Delhi District Court
Delhi Metro Rail Corporation vs Kone Elevator India Pvt Ltd on 14 November, 2025
IN THE COURT OF SH. PULASTYA PRAMACHALA
DISTRICT JUDGE, (COMMERCIAL COURT)-01,
PATIALA HOUSE COURT, NEW DELHI
Sl. INDEX
No. HEADINGS Page Nos.
1. Memo of Parties 2
2. Description of case 2
3. Brief Facts of the Case 2-4
4. Grounds of objection 4-7
5. Reply filed by the respondent 7-8
6. Arguments of petitioner 9-10
7. Arguments of respondent 10-12
8. Appreciation of arguments, facts and law 12-24
9. Decision 24
Digitally
signed by
PULASTYA
PULASTYA PRAMACHALA
PRAMACHALA Date:
2025.11.14
17:15:54
+0530
ARBTN 5488/2018 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.1 of 24 Patiala House Court, New Delhi
ARBTN NO. 5488/2018
In the Matter of: -
DELHI METRO RAIL CORPORATION LTD.,
Metro Bhawan, 13, Fire Brigade Lane,
Barakhamba Road, New Delhi-110001.
...Petitioner
Versus
KONE ELEVATOR INDIA PVT. LTD.
Having its registered address at:
50, Vanagaram Road, Ayanambakam,
Chennai- 600095.
...Respondent
Date of Institution : 01.10.2018
Arguments heard on : 17.10.2025
Decided on : 14.11.2025
Decision : Petition is rejected.
JUDGMENT
DESCRIPTION OF CASE
1. Present petition under Section 34 of the Arbitration and Concilia-
tion Act, 1996 (hereinafter referred to as "the Act") has been filed by petitioner, Delhi Metro Rail Corporation Ltd. (DMRC), seeking setting aside of the Arbitral Award dated 15.06.2018 passed by the Arbitral Tribunal comprising of Sh. K. Choudhary (Presiding Arbitrator), Sh. O.P. Bhatia, and Sh. Arun Kumar Trivedi (Member Arbitrators).
BRIEF FACTS OF THE CASE
2. Briefly stated Petitioner has alleged that, it is a company incorpo-
rated under the Companies Act, established with the objective of implementing and operating a world-class Mass Rapid Transport System in the National Capital Region. Respondent is a company ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.2 of 24 Patiala House Court, New Delhi engaged in the business of design, manufacturing, supply and commissioning of elevators, and supply, erection and commis- sioning of escalators.
3. Petitioner was entrusted with the development of infrastructure and construction of Phase-II of the Institute of Liver and Biliary Sciences (ILBS), situated at D-1, Vasant Kunj, New Delhi. In connection therewith, petitioner floated a tender for design, man- ufacturing, supply, installation and commissioning of 24 eleva- tors for the said project. Respondent participated in the tender process and was successfully awarded the contract. Conse- quently, both parties executed Contract Agreement No. DMRC/ Elect/IT&PD/ILBSElevators/03 dated 16.07.2011 for a total con- tract value of Rs.9,04,18,680/-.
4. As per Clause 51.4 of the Special Conditions of Contract (SCC), the payment schedule to the contractor was stipulated as follows:
i. 65% of the payment was payable upon bringing the material to the site, and ii. The remaining 35% upon erection, installation, testing, com-
missioning, and issuance of completion certificate. It is further pleaded that for the purposes of Delhi Value Added Tax (DVAT), the contract was accordingly bifurcated- VAT was chargeable on the 65% payment component relating to supply of material, while no VAT was applicable on the remaining 35%, which pertained exclusively to services rendered by the contractor.
5. Respondent commenced work and raised monthly Running Ac-
count (R.A.) Bills from the year 2012 onwards, corresponding to ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.3 of 24 Patiala House Court, New Delhi the material brought to site and the work executed, duly recorded in Measurement Book (M.B.) sheets signed by officials of both parties. Petitioner regularly filed its statutory tax returns for the relevant tax periods and made payments to respondent, including the VAT component. However, despite repeated written requests, respondent failed to furnish the requisite tax invoices along with its R.A. Bills within the corresponding tax period. Due to this failure, petitioner was unable to avail Input Tax Credit (ITC) of the VAT component already paid, thereby suffering financial loss equivalent to the amount of ITC that could not be claimed. To mitigate such loss and in terms of Clause 5 of the Form of Agreement and Clause 16.3 of the SCC, petitioner recovered the said loss by deducting equivalent amounts from subsequent R.A. Bills of respondent.
6. Aggrieved by such deductions, respondent invoked the arbitra-
tion clause. The matter was referred to an Arbitral Tribunal of three members, which, after considering the claims and defenses, passed the impugned Award dated 15.06.2018, holding that re- spondent was entitled to payment of the withheld amount of Rs.77,23,421/-, recovered up to the 9th R.A. Bill. The Tribunal allowed the claim of respondent without, according to petitioner, duly appreciating respondent's breach of contractual and statu- tory obligations.
GROUNDS OF OBJECTION/CHALLENGE
7. Aggrieved by the said award dated 15.06.2018, present objection petition has been filed by the petitioner mainly on following grounds: -
ARBTN 5488/2018 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.4 of 24 Patiala House Court, New Delhi
i. Because the impugned Award is in conflict with the public
policy of India, and is contrary to the fundamental policy of Indian law. The Arbitral Tribunal passed the Award without taking into consideration the provisions of the Delhi Value Added Tax Act, 2004, the Delhi Value Added Tax Rules, 2005, and in violation of Section 73 of the Indian Contract Act, 1872.
ii. Because the Tribunal failed to appreciate that Section 2(1) (zc) of the DVAT Act defines the term "sale" to include, under clause (v), the transfer of property in goods involved in the execution of a works contract, which is directly relevant to the present dispute.
iii. Because the Tribunal overlooked that Clause 51.4 of the Special Conditions of Contract (SCC) itself divided the contract into two distinct parts:
the first part providing for 65% payment upon material being brought to site, and the second part providing for the balance 35% payment upon erection, installation, testing, and commissioning of lifts.
iv. Because the Tribunal failed to appreciate that Clause 6 of the Indenture merely stipulated that any excess stage payment beyond the quantity actually used at site would be treated as the contractor's property without liability upon DMRC. In the present case, no such claim regarding excess stage payment was raised by either party.
v. Because the Tribunal ignored Clause 75 of the General Conditions of Contract (GCC) dealing with "Advances", ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.5 of 24 Patiala House Court, New Delhi and in particular Clause 75.4, which specifically provided that any advance against materials at site shall be limited to 80% of the value of such materials.
vi. Because the Tribunal failed to consider crucial documentary evidence, particularly the letter dated 21.08.2014 issued by respondent itself, wherein Issue No. 7 pertained to credit of tax invoices raised.
vii. Because the Tribunal failed to properly construe Clauses 73 and 73.1 of the GCC, which clearly provide that the contractor is entitled to payment from time to time, by way of "on-account" bills, only for such work as, in the opinion of the Engineer, has been executed in accordance with the contract.
viii. Because the Tribunal overlooked that respondent, while claiming payment of tax components in its R.A. Bills, consistently failed to discharge its statutory obligation of remitting VAT to the DVAT authorities in a timely manner, and habitually delayed the submission of tax invoices, thereby depriving petitioner of its lawful Input Tax Credit (ITC).
ix. Because the Tribunal erred in ignoring the fact that although petitioner had duly paid the VAT component to respondent and discharged its output tax liability, it was unable to avail the corresponding ITC due to respondent's failure to furnish timely tax invoices. Consequently, petitioner was entitled to recover the resultant loss from respondent, in accordance with Clause 5 of the Form of Agreement and Clause 16.3 of ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.6 of 24 Patiala House Court, New Delhi the SCC.
x. Because the Tribunal also failed to take note of Clause 3.1.7 of the Notice Inviting Tender (NIT), which specifically mandated that the contractor would maintain meticulous records of all taxes and duties paid and furnish the same to the employer to enable availing of exemption or reimbursement. Similar obligations are reiterated under Clause 5 of the Form of Agreement and Clause 16.3 of the SCC, making the contractor solely responsible for compliance with all tax laws.
xi. Because the Tribunal grossly erred in dismissing petitioner's application under Sections 18 and 19(4) of the Act, seeking permission to lead evidence by way of affidavit and to cross-examine respondent's witness. Petitioner was within its legal right to seek such liberty in order to effectively challenge and test the veracity of respondent's testimony.
REPLY FILED BY THE RESPONDENT
8. In response to the present petition, respondent filed a detailed re-
ply denying all averments and contentions raised by petitioner. It is averred that the petition does not disclose any ground falling within the permissible ambit of Section 34 of the Arbitration and Conciliation Act, 1996, and is therefore liable to be dismissed at the very threshold. Respondent contends that Clause 51.4 of the Special Conditions of Contract (SCC) merely prescribes the man- ner of stage-wise payments to be made under the contract and cannot be construed as a clause determining the taxable value for the purposes of Value Added Tax (VAT) or Service Tax. It is ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.7 of 24 Patiala House Court, New Delhi urged that in the case of composite contracts, the payment of VAT is governed by the Delhi Value Added Tax Rules, 2005, which provide that 85% of the contract value shall be treated as the value of goods for the purpose of levy of DVAT.
9. Respondent further submits that petitioner has erroneously equated the payment terms, which regulated only the cash flow and execution stages, with the value of goods liable to VAT un- der the DVAT framework. It is contended that the contract price, as clearly stated in the Letter of Acceptance and the Agreement, was inclusive of all taxes and duties. There was no contractual provision authorizing petitioner to withhold or recover any addi- tional amount on account of DVAT, except the statutory tax de- duction at source (TDS), which was duly effected from the 1st to the 4th Running Account Bills. Respondent further pleaded that the Arbitral Tribunal had duly considered the relevant provisions of the DVAT Act and Rules, including the incidence of tax, tim- ing of issuance of invoices, withholding tax provisions, and pay- ment obligations under the contract. The Tribunal also examined the DVAT returns filed by respondent, along with all relevant contractual and correspondence records exchanged between the parties. It is further asserted that the impugned Award has been passed after due consideration of all material evidence and docu- ments, in accordance with the contractual terms and applicable law. Hence, the Award cannot be said to suffer from any perver- sity, illegality, or violation of public policy of India. On these premises, respondent has prayed for dismissal of the objection petition with costs.
ARGUMENTS OF THE PETITIONER ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.8 of 24 Patiala House Court, New Delhi
10. Written submissions were filed on behalf of petitioner reiterating the contentions raised in the petition. It is argued that the Run- ning Account (R.A.) Bills raised by respondent were inclusive of VAT, and the total value of the 24 tax invoices amounted to Rs.8.96 crores, which also represented the final contract value as confirmed vide letter dated 31.10.2013 issued jointly by peti- tioner and respondent, and further reflected in the completion certificate dated 28.12.2015. It has been submitted that payment was to be made only for the works actually executed by respon- dent, and any accretion in execution of such works constituted a taxable sale within the meaning of Clause 51.0 of the Special Conditions of Contract (SCC). Petitioner had been regularly de- positing DVAT TDS @ 2%/4% on behalf of respondent under Section 36A of the DVAT Act, such deduction being permissible only on amounts paid or payable for the transfer of property in goods. Respondent never objected to such deductions and, on the contrary, claimed due credit thereof. Petitioner contends that it was not the end consumer of the works, as the project was being executed for ILBS (Institute of Liver and Biliary Sciences), and that billing to ILBS was undertaken year by year and not upon completion of the entire work. Respondent, despite charging VAT from petitioner, failed to issue corresponding tax invoices despite repeated letters and requests, resulting in financial loss to petitioner by way of loss of Input Tax Credit (ITC).
11. Petitioner arhues that the first tax invoice was raised by respon-
dent only on 28.12.2012, after payment of the 4th R.A. Bill, wherein 85% of the value was subjected to VAT and 15% to Ser- vice Tax. Deductions were thereafter made from the 5th to 9th ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.9 of 24 Patiala House Court, New Delhi R.A. Bills. Respondent's contention that such payments were in the nature of advance is denied, as all payments made, even for bringing material to the site, were inclusive of VAT, indicating the clear intention of the parties to treat such payments as sales within a works contract. In support of these contentions, learned counsel for petitioner placed reliance upon the following judg- ments: -
i. Builders Asson. of India v. Union of India [AIR 1989 SUPREME COURT 1371] ii. Gangabai v. Chhabubai [1982 AIR 20] iii. Larsen and Toubro Limited and Ors v. State of Karnataka and Ors. [MANU/SC/0985/2013] iv. Ssangyong Engineering & Construction Co. Ltd v. National Highways Authority of India (NHAI) [MANU/SC/0705/2019] v. Emkay Global Financial Services Ltd. v. Girdhar Sondhi [MANU/SC/0875/2018] ARGUMENTS OF THE RESPONDENT
12. Written submissions were also filed on behalf of respondent, wherein all allegations and averments of petitioner were denied. It is argued that Clause 23 of the SCC operates as a precondition to final acceptance of the plant and installation. The completion certificate is issued only upon petitioner's engineer being satis- fied with the works executed by respondent, confirming the handing over of the lifts. Only thereafter, respondent becomes entitled to raise tax invoices, signifying transfer of property in ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.10 of 24 Patiala House Court, New Delhi goods as contemplated under the contract. It is further argued that respondent raised invoices only upon issuance of the com- pletion certificate, evidencing transfer of property under the works contract. However, petitioner, of its own accord, recorded purchases and raised bills to its customer (ILBS) even prior to completion of respondent's works. Such premature billing by pe- titioner cannot create any liability upon respondent. It is con- tended that any recovery or deduction on account of DVAT from R.A. Bills was impermissible, save and except for statutory TDS, which was duly effected from the 1st to 4th R.A. Bills. The con- tract contained no clause authorizing further withholding or re- covery of DVAT amounts. Respondent further submits that none of the grounds raised by petitioner fall within the scope of Sec- tion 34 of the Arbitration and Conciliation Act, 1996, and that the impugned Award is a well-reasoned one, based on the con- tractual terms, correspondence, and applicable legal provisions. In support of these submissions, learned counsel for respondent relied upon the following authorities: -
i. Kone Elevator India Private Limited v. State of Tamil Nadu [(2014) 7 SCC 1] ii. Emkay Global Financial services Ltd. v. Girdhar Sondhi, [(2018) 9 SCC 499] iii. Associate Builders v. Delhi Development Authority [(2015) 3 SCC 49] iv. Ssangyong Engineering & Construction Co. Ltd v. National Highways Authority of India [(2019) 15 SCC 131] v. Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd. [(2022) 1 SCC 131].
ARBTN 5488/2018 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.11 of 24 Patiala House Court, New Delhi
13. I have examined the rival contentions and the record of the case.
APPRECIATION OF ARGUMENTS, FACTS & LAW
14. The scope of enquiry under section 34 is restricted to consideration whether any one of the grounds mentioned in section 34 exists for setting-aside the Award. Section 34 of the Act reads as under: -
"34. Application for setting aside arbitral Award- (1) Recourse to a court against an arbitral Award may be made only by an application for setting aside such Award in accordance with sub-section (2) and sub- section (3). (2) An arbitral Award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.12 of 24 Patiala House Court, New Delhi
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence."
15. The general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the Award which makes it unsustainable, is not to be set aside even by the Court, even if the Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by the Arbitrator and only grounds on which the Award can be set aside ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.13 of 24 Patiala House Court, New Delhi are mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds, sufficient reasons and no error of law or misconduct is cited, the Award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the Award passed by the Arbitrator.
16. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India, 2019 SCC OnLine SC 677 held that under Section 34 (2A) of the Act, a decision which is perverse while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the Award.
A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore, would also have to be characterized as perverse. It was held that a finding based on no evidence at all or an Award which ignores vital evidence in arriving at its decision, would be perverse and liable to be set aside on the ground of patent illegality.
17. Hon'ble Supreme Court in the case of Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.14 of 24 Patiala House Court, New Delhi trivial but goes to the root of the matter. It was held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
18. In the case of OPG Power Generation Private Limited v.
ENEXIO Power Cooling Solutions India Private Limited and Anr., (2025) 2 SCC 417, while dealing with scope to interfere on the basis of reasoning and interpretation of terms of contract, Hon'ble Supreme Court observed as under: -
"80. We find ourselves in agreement with the view taken in Dyna Technologes, as extracted above. Therefore, in our view, for the purposes of addressing an application to set aside an arbitral award on the ground of improper or inadequate reasons, or lack of reasons, awards can broadly be placed in three categories:
(1) where no reasons are recorded, or the reasons recorded are unintelligible;
(2) where reasons are improper, that is, they reveal a flaw in the decision-making process; and (3) where reasons appear inadequate.
81. Awards falling in Category (1) are vulnerable as they would be in conflict with the provisions of Section 31(3) of the 1996 Act. Therefore, such awards are liable to be set aside under Section 34, unless:
(a) the parties have agreed that no reasons are to be given, or
(b) the award is an arbitral award on agreed terms under Section 30.
82. Awards falling in Category (2) are amenable to a challenge on ground of impropriety or perversity, strictly in ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.15 of 24 Patiala House Court, New Delhi accordance with the grounds set out in Section 34 of the 1996 Act.
83. Awards falling in Category (3) require to be dealt with care. In a challenge to such award, before taking a decision the Court must take into consideration the nature of the issues arising between the parties in the arbitral proceedings and the degree of reasoning required to address them. The Court must thereafter carefully peruse the award, and the documents referred to therein. If reasons are intelligible and adequate on a fair reading of the award and, in appropriate cases, implicit in the documents referred to therein, the award is not to be set aside for inadequacy of reasons. However, if gaps are such that they render the reasoning in support of the award unintelligible, or lacking, the Court exercising power under Section 34 may set aside the award. Scope of interference with the interpretation/construction of a contract accorded in an arbitral award
84. An Arbitral Tribunal must decide in accordance with the terms of the contract. In a case where an Arbitral Tribunal passes an award against the terms of the contract, the award would be patently illegal. However, an arbitral Tribunal has jurisdiction to interpret a contract having regard to terms and conditions of the contract, conduct of the parties including correspondences exchanged, circumstances of the case and pleadings of the parties. If the conclusion of the arbitrator is based on a possible view of the matter, the Court should not intefere. But where, on a full reading of the contract, the view of the Arbitral Tribunal on the terms of a contract is not a possible view, the award would be considered perverse and as such amenable to interference.
Whether unexpressed term can be read into a contract as an implied condition
85. Ordinarily, terms of the contract are to be understood in the way the parties wanted and intended them to be. In agreements of arbitration, where party autonomy is the grund norm, how the parties worked out the agreement, is ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.16 of 24 Patiala House Court, New Delhi one of the indicators to decipher the intention, apart from the plain or grammatical meaning of the expressions used.
86. However, reading an unexpressed term in an agreement would be justified on the basis that such a term was always and obviously intended by the parties thereto. An unexpressed term can be implied if, and only if, the court finds that the parties must have intended that term to form part of their contract. It is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them. Rather, it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, although tacit, forms part of the contract.
87. But before an implied condition, not expressly found in the contract, is read into a contract, by invoking the business efficacy doctrine, it must satisfy the following five conditions:
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the contract, that is, a term will not be implied if the contract is effective without it;
(c) it must be obvious that "it goes without saying";
(d) it must be capable of clear expression;
(e) it must not contradict any terms of the contract."
19. In the present case, challenge to Award in question basically rest upon one basic question that is whether the Arbitral Tribunal committed blatant legal error in rejecting the plea of petitioner herein that with the delivery of materials at the site, there was complete sale qua those materials including elevator and hence, respondent was duty bound to issue invoice tax credit in respect of elevators. It is admitted fact that there was a term and condition of stage payment in the agreement between the parties. 65% of payment was to be made by petitioner after material ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.17 of 24 Patiala House Court, New Delhi being brought at site. 15% of the payment was to be made after erection/installation. 10% of payment was to be made after successful testing and commissioning and last 10% of payment was to be made after issuance of completion certificate. According to petitioner, with 65% payment made to the respondent, there was transfer of ownership over the elevators brought at the site. Hence, the sale qua those elevators was complete at that moment itself.
20. The Arbitral Tribunal referred to some case laws in order to decide afore-said questions, referring to the observations made in the case of State of Andhra Pradesh & Ors. Vs. Respondent (a) Larsen & Toubro Ltd. & Ors., Civil Appeal No. 5239 of 2008, decided on 26.08.2008 by Hon'ble Apex Court, wherein it was held that: -
"17. The question which is raised before us is : whether the turnover of the sub-contractors (whose names are also given in the original writ petition) is to be added to the turnover of L&T. In other words, the question which we are required to answer is : whether the goods employed by the subcontractors occur in the form of a single deemed sale or multiple deemed sales. In our view, the principle of law in this regard is clarified by this Court in the case of Builders Association of India (supra) as under:
"Ordinarily unless there is a contract to the contrary in the case of works contract the property in the goods used in the construction of a building passes to the owner of the land on which the building is constructed, when the goods or materials used are incorporated in the building." (emphasis supplied by us)"
20. Before concluding, we may refer to one more aspect. It appears that after the impugned judgment, the Department ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.18 of 24 Patiala House Court, New Delhi has amended Rule 17 of the APVAT Rules, 2005 vide Government Order dated 20.8.2007. The position has been clarified vide Rule 17(1)(c) (as amended). It is now clarified that where a VAT dealer awards any part of the contract to a registered sub-contractor, no tax shall be payable on the consideration paid for the sub-contract. Therefore, in our view, the principle to be adopted in all such cases is that the property in the goods would pass to the owner/contractee on its incorporation in the works executed. This principle finds place in sub-section 7(a) of Section 4 of the said 2005 Act."
21. The Tribunal also referred to the above-mentioned stage payments and concluded that incorporation of the lift in the building was complete only after the completion certificate was issued by the petitioner herein. As far as this conclusion of Arbitral Tribunal is concerned, I find myself in agreement with such conclusion. Bringing the material at the site could not have been an instance of complete sale of the lifts/elevators. In the given kind of contract, the respondent herein had to not only install the lifts, but also had to ensure that they become operational. The case law relied upon by the Arbitral Tribunal leave no doubt that the lifts when incorporated in the building, could have been subject matter of transfer of ownership over them. Therefore, in any situation, such conclusion cannot be termed to perverse.
22. Moreover, the Arbitral Tribunal referred to the e-mail sent by respondent to petitioner on 30.12.2014 at 16:39, which is as under: -
"We are thankful for the courtesy extended to our Mr. Yuvaraj, DGM-Taxation, from Chennai during his meeting in your Monika Site office on 23.12.2014 ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.19 of 24 Patiala House Court, New Delhi regarding reimbursement of VAT amount for ILBS Contract for Elevators.
S.No. Points Discussed Action to be Taken
1. DMRC agreed to release KONE agreed for holding outstanding payment after VAT amount and the same holding VAT amount and the will be claimed on the same will b e released on the basis of Tax / final invoice basis of tax/final invoice
2. As Agreed, Tax Invoice will be KONE will submit, after submitted to customer as & HOC on every equipment when a lift is handed over. The handover. same is not related to project closure.
3. For two lifts Tax Invoice which KONE check the provision has already been handed over for claiming VAT credit for which we are checking the time limit under DVAT provision under DVAT provision."
provision for availing VAT credit.
23. Petitioner has argued that this email was not signed by representative of petitioner and during admission/denial petitioner had denied this mail. The Arbitral Tribunal noted that petitioner herein had acknowledged receipt of afore-said email, but had denied the contents of the email. The Arbitral Tribunal went on to observe that the petitioner had liberty to deny the contents of the mail during currency of contract, but denial of the document during the arbitral proceedings was of little help to them. Thus, it was taken into consideration by the Tribunal. This court is not supposed to interfere on the basis of reasons for appreciation of a particular piece of evidence given by Tribunal. Furthermore, if this email was received by the petitioner herein, then in case of finding contents of the email to be factually incorrect, the natural course of reaction would have been to ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.20 of 24 Patiala House Court, New Delhi revert back by sending a reply to such mail and making it clear that the given Minutes of Meeting were wrongly mentioned in the email of respondent. My attention was not taken to any such material, if produced before the Arbitral Tribunal. Therefore, reliance/consideration on afore-said email containing Minutes of Meeting purportedly held between representatives of both the sides, cannot be questioned. This Minute of Meeting goes on to show that petitioner wanted the respondent to issue invoice of Tax Credit with back date, but same was not accepted by the respondent. Just because respondent did not accept such demand of petitioner, it probably led petitioner to plea a new interpretation of contractual obligations and intentions of the parties, in order to claim that with 65% of the payment there was complete sale of the lifts and hence, respondent was duty bound to issue invoice of tax credit. However, the subsequent stand of petitioner was rightly rejected by the Arbitral Tribunal.
24. Ld. counsel for petitioner referred to following provisions of the Delhi Value Added Tax Act, 2004 and the Rules framed thereunder, to submit that the Arbitral Tribunal ignored the mandate of these law provisions: -
"Section 2
(r) "input tax" in relation to the purchase of goods, means the proportion of the price paid by the buyer for the goods which represents tax for which the selling dealers is liable under this Act;
(zc) "sale" with its grammatical variations and cognate expression means any transfer of property in goods by one person to another for cash or for deferred payment or for other valuable consideration (not including a grant or subvention payment made by one government agency or ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.21 of 24 Patiala House Court, New Delhi department, whether of the central government or of any state government, to another) and includes-
(v) transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(zh) "tax invoice" means the document defined in section 50 of this Act:
(zi) "tax period" means the period prescribed in the rules made under this act; [Rule 26] (zo) "works contract" includes any agreement for carrying out for cash or for deferred payment or for valuable consideration, the building construction, manufacture, processing, fabrication, erection, installation, fitting out, improvement, repair or commissioning of any moveable or immovable property.
(zp) "year" means the financial year from the first day of April to the last day of March;
Section 9 Tax Credit Rules: 6,7 Form: Nil [(1) Subject to sub-section (2) of this section and such conditions, restrictions and limitations as may be prescribed, a dealer who is registered or is required to be registered under this act shall be entitled to a tax credit in respect of the turnover of purchases occurring during the tax period [where the purchase arises] in the course of his activities as a dealer and goods are to be used by him directly or indirectly for the purpose of making- (3) The amount of the tax credit to which a dealer is entitled in respect of the purchase of goods shall be the amount of input tax arising in the tax period reduced in the manner described in sub-sections [(4),(6) and (10)] of this section. (8) The tax credit may be claimed by a dealer only if he holds a tax invoice at the time the prescribed return for the tax period is furnished.
ARBTN 5488/2018 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.22 of 24 Patiala House Court, New Delhi
Section 28 Correction of deficiencies
Rules: 29 Form: 16,17
If a person discovers a discrepancy in a return furnished by him for a tax period under this Act, he shall remove such discrepancy and furnish a revised return within the year following the year of such tax period:
Section 50 Tax invoices Rules: 29 Form: 16,17 A registered dealer making a sale liable to tax under this act shall, at the request of the purchaser, provide the purchaser at the time of sale with a tax invoice containing the particulars specified in sub-section (2) of this section and retain a copy thereof:
PROVIDED that a tax invoice shall not be issued by a dealer who-
Is specified in the fifth schedule;
Elects to pay tax under Section 16 of this Act; or
Is making the sale in the course of interstate trade or
commerce or export:
PROVIDED FURTHER that not more than one tax invoice shall be issued for each sale;
Rule 26. Tax period (Delhi Value added tax rules) Section:26 Form: Nil [(1) Subject to sub-rule (2) of this rule, the tax period for all the dealers shall be a quarter.].
25. I find that the above-mentioned legal provisions did not have any relevance while deciding the moot question as to when the respondent herein was supposed to issue invoice of tax credit. That is when there was transfer of ownership over lifts in ARBTN 5488/2018 (Pulastya Pramachala) District Judge (Commercial Court)-01, Page No.23 of 24 Patiala House Court, New Delhi question in favour of the petitioner herein. Therefore, I do not find reference to these legal provisions making out any case of perversity or ignorance to fundamental law of India.
DECISION
26. In view of my foregoing discussions and observations, I do not find any merit in the petition under Section 34 of Arbitration and Conciliation Act, 1996, as filed by the petitioner. Hence, same is rejected.
Digitally signed by PULASTYA PRAMACHALAPULASTYA PRAMACHALA Date:
2025.11.14 17:15:59 +0530 Pronounced in the (PULASTYA PRAMACHALA) Open Court on this District Judge (Commercial Court)-01, th 14 Day of November, 2025 Patiala House Court, New Delhi.
ARBTN 5488/2018 (Pulastya Pramachala)
District Judge (Commercial Court)-01,
Page No.24 of 24 Patiala House Court, New Delhi