Ircon Infrastructure Services LTD vs. Madurai Multi Functional Complex Private Limited

Facts

This matter concerns an execution petition filed by the Decree Holder, IRCON Infrastructure Services Ltd., against the Judgment Debtor, Madurai Multifunctional Complex Private Limited. The dispute revolves around the payment of arrears and the adjustment of amounts recovered by the Decree Holder. The Judgment Debtor sought to adjust Rs. 1,58,70,000/- recovered by encashing a bank guarantee towards outstanding installments. The Decree Holder contended that such an adjustment was not permissible and had not been permitted by the Arbitral Tribunal or the Appellate Court. The parties agreed that Rs. 1,08,13,211/- was due as arrears for the period May 1, 2023, to May 31, 2024. Directions were issued to the sub-sub-lessee, Joyalukkas India Pvt. Ltd., regarding the remittance of rental payments, TDS, and GST.

Held

The Court held that the Judgment Debtor was not entitled to seek an adjustment of the Rs. 1,58,70,000/- collected by encashing the bank guarantee towards the payments due as per the order dated May 14, 2024, of the Arbitral Tribunal, as modified by the order dated May 30, 2024, of the Appellate Court. The Court reasoned that although the encashment of the bank guarantee on May 1, 2023, was within the knowledge of the parties, no such adjustment was prayed for before the Arbitral Tribunal or the Appellate Court. The Judgment Debtor was advised to approach the Arbitral Tribunal for any future adjustment. Consequently, the admitted position was that Rs. 1,08,13,211/- was due and recoverable by the Decree Holder as on the date of the order. The Court issued specific directions to Joyalukkas India Pvt. Ltd. for the remittance of rental payments, TDS, and GST to satisfy the outstanding amount. The mandate of the Arbitral Tribunal was extended by one year till May 2, 2026, with the consent of both parties. The Decree Holder was directed to issue invoices recording 'rent' instead of 'user charges'.

Key Issues

1. Whether the Judgment Debtor is entitled to seek an adjustment of Rs. 1,58,70,000/-, which the Decree Holder collected by encashing a bank guarantee on May 1, 2023, towards the outstanding arrears as per the orders of the Arbitral Tribunal and the Appellate Court? Petitioner/Judgment Debtor's arguments: The Judgment Debtor argued that the encashment of the bank guarantee was equivalent to twelve months' rent and should be adjusted towards the IVth, Vth, and VIth installments of arrears. If this adjustment were permitted, all arrears would be considered paid. They also stated that current rental payments, including TDS, were regular and that difficulties in collecting rent from the sub-sub-lessee were due to the Decree Holder's actions. Revenue/Decree Holder's arguments: The Decree Holder argued that it was 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. Furthermore, no such prayer for adjustment was made before either of those forums.