M/S Arjundas Naraindas Construction Co. V. The Union of India through the General Manager, East Central Railway, Hajipur and The General Manager, East Central Railway, Hajipur and The Chief Administrative Officer (Construction East Central Railway), Mahendru Ghat, Patna and Financial Advisor-cum-Chief Accounts Officer (Construction East Central Railway), Mahendru Ghat, Patna and The Chief Engineer (Construction)(East), East Central Railway, Mahendru Ghat, Patna and The Deputy Chief Engineer/Construction/I, East Central Railway, Samsstipur

CWJC/14198/2009

AI Insights

The case revolves around a dispute concerning the deduction of royalty charges by East Central Railway from the payments due to M/S Arjundas Naraindas Construction Co. for a construction contract. The petitioner argued that the royalty for earth used in construction, which was levied after the submission of tender papers, should be borne by the Railways as per the contract terms. The Railways contended that the responsibility for these charges lay with the contractor. The court examined the contract clauses and relevant rules, ultimately deciding that the Railways were responsible for the royalty charges and should not have deducted them from the petitioner's payments.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 803496 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 30-11-2010
• Assessment Year: misc
• Laws Referred To: Bihar Minor Mineral Concession Rules, 1972
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: PARSHURAM SINGH
• Assessee Lawyers: Y V GIRI; RAJU GIRI VIKAS RATAN BHARTI
• Keywords: Arbitrariness; Construction contract; Fairness; Royalty; Statutory tax; Violation of Article 14
• Section: 23(4)

Judgement Text

" IN THE HIGH COURT OF JUDICATURE AT PATNA CWJC No.14198 of 2009 M/S ARJUNDAS NARAINDAS CONSTRUCTION CO., A JOINT VENTURE FIRM HAVING ITS OFFICE AT 14/441, BINODPUR, KATIHAR-854105 THROUGH ITS AUTHORISED REPRESENTATIVE SRI GORDHANDAS KHUSHWANI SON OF LATE HARUMAL…. …… PETITIONER Versus 1. THE UNION OF INDIA THROUGH THE GENERAL MANAGER, EAST CENTRAL RAILWAY, HAJIPUR, DISTRICT-HAJIPUR, 2. THE GENERAL MANAGER, EAST CENTRAL RAILWAY, HAJIPUR, DISTRICT-HAJIPUR, 3. THE CHIEF ADMINISTRATIVE OFFICER (CONSTRUCTION EAST CENTRAL RAILWAY), MAHENDRU GHAT, PATNA, DISTRICT-PATNA, 4. FINANCIAL ADVISOR-CUM-CHIEF ACCOUNTS OFFICER (CONSTRUCTION EAST CENTRAL RAILWAY), MAHENDRU GHAT, PATNA, DISTRICT-PATNA, 5. THE CHIEF ENGINEER (CONSTRUCTION)(EAST), EAST CENTRAL RAILWAY, MAHENDRU GHAT, PATNA, DISTRICT-PATNA, 6. THE DEPUTY CHIEFNGINEER/CONSTRUCTION/I, EAST CENTRAL RAILWAY, SAMSSTIUR …. …….RESPONDENTS For the Petitioner : Mr. Y.V. Giri, Senior Advocate, M/s Raju Giri & Vikas Ratan Bharti, Advocates For the Respondents : Mr. Parshuram Singh, Advocate ….. 5 30.11.2010 Heard the parties. Ordinarily, this Court does not interfere in disputes relating to contracts even when one of the parties is the State Government or the Union of India. But cases involving apparent arbitrariness and lack of fairness amounting to clear violation of 2 Article 14 of the Constitution constitute an exception. The present case comes under that category. In the present case, the controversy between the parties does not relate to any right based upon disputed facts. The dispute is only over an issue of law as to whether levy of royalty by the State Government on ordinary earth used for filling or leveling purposes in construction of embankment, road, railways and buildings under the provisions of Bihar Minor Mineral Concession Rules, 1972 (hereinafter referred to as “the Rules”) will be covered by the expression “statutory tax” as finds mention in Clause 23.4 of the Chapter III of the document containing the Conditions of Tender and Instruction to Tenderers or will it amount only as additional cost of earth. There is no dispute on facts that the petitioner- company was awarded the work of construction of new bridge by the Railways between Darbhanga-Kakkarghati pursuant to Tender No.72 of 2004-05. A letter of acceptance was issued by the respondents on 27.02.2006 and the contract work is said to have started on that date. Agreement was entered into relating to contract of work on 27.04.2006. Annexure 1 to the writ petition contains the agreement and certain other documents. It includes a letter issued by the Chief Engineer of the East Central Railway 3 (Construction Organisation) dated 27.02.2006 containing two special conditions given by the petitioner as tenderer and the Railways remarks over those special conditions. Special condition no.6 given by the petitioner clearly mentions that in case of any increase in present rate of taxes or any new sort of tax levied either by the Central or the State Government after the date of tender and upto the completion of work shall be paid to the tenderer as actual. This shall include Income Tax, Duties, Levies, Royalty, Sales Tax, Surcharge, Turn-over Tax, etc. Against this special condition no.6 the Railways remarks are to the effect that such condition will be governed as per Clause 23.4 of Chapter III of Conditions of Tender and Instructions to Tenderers. The said Clause 23.4 is crucial and hence it is extracted hereinbelow. “23.4 RATES TO INCLUDE ALL TAXES : The rates quoted shall be inclusive of all taxes levied by Central or State Govt. or by any Municipal Local or any other body. However, change of rate of Statutory Taxes of the State/Central Government and levy of any new type of Statutory Tax shall be on Railway Account.” From the aforequoted Clause 23.4, it is evident that any increase in the rates of taxes or levy of any new type of statutory 4 tax shall be liability of the Railways. Learned counsel appearing for the Railways has placed reliance upon a document, which is part of the agreement as its Annexure A at page 65. Clause 1(b)(iii) of the same has been highlighted to submit that payment of royalty taxes, cost of earth and any other incidental charges are to be borne by the contractors and the quoted rate should include all such charges. According to the learned counsel for the Railwys, such liability upon the contractor is sufficient to take care of royalty on earth, which has been admittedly become payable with effect from 19.04.2006, i.e after the submission of tender papers. We are unable to accept the aforesaid submission in view of clear stipulation to the contrary in Clause 23.4 of the agreement noticed above. There is no dispute that royalty on earth is a subsequent liability created under a Statute. Although respondent-Railways were justified in paying the royalty as per the demand made by the State Government under the provisions of the Rules, they were wholly unjustified in deducting the royalty amount, which is to the tune of Rs.69,93,694.35 paise from the amount payable to the petitioner, who has successfully completed the contract work long back in March 2008. 5 The action of the respondent-Railways is based upon clear misinterpretation of the agreed terms of the contract and is patently unfair and arbitrary. In that view of the matter, the respondents are directed to bear the royalty amount as their own obligation and pay that amount to the petitioner without any delay and in any case, within three months because such amount was deducted arbitrarily from the petitioner, as is apparent from the 23rd and final bill, which is an Annexure to the writ petition and is not in dispute. The writ petition stands allowed to the aforesaid extent. No costs. S.C./Sanjay-II (Shiva Kirti Singh, J.) ( Dr. Ravi Ranjan, J) "