(2023) taxcode.in 62 HC
IN THE HIGH COURT OF JHARKHAND
Techno Electric and Engineering Company Ltd.
v.
The State of Jharkhand and Ors.
W.P.(T) No. 4885 of 2022 with W.P.(T) No. 4886 of 2022 with W.P.(T) No. 4904 of 2022 with W.P.(T) No. 4905 of 2022
Decided on 26-Jul-23
Coram: Mr.Justice Rongon Mukhopadhyay and Mr. Justice Deepak Roshan
Add. Info:
For Appellant(s): Mr. Ajit Kumar, Sr. Adv, Mr. Nitin Kr. Pasari, Adv, Ms. Sidhi Jalan, Adv., Mr. Udit Gupta, Adv.
For Respondent(s): Mr. Ashutosh Anand, AAG-III, Mr. Sachin Kumar, Sr. S.C
Judgment/Order:
JUDGMENT
Heard learned counsel for the parties.
2. Since issue is common in all these writ applications and pertains to the same Assessee; as such, all are heard together and disposed of by this common judgment.
In all these writ applications the petitioner has prayed for following reliefs:
(a) For issuance of an appropriate writ, order or direction, declaring the action of the Respondent in withholding amount of GST impact while paying bills from the month of September, 2019, as manifestly arbitrary, violative of the doctrine of promissory estoppel and contrary to Article 14 of the Constitution of India;
(b) For issuance of an appropriate writ, order or direction, declaring that being satisfied and in view of introduction of GST during the continuance of the ongoing Contract, the liability to pay GST shall be that of the Respondents in terms of the amended work order incorporating the impact of GST and as such, the Respondents be directed to forthwith pay withheld amount from various bills of the\ petitioner since September, 2019.
(c) For issuance of an appropriate writ, order or direction, holding and declaring that in view of the amended Work Order incorporating the impact of GST, read with the Bid document, the Petitioner is entitled for impact of GST along with interest from September, 2019 onwards, since the GST liability has been discharged by the Petitioner out of its own pocket and can be viewed on the State GST Portal which has been illegally withheld by the Respondents from September, 2019 onwards, thus, doubly penalizing the petitioner i.e., on one hand, the petitioner is regularly depositing the GST amount as a statutory requirement and on other hand, the Respondent is withholding on ad-hoc basis the GST from Petitioner’s tax invoice.
(d) For issuance of an appropriate writ, order or direction, holding and declaring that the Petitioner is entitled for reimbursement of GST due to the fact that Respondent have deposited TDS on CGST and SGST @ 1% each of gross value of GST invoice from the date of applicability i.e. from 01/09/2018.
3. The petitioner had preferred above referred four separate writ applications. However, since the issue is common; hence the facts enumerated in W.P.(T) No. 4885 of 2022 has been made the basis for the entire factual narration. The facts of the case lie in a narrow compass. A tender was floated by the Respondent no. 2-Jharkhand Bijli Vitran Nigam Limited (JBVNL) for the electrification of rural areas, which was to be implemented in terms of a scheme floated by the Central Government namely Deen Dayal Upadhyay Gramin Jyoti Yojna (DDUGJY). The scheme was such that 60% of the project was to be funded by Rural Electrification Corporation Limited (REC), 30% of the sanctioned cost was to be funded as loan by the Project Implementing Agency (PIA/licensee) and 10% is to be funded by the respective State Governments across the nation. Before enactment of Good & Services Tax Act, the licensee floated Notice Inviting Tender and in which a pre-bid meeting was carried out, wherein the intending bidders raised query related to Clause 10.7 & Clause 31 of the General Condition of Contract.
4. For brevity, the Original Clause 10.7 and Clause 31 are hereto quoted for ready reference:
“For the purpose of the Contract, it is agreed that the Contract Price specified in Article 2 (Contract Price and Terms of Payment) of the Contract Agreement is based on the taxes, duties, levies and charges prevailing at the date seven (07) days prior to the last date of bid submission hereinafter called “Tax” in this GCC Sub-clause 10.7). If any rates of Tax are increased or decreased, a new Tax is introduced, an existing Tax is abolished, or any change in interpretation or application of any Tax occurs in the course of the performance of the Contract, which was or will be assessed on the Contractor in connection with performance of the Contract, an equitable adjustment of the Contract price shall be made to fully take into account any such change by addition to the Contract price or deduction therefrom, as the case may be, in accordance with GCC Clause 31 (Changes in Laws and Regulations) hereof. In the event of introduction of GST in the course of performance of contract, PIA shall examine its impact on the affected transactions under the contract in totality, for equitable adjustment in the contract price, if required. The contractor shall furnish the relevant details/documents for this purpose, as may be required by PIA. However, these adjustments would be restricted to direct transactions between the Employer and the Contractor for which the taxes and duties are reimbursable by the Employer as per the Contract. These adjustments shall not be applicable on procurement of raw materials, intermediary components etc by the Contractor and also not applicable on the bought out items dispatched directly from sub-vendor’s works to site.
In respect of raw materials, intermediary components etc and bought out items, neither the Employer nor the Contractor shall be entitled to any claim arising due to increase or decrease in the rate of Tax, introduction of a new Tax or abolition of an existing Tax in the course of the performance of the Contract.”
After the pre-bid meeting was carried out and pursuant to the letter of REC dated 30.06.2016 read with subsequent letters issued from time to time, Clause 10.7 read as under:
“For the purpose of the Contract, it is agreed that the Contract Price specified in Article 2(Contract Price and Terms of Payment) of the Contract Agreement is based on the taxes, duties, levies and charges prevailing at the date seven (07) days prior to the last date of bid submission (hereinafter called “Tax” in this GCC Sub-clause 10.7). If any rates of Tax are increased or decreased, a new Tax is introduced, an existing Tax is abolished, or any change in interpretation or application of any Tax occurs in the course of the performance of the Contract, which was or will be assessed on the Contractor in connection with performance of the Contract, an equitable adjustment of the Contract price shall be made to fully take into account any such change by addition to the Contract price or deduction therefrom, as the case may be, in accordance with GCC Clause 31 (Changes in Laws and Regulations) hereof. In the event of introduction of GST in the course of performance of contract, PIA shall examine its impact on the affected transactions under the contract in totality, for equitable adjustment in the contract price, if required. The contractor shall furnish the relevant details/documents for this purpose, as may be required by PIA.”
A perusal of the original Clause 10.7 as per tender document and after pre-bid meeting, Clause 10.7 emerged as under:
“For the purpose of the Contract, it is agreed that the Contract Price specified in Article 2(Contract Price and Terms of Payment) of the Contract Agreement is based on the taxes, duties, levies and charges prevailing at the date seven (07) days prior to the last date of bid submission (hereinafter called “Tax” in this GCC Sub-clause 10.7). If any rates of Tax are increased or decreased, a new Tax is introduced, an existing Tax is abolished, or any change in interpretation or application of any Tax occurs in the course of the performance of the Contract, which was or will be assessed on the Contractor in connection with performance of the Contract, an equitable adjustment of the Contract price shall be made to fully take into account any such change by addition to the Contract price or deduction therefrom, as the case may be, in accordance with GCC Clause 31 (Changes in Laws and Regulations) hereof. In the event of introduction of GST in the course of performance of contract, PIA shall examine its impact on the affected transactions under the contract in totality, for equitable adjustment in the contract price, if required. The contractor shall furnish the relevant details/documents for this purpose, as may be required by PIA.”
A perusal of amended Clause 10.7 made it clear that the contractors would be entitled to equitable adjustment on account of introduction of GST in totality in connection with the contract. In the same very clause, it was mentioned that the Project Implementing Agency shall examine the impact and will accordingly reimburse the same to the contractor.
As a consequence of the pre-bid meeting, the work orders were issued vide different Letter of Awards and in the Letter of Award, Clause 28 of the Letter of Award of different dates read as under:
“If any rates of Tax are increased or decreased, a new tax is introduced, an existing, tax is abolished, or any change in interpretation or application of any ta occurs in the course of the performance of the contract, which was or will be assessed on the contractor in connection with performance of the contract, an equitable adjustment of the contract price shall be made to fully take into account any such change by addition to the contract price or deduction therefrom, as the case may be in accordance with GCC. Clause 31 (change in Laws and Regulations) hereof. In the event of introduction of GST in the course of performance of contract, PIA shall examine its impact on the affected transactions under the contract in totality for equitable adjustment in the contract price, if required. The contractor shall furnish the relevant details/documents for this purpose, as may be required by PIA.”
5. The case of the petitioner is that there was no confusion till the letter of award was issued, inasmuch as, the Letter of Award was issued pre-enactment of GST. However, after introduction of GST Act, since the contract so awarded, also borne the approval of Board of Directors of the licensee dated 21.04.2017, the petitioner made its claim of impact of GST and based upon the same, the amended work orders were also issued, taking into consideration the impact of GST and the licensee had been paying the same until August 2019.
Suddenly, from September 2019, the licensee stopped making payment of the impacted transactions of GST and in fact started recovering the enhanced tax so paid to the petitioner from the running bills of the petitioner, for all the contracts. Faced with the situation, the petitioner made its claim before the licensee inter alia also submitted that the liability to GST has already been discharged by the petitioner with the State Government. Since, the claim of the petitioner was kept dormant, although the licensee time and again sought documents and clarification from the petitioner, since nothing was forthcoming in favour of the petitioner, the petitioner approached this Court under the writ jurisdiction.
6. Mr. Ajit Kumar learned senior counsel for the petitioner submits that the “Pre-bid Clarification dated 06-09-2016” and Clause 28 of “Letter of Award dated 09-06-2017”, both are made integral part of the Contract Agreement dated 19-07-2017. The Clause 28 of the Letter of Award dated 09-06-2017(Annexure 7) uses the word “IT IS AGREED THAT” which shows the consensus ad idem between the parties and intentions of the parties on the date of entering into the Contract Agreement.
With the said Pre-Bid Clarification dated 06-09-2016 and Clause 28 of the Letter of Award 09-06-2017, the Respondent No.2 has ventilated its intentions in writing to omit the following portions of Original Clause 10.7 of NIT which is now sought to brought back from the back door by the Respondent No.2 as appears from the Counter Affidavit which is contrary to the intentions of the parties on the day of entering into contract.
Learned sr. counsel further submits that the stand taken or interpretation now advanced by the respondent No.2 in the Counter Affidavit amounts to omitting and deleting the Pre-Bid Clarification dated 06-09-2016 and Clause 28 of the Letter of Award dated 09-06-2017 which are treated as “Integral Part” of the Contract Agreement dated 19-06-2017. From the Pre-bid Clarification dated 06-09-2016 and the Clause 28 of Letter of Award dated 09-06-2017 the intentions of the parties are clear that in the event of introduction of GST in the course of performance of contract, PIA shall examine its impact on the affected transactions under the contract in totality for equitable adjustment in the contract price, if required.
The Respondent issued four amendment/freezing of BOQs on 10-08-2018, 27-11-2018, 30-04-2019 and 03-02-2020 for procurement of materials, wherein the impact of GST was retained by the Respondent. The Respondent has deposited TDS on CGST and SGST @ 1% each of gross value of GST invoice from the date of applicability i.e. from 01-09-2018. He further submits that the respondent also issued a performance certificate to the petitioner indicating that the work was completed to the satisfaction of the respondent and Work Completion Certificates were issued on 17- 08-2021 for Ramgarh district, on 17-12-2021 for Dhanbad district, on 20-12-2021 for Bokaro district and on 01-01-2022 for Chatra district.
Further, as per the agreed terms, after introduction of GST, the respondent No.2 started paying /reimbursing amounts of GST impact on “affected transactions in totality” i.e., direct transactions between Employer and Contractors as well as indirect transactions (bought out items) which continued up to August, 2019 i.e., up till execution of 80% of the work.
Learned sr. counsel contended that this action shows understanding and conduct of the respondent No.2 of the said amended Clause 10.7. He further submits that the respondent No.2 never informed petitioner till date the reasons for withholding of GST amount or that they are releasing GST payment as indirect transactions/bought out item provisionally. The contention of the respondent No. 2, that the GST was reimbursed as indirect transaction provisionally is extraneous and does not bear out from the agreed terms. However, from September, 2019 when only 20% work was remaining, the respondent No.2 stopped paying/reimbursing the GST impact on indirect transactions (bought out items) and rather started recovering the GST impact already paid/reimbursed till August, 2019 from their current bills.
He reiterated that in the agreed terms of the contract there is no scope of payment/reimbursement of tax provisionally particular when the respondent No. 2 is denying their liability all together in respect of indirect/bought out transaction. The plea of provisional payment taken by the respondent No. 2 is false and unfounded. From September 2019, till the date of filing of these writ applications an amount of Rs.52 Crore (approx.) from different bills of Dhanbad District, Bokaro District and Ramgarh District have been arbitrarily and without any reason withheld from the Petitioner’s various bills. The Petitioner wrote following letters to Respondent for release of withheld amount, which are referred to herein below:
i) TECH/JBVNL-DHAN-CHATRA/2019/2505 dated 21-11-2019
ii) TECH/JBVNL-DHAN-CHATRA/2020/2676 dated 18-01-2020
iii) TECH/JBVNL-DHAN&CHATRA/2020/3263 dated 07-12-2020
iv) TECH/JBVNL-DHAN-CHATRA/2021/3384A dated 10-08-2021
v) TECH/JBVNL-DHAN&CHATRA/2021/ 3384G dated 29-10-2021
vi) TECH/JBVNL-DHAN.2022/5030 dated 22-08-2022
Learned senior counsel lastly submits that faced with the situation, the petitioner made its claim before the respondent No.2 Since, the claim of the petitioner was kept dormant, the petitioner approached this Court invoking its writ jurisdiction under Article 226 of the Constitution of India.
7. In essences, learned senior counsel summarized his argument as follows:
(a) As per the agreed terms the respondent no.2 is bound/obliged to pay/reimburse the impact of GST on the affected transactions in totality by equitable adjustment in the contract price,
(b) There is no conflict between different clauses of the contract as accepted by the respondent no.2 [under para 10(i) of counter affidavit] hence, the “order of precedence” under clause 1.2 of contract agreement (Annexure 9) is not attracted.
(c) Writ in contractual matters against public authority or instrumentality or agencies of State are maintainable.
8. Mr. Sachin Kumar, learned Sr. S.C. appearing on behalf of the JBVNL relying upon several paragraphs of the counter-affidavit submits as under:
(i) The ADDENDUMM OF 10.7 in Pre-Bid Meeting shall be interpreted with GCC clause 31 which is part of above addendum (Para 8,9,10 of Counter Affidavit).
(ii) In the REC Letter dated 30-06-2016 [Para 10(i) of Counter Affidavit] the aforesaid stipulations were only reiterated. Perusal of the above stipulations/documents do not reveal any sort of contradiction amongst them. In fact, both the clauses are seen supporting and complementing each other, which have been just reiterated in the REC’S Letter.
(iii) Relying further upon Para 10(v) of the Counter Affidavit it has been further submitted that on cited clause, REC clarifications and opinion of consultant and State Government it is clear cut that GST impact shall be provided on direct transactions only.
Learned counsel submits that after analyzing the documents submitted by the M/S T Techno Electric & Engg. Co. in pursuance of letter No 2638/RE dated 8/11/17 & letter No 2881/RE dated 27/11/17 it has been found that all the transactions have been made by the M/S T Techno Electric & Engg. Co. are indirect transactions which automatically disqualify the claim amount against GST.
(iv) Learned counsel further referred Para 15 of the Counter Affidavit and submitted that the REC vide its letter dated 18.09.2018 and 19.06.2018 and again vide letter dated 02.09.2019 clarified that the change in taxes would be restricted to direct transactions between employer and the Contractor for which the taxes and duties are reimbursable by the Employer as per the contract. The Payment was being made to agency on provisional basis as per Letter No.2638/RE dated 08/11/17 and Letter No. 2881/RE dated 27/11/17 issued regarding revision in contract price for GST impact However, after analysis of facts.
(v) Learned counsel lastly submits by referring Para 25 of the Counter Affidavit though, Clause No.10.7 had been amended but it had to be read with clause No.31, which strictly prohibits the differential GST impact in case of indirect transaction (bought out items), if any and should not be read separately at any time. He concluded his argument by submitting that the Petitioner in no case is entitled for differential cost of GST as it is applicable only on direct item subject to furnishing of relevant documents.
9. Having heard learned counsel for the parties and after perusing the averments made in the respective affidavits and the documents annexed therein and also after analysing different clauses of tender agreement especially original Clause 10.7 of NIT and the subsequent amendment and also the pre-bid clarification dated 06.09.2016; it appears that as per the agreed terms of the contract, the respondent No.2 is legally bound to pay/reimburse the “impact of GST” on all “affected transactions” under the contract “in totality” for “equitable adjustment” in the contact price.
The words “impact of GST” on “affected transactions” under the contract “in totality” read in its ordinary natural sense would include all affected transactions in totality under the contract, going by the plain words. The intentions of the parties to reimburse/pay and receive the impact of GST on direct transactions and also indirect transactions (bought out items) is clear from the deletion of portions from Clause 10.7 of GCC which restricted reimbursement of GST only to direct transactions. After deletion of the said portion, the word “affected transactions” and “in totality” and “equitable adjustment” has to be interpreted in the context of amended Clause 10.7.
It is not a case of the respondent No. 2 that the indirect transactions (bought out items) are not “affected transactions” nor it is the case of the respondent No.2 that there is no “impact of GST” on the said indirect transactions or that it does not come within the totality of the contract and adjustment of such cost would not equitable. A plain reading of amended Clause 10.7 shows that the GST impact is payable on all “affected transactions” considered in “totality” without any exception to indirect transactions.
It is evident that the portions of the original Clause 10.7 which carved out an exception to indirect transactions (bought out items) for non-reimbursement of GST, is deleted and is no more part of the agreed terms of the contract. The Clause 31 of the GCC cannot be read in such a manner to bring back what is deleted by the parties as per agreed terms and do violence with amended Clause 10.7, Pre-bid clarification and Clause 28 of LOA. The Clause 31 of the GCC has be to be read in the context of amended Clause 10.7 Pre-bid clarification and Clause 28 of LOA and in light of clear intention of the parties to delete the portion which barred reimbursement impact of GST on indirect transactions. The intentions of the parties on the date of entering into contract is clear from Pre-Bid Clarification dated 06-09-2016 and Clause 28 of the LOA dated 09-06-2017 which are integral part of the Contract Agreement by virtue of Article 1.1. It is not the case of the respondent No.2 that the Original Clause 10.7 was not amended by way of pre-bid clarification and LOA (Clause 28).
10. The Respondent No.2 under Para 25(c) of their Counter Affidavit has taken the following stand.
25…..
(d) Certainly, Clause No.10.7 had been amended but it had to be read with clause No.31, which strictly prohibits the differential GST impact in case of indirect transaction (bought out items), if any and should not be read separately at any time.
The Respondent No.2 intends to bring back from the back door what parties agreed to delete from Clause 10.7 of GCC. The Clause 28 of the Letter of Award dated 09-06-2017(Annexure 7) which is integral part of Contract Agreement dated 19-06-2017 under Article 1.1 which uses the word “IT IS AGREED THAT” which shows consensus ad idem between the parties and intentions of the parties on the date of entering into the Contract Agreement. It is evident from record that the intentions of the parties are clear from a plain reading of the amended Clause 10.7 of GCC vis a vis original Clause 10.7 of GCC. The amended Clause 10.7 read in the context of Original/unamended Clause 10.7. With the said Pre-Bid Clarification dated 06-09-2016 and Clause 28 of the Letter of Award 09-06-2017, the respondent No.2 has ventilated its intentions in writing to omit the following portions of Original Clause 10.7 of NIT which is now sought to brought back from the back door by the respondent No.2 as appears from the Counter Affidavit which is contrary to the intentions of the parties on the day of entering into contract.
The stand taken or interpretation now advanced by the Respondent No.2 in the Counter Affidavit amounts to omitting and deleting the Pre-Bid Clarification dated 06-09-2016 and Clause 28 of the Letter of Award dated 09-06-2017 which are treated as “Integral Part” of the Contract Agreement dated 19-06-2017 under Article 1.
In the case of Transmission Corporation of Andhra Pradesh Ltd. Vs. GMR Vemagiri Power Generation Ltd. reported in (2018) 3 SCC 716 it is held by the Hon’ble Supreme Court that in the event of any ambiguity arising the terms of the contract will have to be interpreted by taking into consideration all surrounding fact and circumstances including correspondence exchanged, to arrive at the real intendment of the parties, and not what one of the party may contend subsequently what to have been intended. It is further held that there is no need to inquire whether their particular interpretation is correct or not or whether they were mistaken or not or whether they had in mind the original term or not suffice that they have, in their course of dealing, put their own interpretation in their contract, and cannot be allowed to go back.
11. From the Pre-bid Clarification dated 06-09-2016 and the Clause 28 of Letter of Award dated 09-06-2017 the intentions of the parties are clear that in the event of introduction of GST in the course of performance of contract, PIA shall examine its impact on the affected transactions under the contract in totality for equitable adjustment in the contract price, if required. It further transpires that the pre- bid negation and Para 28 of LOA explains the scope of Clause 31.
It is fairly well settled that a contract should be read as a whole and so far, as possible as mutually explanatory as held by the Hon’ble Apex Court in the case of South East Asia Marine Engineer Construction Ltd. Vs. OIL India Ltd. reported in (2020) 5 SCC 164.
In the case of Indian Oil Corporation Ltd. Vs. FEPL Engineering P. Ltd. reported in (2019) (6) Arb LR 155 (Delhi) (DB) it is held by the Delhi High Court that the explicit terms of the contract are always the final words with regard to the intention of parties and multiclass contract has to be understood and interpreted in a manner that any view as a particular clause of the contract should not do violence to another part of the contract.
In the case of Oil & Natual Gas Corp Vs Saw Pipes Ltd repotted in (2003) 5 SCC 705 it is held by the Hon’ble Supreme Court that it is settled law that the intentions of the parties is to be gathered from the words used in the agreement. When the terms of the contract are clear and unambiguous then its meaning is to be gathered only from the words used therein. In a case where agreement is executed by the expert in the field it cannot be held that the intention of the parties was different from the language used therein.
12. It is further apparent that the contract in the instant case is supply contract, are for sale of goods, hence, in any case, in terms of Section 64 A of the Sale of Goods Act, 1930 the petitioner is entitled to GST impact on the indirect transactions. Section 64A, Sale of Goods Act, makes it clear that the respondents are under obligation to pay the taxes, duties and levies in the event of change in law and the seller (in the present case, the Petitioner) has a right to add such additional amount of tax to the contract price. In terms of Section 64A(2)(b) of Sale of Goods Act, the Petitioner, is entitled to recover from the respondents the tax withheld on account of imposition of GST.
Thus, the actions of the respondent No.2 violates principles of promissory estoppels and contrary to the doctrine of legitimate expectations of the petitioner and hence, offends Article 14 of the Constitution of India. The petitioners having shifted their position in view of the pre-bid meeting and clarification, now at this stage, the licensee cannot take a U-Turn by not paying the GST impact.
At this stage it is relevant to observe that as per the agreed terms, after introduction of GST, the Respondent No.2 started paying /reimbursing amounts of GST impact on “affected transactions in totality” i.e., direct transactions between Employer and Contractor as well as indirect transactions (bought out items) which continued up to August, 2019, up till execution of 80% of the work. However, all of a sudden, without even informing the petitioner, withheld amount of GST impact while paying bills from the month of September, 2019 and also started recovering the same. As a matter of fact, the Respondent No.2 never informed Petitioner till date the reasons for withholding of GST amount or that they are releasing GST payment as indirect transactions/bought out item provisionally.
13. The contention of the Respondent No. 2 that the GST was reimbursed as indirect transaction provisionally is extraneous and does not bear out from the agreed terms but the Respondent No.2 remained silent. In the case of Mahabir Auto Stores Vs Indian Oil Corporation reported in (1990) 3 SCC 752 it is held by the Hon’ble Apex Court that State or its instruments entering any commercial transaction under Article 298 of the Constitution of India, are “State” under Article 12 and its actions must be reasonable, fair and just even when no “formal contract” has been entered into between the parties and it should inform and take into confidence the affected party when any adverse action is contemplated.
Similar view was taken in the case of Security Printing Mining Corp. of India Ltd. Vs. Gandhi Industrial Corp. reported in (2007) 217 ELT 489 (SC) wherein it is held by the Hon’ble Supreme Court that principles of sub-silentio not applicable when terms and condition are well known and clearly understood between parties.
Further, in the case of Sime Darby Engineering SONBHD Vs. Engineers India Ltd. reported in (2009) 7 SCC 545 it is held by the Hon’ble Supreme Court that any policy/decision cannot change the contractual clause.
14. There is no conflict between different clauses of the contract as accepted by the respondent no.2 [under para 10(i) of counter affidavit] hence, the “order of precedence” under clause 1.2 of contract agreement (Annexure 9) is not attracted. The Article 1.2 of the Contract Agreement dated 19-06-2017 provides the “Order of Precedence (Reference to GCC Clause 2)” which reads as follows;
Article 1. Contract Documents
1.1 Contract Documents(Reference GCC Clause 2.2)
The following documents shall constitute the Contract between the Employer and the Contractor, and each shall be read and construed as an integral part of the Contract.
Volume – A
1. The Contract Agreement and the Appendices thereto.
2. Invitation to bids. NIT No.110/PR/JBVNL/16-17
3. Pre-Bid Clarification dated 09-06-2016
4. Letter of Intent No.990/RE dated 09-05-2017
5. …..
6. …..
7. Letter of Award, LOA No.60/RE dated 09-06-2017
1.2 “Order of Precedence (Reference to GCC Clause 2)
In the event of any ambiguity or conflict between the Contract Documents list above, the order of precedence shall be the order in which the Contract Documents are listed in Article 1.1(Contract Documents) above.
In the instant case there is no ambiguity or conflict between the contract documents, hence, the order of precedence under Article 1.2 would not apply. The Respondent No.2 under Para 10(i) of the Counter Affidavit has accepted that stipulations/documents do not reveal any sort of contradiction amongst them. In fact, both the clauses are seen supporting and complementing each other, which have been just re-iterated in the REC’S Letter dated 30-06-2016.
15. With regard to the contention of the Respondents on the question of maintainability; now it is well settled that the writ in contractual matters against public authority or instrumentality or agencies of state are ‘State’ within the meaning of Article-12 of the Constitution of India and hence are maintainable. Now the law is no more res integra, even in contractual matters the writs would maintainable against the Government or instrumentality or agencies of the Government. Even in cases of money claim writ against State within the meaning of Article 12 of the Constitution of India would be maintainable. In the case at hand, the acts and actions of the Respondents are in derogation to the Article 14, 19(1)(g), 21 and 300A of the Constitution of India.
In the case of UOI Vs. Tantia Construction Pvt. Ltd reported in (2011) 5 SCC 697 it is held by the Hon’ble Supreme Court that writ in contractual matters would be maintainable even if there is an arbitration clause as alternative remedy is not a bar. Recently, the Hon’ble Apex Court in the case of Popatrao Vyankatrao Patil v. State of Maharashtra, reported in (2020) 19 SCC 241, held that the High Court would be justified in exercising its jurisdiction under Article 226 to the exclusion of other available remedies when it finds that the action of the State or its instrumentality is arbitrary and unreasonable and, as such, violative of Article 14 of the Constitution of India.
In the well celebrated judgment, the Supreme Court in the case of ABL International Ltd. v. Export Credit Guarantee Corpn. of India Ltd., reported in (2004) 3 SCC 553, at Para 23, has held that, once the State or an instrumentality of the State is a party of the contract, it has an obligation in law to act fairly, justly and reasonably which is the requirement of Article 14 of the Constitution of India. Therefore, if an instrumentality of the State has acted in contravention of Article 14, then a writ court can issue suitable directions to set right the arbitrary actions and even can grant money claim. Similar views have been expressed in the case of Unitech Limited Vs Telengana State Industrial Infrastructure Corporation (TSIIC) reported in 2011 SCC Online SC 99 (Para 38 to 41).
As a matter of fact, this issue has been settled way back in the case of Kumari Shrilekha Vidyurthi Vs. State of Uttar Pradesh reported in (1991) 1 SCC 212, wherein it is held by the Hon’ble Apex Court that States Constitutional obligation co-exists with contractual obligation and State action is amenable to judicial review to determine violation of Article 14 irrespective of where it in contractual sphere or other sphere. The action of judicial review should be based not on the nature of function i.e., contractual or otherwise but public nature of the body exercising that function, State action being public in nature is open to judicial review even, if it pertains to contractual field. The requirement of Article 14 should extend even in the sphere of contractual matters for regulating the conduct of States activity. To the extent the challenge is made on the ground of violation of Article 14 by alleging that the impugned act is arbitrary unfair or unreasonable, the fact that the dispute also falls within the domain contractual obligation, would not relieve the State of its obligation to comply with the basic requirement of Article 14. An additional contractual obligation cannot direct the claimant of the guarantee under Article 14 of the non-arbitrariness at the hands of the State in any of its action. Every State action in order to survive, must be susceptible to the vice of arbitrariness which is crux of Article 14 and basic to the rule of law, the system which governs us. Arbitrariness is the very negation of rule of law. Satisfaction of test of non-arbitrariness in every State action is sine qua non to its validity and in this respect the State cannot claim comparison of with private individual even in the field of contract Arbitrariness is anathema to State action in every sphere and wherever the vice percolates, the Court would not be impeded by technicalities to trace it and strike it down. This is the surest way to ensure the majesty of rule of law guaranteed by the Constitution of India. Every State action must be informed by reasons and it follows that an out uninformed by reason, is arbitrary. The same view was reiterated by the Hon’ble Apex Court in the case of Food Corporation of India vs Kamdhenu Cattle Feed Industries, reported in (1993) 1 SCC 71.
Recently, in the case of Papatrao Vyankatrao Patil Vs. The State of Maharashtra reported in (2020) SCC Online SC 291 it is held by the Hon’ble Supreme Court that State and its instrumentality should act as a model litigant and should not put forth false, frivolous, vexatious, technical (unjust) contention to obstruct patch of justice and by taking technical plea for the purpose of defeating legitimate claim of citizen and should do what is fair and just for the citizen.
16. In view of the aforesaid discussion and the settled proposition of law we are of the considered opinion that the respondents were not justified in withholding the amount of GST impact and the same is arbitrary, violative and against their own terms of agreement.
Consequently, we hold that in view of introduction of GST during the continuance of the ongoing contract, the liability to pay GST shall be that of the Respondent JBVNL in terms of the amended work order incorporating the impact of GST.
Hence, the matter is remitted back to the Respondent JBVNL to calculate and pay the withheld amount which has been deducted from various bills of the petitioner since September, 2019 till the date of actual payment as the petitioner is entitled for reimbursement of GST along with statutory interest in terms of the GST Act, 2017 read with the Rules framed thereunder. It is made clear that the entire exercise shall be completed within a period of 12 weeks from the date of receipt/production of copy of this order.
17. Accordingly, these writ applications stand disposed of.
Pending I.As., if any, are also disposed of.
(Rongon Mukhopadhyay, J.)
(Deepak Roshan, J.)
Original judgment copy is available here.