Article by Vijay Pal Dalmia, Advocate, Supreme Court of India and Delhi High Court, Partner & Head of Intellectual Property Laws Division, Vaish Associates Advocates, India
Email id: vpdalmia@vaishlaw.com
Mobile No.: +91 9810081079

Key Highlights

  1. BHC: Once parties acknowledge existence of arbitration clause, court can appoint arbitrator even if stamp duty is insufficiently paid.
  2. NCLT: Resolution Plan cannot be rejected on a perceived grievance by a suspended director who failed to take steps.
  3. NCLAT: There is no conflict between Section 17B of the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and the Insolvency and Bankruptcy Code, 2016.
  4. NCLT: No insolvency proceedings can be initiated under the Insolvency and Bankruptcy Code, 2016, against personal guarantors of Non-Banking Financial Companies unless threshold of asset size of INR 500 Crores is satisfied.

I. BHC: Once parties acknowledge existence of arbitration clause, court can appoint arbitrator even if stamp duty is insufficiently paid.

The Bombay High Court ("BHC") has in the judgement dated February 28, 2022 ("Judgement"), in the matter of Pigments and Allieds v. Carboline (India) Private Limited and Official Liquidator and Liquidator of Octamec Engineering Limited [Arb. Application 225 of 2016] held that once parties acknowledge existence of arbitration clause, court can appoint arbitrator even if stamp duty is insufficiently paid.

Facts

Pigments & Allieds, a partnership firm ("Applicant") filed an application under Section 11 of the Arbitration and Conciliation Act, 1996 ("Act") and sought appointment of a sole arbitrator in furtherance of invoking the arbitration clause under a Tripartite Agreement dated February 06, 2013 ("Agreement"), executed between the Applicant, Carboline (India) Private Limited ("Respondent no. 1") and Official Liquidator and Liquidator of Octamec Engineering Limited ("Respondent no. 2") (collectively referred to as "Respondents"). A original copy of the Agreement was not available with any of the parties.

As per the Agreement, the Applicant was required to carry out work including construction and maintenance for Vodafone Shared Services Limited pursuant to a Subcontractor Agreement dated September 18, 2012 between the Respondents inter se ("Subcontractor Agreement"). Essentially the work involved supply and application of intumescent paint fire protection system and anti- corrosive paint to steel columns, fire and rust protection systems for the Vodafone Data Centre. The Respondent no.2 had placed a work order and a purchase order ("PO") issued under the Subcontractor Agreement on October 08, 2012, on the Respondent no.1 for supply and application of the aforesaid. The PO was placed by the Respondent no. 1 on the Applicant for supply of paint, as aforesaid for a consideration of Rs.18,00,77,644/- approx. Payment was to be made by way of a Letter of Credit ("LoC") of 90 days.

Pursuantly, Applicant had ordered 21 full container loads of the paint from Jordan. But the Respondent no. 1 had defaulted in making payments. The Respondent no. 1 apparently entered into negotiations with the Applicant to revise payment terms. Thereafter a new purchase order dated December 26, 2012 ("NPO") was issued reflecting negotiated terms for supply of 3,32,597 ltrs. (approx.) of paint for a consideration of Rs.19,19,13,125/- approx. The consignments had begun arriving at Nhava Sheva Port around January 2013 and the Applicant was incurring high demurrage charges and port charges. However, the Respondent no. 1 did not make payments under the NPO as well. The Respondent no. 1 then suggested that the Respondent no. 2 would open the requisite LoCs in favour of the Applicant and that the Respondent no. 2 should accept a combination of advances payable by post-dated cheques as guarantee against the LoCs being issued to the Applicant by the Respondent no. 2. Subsequently, the Agreement was executed on February 06, 2013. After much follow-up, some part payments were made in February 2013 and March 2013. Corresponding quantity of paint was released after payment was made towards detention charges, demurrage and customs duty.

The first shipment was then delivered at Vodafone site on February 26, 2013. The Applicant reminded Respondent no. 2 that they were incurring huge costs by way of customs duty, demurrage charges since the paint had not been collected due to the default of Respondent no. 1. The 3rd and 4th consignments were awaiting clearance and this has caused enormous loss to the Applicant. Under clause 10(b) of the Agreement, disputes between the parties were to be referred to Arbitration. The Applicant's case was that both the Respondents had avoided interacting with the Applicant and that they had jointly and severally failed to make payments for a shipment. A claim for a sum of Rs.8,92,97,690/- approx. had been made along with Rs.1,24,04,618/- approx. towards demurrage, detention and other port charges. Interest had also been claimed @ 18% P.A. In these circumstances, the Applicant invoked arbitration by its letter-cum-demand notice dated June 2, 2016 ("Demand Notice"), and a sole arbitrator had been nominated.

It was stated that, on November 09, 2017, court had ordered impounding of the Agreement since it was found to be inadequately stamped. On December 10, 2019, the Superintendent of Stamps, Mumbai passed an order and issued a demand notice for payment of duty amounting to Rs.10,72,140/- , penalty of Rs.15,01,000/-, and a sum of Rs.200/- was payable towards indemnity.

To view the full article please click here.

© 2020, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.