1. Various contractors disputed the imposition of building and construction workers' cess by the highway authority, contending that welfare boards were not constituted at the time of bid submission. (Para 1 , 17 , 41 , 44 , 45 , 46 , 47 , 48 )
Back
Next 
2026 Supreme(SC) 79
SUPREME COURT OF INDIA
SANJAY KUMAR, ALOK ARADHE, JJ.
Prakash Atlanta (JV) – Appellant
Versus
National Highways Authority Of India – Respondent
Civil Appeal No. 4513 of 2025 With C.A. No. 5416 of 2025 C.A. No. 5302 of 2025 C.A. No. 5301 of 2025 C.A. No. 5304 of 2025 C.A. No. 5412 of 2025
Decided On : 20-01-2026
Advocates appeared:
For the Appellant(s) : Ms. Aishwarya Bhati, A.S.G. Ms. Neetica Sharma, Adv. Mr. Naman Saraswat, Adv. Ms. Manisha Chava, Adv. Mr. Ram Money, Adv. Mr. A.P. Singh, Adv. Mr. Vikas Soni, Adv. Mr. Tavinder Sidhu, Adv. M/s. M.V. Kini & Associates, AOR Mr. Nakul Dewan, Sr. Adv. Mr. Chirag M. Shroff, AOR Mr. Dhananjay Kataria, Adv. Mr. Chanchal Kumar Ganguli, AOR Mr. Manish Bishnoi, Adv. Ms. Gunjan Sinha Jain, Adv. Ms. Muskaan Gopal, Adv.
For the Respondent(s): Mr. V. Giri, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Victor Das, Adv. Mr. Vipul Singh, Adv. Ms. Shruti Arora, Adv. Ms. Nidhi Sri, Adv. Ms. Aishwarya Mishra, Adv. Mr. E.C. Agrawala, AOR Mr. Chirag M. Shroff, AOR Mr. K. Parameshwar, Sr. Adv. Mr. M.V. Mukunda, Adv. Mr. N. Sai Kaushal, Adv. Mr. Nishanth Patil, AOR Mr. R. Sathish, AOR Mr. Rajesh Kumar, Adv. Mr. K.K. Mohan Das, Adv. Mr. Mathan Joseph, Adv. Mrs. S. Geetha, Adv. Mr. Chanchal Kumar Ganguli, AOR Mr. Manish Bishnoi, Adv. Ms. Gunjan Sinha Jain, Adv. Ms. Muskaan Gopal, Adv. Mr. Arjun Raghavendra M., Adv. Mr. Dhaval Deshpande, Adv. Mr. Amir Arsiwala, AOR Mr. Divyansh Jain, Adv. Mr. Stephin George, Adv. Mr. Akanksha Jain, Adv. Mr. Apoorv Saini, Adv. Mr. Subhasish Bhowmick, AOR Mr. Deepak Kumar, Adv. Mr. Subhasish Bhowmick, AOR
For the Appellant(s) : Ms. Aishwarya Bhati, A.S.G. Ms. Neetica Sharma, Adv. Mr. Naman Saraswat, Adv. Ms. Manisha Chava, Adv. Mr. Ram Money, Adv. Mr. A.P. Singh, Adv. Mr. Vikas Soni, Adv. Mr. Tavinder Sidhu, Adv. M/s. M.V. Kini & Associates, AOR Mr. Nakul Dewan, Sr. Adv. Mr. Chirag M. Shroff, AOR Mr. Dhananjay Kataria, Adv. Mr. Chanchal Kumar Ganguli, AOR Mr. Manish Bishnoi, Adv. Ms. Gunjan Sinha Jain, Adv. Ms. Muskaan Gopal, Adv.
For the Respondent(s): Mr. V. Giri, Sr. Adv. Mr. Mahesh Agarwal, Adv. Mr. Victor Das, Adv. Mr. Vipul Singh, Adv. Ms. Shruti Arora, Adv. Ms. Nidhi Sri, Adv. Ms. Aishwarya Mishra, Adv. Mr. E.C. Agrawala, AOR Mr. Chirag M. Shroff, AOR Mr. K. Parameshwar, Sr. Adv. Mr. M.V. Mukunda, Adv. Mr. N. Sai Kaushal, Adv. Mr. Nishanth Patil, AOR Mr. R. Sathish, AOR Mr. Rajesh Kumar, Adv. Mr. K.K. Mohan Das, Adv. Mr. Mathan Joseph, Adv. Mrs. S. Geetha, Adv. Mr. Chanchal Kumar Ganguli, AOR Mr. Manish Bishnoi, Adv. Ms. Gunjan Sinha Jain, Adv. Ms. Muskaan Gopal, Adv. Mr. Arjun Raghavendra M., Adv. Mr. Dhaval Deshpande, Adv. Mr. Amir Arsiwala, AOR Mr. Divyansh Jain, Adv. Mr. Stephin George, Adv. Mr. Akanksha Jain, Adv. Mr. Apoorv Saini, Adv. Mr. Subhasish Bhowmick, AOR Mr. Deepak Kumar, Adv. Mr. Subhasish Bhowmick, AOR
The interpretation of the Building and Other Construction Workers Act and the Cess Act requires the establishment of welfare boards for the effective levy and collection of cess; until then, contractors are not liable for cess in existing contracts.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 - Building and Other Construction Workers’ Welfare Cess Act, 1996 - Applicability of cess post notification of respective welfare boards - Court affirmed the stance that without constitution of welfare boards, levy of cess under the Cess Act is not tenable - Relevant statute timelines established but due to procedural lapses, the Acts remained unenforced for an extended duration - Statutory obligations outlined in Clause 14.3 and Clause 70.8 of contracts held as not applicable for past contracts where no provision existed at bid submission time to incorporate cess - Therefore, responses to statutory obligations need to align with legislative readiness - Findings under previous arbitral awards are confirmed; appeals of the National Highways Authority dismissed except one related to Prakash Atlanta JV where liability for cess post-termination of contracts was ruled out. (Paras 1-60)
(B) Interpretation of Statutes - The importance of subsequent legislation vs. existing obligations was re-iterated, emphasizing compliance only when requisite framework for collection and disbursement as per Acts is ready. (Paras 51-59)
(C) Arbitrary interpretations unsubstantiated by valid reasoning were disallowed; maintaining the integrity of arbitral awards as final determinations absent of explicit legal violations is highlighted. (Paras 32-36)
Judgement Key Points
Certainly. Here is a summary of the judgement based on the provided document:
The Supreme Court examined the legal interpretation and implementation of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act), and the Building and Other Construction Workers Welfare Cess Act, 1996 (Cess Act), particularly focusing on whether these Acts could be considered as ‘subsequent legislation’ for contractual obligations in construction projects. The Court noted that both Acts were enacted in 1996, with the Cess Act coming into force earlier, but their effective implementation was delayed due to the failure of the authorities to establish the necessary Welfare Boards, which are essential for the collection and utilization of the cess. The Court emphasized that the Acts and Rules remained largely dormant until the machinery for implementation was put into place, and that the constitution of Welfare Boards was a prerequisite for the levy and collection of cess.
The Court clarified that the Acts are designed to be complementary, with the Cess Act intended to augment resources for Welfare Boards created under the BOCW Act. Without the establishment of these Boards, the collection of cess was not legally enforceable. The Court also highlighted that the Acts’ operative dates do not automatically imply their effective application, especially in the absence of the necessary administrative machinery.
In relation to contractual clauses, the Court found that the interpretation of ‘subsequent legislation’ clauses by arbitral tribunals was reasonable and plausible. The tribunals correctly applied the principles of contractual interpretation, especially considering the timing of bids and the enactments’ effective machinery. The Court reaffirmed that arbitral awards should only be disturbed if they are perverse or illegal, and that the courts should respect the autonomy and expertise of arbitrators in interpreting contractual terms.
The Court dismissed the appeals filed by the National Highways Authority of India (NHAI), affirming the arbitral awards in favor of the contractors in cases where the Acts and Rules were not effectively in force at the time of the contracts. Conversely, it allowed the appeal of a contractor involved in a case where the contract was entered into before the Acts’ effective machinery was established, and the collection of cess was not yet operational, thereby setting aside the orders holding the contractor liable for cess.
Overall, the judgement underscores that the validity of cess collection and contractual obligations depends critically on the actual operationalization of the relevant welfare legislation, and that contractual interpretation should be based on the facts and the timing of legislative and administrative measures.
Legal Category Hierarchy
Table of Contents
2. The authority argued the cess act applied from its notification irrespective of board constitution, whereas contractors contended the lack of statutory machinery prevented its application as subsequent legislation. (Para 17 , 49 )
3. The absence of established welfare boards rendered the collection of cess logically and legally impossible; therefore, the levy constitutes a fee requiring functional statutory machinery for valid assessment. (Para 35 , 36 , 37 , 50 , 51 , 52 )
4. Constitution of welfare boards under the act is a sine qua non for the valid levy and collection of cess, precluding retrospective liability before such machinery exists. (Para 22 , 50 , 59 )
5. The court dismissed the authority's appeals and set aside orders holding the contractor liable for cess in a contract concluded and initiated prior to the necessary statutory notification. (Para 60 )
6. Is the constitution of Welfare Boards a condition precedent for the levy and collection of cess under the Cess Act?
Yes. The court held that because the Cess Act is complementary to the BOCW Act and intended to augment the resources of the Welfare Boards, the levy and collection of cess cannot arise in the absence of such Boards, which constitute the necessary machinery for effectuating the statutory scheme. (Para 35 , 36 , 50 , 59 )
7. Does the failure to factor in cess during bid submission, before the establishment of statutory machinery, qualify as subsequent legislation?
Yes. Where the required machinery for cess collection did not exist at the time of bidding or contract formation, the notification of rules or constitution of boards post-facto triggers the subsequent legislation clause, entitling the contractor to reimbursement as the levy could not have been reasonably anticipated. (Para 38 , 40 , 51 , 52 )
8. To what extent can courts under the Arbitration and Conciliation Act interfere with an arbitral tribunal's interpretation of contractual terms?
Courts cannot sit in appeal over an arbitral award. Interference is restricted to limited grounds, such as patent illegality or violation of fundamental public policy; if the tribunal's interpretation of contractual clauses is a plausible, reasonable, or possible view, it must be upheld. (Para 23 , 27 , 29 , 30 , 52 , 59 )
JUDGMENT :
SANJAY KUMAR, J.
1. These civil appeals, sourced in arbitral awards passed under the Arbitration and Conciliation Act, 19961[For short, the ‘Arbitration Act’], seek to raise questions about the interpretation and implementation of two enactments – ‘The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996’2[For short, ‘the BOCW Act’], and ‘The Building and Other Construction Workers’ Welfare Cess Act, 1996’3[For short, ‘the Cess Act’]. Prakash Atlanta (JV) filed the first of these appeals, viz., Civil Appeal No. 4513 of 2025, while National Highways Authority of India4[For short, ‘NHAI’] is the appellant in the other five appeals, viz., Civil Appeal Nos. 5301, 5302, 5304, 5412 and 5416 of 2025. Insofar as the appeals filed by NHAI are concerned, a common issue arises therein. The issue is as to whether the BOCW Act and the Cess Act can be treated as ‘subsequent legislation’ for the purposes of the contracts entered into by NHAI with its contractors, the respondents in NHAI’s five appeals. By way of their awards passed in favour of the said respondents, the arbitral tribunals held that these Acts did qualify as ‘subsequent legislation’.
2. This being the milieu, it would be apposite to first note the statutory schemes of the BOCW Act and the Cess Act. Both these enactments had their origin in Ordinances promulgated on 03.11.1995. These Ordinances were followed by the later Ordinances dated 05.01.1996, 27.03.1996 and 20.06.1996. Finally, both the enactments took shape on 19.08.1996, with the sanction of the Parliament. The BOCW Act came into force on 01.03.1996, as per Section 1 (3) thereof. The Cess Act, on the other hand, came into force even earlier on 03.11.1995, as per (3) thereof. The preamble to the BOCW Act states that it is an Act to regulate the employment and conditions of service of building and other construction workers and to provide for their safety, health and welfare measures and for other matters connected therewith or incidental thereto. The Cess Act is linked to the BOCW Act, as is evident from its preamble and Statement of Objects and Reasons, which state that it is an Act to provide for levy and collection of cess on the cost of construction incurred by employers with a view to augmenting the resources of the Building and Other Construction Workers’ Welfare Boards constituted under the BOCW Act.
3. Section 1 (4) of the BOCW Act states that the said enactment would apply to every establishment which employs, or had employed on any day of the preceding twelve months, ten or more building workers in any building or other construction work. Section 2 (1)(a) thereof defines ‘appropriate Government’ to mean the Central Government in cases falling within Clauses (i) and (ii). (1)(a)(ii) pertains to public sector undertakings which may be specified by the Central Government, under notification, that employ building workers either directly or through a contractor. The ‘Explanation’ thereto provides that a public sector undertaking (PSU) means any corporation established by or under any Central, State or Provincial Act or a Government company, which is owned, controlled or managed by the Central Government. (1)(a)(iii) states that, in relation to any other establishment which employs building workers, either directly or through a contractor, the Government of the State in which that other establishment is situated would be the appropriate Government. (1)(c) defines ‘Board’ to mean a Building and Other Construction Workers’ Welfare Board constituted under 8(1) thereof. (1)(d) defines ‘Building or other construction work’ to include construction, alteration, repairs, maintenance or demolition of, or in relation to, amongst others, roads also. (1)(i) defines ‘employer’ inclusively and it reads as follows:
‘(i) “employer”, in relation to an establishment, means the owner thereof, and includes,—
(i) in relation to a building or other construction work carried o
