CARIBJET INC Vs. AIR INDIA LIMITED

JUDGEMENT

(1.) Heard. Admit. The respondent waives service. By consent, heard forthwith.

(2.) This appeal arises from the order dated 15-6-2006 passed in Notice of Motion No.685 of 2005 in Suit No.3228 of 2001. By the impugned order, the Notice of Motion which was taken out by the appellant has been dismissed. The said Notice of Motion was taken out by the appellant for an order referring the parties to arbitration in respect of the suit claim on the basis of the provisions of Article 7 r/w Articles of Wet Lease Agreement dated 22-10-1995 which was executed between the parties. The learned single Judge has held that Article 11 has ceased to be operative after the obligation to pay rent under the agreement had been terminated and had been replaced by a liability to pay damages.

(3.) The parties to the proceedings had entered into a Wet Lease Agreement dated 22-10-1995 and the Article 7 thereof related to arbitration. Consequent to termination of the agreement by the respondent on 4-9-1996, the appellant sought to refer the dispute to arbitration on 7-1-1997. The Arbitral Tribunal by its award dated 19-1-1999 ruled that the termination was wrongful. The respondent s application for leave to appeal was rejected. Under the Quantum Award passed in London, the respondent was found liable to pay to the appellant a sum of US$ 23,634,581.00 as on 15-11-1999. The appellant moved the Court in England on 6-12-1999 for enforcement of the said Quantum Award. On 16-12-1999 the respondent filed an application to the Reserve Bank of India for payment of the said sum of US$ 23,634,581.00. The Reserve Bank of India gave permission to the respondent under its order dated 21-12-1999 subject to obtaining NOC from the Income-Tax Department. On 21-12-1999, accordingly, the respondent applied to the Deputy Commissioner of Income-Tax for the necessary NOC. Under the letter dated 30-12-1999 the Income-Tax Department directed the respondent to deposit the said sum of US$ 23,634,581.00 in the Government treasury. On 20-1-2000 the London Court stayed the enforcement of the said Quantum Award on the condition that the respondent opens an escrow account with a Bank in London and deposits a sum of US$ 21.6 million. The Court thereupon referred the dispute as to the claim of the respondent that in view of Clause 11.1 of the said Agreement, it was entitled to deposit the said sum of US$ 21.6 million in Government treasury and obtain a discharge in respect thereof, to the Arbitral Tribunal. On 9-2-2000 the Deputy Commissioner of Income-Tax directed the respondent not to remit any monies to the appellant or to deposit monies in the escrow account or any other account in India and also provisionally attached the said amount payable under the said Quantum Award. However, on 14-2-2000, in compliance of the said order dated 20-1-2000, the respondent deposited sum of US$ 21.6 million in an escrow account. On 27-3-2000 the Deputy Commissioner of Income-Tax called upon the respondent to pay the amount allegedly payable by the appellant, amounting to US$ 28.22 million and prohibited the respondent from making payment of any sums even in future to the appellant. On 22-5-2000 the Arbitral Tribunal passed an order holding that in view of the repudiation of the Wet Lease Agreement, the respondent was not entitled to deduct any amount from the award or pay the same to the income-tax authorities. On 19-7-2000 the respondent applied for leave to appeal from the said order dated 22-5-2000 in the Commercial Court in England which was refused and the appellant s Motion for an order instructing the monies in the escrow to be held solely for the benefit of the appellant was allowed. On 28-7-2000 the income-tax authorities issued notice to the respondent under Section 210 of the Income-Tax Act, 1961 to show cause why penalty should not be imposed on it for non-payment of tax demanded. On 29-9-2000 the respondent deposited a sum of Rs.10,46,52,267/- with the income-tax authorities towards the tax deducted at source by the Arbitral Tribunal. On 14-2-2001 an order was passed by the Deputy Commissioner of Income-Tax treating the respondent as an "assessee in default" for not having deducted tax at source on the said sum of US$ 21.6 million. On 19-2-2001 the Deputy Commissioner of Income-Tax addressed notice to the respondent to pay tax on the said Quantum Award, treating the respondent as an "assessee in default". On 15-3-2001 the Deputy Commissioner of Income-Tax issued a show cause notice to the respondent as to why it should not be treated as an "agent of the appellant". The respondent filed an appeal before the Commissioner of Income-Tax against the order dated 14-2-2001 which was dismissed as being not maintainable. On 20-7-2001 the present Suit came to be filed wherein the appellant took out the above referred Notice of Motion and the same came to be dismissed by the impugned order dated 15-6-2006.