THE HON’BLE SRI JUSTICE NOOTY RAMAMOHAN RAO WRIT PETITION NO.21583 OF 2010 14th September, 2011. BETWEEN: M/S.VIJAY LEASING COMPANY M/S.SRI CHENNAKESAVA CONSTRUCTIONS (SCKC) A JOINT VENTURE FIRM, IN THE NAME OF M/S.VLC-SCKC-JV, HAVING ITS OFFICE AT H.NO.8-2-686/k/27, KIMTEE ENCLAVE, ROAD NO.12, BANJARA HILLS, HYDERABAD – 34 REP. BY AUTHORISED SIGNATORY C.VIJAYASEKHAR REDDY .. PETITIONER AND THE A.P.MINERAL DEVELOPMENT CORPORATION LIMITED., (A STATE GOVERNMENT UNDERTAKING) PANCOM BUSINESS CENTRE, 2ND AND 3RD FLOORS, 8-3-945, AMEERPET, HYDERABAD – 500 073 REP. BY ITS VICE CHAIRMAN & MANAGING DIRECTOR .. RESPONDENT THE HON’BLE SRI JUSTICE NOOTY RAMAMOHAN RAO WRIT PETITION NO.21583 OF 2010 O R D E R : This writ petition has been instituted mounting a challenge to the order passed on 16-08-2010 by the respondent-A.P. Mineral Development Corporation Limited. The writ petitioner is a joint venture firm which responded to a tender floated by the respondent on 26.4.2008 for “excavation and removal of 45 lakh cubic meters of Overburden and 15 lakhs MTs of Barytes Ore (ROM) per annum including drilling 110 Dia Wholes, controlled blasting with shock tube initiation, loading, transportation, unloading, stacking and levelling at Mangampet Barytes Mine, Mangampet village, Near Railway Kodur, Kadapa District” for a period of 5 years from the date of commencement of the contract. The bids were opened on 26.5.2008 and the petitioner emerged as the lowest bidder (L1). Though the petitioner had initially quoted its value at Rs.394,93,25,000/- subsequently it has reduced its price by Rs.2.25 ps per cubic meter for the Over burden and consequently brought down the value of its offer to Rs.389,87,00,000/-. This was accepted by the respondent- Corporation on 23.6.2008. As is required by the terms of the letter of intent, the petitioner has furnished the necessary bank guarantee towards security deposit cum performance bank guarantee in a sum of Rs.3.90 crores. The petitioner has commenced the work of excavation on 11.8.2008 and so far he has accomplished work of nearly Rs.252.95 crores of the contracted value. On 16.8.2010 the respondent has issued a letter pointing out that the audit party of the Accountant General during the course of the audit of the books of accounts of the Corporation have observed that the basic service tax rate has been reduced to 10 % from 12 % w.e.f. 24.2.2009 and since service tax is one of the cost components behind the contract value, it was opined by the audit party that the petitioner is liable to pay the differential amount of 2.06 percent. Taking this observation of the audit party into consideration, the Board of Directors of the respondent-Corporation have taken a decision to recover an amount of Rs.2.33 Crores from the petitioner in ten monthly instalments duly deducting the same from the bills payable to the petitioner w.e.f. July, 2010 onwards. It is, this decision, which is challenged in this writ petition. Heard Sri.S.Ravi, learned senior counsel appearing for Sri.B.Chandrasen Reddy, learned counsel for the writ petitioner and Sri.V.Subrahmanyam, learned Standing Counsel for the respondent- Corporation. The learned senior counsel would submit that the petitioner and the respondent have entered into a contract carefully reducing its terms into writing and therefore the conduct of both the parties thereafter should adhere strictly to the terms and conditions stipulated in the said contract. The respondent cannot make any unilateral departure from the terms and conditions contained in the contract and try to reduce the value or values incorporated in the contract resulting in recovery from the bills payable to the petitioner. Learned senior counsel has pointed out that the agreement comprises of the very same conditions stipulated in the tender document upon finalisation of the contract in favour of the writ petitioner. Learned senior counsel has pointed out that paragraph 6.1.2 dealt with the various aspects relating to the price bid and the terms contained therein are set out herein below: “ 6.1.2 PART II: Price Bid : The following documents duly filled in and signed by the tenderer with date and company seal on each paper shall be submitted as PART II of the Tender offer: i) Price quotation as specified in Form J. ii) The rates must be clearly written both in figures and in words in English. iii) The rates quoted in the tender must be firm and hold good for 6 months from the date of opening or Techno commercial bid for acceptance by the Corporation and thereafter throughout the contract period. No escalations whatsoever will be allowed except as provided in the tender. Increase in the rates on any other account shall not be considered. iv) Only the tenderer who quotes rates for the excavation of both Overburden and ROM shall be considered for evaluation. Quoting for part of the work is liable for rejection. v) The rates quoted shall be all inclusive covering the cost of personnel, equipments, materials, escalations (except as provided in the tender) and all other facilities and operations necessary for the satisfactory completion of the work and shall be inclusive of all charges for handling, transport, lead, lift, labour housing, sanitary and medical facilities for labour, construction, tools and plant, electric power and water, workshop, insurance, payment of taxes including Service Tax, Sales Tax etc., and duties watch & ward arrangements, lighting at dump yards etc., and all other expenses of every description which under the contract are to be borne by the CONTRACTOR. All the taxes and levies etc., shall be borne by the contractor as applicable from time to time.” (Emaphasis is generated) Learned senior counsel has also pointedly drawn my attention to the stipulations contained in paragraph 3.6, which dealt with the service tax component and it reads as under: “ 3.6 SERVICE TAX: The liability of payment of Service Tax vests with the successful bidder/contractor basing on the value of the contract less cost of diesel and explosives which will be supplied by the Corporation as per the requirement of the contractor at his cost duly deducting the same from the bills of the contractor as quoted in the tender. In case the Service Tax is payable on Diesel & Explosives, the same shall be borne by the contractor. On payment of Service Tax, the contractor shall submit a copy of the Returns to the Corporation.” Sri.S.Ravi, learned senior counsel would contend that the rates quoted in the tender are required to be firm in all respects and hence thereafter there cannot be any variation in the rates quoted by the petitioner once it is accepted by the respondent. Prior to acceptance a downward revision of price being beneficial to the respondent Corporation it was allowed. Similarly, the rate quoted by the petitioner was to be inclusive of all elements including of all charges liable to be incurred by the petitioner and payment of all taxes including service tax, sales tax etc., and other related duties. It is further made clear that the liability for payment of service tax vests with the successful bidder basing on the value of the contract executed, less cost of diesel and explosives which will be supplied by the Corporation. The contract has also taken care to insulate the Corporation by providing that in case the service tax is payable on diesel and explosives, the same shall be borne by the contract. In other words, should the service tax become payable at any later point of time on diesel or explosives, to the said extent the burden will be to the account of the writ petitioner. Hence, in the face of these conditions contained in the contract any variation in the tax structure will be to the account of the writ petitioner and it will not enure to the benefit of the Corporation. Further, learned counsel would submit that unilaterally the Corporation cannot decide that the petitioner has been paid any amount in excess of its eligibility and then propose to recover any such sum from the bills payable to the petitioner. He, therefore, submits that the impugned order is, prima facie, arbitrary and unsustainable. Per contra, learned Standing Counsel for the respondent-Corporation would submit that it is no doubt true that the offer made by the bidders was required to be a firm offer but that does not mean that the bidder can at any later point of time seek to derive additional advantage due to reduction of any tax structure. Since the auditors have raised a tenable objection and since the respondent is a public sector undertaking, the matter was considered at the highest level and a decision has been taken to recover the excess amount paid to the petitioner. Even while ordering for such recovery the respondent-Corporation acted fairly by proposing to recover the amount in ten monthly instalments so that the petitioner’s interests will not be adversely impacted immediately. Learned Standing Counsel would further submit that as to whether the terms of the contract or stipulations contained therein contain the necessary power for the Corporation to revise, at times, is not a question capable of being adjudicated in a writ petition even though the respondent Corporation is an instrumentality of the State and the proper remedy in such cases should have been by approaching a civil court. Further, the contract itself has contemplated and provided for such a contingency by declaring that all disputes arising from the said contract are liable to be resolved in a civil court only and hence writ remedy is not the proper remedy available to the petitioner. Learned Standing Counsel would further submit that as a policy wherever evidence is required to be collected for effectively resolving a dispute between the parties, the parties must be relegated to the civil court so that upon collection of evidence the principal controversy can get effectively resolved. It will be appropriate to notice, from the material that has been enclosed to the counter affidavit filed by the Corporation, as to the nature of objection raised by the Accountant General. In the draft paragraph, which the Accountant General has intended to file, it has been clearly pointed out that while framing the terms of the contract, the respondent Corporation did not provide for reduction of value of contract consequent to the reduction of tax rates, if any, to avoid undue benefit to the contractor, unlike the general practice followed in this regard by the rest of the public sector undertakings. Thus, the Accountant General in his objections has pointed out that the respondent Corporation has failed to settle an appropriate term of contract concerning the possibility of reduction in tax structure and in such an event the benefits of such reduction should enure to the benefit of the Corporation. Instead of addressing this problem straightaway, what the Corporation did was, it placed the matter before the 353rd meeting of the Board of Directors, which was held on 30-06-2010. In the said meeting it was resolved to recover the differential amount of Rs.2.33 crores from the writ petitioner, occasioned due to the reduction in slab rate of service tax from 12% to 10%. The Board of Directors further approved that the amount be recovered from the excavation bills of the petitioner from April 2010 onwards. It was proposed to recover the money in 10 instalments and hence, recovery is sought to be made. As was noticed supra, the terms and conditions, subject to which the notice inviting tenders has been floated have been incorporated as the terms and conditions of the contract itself. The contract being the result of negotiations between two sets of parties, any variation of the terms and conditions contained in any such contract, will also have to be a mutual affair. Without the consent or agreement of one of the parties to the contract, there cannot be any unilateral change or alteration brought about in the terms of a contract. In the instant case, the decision of the Board of Directors of the Corporation at their 353rd meeting amounted to altering or incorporating a new term in the contract that was already entered into by and between the parties. In the absence of any provision or term or condition in the contract, concerning reduction of any of the components of the prices or reduction in the slab rate in the service tax or any other tax payable, one has to necessarily construe that the price quoted being an inclusive one, the service tax component is not liable to be dissected from the price component and on that score regulate the payments thereafter. It will not be very difficult to assume that in case the tax rates have gone up, the Corporation would not have increased the contract value correspondingly. Therefore, the contract itself should have provided for a term or condition indicating that any increase in the tax structure will be to the account of the contractor, while any decrease in the tax structure should be to the benefit of the Corporation. In the absence of any such term, a unilateral decision could not have been taken by the Board of Directors of the Corporation. For sheer failure to contemplate the possibility of variation in the rates of taxes, while entering into a contract, the respondent Corporation cannot convert such a situation to its advantage. Further, for resolving this controversy, one does not need to lead any further evidence than to look at the terms and conditions of the contract. Hence, there is no necessity to go to a civil court. Further, it is a settled principle of law that if a right is claimed in terms of a contract such a right cannot be enforced in a writ petition. Writ petition is not an appropriate remedy for impeaching contractual obligations. But however, if the source of the right claimed could be contractual but the action complained of was the result of purported exercise of statutory power, then relief can be claimed in the writ petition. Therefore, the impugned order passed by the Corporation is arbitrary and unsustainable in law. It would only be apt to notice, here and now, how when a similar plea was raised before the Supreme Court in ABL INTERNATIONAL LIMITED AND ANOTHER v. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LIMITED AND OTHERS[1], it was repelled in the following words: “23. ……………………. Therefore, if by the impugned repudiation of the claim of the appellants the first respondent as an instrumentality of the State has acted in contravention of the above said requirement of Article 14 then we have no hesitation that a writ court can issue suitable directions to set right the arbitrary actions of the first respondent. In this context, we may note that though the first respondent is a company registered under the Companies Act, it is wholly owned by the Government of India. …………………………….. 24. It is clear from the above two objects of the company that apart from the fact that the company is wholly a Government owned company it discharges the functions of the Government and acts as an agent of the Government even when it gives guarantees and it has a responsibility to discharge such functions in the national interest. In this background it will be futile to contend that the actions of the first respondent impugned in the writ petition do not have a touch of public function or discharge of a public duty…………………….” The amounts so far recovered have to be reversed and repaid to the petitioner within a month’s time from the date of receipt of a copy of this order. Consequently, the Corporation cannot effect payment by altering the value of the contract based upon reduction of the service tax from 12% to 10%. It is needless to observe that the bank guarantee furnished by the petitioner, pursuant to the interim order passed by this Court on 24-12-2010 in W.P.M.P.No.38127 of 2010, shall be refunded to it, within thirty days from the date of receipt of a copy of this order. With this, the writ petition stands allowed, but however, without costs. Dt: 14 -09-2011. ( NOOTY RAMAMOHAN RAO, J ) Tnb / mrk [1] (2004)3 SCC 553