The Kerala Land Development Corporation Limited v. Sebastian Jose - Kerala High Court, 22 June 2022

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI WEDNE AY, THE 22ND DAY OF JUNE 2022 / 1ST ASHADHA, 1944 W.A. NO.1710 OF 2021 (AGAINST THE JUDGMENT DATED 13.09.2021 IN WP(C)11662/2021 OF HIGH COURT OF KERALA) APPELLANTS/RESPONDENT No.2 & 3 IN W.P.(C): 1 THE KERALA LAND DEVELOPMENT CORPORATION LIMITED, TC 11/570, MUSEUM BAINS COMPOUND, KODIAR P.O, TRIVANDRUM 695 003, REP. BY ITS MANAGING DIRECTOR. 2 THE CONSTRUCTION ENGINEER, KLDC LTD., THRISSUR, 28/725, CHEMBUKAVU, NEAR RAMA NILAYAM, THRISSUR 680 020. BY ADVS. RAVI KRISHNAN A.KUMAR RESPONDENTS/PETITIONER: 1 SEBASTIAN JOSE, AGED 38 YEARS, S/O.K.P. JOSE, RESIDING AT KOORAN KALLUKARAN HOUSE, PULIYANAM DISTRICT POST, ANGAMALY, ERNAKULAM -682 017 2 THE STATE OF KERALA, REP. BY THE PRINCIPAL SECRETARY, PUBLIC WORK DEPARTMENT, ROADS AND BRIDGES ADMINISTRATION, GOVERNMENT SECRETARIAT, TRIVANDRUM 695 001. 3 NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT, PLOT C-24, G BLOCK, BANDRA KURLA COMPLEX, BKC ROAD, BANDRA EAST, MUMBAI, MAHARASHTRA-400 051, REP. BY ITS MANAGING DIRECTOR. BY ADVS. SANTHOSH MATHEW ARUN THOMAS KARTHIKA MARIA ANIL SEBASTIAN PULICKEL THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 22.06.2022, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

W.A. No.1710 of 2021 2 JUDGMENT (Dated: 22nd June, 2022 Basant Balaji, J Respondents 2 and 3 in W.P.(C)No.11662 of 2021 are the appellants and the 1st respondent in the writ petition. (The parties are referred to as they are arrayed in the writ petition). The writ petition was filed for the following reliefs: i) Call for the records leading to Ext.P9 and issue a writ of certiorari for quashing the same, ii) Issue a writ of mandamus or any other appropriate writ order or direction, declaring that the terms and conditions contained in Ext.P1 shall govern the contract for the work titled NABARD RIDF XXII Infrastructural works in Kurinjikkal Construction of bridge across Puzhakkal Thodu in Kurinjikkal Puthurkkara in Thrissur District and iii) Issue a writ of mandamus or any other appropriate writ order or direction, directing the 2nd and 3rd respondent to pay the GST component against all the bills raised by the petitioner.

The petitioner is a Class-A contractor undertaking Government works across State of

W.A. No.1710 of 2021 3 Kerala. The respondent invited tender for the work titled “NABARD RIDF XXII Infrastructural works in Kurinjikkal–Construction

of Bridge

across Puzhakkalthodu in Kurinjikkal Puthurkkara in Thrissur District”. The petitioner submitted his bid for the work for an amount of Rs.3,92,70,009.03 excluding the value of GST. Being the lowest bidder as per selection notice dated 28.09.2018, the petitioner was instructed by the 3rd respondent to execute the agreement for the work. The petitioner thereafter commenced the work described above and when a portion of the work had been completed and measured by the 3rd respondent, he submitted 1st stage part payment bill but the 3rd respondent refused to pay the GST component in the bill and the amount excluding GST was paid to the petitioner. According to the petitioner, the stand taken by the respondent is a clear violation of

W.A. No.1710 of 2021 4 the terms and conditions stipulated in the Tender Document. A representation was submitted before the 2nd and 3rd respondents by the petitioner requesting to pay the GST portion of the bill, but the same was also rejected as per Ext.P9 order dated 28.01.2021. Impugning the said order the writ petition is filed by the petitioner.

The 3rd respondent filed a counter affidavit stating that the payment of GST is a statutory obligation of the person who renders the service or executes the work under the contract. It was stated that the word except Goods and Service Tax (GST) in clause 3.3.3 of Ext.P1 was intended to avoid a separate GST amount in the bid but it was always included in the estimate and all the other bidders quoted their bid by including the GST component also. If the other bidders had not included the GST in their quotes their bids

W.A. No.1710 of 2021 5 would have been the lowest than that of the petitioner's. It was also contended that as per G.O.(P)No.2/2018/PWD, taxpayer must pay GST directly to the tax system and also that the Government does not provide Goods and Service Tax beyond the contract amount.

The learned single judge, referring to clauses set out in Ext.P1, more particularly Clause 3.3.3 and also BoQ (Bill of Quantities), came to the conclusion that Ext.P9 is contrary to Notice Inviting Tender and it was declared that the terms and conditions contained in Ext.P1 shall govern the contract, hence Ext.P9 was set aside. It was held that, the petitioner in terms of Clause 3.3.3 was not bound to include GST in the bid and therefore directed the respondents 2 and 3 to pay the GST component against the bill raised by the petitioner as expeditiously as possible and

W.A. No.1710 of 2021 6 at any rate within a period of three months from the date of receipt of the copy of the judgment.

The main contention against the impugned judgment is that Clause 3.3.3 of notice inviting tender is incorrectly and erroneously interpreted. Payment of GST being a statutory obligation on persons who render service and the obligation is legally on the petitioner but not the respondent/corporation. The term 'except' Goods and Service Tax (GST) stated in Clause 3.3.3 was intended to separate GST amount in bid, but it included in the estimate to be made by a tenderer. He further contended that, as per G.O. (P)No.2/2018/PWD dated 27.01.2018, the Government of Kerala has issued a detailed instruction regarding execution of work for PWD as per GST Rules stating that the Government will not pay GST in excess of the contract amount. Clause 3.3.3,

W.A. No.1710 of 2021 7 notice inviting tender is at par with the Government order. If the petitioner had any doubt or needed clarification in the clause of contract, he ought to have approached the authorities prior to the issuance of the work order as per clause 2.2.1 of the notice inviting tender. He argues that at the time of preparation of the estimate, tax component is added to the rate in every item included in the work. Therefore, he prayed that the learned single judge has failed to appreciate Clause 3.3.3 in the right perspective and allowed the writ petition.

Clause 3.3.3 specifically states that: “the rate quoted shall also include all statutory tax and other mandatory remittances payable by the contractor as per the existing tax systems and Government orders which are applicable to the contract except Goods and Service Tax”. The petitioner while quoting the bid has

W.A. No.1710 of 2021 8 specifically excluded the component of GST from the quote in view of the said clause.

The BoQ format appended to Notice Inviting Tender produced as Ext.P3 makes it clear that in column No.7, the total amount to be shown is without taxes and thus the petitioner quoted the amount excluding the GST amount. Before the learned single judge, the contention taken by the respondent/appellant was that the rate to be quoted should include all statutory taxes on the date of submission of the tender and all the taxes shall be paid by the contractor. The payment of GST is a statutory obligation to render service and carryout any contract for Government and that the word except was intended to avoid a separate GST amount in the bid, but it always include in the estimate. The said contention was repelled, taking note of the specific exclusion of the GST

W.A. No.1710 of 2021 9 portion in Clause 3.3.3 and also in column No.7 of BoQ.

The counsel for the appellant relied on the decision reported in Reliance Telecom Limited and Another v. Union of India and Another [(2017) 4 SCC 269], to contend that matters relating to complex auction procedure having enormous financial ramification, interference by the courts based upon any perception which is thought to be wise or assumed to be fair can lead to a situation which is not warrantable and may have unforeseen adverse impact. It was held that in the absence of any arbitrariness or favoritism or exercise of power for any collateral purpose in notice inviting application, the exercise of power of judicial review was not warranted.

In the decision reported in Caretel Infotech Limited v. Hindustan Petroleum

W.A. No.1710 of 2021 10 Corporation Limited and Others [(2019) 14 SCC 81], it was held that, it should not be the endeavour of courts to give their own interpretation to contracts, more specifically tender terms, at the behest of a 3rd party competing for the tender, rather than what is propounded by the party framing the tender. It was further held that the author of the document is the best person to understand and appreciate its requirements.

In Bharat Coking Coal Limited and Others v. Amr Dev Prabha and Others [(2020) 16 SCC 759], the Apex Court went on to hold that in contractual matters, judicial review is very limited and can be invoked only in cases there is public interest and that there is no arbitrariness, illegality discrimination.

10.

Coming to the facts of this case, on a plain reading of Clause 3.3.3 of Notice Inviting

W.A. No.1710 of 2021 11 Tender, it can be seen that, it is clear as day that the GST component is specifically excluded from the rate to be quoted by the bidder and also column No.7 of BoQ specifically excludes taxes from the scope of bid amount. In such view of the matter, the petitioner was justified in quoting the bid excluding the GST components, the appellant having incorporated such a clause in the notice inviting tender cannot turn around after accepting the bid and entering into a contract with the petitioner stating that the GST portion has to be borne by the petitioner and not by the appellant. We are afraid that such an interpretation goes against Ext.P1 especially Clause 3.3.3. 11. Clauses 3.3.5 and 3.3.6 are to be read along with Clause 3.3. 3. Clauses 3.3.5 and 3.3.6 direct that all taxes and mandatory remittance

W.A. No.1710 of 2021 12 applicable to the contract and payable by the contractor as per the existing tax systems and Government Orders shall be payable by the contractor and the Corporation will not entertain any claim what so ever in respect of the same. In the said clause also it is made clear that, however in respect of any such tax payable by the Corporation, wherever legally applicable, the same shall be bound by the Corporation has laid down in the Governmental system in force. Clause 3.3.6 says that all royal taxes, royalty, octroi and other levies payable by the contractor under the contract shall be included in the rates. Reading all three clauses together, it can be seen that all taxes and other mandatory remittance stated in Clauses 3.3.5 and 3.3.6 relate to all statutory taxes and mandatory remittance except Goods and Service Tax. It can only mean that Goods and

W.A. No.1710 of 2021 13 Service Taxes having been specifically exempted from adding in the rates quoted, the same cannot be made inclusive in the subsequent clauses namely, 3.3.5 and 3.3. 6. GST being a tax to be suffered by the ultimate beneficiary, the Corporation for whom the work is done by the contractor has to remit the same.

12.

Heard counsel on either side.

13.

The arguments on both sides are stated and upon due appreciation of the challenge to the judgment under appeal, we hasten to add that the same contentions, however in a different syntax were put forward before the learned single judge. The judgment under appeal has recorded findings on those contentions. In this intra court appeal the respondent/corporation demonstrates how the findings in the judgment are erroneous warranting an interference. The respondent/corporation is the

W.A. No.1710 of 2021 14 maker of the tender conditions. Clause 3.3.3 in clear terms excludes GST component. Inviting the GST component while interpreting subsequent clauses is impermissible. Being the maker, in the event of arguable ambiguity, the benefit of ambiguity is extended not to the maker but the other party.

14.

The learned single judge has judiciously used his discretion and allowed the writ petition declaring that the terms and conditions in Ext.P1 shall govern the contract and that respondents 2 and 3 have to pay the GST component against the bill raised by the petitioner. The decision cited by the counsel for the appellant only prohibits the writ court from interfering in any contractual matter and the interference in the auction procedure when the decision making process is arbitrary and for any extraneous consideration.

W.A. No.1710 of 2021 15 In this case, the learned single judge has not gone into the complexities of the clauses in the notice inviting tender nor substituted any interpretation other than those explicitly provided in the clause. In such view of the matter, the decisions cited (supra) have no application to the facts of this case and are distinguishable. The learned single judge was right in declaring that the GST component was not to be included as per clause 3.3.3 of Ext.P1 and the direction to pay the GST component by respondents 2 and 3 is in tune with the clauses of Ext.P1 and hence there are no grounds to interfere with the judgment of the learned single judge, and hence the writ appeal is dismissed.

15.

Adv.A.Kumar referring to the instructions received from the respondent/corporation submits that Contempt Case stands posted today for framing

W.A. No.1710 of 2021 16 charges

against

the officers

of respondent/corporation and he requests reasonable time for complying with the directions incorporated in the judgment under appeal. He requests 8 to 12 weeks time for complying with the directions.

16.

The learned counsel for the respondent per se does not oppose in granting time for complying with the directions issued by the learned single judge, but objects to the respondents' request to comply with the order within a period of 8 to 12 weeks. We take note of all the attending circumstances in the matter, namely, the effective and bona fide pursuant of remedy available to the respondent/corporation before this Court etc., We deem it appropriate to grant the request made by the appellant by giving 6 weeks time from today to

W.A. No.1710 of 2021 17 comply with the directions issued by the learned single judge. The Contempt Case since stands listed today, the counsel appearing for the parties are given liberty to communicate the outcome of the appeal and gist of the concluding portion of our judgment. Writ Appeal is dismissed with the above observations. S.V.BHATTI, JUDGE BASANT BALAJI, JUDGE ss