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2011 Supreme(Pat) 2432
2012 (1) PLJR 368
PATNA HIGH COURT
R.M. Doshit, CJ & Birendra Pd. Verma, JJ.
M/s HPCL BIOFUELS L TO. (a wholly owned subsidiary company of Hindustan. Petroleum Corporation Limited) situated earlier at 6th Floor, Lok Nayak Jai Prakash Bhawan, Dak Bunglow, P.S. Kotwali, Town & District-Patna, situated presently at 271, New Patliputra Colony, Town & District Patna, through its Chairman-cum Marketing Director & Anr. (in all)
vs.
The Saraswati Industrial Syndicate Limited, a Company having its registered office at Yamuna Nagar135001, Haryana and its Corporate Office situated at A-4, Sector-24, P .S. & District-Gautam Budh Nagar, Noida (Uttar Pradesh), through its constituted. Attorney Ravinder Kumar Sharma S/o late D.R. Sharma, Rio 143, Sector-A, Pocket-B& C, Vasant Kunj, P .S.-Mahrauli, District-New Delhi-110070 & Ors. (in all)
LPA No. 1336 of 2011
[in CWJC No. 16774 of 2010; with I.A.
Nos. 7042 and 7243 of 2011] in 1336 of 2011
Decided On: 22.11.2011/14.12.2011
Advocate Appeared
For the Appellants : Mis Chitranjan Sinha, Rajeev Prakash.
For the Respondent: M's Dr. Debi Prasad Pal, No.1 S.D. Sanjay, Amamath Sen.
For the State : Mr. Vikash Kumar.
The main legal point established in the judgment is that disputes regarding contract terms and conditions, including liability for statutory taxes, should be referred to arbitration if the parties have agreed to do so.
Headnote:
Arbitration Agreement - Entry Tax Dispute - The Bihar Tax on Entry of Goods in the Local Areas for Consumption, Use or Sale Therein Act, 1993 - Section 3
Fact of the Case:
The appellant, a subsidiary of a public sector undertaking, entered into a contract with a company for installation of a Sugar Mill in Bihar. The company challenged the appellant's action of recovering entry tax paid for machinery brought into Bihar. The Single Judge allowed the writ petition, restraining the appellant from recovering the entry tax amount.
Finding of the Court:
The Court found that the dispute fell within the realm of the construction of the contract terms and conditions, and the parties had agreed to refer any dispute to an arbitrator. The Court held that the petition under Article 226 of the Constitution should not have been entertained and set aside the Single Judge's judgment, dismissing the writ petition and directing the parties to resolve their dispute through arbitration.
Issues: The issues involved the liability for entry tax under The Bihar Tax on Entry of Goods in the Local Areas for Consumption, Use or Sale Therein Act, 1993, and the enforceability of the arbitration agreement.
Ratio Decidendi: The Court held that the dispute regarding entry tax liability and the construction of the contract terms fell within the realm of the contract and should be referred to arbitration as agreed by the parties. The Court also emphasized that the petition under Article 226 of the Constitution should not have been entertained.
Final Decision: The Court allowed the appeal, set aside the Single Judge's judgment, dismissed the writ petition, and directed the parties to resolve their dispute through arbitration.
(Per: Hon'ble the Chief Justice)
Order dated 22.11.2011
Re: I.A. No. 7042 of 2011
This application is made by the appellant for permission to bring on record the correspondence (pp 44 to 49). The respondents have no objection, if the said documents are placed on record.
2. Permission is granted.
3. Interlocutory Application is allowed.
Re: L.P .A. No. 1336 of 2011
4. This Appeal under Clause 10 of the Letters Patent is preferred by the M/s HPCL BIOFUELS LTD., a wholly owned subsidiary of Hindustan Petroleum Corporation Limited, a public sector undertaking of the Central Government, against the judgment and order dated 7th July, 2011 passed by the learned Single Judge in above CWJC No. 16774 of 2010.
5. The respondent no. 1: the writ petitioner, is one Saraswati Industrial Syndicate Limited, a Company incorporated under the Companies Act, 1956 (hereinafter referred to as "the Company"). The Company claims that it is the proprietor of M/s ISGEC John Thomson (hereinafter referred to as "the Firm"). The Company entered into the agreement with the HPCL BIOFUELS LTD. for installation and commission of a Sugar Mill in the State of Bihar through the Firm. A contract was entered into by the Firm and the appellant. Letter of intent was issued on 22nd October, 2009. Admittedly, for execution of the contract certain machineries have been purchased and brought in the State of Bihar in the name of the appellant. For bringing the said machineries in the State of Bihar, the appellant has been charged the entry tax and such entry tax paid by the appellant has been recovered by the appellant from the Firm from the contractual amount. It is the said action of the appellant which was the subject matter of challenge in above CWJC No. 16774 of 2010 filed by the Company.
6. According to the Company, the machinery in question was manufactured by the Company in its plant situated in the State of Haryana. The Machinery was sold to the appellant at Haryana. The property in the said machinery passed over to the appellant in Haryana. It was the appellant which brought the said machinery in the State of Bihar for installation. The appellant was, therefore:' liable to pay the entry tax under The Bihar Tax on Entry of Goods in the Local Areas for Consumption, Use or Sale Therein Act, 1993 (hereinafter referred to as "The Entry Tax Act").
7. The petition was contested by the appellant. According to the appellant, the appellant has entered into a contract with. the Firm for installation and commission of a Sugar Mill in' the State of Bihar. The appellant has no privy of contract with the Company, The Company is a stranger to the said contract. Under the terms and conditions of the contract the Firm was liable to incur all expenses including various taxes. Further, under the contract, the appellant and the Firm had agreed upon an arbitration agreement. The dispute, therefore, was referable to the Arbitration. The writ petition under Article 226 , of the Constitution was not maintainable.
8. The learned Single Judge, was of the opinion that the alternative remedy of arbitration was not a rule of law or compulsion, but was a matter of caution and discretion. In view of the infraction or violation of the fundamontal right, the alternative remedy cannot be pressed into service. Besides, in the matter of entry tax the State Government would be vitally interested. The State Government being not a party to the agreement, the matter relating to the entry tax cannot be referred to the Arbitration. In view of the said findings and the finding that the appellant was liable to pay entry tax for the machinery imported in the State of Bihar, the learned Single Judge allowed the writ petition. The appellant is restrained from recovering the amount of entry tax paid by it from the contractual amount. Therefore, the present Appeal.
9. Learned counsel Mr. Chitranjan Sinha has appeared for the appellant. He has taken us through the contract to buttress the argument that under the ag
