The court emphasized the obligation of the Appellants to deposit the Holdback Amount and the broad discretion of the court to grant interim measures under Section 9 of the Arbitration and Conciliation Act, 1996.

JUDGMENT

S.C. Gupte, J. - Heard learned Counsel for the parties.

2. These commercial appeals challenge an order passed by a learned Single Judge of this court under Section 9 of the Arbitration and Conciliation Act, 1996 ("Act"). By the impugned order, the learned Judge has granted interim relief to the Respondent herein (original petitioner) in terms of prayer clause (b)(i) of the Commercial Arbitration Petition, which requires the Appellants herein to deposit in court Rs.59,51,08,633/- viz. An amount of Rs.44,63,71,671 in the case of Jagdish Ahuja & Anr. and an amount of Rs.14,87,36,936/- in the case of Shree Ahuja Properties & Realtors Pvt. Ltd.

3. The Respondent herein is a Cyprus based company. The Appellant in the companion appeal (COAPP No.11 of 2020) - Shree Ahuja Properties & Realtors Pvt. Ltd., an Indian company, carrying on real estate development business, issued fully convertible debentures (FCDs), which were subscribed to by the Respondent. The appellants in this appeal (COAPP No.12 of 2020) are promoters of this Indian company. Between December 2012 and January 2015, the Appellants purchased all FCDs of the Indian company held by the Respondent in different tranches. The parties entered into diverse Debenture Purchase Agreements, the last of which was Share and Debenture Purchase Agreement dated 22 December 2015 ("SDPA"), under which the final tranche of FCDs was purchased by the Appellants. The disputes between the parties arise out of this SDPA. The SDPA inter alia allowed the Appellants to hold back amounts representing tax/Tax Deducted at Source ("TDS") on the price of the FCDs and interest payable to the Respondent. The Appellants accordingly withheld sums of Rs.44,63,71,697/- and Rs.14,87,36,936/- from the amount payable to the Respondent towards purchase of the FCDs ("Holdback Amount"). The SPDA inter alia required the Appellants (purchasers) to deposit the Holdback Amount with the income tax authority in the name of the Respondent (seller) within the time limit prescribed under the Income Tax Act and in any event, on or before 31 March 2015. It is an admitted position that this amount, though withheld by the Appellants, has not been deposited into the treasury. That was presumably on the footing that it was not payable to the revenue. If it was not payable to the revenue, it is the seller, who was entitled to receive this amount. It cannot be that the amount is neither deposited into the treasury towards the tax obligation of the seller nor paid directly to the seller towards the price of the FCDs. That is apparently the basis on which the impugned order of deposit of the Holdback Amount into the court was passed by the learned Single Judge.

4. It is difficult to find fault with this order. Mr. Naphade, learned Senior Counsel appearing for the Appellants, submits that, firstly, under Section 205 of the Income Tax Act, once tax is deducted from the amount payable to the seller, it is the purchaser who is obligated to pay the same into the treasury; the assessee seller cannot be called upon to pay the tax himself to the extent of the deduction. In other words, it is submitted that it would then be a claim of the revenue against the purchaser. Learned Counsel submits that the purpose of the Respondent's (i.e. the seller's) application under Section 9 of the Act cannot be to secure the claim of the revenue. Learned Counsel, secondly, submits that even if this amount were to be secured as a claim of the Respondent seller, there is no case made out under Order 38 Rule 5 for seeking an order of deposit of this amount into court under Section 9 of the Act.

5. In the first place, the purchaser's liability to pay this amount (namely, the Holdback Amount) into the treasury towards the tax liability of the seller is essentially a matter of their inter se agreement, which is contained in clause 4.5.1 of the SDPA. The payability of the tax for the consideration received under the SPDA may be a matter between the assess