Searching Case Laws & Precedent on Legal Query!
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query!
Scanned Judgements…!
GST Claims and Arbitration - The key insight from the sources is that claims related to GST, VAT, or other sovereign functions cannot be arbitrated as they involve state or sovereign powers. Vidya Drolia emphasizes that the correctness and validity of the State or sovereign functions cannot be made a direct subject-matter of a private adjudicatory process ["Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022)"]. Similarly, disputes over GST liabilities, such as those placed on GAIL, are considered non-arbitrable because they pertain to sovereign functions and cannot be delegated to private tribunals.
Builder-Buyer Disputes and Arbitration - Multiple cases clarify that arbitration clauses in builder-buyer agreements do not bar consumers from approaching consumer forums, especially when the dispute involves non-arbitrable issues like possession, delay, or contractual rights. For instance, the arbitration clause in the Agreement does not bar the jurisdiction of the Consumer Fora ["AASHISH KUMAR vs M/S AMBIKA REALCON DEVELOPERS PRIVATE LIMITED - Consumer State"], and the existence of Arbitration Clause in Flat Buyer Agreement does not preclude the Consumer to approach the Consumer Forum ["PURI CONSTRUCTION PVT.LTD vs RAM GANESH VITTAL - Consumer State"]. Courts have consistently held that disputes involving consumer rights, such as delay in possession or unfair contract terms, remain within the jurisdiction of consumer forums despite arbitration clauses.
Arbitrability of GST Claims - The sources reinforce that GST claims, being a sovereign function, cannot be referred to arbitration, regardless of contractual clauses. The correctness and validity of the State or sovereign functions cannot be made a direct subject-matter of a private adjudicatory process ["Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022)"]. Hence, even if a builder and buyer agree to arbitration, GST-related disputes are excluded from arbitration because they involve government taxation powers.
Summary and Conclusion - Based on the cited judgments and legal principles, GST claims between a builder and a buyer cannot be raised in arbitration as they involve sovereign functions that are non-arbitrable. While contractual disputes like possession, delay, or contractual obligations can be arbitrated, claims concerning tax liabilities or sovereign functions are outside the scope of arbitration and are to be resolved through appropriate statutory or governmental channels.
References:- ["Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022)"]- ["AASHISH KUMAR vs M/S AMBIKA REALCON DEVELOPERS PRIVATE LIMITED - Consumer State"]- ["Ramesh Thangarajan v. Dr. Santhosshi Narayanan - Delhi"]- ["M/S TIRUPATI BUILDING AND OFFICE PVT LTD vs M/S CHAUHAN JEWELLERS PVT LTD - Delhi"]- ["RAJ KUMARI vs ALM INFOTECH CITY PVT. LTD. - Consumer State"]- ["VINGRO DEVELOPERS PVT. LTD. vs NITYA SHREE DEVELOPERS PVT. LTD. THROUGH ITS PRINCIPAL OFFICER & ORS. - Delhi"]- ["Public Works Department, Government Of Rajasthan Jaipur VS Nagaur Mukundgarh Highways Pvt. Ltd. - Rajasthan"]- ["SMS Limited vs Western Coalfields Limited - Bombay"]- ["Rajnesh Sharma VS Business Park Town Planners Ltd. - Supreme Court"]- ["Akshay Talwar VS Anil Seth - Delhi"]- ["EMAAR INDIA LTD Vs CITRON HOLDING LLP - Delhi"]- ["PURI CONSTRUCTION PVT.LTD vs RAM GANESH VITTAL - Consumer State"]- ["NEERJA SURI & ANR. vs M/S. SATYA DEVELOPERS PVT. LTD. - Consumer National"]
In the real estate sector, disputes between builders and buyers often revolve around payments, possession delays, and additional charges like Goods and Services Tax (GST). A common question arises: Can GST claims between builder and buyer be raised in arbitration? This issue pits contractual obligations against the sovereign nature of taxation, raising questions about arbitrability under Indian law.
This blog post delves into the legal nuances, drawing from Supreme Court precedents and recent judgments. While arbitration offers a swift resolution for commercial disputes, tax-related claims may fall outside its scope. Note: This is general information, not specific legal advice. Consult a qualified lawyer for your situation.
Builder-buyer agreements typically include clauses on tax liabilities, where builders charge GST on construction services and seek reimbursement from buyers. Disputes emerge when buyers challenge these charges, alleging incorrect application or contractual breaches.
For instance, invoices may include 18% GST, with builders claiming recovery under the agreement. Buyers might argue these are not payable or miscalculated. The key question is whether such claims trigger arbitration under standard clauses in Builder-Buyer Agreements (BBAs).
Recent cases highlight that while BBAs often mandate arbitration for all disputes arising out of the agreement, tax claims complicate this. Courts distinguish between pure tax challenges (non-arbitrable) and contractual interpretations (potentially arbitrable). Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022)
Taxation is a sovereign function, generally non-arbitrable. The Supreme Court in Vidya Drolia v. Durga Trading Corporation (2021) clarified that disputes involving inalienable sovereign rights, like taxation, cannot be delegated to private arbitrators. Empire Industries Limited, Represented by Mr. Yogesh Grover vs Five Star Marine Exports Pvt. Ltd. - 2025 Supreme(Online)(MAD) 15704
The Court emphasized: sovereign functions—such as taxation—are generally non-arbitrable because they are inalienable, non-delegable. Empire Industries Limited, Represented by Mr. Yogesh Grover vs Five Star Marine Exports Pvt. Ltd. - 2025 Supreme(Online)(MAD) 15704
In builder-buyer contexts, if a claim challenges the GST levy itself (e.g., rate validity), arbitration is typically barred. However, if it's about contractual reimbursement obligations, it may proceed.
Most BBAs contain broad arbitration clauses. For example, Clause 29 or 30 in some agreements states: all disputes arising out of the said Agreement shall be referred to Arbitration. VINGRO DEVELOPERS PVT. LTD. vs NITYA SHREE DEVELOPERS PVT. LTD. - 2024 Supreme(Online)(DEL) 8088
Yet, courts scrutinize scope:- Arbitrable: Disputes over whether the contract mandates GST reimbursement, invoice interpretation, or performance.- Non-Arbitrable: Direct challenges to tax lawfulness or assessments.
In one case, the court noted GST disputes could be commercial if tied to contract terms, not sovereign power. Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022) The clause emphasized settlement via Arbitration and Conciliation Act, 1996 rules.
Builder-specific insights from other rulings:- Arbitration clauses do not bind non-signatories like agents. VINGRO DEVELOPERS PVT. LTD. vs NITYA SHREE DEVELOPERS PVT. LTD. - 2024 Supreme(Online)(DEL) 8088- Consumer forums retain jurisdiction despite arbitration clauses, especially for possession delays. RAJ KUMARI vs ALM INFOTECH CITY PVT. LTD. - 2025 Supreme(Online)(SCDRC) 127Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 2369
Real estate buyers often invoke Consumer Protection Act remedies for deficiencies like delayed possession. Courts have ruled that arbitration clauses cannot circumscribe consumer fora jurisdiction.
The Supreme Court held: an Arbitration Clause in the afore-stated kind of Agreements between the Complainants and the Builder cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act. Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 1911EMAAR MGF LAND LIMITED VS AFTAB SINGH - 2018 Supreme(SC) 1235
Key points:- Buyers qualify as consumers if not for resale profit. DLF Homes Panchkula Pvt. Ltd. VS Himanshu Arora- If a consumer complaint is filed first, arbitration jurisdiction is excluded. Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 1834- Forums award compensation for delays, e.g., Rs.5 per sq. ft., overriding arbitration pleas. RAJ KUMARI vs ALM INFOTECH CITY PVT. LTD. - 2025 Supreme(Online)(SCDRC) 127
For GST claims, if framed as a service deficiency (e.g., unjust GST charging), consumer courts may handle them, bypassing arbitration.
Jurisdiction often hinges on claim value, excluding interest or future GST. Simentech India Private Limited VS Bharat Heavy Electricals Limited - Current Civil Cases (2024) Courts assess values at arbitration invocation.
In Sanjeev Narula, J., disputes on tax legitimacy were deemed non-arbitrable. Simentech India Private Limited VS Bharat Heavy Electricals Limited - Current Civil Cases (2024)
Procedural notes:- Section 11 petitions limited to arbitration agreement existence and prima facie case. VINGRO DEVELOPERS PVT. LTD. vs NITYA SHREE DEVELOPERS PVT. LTD. - 2024 Supreme(Online)(DEL) 8088- Group of Companies Doctrine may bind non-signatories, but not always in builder cases. VINGRO DEVELOPERS PVT. LTD. vs NITYA SHREE DEVELOPERS PVT. LTD. - 2024 Supreme(Online)(DEL) 8088
| Aspect | Position | Key Source ||--------|----------|------------|| Tax Disputes Arbitrability | Non-arbitrable if sovereign (e.g., GST assessment) | Vidya DroliaEmpire Industries Limited, Represented by Mr. Yogesh Grover vs Five Star Marine Exports Pvt. Ltd. - 2025 Supreme(Online)(MAD) 15704 || Contractual GST Reimbursement | Arbitrable if commercial/contract interpretation | Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022) || Builder-Buyer Arbitration Clauses | Do not override consumer fora | Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 2369EMAAR MGF LAND LIMITED VS AFTAB SINGH - 2018 Supreme(SC) 1235 || Jurisdictional Thresholds | Claim value at invocation, exclude interest/GST | Simentech India Private Limited VS Bharat Heavy Electricals Limited - Current Civil Cases (2024) |
GST claims between builders and buyers cannot always be raised in arbitration. Pure tax challenges are typically non-arbitrable due to sovereign functions, but contractual disputes over reimbursement may qualify. In real estate, consumer protection often trumps arbitration.
Recommendations:- Draft clear clauses excluding/including tax issues.- Opt for consumer forums early if applicable.- Assess if dispute is contractual vs. statutory.
Clear drafting and early legal consultation can prevent escalation. Stay informed on evolving jurisprudence for effective resolution.
Sources: Spectrum Power Generation Limited vs Gail (India) Limited - Delhi (2022)Empire Industries Limited, Represented by Mr. Yogesh Grover vs Five Star Marine Exports Pvt. Ltd. - 2025 Supreme(Online)(MAD) 15704Simentech India Private Limited VS Bharat Heavy Electricals Limited - Current Civil Cases (2024)VINGRO DEVELOPERS PVT. LTD. vs NITYA SHREE DEVELOPERS PVT. LTD. - 2024 Supreme(Online)(DEL) 8088RAJ KUMARI vs ALM INFOTECH CITY PVT. LTD. - 2025 Supreme(Online)(SCDRC) 127Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 2369Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 1911Shriprop Structures Pvt. , Ltd. , Rep. by its Authorised Signatory, Lakshmi Neela Rite Chamber, T. Nagar VS Neerathulingam - 2019 Supreme(Mad) 1834EMAAR MGF LAND LIMITED VS AFTAB SINGH - 2018 Supreme(SC) 1235DLF Homes Panchkula Pvt. Ltd. VS Himanshu Arora
#GSTArbitration #BuilderBuyerLaw #RealEstateDisputes
The issue which is essentially raised is whether the GST/VAT liability which came to be placed upon GAIL could be passed onto the petitioner or it be held liable to reimburse GAIL to the aforesaid extent under the agreement. The challenge is raised solely on the anvil of Article 10.6. ... Vidya Drolia thus is an authority for the proposition that the powers and decisions that the State may take in exercise of its sovereign functions, and which would necessarily include its taxing power, cannot form subject matter of an #....
Emaar MGF Land Limited & Anr., Consumer Case No. 701 of 2015, wherein, vide order dated 13.07.2017, it has been held that an Arbitration Clause in the Agreements/contracts between the buyer and the Builder cannot circumscribe the jurisdiction of a Consumer Fora notwithstanding the amendments made ... to Section 8 of the Arbitration Act. ... Consequently, the complainants, already observed above, are held entitled to delayed compensation/interest on the entire amount paid by them including GST#....
Hence, the objection raised by the Opposite Party Builder that the clause of Arbitration bars this Commission from entertaining the Complaint is unsustainable. ... 14. ... The Appellant - Builder cannot seek to bind the Respondent with such one - sided contractual terms." ... 17. ... The Complainant raised query for actual date of possession but the OP - Builder without assigning any reason for the delay, kept postponing the delivery date of the said Villa on one ....
The said Builder Buyer Agreement contained Clause No. 54 as the arbitration clause, which stipulated that any disputes arising between the parties shall be resolved through arbitration, to be conducted in Delhi, and further provided that the Arbitrator shall be appointed by the Builder, i.e. the petitioner ... This Court appointed the Arbitrator and arbitration proceedings commenced wherein the respondent made claims for business losses, mental harassment and cost of ....
OP cannot wriggle out from the implications flowing from Builder Buyer Agreement and cannot be allowed to frustrate the indefeasible rights of complainant on its own whims and fancies and cannot be permitted to deviate from its clauses. ... It is also admitted that Builder Buyer Agreement dated 14.01.2013 was entered into. Builder Buyer Agreement, of course, constitutes a binding contract between the parties. ... OP is entitled to r....
17.In the present case, the main challenge raised by the respondent is that Respondent No.2 and 3 are not parties to the Arbitration Agreements and thus, the matter cannot be referred to arbitration. ... The clause 29 and 30 of the Builder Buyer Agreements holds as is under: “29. ... The parties executed 8 Builder Buyer Agreements dated 18.11.2016 for 8 plots of land admeasuring 125 sq. yds each and subsequently, 4 additional Builder#HL_EN....
17.In the present case, the main challenge raised by the respondent is that Respondent No.2 and 3 are not parties to the Arbitration Agreements and thus, the matter cannot be referred to arbitration. ... The clause 29 and 30 of the Builder Buyer Agreements holds as is under: “29. ... The parties executed 8 Builder Buyer Agreements dated 18.11.2016 for 8 plots of land admeasuring 125 sq. yds each and subsequently, 4 additional Builder#HL_EN....
OP cannot wriggle out from the implications flowing from Builder Buyer Agreement and cannot be allowed to frustrate the indefeasible rights of complainant on its own whims and fancies and cannot be permitted to deviate from its clauses. ... It is also admitted that Builder Buyer Agreement dated 14.01.2013 was entered into. Builder Buyer Agreement, of course, constitutes a binding contract between the parties. ... OP is entitled to r....
It is stated that the Agreement contains Arbitration Clause, which clearly states that all disputes arising out of the said Agreement shall be referred to Arbitration. ... 6. ... A buyer can be expected to wait for possession for a reasonable period. A period of seven years is beyond what is reasonable. Hence, it would have been manifestly unfair to non - suit the buyer merely on the basis of the first prayer in the reliefs sought before the SCDRC. ... The Complainants filed their Rejoinder denying all the rival conten....
at 18%, had the respondent raised invoices at 18% GST. ... For the first time before this Court, the petitioners have raised the contention that the respondent cannot claim penalty and interest since the contract does not provide for the same; b) Being liable to pay GST to the GST Department, the respondent is under obligation to defend ... Since the petitioners refused to pay GST at the rate of 18% as demanded by the respondent, subsequent to the raising of invoices ....
(vi) Thereafter it seems that, the appellant in that case had approached the Delhi High Court. Consequently, we unhesitatingly reject the arguments on behalf of the Builder and hold that an Arbitration Clause in the afore-stated kind of Agreements between the Complainants and the Builder cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.” Since the Delhi High Court has dismissed the said appeal to present before the Appellate Court, the said Civil Appeal Nos.23512 - 23513 of 2017, challenging the....
Consequently, we unhesitatingly reject the arguments on behalf of the Builder and hold that an Arbitration Clause in the afore-stated kind of Agreements between the Complainants and the Builder cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.” (vi) Thereafter it seems that, the appellant in that case had approached the Delhi High Court. Since the Delhi High Court has dismissed the said appeal to present before the Appellate Court, the said Civil Appeal Nos.23512 - 23513 of 2017, challenging the....
(vi) Thereafter it seems that, the appellant in that case had approached the Delhi High Court. Since the Delhi High Court has dismissed the said appeal to present before the Appellate Court, the said Civil Appeal Nos.23512 - 23513 of 2017, challenging the Larger Bench decision of the NCDRC, dated 13.07.2017 as well as the consequential order dated 28.08.2017 were filed before the Hon’ble Apex Court. Consequently, we unhesitatingly reject the arguments on behalf of the Builder and hold that an Arbitration Clause in the afore-stated kind of Agreements between the Complainants and the....
Consequently, we unhesitatingly reject the arguments on behalf of the Builder and hold that an Arbitration Clause in the afore-stated kind of Agreements between the Complainants and the Builder cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.”
In their respective written statements the opposite parties took the preliminary objection that respective complainants/respondents in these appeals are not the consumers as they had booked the floors in the subject project for the purpose of earning profit by resale at a higher price. The opposite parties also took the plea that in view of clause 55 of the builder-buyer agreement the subject dispute should be referred to arbitration. A separate application under Section 8 of the Arbitration & Conciliation Act, 1996 was also moved in this regard. The Larger Bench after cons....
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