M/s Blink Fix Private Limited vs. MMR Enterprises and connected matters
Background
Under a 2022 marketing/branding services agreement, the respondent raised invoices including GST, which the petitioner paid and used to claim Input Tax Credit. The GST department later alleged the respondent had never deposited the collected GST with the government, forcing the petitioner's parent company to reverse over Rs 12.78 crore in credit, interest and penalty. The petitioner invoked the agreement's arbitration clause and separately sought urgent interim protection (freezing bank accounts, restraining asset transfers) pending arbitration.
Decision Breakdown
The respondent argued the GST-related dispute was not arbitrable and should be left to tax authorities, but the Court held that at the stage of appointing an arbitrator, only the prima facie existence of a valid arbitration clause need be examined: arbitrability itself is for the arbitral tribunal to decide unless the dispute is obviously non-arbitrable, which this was not since it rested on the agreement's own indemnity clause. The Court appointed a sole arbitrator and, having done so, converted the pending urgent-relief petition into an application to be decided by that arbitrator (as a Section 17 application) rather than deciding the freeze/restraint requests itself.
Lesson Learnt
Disputes that also touch on tax issues (like GST liability) are not automatically excluded from arbitration if they arise out of a contractual indemnity clause: courts will generally let the arbitrator decide arbitrability first rather than blocking arbitration at the threshold.