New Delhi, Jul 31 A Delhi court has set aside an arbitrator's decision to dismiss a private company's claim seeking a refund of around Rs 15 lakh deposit held by the Northern Railway.
District Judge (Commercial Court) Pulastya Pramachala was hearing a plea by Carzonrent (India) Pvt Ltd challenging the July 2022 award of a sole arbitrator which rejected its claim seeking refund, saying it was "time-barred".
"The claimant has slept throughout 2014 to 2020 and never enforced its right, which has now become time-barred and remedy in law cannot be availed for the said relief…," the arbitrator had said.
The case stems from a three-year contract to Carzonrent in 2011 to run radio taxi services at the Hazrat Nizamuddin Railway Station.
After the contract ended, the company sought a refund of its security deposit. The Northern Railway, however, refused to release the deposit, saying the company needed to pay service tax, a claim which the company contested, citing tax laws and contract stipulations.
In an order passed on Thursday, the court said that there were active negotiations between the company and the Northern Railway till 2019.
"It was only on May 30, 2019, that a firm and final stand was taken on behalf of respondent (Northern Railway) to say that petitioner (Carzonrent) was liable to pay service tax, which was made a pre-condition for release of security deposit," the court said.
It said that the "breaking point" in the negotiations between the parties occurred only in May 2019, and the company's invocation of arbitration in August 2020 was within the limitation period.
"It is worth mentioning here that the arbitrator had already held while returning the finding… that security deposit in the case was not subject to service tax and demand for the service tax, or GST was not borne out from the terms and nature of the contract between the parties."
"Thus, the arbitrator had accepted the contention of the petitioner herein regarding no liability to pay service tax, but on account of the finding given on issue related to limitation, such claim of petitioner was not allowed on merits and was declined," Judge Pramachala said.
He then set aside the decision, saying it caused severe prejudice to the company, and is accordingly found "perverse".
The judge said that the "parties may resort to further arbitration" regarding the issue.
