Case: State Of U.P.  Vs. Bridge &amp; Roof Co

3. The respondent - Bridge & Roof Company (India) Limited - is a public sector corporation. It entered into a works contract with the Government of Uttar Pradesh for rehabilitation and improvement of a certain stretch of road in Uttar Pradesh. The tender notice was issued on 1-9-1990. The date of opening the tenders was specified as 17-12-1990. The tenders were opened and the respondents tender was accepted on 1-5-1991. The work has since been completed. The dispute is only about certain payments which the respondent claims are due to it whereas the appellant - Government of Uttar Pradesh - says that it is entitled to retain4. According to the terms of the contract, the rates quoted by the contractor were deemed to be inclusive of the sales tax, if any, on the constructional plant, material and supplies required for the purposes of the contract8. It is stated before us that pursuant to Section 7-D of the Act the Government devised a composition scheme on 5-4-1991. It was amended later on 20-11-19919. The respondent appears to have applied to the Commissioner of Sales Tax, U.P. for composition of his tax liability under the said contract and for reducing the rate of deduction of tax at source. This application was made in terms of Section 7-D and the proviso to Section 8-D(1). Upon this application, it is averred, an order of composition was passed. What is relevant is that the Deputy Commissioner (in exercise of the powers delegated to him by the Commissioner) ordered (vide his order dated 27-5-1992) that "at the time of payment of balance amount from the above contract price, the sales tax should be deducted at the rate of one per cent". A copy of this order was also communicated to the Superintending Engineer concerned of the PWD. It is an admitted case of both the parties that the composition scheme devised by the Government on 5-4-1991 (as amended on 20-11-1991) is valid and effective only till and inclusive of 31-3-1995 but not thereafter10. In September 1995, the respondent filed CMWP No. 24837 of 1995 in the Allahabad High Court with the following prayer"(a) to issue a writ in the nature of mandamus commanding Respondent 2 (Superintending Engineer) restraining them from deducting a sum of Rs. 82, 24, 969 from Bill No. 44-RA bill dated 20-5-1995/31-7-1995 (Annexure 4) of the petitioner-Company." *11. After setting out the relevant facts, the respondent contended in the said writ petition that the proposed deduction of the sum of Rs. 82, 24, 969 from the petitioners bills, purporting to act under clause 70(4) of the contract is misconceived and untenable because the rate of sales tax has not been reduced in the present case as contemplated by clause 70(4), but that only the rate of deduction at source has been reduced. The respondents case was that the change in the rate of deduction at source or the composition of the respondents liability to pay tax under Section 7-D is of no concern to the Government. The Government must deduct only one per cent up to 31-3-1995 as directed in the order dated 27-5-1992 and leave the rest to the respondent and the Sales Tax authorities. The respondents in the writ petition (appellants herein) filed a counter disputing the several contentions raised in the writ petition and justifying the retention of the sum of Rs. 82, 24, 969. According to the appellants, the said amount need not be paid to the Sales Tax Department also. By virtue of the composition agreement between the respondent and the Sales Tax Department under Section 7-D, read with the order of the Deputy Commissioner under the proviso to Section 8-D(1), the tax liability of the respondent has been reduced with respect to the works contract between them, within the meaning of clause 70(4) of the contract and, therefore, they submitted, the benefit of the said reduction should go to the Government, as provided by the contract12. The High Court did not deal with the several contentions aforesaid. It disposed of the writ petition observing that inasmuch as "the Commissioner in his order has accepted the prayer for composition as requested by the petitioner and has directed the deduction of one in lieu of four per cent, (and) only that amount is to be deducted from the amount required to be paid to the petitioner under the bill in question and the same will cover the period up to 31-3-1995 and not thereafter and the payment under the bill shall be made accordingly". The High Court then observed that inasmuch as the order of the Commissioner under the proviso to Section 8-D(1) has not been challenged by the Government, the writ petition is liable to be disposed of with the direction aforesaid, viz., that the Government shall deduct only one per cent of the bill in question up to 31-3-1995

Court's reasoning:
15. In our opinion, the very remedy adopted by the respondent is misconceived. It is not entitled to any relief in these proceedings, i.e., in the writ petition filed by it. The High Court appears to be right in not pronouncing upon any of the several contentions raised in the writ petition by both the parties and in merely reiterating the effect of the order of the Deputy Commissioner made under the proviso to Section 8-D(1)16. Firstly, the contract between the parties is a contract in the realm of private law. It is not a statutory contract. It is governed by the provisions of the Contract Act or, maybe, also by certain provisions of the Sale of Goods Act. Any dispute relating to interpretation of the terms and conditions of such a contract cannot be agitated, and could not have been agitated, in a writ petition. That is a matter either for arbitration as provided by the contract or for the civil court, as the case may beThe prayer in the writ petition, viz., to restrain the Government from deducting a particular amount from the writ petitioners bill(s) was not a prayer which could be granted by the High Court under Article 226. Indeed, the High Court has not granted the said prayerThat is again a matter relating to interpretation of a term of the contract and should be agitated before the arbitrator or the civil court, as the case may be. If any amount is wrongly withheld by the Government, the remedy of the respondent is to raise a dispute as provided by the contract or to approach the civil court, as the case may be, according to law. Similarly if the Government says that any overpayment has been made to the respondent, its remedy also is the same18. Accordingly, it must be held that the writ petition filed by the respondent for the issuance of a writ of mandamus restraining the Government from deducting or withholding a particular sum, which according to the respondent is payable to it under the contract, was wholly misconceived and was not maintainable ine writ petition ought to have been dismissed on this ground alone20. Now coming to the order made by the Deputy Commissioner under the proviso to Section 8-D(1) of the Act, all that it says is that the Government shall deduct tax at source only at the rate of one per cent instead of at the rate of 4 per cent. The said order, having been made under the statute, relieves the Government of its obligation to deduct at source at the rate of 4 per cent. In other words, by virtue of the said order, no action can be taken against the Government (appellants) for not deducting at the rate of 4 per cent under Section 8-D. The learned counsel for the respondent contend that the order under the proviso to Section 8-D(1) does not determine the tax liability of the respondent, which liability, they say, will be determined only in the assessment proceedings. Maybe they are right or maybe, not. We need not express any opinion on these submissions because, as already pointed out hereinabove, the said question depends upon the interpretation of the terms of the contract between the parties. Just because the interpretation of orders made under Section 7-D or Section 8-D(1) may also fall for consideration while construing the terms of the contract does not convert the controversy into a public law issue. It is yet a matter within the realm of private law and, therefore, outside the purview of the writ petition. The arbitrator under the contract or the civil court, as the case may be, can go into and decide both questions of fact as well as questions of law21. There is yet another substantial reason for not entertaining the writ petition. The contract in question contains a clause providing inter alia for settlement of disputes by reference to arbitration (clause 67 of the contract). The arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extraordinary jurisdiction of the High Court under Article 226. The existence of an effective alternative remedy - in this case, provided in the contract itself - is a good ground for the court to decline to exercise its extraordinary jurisdiction under Article 226. The said article was not meant to supplant the existing remedies at law but only to supplement them in certain well-recognised situations. As pointed out above, the prayer for issuance of a writ of mandamus was wholly misconceived in this case since the respondent was not seeking to enforce any statutory right of theirs nor was it seeking to enforce any statutory a obligation cast upon the appellants. Indeed, the very resort to Article 226 - whether for issuance of mandamus or any other writ, order or direction - was misconceived for the reasons mentioned supra22. So far as the High Courts direction to deduct at the rate of one per cent is consumed, it may be a case of stating the obvious, as contended by the appellants. But it must also be realised that more than that could not have been legitimately granted in a writ petition. It must also be noticed that the declaration granted is effective only for a limited period, i.e., 31-3-1995. It does not apply to payments made on or after 1-4-1995. What does it mean in the facts and circumstances of the case, we do not know. Whatever it means, it cannot certainly be construed as a direction to the appellants to pay over the said sum of Rs. 82, 24, 969 to the respondent as claimed by it or as upholding the basis of the respondents claim put forward in the writ petition23. Before parting with this appeal, we must mention that counsel for both the parties have urged several other contentions of fact and law and relied upon several other clauses of the contract apart from those mentioned supra. We have not set them out herein because, in our opinion, they are outside the ken of a writ petition. It shall be open to the parties to urge and rely upon them at the proper stage and before the appropriate forum