UTTAR PRADESH POWER TRANSMISSION CORPORATION LTD. AND ANR. versus CG POWER AND INDUSTRIAL SOLUTIONS LIMITED AND ANR. on 12 May 2021

[2021] 5 S.C.R. 37

UTTAR PRADESH POWER TRANSMISSIONCORPORATION LTD. AND ANR.

v.

CG POWER AND INDUSTRIAL SOLUTIONS LIMITEDAND ANR.

(Special Leave Petition (C) No. 8630 of 2020)

MAY 12, 2021

[UDAY UMESH LALIT AND INDIRA BANERJEE, JJ.]

Building and Other Construction Workers’ Welfare Cess Act,1996: s. 3(1), (2) – Building and Other Construction Workers WelfareCess Rules, 1998 – rr. 3 and 4 (1)-(4) – Building and OtherConstruction Workers (Regulation of Employment and Conditionof Service) Act, 1996 – s. 2 (1)(d), (g) and (i) – Levy of cess on costof construction incurred by builders – Respondent no. 1-contractorentered into an agreement with UPPTCL for construction of 765/400 KV Substations, split into four contracts – Dispute betweenparties – Issuance of letters by UPPTCL directing respondent no.1to remit Labour Cess computed at 1% of the contract – UPPTCLdemanded cess on the supply Contract, on the basis of report of theCAG – Writ petition by respondent no. 1 – High Court allowed thepetition, setting aside the letters – Interference with – Held: Notcalled for – Cess under the Cess Act read with BOCW Act is leviablein respect of building and other construction works – Scheme ofBOCW Act excludes supply contract from its ambit – Action ofUPPTCL in forcibly extracting building cess from respondent no.1in respect of the first contract, solely on the basis of the CAG report,is in excess of power conferred on UPPTCL, when there wasadmittedly no assessment or levy of cess under the Cess Act –UPPTCL has no power and authority and or jurisdiction to realizelabour cess under the Cess Act in respect of the first contract bywithholding dues in respect of other contracts and/or invoking aperformance guarantee – Furthermore, the Cess Act and/or statutoryrules framed thereunder prescribe the mode and manner of recoveryof outstanding cess under the Cess Act – UPPTCL could not havetaken recourse to the methods adopted by it – Thus, thecommunications rightly set aside.

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ABuilding and Other Construction Workers’ Welfare Cess Act,1996: Elucidation of.

Constitution of India: Art. 226 – Contractual matters – Scopeof interference by High Court – Held: Availability of an alternativeremedy does not prohibit the High Court from entertaining a writBpetition in an appropriate case – Relief u/Art.226 may be grantedin a case arising out of contract – However, the writ jurisdiction u/Art.226 being discretionary, the High Courts usually refrain fromentertaining a writ petition which involves adjudication of disputedquestions of fact which may require analysis of evidence of witnesses– Monetary relief can also be granted in a writ petition.C

Dismissing the Special Leave Petition, the Court HELD: 1. In the instant case, the action of UPPTCL inforcibly extracting building cess from the Respondent No.1 inrespect of the first contract, solely on the basis of the CAG report,Dis in excess of power conferred on UPPTCL by law or in terms ofthe contract. In other words, UPPTCL has no power and authorityand or jurisdiction to realize labour cess under the Building andOther Construction Workers’ Welfare Cess Act, 1996 in respectof the first contract by withholding dues in respect of othercontracts and/or invoking a performance guarantee. There is noElegal infirmity in the finding of the High Court that UPPTCL actedin excess of power by its acts impugned, when there wasadmittedly no assessment or levy of cess under the Cess Act.Even otherwise, the Cess Act and/or statutory rules framedthereunder prescribe the mode and manner of recovery ofFoutstanding cess under the Cess Act. It is well settled that whenstatute requires a thing to be done in a particular manner, it is tobe done in that manner alone. UPPTCL could not have takenrecourse to the methods adopted by it. The impugnedcommunications have rightly been set aside. The judgment andorder of the High Court impugned does not call for inferenceGunder Article 136 of the Constitution of India. [Paras 70-72][86-D-G]

2.1 By the impugned order dated 24th February 2020, theHigh Court set aside the letters dated 2nd September, 2016 and29th December, 2018 sent by the Petitioner to the RespondentH

demanding outstanding labour cess amounting toARs.2,60,68,814/- computed at the rate of 1% of the contract value.The High Court accepted the submission of the Respondent No.1that in the absence of levy and assessment under the Buildingand Other Construction Workers’ Welfare Cess Act, 1996 andBuilding and Other Construction Workers Welfare Cess Rules,B1998, the letters of the UPPTCL were not sustainable in law.Cess could only be recovered in the manner stipulated in theCess Act and the Rules framed thereunder. The High Courtobserved that if cess were leviable under the Cess Act, it wouldbe necessary for the concerned authorities to undertake theexercise of assessment and levy of cess under the Cess Act ofC1996 as amended, before the same could be realized from acontractor. The High Court found that in the absence of any orderfor levy and assessment under the Cess Act of 1996 recoverycould not be made pursuant to an audit objection of CAG. [Paras43-44][73-C-F]

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2.2 There does not appear to be any provision in the firstcontract, second contract, third contract, or fourth contract or inthe Special Conditions of Contract or the General Conditions forSupply of Plant and the Execution of work which enables UPPTCLto withhold any amount from the bills raised by the RespondentNo.1 on UPPTCL towards any taxes, cess or any other statutorydues of the contractor. Nor has the UPPTCL adverted to anyspecific provision of the contract which enables UPPTCL to doso. Clause 8.1 of the Special Conditions of Contract relied uponby UPPTCL reads that the prices of imported items, if any, shallbe inclusive of all taxes, duties, licence fees, import/customsduties etc. legally payable. Any such taxes, duties levies shall beon Contractor’s account and no separate claim on the Accountshall be entertained by the purchaser. This clause does notauthorize UPPTCL to deduct taxes etc. from bills. [Para 45][73-F-H; 74-A-B]

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2.3 It is nobody’s case that Respondent No.1 has committedany breach or default in performance of the First Contract, thatis, the Supply Contract, rendering it liable for any damages, costsor expenses. The Respondent No.1 duly discharged itsobligations under the First Contract (Supply Contract) to the H

Asatisfaction of UPPTCL, and accordingly all payments due to itwere cleared. The Performance Guarantees furnished by theRespondent No.1 were also partially discharged except to theextent of covering cess on the First (Supply) contract. This isapparent from the communication of the UPPTCL dated 1st June2018 to the Bank (Respondent No.2). [Para 47][76-E-G]B

2.4 Clause 8 of the Special Conditions of the Contractmerely says that duties, taxes, fees etc. as are legally applicable,shall be paid at actuals by the contractor. This clause does notenable UPPTCL to withhold payments or to realize cess byrevocation of a Performance Guarantee. [Para 48][76-G-H]C

2.5 The clear statutory scheme of the BOCW Act excludesa supply contract from within its ambit. On behalf of theRespondent No.1, it is pointed out that several public authoritiesand corporations, such as the Delhi Metro Rail Corporation andKarnataka Power Transmission Corporation Limited, have issuedDinstructions that no cess under the BOCW Act is leviable on acontract for supply of goods. [Para 51][79-E-F]

2.6 Under Section 2(g) of the BOCW Act the term‘Contractor’ means a person who undertakes to produce a givenresult for any establishment, other than a mere supply of goodsEor articles of manufacture, by the employment of building workersor who supplies building workers for any work of theestablishment and includes a sub-contractor. The RespondentNo.1 is apparently not a contractor, within the meaning of Section2(1)(g) of the BOCW Act in respect of the first, second and fourthFcontracts. Nor is the Respondent No.1 employer within themeaning of Section 2(1)(i) of the BOCW Act. Section 2(1)(i) ofthe BOCW Act defines ‘employer’ to include the contractor inrelation to a building and other construction work carried on byor through a contractor or by employment of building workerssupplied by a contractor. The Respondent No.1 neither falls withinGthe definition of ‘contractor in Section 2(1)(g) nor 2(1)(i)(iii) ofthe BOCW Act. Apparently, the Respondent No.1 is not liableto cess in respect of the First, Second and Fourth contracts.[Para 52][79-F-H; 80-A-B]

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2.7 Cess under the Cess Act read with BOCW Act isleviable in respect of building and other construction works. Thecondition precedent for imposition of cess under the Cess Act isthe construction, repair, demolition or maintenance of and/or inrelation to a building or any other work of construction,transmission towers, in relation inter alia to generation,transmission and distribution of power, electric lines, pipelinesetc. Mere installation and/or erection of pipelines, equipmentsfor generation or transmission or distribution of power, electricwires, transmission towers etc. which do not involve constructionwork are not amenable to Cess under the Cess Act. Accordinglyno intimation or information was given or any return filed withthe Assessing Officer under the Cess Act or the Inspectorunder the BOCW Act in respect of the First and SecondContracts, either by UPPTCL or by the Respondent No.1.[Para 53][80-B-E]

2.8 A contractor who enters into a pure Supply Contract isstatutorily exempted from levy under the BOCW Act. TheContract in question is a Supply Contract as would be evidentfrom Clause 8.7 of the Special Conditions of Contract.[Para 54][80-E-F]

2.9 Respondent No.1 rightly submitted that the fourcontracts had been treated as a singular contract solely for thepurposes of responsibility for timely execution. For all otherintents and purposes, including levy of any tax or fees, the contractfor supply was understood by the parties as a separate and distinctcontract. As per the terms of payment under Clause 9.1 of theSpecial Conditions of Contract, the Schedule of Payments wereseparate for the supply and delivery of equipment and materials,totaling to Rs.275,09,33,042.00 as against the total value of thecontract which is Rs.302,06,08,217.00. It was submitted that theterms and clauses of the contract made it amply clear that thefirst contract was for supply and delivery of equipment andmaterials. It was a pure supply contract, separate and distinctfrom civil works contract. The UPPTCL itself understood theCess Act as not applicable to the Supply Contract and accordinglydid not deduct cess from the invoices/bills of the Respondent.[Paras 55-57][80-G-H; 81-A-B]

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A2.10 There can be no comparison between realization ofdisputed cess by withholding the bills raised by the RespondentNo.1 or by invocation of a bank guarantee furnished by theRespondent No.1 after release of payment to the RespondentNo.1, and deduction of Income Tax at source which is a statutoryobligation of any person making a payment which constitutesB‘income’ under Section 192 of the Income Tax Act, 1961.[Para 59][81-D-E]

2.11 UPPTCL demanded and partly realized cess on thesupply Contract, solely on the basis of report of the CAG. In theabsence of any adjudication, it was impermissible for UPPTCL toCissue the impugned communication to realize cess solely on thebasis of the report of the CAG. [Para 60][81-F]

2.12 In the instant case, there is apparently no dispute,difference or controversy between UPPTCL and the RespondentNo.1 as to the true construction, meaning or intent of any part ofDthe conditions of contract or to the manner of execution or thequality or description or payment for the same. Nor is there anydispute as to the true meaning, intent, interpretation, constructionor effect of the clauses of contract, specifications or drawings orany of them. UPPTCL has changed its stand only after the CAGEreport. Cess in respect of the First Contract has been deductedonly in view of the audit objection raised by the Office ofComptroller and Auditor General (CAG). [Para 63][83-G-H;84-A]

2.13 Even though there is an arbitration clause, theFPetitioner has not opposed the writ petition on the ground ofexistence of an arbitration clause. There is no whisper of anyarbitration agreement in the Counter Affidavit filed by UPPTCLto the writ petition in the High Court. In any case, the existenceof an arbitration clause does not debar the court from entertaininga writ petition. [Para 66][85-E]G

3.1 It is well settled that availability of an alternative remedydoes not prohibit the High Court from entertaining a writ petitionin an appropriate case. The High Court may entertain a writpetition, notwithstanding the availability of an alternative remedy,particularly (1) where the writ petition seeks enforcement of aH

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fundamental right; (ii) where there is failure of principles of naturaljustice or (iii) where the impugned orders or proceedings arewholly without jurisdiction or (iv) the vires of an Act is underchallenge. [Para 67][85-F-G]

3.2 It is now well settled that relief under Article 226 of theConstitution of India may be granted in a case arising out ofcontract. However, the writ jurisdiction under Article 226, beingdiscretionary, the High Courts usually refrain from entertaininga writ petition which involves adjudication of disputed questionsof fact which may require analysis of evidence of witnesses.Monetary relief can also be granted in a writ petition. [Para 69][86-C]

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Lanco Anpara Power Limited v. State of Uttar Pradeshand Ors. (2016) 10 SCC 329:[2016] 5 SCR 731 –distinguished Dewan Chand Builders and Contractors vs. Union ofIndia (2012) 1 SCC 101 : [2011] 13 SCR 214; Centreof Public Litigation v. Union of India (2012) 3 SCC 1 :[2012] 3 SCR 147; Arun Kumar Agrawal v. Union ofIndia and Others (2013) 7 SCC 1 : [2013] 3 SCR 508;Pathan Mohammed Suleman Rehmatkhan v. State ofGujarat and Others (2014) 4 SCC 156 : [2013]12 SCR 446; Whirlpool Corporation v. Registrar ofTrade Marks, Mumbai and Ors. AIR 1999 SC 22 :[1998] 2 Suppl. SCR 359; Pimpri Chinchwad MunicipalCorporation and Ors. v. Gayatri Construction Companyand Ors (2008) 8 SCC 172 : [2008] 11 SCR 980;Harbanslal Sahnia and Ors. v. Indian Oil CorporationLtd. (2003) 2 SCC 107 – referred to.

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BCIVIL APPELLATE JURISDICTION : Special Leave Petition(C) No. 8630 of 2020.

From the Judgment and Order dated 24.02.2020 of the High Courtof Judicature at Allahabad (Lucknow Bench, Lucknow) in MISC.BENCH (M/B) No. - 125 of 2019.C

Shishir Prakash, Ms. Karuna Krishan Thareja, Rahul Bhatia, Advs.for the Appellants.

Ramesh Singh, Sr. Adv., Ms. Monisha Handa, Mohit D. Ram,Advs. for the Respondents.

DThe Judgment of the Court was delivered by INDIRA BANERJEE, J.

1. This Special Leave Petition, under Article 136 of the Constitutionof India, filed by the Petitioner, hereinafter referred to as the UPPTCL,is against a final Judgment and Order dated 24[th] February 2020 passedEby the High Court of Judicature at Allahabad (Lucknow Bench), allowingthe writ petition filed by Respondent No.1 and setting aside thelettersdated 2[nd] September 2016 and 29[th] December 2018 issued by theExecutive Engineer, Unnao UPPTCL directing the Respondent No.1 toremit Labour Cess amounting to Rs.2,60,68,814/-, computed at 1% ofFthe contract value, under Sections 3 sub-section (1) and (2) of the Buildingand Other Construction Workers’ Welfare Cess Act, 1996, hereinafterreferred to as the “Cess Act”, read with Rules 3 and Rule 4 (1), (2) (3)and (4) of the Building and Other Construction Workers Welfare CessRules, 1998, hereinafter referred to as the “Cess Rules” and also Section2 (1)(d), (g) and (i) of the Building and Other Construction WorkersG(Regulation of Employment and Condition of Service) Act, 1996,hereinafter referred to as the “BOCW Act”.

2. The BOCW Act has been enacted to regulate the employmentand conditions of service of building and other construction workers andto provide for their safety, health and welfare measures and for otherH

matters connected therewith or incidental thereto. As per the Statementof Objects and Reasons for the BOCW Act, “it is estimated that about8.5 million workers in the country are engaged in building andother construction works. Building and other construction workersare one of the most numerous and vulnerable segments of theunorganised labour in India. The building and other constructionworks are characterised by their inherent risk to the life and limbof the workers. The work is also characterised by its casual nature,temporary relationship between employer and employee, uncertainworking hours, lack of basic amenities and inadequacy of welfarefacilities.”

3. The Statement of Objects and Reasons further state “in viewof the circumstances explained above, it has been considerednecessary to constitute Welfare Boards in every State so as to provideand monitor social security schemes and welfare measures for thebenefit of building and other construction workers. For the saidpurpose, it has been considered appropriate to bring in acomprehensive legislation by suitably amplifying the provisions ofthe Building and Other Construction Workers (Regulation ofEmployment and Conditions of Service) Bill, 1988 which wasintroduced in the Rajya Sabha on the 5th December, 1988. It hasalso been considered necessary to levy a cess on the cost ofconstruction incurred by the employers on the building and otherconstruction works for ensuring sufficient funds for the WelfareBoards to undertake the social security schemes and welfaremeasures.”

4. As stated in its Statement of Objects and Reasons, the BOCWAct, iner alia, provides for the following matters:- “i) provision to cover every establishment which employs orhad employed on any day of the preceding twelve months,fifty or more workers in any building or other constructionwork;

……..(v) registration of establishments employing constructionworkers,

(vi) registration of building workers as beneficiaries underthe said Ordinance and provision for their identity cards, etc.; AB

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A(vii) constitution of Welfare Boards by the State Governmentsand registration of beneficiaries under the Fund;

(viii) provide for financing and augmenting resources of theWelfare Board constituted by the State Governments;

(ix) fixing hours for normal working day, weekly paid restBday, wages for over time, provision of basic welfare: amenitieslike drinking water, latrines and urinals, creches, first aid,canteens, etc., for the building workers;

(x) provision for temporary living accommodation to allbuilding workers within or near the work site; C

(xi) making adequate provisions for safety and healthmeasures for construction workers including appointment ofsafety committees and safety officers and compulsorynotification of accidents.”

D5. The Statement of Objects and Reasons reveals that the necessityto enact BOCW Act arose from the necessity to levy cess on the cost ofconstruction incurred by the employers on a building and on otherconstruction works, in order to generate funds for the Welfare Boardsto enable such Welfare Boards to undertake social security schemesand welfare measures for building and construction workers.

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6. Section 2(1)(d) of the BOCW Act defines “building or otherconstruction work” to mean the construction, alteration, repairs,maintenance or demolition of or, in relation to, buildings, streets, roads,railways, tramways, airfields, irrigation, drainage, embankment andnavigation works, flood control works (including storm water drainageFworks), generation, transmission and distribution of power, water works(including channels for distribution of water), oil and gas installations,electric lines, wireless, radio; television, telephone, telegraph and overseascommunication dams, canals, reservoirs, watercourses, tunnels, bridges,viaducts, aquaducts, pipelines, towers, cooling towers, transmission towersand such other work as may be specified in this behalf by the appropriateGGovernment, by notification, but does not include any building or otherconstruction work to which the provisions of the Factories Act, 1948 (63of 1948), or the Mines Act, 1952 (35 of 1952), apply.

7. Under Section 2(1)(e) of the BOCW Act ‘building worker’means a person who is employed to do any skilled, semiskilled or unskilledH

manual, supervisory, technical or clerical work for hire or reward, whetherthe terms of employment be express or implied, in connection with anybuilding or other construction work but does not include any suchperson-

(i) who is employed mainly in a managerial or administrativecapacity; or.

(ii) who, being employed in a supervisory capacity, drawswages exceeding one thousand six hundred rupees permensem or exercises, either by the nature of the dutiesattached to the office or by reason of the powers vested inhim, functions mainly of a managerial nature.

8. Clause (b) of Section 2(1) of the BOCW Act defines‘beneficiary’ to mean building workers, registered under Section 12 ofthe said Act. ‘Contractor’, ‘employer’ and ‘establishment’ respectivelyhave been defined in Sections 2(1)(g), 2(1)(i) and 2(1)(j) of the BOCWAct set out hereinbelow:- “(g) “contractor” means a person who undertakes to producea given result for any establishment, other than a mere supplyof goods or articles of manufacture, by the employment ofbuilding workers or who supplies building workers for anywork of the establishment; and includes a sub-contractor; ……

(i) employer”, in relation to an establishment, means the ownerthereof, and includes,-

(i) in relation to a building or other construction work carriedon by or under the authority of any department of theGovernment, directly without any contractor, the authorityspecified in this behalf, or where no authority is specified,the head of the department;

(ii) in relation to a building or other construction work carriedon by or on behalf of a local authority or other establishment,directly without any contractor, the chief executive officer ofthat authority or establishment;

(iii) in relation to a building or other construction work carriedon by or though a contractor, or by the employment of buildingworkers supplied by a contractor, the contractor; A

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(j) establishment means any establishment belonging to, orunder the control of, Government, any body corporate or firm,an individual or association or other body of individualswhich or who employs building workers in any building orother construction work; and includes an establishmentbelonging to a contractor, but does not include an individualwho employs such workers in any building or constructionwork in relation to his own residence the total cost of suchconstruction not being more than rupees ten lakhs”

9. Some of the relevant provisions of the BOCW Act are set outhereunder:- “7. Registration of establishments.- (1) Every employer shall,- (a) in relation to an establishment to which this Act applieson its commencement, within a period of sixty days from suchcommencement; and (b) in relation to any other establishment to which this Actmay be applicable at any time after such commencement,within a period of sixty days from the date on which this Actbecomes applicable to such establishment, make anapplication to the registering officer for the registration ofsuch establishment:

Provided that the registering officer may entertain any suchapplication after the expiry of the periods aforesaid, if he issatisfied that the applicant was prevented by sufficient causefrom making the application within such period.

8. Revocation of registration in certain cases.- If the registeringofficer is satisfied, either on a reference made to him in thisbehalf or otherwise, that the registration of any establishmenthas been obtained by misrepresentation or suppression of anymaterial fact or that the provisions of this Act are not beingcomplied with in relation to any work carried on by suchestablishment, or that for any other reason the registrationhas become useless or ineffective and, therefore, requires tobe revoked, he may, after giving an opportunity to theemployer of the establishment to be heard, revoke theregistration.

9. Appeal.-(1) Any person aggrieved by an order made underSection 8 may, within thirty days from the date on which theorder is communicated to him, prefer an appeal to the appellateofficer who shall be a person nominated in this behalf by theappropriate Government:

Provided that the appellate officer may entertain the appealafter the expiry of the said period of thirty days if he is satisfiedthat the appellant was prevented by sufficient cause from filingthe appeal in time.

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11. Beneficiaries of the Fund.-Subject to the provisions ofthis Act, every building worker registered as a beneficiaryunder this Act shall be entitled to the benefits provided by theBoard from its Fund under this Act.

12. Registration of building workers as beneficiaries.- (1)Every building worker who has completed eighteen years ofage, but has not completed sixty years of age, and who hasbeen engaged in any building or other construction work fornot less than ninety days during the preceding twelve monthsshall be eligible for registration as a beneficiary under thisAct.

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16. Contribution of building workers.- (1) A building workerwho has been registered as a beneficiary under this Act shall,until he attains the age of sixty years, contribute to the Fundat such rate per mensem, as may be specified by the StateGovernment, by notification in the Official Gazette anddifferent rates of contribution may be specified for differentclasses of building workers:

Provided that the Board may, if satisfied that a beneficiary isunable to pay his contribution due to any financial hardship,waive the payment of contribution for a period not exceedingthree months at a time.

(2) A beneficiary may authorise his employer to deduct hiscontribution from his monthly wages and to remit the same,within fifteen days front such deduction, to the Board.

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17. Effect of non-payment of contribution.- When a beneficiaryhas not paid his contribution under sub-section (1) of section16 for a continuous period of not less than one year, he shallcease to be a beneficiary:

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Provided that if the Secretary of the Board is satisfied thatBthe non-payment of contribution was for a reasonable groundand that the building worker is willing to deposit the arrears,he may allow the building worker to deposit the contributionin arrears and on such deposit being made, the registrationof building worker shall stand restored.

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22. Functions of the Boards.—(1) The Board may—

(a) provide immediate assistance to a beneficiary in case ofaccident; D(b) make payment of pension to the beneficiaries who havecompleted the age of sixty years;

(c) sanction loans and advances to a beneficiary forconstruction of a house not exceeding such amount and onsuch terms and conditions as may be prescribed; E(d) pay such amount in connection with premia for GroupInsurance Scheme of the beneficiaries as it may deem fit; (e) give such financial assistance for the education of childrenof the beneficiaries as may be prescribed; (f) meet such medical expenses for treatment of major ailmentsFof a beneficiary or, such dependant, as may be prescribed; (g) make payment of maternity benefit to the femalebeneficiaries; and (h) make provision and improvement of such other welfaremeasures and facilities as may be prescribed.

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24. Building and Other Construction Workers’ Welfare Fundand its application.- (1) There shall be constituted by a Boarda fund to be called the Building and other ConstructionHWorkers’ Welfare Fund and there shall be credited thereto- (a) any grants and loans made to the Board by the CentralGovernment under section 23;3

(b) all contributions made by the beneficiaries;

(c) all sums received by the Board from such other sources as may be decided by the Central Government,

(2) The Fund shall be applied for meeting- (a) expenses of the Board in the discharge of its functionsunder section 22; and (b) salaries, allowances and other remuneration of themembers, officers and other employees for the Board;

(c) expenses on objects and for purposes authorised bythis Act.

(3) No Board shall, in any financial year, incur expensestowards salaries, allowances and other remuneration to itsmembers, officers and other employees and for meeting theother administrative expenses exceeding five percent of itstotal expenses during that financial year.

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32. Drinking water.-(1) The employer shall make in everyplace where building or other construction work is in progress,effective arrangements to provide and maintain at suitablepoints conveniently situated for all persons employed therein, a sufficient supply of wholesome drinking water.

(2) All Such points shall be legible marked Drinking Water ina language understood by a majority of the person employedin such place and no such point shall be situated within sixmetres of any washing place, Urinal or latrine.

33. Latrines and urinals.- In every place where building orother construction work is carried on, the employer shallprovide sufficient latrine and urinal accommodation of suchtypes as may be prescribed and they shall be so convenientlysituated as may be accessible to the building workers at alltimes while they are in such place:

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Provided that it shall not be necessary to provide separateurinals in my place where less than fifty persons are employedor where the latrines are connected to a water-borne sewagesystem.

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34. Accommodation.- (1) The employer shall provide, free ofcharges and within the work site or as near to it as may bepossible temporary living accommodation to all buildingworkers employed by him for such period as the building orother construction work is in progress.

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(2) The temporary accommodation provided under sub-section(1) shall have separate cooking place bathing, washing andlavatory facilities C

35. Creches.-(1) In every place where in more them fifty femalebuilding workers are ordinarily employed, there shall beprovided and maintained, a suitable room or rooms for theuse of children under the, age of six years of such femaleworkers.

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36. First-aid.—Every employer shall provide in all the placeswhere building or other construction work is carried on suchfirst-aid facilities as may be prescribed.

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38. Safety Committee and safety officers.—(1) In everyestablishment wherein five hundred or more building workersare ordinarily employed, the employer shall constitute a SafetyFCommittee consisting of such number of representatives ofthe employer and the building workers as may be prescribedby the State Government.

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40. Power of appropriate Government to make rules for thesafety and health of building workers.—(1) The appropriateGovernment may, by notification, make rules regarding themeasures to be taken for the safety and health of buildingworkers in the course of their employment and the 14equipment and appliances necessary to be provided to them G

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for ensuring their safety, health and protection, during suchemployment.

(2) In particular, and without prejudice to the generality ofthe foregoing power, such rules may provide for all or any ofthe following matters, namely:—

41. Framing of model rules for safety measures.-The CentralGovernment may, after considering the recommendation ofthe expert committee constituted under section 5, frame modelrules in respect of all or any of the matters specified in section40 and where any such model rules have been framed inrespect of any such matter, the appropriate Government shallwhile making any rules in respect of that matter under section40, so far as is practicable, conform to such model rules.

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46. Notice of commencement of building or other constructionwork.—(1) An employer shall, at least thirty days before thecommencement of any building or other construction work,send or cause to be sent to the Inspector having jurisdictionin the area where the proposed building or other constructionwork is to be executed, a written notice containing—

(a) the name and situation of the place where the building orother construction work is proposed to be carried on; (b) the name and address of the person who is undertakingthe building or other construction work;

(c) the address to which communications relating to thebuilding or other construction work may be sent; (d) the nature of the work involved and the facilities, includingany plant and machinery, provided; (e) the arrangements for the storage of explosives, if any, tobe used in the building or other construction work; (f) the number of workers likely to be employed during thevarious stages of building or other construction work; A

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A(g) the name and designation of the person who will be inoverall charge of the building or other construction work atthe site; (h) the approximate duration of the work;

(i) such other matters as may be prescribed.

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(2) Where any change occurs in any of the particularsfurnished under sub-section (1), the employer shall intimatethe change to the Inspector within two days of such change.

(3) Nothing contained in sub-section (1) shall apply in caseCof such class of building or other construction work as theappropriate Government may by notification specify to beemergent works.”

10. A perusal of the various provisions of the BOCW Act makesit amply clear that the said Act has been enacted for the welfare of onlyDbuilding and other construction workers and to make adequate provisionsfor their safety, health and financial security.

11. The Cess Act has been enacted to provide for the levy andcollection of cess on the cost of construction incurred by employers,with a view to augment the resources of the Building and OtherConstruction Workers’ Welfare Boards, constituted under the BOCWEAct.

12. Section 3(1) of the Cess Act, which is the charging section,provides for the levy and collection of a Cess for the purposes of theBOCW Act, at such rate not exceeding two per cent, but not less thanone per cent, of the cost of construction incurred by an employer, as theFCentral Government may, by notification in the Official Gazette, fromtime to time specify.

13. Sub-Section (2) of Section 3 of the Cess Act provides that theCess levied under Sub-Section (1) shall be collected from every employerin such manner and at such time, including deduction at source, in relationGto a building or other construction work of a Government or of a PublicSector Undertaking, or advance collection through a local authority, wherean approval of such building or other construction work by such localauthority is required, as may be prescribed by rules made under theBOCW Act.

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14. Sub-Section (3) of Section 3 provides that the proceeds of theCess collected under Sub-Section (2) shall be paid, by the local authorityor the State Government collecting the Cess, to the Board after deductingthe cost of collection of such cess not exceeding one per cent of theamount collected.

15. Sub-Section (4) of Section 3 of the Cess Act, contains a nonobstante clause which makes it clear that, notwithstanding anythingcontained in Sub-Section (1) or (2), the Cess leviable under the CessAct, including payment of such Cess in advance may, subject to finalassessment to be made, be collected at a uniform rate or rates, as maybe prescribed by the Cess Rules, on the basis of the quantum of thebuilding or other construction work involved.

16. Section 4(1) requires every employer to furnish such return tosuch officer or authority, in such manner and at such time as may beprescribed. Sub-Section (2) of Section 4 provides that, if any personcarrying on the building or other construction work, liable to pay theCess under Section 3, fails to furnish any return under Sub-Section (1),the officer or the authority shall give a notice requiring such person tofurnish such return before such date as may be specified in the notice.

17. Sections 5, 6, 7, 8, 9 and 10 of the Cess Act provide:- “5. Assessment of cess.—(1) The officer or authority to whomor to which the return has been furnished under Section 4shall, after making or causing to be made such inquiry as heor it thinks fit and after satisfying himself or itself that theparticulars stated in the return are correct, by order, assessthe amount of cess payable by the employer.

(2) If the return has not been furnished to the officer orauthority under sub-section (2) of Section 4, he or it shall,after making or causing to be made such inquiry as he or itthinks fit, by order, assess the amount of cess payable by theemployer.

(3) An order of assessment made under sub-section (1) orsub-section (2) shall specify the date within which the cessshall be paid by the employer.

6. Power to exempt.—Notwithstanding anything contained inthis Act, the Central Government may, by notification in the A

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Official Gazette, exempt any employer or class of employersin a State from the payment of cess payable under this Actwhere such cess is already levied and payable under anycorresponding law in force in that State.

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7. Power of Entry – Any officer or authority of the StateGovernment specially empowered in this behalf by thatGovernment may—

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(a) with such assistance, if any, as he or it may think fit, enterat any reasonable time any place where he or it considers itnecessary to enter for carrying out the purposes of this Actincluding verification of the correctness of any particularsfurnished by any employer under section 4; C

(b) do within such place anything necessary for the properdischarge of his or its duties under this Act; and

(c) exercise such other powers as may be prescribed.

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8. Interest payable on delay in payment of cess. – If anyemployer fails to pay any amount of cess payable undersection 3 within the time specified in the order of assessment,such employer shall be liable to pay interest on the amount tobe paid at the rate of two per cent. for every month or part ofEa month comprised in the period from the date on which suchpayment is due till such amount is actually paid.

—9. Penalty for non-payment of cess within the specified time.If any amount of cess payable by any employer under Section3 is not paid within the date specified in the order ofassessment made under Section 5, it shall be deemed to be inarrears and the authority prescribed in this behalf may, aftermaking such inquiry as it deems fit, impose on such employera penalty not exceeding the amount of cess:

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Provided that, before imposing any such penalty, suchemployer shall be given a reasonable opportunity of beingheard and if after such hearing the said authority is satisfiedthat the default was for any good and sufficient reason, nopenalty shall be imposed under this section.

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10. Recovery of amount due under the Act.—Any amount dueunder this Act (including any interest or penalty) from an H

employer may be recovered in the same manner as an arrearof land revenue.”

18. In exercise of power conferred by Section 14 of the CessAct, the Central Government has by Notification GSR 149(E) dated 26[th]March 1998 published in the Gazette of India, Extra; part 2, Section3(1), dated 26[th] March 1998, enacted the Building and Other ConstructionWorkers’ Welfare Cess Rules, 1998. Rules 3, 4, 5, 6, 7, 8, 9, 12, 13 and14 of the Cess Rules, provide:

“3. Levy of cess.—For the purpose of levy of cess under sub-section (1) of Section 3 of the Act, cost of construction shallinclude all expenditure incurred by an employer in connectionwith the building or other construction work but shall notinclude—

— cost of land;

— any compensation paid or payable to a worker or his kinunder the Workmen’s Compensation Act, 1923.

4. Time and manner of collection.—(1) The cess levied undersub-section (1) of Section 3 of the Act shall be paid by anemployer, within thirty days of completion of the constructionproject or within thirty days of the date on which assessmentof cess payable is finalised, whichever is earlier, to the CessCollector.

(2) Notwithstanding the provisions of sub-rule (1), where theduration of the project or construction work exceeds one year,cess shall be paid within thirty days of completion of oneyear from the date of commencement of work and every yearthereafter at the notified rates on the cost of constructionincurred during the relevant period.

(3) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the levy of cess pertains to building and otherconstruction work of a Government or of a Public SectorUndertaking, such Government or the Public SectorUndertaking shall deduct or cause to be deducted the cesspayable at the notified rates from the bills paid for such works.

(4) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the approval of a construction work by a local A

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authority is required, every application for such approval shallbe accompanied by a crossed demand draft in favour of theBoard and payable at the station at which the Board is locatedfor an amount of cess payable at the notified rates on theestimated cost of construction:

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Provided that if the duration of the project is likely to exceedone year, the demand draft may be for the amount of cesspayable on cost of construction estimated to be incurredduring one year from the date of commencement and furtherpayments of cess due shall be made as per the provisions ofsub-rule (2).

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(5) An employer may pay in advance an amount of cesscalculated on the basis of the estimated cost of constructionalong with the notice of commencement of work under Section46 of the Main Act by a crossed demand draft in favour ofthe Board and payable at the station at which the Board islocated:

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Provided that if the duration of the project is likely to exceedone year, the demand draft may be for the amount of cesspayable on cost of construction estimated to be incurredduring one year from the date of such commencement andfurther payment of cess due shall be made as per the provisionsof sub-rules (2).

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(6) Advance cess paid under sub-rules (3), (4) and (5), shallbe adjusted in the final assessment made by the AssessingOfficer.

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5. Transfer of the proceeds of the cess to the Board.—(1) Theproceeds of the cess collected under Rule 4 shall be transferredby such Government office, Public Sector Undertakings, localauthority, or Cess Collector, to the Board along with the formof challan prescribed (and in the head of account of theGBoard) under the accounting procedures of the State, bywhatever name they are known.

(2) Such government office or Public Sector Undertakingsmay deduct from the cess collected, or claim from the Board,as the case may be, actual collection expenses not exceedingone per cent of the total amount collected.

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(3) The amount collected shall be transferred to the Boardwithin thirty days of its collection.

6. Information to be furnished by the employer.—(1) Everyemployer, within thirty days of commencement of his work ofpayment of cess, as the case may be, furnish to the AssessingOfficer, information in Form I.

(2) Any change or modification in the information furnishedunder sub-rule (1) shall be communicated to the AssessingOfficer immediately but not later than thirty days from thedate of affecting the modification or change.

7. Assessment.—(1) The Assessing Officer, on receipt ofinformation in Form I from an employer shall make a scrutinyof such information furnished and, if he is satisfied about thecorrectness of the particulars so furnished, he shall make anorder of assessment within a period not exceeding six monthsfrom the date of receipt of such information in Form I,indicating the amount of cess payable by the employer andendorse a copy thereof to the employer, to the Board and tothe Cess Collector and despatch such order within five daysof the date on which such order is made.

(2) The order shall inter alia, specify the amount of cess due,cess already paid by the employer or deducted at source andthe balance amount payable and the date, consistent with theprovision of Rule 4, by which the cess shall be paid to theCess Collector.

(3) If on scrutiny of information furnished, the AssessingOfficer is of the opinion that employer has undercalculatedor miscalculated the cost of construction or has calculatedless amount of cess payable, he shall issue notice to theemployer for assessment of the cess.

(4) On receipt of such notice the employer shall furnish to theAssessing Officer a reply together with copies of documentaryor other evidence in support of his claim, within fifteen daysof the receipt of the notice:

Provided that the Assessing Officer may, in the course ofassessment, afford an opportunity to the assessee to be heardin person, if he so requests to substantiate his claim.

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(5) If the employer fails to furnish the reply within the periodspecified under sub-rule (4), or where an employer fails tofurnish information in Form I, the Assessing Officer shallproceed to make the assessment on the basis of availablerecords, and other information incidental thereto.

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(6) The Assessing Officer may, at any time while the work isin progress, authorise such officer to make such enquiry atthe work site or from documentary evidence or in any othermanner as he may think fit for the purpose of estimating thecost of construction as accurately as possible.

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8. Return of overpaid cess.—(1) Where the Assessing Officerhas passed an order of assessment and the employer decidesto withdraw from or foreclose the works or modifies the planof construction thereby reducing the cost of constructionundertaken or has been forced by other circumstances to calloff the completion of the work undertaken, he may seekrevision of the assessment order by making an information inForm II to the Assessing Officer giving details of suchreduction or stoppage of work.

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(2) Revision of order of assessment shall be made by theAssessing Officer, in the same manner as the original order,within thirty days of receipt of such information in Form II.

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(3) Following the revision of assessment as per sub-rule (2),the Assessing Officer shall, wherever necessary, endorse acopy of the revised assessment to the Board or Cess Collector,as the case may be, for making the refund of excess cess asFordered in the revised assessment.

(4) The Board shall, within thirty days of recepit of theendorsement from the Assessing Officer under sub-rule (3),refund the amount specified in the order to the employerthrough a demand draft payable at the station where theestablishment is located.

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(5) Where the Appellate Authority has modified the order ofassessment reducing the amount of cess, refund shall be madewithin such time as may be specified in that order.

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9. Exemption.—(1) Any employer or class of employers in aState seeking exemption under Section 6 of the Act may makean application to the Director-General of Labour Welfare,Ministry of Labour, Government of India, stating the detailsof works undertaken, names of the Act or corresponding lawin force in that State under which he is liable to pay cess forthe welfare of the construction workers and amount of cessactually paid along with the date of such payment and proofthereof. A copy of such application shall be endorsed to eachof the Assessing Officer and the board concerned.

(2) On receipt of such application, the Central Governmentmay, if it feels necessary, seek a report from the StateGovernment concerned.

(3) On examining the grounds, facts and merits of suchapplication the Central Government may, by notification inthe Official Gazette, issue an order exempting the employeror class of employers, as the case may be, from payment ofcess payable under the Act where such cess is already leviedand payable under such corresponding law.

(4) Assessment proceedings shall be stopped by the AssessingOfficer for a period of thirty days commencing from the dateof the receipt of a copy of the application under sub-rule (1)to him, or till the order of the Central Government under sub-rule (3) is conveyed to an employer or class of employerswho made the application under sub-rule (1), whichever isearlier.

12. Penalty for non-payment.—(1) An Assessing Officer, if itappears to him that an employer has not paid the cess withinthe date as specified in the assessment order or has paid lesscess, including the cess deducted at source or paid in advance,shall issue a notice to such employer that it shall be deemedto be in arrears and such Assessing Officer may, after suchinquiry as it deems fit, impose on such employer, a penaltynot exceeding such amount of cess:

Provided that before imposing any such penalty, such employershall be given a reasonable opportunity of being heard andif after such hearing the Assessing Officer is satisfied that AB

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the default was for any good and sufficient reason, no penaltyshall be imposed on such employer.

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13. Recovery of overdue amount.—For the purpose ofrecovery of sums due on account of unpaid cess, interest foroverdue payment or, penalty under these rules, the AssessingBOfficer shall prepare a certificate signed by him, specifyingthe amount due and send it to the Collector of the districtconcerned who shall proceed to recover from the saidemployer the amount specified thereunder as if it were anarrear of land revenue.

14. Appeal.—(1) An employer aggrieved by an order of theassessment made under Rule 7 or by an order imposing penaltymade under Rule 12 may appeal against such order, withinthree months of the receipt of such order, to the AppellateAuthority.

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D(2) The appeal shall be accompanied with—

(a) the order appealed against;

(b) a certificate from the Cess Collector to the effect that theamount of cess or penalty or both, as the case may be, relatingto such appeal has been deposited; E

(c) a fee equivalent to one per cent of the amount in disputeor penalty or both, as the case may be, under such appeal; (d) a statement of points in dispute; (e) documentary evidence relied upon.

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(3) On receipt of the appeal the Appellate Authority maycall from the Assessing Officer a statement on the basis ofhis assessment order appealed against, as such AppellateAuthority may consider necessary for the disposal of suchappeal.

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(4) The Appellate Authority shall give the appellant anopportunity of being heard in the matter and dispose ofthe appeal as expeditiously as possible.

(5) On being satisfied on the quantum of cess the AppellateAuthority shall confirm the order of the Assessing Officer H

or if in his opinion the assessment was wrong or on thehigher side shall modify the order of assessment or if inhis opinion the assessment is on the lower side or if thebasis of assessment is wrong, it shall remand back theassessment order to the Assessing Officer along with hisobservations to rectify the wrong.

(6) An order remanded back under sub-rule (5) shall bedisposed of by the Assessing Officer within one month in viewof the observation made by the Appellate Authority:

Provided that if the amount of cess is proposed to be enhancedthe assessee shall be given an opportunity of being heard.

(7) No appeal shall lie against the order of the AppellateAuthority under this rule.

(8) If the Appellate Authority is of the opinion that the quantumof penalty imposed is on the higher side or not correctly madeit shall suitably modify or set aside the order of the AssessingOfficer, as the case may be.

(9) The appeal under this rule shall be disposed of by makinga speaking order and a copy of such order shall be sent toeach of the appellant, the Assessing Officer and the Boardwithin five days of the date on which such order is made.

(10) An order in appeal reducing the amount of cess shallalso ask the Board to refund the excess cess.

(11) An order in appeal reducing, enhancing or confirmingthe orders of penalty, as the case may be, shall also specifythe date by which the amount of penalty should be paid/refunded.”

19. The Respondent No.1, M/s CG Power and Industrial SolutionsLimited (formerly known as M/S Crompton Greaves Limited) enteredinto a Framework Agreement with UPPTCL for construction of 765/400 KV Substations, at Unnao, Uttar Pradesh.

20. By a letter No. 130/ESD-765/2/CGL dated 5[th] March 2010,the Superintending Engineer, UPPTCL, Unnao placed a detailed orderon the Respondent No.1 for construction of 765/400 kV Substation atUnnao on single source responsibility turn-key basis. The scope of thework as stated in the said letter was as follows:- A

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A“1. Scope

1.1 The scope of this contract, hereinafter called “FIRSTCONTRACT”, covers all works related to design, engineering,manufacturing, testing at works, supply of all required equipmentand material with accessories and auxiliaries, as detailed inBSchedule of Quantities & Prices (Annexure-IV) to sub-stationsite. The scope shall also include supply of any other item necessaryfor completing the scope of work without any extra cost, if notspecified in above Schedule.

1.2 The “SECOND CONTRACT” shall cover unloading, handlingat site, erection, testing and commissioning of all the equipmentand material to be supplied by the contractor under first contractand any other work require to complete the scope forcommissioning and handing over the entire sub-station.

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1.3 the “THIRD CONTRACT” shall cover all civil works includingmaterial to complete the scope for commissioning and hading overof the entire sub-station.

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1.4 The proposed sub-station shall be constructed as per scope ofwork (Doc. No.017806-47ES-0100) under the technicalspecification (Volume-II) and the specification drawings enclosedwith the REP document.

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1.5 The proposed sub-station will be comprised of following works:

1.5.1 765kV switchyard (one & a half breaker scheme)

a) Two (2), 765kV feeder bays along-with 1x330MVAR shuntreactor in each bay F

b) Two (2), 765kV bays for 2x1000MVA Tranformer Bank

c) One (1), 765kV bay for 189MVAR Bus Reactor Bank

d) 3 nos. spare 765kV bays

1.5.2 400kV switchyard is to be modified to accommodate Two(2), 400kV bays of 2x1000MVA, 765/400kV Transformer Bankin Double Main & Transformer Bus arrangement.

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1.5.3 Electrical / Mechanical Auxiliaries & other Major Misc.works H

a) 2x1000kVA, 33/0/4kV Transformers

b) D.G Set

c) Air conditioning Plant for each building

d) Lighting system for complete switchyard, buildings, streets andstores etc.

e) SDH communication system & PLCC communication f)AC & DC Auxiliary Power supply system including Batteries,Battery charges, AC & DC distribution boards

g) Fire Fighting equipment

h) Any other work necessary for completion of sub-station”

Sub-para 5 of the said letter under the sub-heading “Nature ofContract” clearly provided that the work for the 765kV sub-stations onsingle source responsibility, turn-key basis shall be awarded throughfollowing four separate contracts:- FIRST CONTRACT“Supply and Delivery of Equipment& Material”

SECOND CONTRACT“Handling, Erection, Testing andCommissioning Works”

THIRD CONTACT“Civil Works”FOURTH CONTRACT“Three years O & M”

21. In terms of the said Framework Agreement, the work wassplit, and covered by four separate contracts. The first contract was fordesign, engineering, manufacture, testing at works and supply of allrequired equipment and materials with accessories and auxiliaries, asdetailed in the said contract; the second contract covered erection, testingand commissioning at site including unloading, handling etc.; the thirdcontract covered all civil works including materials for commissioningand handing over of the Substations and the fourth contract coveredoperations and maintenance for three years.

22. In sub-clause 5 of the said Frame Work Agreement, under thehead “Nature of Contract”, it was clearly stated that the first and secondcontract shall cover all works other than civil works required to becompleted. The first contract covered supply and delivery of all equipment A

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Aand materials as per schedule of prices as contained in the concernedcontract and any other item required to complete the scope of work forcompletion of sub-station including their performance and guarantees;the second contract covered unloading, handling at site, erection, testingand commissioning of all the equipment and material supplied by thecontractor under the first contract and any other work required to completeBthe scope for commissioning and handing over of the entire sub-station.The third contract would cover all civil works including required materialsunder its scope.

23. Four separate contracts were executed by and betweenUPPTCL and the Respondent No.1. There can be no doubt that cessCunder the Cess Act is payable in respect of the Third Contract,which covers all civil works. The first and second contracts, whichcover all works other than civil works, and do not involve anyconstruction, do not attract cess under the Cess Act.

24. The penultimate paragraph of Clause 5 of the said FrameDWork Agreement provided:- “Nature of Contract

…...

The Contractor shall be fully responsible for the works to beEexecuted under first three (3) Contracts and any breach oroccurrence or default under one Contract shall automaticallybe deemed as a breach or occurrence or default of otherContracts, giving the Engineer absolute right to takeappropriate action under any/all the Contracts including rightFto recover damages from any/all the Contracts or terminateany/all the Contracts. Any such breach or default oroccurrence in any of the Contracts shall not relieve theContractor of any of his responsibility/obligation under theother Contracts and no time extension shall be given to theContractor on these grounds. The equipment/material to beGsupplied by the Contractor under the first Contract wheninstalled and commissioned under the second Contract shallgive satisfactory performance in accordance with provisionsof the Contract. The signing of three (3) separate Contractsshall in no way dilute the insurance responsibility andobligations of the Contractor.”

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25. The total value of (i) the First Contract (Supply) was2750933042.00 (Two Hundred and Seventy Five Crores Nine Lakhs,Thirty Three Thousand and Forty Two), (ii) the Second Contract(Erection) was Rs.40129510.00 (Four Crores One Lakh, Twenty NineThousand Five Hundred and Ten), (iii) the Third contract (Civil) wasRs. 193808465.00 (Nineteen Crores Thirty Eight Lakhs Eight ThousandFour Hundred and Sixty Five) and (iv) the Fourth contract (Operationsand Maintenance) was Rs.35737200.00 (Three Crores, Fifty SevenLakhs Thirty Seven Thousand and Two Hundred).

26. In this context, it would be appropriate to refer to Clause 6 ofthe letter dated 5[th] March 2010, extracted hereinbelow:- “6. Aggregate Contract Value The sum of Contract values of first, second, third and fourthContracts for 765/400kV sub-station at Unnao shall be theaggregate Contract value. The aggregate value of each contractshall be as under:-

i.Total value of First ContractRs.275,09,33,042.00(Supply of Equipment & Material)

ii.Total value of Second ContractRs.4,01,29,510.00(Handling, Erection, testing &commissioning Works)

iii.Total Value of Third contractRs.19,38,08,465.00(Civil Works)

iv.Total value of Fourth ContractRs.3,57,37,200.00(Three Years O & M)

Aggregate Value of ContractRs.302,06,08,217.00

(Rupees three hundred two crore six lac eight thousand twohundred seventeen only)

27. Clause 13 provided that the contract would be governed bythe conditions given in the said letter read with:

(a) Special Conditions of Contract (Annexure-II)

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A(b) General Conditions for supply of Plant & the Execution ofwork Form-A (Annexure-III),

(c) (i) Technical specification as per volume II, III & IV, (d) Technical Data Schedule (Guarantee technical particulars, asper volume -V).B28. Clause 1 of the Special Conditions of Contract relating toScope of Work provided:- “The scope of work is defined in the technical specificationNo.017806-47ES-0100 and comprises engineering,Cprocurement and construction of 765/400 kV sub-station atUnnao on a turn-key basis.

The substation includes four (4) separate Contracts whichare defined in Clause 3.1 of the Special Conditions ofContract.”

D29. Clause 3 of the Special Conditions of Contract relating toNature of Contracts specifically provides:- “SCC 3 Nature of Contract SCC 3.1 The work for the above 765kV sub-stations on singlesource responsibility, turn-key basis shall be awarded throughEfollowing four separate contracts:- FIRST CONTRACT“Supply and Delivery of Equipment &Material”

SECOND CONTRACT “Handling, Erection, Testing andFCommissioning Works”

THIRD CONTACT“Civil Works”

FOURTH CONTRACT “Three years O & M”

The first and second Contracts shall cover all works, other thancivil works, required to complete total scope under theseGspecifications. The THIRD Contact shall cover all civil worksincluding required materials under its scope.

The first Contract shall cover supply and delivery of all equipmentsand materials as per Schedule of Prices of respective Contractand any other item required to complete the scope of work for H

completion of substation including their performance andguarantees.

The second Contract shall cover unloading, handling at site,erection, testing and commissioning of all the equipments andmaterials to be supplied by the Contractor under first Contractand any other work require to complete the scope forcommissioning and handing over of the entire substation.

The third Contract shall cover all Civil Works including materialsto complete the scope for commissioning and handing over of theentire substation.

The Contractor shall be fully responsible for timely execution ofall the activities under above three (3) Contracts such that thesubstation is commissioned and handed over within stipulatedcompletion period.

The Contractor shall be fully responsible for the works to beexecuted under first three (3) Contracts and any breach oroccurrence or default under one Contract shall automatically bedeemed as a breach or occurrence or default of other Contractsgiving the Engineer absolute right to take appropriate action underany/all the Contracts including right to recover damages from any/all the Contracts or terminate any/all the Contracts. Any suchbreach or default or occurrence in any of the Contracts shall notrelieve the Contractor of any of his responsibility /obligations underthe other contracts and no time extension shall be given to theContractor on these grounds. The equipment/material to besupplied by the Contractor under the first Contract when installedand commissioned under the second Contract shall give satisfactoryperformance in accordance with provisions of the Contract. Thesigning of three (3) separate Contracts shalt in no way dilute theinsurance responsibility and obligations of the Contractor.

Notwithstanding executing the separate Contracts and breakupof Contract prices the Contracts shall at all times be construed asa single source responsibility assignment, complete projectmanagement, overall co-ordination between civil, electrical supplyand erection works for timely commissioning of Substation shallbe the Contractor’s responsibility.

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Clauses 3.2, 3.3, 3.4, 3.5 and 8.1 of the Special Conditions ofContract is set out hereinbelow:- SCC 3.2 Vetting of Documents The Contractor shall bear all the charges in respect of vetting andexecution of Contract documents.

SCC 3.3 Aggregate Contract Vaue

The sum of Contract Values of first, second, third and fourthContracts shall be the aggregate Contract value. The limits forquantity variation and penalties for delays shall be 10% of therespective Contract value as under:

SCC 3.4 Quantity Variation

The quantities of individual works under any of the above Contractsmay very to any extent; however the total value of such variationsshall not exceed the 10% of the concerned Contract value.

Such variations in quantities/work, under any of the aboveContracts, upto 10% of the concerned Contract value shall beallowed by concerned Engineer of Contract. However if suchvariation is likely to exceed 10% of the Contract value of anyContract, the variation shall be allowed by concerned Engineer ofContract after taking prior concurrence of competent authority.

SCC 3.5 Liquidated Damages for Delays in CompletionPeriod Damages for delay in completion under clause 32 of Form “A”shall be applicable with the condition that the ’liability of delay’ shall be increasedfrom 10% if the transformer for the first phase of Unnao sub-station do not reach site up to December, 2010. tn view of turn-key nature of contract liquidated damages shall be levied only incase of delay on contractual completion period of that phase ofsub-station.

SCC 8.1 The prices of imported items, if any, shall be inclusiveof all taxes, duties, license fees, import/custom duties etc. legallypayable. Any such taxes, duties and levies shall be Contractor’saccount and no separate claim on this account shall be entertainedby the Purchaser.”

30. Pursuant to the said First Contract (Supply Contract) theRespondent submitted two performance bank guarantees on 30[th] August2012, that is bank guarantee No. 2012/272 issued by Corporation Bank,Mumbai for an amount of Rs.6092783.00 and bank guarantee No.2012/273 also drawn on the Corporation Bank, Mumbai for an amount ofRs.71068130/-. Respondent No.1 duly performed the first contract underthe framework agreement that is the contract for supply of equipmentalong with accessories and auxiliaries and other related materials andthe bills raised were dulycleared.

31. Subsequently, there was an audit inspection of the 765 KVTransmission Division, Unnao for the period from April 2012 to April2016. The audit inspection was conducted by the Audit Officer underthe Senior Accountant General during the period from 4[th] June 2016 to9[th] June 2016.

32. In the Audit Report, the Accountant General pointed out thelapse on the part of UPPTCL, in not deducting labour cess from the billsof the contractor, that is Respondent No.1, in respect inter alia of theFirst Conract, observing that every employer was required to levy andcollect cess at a rate not exceeding 2% and not less than 1% of the costof construction incurred by an employer and to deposit the same withthe Building and Other Construction Workers Welfare Board.

33. By a letter No.184 dated 2[nd] September 2016, the ExecutiveEngineer of the Petitioner, informed the Respondent No.1 of the objectionraised in the Audit Inspection Report regarding non deposit of LabourCess on the First Contract. It was contended that 1% Labour Cess wasto be collected from the contractor on the project cost, which wouldinclude supply of equipment and materials as well as erection work. TheRespondent No.1 was also informed that simple interest was chargeableon Labour Cess at the rate of 2% per month.

34. By a letter dated 14[th] September 2016, the Respondent objectedto the imposition of Labour Cess computed at 1% of the total cost ofconstruction, stating that for the purposes of the first contract, the companywas not covered under the definition of contractor under the Act.Thereafter, by a letter dated 27[th] September 2016, the UPPTCL advisedthe Respondent No.1 to seek opinion of the Labour Commissioner onthe applicability of Labour Cess.

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A35. By a letter dated 14[th] November 2016, the Respondent No.1sought the opinion of the Labour Commissioner on the applicability ofLabour Cess on the cost of supply of equipment and materials, contendingthat Labour Cess was not payable under the Cess Act or the BOCWAct on supply of equipment and materials.B36. The Respondents also made representations to the UPPTCLfor setting aside the demand for cess alleged to be outstanding, on theground that the first contract was exempted from cess under the BOCWAct and the Cess Act 1996.

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37. UPPTCL did not release the Performance Bank GuaranteeCof Rs.7 crore odd furnished by the Respondent No.1, to secure recoveryof an amount of Rs.2.6 crores towards cess. Later, the RespondentNo.1 extended the validity of the bank guarantee until 30[th] November,2018, and further extended the bank guarantee till February 2019.

38. In the meanwhile, by a letter dated 1[st] June 2018, theDSuperintending Engineer, UPPTCL informed the Respondent No.2Corporation Bank that consequent upon successful performance of thetransformer and isolators supplied by the Respondent No.1, the bankguarantees against the first (supply) contract were partly discharged asdetailed in the said letter. The Bank was instructed to retain an amountof Rs.2,60,68,814/- from BG No. 2012/2 dated 30.8.2012 ofERs.7,10,68,130/- and issue an amended Bank Guarantee extending itsvalidity.

39. By a letter dated 29[th] December 2018, the SuperintendentEngineer of the UPPTCL requested the Executive Engineer, Unnao torecover labour cess for the supply part of the composite contract fromFthe pending bills of the Respondent No.1 and, in case any amount stillremained outstanding, to deduct such amount by encashment of thePerformance Bank Guarantee for Rs.2,60,68,814/- held to secure thepayment of labour cess.

40. On or about 3[rd] January 2019, the Respondent filed a WritGPetition M/B No.125 of 2019 before the Lucknow Bench of the AllahabadHigh Court, challenging the said communications. In or about February2019, while the writ petition was pending, the Executive Engineer, Unnaopurported to deposit Rs.38,38,104/- with the Building and otherConstruction Workers Welfare Board (BOCWWB) as part paymenttowards labour cess.H

41. By an interim order dated 7[th] January 2020, the Hon’ble HighCourt restrained the UPPTCL from encashing the bank guarantee. Thequestion of law as to whether cess would be payable in respect of supplyof equipment by the Respondent no.1 to UPPTCL was kept open.

42. UPPTCL filed a Counter Statement to the writ petition andthe Respondent filed a Rejoinder thereto contending that the provisionsof the BOCW Act were not applicable to the Supply Contract and levyand deduction of labour cess in respect of the Supply Contract, was notpermissible in law. UPPTCL did not take any objection to themaintainability of the writ petition on the ground of existence of analternative remedy, as is evident from its Counter Statement/Affidavitfiled in the High Court.

43. By the impugned order dated 24[th] February 2020, the HighCourt set aside the letters dated 2[nd] September, 2016 and 29[th] December,2018 sent by the Petitioner to the Respondent demanding outstandinglabour cess amounting to Rs.2,60,68,814/- computed at the rate of 1%of the contract value.

44. The High Court accepted the submission of the RespondentNo.1 that in the absence of levy and assessment under the Cess Act1996 and the Rules made thereunder, the letters of the UPPTCL werenot sustainable in law. Cess could only be recovered in the mannerstipulated in the Cess Act and the Rules framed thereunder. The HighCourt observed that if cess were leviable under the Cess Act, it wouldbe necessary for the concerned authorities to undertake the exercise ofassessment and levy of cess under the Cess Act of 1996 as amended,before the same could be realized from a contractor. The High Courtfound that in the absence of any order for levy and assessment underthe Cess Act of 1996 recovery could not be made pursuant to an auditobjection of CAG.

45. There does not appear to be any provision in the first contract,second contract, third contract, or fourth contract or in the SpecialConditions of Contract or the General Conditions for Supply of Plantand the Execution of work which enables UPPTCL to withhold anyamount from the bills raised by the Respondent No.1 on UPPTCL towardsany taxes, cess or any other statutory dues of the contractor. Nor hasthe UPPTCL adverted to any specific provision of the contract whichenables UPPTCL to do so. Clause 8.1 of the Special Conditions of A

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AContract relied upon by UPPTCL reads that the prices of imported items,if any, shall be inclusive of all taxes, duties, licence fees, import/customsduties etc. legally payable. Any such taxes, duties levies shall be onContractor’s account and no separate claim on the Account shall beentertained by the purchaser. This clause does not authorize UPPTCLto deduct taxes etc. from bills.B

46. Clauses 24, 25 and 26 of the General Conditions for Supply ofPlant and Execution of Works to the UPPTCL provide as follows:- “24.Deduction from Contract Price :-All costs, damages orexpenses, which the Purchaser may have paid, for which underCthe Contract, the Contractor is liable, may be deducted bythe purchaser from any money due or which may become dueby him to the Contractor under Contract or may be recoveredby suit or otherwise from the Contractor.

Any sum of money due and payable to the ContractorD(including security deposit returnable to him) under thisContract may be appropriated by the Purchaser and set offagainst any claim of the Purchaser for the payment of a sumof money arising out of or under any contract made by theContractor, with the Purchaser.

25. Terms and Payment:-21 (1) subject to deduction whichthe Purchaser may be authorized to make under the Contractor subject to any additions or deductions provided for underClause 12, the Contractor shall be entitled to payment asfollows:- E

F(a) Eight percent of the F.O.R. Contract Value of the plant inrupees on receipt by the Purchaser of the Contractor’s invoicegiving the number and date of railway receipt covering thedispatch of the plant from the Indian Port and of the advisenote giving case number and contents, together with acertificate by the Contractor to the effect that the plant detailedGin the said advise note has actually been dispatched underthe said railway receipt and that the Contract value of thesaid plaint so dispatched is not less than the amount enteredin the invoice.

(b) Ten percent of the F.O.R. Contract value of the plant onHsatisfactory completion of test an taking over of the plant.

(c) Ten percent of the F.O.R. Contract value of the plant atthe end of Twelve months from the date of taking over.

(d) For the erection of the plant and proportion of the progressof the work on the receipt by the Purchaser of monthly invoicessubmitted by the Contract supported by the certificates of theEngineer.

If at the time at which either of the instalments due undersub-clause (b) and (c) of Clause (1) hereof become payablethere are minor defects in the plant which are not of suchimportance as to affect the full commercial use of the plantthen the Purchaser shall be entitled to retain only such partof the instalment then due as represents the cost of makinggood such minor defects and any sum so retained shall, subjectto the provisions of Clause 36, become due upon such minordefects being made good.

If the Purchaser desires that the plant or any portion thereofshould not be dispatched by the Contractor when it is due fordispatch, the Contractor shall store such plant or portion athis works and be ‘responsible’ for all risk. For such storagethe Purchaser shall pay to the Contractor at a rate to bemutually agreed upon between the parties, but not exceeding5s (five Shillings) per ton per week payable quarterly, plusinterest at one percent per annum above the current rate ofthe State Bank of India on 80% of the Contract value of theplant or portion thereof so stored, for the period from thedate on which the said plant or portion becomes, due and isready for shipment upto the date on which it is actuallyshipped.

(A) In the event of the Supplier/Contractor/Company not beingable to supply the materials or to carry out works inaccordance with the terms of this Contract, the Government/Purchaser/Owner shall have the right to recover any sumadvanced in accordance with the Clause 25 from the Supplier/Contractor/Company and from his/its assets.

26. Provisional Sums :-In any case where the Contract priceincludes a provisional sum to be provided by the Contractorfor meeting the expenses of extra work or for work to be ABC

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Adone or materials to be supplied by a sub-Contractor, suchsum shall be expended or used, either wholly or in part, or benot used at the discretion of the Engineer and entirely as hemay decide and direct. If no part or only a part thereof beused, then the whole or the part not used, as the case may be,shall be deducted from the Contract price. If the sum used isBmore than such provision, the Contractor shall pay the excess.In the case of the materials supplied or work done by a sub-Contractor, the total of the net sum paid to the sub-Contractoron account of such materials or work and a sum equal to 10% of such net sum allowed as Contractor’s profit shall beCdeemed to be sum used. None of the works or articles to whichsum of money refers shall be done or purchased without thewritten order of the Engineer. The Contractor shall allow thesub-Contractors every facility for the supply of materials orexecution, of their several works simultaneously with his own,and shall, within fourteen days after the Engineer hasDrequested him in writing to do so, pay the dues of such sub-Contractors on account of such materials or work:PROVIDED ALWAYS that the Contractor shall have noresponsibility with regard to such works or articles unless heshall have previously approved the sub-Contractor and\orEthe material or plant to be supplied.”

47. It is nobody’s case that Respondent No.1 has committed anybreach or default in performance of the First Contract, that is, the SupplyContract, rendering it liable for any damages, costs or expenses. TheRespondent No.1 duly discharged its obligations under the First ContractF(Supply Contract) to the satisfaction of UPPTCL, and accordingly allpayments due to it were cleared. The Performance Guarantees furnishedby the Respondent No.1 were also partially discharged except to theextent of covering cess on the First (Supply) contract. This is apparentfrom the communication of the UPPTCL dated 1[st] June 2018 to theBank (Respondent No.2), referred to above.G

48. As observed above, Clause 8 of the Special Conditions of theContract merely says that duties, taxes, fees etc. as are legally applicable,shall be paid at actuals by the contractor. This clause does not enableUPPTCL to withhold payments or to realize cess by revocation of aPerformance Guarantee.H

49. In Dewan Chand Builders and Contractors vs. Union ofIndia reported in (2012) 1 SCC 101, this Court examined the object ofthe BOCW Act of welfare of workers engaged in building andconstruction work, and held:- “The background in which the BOCW Act was enacted, is setout in the Statement of Objects and Reasons appended to theBill preceding its enactment. To better appreciate the legislativeintent, it would be instructive to refer to the following extractfrom the Statement of Objects and Reasons:

It is estimated that about 8.5. Million workers in the countryare engaged in building and other construction works.Building and other construction workers are one of themost numerous and vulnerable segments of the unorganizedlabour in India. The building and other construction worksare characterized by their inherent risk to the life and limbof the workers. The work is also characterized by its casualnature, temporary relationship between employer andemployee, uncertain working hours, lack of basic amenitiesand inadequacy of welfare facilities. In the absence ofadequate statutory provisions, the requisite informationregarding the number and nature of accidents is also notforthcoming. In the absence of such information, it isdifficult to fix responsibility or to take any correctiveaction.

Although the provisions of certain Central Acts areapplicable to the building and other construction workersyet a need has been felt for a comprehensive CentralLegislation for regulating their safety, health, welfare andother conditions of service.”

5. A fairly long preamble to the BOCW Act is again indicativeof its purpose. It reads thus:

“An Act to regulate the employment and conditions ofservice of building and other construction workers and toprovide for their safety, health and welfare measures andfor other matters connected therewith or incidentalthereto.”

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7. The Statement of Objects and Reasons to the BOCW Actexplained that it had been considered ‘necessary to levy aCess on the cost of construction incurred by the employerson the building and other construction works for ensuringsufficient funds for tthe Welfare Boards to undertake the socialsecurity Schemes and welfare measures.’ Simultaneously withthe enactment of the BOCW Act, the Parliament enactedthe Cess Act. The Statement of Objects and Reasons to the CessAct noted that the intention was to ‘provide for the levy andcollection of a Cess on the cost of construction incurred bythe employers for augmenting the resources of the Buildingand Other Construction Workers’ Welfare Boards constitutedby the State Governments under the Building and OtherConstruction Workers (Regulation of Employment andConditions of Service) Ordinance, 1995.’

8. It is manifest from the overarching schemes of the BOCWAct, the Cess Act, the Rules made thereunder that their soleobject is to regulate the employment and conditions of serviceof building and other construction workers, traditionallyexploited sections in the society and to provide for their safety,health and other welfare measures. The BOCW Act and theCess Act break new ground in that, the liability to pay Cessfalls not only on the owner of a building or establishment,but under Section 2(i)(iii) of the BOCW Act ‘in relation to abuilding or other construction work carried on by or througha contractor, or by the employment of building workerssupplied by a contractor, the contractor.’ The extension ofthe liability on to the contractor is with a view to ensure that,if for any reason it is not possible to collect Cess from theowner of the building at a stage subsequent to the completionof the construction, it can be recovered from the contractor.The Cess Act and the Cess Rules ensure that the Cess iscollected at source from the bills of the contractors to whompayments are made by the owner. In short, the burden of Cessis passed on from the owner to the contractor.

50. In Lanco Anpara Power Limited v. State of Uttar Pradeshand Ors. Repored in (2016) 10 SCC 329, this Court held:-

“37. We now advert to the core issue touching upon theconstruction of Section 2(1)(d) of the BOCW Act. The argumentof the appellants is that language thereof is unambiguousand literal construction is to be accorded to find the legislativeintent. To our mind, this submission is of no avail. Section2(1)(d) of the BOCW Act dealing with the building orconstruction work is in three parts. In the first part, differentactivities are mentioned which are to be covered by the saidexpression, namely, construction, alterations, repairs,maintenance or demolition. Second part of the definition isaimed at those buildings or works in relation to which theaforesaid activities are carried out. The third part of thedefinition contains exclusion clause by stipulating that it doesnot include “any building or other construction work to whichthe provisions of the Factories Act, 1948 (63 of 1948), or theMines Act, 1952 (35 of 1952), applies”. Thus, first part ofthe definition contains the nature of activity; second partcontains the subject-matter in relation to which the activity iscarried out and the third part excludes those building or otherconstruction work to which the provisions of the FactoriesAct or the Mines Act apply.”

51. The clear statutory scheme of the BOCW Act excludes asupply contract from within its ambit. On behalf of the Respondent No.1,it is pointed out that several public authorities and corporations, such asthe Delhi Metro Rail Corporation and Karnataka Power TransmissionCorporation Limited, have issued instructions that no cess under theBOCW Act is leviable on a contract for supply of goods. Copies of theKPTCL circulars dated 22.8.2012 and 28.8.2012 to this effect are annexedto the Rejoinder of the Respondent no.1 in the High Court.

52. Under Section 2(g) of the BOCW Act the term ‘Contractor’means a person who undertakes to produce a given result for anyestablishment, other than a mere supply of goods or articles ofmanufacture, by the employment of building workers or who suppliesbuilding workers for any work of the establishment and includes a sub-contractor. The Respondent No.1 is apparently not a contractor, withinthe meaning of Section 2(1)(g) of the BOCW Act in respect of the first,second and fourth contracts. Nor is the Respondent No.1 employer withinthe meaning of Section 2(1)(i) of the BOCW Act. Section 2(1)(i) of the AB

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ABOCW Act defines ‘employer’ to include the contractor in relation to abuilding and other construction work carried on by or through a contractoror by employment of building workers supplied by a contractor. TheRespondent No.1 neither falls within the definition of ‘contractor in Section2(1)(g) nor 2(1)(i)(iii) of the BOCW Act. Apparently, the RespondentNo.1 is not liable to cess in respect of the First, Second and FourthBcontracts.

53. Cess under the Cess Act read with BOCW Act is leviable inrespect of building and other construction works. The condition precedentfor imposition of cess under the Cess Act is the construction, repair,demolition or maintenance of and/or in relation to a building or any otherCwork of construction, transmission towers, in relation inter alia togeneration, transmission and distribution of power, electric lines, pipelinesetc. Mere installation and/or erection of pipelines, equipments forgeneration or transmission or distribution of power, electric wires,transmission towers etc. which do not involve construction work are notDamenable to Cess under the Cess Act. Accordingly no intimation orinformation was given or any return filed with the Assessing Officerunder the Cess Act or the Inspector under the BOCW Act in respect ofthe First and Second Contracts, either by UPPTCL or by the RespondentNo.1.

E54. A contractor who enters into a pure Supply Contract isstatutorily exempted from levy under the BOCW Act. The Contract inquestion is a Supply Contract as would be evident from Clause 8.7 ofthe Special Conditions of Contract which states:

“The contract shall be a ‘Divisible Contract’ with single pointFresponsibility, hence no works Contract tax shall be payableand the Purchaser shall not bear any liability on thisaccount.”

55. Mr. Ramesh Singh appearing on behalf of the RespondentNo.1 submitted and rightly, that the four contracts had been treated as aGsingular contract solely for the purposes of responsibility for timelyexecution. For all other intents and purposes, including levy of any tax orfees, the contract for supply was understood by the parties as a separateand distinct contract.

56. Mr. Singh pointed out that as per the terms of payment underClause 9.1 of the Special Conditions of Contract, the Schedule ofH

Payments were separate for the supply and delivery of equipment andmaterials, totaling to Rs.275,09,33,042.00 as against the total value ofthe contract which is Rs.302,06,08,217.00.

57. Mr. Singh argued that the terms and clauses of the contractmade it amply clear that the first contract was for supply and delivery ofequipment and materials. It was a pure supply contract, separate anddistinct from civil works contract. The UPPTCL itself understood theCess Act as not applicable to the Supply Contract and accordingly didnot deduct cess from the invoices/bills of the Respondent.

58. As argued by Mr. Singh, the judgment of this Court in LancoAnpara Power Limited v. State of Uttar Pradesh and Other reportedin (2016) 10 SCC 329 cited on behalf of UPPTCL is of no assistance toUPPTCL since the issues of whether cess under the Cess Act wasleviable on a Supply Contract or whether the cost of construction underSection 3 of the Cess Act read with Rule 3 of the Cess Rules includedthe cost of supply of equipment were not adjudicated in the aforesaidcase.

59. There can be no comparison between realization of disputedcess by withholding the bills raised by the Respondent No.1 or byinvocation of a bank guarantee furnished by the Respondent No.1 afterrelease of payment to the Respondent No.1, and deduction of IncomeTax at source which is a statutory obligation of any person making apayment which constitutes ‘income’ under Section 192 of the IncomeTax Act, 1961.

60. As observed above, UPPTCL demanded and partly realizedcess on the supply Contract, solely on the basis of report of the CAG. Inour considered view, in the absence of any adjudication, it wasimpermissible for UPPTCL to issue the impugned communication torealize cess solely on the basis of the report of the CAG.

61. In Centre of Public Litigation v. Union of India reported in(2012) 3 SCC 1, this Court held that when CAG report was subject toscrutiny of the Public Accounts Committee and the Joint ParliamentaryCommittee, it would not be proper to refer to to findings and conclusionscontained therein. In this context, reference may also be made to thedecision of this Court in Arun Kumar Agrawal v. Union of India andOthers reported in (2013) 7SCC 1, where this Court held:- AB

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“56. CAG may be right in pointing out that public monies areto be applied for the purposes prescribed by Parliament andthat extravagance and waste are minimised and that soundfinancial practices are encouraged in estimating andcontracting, and in administration generally.

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67. The question that is germane for consideration in thiscase is whether this Court can grant reliefs by merely placingreliance on the CAG’s Report. The CAG’s Report is alwayssubject to parliamentary debates and it is possible that PACcan accept the ministry’s objection to the CAG Report or rejectthe report of the CAG. The CAG, indisputably is anindependent constitutional functionary, however, it is forParliament to decide whether after receiving the report i.e.PAC to make its comments on the CAG’s Report.”

62. In Pathan Mohammed Suleman Rehmatkhan v. State ofGujarat and Others reported in (2014) 4 SCC 156, this Court held:- “9. We heard Shri Y.N. Oza, the learned counsel for thepetitioner and perused the records, as well as counter-affidavitand reply-affidavit filed by the parties before the GujaratHigh Court. The entire case of the petitioner is based on theCAG report. The applicability and the binding characteristicsof such report were considered by the High Court. In ArunKumar Agrawal case [Arun Kumar Agrawal v. Union of India,(2013) 7 SCC 1] this Court held as follows: (SCC p. 24, para68)

“68. We may, however, point out that since the report is froma constitutional functionary, it commands respect and cannotbe brushed aside as such, but it is equally important to examinethe comments what respective Ministries have to offer on theCAG’s report. The Ministry can always point out, if there isany mistake in the CAG’s report or the CAG hasinappropriately appreciated the various issues.”

10. The CAG is a key figure in the system of parliamentarycontrol of finance and is empowered to delve into the economy,efficiency and effectiveness with which the departmental authorities or other bodies had used their resources indischarging their functions. The CAG is also the final auditauthority and is a part of the machinery through which thelegislature enforces the regulatory and economy in theadministration of public finance, as has been rightly pointedout by the High Court. But we cannot lose sight of the factthat it is the Government which administers and runs the State,which is accountable to the people. The State’s welfare,progress, requirements and needs of the people are betteranswered by the State, also as to how the resources are to beutilised for achieving various objectives. If every decisiontaken by the State is tested by a microscopic and a suspiciouseye, the administration will come to a standstill and thedecision-makers will lose all their initiative and enthusiasm.At hindsight, it is easy to comment upon or criticise the actionof the decision-maker. Sometimes, decisions taken by the Stateor its administrative authorities may go wrong and sometimesthey may achieve the desired results. Criticisms are alwayswelcome in a parliamentary democracy, but a decision takenin good faith, with good intentions, without any extraneousconsiderations, cannot be belittled, even if that decision wasultimately proved to be wrong.

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12. Reference in this regard may also be made to the judgmentof this Court in Centre for Public Interest Litigation v. Unionof India [(2012) 3 SCC 1 : AIR 2012 SC 3725] , wherein itwas held that when the CAG report is subject to scrutiny bythe Public Accounts Committee and the Joint ParliamentaryCommittee, it would not be proper to refer to the findings andconclusions contained therein. The Court even went on tosay that it is not necessary to advert to the reasoning andsuggestions made, as well.”

63. In this Case, there is apparently no dispute, difference orcontroversy between UPPTCL and the Respondent No.1 as to the trueconstruction, meaning or intent of any part of the conditions of contractor to the manner of execution or the quality or description or paymentfor the same. Nor is there any dispute as to the true meaning, intent,interpretation, construction or effect of the clauses of contract, A

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Aspecifications or drawings or any of them. UPPTCL has changed itsstand only after the CAG report. Cess in respect of of the First Contracthas been deducted only in view of the audit objection raised by the Officeof Comptroller and Auditor General (CAG).

64. The initial stand of UPPTCL will appear from the relevantBportion of the CAG report reproduced hereinbelow:-

“Management stated in its reply that the labour cess fromsupply bills has not been deducted because there was notinvolvement of labour in supply of material whereas labourcess has been deducted from the erection bill. Reply is notCtenable as labour cess will be deducted from the cost ofconstruction wherein supply of material and erection of workwere also included.

[Emphasis Supplied]”

65. It is true that the General Conditions contain an ArbitrationDClause which is set out hereinbelow:- “Arbitration :- If any dispute, difference or controversy shallat any time arise between the Contractor on the one handand the U.P. Power Transmission Corporation Limited andthe Engineer of the contract on the other hand, the contract,Eor as to the true construction meaning and intent of any partor condition of, the same or as to the manner of execution oras to the quality or description of, or payment for the same,or as to the true intent, meaning, interpretation, constructionor effect of the clauses of Contract, specifications orFdrawings or any of them, or as to anything to be done,committed or suffered in pursuance of the contract, orspecification or as to the mode of carrying the contract intoeffect, or as to the breach of alleged breach of the contract,or as to any claims on account of such breach or allegedbreach or as to obviating or compensating for the commissionGof any such breach, or as to any other matter or thingwhatsoever connected with or arising out of the contract andwhether before or during the progress of after the completionof the contract, such question difference of dispute shall bereferred for adjudication to the Chairman, U.P. PowerTransmission Corporation Limited or to any other person G

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nominated by him in this behalf and his decision in writingshall be final, binding and conclusive. This submission shallbe deemed to a submission on arbitration within the meaningof the Indian Arbitration Act, 1940 or any statutorymodification thereof The Arbitrator may from time to time withconsent of the parties enlarge the time for making andpublishing the award.

Upon every or any such reference, the cost of an incidentalto the reference and award respectively shall be in thediscretion of the arbitrator, who shall be competent todetermine the amount thereof or direct the same to be taxedas between solicitor and clients or as between party and partyand to direct by whom and to whom and in what manner thesame shall be borne and paid.

Work under the contract shall, if reasonably, possible,continued during the Arbitration proceedings and nopayments due to payable by the UPPTCL shall be withheldon account of such proceeding. In case refusal/neglect bysuch nominee Chairman, UPPTCL may nominate anotherperson in his place.”

66. Even though there is an arbitration clause, the Petitioner hereinhas not opposed the writ petition on the ground of existence of anarbitration clause. There is no whisper of any arbitration agreement inthe Counter Affidavit filed by UPPTCL to the writ petition in the HighCourt. In any case, the existence of an arbitration clause does not debarthe court from entertaining a writ petition.

67. It is well settled that availability of an alternative remedy doesnot prohibit the High Court from entertaining a writ petition in anappropriate case. The High Court may entertain a writ petition,notwithstanding the availability of an alternative remedy, particularly (1)where the writ petition seeks enforcement of a fundamental right; (ii)where there is failure of principles of natural justice or (iii) where theimpugned orders or proceedings are wholly without jurisdiction or (iv)the vires of an Act is under challenge. Reference may be made toWhirlpool Corporation v. Registrar of Trade Marks, Mumbai andOrs. reported in AIR 1999 SC 22 and Pimpri Chinchwad MunicipalCorporation and Ors. V. Gayatri Construction Company and Ors,reported in (2008) 8 SCC 172, cited on behalf of Respondent No.1.

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A68. In Harbanslal Sahnia and Ors. v. Indian Oil CorporationLtd. reported in (2003) 2 SCC 107, this Court allowed the appeal froman order of the High Court dismissing a writ petition and set aside theimpugned judgment of the High Court as also the impugned order of theIndian Oil Corporation terminating the dealership of the Appellants,notwithstanding the fact that the dealership agreement contained anBarbitration clause.

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69. It is now well settled by a plethora of decisions of this Courtthat relief under Article 226 of the Constitution of India may be grantedin a case arising out of contract. However, the writ jurisdiction underArticle 226, being discretionary, the High Courts usually refrain fromCentertaining a writ petition which involves adjudication of disputedquestions of fact which may require analysis of evidence of witnesses.Monetary relief can also be granted in a writ petition.

70. In this case, the action of UPPTCL in forcibly extracting buildingcess from the Respondent No.1 in respect of the first contract, solely onDthe basis of the CAG report, is in excess of power conferred on UPPTCLby law or in terms of the contract. In other words, UPPTCL has nopower and authority and or jurisdiction to realize labour cess under theCess Act in respect of the first contract by withholding dues in respectof other contracts and/or invoking a performance guarantee. There isEno legal infirmity in the finding of the High Court that UPPTCL acted inexcess of power by its acts impugned, when there was admittedly noassessment or levy of cess under the Cess Act.

71. Even otherwise, the Cess Act and/or statutory rules framedthereunder prescribe the mode and manner of recovery of outstandingFcess under the Cess Act. It is well settled that when statute requires athing to be done in a particular manner, it is to be done in that manneralone. UPPTCL could not have taken recourse to the methods adoptedby it. The impugned communications have rightly been set aside.

72. In our considered opinion, the judgment and order of the HighGCourt impugned does not call for inference under Article 136 of theConstitution of India. The Special Leave Petition is, therefore, dismissed.

Nidhi Jain

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