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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
National Highway Authority of India – Petitioner
Versus
M/s Progressive-MVR Joint Venture – Respondent
O.M.P. (COMM) No. 391 of 2017 and I.A. No. 12843 of 2017
Decided On : 28-02-2018
NHAI - Arbitration and Conciliation Act, 1996 - Section 34 - Building and Other Construction Workers Welfare Cess Act, 1996 - [Section 34 of the Arbitration and Conciliation Act, 1996] - The court discussed the applicability of the Building and Other Construction Workers Welfare Cess Act, 1996 and its impact on the contract between the parties. The key legal provisions considered were Clause 34.2 of the Conditions of Particular Application (COPA) and the notification of Bihar Building and Other Construction Workers Welfare Rules, 2005. The court's decision was influenced by the interpretation of the Cess Act as a subsequent legislation and the precedent set by earlier decisions.
Fact of the Case:
The petitioner NHAI filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an Arbitral Award related to disputes arising from an agreement for construction works. The main controversy was the deduction of 1% cess under the Building and Other Construction Workers Welfare Cess Act, 1996 by NHAI, which the respondent disputed as not being operative at the time of tender submission.
Finding of the Court:
The court found that the Cess Act was in contemplation at the time of entering into the Agreement, but accepted the Arbitral Tribunal's decision that it should be considered as a subsequent legislation. The court also upheld the costs awarded by the Arbitral Tribunal in favor of the respondent.
Issues: The issues involved the applicability of the Cess Act, the interpretation of Clause 34.2 of COPA, and the dispute over costs awarded by the Arbitral Tribunal.
Ratio Decidendi: The court's decision was based on the interpretation of the Cess Act as a subsequent legislation and the precedent set by earlier decisions, including the notification of relevant rules governing the Cess Act.
Final Decision: The petition was dismissed, and the court upheld the impugned award and costs awarded by the Arbitral Tribunal.
1. The petitioner (hereafter "NHAI") has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter "the Act") inter-alia, impugning an Arbitral Award dated 29.06.2017 (hereafter "the impugned award"). The impugned award was rendered in the context of disputes that had arisen in respect of an agreement dated 20.10.2005 (hereafter "the Agreement") entered into between the concerned parties for the works pertaining to “Four Lanning from Km 402.00 to Km 440.00 of Gopalganj- Muzaffarpur Section of NH-28 in Bihar, Contract Package No. LMNHP-EW-II-(WB)-10.”
2. The controversy involved in the present petition relates to the award of Rs. 2,79,36,333/- which was awarded to the petitioner in respect of the amount of 1% cess deducted by the NHAI on account of contributions made under the Building and Other Construction Workers Welfare Cess Act, 1996 (hereafter "the Cess Act"). The Arbitral Tribunal accepted the respondents claim that the said legislation was not operative at the time of submission of the tender and, therefore, ought to be considered as a subsequent legislation. The NHAI disputes the same. According to the NHAI, the Cess Act was enacted in 1996 and was specifically mentioned in Clause 34.2 of the Conditions of Particular Application (COPA), which formed an integral part of the contract between the parties; thus, the same could not be considered as a subsequent legislation.
3. The learned counsel appearing for the NHAI also earnestly canvassed that the costs awarded by the Arbitral Tribunal in favour of the respondent (claimant before the Tribunal) was unsustainable as the NHAI had already paid its share of costs as per its schedule of fees.
4. Briefly stated, the relevant facts are that the tenders for the aforementioned works were invited sometime in July, 2005. Pursuant to the said invitation, the respondent submitted its bid on 25.07.2005.
5. There is no dispute that in terms of the Agreement, the respondent would not be liable to bear additional costs on account of any subsequent legislation enacted after 28 days prior to the date of submission of the tender (that is after 27.06.2005).
6. Although, the Cess Act was enacted earlier in 1996, it is admitted that the same was not being implemented as the requisite rules had not been framed. These rules – Bihar Building and Other Construction Workers Welfare Rules, 2005 (hereafter "BOCW Rules") were notified by the State Government by a Gazette Notification dated 03.09.2005. Pursuant to the said notification, the Welfare Board was constituted on 18.02.2008 and a circular dated 04.09.2008 was issued by the State Government (Labour Department) calling upon various departments to deposit the cess levied under the Cess Act.
7. The NHAI awarded the contract to the respondent on 20.10.2005.
8. The petitioner commenced deducting the cess from the Interim Payments Certificates (IPC) issued to the respondent from 2007 onwards.
9. Before proceeding further, it would be relevant to refer to the relevant clause of COPA, which is set out below:-
“Clause 34.2 – Compliance with Labour Regulations
During continuance of the contract, the Contractor and his Sub-Contractors shall abide at all times by all existing labour enactments and rules made thereunder, regulations, notifications and bye laws of State or Central Government or local authority and any other labour law (including rules), regulations bye laws that may be passed or notification that may be issued under any labour law in future either by the State or the Central Government or the local authority. Salient features of some of the major labour laws that are applicable to construction industry are given below. The Contractor shall keep the Employer indemnified in case any action is taken against the Employer by the competent authority on account of contravention of any provisions of an
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