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No deductions allowed from a judgment-debt/arbitral award

Cause Title : M/s. Neo Built Corporation Vs. Union of India, EC 272 of 2022, Calcutta High Court

Date of Judgment/Order : 10.07.2023

Corum : Moushumi Bhattacharya, J.

Citied: 

  1. All India Reporter Ltd. vs. Ramchandra D. Datar; AIR 1961 SC 943
  2. S.S. Miranda Ltd. vs. Shyam Bahadur Singh; 1984 SCC OnLine Cal 161
  3. Voith Hydro Ltd. vs. NTPC Limited; 2021 SCC OnLine Del 1325

Background

An award of Rs. 3.88 cr was decreed against the Metro Railway which was reaffirmed on appeal by the Division Bench of the High Court. However, the grievance of the award-holder is that instead of Rs. 3.88 crores which was recorded in the order dated 4th May, 2023, the award-holder received an amount of only Rs. 3.5 crores. The difference of about Rs. 38 lacs was a result of the award-debtor deducting TDS on the said amount. The Metro Railway argued that the deduction has been done as per the rules set by the Railway Board, Ministry of Railways.

Judgment

The question before the HC was whether TDS can be deducted from an awarded/decretal amount.

Referring to the judgments above, the HC observed that the Supreme Court held that the judgment-debtor cannot satisfy the claim of a third party against the judgment-creditor and pay only the balance to the latter in the absence of a direction in the decree to that effect and it has been further decided by the various courts that the judgment-debtor who had deducted TDS, - would be at liberty to take steps for recovery of the amount from Income Tax Authority in accordance with law.

The HC held that the position in law is that the decretal amount is a “judgment-debt” and must be paid in its entirety to the decree-holder. No amount can be deducted as tax at source from the decretal sum and that the judgment-debtor is not entitled to pay only the balance amount to the decree-holder.

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