Pudukottai Green Power PVT LTD. vs. Nhpc LTD.

Facts

Pudukottai Green Power Pvt Ltd. (Petitioner) filed a writ petition seeking a Mandamus to direct NHPC Limited (First Respondent) to refund the GST component of Rs. 43,73,269/- for the period July 2017 to June 2021, along with interest, and to direct the First Respondent to pay GST on lease rent. The Petitioner had entered into a 27-year lease agreement with the First Respondent on May 26, 2017, for 250.18 acres of land for a solar power project. Clause 14 of the agreement stipulated that taxes, rates, cess, and other levies, including 'new introductions,' would be borne by the First Party (Petitioner). The Petitioner contended that GST, introduced after the agreement, could not be levied on them, arguing it was unconstitutional and that the term 'new introductions' in Clause 14 did not encompass GST. The First Respondent argued that Clause 14 unambiguously placed the tax burden on the Petitioner.

Held

The Court held that the writ petition could not be entertained by the High Court. The primary reason was the existence of a clear arbitration clause (Clause 21) in the lease agreement between the Petitioner and the First Respondent. This clause stipulated that any controversy or dispute arising out of or in relation to the agreement, including its existence, validity, or termination, shall be referred to and finally resolved by arbitration. The Court noted that a clear lis had arisen between the parties concerning the interpretation of Clause 14, specifically whether the term 'new introductions' included GST. Since the parties had signed an agreement with a written arbitration clause, they could not bypass it and approach the High Court under Article 226. Therefore, the Court relegated both parties to the arbitration proceedings as provided under Clause 21 of the agreement. The Court explicitly stated that it was not expressing any view on the interpretation of Clause 14 to avoid hampering the arbitration proceedings. The writ petition was rejected, and the parties were directed to constitute an Arbitral Tribunal.

Key Issues

1. Whether the GST component of Rs. 43,73,269/- paid by the Petitioner for the period July 2017 to June 2021, pertaining to the lease of land for a solar power project, is refundable by the First Respondent, considering Clause 14 of the lease agreement dated May 26, 2017, and the introduction of GST post-agreement. Petitioner's Arguments: - The levy of GST on lands and buildings is unconstitutional as it falls under Entry 49 of List II (State List) of the Constitution, and Parliament cannot legislate on this under Entry 97 of List I (Union List) (residual power). This issue is pending before the Supreme Court. - Clause 14 of the agreement, which states that 'new introductions' of taxes shall be borne by the Petitioner, does not include GST, as it was introduced after the agreement and was not contemplated by the parties. - Even if GST is leviable, it should be borne by the First Respondent. First Respondent's Arguments: - Clause 14 of the agreement clearly states that 'all taxes, rates, cess and other levy including penalties...including enhancements and new introductions shall be to the account of the First Party' (Petitioner). - The Petitioner cannot approach the High Court under Article 226 when there is a clear arbitration clause in the agreement.