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IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD
GHULAM MOHAMMED and B.SESHASAYANA REDDY, JJ.
Continental Construction Company — Appellant
Versus
Board of Trustees, Visakhapatnam Port Trust, rep. by its Secretary, Visakhapatnam — Respondent
C.M.A. No.1299 of 2000
Decided on 20-02-2008.
Continental Construction Company – Indian Arbitration Act, 1940 – Section 39 – Tender – Royalty - Application filed under Section 30 of the Indian Arbitration Act, 1940 and set aside the award and directed the appellant herein to pay seigniorage fee and cess amounting together with interest Back ground facts of the case Port Trust invited tenders for execution of C2 and C3 contract works are land based works at Lova Gardens, and Marine Works and break water construction -Continental Construction Company submitted tender and the same came to be accepted after due negotiations letters of intent for both C2 and C3 contracts were issued agreements were entered into between the parties contractor was permitted to use the quarries of the claimant and the claimant agreed to pay value of sized rocks contractor agreed to pay royalty to the claimant royalty was to be paid only on quantity of rock actually used on works while quarrying operations were in progress, demand notices came to be issued by District Revenue Officer under A.P. Minor Mineral Concession Rules demanding seigniorage fee District Collector, Visakhapatnam attached the dumpers of the contractor –Held, counsel referred the above clause copiously in support of their respective contentions. Therefore, we have given close reading of the above-referred clause. Under the proviso to the above-referred clause, the Board i.e, claimant undertook to reimburse all such sums as the engineers would certify to have properly payable and paid by the contractor in respect of such fee other than fee which the contract requires the contractor to pay. It indicates that in case the terms of the contract do not require the contractor to pay such fees, the claimant undertook to reimburse clause is to be read along with Clauses 9 and 13 of the Instructions to Tenderers. Under of Instructions to Tenderers rates mentioned in the bill of quantities by the contractor are inclusive of all taxes, duty, etc seigniorage fee comes within the meaning of any other imposition of like nature claimant paid the value of the rock extracted from the quarries contractor having received the value of the rock in accordance with the terms of the agreement cannot be permitted to contend that he is not liable to pay the seigniorage fee if the contention of the contractor is accepted, the claimant has to pay more than what he received as royalty royalty" received is approximately, and whereas the seignior fee a construction of the terms of the contract tends to absurdity learned arbitrator has totally misread the terms of the contract tends to the liability of payment of seigniorage fee on the claimant court below considered the terms of the contract in right perspective and recorded a finding that It is the contractor who IS liable to pay seigniorage fee court below is justified in setting aside the findings of the learned Umpire with regard to payment of seigniorage fee and cess – Civil Miscellaneous Appeal is partly allowed.
This Civil Miscellaneous Appeal is filed under Section 39 of the Indian Arbitration Act, 1940 questioning the order dated 5.1.2000 passed in O.P.No.14 of 1990 on the file of 1st Additional Senior Civil Judge, Visakhapatnam, whereby and whereunder the learned Additional Senior Civil Judge allowed the application filed under Section 30 of the Indian Arbitration Act, 1940 and set aside the award dated 25.9.1989 and directed the appellant herein to pay seigniorage fee and cess amounting to RS.27,84,617.1 0 together with interest @ 12 percent from 23.6.1988.
2. Back ground facts of the case, in brief, are:
Visakhapatnam Port Trust (hereinafter referred to as Claimant) invited tenders for execution of C2 and C3 contract works. They are land based works at Lova Gardens, and Marine Works and break water construction. Continental Construction Company (hereinafter referred to as the Contractor) submitted tender and the same came to be accepted after due negotiations. The letters of intent for both C2 and C3 contracts were issued on 7.5.1971 and agreements were entered into between the parties. The contractor was permitted to use the quarries of the claimant and the claimant agreed to pay value of sized rocks. The contractor agreed to pay royalty to the claimant @ RS.2.50/- per 100 eft. However, royalty was to be paid only on quantity of rock actually used on works. While quarrying operations were in progress, demand notices came to be issued by District Revenue Officer under A.P. Minor Mineral Concession Rules demanding seigniorage fee. District Collector, Visakhapatnam attached the dumpers of the contractor. Thereupon, the contractor filed W.P.No.3386 of 1974. The said writ petition came to be allowed on 9.12.1974 directing the District Collector to issue appropriate notice to the claimant and the contractor. Accordingly, notices came to be issued to the contractor and the claimant. Ultimately, liability to pay seigniorage fee came to be fastened on the claimant by the Department of Mines and Geology vide proceedings No.2195/S1/75 dated 14.9.1978 of the Director of Mines and Geology, Hyderabad.
3. The claimant filed W.P.No.4940 of 1978 assailing the order of the Director of Mines and Geology as confirmed by Government of A.P. The said writ petition came to be allowed in part setting aside the penalty and giving liberty to the claimant to recover seigniorage fee if it is permissible according to law. For better appreciation, we may refer the relevant portion of the order and it is thus:
"It is well settled that levy of penalty is not automatic nor is the levy at ten times obligatory. It depends upon the facts of a given case. The Collector himself had informed the petitioner on an earlier occasion that no such permission is required. The petitioner bona fide believed in the said representation, and did not think it necessary to apply for permission for the said quarrying. There was also som ambiguity about the language of the proviso to Rule 5(1). In all the circumstances, the levy of penalty, in our opinion, is totally unwarranted and uncalled for. After all, the petitioner is a public sector concern, and it cannot be believed that it carried on quarrying operations inspite of knowing that it is illegal. Not that we are saying that such knowledge is necessary. What is important is the letter of the Collector dated 28.2.1970, which clearly told the petitioner that such permission is not necessary. In these circumstances, the levy of penalty must be held to be bad.
The Writ petition is accordingly, allowed in part, and the levy of penalty in a sum of RS.2,03,25,672.90 ps., is quashed. The rest of the demand shall, however, stand undisturbed. There shall 'be no order as to costs.
So far as the question as to who is liable to pay the said fee is concerned, it is a matter between the petitioner and the contractor. The contractor is not represented before us. Without hearing him it is not possible for us to
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