Metals & Minerals Trading Corporation of India v. M/s K. S. Oils Ltd.

1. This intra court appeal by Metal and Minerals Trading- Corporation ofIndia and Anand'Trivedi, Director, Agro ('Appellant' for/short) under Section 37 of the Arbitration and Conciliation/Act v 1996;CAct' for short) read with Section 13 of the Commercial' ' Division and Commercial Appellate Division of,High Courts Act, 2015 impugns judgment and order dated 06.02.2018 passed by the,Single Judge in QMP (Comm.) No", li/2018., ^ FAP(OS) (COMM) 54/2018 Page J of[5] 2018:DHC:9145-DB ^ 2. The impugned-order rejects objections filed by the appellant under Section 34 ofthe Act and upholds the award dated 16.1Q.2017.. ' • 3. Counsel submits that appellant,was justified encashing the entire bank guarantee and withholding the payment as it was possible that furthei Value Added Tax Liability may have arisen and imposed. Further the rate ofinterest as awarded IS rather high. ' ^ 4., The appellant and M/s K. S. ^Oils Ltd. (respondent) had entered ' into agreements.dated 14.09.2007 and 10.09.2008, which were extended upto 31.01.2011, !for trading and procurement ofmustard ' seeds and'other agri-commodities through National Commodity &' ^ ^ Derivatives Exchange (NCDEX). ' ^, 5.,, Agreements had clauses to',indemnify the appellant against;. ' • •losses,'darpages etc. which.have been reproduced in.the impugned order dated 06.02.2018 and read as under:-. •

^,.^/clauses offuture trading on NCDEX. KSOL.shallalso \. " ^. keep MMTC indemnified. against'all such payment/ liabilities ifclaimed by.any auihprity/ies, even at a later date against the transaction made under this agreement- ' • Further, without any protest'or. demur KSOL 0,M.P. (COMM.) 11/2018 indemnifies MMTC and its branches and shall always keep MMTC fully indemnified and agrees to hold MMTC and its branches harmless against • ^ any loss claim, damage, demurrage,. costs, penalties,. ~' liabilities, legal cases, shortage during transit/storage,. quantity/quality/purity, specifications etc, ofthe material cost of expenses of whatsoever nature caused to MMTC ' onaccount ofKSOL's acts/omissions/defaultand/ornon FA0(0S) (COMM) 54/2018,, • - pag,2of5fulfillment of terms and conditions of this agreement. KSOL''Shall also indemnify M^C from any/all claims under the contract as well as agro commodities •, tradingin NCDEX. - - ' •,27. Any ^ statutory charges _and applicable duties/levies/taxes such as VAT/CST/ST/ Mandi Tax etc. at any point oftimefor transaction undir this agreement shall be, to the account ofKSOL. Further allexpenses 'like insurance,.storage charges, NCDEX charges and other out ofpocket expenses, if any, shall be to the account ofKSOL.. ',, 3L, If. any litigation arises, out of quality/quantity complaint and or failure to deliver the rnaterial and/or. shortages (quantity) or for any other reason between MMTC and the NCDEX and any other authority/party,' KSOL shall be. setting the dispute at their own level and shall keep MMTC indemnified in this respect.' If any dispute is arisen, the same will be dealt in consultation with KSOL, attheir risk, cost and consequences. -

33. Notwithstanding anything contained herein to the; contraiy, allrisk, consequences arising out ofthe actual • transact.ion(s) taking place between the parties hereto under ^this agreement and/or any modified/amended undertaking will be to-the account ofKSOL only.

38. The termination.ofthis Agreement shall not affect any, rights or obligations ofeither party which have accrued priorto the termination or'which may arise out oforin connection with trades/transaction.entered into or acts •done or,omittedprior to the termination, but which may ' ' "result in future dues/obligations payable by KSOL to. MMTC -and/or the financial' institutiOns/bdnks and/or NCDEXand/or any other authority.",

6. The respondent'had furnished bank guarantee ofRs.[5] crores to. cover' price fluctuations etc., ' -,, ',FA0(0S)(C0MM) 54/201S '

7. The appellant had invoked and encashed the bank guarantee for Rs. 5 crores in view of demand of Rs. Rs.3,89,39,763/- raised by the Value Added Tax (VAT) Department, State ofRajasthan...

8. The respondent had thereupon invoked the arbitration clauses for refund and payment ofRs.2.59 crores, on account ofwithholding ofexcess amount. Therespondent has also prayed forpendent.lite andfuture interest.

9. In response/reply to the claim petition, the appellant had disputed that they had withheld the excess amount to Rs.2.59 crores. The appellant had submitted that they had withheld Rs.1,88,08,233/- to offset any Value Added Tax Liabilitythat could accrueor arise in future.

10. Unanimous award dated 16.10.20-17 is detailed and refers to the -pleadings and evidence on record. Arbitration tribunal has recorded that the. appellant had made mistakes by raising two invoices and typographical •errors due to which intra state sales at indore got reflected as sales taxable in the State of Rajasthan. On account of the said mistake and error the demand was raised. The appellant, had filed appeals before the Deputy Commissioner (Appeals) II, Commercial Taxes, Jaipur who decided the A issue in favour of the appellant and the demand was quashed. VAT Department's appeals before the Rajasthan Tax Board,- Ajmer and revision petition before the High Court ofRajasthan were dismissed.

11. After analyzing the entire factual background and also the "fact that Rs.1,88,08,233/- had •been withheld by the appellants for future VAT liability, which may or may not have accrued and in fact was neverincurred or accrued, the said' amount has been directed to be refunded along with interestat 12.5% per annum from 05.01.2012 till 16.10.2017 i.e. the datethe bank guarantee was invoked, till the date ofthe award. On failure to pay the * \ FAO(OS) (COMM) 54/2018 ' • ' Page 4of[5] amount within 60 days, the appellant were Hable to pay interest @ 8% per annum onRs.1,88,08,233/- from thedate oftheaward tillpayment.,12. We, are entirely in agreement with the findings recorded by the Single Judge who has upheld the award..The award is just^ fair and equitable. Argument raised relate ito merits and are beyond parameters of.judicial review prescribed for interference under Section 34 of the Act. We are not required to. repraise and scrutinize merits of the.finding on facts as an appellate court and forum. It is obvious and without doubt excessive aniount of Rs.1,88,08,233/- was withheld. Refund was certainly justified. Interest awarded @115%% and 8% per annum is not excessive or penal. Market,and banlc rates were much higher. Rate of interest prescribed under Section 3.1(7) oftheAct is also higher.

13. The appeal has no merit and accordingly, the same is dismissed. CM ' No. 12423/2018 for stay is disposed ofas infructuous. ' • ' SANJIVKHANNA, J ' ' ^ CLe-teo DEEPA SHARMA, J APRIL 03, 2018 b FAO(OS) (COMM) 54/2018 Page 5of[5]