In a significant arbitration-related ruling, the Supreme Court of India has dismissed a Special Leave Petition filed by Kannur Municipal Corporation challenging arbitral and judicial findings that exempted a BOT bus stand complex from property tax.
The Court, however, modified the award on interest, directing refund of the principal amount without interest, subject to limited conditions.
Background: Property Tax Dispute Over BOT Bus Stand
The dispute arose from a Concession Agreement dated 27 October 2004 between Kannur Municipality and M/s K.K. Builders for construction and operation of a bus stand complex on a Build-Operate-Transfer (BOT) basis.
When the Municipality sought to levy property tax under the Kerala Municipality Act, the matter went to arbitration under the agreement’s arbitration clause. The Arbitrator held that the property was exempt from tax, as ownership of both land and building vested with the Municipal Corporation.
This arbitral award was upheld by the courts under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.
Issue Before the Supreme Court
The key question before the Supreme Court was whether it should interfere with concurrent findings of the Arbitrator and the courts below that the property stood exempt from municipal taxation.
Additionally, the Court examined whether the 15% interest imposed on the refund amount was justified.
Supreme Court’s Ruling
The Supreme Court refused to interfere with the concurrent findings and held that:
- The Arbitrator and courts below had correctly concluded that the property was tax-exempt
- There was no scope for interference under Article 136 in light of settled arbitration principles
- However, the 15% interest awarded on the refund was excessive
Accordingly, the Court directed that:
- The principal amount be refunded within six weeks
- No interest would apply if refunded on time
- A reduced interest of 8% per annum would apply only for delayed payment
The Special Leave Petition was disposed of with these directions
Order-39644_2023-03-02-2026
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Why This Judgment Matters
The ruling reinforces key arbitration principles:
- Concurrent arbitral findings deserve deference
- Municipal bodies cannot reopen settled tax disputes through repeated litigation
- Courts will curb excessive interest awards, even while upholding arbitral outcomes
The decision strengthens certainty in BOT infrastructure projects and municipal arbitration disputes.
Counsel Who Appeared for the Respondents
The following advocates appeared on behalf of the respondent, M/s K.K. Builders before the Supreme Court:
- Mr. Vinay Navare, Senior Advocate
- Dr. Shine P. Sasidhar, Advocate
- Mr. Gireesh Kumar K., Advocate
- Mr. Raman VR, Advocate
- Mr. Patta Arunkumar, Advocate
- Mr. Tom Joseph, Advocate-on-Record (AOR)
Order-39644_2023-03-02-2026
