VINOD AGARWAL Vs. FROST INTERNATIONAL LTD.

JUDGEMENT

(1.) The petitioners have filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the 'A&C Act') impugning an Arbitral Award dated 27.11.2018 (hereafter the 'impugned award') delivered by an Arbitral Tribunal comprising of a Sole Arbitrator.

(2.) The controversy in the present petition is limited to examining whether the impugned award for a sum of â "? ?82,73,709/- (Rupees Eighty Two Lacs, Seventy-Three Thousand, Seven Hundred and Nine only) rendered by the Arbitral Tribunal in favour of respondent no.1, M/s Frost International Ltd. (hereafter 'Frost') is patently illegal. The Arbitral Tribunal held that the petitioners were liable to pay the said amount against their obligation to indemnify Frost for any loss caused on account of breach of their representations and warranties in terms of the Share Purchase Agreement dated 07.08.2013 (hereafter the 'SPA'). The Arbitral Tribunal found that contrary to the representations made by the petitioners, respondent no.2 company, M/s Agros Impex (I) Pvt. Ltd. (hereafter 'Agros') was liable to pay Income Tax and penalty for the Assessment Years 2006-07 to 2010-11, which were not disclosed or recognized in the Books of Accounts of Agros. The Arbitral Tribunal had also found that Frost had paid the said liability and thus, in terms of Clause 7.1 of the SPA, the petitioners were liable to make good the loss suffered by Frost.

(3.) Mr Vachher, learned counsel appearing for the petitioners, confined his submissions within a narrow compass. He, readily, conceded that the findings of the Arbitral Tribunal to the effect that Agros had incurred liabilities in respect of the taxes and penalty for the Assessment Years 2006-07 to 2010-11 to the extent of â "? ?82,73,709/-, which were not disclosed in the Books of Accounts, could not be interfered with, in these proceedings. He confined his submissions to assailing the findings of the Arbitral Tribunal to the effect that Frost had established that it had paid the said liability and/or had incurred a loss to the aforesaid extent. He submitted that the evidence on record did not establish that Frost had paid a sum of â "? ?82,73,709/- towards Income Tax and penalty. He submitted that this was also contrary to its pleadings as in the Statement of Claims, Frost had asserted that it had paid a sum of â "? ?20,39,580/- (Rupees Twenty Lacs, Thirty-Nine Thousand, Five Hundred and Eighty only) being a major shareholder of Agros. Although, Frost claimed that Agros had incurred a liability towards Income Tax to the extent of â "? ?82,73,709/-, it did not assert that the aforesaid sum was discharged by Frost or was directly paid by it to the Income Tax Authorities. He submitted that in any event, there was no evidence on record to establish that Frost had discharged the aforesaid liability by making payments to the Income Tax Authorities.