FAO(COMM) 126/2022

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IN THE HIGH COURT OF DELHI AT NEW DELHI

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FAO (COMM) 126/2022, CM Nos.37572/2022, 37573/2022,

37574/2022, 37575/2022 & 37576/2022

UNION OF INDIA THORUGH EXECUTIVE

ENGINEER

..... Appellant

Through:

Mr. Ruchir Mishra, Mr. Sanjiv Kr.

Saxena, Mr. Mukesh Kr. Tiwari,

Mr. Ramneek Mishra, Ms. Mansi

Verma and Mr. Channan Lal

Sharma, Advs.

versus

M/S SWADESHI CIVIL INFRASTRUCTURE

PVT LTD

..... Respondent

Through:

None.

CORAM:

HON’BLE MR. JUSTICE VIBHU BAKHRU

HON’BLE MR. JUSTICE AMIT MAHAJAN

VIBHU BAKHRU, J. (ORAL)

1.

The appellant has filed the present appeal under Section 37 of the

Arbitration and Conciliation Act (hereafter ‘the A&C Act’), impugning

an order dated 20.04.2022, passed by the learned Commercial Court,

whereby the appellant’s application under Section 34 of the A&C Act,

seeking to set aside an arbitral award dated 15.09.2018 (hereafter ‘the

impugned award’), was rejected.

2.

The controversy in the present case, essentially, relates to the

respondent’s claim for refund of the Security Deposit, which was

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/003511

FAO(COMM) 126/2022

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retained by the appellant. The Security Deposit was to be released on

completion of five years from the completion of works. After the expiry

of the said period, the appellant has, suo moto, adjusted certain claims

against the Security Deposit. Such claims not only included claims in

respect of the contract in question (the contract in respect of which the

Security Deposit was furnished) but ten other contracts as well.

3.

According to the appellant, certain excess payments were made

to the respondent as reimbursement of service tax and it was entitled to

adjust the same from the Security Deposit. It is the respondent’s case

that the respondent was entitled for reimbursement of service tax paid

in respect of the contracts entered into between the parties.

4.

The appellant claims that there was an error in calculation of the

said service tax, inasmuch as, the service tax was calculated on the gross

amount of invoices, which included the Value Added Tax (VAT).

According the appellant, the VAT was required to be deducted from the

gross amount and the service tax was payable only on the amount sans

the VAT component.

Factual Context

5.

The brief facts relevant to address the controversy are as under:

5.1

The respondent issued a Notice Inviting Tender (hereafter ‘the

NIT’) for the works regarding “Providing & Fixing of seating

This is a digitally signed Judgement.

NEUTRAL CITATION NO: 2022/DHC/003511

FAO(COMM) 126/2022

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Nehru Stadium, New Delhi”.

5.2

Pursuant to the said NIT, the respondent submitted its bid for

executing the aforesaid works on 25.09.2009. The respondent’s bid for

a contract value of ₹5,24,25,000/- (Rupees Five Crores Twenty-Four

Lakhs and Twenty-five Thousand only) was accepted and the appellant,

thereafter, issued a Letter of Award on 27.11.2009 (hereafter ‘the

LoA’), in favour of the respondent. In terms of the LoA, the respondent

was required to submit a Performance Guarantee for a sum of

₹26,21,250/-, within a period of ten days from the issue of the LoA.

5.3

Thereafter, the parties entered into a formal agreement bearing

no. 02/EE/CWDG-1/2009-10 (hereafter ‘the Contract’). In terms of the

Contract, the stipulated date for commencement of the works was

12.12.2009, and the said works were to be completed within a period of

three months, that is, on or before 11.03.2010.

5.4

In addition to the Contract, the parties had entered into other

contracts in respect of separate works concerning the Commonwealth

Games and had per