The implementation of GST as a ‘change in law’ qualifying as a force majeure event
Impact of GST - A force majeure event - The petition filed by NHAI which was the respondent in arbitration challenged the award dated 20-11-2019 passed by the sole arbitrator. Under the award the petitioner was held liable to pay the respondent a sum of INR 1,40,60,784 along with interest @ 9% per annum by way of compensation on account of inter alia loss in revenue triggered by reduced toll collections once GST was implemented w.e.f. 1-7-2017. The respondent, after taking over control of the Plaza realized that the petitioner’s estimated projections had failed to account for the adverse consequences of a change in the tax regime. Evidently, there was a heavy fall in the traffic volume of the commercial transport vehicles and user fee collection on the highway owing to the implementation of GST. The petitioner vide reply dated 11-7-2017 refused to accept the petitioner’s claims and denied that the implementation of GST was a force majeure event. The respondent was compelled to deposit an amount of INR 1,59,13,974 with the petitioner by way of toll collection deposit. On 27-10-2017, the respondent wrote to the petitioner requesting it to not take any hasty decision against the respondent on the ground of outstanding deposit of toll collection. When the petitioner failed to reply, the respondent invoked arbitration. The Learned Arbitrator held that the implementation of the GST was indeed a force majeure event in the light of the petitioner’s circular dated 16-3-2018 whereunder it accepted GST w.e.f. 1-7-2017 as a ‘change in law’ falling under the ambit of force majeure as envisaged in the contract agreement. The court observed that the Learned Arbitrator has rightly held that once the earlier date of 1-4-2017 was postponed by the Government of India, the next date of implementation was not known or could not be speculated by anybody. The court observed that there is no merit in the petitioner’s contention that the implementation of GST could not be construed as a ‘change in law’ to qualify as a force majeure event in the respondent’s case. There is no infirmity in the award dated 20-11-2019.
Held that:-The Hon’ble High Court dismissed the petition being meritless.
The implementation of GST as a ‘change in law’ qualifying as a force majeure event
Impact of GST - A force majeure event - The petition filed by NHAI which was the respondent in arbitration challenged the award dated 20-11-2019 passed by the sole arbitrator. Under the award the petitioner was held liable to pay the respondent a sum of INR 1,40,60,784 along with interest @ 9% per annum by way of compensation on account of inter alia loss in revenue triggered by reduced toll collections once GST was implemented w.e.f. 1-7-2017. The respondent, after taking over control of the Plaza realized that the petitioner’s estimated projections had failed to account for the adverse consequences of a change in the tax regime. Evidently, there was a heavy fall in the traffic volume of the commercial transport vehicles and user fee collection on the highway owing to the implementation of GST. The petitioner vide reply dated 11-7-2017 refused to accept the petitioner’s claims and denied that the implementation of GST was a force majeure event. The respondent was compelled to deposit an amount of INR 1,59,13,974 with the petitioner by way of toll collection deposit. On 27-10-2017, the respondent wrote to the petitioner requesting it to not take any hasty decision against the respondent on the ground of outstanding deposit of toll collection. When the petitioner failed to reply, the respondent invoked arbitration. The Learned Arbitrator held that the implementation of the GST was indeed a force majeure event in the light of the petitioner’s circular dated 16-3-2018 whereunder it accepted GST w.e.f. 1-7-2017 as a ‘change in law’ falling under the ambit of force majeure as envisaged in the contract agreement. The court observed that the Learned Arbitrator has rightly held that once the earlier date of 1-4-2017 was postponed by the Government of India, the next date of implementation was not known or could not be speculated by anybody. The court observed that there is no merit in the petitioner’s contention that the implementation of GST could not be construed as a ‘change in law’ to qualify as a force majeure event in the respondent’s case. There is no infirmity in the award dated 20-11-2019.
Held that:-The Hon’ble High Court dismissed the petition being meritless.