# F.C.I. & Ors v. M/s P. Roy & Co. & Anr

- **Citation:** (2021) 9 ILRA 1144
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2021-09-09
- **Case number:** Arbitration Application No. 10 of 2019
- **Bench:** Attau Rahman Masoodi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/f-c-i-ors-v-m-s-p-roy-co-anr-47357
- **Pages:** 8

## Headnote

A. Arbitration Law - Appointment of
arbitrator - Arbitration and Conciliation
Act, 1996 - Section 11(6) & 15(2) -
Procedure after termination of mandate
for
appointment
of
the
substitute
arbitrator - The parties are free to choose
and save the purpose of arbitration clause
by their own conduct failing which the
judicial
forum
for
appointment
of
arbitrator
once
resorted
to
assumes
certainty and the substitute arbitrator is
to be appointed by the same forum so as
to avoid adjudicatory delays and that is
why the special mechanism is recognised
by law. The Court may explore an opportunity
of mutual consent at the very first opportunity
which in the event of failure, as is the case at
9 All F.C.I. & Ors. Vs. M/s P. Roy & Co. & Anr.
1145
hand, leads to the above interpretation. (Para
19)

The extinguishment of the right of
parties as per agreement except for
invoking the jurisdiction of the Court,
recognising
statutory
waiver
on
principle,
must
be
the
rule
for
appointment of the substitute arbitrator.
In the case at hand, the Court did offer an
opportunity of mutual consent to the parties
once again but was of no avail. The shortened
course restricting the parties not to undergo
the agreed independent procedure tending to
delay, is the purpose of procedural brevity
embodied u/s 15(2) of the Act. (Para 20)

In present case, mutual conduct of the parties
by
subscribing
to
the
proceedings
of
arbitration under the judicial order passed by
this
Court
on
12.7.2002
has
attained
certainty, therefore, the procedure under S.
15(2) would be referable to the same
procedure as was involved to serve the
purpose of arbitration clause at the initial
stage. The option vested in the parties to
constitute the arbitration tribunal through ICA
stood exhausted and became obsolete after
passing of the order by this Court on
12.7.2002, therefore, the record of pending
proceedings deserves to be retrieved by this
Court and transferred to the Tribunal of the
sole arbitrator constituted as per law. (Para
17)

B. The failure of parties to constitute the
Tribunal
once
experienced
would
extinguish the right embodied in the
agreement
and
confer
an
exclusive
jurisdiction upon the court to appoint
substitute arbitrator as and when the
situation arises. There may be a situation
where the parties at the initial stage invoke
the arbitration clause successfully and the
same procedure may fail at the time of the
appointment of substitute arbitrator. Even in
such a situation, the jurisdiction u/s 11 of the
Act, nevertheless, remains open. (Para 21)

Application allowed. (E-4)

Precedent followed:

## Text

1144 INDIAN LAW REPORTS ALLAHABAD SERIES
on furnishing a personal bond with two
sureties each in the like amount to the
satisfaction of the court concerned with the
following conditions:-

(i) That the accused-applicant no.
2 shall not leave India during pendency of
the
investigation/trial
without
prior
permission from the concerned Court and
shall also surrender his passport, if any,
before the concerned Court forthwith;

(ii) That the accused-applicant
no. 2 shall not, directly or indirectly make
any inducement, threat or promise to any
person acquainted with the facts of the case
so as to dissuade him from disclosing such
facts to the court or to any police officer;
and

(iii) The applicant no. 2 shall file
an undertaking to the effect that he shall
not seek any adjournment on the dates
fixed for evidence and the witnesses are
present in court. In case of default of this
condition, it shall be open for the trial court
to treat it as abuse of liberty of bail and
pass orders in accordance with law.

(iv) The applicant no. 2 shall
remain present before the trial court on
each date fixed, either personally or
through his counsel. In case of his absence,
without sufficient cause, the trial court may
proceed against him under Section 229-A
of the Indian Penal Code.

(v) In case, the applicant no. 2
misuses the liberty of bail and in order to
secure his presence proclamation under
Section 82 Cr.P.C. is issued and the
applicant fails to appear before the court on
the date fixed in such proclamation, then,
the trial court shall initiate proceedings
against him, in accordance with law, under
Section 174-A of the Indian Penal Code.

(vi) The applicant no. 2 shall
remain present, in person, before the trial
court on the dates fixed for (i) opening of
the case, (ii) framing of charge and (iii)
recording of statement under Section 313
Cr.P.C. If in the opinion of the trial court
default of this condition is deliberate or
without sufficient cause, then it shall be
open for the trial court to treat such default
as abuse of liberty of his bail and proceed
against him in accordance with law.
----------
(2021)09ILR A1144
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 09.09.2021

BEFORE

THE HON'BLE ATTAU RAHMAN MASOODI, J.

Arbitration Application No. 10 of 2019

F.C.I. & Ors. ...Applicants
Versus
M/s P. Roy & Co. & Anr. ...Opposite Parties

Counsel for the Applicants:
Anurag Verma, Apoorva Tewari, Brijesh
Kumar

Counsel for the Applicants:
Dhirendra Kumar Srivastav, Rajnish Ojha,
Rakesh Dwivedi, Rao Narendra Singh,
Sormi Dutta, Vinay Kumar Yadav

A. Arbitration Law - Appointment of
arbitrator - Arbitration and Conciliation
Act, 1996 - Section 11(6) & 15(2) -
Procedure after termination of mandate
for
appointment
of
the
substitute
arbitrator - The parties are free to choose
and save the purpose of arbitration clause
by their own conduct failing which the
judicial
forum
for
appointment
of
arbitrator
once
resorted
to
assumes
certainty and the substitute arbitrator is
to be appointed by the same forum so as
to avoid adjudicatory delays and that is
why the special mechanism is recognised
by law. The Court may explore an opportunity
of mutual consent at the very first opportunity
which in the event of failure, as is the case at
9 All F.C.I. & Ors. Vs. M/s P. Roy & Co. & Anr.
1145
hand, leads to the above interpretation. (Para
19)

The extinguishment of the right of
parties as per agreement except for
invoking the jurisdiction of the Court,
recognising
statutory
waiver
on
principle,
must
be
the
rule
for
appointment of the substitute arbitrator.
In the case at hand, the Court did offer an
opportunity of mutual consent to the parties
once again but was of no avail. The shortened
course restricting the parties not to undergo
the agreed independent procedure tending to
delay, is the purpose of procedural brevity
embodied u/s 15(2) of the Act. (Para 20)

In present case, mutual conduct of the parties
by
subscribing
to
the
proceedings
of
arbitration under the judicial order passed by
this
Court
on
12.7.2002
has
attained
certainty, therefore, the procedure under S.
15(2) would be referable to the same
procedure as was involved to serve the
purpose of arbitration clause at the initial
stage. The option vested in the parties to
constitute the arbitration tribunal through ICA
stood exhausted and became obsolete after
passing of the order by this Court on
12.7.2002, therefore, the record of pending
proceedings deserves to be retrieved by this
Court and transferred to the Tribunal of the
sole arbitrator constituted as per law. (Para
17)

B. The failure of parties to constitute the
Tribunal
once
experienced
would
extinguish the right embodied in the
agreement
and
confer
an
exclusive
jurisdiction upon the court to appoint
substitute arbitrator as and when the
situation arises. There may be a situation
where the parties at the initial stage invoke
the arbitration clause successfully and the
same procedure may fail at the time of the
appointment of substitute arbitrator. Even in
such a situation, the jurisdiction u/s 11 of the
Act, nevertheless, remains open. (Para 21)

Application allowed. (E-4)

Precedent followed:

1. Tirath Ram Sumer Kumar Vs Rakesh Kumar
Mishra & ors., 2017 (2) ADJ 71 (Para 15)

2. Ramjee Power Construction Ltd. Vs Damodar
Valley Corporation, (2009) 2 Arb LR 625 (Para
19)

Precedent cited:

1. Yashwith Constructions (P) Ltd. Vs Simplex
Concrete Piles India Ltd., (2006) 6 SCC 204
(Para 16)

2. National Highway Authority of India & anr. Vs
Bumihighway DDB Ltd. (JV) & ors., (2006) 10
SCC 763 (Para 16)

3. Antrix Corporation Ltd. Vs Devas Multimedia
Pvt. Ltd., (2014) 11 SCC 560 (Para 16)

4. S.B.P. & Co. Vs Patel Engineering Ltd. & anr.,
(2005) 8 SCC 618 (Para 16)

5. San-A-Tradubg Company Ltd. Vs I.C. Textiles
Ltd., (2012) 7 SCC 192 (Para 16)

(Delivered by Hon'ble Attau Rahman
Masoodi, J.)

1. Heard Shri B.K. Saxena learned
counsel and Sri O.P. Srivastava learned
Senior Counsel assisted by Sri Anurag
Verma learned counsel for the petitioners
and Sri D.K. Srivastava learned counsel
who has put in appearance on behalf of the
respondent no. 1.

2. Attaching primacy to the domain of
parties for constitution of the Arbitral
Tribunal, this Court passed an order on
6.8.2021, which reads as under:

"Heard
Sri.O.P.
Srivastava,
learned senior counsel and Sri B.K.Saxena,
learned counsel assisted by Sri Anurag
Verma learned counsel for the petitioners
and
Sri Dhirendra
Kumar
Srivastav,
learned counsel for the opposite parties.
1146 INDIAN LAW REPORTS ALLAHABAD SERIES

There is a hope of some mutual
agreement insofar as the appointment of the
arbitrator in the present case is concerned.

List this case on 11.08.2021 in
terms of the order already passed."

3. The hope ultimately failed. The
arbitration
clause
contained
in
the
agreement giving rise to the dispute reads
as under:

"All
disputes
or
differences
whatever arising between the parties out of
or relating to the construction, meaning
and operation or effect of this agreement or
the breach thereof shall be settled by
arbitration in accordance with the rules of
arbitration of the Indian Council of
Arbitration and the award in pursuance
thereof shall be binding on the parties. The
award will be speaking order."

4. At the time when dispute within the
scope of agreement arose in the year 2002,
the opposite party no. 1 approached this
Court under Section 11 of the Arbitration
and Conciliation Act, 1996 for appointment
of the arbitrator. The application so filed
registered as Arbitration Application No. 7
of 2002 was disposed of by order dated
12.7.2002 reproduced as under:

"Hon'ble Mr. M.M. Dutt, a retired
Judge of the Supreme Court of India, is
appointed sole Arbitrator under Section
11(5) of the Arbitration and Conciliation
Act, 1996. The Arbitrator shall be paid
Rupees 15,000/- per sitting to be borne by
the parties equally."

5. It is pursuant to this order that both
the parties subscribed to the arbitral
proceedings before the Tribunal of sole
Arbitrator until his demise on 15.7.2009.

6. Parties concede to the extent that a
claim was raised before the Arbitral
Tribunal by the opposite party no. 1 to
which a written statement was also filed by
the petitioners. It is also admitted to both
the parties that as many as 104 sittings of
the sole Arbitrator took place, however, the
stage to which the proceedings progressed
is not clearly stated in the present
application or the objections filed by the
opposite party. The proceedings before the
Arbitral Tribunal of sole Arbitrator also
remained unquestioned by either of the
parties.

7. The present petition instituted in
2019 under Section 11(6) read with Section
15(2) of the Act has come up for hearing
after about eleven years of the termination
of mandate. An exhaustive exercise of
correspondence prior to the filing of this
application seems to have taken place
between the parties but of no consequence.

8. The factual position that emerges
from the averments made in the application
and the counter affidavit filed in response
thereto is that prior to filing of the present
application, the petitioners seem to have
constituted the Arbitral Tribunal of sole
Arbitrator by appointing one Rajesh Saha,
General
Manager(F&A),
FCI
on
20.12.2017 but the opposite party no. 1 for
the reasons best known did not subscribe to
the proceedings.

9. The opposite party no. 1 instead
chose to proceed in accordance with the
agreement by making an application on
1.10.2017 to the Indian Council of
Arbitration (ICA) pursuant to which the
Arbitral Tribunal of three members was
constituted notwithstanding the objection
raised by the petitioners as to the
procedure. According to the petitioners, the
9 All F.C.I. & Ors. Vs. M/s P. Roy & Co. & Anr.
1147
appointment of substitute arbitrator would
not be legitimate unless he is appointed in
the same manner in which the Tribunal as a
result of the conduct of the parties, was
appointed at the initial stage. It is urged that
the parties of their own volition rendered
the mutually agreed procedure obsolete and
the rights once waived would not revive
contrary to the mandate of Section 15(2) of
the Act.

10. Section 15(2) of the Arbitration
and Conciliation Act is extracted below:

"15. Termination of mandate
and
substitution
of
arbitrator-.(1)
.................

(2) Where the mandate of an
arbitrator terminates, a substitute arbitrator
shall be appointed according to the rules
that were applicable to the appointment of
the arbitrator being replaced."

11. Admittedly the Arbitral Tribunal
of sole arbitrator at the initial stage was
constituted under Section 11 of the Act.
The
procedure
for
appointment
of
substitute arbitrator on termination of
mandate is traceable to Section 15(2) of the
Act. The mechanism for appointment of the
arbitrator being replaced thus assumes
significance for lawful adjudication of the
pending proceeding.

12. The Arbitral Tribunal constituted
by Indian Council of Arbitration in the
meantime passed an order on 18.2.2019
and the same is reproduced below:

"This is an arbitration which has
been pending for almost 18 years now. Late
Justice M.M.Dutt Former Judge of the
supreme Court of India was appointed as
an arbitrator by the Hon'ble Allahabad
High Court on 12th July 2002 in
arbitration application no.7 of 2002. We
are told that Justice Dutt commenced the
arbitration proceedings after his aforesaid
appointments and held 104 sittings till his
demise. We are told he passed away long
back. In the aforesaid background, as
contended by the Ld. Counsel for the
Claimant, there being an arbitration clause
in the contract between the parties which
clothes ICA with the jurisdiction to appoint
the arbitrator, in exercise of the said
jurisdiction the ICA has constituted the
present Arbitral Tribunal. We are also told
that in this case after the completion of the
pleadings in all respects, framing of issues
and filing of evidence affidavits of both the
including the recording of depositions in
the Tribunal of the witnesses whose
evidence
affidavits
had
been
filed,
arguments at the final stage of hearing
were addressed by the Counsel for both the
parties but unfortunately due to his failing
health
and
ultimate
demise,
the
proceedings could not be concluded and
Award Could not be passed.

In the aforesaid background, this
arbitration case has now been referred to
this Tribunal.

Today, the Ld. Counsel for the
Claimant has filed the copies of the
following:

1. Statement of Claim;

2.
Counter
Claim
of
the
Respondent, which includes the Statement
of Defence as well as the Counter claim

3. Rejoinder of the Claimant

4. Evidence affidavit of the
witness No. 1 of the Claimant;
1148 INDIAN LAW REPORTS ALLAHABAD SERIES

5. Evidence affidavit of the
witness No. 2 of the Claimant

6. Evidence affidavit of one
witness of the Respondent;

7. Minutes of the meetings (Vol.1)

8. Minutes of the meetings (Vol.2)

Copies of the aforesaid 8 volumes
have been handed over today to the three
members of the arbitral tribunal as well as
to Sh. M .L. Sharma, Ld. Counsel for the
Respondent.
Since
Sh.
M.L.
Sharma
contends that he has been engaged only
today and is not at all aware about the
facts of the case or its background, he
would need reasonably sufficient time to
check up with is clients and revert on the
next date.

Copies of the aforesaid 8 volumes
have been handed over today to the three
members of the arbitral tribunal as well as
to Sh. M.L. Sharma,Ld Counsel for the
Respondent.
Since
Sh.
M.L.
Sharma
contends that he has been engaged only
today and is not at all aware about the
facts of the case or its background, he
would need reasonably sufficient time to
check up with his clients and revert on the
next date.

We expect the Respondent to
sincerely and faithfully report to us on the
next date about the following:

1. Whether the copies of the
aforesaid 8 volumes filed today by the
Claimant are correct;

2. Whether in addition to the
aforesaid,
the
Respondent
is
in
possession of any additional documents
which have not been filed by the
Claimant today and which are relevant
for
the
disposal
of
this
case.
If
Respondent indeed finds that there are
such documents, it shall be filing the
copies thereof on the next date;

3. We expect both the parties to
cooperate with us in the expeditious
disposal of this almost two decades old
arbitration case. We also expect both the
parties to inform us on the next date
whether they would intend to lead any
evidence in addition to what was already
recorded
and
file
any
additional
documents or pleadings.

Mr. Sharma submitted that this
arbitration is not maintainable because
according to him this Tribunal has not
been properly constituted. The Tribunal
advised Mr. Sharma that the Respondent
is
at
liberty
to
move
appropriate
application under the relevant provisions
of the Arbitration and Conciliation Act,
1996 questioning the jurisdiction of this
Tribunal. If he intends to do so, he must
file such an application within three
weeks from today with an advance copy
to the ICA. The Claimant may file reply
thereto in two weeks thereafter.

The next date of hearing is fixed
for 18th April, 2019 at 12:00 noon at the
same venue."

13. The present application under
Section 11(6) read with Section 15(2) of
the Act came to be filed after passing of the
above order on 18.2.2019 by the three
member Tribunal constituted by ICA. This
Court at the very initial stage has passed an
interim order on 31.5.2019, whereby the
proceedings before the Tribunal constitute
by ICA were stayed.
9 All F.C.I. & Ors. Vs. M/s P. Roy & Co. & Anr.
1149

14. Sri Brijesh Kumar Saxena,
learned counsel for the petitioners has
argued that it is a case for appointment of
substitute Arbitrator in the surviving
proceedings, therefore, the procedure under
Section 15(2) read with Section 11(6) of
the Act would be the same as was applied
for appointment of the Tribunal at the first
instance. The procedure for constitution of
the Tribunal in accordance with the rules of
ICA as embodied in the arbitration clause
became obsolete with the passing of
judicial order on 12.7.2002 which has
remained unchallenged througout. The
principle of waiver incorporated statutorily
has eclipsed the option of parties to
constitute the Tribunal as per agreement
which would not revive at this stage when
the substitute arbitrator is liable to be
appointed in accordance with the procedure
provided under Section 15(2) of the Act.

15. Referring to sub-section (2) of
Section 15 of the Act it has been argued
that the position of law is well settled under
various pronouncements including the
judgement of a coordinate Bench of this
Court in the case of Tirath Ram Sumer
Kumar versus Rakesh Kumar Mishra and
others reported in 2017(2) ADJ 71 which
has elaborately dealt with the relevant case
law applicable in this behalf.

16. Per contra, Sri D.K. Srivastava
appearing for opposite party no. 1 has
argued that the application filed by the
petitioner is not maintainable for the reason
that the petitioner has an opportunity of
filing objections before the Tribunal
already constituted as per the terms of the
arbitration clause. It is argued that parties
are not bound by the principle underlying
Section 11 CPC irrespective of the fact that
it was a motion on behalf of the opposite
party no. 1 itself that enabled the High
Court to step in under Section 11 of the
Arbitration and Conciliation Act, 1996.
Hence, the initial constitution of the
tribunal by order dated 12.7.2002 does not
bind the parties on their mere participation
to follow a procedure other than the one as
provided in the arbitration clause extracted
above. In support of the arguments
putforth, learned counsel for the opposite
party no. 1 has cited the case laws noted
below.

Sl
Particulars
Citation
1.
Yashwith
Constructions (P)
Ltd
v.
Simplex Concrete
Piles India Ltd.
(2006) 6 SCC 204
2.
National
Highway
Authority
of
India and another
v.
Bumihighway
DDB Ltd. (JV)
and others.
(2006) 10 SCC 763
3.
Antrix
Corporation Ltd.
v.
Devas
Multimedia Pvt.
Ltd.
(2014) 11 SCC 560
4.
S.B.P.
&
Co.
v.
Patel Engineering
Ltd.
&
anr.

(2005) 8 SCC 618
5.
San-A-Tradubg
Company
Ltd.
v.
I.C.
Textiles
(2012) 7 SCC 192
1150 INDIAN LAW REPORTS ALLAHABAD SERIES
Limited

17. Having regard to the rival
submissions made by learned counsel for
the
parties
and
on
a
thoughtful
consideration of judicial pronouncements
cited by them, this Court is of the
considered opinion that the mutual conduct
of the parties by subscribing to the
proceedings of arbitration under the judicial
order passed by this Court on 12.7.2002 has
attained certainity, therefore, the procedure
under Section 15(2) would be referable to
the same procedure as was involved to
serve the purpose of arbitration clause at
the initial stage. Enough time has already
gone by to revive the proceedings as per
law and the parties would not capitalise any
gain by prolonging the proceedings. Any
further delay would be against the very
spirit of the arbitration clause and this
Court is duty bound to honour the mandate
of law to serve the purpose. The option
vested in the parties to constitute the
arbitration tribunal through ICA stood
exhausted and became obsolete after
passing of the order by this Court on
12.7.2002, therefore, the record of pending
proceedings deserves to be retrieved by this
Court and transferred to the Tribunal of the
sole arbitrator constituted as per law.

18. The Court may, however, note
that the parties have not raised any
objection against any of the members of the
Tribunal constituted by ICA.

19. As to what would be the
procedure after termination of mandate for
appointment of the substitute arbitrator, this
Court is convincingly persuaded by a
meaningful interpretation of Section 15(2)
of the Act by Calcutta High Court in the
case reported in (2009) 2 Arb LR 625
(Ramjee Power Construction Ltd v.
Damodar Valley Corporation) for the
reason that the provisions of law in this
regard have not undergone any substantial
legislative change. This Court may reiterate
that the parties are free to choose and save
the purpose of arbitration clause by their
own conduct failing which the judicial
forum for appointment of arbitrator once
resorted to assumes certainty and the
substitute arbitrator is to be appointed by
the same forum so as to avoid adjucatory
delays and that is why the special
mechanism is recognised by law. The Court
may explore an opportunity of mutual
consent at the very first opportunity which
in the event of failure, as is the case at
hand, leads to no other interpretation except
what has been held in the judgement cited
above. It is for this reason Section 15(2) of
the Act steps in to aid the parties strengthen
the essence of arbitration for settlement of
disputes. The insurmountable delays must
be curtailed by applying a pragmatic
approach as is the object of Section 15(2)
of the Act to approach the forum straight.

20. In the case at hand, the Court did
offer an opportunity of mutual consent to
the parties once again but of no avail.
These clinical tests are discretionary which
invariably prove fruitless. Therefore, the
extinguishment of the right of parties as per
agreement
except
for
invoking
the
jurisdiction of the Court, recognising
statutory waiver on principle, must be the
rule for appointment of the substitute
arbitrator. The shortened course restricting
the parties not to undergo the agreed
independent procedure tending to delay, in
my humble view, is the purpose of
procedural brevity embodied under Section
15(2) of the Act.

21. There may be a situation where
the parties at the initial stage invoke the
9 All M/s RM Dairy Products LLP, Sultanganj, Agra Vs. State of U.P. & Ors.
1151
arbitration clause successfully and the same
procedure may fail at the time of the
appointment of substitute arbitrator. Even
in such a situation, the jurisdiction under
Section 11 of the Act, nevertheless,
remains open. The failure of parties to
constitute the Tribunal once experienced
would extinguish the right embodied in the
agreement
and
confer
an
exclusive
jurisdiction upon the court to appoint
substitute arbitrator as and when the
situation arises.

22. In view of what has been
recorded above, the present application is
allowed and the Court proposes Hon'ble
Mr. Justice V.K. Gupta (Retired CJ)
resident of E-31, Jangpura Extension,
New Delhi-110014 to be the sole
arbitrator in the present case, subject to
his consent in terms of Section 11(6) read
with Section 12(1) of the Act on the
terms and conditions of fee as per
schedule. The Senior Registrar of this
Court is directed to retrieve the record of
the arbitration proceedings for being sent
to the substitute arbitrator expeditiously
and preferably within one month. The
record already made available, if any,
may
be
retained
by
the
proposed
arbitrator and apprised to the Court
alongwith the consent letter. The order
passed by this Court alone shall bind the
parties to subscribe to the further arbitral
proceedings
in
continuity
of
the
arbitration commenced in furtherance of
the order dated 12.7.2002 passed earlier.

23. List this case on 6.10.2021 for
further orders.
----------
(2021)09ILR A1151
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 15.07.2021

BEFORE

THE HON'BLE NAHEED ARA MOONIS, J.
THE HON'BLE SAUMITRA DAYAL SINGH, J.

Writ Tax No. 434 of 2021

M/s RM Dairy Products LLP, Sultanganj,
Agra ...Petitioner
Versus
State of U.P. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Nishant Mishra, Ms. Yashonidhi Shukla

Counsel for the Respondents:
C.S.C., A.S.G.I., Sri Manu Ghildyal, Sri
Ashok Singh

A. Tax Law - Input Tax Credit - UP GST
Act, 2017 - Sections 74, 78 & 79 - State
GST Rules, 2017 - Rules 142 & 161 -
State/Central Goods and Services Tax
Rules, 2017: Rule 86A(1) - The Rule does
not contemplate any recovery of tax due
from an assessee. It only provides, in certain
situations and upon certain conditions being
fulfilled, specified amount may be held back and
be not allowed to be utilized by the assessee
towards discharge of its liabilities on the
outward tax or towards refund. It creates a
lien without actual recovery being made
or attempted. (Para 12)

B. Words & Phrases - 'input tax available'
- The words 'input tax available' used in the first
part of sub-rule (1) of Rule 86-A have to be
read only in the context of the infringement
being alleged by the revenue, i.e. fraudulent
availment or availment dehors eligibility to the
same. They cannot be read as actual input tax
available on the date of the order passed under
that Rule. (Para 13, 14)

'available', 'has been' - The word 'available'
used in the first part of sub-Rules of Rule 86-A
would always relate back in time when the
assessee allegedly availed input tax credit either
fraudulently or which he was not eligible to
avail. It does not refer to and, therefore, it does
not relate to the input tax credit available on the