Case: DHV BV Vs. Tahal Consulting Engineers Ltd. &amp; Another

that the client shall pay on behalf of the Consultants and the Personnel any taxes, duties, fees, levies and other impositions imposed, under the Applicable Law, on the consultants and the Personnel in respect of: (a) any payments whatsoever made to the Consultants, Sub-Consultants and the Personnel of either of them (other than Indian Nationals or Foreign Nationals now permanently residing in India), in connection with the carrying out of the Services; (b) any equipment, materials and supplies brought into India by the Consultants or Sub-consultants for the purpose of carrying out the Services and which after having been bought into such territories will be subsequently withdrawn therefrom by them; (c) any equipment imported for the purpose of carrying out the Services and paid for out of funds provided by the client and which is treated as property of the client. (d) Any property brought into India by the Consultants, any sub-consultants, the Personnel of either of them (other than Indian nationals or permanent residents of India), or the eligible dependants of such Personnel for their personal use and which will subsequently be withdrawn therefrom by them upon their respective departure from India, provided that: (1) the consultants, sub-consultants and personnel and their eligible dependants, shall follow the usual customs procedures of the Government in importing property into India; and (2) If the consultants, sub-consultants or personnel, or their eligible dependants, do not withdraw but dispose of any property in India country upon which customs duties and taxes have been exempted, the consultants, sub-consultants or personnel, as the case may be, (i) shall bear all such customs duties and taxes in conformity with the regulations of the Government. (ii) Shall reimburse them to the client if they were paid by the client at the time the property in question was brought into the Governments country. 14. Under the said clause, TNPWD, as a client had taken upon itself the obligation to pay on behalf of the consultants, sub-consultants and the personnel any taxes, dues, fees, etc. imposed under the applicable law. At the same time, it is significant to note that as per clause (d) thereof, not only there is an obligation to pay taxes etc. in certain situations, reimbursement of some of the amounts by the consultants to the client, which the client was compelled to pay, is also postulated. Obviously, such a situation may arise and this clause would be enforceable even after the expiry of the contract on completion of the services and on the payments having been made. Therefore, it cannot be laid as an abstract proposition that whenever the contracted work is completed, all the rights and obligations of the parties under the contract, ipso facto, come to an end and the arbitration agreement also perishes with the contract. Each case is required to be considered on its own facts. In the instant case, though it is true that all the payments were to be made by TNPWD to the consultants, namely, Tahal, but the obligation to pay taxes was also in respect of the payments which were to be received by the sub-consultants, namely, DHV in terms of sub-clause (a). Similarly, DHV as well as Tahal was under an obligation to reimburse to TNPWD the amount, if any, paid by them in terms of the aforenoted clause. Thus, it was the performance of the contract that had come to an end, but the contract is still in existence insofar as the dispute arising under clause 1.10 thereof is concerned. I have, therefore, no hesitation in rejecting the plea of learned counsel for the TNPWD that DHV had no direct contract with them insofar as the payments of taxes were concerned, and, therefore, the dispute raised by them could not fall within the ambit of arbitration agreement between TNPWD the client and Tahal the consultant or that on completion of the contract, the arbitration clause in the main contract got extinct. In my opinion, therefore, an enforceable arbitration agreement exists between the parties. 15. Clause 8.2 of the main contract provides for the right to arbitration and reads as follows: 8.2 Right to Arbitration Any dispute between the parties as to matters arising pursuant to this contract which cannot be settled amicably within thirty (30) days after receipt by one Party of the other Partys request for such amicable settlement, may be submitted by either Party for arbitration in accordance with the following provisions: xxxxxxxxx 16. The arbitration agreement is in clear terms and brings within its ambit any dispute between the parties as to matters arising pursuant to the main contract which cannot be settled amicably. Admittedly, the liability to pay the taxes flows from the contract and not otherwise. Having found that it was obligatory upon TNPWD to discharge the tax liability in respect of the payments made to the sub-consultants and DHV being a signatory to the main contract, I am of the opinion that claim made by DHV in respect of the Income tax dues would fall within the ambit of the arbitration agreement between the parties. 17. As regards the question as to whether the said claim can be said to be stale in the sense that after the last payment in January, 2003, none of the three parties herein had any pending claims against each other insofar as the payments under the main contract were concerned, I am of the view that notwithstanding the fact that payments against all the invoices raised by DHV stood paid, in the light of the agreement between the parties in terms of clause 1.10, subsequent creation of an additional payment by the Income tax department in respect of the payments made by TNPWD to DHV through Tahal, has given rise to a live dispute requiring settlement between the parties in terms of the arbitration agreement. For the view I have taken, it is axiomatic that prima facie, the claim made by DHV is not barred by limitation. 18. For the aforesaid reasons the

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]As regards the question as to whether the said claim can be said to be stale in the sense that after the last payment in January, 2003, none of the three parties herein had any pending claims against each other insofar as the payments under the main contract were concerned, I am of the view that notwithstanding the fact that payments against all the invoices raised by DHV stood paid, in the light of the agreement between the parties in terms of clause 1.10, subsequent creation of an additional payment by the Income tax department in respect of the payments made by TNPWD to DHV through Tahal, has given rise to a live dispute requiring settlement between the parties in terms of the arbitration agreement. For the view I have taken, it is axiomatic that prima facie, the claim made by DHV is not barred by limitation