaid Award under Section 34 of the A C Act, in OMP (COMM.) 16/2017, which was dismissed by this Court on 02.07.2019. 6. In compliance with the order dated 06.02.2017 passed by this Court in OMP (COMM.) 16/2017, Voith had extended the Bank Guarantees furnished by it to the Judgment Debtor against the advance received by them during the term of the contract. Concededly, the said advance was adjusted in determining the amounts awarded. The details of the said Bank Guarantees (hereafter the Advance BGs') are set out below: Bank Guarantee No. Bank/Date of Issuance Bank Guarantee Amount Expiry date GO191148450 ANZ Bank 24 January 2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19-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 the Division Bench of this Court by an order dated 02.03.2020. NTPC challenged the said order before the Hon'ble Supreme Court by filing a Special Leave Petition-SLP(C) No. 7312/2020. The said SLP was dismissed by the Supreme Court by an order dated 22.09.2020. 11. Whilst NTPC was availing of its remedies against the Arbitral Award, it insisted that the Bank Guarantees (Advance BGs as well as the Niti Aayog BG) be extended. 12. It is Voith's case that the amount paid by NTPC falls short of the amount payable by it for discharge of the Arbitral Award. 13. Voith has filed a chart indicating the calculation of the amount payable today (which is annexed as document No. 13 to the application). According to the said chart, a sum of ₹ 21,17,72,890.83/- is due and payable by NTPC. 14. Mr. Ciccu Mukhopadhaya, learned Senior Counsel appearing on behalf of Voith submitted that NTPC had paid an amount ₹ 76,11,36,565 in terms of the Niti Ayog Circular, instead of ₹ 88, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Interest on the Shortfall under the Niti Aayog Office Memorandum ₹ 2,24,57,027.11 TOTAL AMOUNT IN INR AFTER TAKING INTO CONSIDERATION THE EXCHANGE RATE AS ON 17.10.2019 ₹ 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 that in terms of the Award, the said Advance BGs were to be released. However, Voith was compelled to keep the Bank Guarantees alive and, therefore, Voith ought to be reimbursed for the cost incurred by it in doing so. 20. Ms. Pinky Anand, learned senior counsel appearing for NTPC countered the aforesaid submission. She submitted that NTPC had correctly calculated 75% of the awarded amount and had paid the same. She submitted that in terms of the Niti Aayog Circular, Voith was required to open an Escrow Account and since the awarded amount was in multiple currencies, Voith was required to obtain specific approvals from the Reserve Bank of India (RBI). Voith took considerable time to comply with the said requirement an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 that in the circumstances, the Advance BGs were, essentially, kept alive to secure NTPC against the amount disbursed in terms of the Niti Aayog Circular. Thus, Voith was not entitled for reimbursement of any cost for the said Bank Guarantee. Reasons and Conclusion 24. As is apparent from the above, the following three principal questions fall for consideration before this Court: (i) Whether there is any binding agreement between the parties whereby they have agreed that the amounts awarded in foreign currency would be computed at the exchange rate as prevalent on 15.09.2017? If not, the exchange rate to be applied for discharge of the amounts awarded in foreign currency. (ii) Whether it was open for NTP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Circular contemplates release of 75% of the arbitral award against the Bank Guarantees. This was only an ad hoc measure to elevate stress in the construction sector. The amounts released in terms of the Niti Aayog Circular cannot be considered as amounts disbursed in discharge of an arbitral award. The Standing Operating Procedure (SOP) issued on 24.11.2016 for release of the payments in terms of Niti Aayog's Circular also makes it amply clear that the payments released under the said Circular would be without prejudice to the rights to the Departments/PSUs. Furthermore, the same would be required to be secured by bank guarantees and in the event the departments/ PSUs prevail in their challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany 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 character of judgment debt, the decree passed by the civil court must be executed subject only to the deductions and adjustments permissible under the Code of Civil Procedure. 34. The Court further observed that there was no provision under the Income Tax Act or under the Code of Civil Procedure, 1908 where an amount of interest payable under a decree would be subject to TDS. 35. In Glencore International AG v. Dalmia Cement (Bharat) Limited: Ex. P. 75/2015 dated 31.07.2019, this Court, inter alia, referred to the following decisions: (i) All India Reporter v. Ramachandra D. Datar, (1961) 2 SCR 773. (ii) V.K. Dewan v. DDA, Execution Petition No. 194/2005, Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject 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 ₹ 2,58,55,348/- (₹ 1,32,10,961/- on the principal and ₹ 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 ₹ 1,34,488/- was deducted by NTPC while depositing the balance amount. Out of the aforesaid amount ₹ 1,10,84,032/- was deducted on account of the principal amount and ₹ 23,50,456/- on account of interest. The said TDS was deposited on 07.01.2020. During the course of arguments, Mr. Mukhopadhaya submitted that a sum of ₹ 1,06,42,438/- could be absorbed by Decree Holder No. 1 against the TDS of ₹ 2,58,55,138/- deducted and deposited by NTPC. He further stated that a further sum of ₹ 55,29,831/- could be absorbed by Decree Holder No. 1 out of the sum of ₹ 1,34,488/- deducted and deposited by NTPC on 07.01.2020. 42. In view of the above, this Court considers it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47. In addition to the questions as discussed above, NTPC had also raised an objection regarding the calculation of the shortfall as claimed by Voith. It was submitted that Voith has also calculated interest on the interest component by adjusting the advances against the amount due against the interest awarded. According to NTPC, Voith had added the advances which were directed to be adjusted under the Arbitral Award to the amount awarded. It had calculated the interest on the resultant amount by considering the same as the awarded amount. It had thereafter, adjusted the advance from the said amounts. 48. In this regard, this Court considers it necessary to clarify that the calculations for discharge of the amount would be in accordance with the tabular statement in the Arbitral Award setting out the amounts awarded in different currencies. It is seen that the Arbitral Tribunal had deducted the advances and had computed the total amount payable after such deduction. Thus, the total amount as awarded after deduction of the advances would necessarily have to be considered as the awarded amount and the amounts paid by NTPC would be adjusted against the awarded amounts and the in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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