Research › Search › Judgment

Andhra High Court · body

2013 DIGILAW 69 (AP)

IRCON International Limited v. State of A. P.

2013-02-06

L.NARASIMHA REDDY

body2013
JUDGMENT : The Government of Andhra Pradesh has undertaken the work of widening the road from Kadapa to Tadipatri. It appears to have been sponsored or funded by the World Bank. The petitioner, which is a Government of India undertaking, submitted its tender and became the successful bidder. The cost of the work is said to be about Rs.50 crores. In relation to the contract, the petitioner raised claims of different kinds. As many as three arbitrations ensued. The respective arbitrators awarded sums of Rs.1,55,49,724/-, 8,79,73,528/- and 32,31,897/-, with interest at the rate of 18% to 10% per annum. Proceedings were initiated before the respective Courts for enforcement of the awards or for setting aside the same, as the case may be. 2. When the proceedings were pending before the Courts, the petitioner appears to have offered for a settlement. The offer was acted by the respondents. Ultimately, G.O.Ms.No.614, dated 25.05.2009, was issued by the 1st respondent, agreeing to pay a sum of Rs.13.25 crores in full and final settlement of the claims. The petitioner states that as against Rs.13.25 crores, the respondents paid a sum of Rs.11,30,20,975/- but did not pay the balance of Rs.1,49,67,045/-. Notices were exchanged. The 1st respondent informed the petitioner that the unpaid amount represents the deduction under various heads, including advance income tax, VAT, education cess, and the recoveries in pursuance of the memo, dated 28.03.2009. Not satisfied with that, the petitioner approached this Court by filing this writ petition. 3. The principal ground urged by the petitioner is that the respondents are bound by the ‘principle of estoppel’ and there is absolutely no justification for them in not paying the part of the amount covered by G.O.Ms.No.614. It is pleaded that on a representation made by the respondents, the petitioner has changed its position by withdrawing the cases, giving up the steps for recovery of amount covered by the awards and waived the interest; and that there is no justification for the respondents in resiling from their commitment under the G.O. Other grounds are also urged. 4. On behalf of the respondents, a counter affidavit is filed. It is stated that after the awards were passed and proceedings were initiated before the Courts, a proposal emanated from the petitioner and on an examination of the same, it was accepted. 4. On behalf of the respondents, a counter affidavit is filed. It is stated that after the awards were passed and proceedings were initiated before the Courts, a proposal emanated from the petitioner and on an examination of the same, it was accepted. It is also stated that the amount covered by the G.O., except the deductions provided for under law, has been paid and that the writ petition is not maintainable, either in law or on facts. 5. Sri S. Rajan, learned counsel for the petitioner submits that the petitioner has changed its position in several respects, on account of the offer or representation by the respondents, resulting in the issuance of G.O., and that the denial of payment of part of the amount is hit by the ‘principle of estoppel’. He places reliance upon the judgment of the Hon’ble Supreme Court in Century Spinning and Manufacturing Co. Ltd. vs. The Ulhasnagar Municipal Council (AIR 1971 SUPREME COURT 1021). He further submits that the deductions, which are proposed to be made, have already been dealt with in the course of arbitration and the respondents are not justified in not releasing the amount. 6. Learned Additional Advocate General on the other hand submits that the G.O. has been implemented in its entirety and deduction of amounts covered by the relevant provisions of law cannot be said to be without any basis. He submits that the major component viz., Rs.1,00,39,766/-is referable to memo, dated 28.03.2009, which was issued subsequent to the award. He contends that the petitioner derived double benefit in the form of the escalation of seigniorage fee and Work Contract Tax (WTC) and the amount paid in excess was directed to be recovered through memo, dated 28.03.2009. 7. As observed earlier, the petitioner is a Government of India undertaking. Though it is carrying out commercial or construction activities, it is supposed to act in a fair and reasonable manner, particularly when it deals with the State and Central Governments. The volume of the work entrusted to it is about Rs.50 crores. Most of the claims made by the petitioner, that led to arbitrations, are on account of the escalation or imposition of conditions by the World Bank or the Government itself. Gone are the days when contractors used to incur loss, if the cost of the material has increased. The volume of the work entrusted to it is about Rs.50 crores. Most of the claims made by the petitioner, that led to arbitrations, are on account of the escalation or imposition of conditions by the World Bank or the Government itself. Gone are the days when contractors used to incur loss, if the cost of the material has increased. Under the present set up, the contractors would be too happy, if there is escalation of the cost of material. In the instant case, the record discloses that the benefit of escalation of tax or seigniorage fee and the like, were availed more than once, but under different heads. 8. It is a matter of record that awards in three arbitrations were passed and the respective parties initiated proceedings before the concerned Courts, to enforce their rights vis-a-vis the awards. At that stage, the petitioner came forward for a settlement by offering to give up the part of interest. A favourable response has emerged from the respondents and ultimately, a G.O. was issued. The fairness on the part of the respondents is evident from the fact that amount more than Rs.11 crores were released in favour of the petitioner. The details of deductions are furnished both in the counter affidavit and the proceedings. They account for the advance income tax, VAT, education cess etc. The major component represents the deduction of excess amount paid towards the escalation of seigniorage fee and WCT. 9. The agreement between the petitioner and the respondents provides for the revision of the bills or the amounts, in case there is revision of the tax regime. The petitioner made claims for enhancement of the bills on account of seigniorage fee and WCT. The scrutiny however has revealed that the benefit was availed at two stages; the first is in the form of cost of material and the second is under Clause 70.8. So was the case with the WCT. 10. On coming to know that serious irregularities in this regard were taking place, the Government issued memo, dated 28.03.2009, directing that wherever the benefit of escalation of seigniorage fee or WCT was extended more than once, recoveries must be effected. It is in this context that the respondents withheld the amount. So was the case with the WCT. 10. On coming to know that serious irregularities in this regard were taking place, the Government issued memo, dated 28.03.2009, directing that wherever the benefit of escalation of seigniorage fee or WCT was extended more than once, recoveries must be effected. It is in this context that the respondents withheld the amount. The petitioner does not dispute that the benefit of escalation in the seigniorage fee and WCT was extended to it in a different form and at the same time, the benefit was claimed under clause 70.8. In case, the petitioner disputes the correctness of the memo, dated 28.03.2009 or it is of the view that it did not avail the double benefit, it can certainly institute proceedings vis-a-vis the same. Withholding of the amount under that count by the respondents cannot be said to be without any basis. The petitioner, which is a Central Government agency, ought not to have driven the respondents to such a prolonged and unnecessary litigation. 11. Therefore, the writ petition is dismissed, with costs of Rs.5,000/- (Rupees Five Thousand Only). 12. The miscellaneous petition filed in this writ petition shall also stand disposed of.