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IN THE HIGH COURT OF DELHI AT NEW DELHI
Vibhu Bakhru, J.
Parsvnath Developers Ltd. - Appellant
Versus
Future Retail Limited - Respondent
ARB.P. 14/2020
Decided On : 12-04-2022
Arbitration - Sub-License Agreement - Arbitration and Conciliation Act, 1996 - Section 11(6)
Fact of the Case:
PDL filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, seeking the appointment of an Arbitrator on behalf of FRL, based on a Sub-License Agreement. The dispute arose from FRL's alleged failure to reimburse service tax paid by PDL.
Finding of the Court:
The Court held that the issues of stamp duty sufficiency and limitation were contentious and required adjudication by the Arbitral Tribunal. The Court's examination under Section 11 of the A&C Act was limited to the existence of the Arbitration Agreement.
Issues: The issues revolved around the sufficiency of stamp duty, limitation of claims, and the existence of an Arbitration Agreement.
Ratio Decidendi: The Court's examination under Section 11 of the A&C Act is confined to the existence of an Arbitration Agreement. Contentious issues such as sufficiency of stamp duty and limitation of claims are to be decided by the Arbitral Tribunal.
Final Decision: The petition was allowed, and Arbitrators were appointed for constitution of the Arbitral Tribunal, subject to necessary disclosures and eligibility under the A&C Act.
JUDGMENT
Vibhu Bakhru, J. - The petitioner (hereafter 'PDL') has filed the present petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act') praying that an Arbitrator be appointed on behalf of the respondent (hereafter 'FRL'), in accordance with Clause 11.3 of the Sub-License Agreement. PDL had nominated its Arbitrator and further prays that the two Arbitrators (one nominated by PDL and the other as may be appointed by this Court on behalf of FRL), be directed to appoint the Presiding Arbitrator.
Factual Matrix
2. PDL is a public company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of developing land and constructing residential and commercial projects in India.
3. FRL is a company incorporated under the provisions of the Companies Act, 1956 and is engaged in the business of running large format stores like 'Big Bazaar', 'Food Bazaar', 'Fashion Bazaar', 'Central' in some of the major cities in India.
4. On 06.09.2004, PDL entered into an agreement with the Delhi Metro Rail Corporation Ltd (DMRC), whereby a specified area on the ground floor and first floor within the Station Box at Inderlok Metro Railway Station was allocated to PDL for constructing a shopping complex under the name and style of 'Parsvnath Mall'. Under the terms of the said agreement, PDL was given the right to sub-license the use of the facility for the period of the agreement and for the uses specified therein.
5. Thereafter, on 29.06.2005, PDL and FRL [formerly known as Pantaloon Retail (India) Limited] entered into a Sub-License Agreement (hereafter 'the Contract'), wherein Unit no. G-29 and F-28, located at the Ground and First floors, admeasuring approximately 42,500 sq. ft. of super area of Parsvnath Mall, were agreed to be sub-licensed to FRL for running a departmental store under the name of 'Big Bazaar'.
6. During the subsistence of the Contract, in the year 2007, the Government of India enacted the Finance Act, 2007 by virtue of which the service of renting/licensing immovable properties for commercial use was included as a taxable service and brought under the nest of service tax with effect from 01.06.2007. Consequently, the licensing of the premises to FRL under the Contract was a taxable service. PDL claims that FRL was liable to bear the additional burden of service tax; however, FRL had failed to reimburse the service tax paid by PDL.
7. PDL states that from 10.07.2007 onwards, various letters were issued to FRL demanding payment of the service tax amount. However, FRL had failed to make the said payment.
8. By a notice dated 27.06.2018, PDL informed FRL that for the period 01.06.2007 to 31.12.2017, FRL was liable to pay an amount of ? 4,27,93,994/- towards service tax and GST. However, since the concession period of PDL with DMRC expired on 19.06.2017, and after adjusting the IFRSD amount of ? 54,51,184/-, FRL was liable to pay the balance amount of ? 3,73,42,810/-. Accordingly, PDL called upon FRL to pay the same within a period of seven days of the receipt of the notice.
9. FRL responded by a letter dated 27.09.2018, disputing the payment of service tax and stated that no stipulation was contained in the Contract for payment of service tax.
10. In view of the disputes, PDL issued a notice dated 19.06.2019, invoking the Dispute Resolution Clause - Clause 11.1 read with Clause 11.2 of the Contract - and, called upon FRL to mutually resolve the disputes within a period of forty-five days of the receipt of the notice.
11. FRL did not respond to the aforesaid notice dated 19.06.2019. Subsequently, by a notice dated 03.09.2019, PDL invoked the Arbitration Clause contained in Clause 11.3 of the Contract and nominated Mr. S.C. Jain to act as one of the arbitrators.
12. On 07.09.2019, FRL responded to PDL's notice dated 19.06.2019, denying its liability to pay the service tax. Further, it stated that majority of the claims of PDL were barred by limitation and thus, were un
The Court's examination under Section 11 of the A&C Act is limited to the existence of an Arbitration Agreement, and contentious issues are to be decided by the Arbitral Tribunal.
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The main legal point established is the limited scope of examination under Section 11 of the A&C Act, which focuses solely on the existence of an arbitration agreement.
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