M/S Haridwar Highways Project Limited vs. M/S National Highways Authority Of INDIA

Facts

This case involves an execution petition filed by IRCON Infrastructure Services Ltd. (Decree Holder) against Madurai Multifunctional Complex Private Limited (Judgment Debtor). The Judgment Debtor's counsel submitted that TDS amounts for certain installments were deposited, and a portion of the third installment was recovered by the Decree Holder directly from the sub-sub-lessee. The Judgment Debtor sought to adjust the amount recovered by the Decree Holder through encashment of a bank guarantee towards outstanding installments. The Decree Holder argued that such an adjustment was not permissible and had not been sought before the Arbitral Tribunal or Appellate Court. The Court noted an admitted outstanding amount of Rs. 1,08,13,211/-. Directions were issued to the sub-sub-lessee, Joyalukkas India Pvt. Ltd., regarding payment of rentals, TDS, and GST. The parties also consented to an extension of the mandate of the Arbitral Tribunal. A dispute regarding the terminology used in invoices ('user charges' vs. 'rent') was also addressed.

Held

The Court held that the Judgment Debtor is not entitled to seek an adjustment of the Rs. 1,58,70,000/- collected by the Decree Holder through encashment of the bank guarantee towards payments due as per the orders of the Arbitral Tribunal and Appellate Court. The reasoning was that this event occurred prior to the orders, and no such adjustment was prayed for before the Arbitral Tribunal or Appellate Court. The Judgment Debtor was advised to approach the Arbitral Tribunal for any future adjustment. The Court found the admitted outstanding amount to be Rs. 1,08,13,211/-. Directions were issued for the sub-sub-lessee, Joyalukkas India Pvt. Ltd., to remit rental payments, deducting TDS and GST, to the Decree Holder until the outstanding amount is satisfied. The mandate of the Arbitral Tribunal was extended by one year. The Decree Holder was directed to issue invoices using the term 'rent' instead of 'user charges' without prejudice to its rights. The execution petition was disposed of as satisfied.

Key Issues

1. Whether the Judgment Debtor is entitled to seek an adjustment of the amount of Rs. 1,58,70,000/- collected by the Decree Holder through encashment of a bank guarantee towards the outstanding installments as per the orders dated 14.05.2024 and 30.05.2024? (Question of law). Petitioner's Arguments (Judgment Debtor): The Judgment Debtor argued that the encashment of the bank guarantee, equivalent to twelve months' rent, should be adjusted against the IVth, Vth, and VIth installments of arrears. If this adjustment is permitted, all arrears would be considered paid. They also contended that current rental payments, including TDS, were regular and that difficulties in rent collection from the sub-sub-lessee were due to the Decree Holder's direct approach. Revenue's Arguments (Decree Holder): The Decree Holder argued that it is not permissible for the Judgment Debtor to adjust the amount recovered through the bank guarantee, as no such adjustment was permitted by the Arbitral Tribunal or the Appellate Court, nor was such a prayer made before them. They also raised concerns about the terminology used in invoices affecting GST benefits.