M/S Bsbk Private Limited vs. State Of Chhattisgarh

Facts

M/s BSBK Private Limited (Petitioner) was awarded a contract by the Municipal Corporation, Bilaspur on March 7, 2019, for the construction of 5785 houses under the Pradhan Mantri Awas Yojna. The contract value was Rs. 2,62,11,92,000/- with a completion period of 36 months. The Petitioner faced significant delays in site handover, starting from June 2019, which impacted the project timeline and incurred financial losses. The Petitioner sought price escalation for work executed beyond the original contract period and refund of GST paid at an enhanced rate. The Municipal Corporation and other respondents are the revenue authorities. The Petitioner filed multiple writ petitions challenging the rejection of its representations and seeking directions for payment of price escalation and GST refund.

Held

The Court held that the Petitioner is entitled to price escalation for the work executed. The reasoning was based on the fact that the Municipal Corporation itself had asked the Petitioner to apply for price escalation. The Court relied on Supreme Court judgments in Assam State Electricity Board and NTPC Limited, which established that price escalation is a normal incident of delays in contract performance, especially in an inflationary environment, and is justified when delays are attributable to the other party. The Court also held that the Petitioner is entitled to a GST refund at the enhanced rate of 18% with effect from July 18, 2022, as per Clause 3.27 of the Agreement, given the government's notification increasing the GST rate. The Court found the writ petitions to be maintainable, referencing Supreme Court decisions in Tantia Construction Private Limited and Unitech Limited, which state that alternative remedies do not bar writ jurisdiction when there is discrimination, arbitrariness, or procedural impropriety. The Court also emphasized the importance of natural justice, citing Rajesh Agrawal, and noted that the Petitioner's representation was rejected cryptically without a proper hearing. The impugned order dated September 8, 2023, was quashed. The Court directed the Secretary, Department of Urban Administration and Development, to critically examine the matter of site allotment and prepare a report within sixty days, affording a hearing to all concerned. Subsequently, after considering inflation rates, an appropriate order for price escalation, particularly for sites handed over in 2022 and thereafter, was to be passed within a further sixty days. No coercive steps were to be taken against the Petitioner for 120 days.

Key Issues

1. Whether the Petitioner is entitled to price escalation for work executed beyond the original contract period of 36 months, considering the delays in site handover attributable to the respondents? (Question of law and fact, turning on contract terms and principles of fairness). 2. Whether the Petitioner is entitled to a refund of GST at the enhanced rate of 18% with effect from July 18, 2022, as per Notification No. 3/22 dated July 13, 2022? (Question of law, turning on the interpretation of the notification and contract clauses). Petitioner's Arguments: The Petitioner argued that the delays in site handover were solely attributable to the respondents, leading to extended execution periods. They contended that under principles of fairness and supported by Supreme Court judgments like Assam State Electricity Board and NTPC Limited, they are entitled to price escalation. Regarding GST, they argued that the increase in rate mandated by the government should be refunded as per Clause 3.27 of the agreement. They also argued that the writ petitions are maintainable despite an arbitration clause, as the issues involve arbitrariness and discrimination by the state instrumentalities, citing Tantia Construction Private Limited and Unitech Limited. They further argued that the rejection of their representation was cryptic and lacked adherence to natural justice principles. Respondents' Arguments: The respondents' arguments are not explicitly detailed in the provided excerpt regarding the specific contentions against price escalation or GST refund. However, the judgment mentions the existence of an arbitration clause (Clause 1.21) and a clause barring price escalation (Clause 3.26) as potential counterarguments, which the court addresses.