Research › Search › Judgment

Gauhati High Court · body

2017 DIGILAW 409 (GAU)

Trinayan Associates (M/S) v. State of Assam

2017-03-30

ACHINTYA MALLA BUJOR BARUA

body2017
JUDGMENT : Achintya Malla Bujor Barua, J. Heard Mr. K.N. Choudhury, learned counsel for the petitioner in WP(C) No.862/2017, WP(C) No.930/2017, WP(C) No.931/2017, WP(C) No.933/2017 and WP(C) No.934/2017 as well as Mr. K.D. Chetry, learned counsel appearing for the petitioner in WP(C) No.1234/2017. Also heard Mr. T.C. Chutia, learned Senior Addl. Govt. Advocate appearing for the State of Assam. 2. All the writ petitions involve a common question of facts and law as to whether the PWD while releasing the payment of bills of the contractors who works under the department are entitled to deduct the component of forest royalty, that may be payable to the Forest Department. The expression forest royalty is understood to mean the royalty that is required to be paid in respect of any mineral removed or consumed from a mining leased area. Such minor minerals also include stone and sand that are required for the construction works undertaken by the respondent PWD. 3. Section 9 of the Mines and Minerals (Development and Regulation) Act, 1957 provides that the holder of a mining lease granted before the commencement of the Act shall, notwithstanding anything contained in the instrument of lease or in any law in force at commencement, pay royalty in respect of any mineral removed or consumed by him or by his agent, manager, employee, contractor or sub-leesee from the leased area after such commencement, at the rate for the time being specified in the second schedule in respect of that mineral. The implication of provision of Section 9 of the Mines and Minerals Act 1957 is that in respect of any minor mineral that may be extracted and removed from the mining leased area the amount specified as royalty, is to be paid to the concerned authorities. 4. In the State of Assam, such mining leased areas are within the control and authority of the Directorate of Geology and Mining and the Principal Chief Conservator of Forest. Accordingly, it is understood that such royalty has to be paid to the Forest Department by the mining lease holder. Subsequently, the mining mineral products are purchased from the mining lease holder by the dealers and retailers and it is stated that while transporting the mining minerals from the mining lease holder to such dealers, including the retailers, at different levels, certain challans are issued under the authority of the Forest Department. Subsequently, the mining mineral products are purchased from the mining lease holder by the dealers and retailers and it is stated that while transporting the mining minerals from the mining lease holder to such dealers, including the retailers, at different levels, certain challans are issued under the authority of the Forest Department. When the retailer sells such minor minerals to the ultimate consumers, it is expected that such retailer has in its possession the required challans etc., which were issued under the authority of the Forest Department. Once the ultimate consumer purchases the minor minerals from the retailer and the retailer issues a purchase voucher for the purpose, it can be understood that such minerals have been purchased from the genuine and authentic source and if necessary, any authority can verify its authenticity by referring the matter to the Forest Department and obtain its view on the same. 5. In this bunch of writ petitions, the act on the part of the respondent PWD has been assailed, whereby, a component called forest royalty, which is in fact a royalty on the mining minerals that may have been used by the contractors in performing the contract work, is sought to be deducted from the final bills payable to the contractors. It is submitted by the learned senior counsel appearing for the petitioners that such act on the part of the respondents PWD is unauthorized and contrary to the provision of law, inasmuch as, the contractors having purchased the minor minerals products from the authentic retail sources, it is to be understood that the required royalty had been paid, initially by the mining mineral lease holder. In this respect, Mr. T.C. Chutia, learned senior counsel for the PWD relies upon a Office Memorandum dated 17.06.2000 of Govt. of Assam Finance Department, wherein, it is provided that the bills of the contractors engaged in construction works of Government departments and using forest produce will not be paid unless the necessary royalty that has been paid. In the said Office Memorandum, it had further been provided that for the purpose, the executing authority will intimate the concerned authority in the Forest Department regarding the forest produces utilized in the construction and sent the documents furnished by the contractors/suppliers in support of such forest produces, to enable the Forest Department authorities to verify the source of payment of dues. The expression forest products used in the Office Memorandum is also understood to be the minor mineral products that is contemplated under section 3(C) of the Mines and Minerals (Development) and Regulation Act, 1957. 6. On perusal of the aforesaid Office Memorandum, it appears to this Court that what is required to be produced by the contractors is the particular documents which will indicate the source from which the contractor may have procured the minor mineral products. Upon such documents being produced, it is for the executing authority of the PWD to take it up with the Forest Department and get it verified whether the source is authentic or not. If upon such verification from the Forest Department, it is found that the source is an authentic and valid source, nothing further is required to be done. On the other hand, if the Forest Department informs the respondent PWD that the source is not authentic source, the respondent PWD may act accordingly for recovery or deduction of the forest royalty product. 7. The aforesaid aspect as to whether the PWD can deduct the component of royalty from the contractor's bill was also the issue before the Division Bench of this Court in case of State of Assam v. Muslim Ali reported in (2013) 2 GLR 505 : (2013) 2 GLT 945. In paragraph 15 of the aforesaid judgment, the Division Bench had considered the Office Memorandum dated 17.06.2000 of the Finance Department and accordingly held that Office Memorandum provides that bills of contractors engaged in construction works of Government departments and Government undertakings, using forest produce will not be paid unless the Forest Department certifies that the forest produce so utilized, has been collected from a legal source and necessary royalty has been paid, and that if the same is not a condition incorporated in the contract agreement, it would have no binding force on the contractor. The Division Bench in Paragraph-10 of the said judgment and order had held that it was firstly necessary for the department to incorporate appropriate conditions in the contract to bind the contractor that he has to procure his forest materials requirement from a specific source and on his failure to procure materials from such source, there could have been an adverse presumption drawn against the contractor and, secondly, the conditions incorporated in the memorandum issued by the Finance Department on 17.06.2000 shall also have to be specifically incorporated as one of the contract conditions, in the contract in question. But the requirement insisted upon by the Finance Department as a contract condition having not been done, the PWD would be dis entitled to realize the royalty on forest produces, which really is a burden of either the Forest Department or the Mines and Minerals Department. Accordingly, the Division Bench was of the view that it is in agreement that the views expressed by the leaned Single Judge and accordingly no appropriation of money from the contractual dues is permissible unless backed by statutory provision or by express provision contained in the contract agreement between the parties to the contract. 8. The said question as to whether the component of forest royalty can be deducted from the bills of the contractor was also an issue before this Court in WP(C) No.1066/2015 and other related writ petitions, wherein, by the order dated 27.09.2016, it had been held that there is no clause in the contract agreement, as indicated in Paragraph-16 of Muslim Ali (supra) case which stipulated that the component of forest royalty can be deducted from the bills of the contractors. In the aforesaid judgment and order of this Court dated 27.09.2016, the provision of Clause 32 of the General Condition of the Contract/Clause 6(j) of the Special Conditions of contract was also given a due consideration. The said clause 32/6j is quoted herein under:- "In the event of any claim by Forest Department, that the contractor has extracted materials in excess of the quantity stated in the permit, Royalty as will be charged by the Forest Department on account of the excess materials will be recovered by the Department from any sum due to the contractor by the State Government under the contract or otherwise from his security deposit or the proceed of sales thereof or sufficient part thereof. The sum so recovered shall be placed in deposit for credit to the Forest Department after settlement of their claim." 9. Upon analysing the aforesaid clause, this Court was of the view that the said clause provides that in the event of a claim being made by the Forest Department that the contractor has extracted materials in excess of the quantity stated in the permit, royalty will be charged by the Forest Department on account of the excess quantity of materials and the same will be recovered by the concerned department from the sum due to the contractor. 10. Accordingly, the condition precedent of invoking deduction of the royalty under Clause 32/6(j) is that in the event a claim is made by the Forest Department that some excess quantity has been extracted beyond the permissible limit of the permit, in such event, the concerned department can deduct the component of the royalty from the bills. In other words, in the absence of any such claim by the Forest Department, no such deduction can be made. In the instant case, as evident from the materials on record and also from the submission of the learned counsel, including the learned counsel PWD, no such claim has made by the Forest Department before the PWD that the contractors have extracted excess amount of minor minerals from what was provided in the concerned permit. As there is no such claim by the Forest Department, the act on the part of the respondent PWD to deduct the component of royalty from the bills of the contractor by invoking clause 32 or 6(j) as the case may be, is without any authority and not sustainable. 11. Mr. T.C. Chutia, learned State Counsel, on the other hand, refers to Clause-10 of the preamble of the concerned agreements that have been entered by the respondent PWD with the respective contractors. Clause-10 of the preamble reads as follows:- "10. AGST (VAT), Forest Royalty including other charges levied by the Forest Department on forest products including any other taxes as applicable is to be paid by the contractor. The department shall deduct the amount of AGST (VAT), FR & ST and any taxes from the contractor's bill if the contractor fails to produce the valid certificates from the concerned department." 12. The department shall deduct the amount of AGST (VAT), FR & ST and any taxes from the contractor's bill if the contractor fails to produce the valid certificates from the concerned department." 12. On a reading of Clause-10, it is seen that the said clause can be found only in the preamble of the agreement and not in the terms and condition of the agreement, which are binding on the respective parties. The preamble of the agreement is merely an indication of the subject matter of the agreement and not a binding clause of the parties. In any view of the matter, Clause-10 of the preamble provides that the department shall deduct the amount, including that of forest royalty and any taxes from the contractor's bill, if the contractor fails to produce the valid certificates from the concerned department. Prima facie, the said provision appears to be directly in conflict that the Office Memorandum dated 17.06.2000. The Office Memorandum of the Finance Department merely requires the contractors to produce the documents in support of such forest products/minor minerals to enable the PWD to get it verified from the authorities of the Forest Department. The Office Memorandum does not speak of any valid certificate from any concerned department. The law relating to conflict of two provisions is that whenever, there is a conflict between the provision in an agreement and more so, in the form of a clause in the preamble and that of an Office Memorandum issued by the appropriate authority in the Government, the provision of Office Memorandum would prevail over such clause in the preamble of the agreement. 13. In view of such position of law, the Clause 10 of the preamble has to be read that the contractors would require to produce the relevant document in support of the purchase of the forest products or the minor mineral. 14. In such view of the matter the reference of Mr. T.C. Chutia to clause 10 of the preamble of the agreement also does not satisfy the requirement as provided by this Court, in the case of Muslim Ali (supra) and the order passed in WP(C) No.1066/2015, that unless there is a condition incorporated in the agreement requiring contractor to produce any such document, the respondent PWD would be dis entitled to deduct the component of the royalty from the bills of the contractor. Accordingly, this Court is of the view that the component of the forest royalty, from the bills of the petitioners in WP(C) No.1234/2017, WP(C) No.862/2017 WP(C) No.930/2017 WP(C) No.931/2017 and WP(C) No. 934/2017 were deducted without any authority of law. Accordingly, the respective amount deducted from the different bill of such petitioners, are liable to be refunded by the respondent PWD. 15. In the event, the said amount had already deposited with the Forest Department, the respondent PWD shall take steps to bring it back from the Forest Department and refund it to the petitioner contractors. Accordingly, the deduction of royalty that is proposed to be made from the bills of the contractors in WP(C) No.933/2017 and WP(C) No.862/2017 shall not be deducted by the respondent authorities. 16. However, Mr. T.C. Chutia, learned Addl. Senior Govt. Advocate expressed an apprehension that the PWD is not in a position to know as to from which source the contractors have procured their minor mineral which they have used for construction work under the department, and in such a situation it is difficult for the respondent PWD to arrive at a conclusion as to whether the required royalty had been paid or not. In order to mitigate such grievance, it would be sufficient if henceforth, the respective contractors while submitting their bills would also produce a document/voucher from the concerned source from which such minor mineral or forest produces are being procured. On the document being produced, the respondent PWD, if so advised, can get it verified from the Forest Department as to the authenticity and legality of the source. Such a requirement would also satisfy the requirement of the provision of the Office Memorandum dated 17.06.2000, which requires the contractors to produce the documents in order to enable the authorities to verify its authenticity of the source. 17. But, however, as provided by this Court in Muslim Ali's case (Supra), the same has to be made a part of the terms and conditions of the agreements that the department would like to enter with the respective contractors. Upon such terms and conditions specifically providing for such document, if incorporated in the agreement, thenceforth, the contractors would be required to provide the relevant purchase voucher of the source from which the minor mineral materials had been procured. With the above observation, these writ petitions stand disposed of. Upon such terms and conditions specifically providing for such document, if incorporated in the agreement, thenceforth, the contractors would be required to provide the relevant purchase voucher of the source from which the minor mineral materials had been procured. With the above observation, these writ petitions stand disposed of. Interim order, if any, passed earlier stands vacated.