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aa9bf72ff480-23 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 16. Claim No. 7:- The contractor claimed Rs. 66,000/- towards overhead charges incurred by him during the extended period of the contract. The arbitrator awarded a sum of Rs. 30,000/- on acceptance of this claim. The overhead charges consist of expenses incurred towards salaries for the staff and office expenses. We are of the view that this claim should have been totally rejected when the claim for extra rates (claim No. 1 (e) was accepted by the arbitrator and a sum of Rs. 1,70,945/- was allowed under that claim. The extra rate was allowed only to recompense the contractor for the extra expenditure that would have been incurred by him on account of prolongation of the contract by reason of breach of contractual obligations by the employer. Naturally/ that would take care of establishment expenditure also. We, therefore, find that claim No. 7 is nothing but a duplication of the claim and by accepting this claim, the arbitrator has awarded damages twice over which is not permissible in law. The award is, therefore, vitiated by error of law apparent on the face of it, and is thus liable to be set aside . The lower Court erred in upholding the award on this item of claim. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-24 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 17. The next and last item of dispute is about interest - - pendente lite and for the pre-reference period. The learned arbitrator awarded interest at 18% per annum on a sum of Rs. 45,064/- representing EMD and FSD form the date of deposit till 25-9-1988 i.e.. the date on which the arbitrator entered reference. For the remaining amounts, the arbitrator awarded interest at 18% per annum from 20-7-1985 i.e., the date of completion of works till 25-9-1988 i.e., the date of entering on reference. Pendente lite interest was denied by the Arbitrator following certain decisions of this Court and of the Supreme Court. The civil Court reduced the interest to 9% per annum. The Court also allowed interest on the amount of Rs. 3,84,196/- from 9-3-1989 i.e., the date of decree till the date of actual payment. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-25 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 18. It is the case of the contractor mat pendente lite interest should have been allowed by the arbitrator and moreover the civil Court had no power to reduce the rate of interest which was within the discretion of the arbitrator. On the other hand, the learned Government Pleader found fault with the award insofar as the interest for the pre-reference period was allowed and justified the disallowance of pendente lite interest relying upon the two Division Bench decisions to which one of us (PVR, J.) was a party, (i.e., State of A.P. v. P.L. Raju and Co, ; Prasad and Company v. Superintending Engineer (I.C), Chittoor (3 supra) and also the Judgment of the Supreme Court in Durga Ram Prasad v. Govt. of A.P., followed by the Division Bench in the aforementioned cases. In those two cases, the Division Bench felt that the law laid down by the Constitution Bench in Secretary, Irrigation Dept. v. C.C. Roy, cannot be applied in view of the specific contractual provision prohibiting payment of interest. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-26 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 19. Firstly, we will consider the legal position as regards the power of the arbitrator to award interest pendente lite. In Secretary, Irrigation Department v. G.C. Roy, a Constitution Bench of the Supreme Court which was called upon to consider the correctness of the decision in Executive Engineer, Irrigation, Balimela v. Abhaduta Jena, reviewed the entire law on the subject and enunciated the following propositions:
" (i) A person deprived of the use of money to which he is legitimately untitied has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of Section 34, Civil Procedure Code and there is no reason or principle to hold otherwise in the case of arbitrator.
(ii) An arbitrator is an alternative forum for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law........ All the same, the agreement must be in conformity with law. The arbitrator must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the land and the agreement. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-27 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | (iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite...........Until Jena case, almost all the Courts in the country had upheld the power of the arbitrator to award interest pendente lite. Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred."
Their Lordships concluded:
"Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties.......,............This does not mean that in every case, the arbitrator should necessarily award intetest pendente lite. It is a matter within is discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view."
20. The legal position has thus been settled by the constitution Bench in G.C. Roy's case (7 supra). Following the path set by the Constitution Bench in G.C. Roy's case (7 supra), the award of interest pendente lite was upheld in a number of cases, vide Jugal Kishore v. Vijayendra, State of Orissa v. B.N. Agarwala, and by this Court in State of A.P. v. N. Siva Reddy, . | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-28 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 21. Even if the award was made prior to the commencement of the Interest Act, the power to award pendente lite interest cannot be doubted, as clarified by the Supreme Court in State of Orissa v. B.N. Agarwala, . No distinction was made in this regard between the reference in a pending suit or a reference made otherwise.
22. The learned Arbitrator did not have the benefit of the exposition of law laid down in that decision as the award was passed much earlier to that decision. The learned Arbitrator, therefore, referred to certain other decisions of the Supreme Court including Jena's case (8 supra) which was overruled by the Constitution Bench on the point of pendente lite interest and also a decision of this Court which also stands impliedly overruled by Roy's case (7 supra). | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-29 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 23. As regards the interest for the pre-reference period, the law laid down in Jena's case (8 supra) has not been distrubed by the Constitution Bench in C.C. Roy's case (7 supra) as clarified by the Supreme Court in Jugal Kishore v. Vijayendra (9 supra) and State ofOrissa v. B.N. Agarwala (10 supra). In Jena's case (8 supra), the Supreme Court categorically held that the award of interest prior to the proceeding is not open to question, the reason being that the expression 'Court' is defined to mean an arbitrator as well. However, if the award was made prior to the coming into force of the Interest Act, interest for the pre-reference period cannot be awarded. On a conspectus of these cases. Dr. Anand, J. Speaking for the Supreme Court in Sudhir Brothers v. Delhi Development Authority, succinctly summarised the legal position as follows:
"Thus, the law is now well settled that the arbitrator has the power and jurisdiction to grant pre-reference interest in references made after the coming into force of the Interest Act, 1978. The Division Bench of the High Court was thus dearly in error in holding that the arbitrator had no jurisdiction to award interest from 1-4-1984 till 8-2-1985. (pre-reference period) in the post-Interest Act, 1978 era." | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-30 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 24. If the matter rests there, there would be no difficulty at all and we need not proceed further to consider whether interest-pendente lite or pre-reference-should be awarded. The decision of the Supreme Court in Durgaram Prasad v. Govt. of A.P. (6 supra) is another milestone implanted in the controversial arena pertaining to the arbitrator's power to award interest. Following this Judgment, a view was taken by two Division Benches of this Court (to which one of us, namely, Venkatarama Reddi, J. was a party) that the law laid down by the Constitution Bench in G.C.Roy's case (7 supra) cannot be applied in view of the specific contractual provision prohibiting payment of interest. The Division Bench understood Clause 69 as creating an embargo against the payment of interest and thus attracting one of the exceptions laid down in G.C. Roy's case (7 supra). In Prasad and Co. case (3 supra), the Division Bench after referring to G. C. Roy's case (7 supra) as well as Durgaram Prasad's case (8 supra), observed at page 555 as follows:
"It may be noticed that the Supreme Court in G.C.Roy's case (7 supra) made it clear that they were dealing with a situation where the agreement was silent as to the award of interest. But, in the face of the prohibition contained in Clause 69, which was referred to and relied on by the Supreme Court in Durgaram Prasad's case (6 supra), the ratio of the dicision in G.C.Roy's case (7 supra) cannot be applied and even pendente lite interest cannot be awarded, not to speak of interest for pre-reference period. This, in effect, is the ratio of the latest decision in Durgaram Prasad's case (6 supra)." | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-31 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | The award and the decree were, therefore, modified by directing interest to be paid only from the date of the award. The same view was reiterated in P.L. Raju's case (5 supra) and it was observed that the binding effect of the decision in Durgaram Prasad's case (6 supra) cannot be whittled down merely because the point which should have been raised (but not raised)did not come up for consideration before the Supreme Court | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-32 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 25. We have closely and carefully examined the observations made and the dicta laid down by their Lordships in Durgaram Prasad's case (6 supra). The judgment of the High Court which was affirmed by the Supreme court is reported in 1975 ALT 370. The facts leading to the controversy are clearly discernible from the High Court's judgment. The 'factual scenario', to put it in the words of the Supreme Court, which led to the conclusion reached by their Lordships unfolds the true ratio of the decision and the context in which some of the observations were made could be clearly understood in the background of the facts presenting themselves for consideration in that case. On a careful analysis of the decision, we are unable to share the view of the Division Bench in the two cases mentioned above that Clause 69 was so interpreted by the Supreme Court as placing a clog on the arbitrator's power to grant interest for the pre-award period on any and every type of amount payable to the contractor under the award. This makes us necessary to refer to Clause 69, which reads as follows:-
"P.S. 69: Interest on money due to the, contractor: (a) No omission by the Executive Engineer or the sub-divisional officer to pay the amount due upon certificates shall vitiate or make void the contract, nor shall the contractor be entitled to interest upon any guarantee fund or payments in arrear, nor upon any balance which may, on the final settlement of his accounts, be found to be due to him." | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-33 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | Their Lordships of the Supreme Court analysed the above clause and pointed out mat the contractor shall not be entitled to interest upon; (a) any guarantee fund; (b) payments in arrears and (c) upon any balance which may on final settlement of his account found to be due to him. The Supreme Court particularly referred to item (c) above with which it was concerned in that case and observed:
"Clause 69 of the MDSS would indicate that mere should be final settlement of the account and upon its settlement, if it is found to be due and payable to the contractor, on such payment also the contractor is not entitled to the payment of interest as contracted under Clause 69."
The Supreme Court then posed the question in the following terms:
"When such is the position, whether the contractor is entitled to payment of interest on mere making a claim and reference made to the arbitrator and whether the arbitrator gets Jurisdiction to award interest on the amount due from the respective dates on which the payments were withheld by .the Engineer concerned." | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-34 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | The Supreme Court then commented that the construction placed on Clause 69 by the High Court in APS RTC v. P. Ramana Reddi, is not correct. "However", their Lordships observed, "on the facts in that case their does not appear to be any dispute as to the amount due. Therefore, the learned Judge had proceeded that since the contract provides for withholding the payment for a suspended period of six months, if the amount is withheld beyond that period, the contractor would be entitled to the payment of interest." Then, the Supreme Court observed that the factual scenario in the case on hand was different. It was observed:
"The very dispute is whether the appellant is entitled to the payment of the amount pursuant to the contract The claim of the State appears to be that the appellant had not constructed the godown in accordance with the specifications and therefore they withheld the payment. Unless the dispute is resolved and the amount is found due, the contractor is not entitled to the payment of it. Thereon, interest in terms of Clause 69 of the MDSS is contracted out. When such be the position, then, mere reference does not the word 'not' is perhaps omitted in the report give jurisdiction to the arbitrator to award interest to the period prior to the reference."
The Supreme Court then referred to Jena's case (8 supra) and Roy's case(7 supra) and concluded:
"Accordingly, we are of the view that the contractor is not entitled to payment of interest in terms of Clause 69 for the period anterior to the reference for arbitration until the final settlement of the amount due to the contractor of his account is determined."
It was further held :
"Therefore, from the date of withholding till the date of award, the appellant is not entitled to the payment of interest. The arbitrator has no jurisdiction to arbitrate that dispute." | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-35 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | A perusal of the Judgment of the High Court from which the appeal arose in the Supreme Court makes it clear that the 'withheld amount' referred to by their Lordships of the Supreme Court represents the recoveries from the running bills. Clause 68 of the APDSS (forming part of the agreement) provides for certain percentage to be withheld and retained as a security for the due fulfilment of the contract. Clause 68 further provides that on the completion of the entire work and on the basis of the certificate issued by the Executive Engineer, the contractor will receive the final payment of all the monies payable to him except the E.M.D. and a sum equal to 21/2% of the total value of the work done. The amount so withheld from the final bill will be paid to the contractor together with the E.M.D. after a period of six months so that during this period, the defects shall have been made good by the contractor. It is this money that falls under item (c) of Clause 69 as indicated by the Supreme Court. We get it from the decision of the Supreme Court itself that there was a dispute as to whether the contractor constructed the godown as per the specifications and, therefore, the Government withheld the payment. Their Lordships took the view that unless that dispute is resolved, the final settlement of the account cannot take place. The Supreme Court therefore held that till the dispute is resolved by the arbitrator by passing the award, accrual of interest thereon is by the express terms of the contract, namely, by Clause 69, specifically excluded. Therefore, the arbitrator has no jurisdiction to award any interest on the withheld amount, that is to say the amount deducted from the running bills or final bill under Clause 68. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-36 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 26. The broad observation that unless the dispute is resolved and the amount is found due, the contractor is not entitled to the payment of it and the interest thereon is contractually excluded by Clause 69 should be understood in the light of the particular facts of that case and the context in which the dispute as to entitlement of interest arose. The decision in Durgaram Prasad's case (6 supra) cannot be treated as an authority for the proposition that the payment of interest is prohibited in respect of any and every type of amount claimed by the contractor when once the dispute arises as to the right to receive payment for a particular item. For instance, let us take a case where the arbitrator finds that certain payments were due for the actual work done but the Department paid for lesser quantities or, let us take a case where the arbitrator finds that the payment should have been made to the contractor at an extra rate on account of prolongation of the contract by reason of breach on the part of the Government. In such cases, it would be unjust to deny interest upto the date of the award. Principle No. 1 laid down in G. C.Roy's case (7 supra) squarely applies in such case. The prohibition contained in Clause 69 against the payment of interest does not apply to such fact situations. As pointed out by the Supreme Court in Board of Trustees, Port of Calcutta v. Engineers-De-Space-Age, a provision in the agreement excluding payment of interest shall be strictly construed and the prohibition cannot be extended to cover any and every type of situation. We are, therefore, of the view that Clause 69 is not in the nature of a blanket ban or an absolute ban on the entitlement of interest for the amounts due to be paid to the contractor. It depends on the nature and character of the amount claimed. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-37 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 27. No doubt, their lordships of the Supreme Court said in so many terms that the interpretation placed on Clause 69 by a learned single Judge of this Court in APS RTC v. Ramana Reddi is not correct but it does not mean that the Supreme Court viewed Clause 69 as placing a total prohibition against payment of interest in all cases in which disputes arise between the parties and such disputes are referred to arbitration. In saying that the interpretation placed by the learned single Judge in APRSTC v. Ramanareddi is wrong, their Lordships only disapproved of the view taken by this Court that Clause 69 operates as a bar against payment of interest for a limited period of six months from the date of completion of the work (which is known as observation period )and not beyond that. The view of the Supreme Court appears to be that the bar extends even beyond the period of six months provided, of course, the sum is of the nature referred to in the second part of Clause 69. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-38 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 28. We hope, we have sufficiently explained the true ratio and implications of the Judgment of the Supreme court in Durgaram Prasad's case (6 supra) at the cost of differing from the view expressed by one of us (PVR, J.) speaking for the Division Bench in the aforementioned cases, i.e., Prasad and Company case (3 supra) and P. L Raju's case (5 supra). Although we have differed with the view expressed in the aforementioned cases] we do not consider it necessary to refer this case to a Full Bench inasmuch as the binding decision of the Constitution Bench in G.C. Roy's case (7 supra) followed by various other subsequent decisions of the Supreme Court as well as the law laid down by three-Judge Bench in Jena's case (8 supra) as regards pre-reference interest was not followed by the Division Bench on a misunderstanding of the ratio of the decision in Durgaram Prasad's case (6 supra). The two Division Bench decisions referred to above must be taken to be decisions rendered PER INCURIAM as far as arbitrator's power to award interest is concerned. However, we are still of the view that Durgaram Prasad's case (6 supra) operates in a limited sphere and it must still be considered to be an authority for the proposition that the arbitrator has no jurisdiction to award interest in regard to matters enumerated in the second part of Clause 69 which were compendiously referred to as 2(a), (b) and (c) by the Supreme Court. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-39 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 29. We would also like to further clarify that the limited applicability of the decision in Durgaram Prasad's case (6 supra) to the situations referred to in second part of Clause 69 is further subject to another principle which has been succinctly laid down by their Lordships Ahmadi, C.J., and S.C. Sen, J., in a very recent case reported in Board of Trustees, Port of Calcutta v. Engineers De-Space-Age (13 supra). The Supreme Court was in the case concerned with a clause in the contract which prohibited the Commissioner from paying interest in the amounts due to the contractor. The Supreme Court while holding that the said clause did not fetter the power of the arbitrator to award interest pendente lite, which is within the discretion of the arbitrator, indicated another line of approach to the problem. The following crucial observations were made at paragraph 5:
" Looked at from another point, if there was a dispute as to whether under this term of the contract the arbitrator was prohibited from awarding interest pendente lite, that was a matter which fell within the jurisdiction of the arbitrator, as the arbitrator would have to interpret Sub-clause (g) of Clause 13 of the contract and decide whether that clause prohibits from awarding interest pendente lite. In that case it cannot be said that the arbitrator had wandered outside the contract to deny to him jurisdiction to decide the question regarding payment of interest pendente lite. Even if we were to accept the contention urged by the learned counsel for the appellant placing reliance on paragraphs 26 and 29 of the Associated Engineering Co. case (2 supra) we think that the arbitrator was well within his jurisdiction in awarding interest pendente lite. " | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-40 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | This line of approach was indicated by the Division Bench at paragraph 34 in P.L. Raju's case (5 supra), but it was not pursued as the Bench felt that the decision in Durgaram Prasad's case (6 supra) was directly on the point and it did not permit any such approach to be adopted. But, the latest decision pavee the way for such approach. Even if the arbitrator construed a provision in the agreement which was susceptible of two interpretations and awarded interest on his own view of the true scope and effect of the relevant clause, it cannot be said that the arbitrator exceeds his jurisdiction. As pointed out by the Supreme Court in Jena's case supra, even if there was slightest possibility of the entitlement to interest on one or other of the legally permissible grounds, it may not be open to the Court to go behind the award and decide whether the award of interest was justifiable.
30. In A.P.S.R.T.C. v. Ramanareddi, the learned single Judge of this Court (Kondanda Ramayya, J.) read Clauses 68 and 69 together and concluded as follows:-
"Thus, it is clear that this Clause 69 is intended to really prevent any claim for interest during the running period when final bill is not settled and also in respect of earnest money deposit or the sum equal to 2 1/2% of the total value of the work done till the expiry of the period of six months. This six months' period is called 'observation period', so mat the Department can see whether the work was done satisfactorily or not. Clause 69 cannot be construed as a total prohibition, but it operates for a limited period of six months from the date of completion of the work." | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-41 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | The learned Judge drew support from a decision of the Supreme Court in Hyderabad Municipal Corporation v. M. Krishnaswami, . The view projected by the learned Judge of this Court on the interpretation of Clause 69 is a possible view that could be taken though not the correct view. Yet another interpretation placed on a clause in the contract similar to Clause 69 is that the said clause applies only where the work was completed within the time Schedule fixed in the original contract, (vide Municipal Corporation of Hyderabad's case .
31. In the present case, it must be remembered that by the time the award was passed, the pronouncement of the Supreme Court in Durgaram Prasad's case (6 supra) was not there. In such a situation, if the arbitrator had interpreted Clause 69 and took the view more or less similar to the view taken by this Court in APSRTC v. Ramanareddi or in Hyderabad Municipal Corporation case, the award would not be open to question either on the ground of error of law apparent on the face of it or on the ground of want of jurisdiction. This in effect isthe principle laid down in Calcutta Port Trust case (13 supra). In the said case the Supreme Court merely reaffirmed the well settled principle that the arbitrator had the jurisdiction to interpret the contract and if he commits an error in the process of interpretation, that does not vitiate the award. In other words, if the view taken by the arbitrator is conceivable or possible, the award ought to be upheld. This oft-repeated principle has been applied with particular reference to a clause in the agreement prohibiting the payment of interest under certain circumstances. That is why the Calcutta Port Trust case (13 supra) is of great relevance to the issue we are dealing with. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-42 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 32. In the light of the above discussion, let us examine - - (1) whether the award of the arbitrator negativing pendente lite interest is vitiated in law; and (2) whether the interest awarded for the pre-reference period is legally sustainable. Excepting the Earnest Money Deposit and Security Deposit which fall under 'guarantee fund, no other amount awarded by the arbitrator is of the nature contemplated by Clause 69 of the contract. With regard to Earnest Money and Security deposit, there is no dispute at all as to the entitlement of the contractor to receive the same. As pointed out by the arbitrator, it is not the case of the Department that the said deposits were forfeited on account of default or breach committed by the contractor or for any other good reason. On the other "hand, the finding of the arbitrator is that the breach was committed by the Department. The only stand taken by the Superintending Engineer before the arbitrator was that the Income-tax clearance certificate was not produced. No provision has been brought to our notice under which the deposits can be withheld for that reason despite the completion of the work by the contractor to the satisfaction of the Department. Even if we go by the dicta laid down in Durgaram Prasad's case (6 supra), if there is no dispute with regard to the liability of the Government to pay the amounts of the nature specified in second part of Clause 69, the bar against payment of interest will not apply. That is how, the decision in APSRTC v. Ramana Reddi was distinguished by their Lordships of the Supreme Court. We are, therefore, of the view mat grant of interest on the amounts awarded by the arbitrator for the pre-reference period is valid and is not liable to be questioned on any relevant ground. However, whether the interest could be awarded from the date of deposit and whether the rate of interest granted by the arbitrator is liable to be | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-43 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | from the date of deposit and whether the rate of interest granted by the arbitrator is liable to be interfered with-we shall deal with later. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-44 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 33. As far aspendente /ifeinterest is concerned, the learned arbitrator rejected the same not on the ground that Clause 69 barred the claim for interest or on the ground that the facts and circumstances of the case did not warrant the award of interest during pendente lite. The arbitrator took into account the legal position obtaining prior to the decision of the Constitution Bench in G.C. Roy's case (7 supra) and disallowed such interest on the ground that he was not invested with the power to award interest. But, in the light of the development of law in this behalf starting with G. C. Roy's case (7 supra), the view taken by the arbitrator cannot be sustained. It must be held that he failed to exercise the power and jurisdiction vested in him on a misconception of the true legal position which came to light only after the decision in G. C. Roy's case (7 supra) subsequently rendered. It is not as if the arbitrator construed Clause 69 and reached the conclusion that he had no power to award interest. It is also not a case where the arbitrator thought it fit and proper not to exercise his discretion to award interest pendente lite on account of any special circumstances of the case. On the other hand, a perusal of the award would show that the arbitrator would have awarded interest but for the erroneous assumption that he had no power to award interest in view of the fluid legal position prevailing before G. C.Roy's case (7 supra). We, therefore, consider it a fit case to modify the award by allowing pendente lite interest instead of remitting the matter back to the arbitrator at this stage. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-45 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 34. The next aspect to be considered is whether the arbitrator is justified in awarding interest from the date of deposit of the E.M.D. and F.S.D. Even taking a most liberal view on the interpretation of Clause 69 in favour of the contractor, we are inclined to think that in view of the express bar contained in Clause 69, the contractor shall not be entitled to any interest atleast till the completion of the contract, i.e., during the currency of the contract. Therefore, the interest is payable only from 20-7-1985 but not from the date of deposit. The arbitrator referred to Section 4 (2) (a) of the Interest Act, 1978 but the arbitrator being bound by the contractual provision cannot exercise his discretion in such a way as to stultify the terms of the contract. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-46 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 35. The last question which remains to be considered is about the rate of interest. The learned counsel for the contractor is justified in saying mat normally it is not within the province of the Court to reduce or modify the rate of interest unless the law prohibits the grant of interest beyond a particular limit The reduction of interest from 18% to 9%, therefore, appears to be illegal. But we have to keep in the forefront of mind the peculiar situation in this case. -The arbitrator, as already noted, had declined to grant pendente lite interest on the ground that he had no jurisdiction to do so. He did not also provide for interest form the date of award for the same reason. If, on a correct view of the law, he had taken a decision to award interest pendente lite and post-award, in addition to the interest for the pre-reference period, it is not known whether he would have awarded interest at the high rate of 18%. In the normal course, we would have thought of remanding the matter to the arbitrator, but in view of the long lapse of time and the representation made by both the counsel, we are inclined to fix a reasonable rate of interest rather than leaving it to the arbitrator to do so at this distance of time. We consider it just and proper to allow interest at 12% per annum on the amounts awarded by the arbitrator both for the pre-reference period as well as for the pendente lite and post-award period, that is to say, from 20-7-1985 to 9-3-1989 and from the date of decree, at the rate fixed by the lower Court i.e., at 9% per annum. | https://indiankanoon.org/doc/17482/ |
aa9bf72ff480-47 | M. Gangareddy, Rep. By His G.P.A., ... vs The State Of A.P. Rep. By The ... on 14 June, 1996 | 36. In the result, the CM.As. and the C.R.P. are partly allowed. There shall be a decree against the State of A.P for payment of a sum of Rs. 3,60,196/- to the contractor who is the plaintiff in CS.No. 546/1989 with interest @ 12% per annum from20-7-1985 to 25-6-1990, i.e., the date of decree of the civil Court and with interest at 9% per annum from that date till the date of payment. In other words, the award shall stand modified to the extent indicated above and be made the rule of the Court subject to the above modification.
37. We make no order as to costs in any of these matters. | https://indiankanoon.org/doc/17482/ |
085843722685-0 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | JUDGMENT B.J. Divan, C.J.
1. In this reference, at the instance of the revenue, the following question has been referred by the Tribunal for our opinion :
"Whether, on the facts and in the circumstances of the case, the estate duty payable on the estate was deductible while computing the estate duty payable on the principal value of the estate passing on the death under the Estate Duty Act ?" | https://indiankanoon.org/doc/718944/ |
085843722685-1 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 2. The facts leading to this reference are as follows : The deceased, Sri Om-prakash Bajaj, expired on June 4, 1971. His estate duty assessment was completed by the Assistant Controller of Estate Duty on July 29, 1972, and he computed the net principal value of the estate at Rs. 3,68,518 as against Rs. 3,45,420 admitted by the accountable person. On this it was computed that an estate duty of Rs. 39,130 way payable. The accountable person filed an appeal before the Appellate Controller and he contended that the estate duty payable should have been allowed as a liability in computing the net principal value of the estate. The Appellate Controller in his order rejected the contention of the accountable person and held that the estate duty payable could not be regarded as a debt existing on the date of the deceased's death for which a deduction would be permissible under Section 44 of the Estate Duty Act. He, accordingly, dismissed the appeal. Against this order of the Appellate Controller, the accountable person took the matter in further appeal before the Appellate Tribunal. The Appellate Tribunal, following its earlier decision in Estate Duty Appeal No. 84 of 1968-69, decided by it on December 30, 1972, held that the estate duty payable should be deducted while computing the principal value of the estate. Thereafter, at the instance of the revenue, the question hereinabove set out has been referred to us for our opinion. The Tribunal in the earlier judgment had held that under Section 44 of the Act, allowance has to be made for debts and incumbrances. According to the Tribunal, the estate duty payable was part of the debts and incumbrances and, therefore, it should be allowed as a deduction. It held that the estate duty payable in respect of the estate is a clear deduction from the value of the estate | https://indiankanoon.org/doc/718944/ |
085843722685-2 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | that the estate duty payable in respect of the estate is a clear deduction from the value of the estate passing. It was held in the earlier decision that the allowance made should be restricted to the final estate duty quantified and held payable after all the appellate decisions. | https://indiankanoon.org/doc/718944/ |
085843722685-3 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 3. In order to appreciate the rival contentions, it is necessary to refer to some of the Sections of the Estate Duty Act, 1953. Under Section 5, Sub-section (1) of the Act, in the case of every person dying after the commencement of the Act, there shall, save as therein expressly provided, be levied and paid upon the principal value ascertained as provided therein of all property settled or not settled including agricultural land, situate in the territories which immediately before the 1st of November, 1956, were comprised in the States specified in the First Schedule to the Act, which passes on the death of such person, a duty called "estate duty" at the rates fixed in accordance with Section 35. Thus, estate duty is payable in respect of properties which pass on the death of the deceased provided it is after the commencement of the Act, and estate duty is payable in respect of all pro- perty settled or not settled including agricultural lands. Part VI of the Estate Duty Act consists of Sections 44 to 50B both inclusive and the entire Part deals with deductions. Section 44 says that in determining the value of an estate for the purpose of estate duty, allowance shall be made for funeral expenses (not exceeding rupees one thousand) and for debts and incumbrances, but allowance shall not be made for the different types of debts such as those mentioned in Clauses (a) to (d) of the section. At this stage, it is worthwhile to refer to Section 36, Sub-section (1), which provides that the principal value of any property shall be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the deceased's death. Thus, the charge is on the property which passes on the death of the deceased, but the valuation of that property is of the time of the death of the deceased and in | https://indiankanoon.org/doc/718944/ |
085843722685-4 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | deceased, but the valuation of that property is of the time of the death of the deceased and in determining the principal value of that estate, allowance for the funeral expenses including allowance for debts and incumbrances has to be made. But it must be borne in mind that under Sub-section (1) of Section 36 what has to be taken into consideration is the time of the death of the deceased and not the time of passing of the property ; the incidence of estate duty or charge of estate duty as pointed out in Section 5(1) is on the property which passes on the death of the deceased, but by virtue of Sub-section (1) of Section 36, the value must be estimated on the basis of the price it would fetch if sold in the open market at the time of the death of the deceased. Clauses (a), (b), (c) and (d) which refer to debts which are not to be allowed under Section 44 are as follows : | https://indiankanoon.org/doc/718944/ |
085843722685-5 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | Clause (a) provides :
"For debts incurred by the deceased, or incumbrances created by a disposition made by the deceased, unless, subject to the provisions of Section 27, such debts or incumbrances were incurred or created bona fide for full consideration in money or money's worth wholly for the deceased's own use and benefit and take effect out of his interest." | https://indiankanoon.org/doc/718944/ |
085843722685-6 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 4. Under clause (b), allowance is not to be made for any debt in respect whereof there is right to reimbursement from any other estate or person, unless such reimbursement cannot be obtained. Under Clause (c) no allowance is to be made more than once for the same debt or incumbrance charged upon different portions of the estate and under Clause (d) no allowance is to be made for debts incurred by or on behalf of the deceased by way of dower, to the extent to which such debts are in excess of rupees five thousand, and any debt or incumbrance for which an allowance is made shall be deducted from the value of the property liable thereto. We are not concerned with the Explanation of Section 44. It is true, as the learned counsel for the accountable person has urged, that Section 44, as it stands, does not contain any qualification in the main clause of Section 44 regarding debts and incumbrances. It is only by reference to the context and scheme of the sections of the Estate Duty Act that we can say as to what exactly the words "debts" and "incumbrances" occurring in the main part of Section 44 mean. At this stage, it is also necessary to refer to some other sections of Part VI, which, as stated above, relates to deductions. Section 48 provides that cost of realising or administering foreign property may be allowed for within certain limits. Under Section 49, allowance for duty paid in a non-reciprocating country is to be allowed as a deduction. Under Section 50, relief is granted from estate duty where court-fees have been paid for obtaining representation to the estate of the deceased. Now, these deductions under Sections 48, 49 and 50, it will be noticed, are in respect of payments made or costs incurred after the death of the deceased and not before the death of the deceased and to that extent the provisions of | https://indiankanoon.org/doc/718944/ |
085843722685-7 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | the death of the deceased and not before the death of the deceased and to that extent the provisions of Sections 48 to 50 do not help us in any manner in interpreting the words "debts" and "incumbrances" occurring in the main part of Section 44. Sections 50A and 50B also provide for some deductions, but they are in respect of special cases where gift-tax had already been paid or tax had been paid on capital gains. Again, they refer to special situations other than a situation for a debt and incumbrance. Therefore, we will have to examine whether any other section of the Estate Duty Act is capable of throwing any light on the meaning of the words "debts" and "incumbrances". Under Section 53, Sub-section (1): | https://indiankanoon.org/doc/718944/ |
085843722685-8 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | "Where any property passes on the death of the deceased--
(a) every legal representative to whom such property so passes for any beneficial interest in possession or in whom any interest in the property so passing is at any time vested, | https://indiankanoon.org/doc/718944/ |
085843722685-9 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | (b) every trustee, guardian, committee or other person in whom any interest in the property so passing or the management thereof is at any time vested, and | https://indiankanoon.org/doc/718944/ |
085843722685-10 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | (c) every person in whom any interest in the property so passing is vested in possession by alienation or other derivative title, shall be accountable for the whole of the estate duty on the property passing on the death but shall not be liable for any duty in excess of the assets of the deceased which he actually received or which, but for his own neglect or default, he might have received."
5. We are not concerned with the proviso to Sub-section (1) nor with any of the other sub-sections of Section 53. Under sub-section (1) of Section 74, a first charge on property has been created in respect of estate duty, and it is in these terms ;
"74. (1) Subject to the provisions of Section 19, the estate duty payable in respect of property, movable or immovable, passing on the death of the deceased, shall be a first charge on the immovable property so passing (including agricultural land) in whomsoever it may vest on his death after the debts and incumbrances allowable under Part VI of this Act; and any private transfer or delivery of such property shall be void against any claim in respect of such estate duty." | https://indiankanoon.org/doc/718944/ |
085843722685-11 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 6. The learned counsel for the accountable person has urged two contentions in the alternative and each contention is sought to be rested independently of the other. The first contention is that estate duty is a debt of the estate which passes on the death of the deceased and, hence, it is deductible under Section 44. That alternative argument is that even if it is not a debt, it is an incumbrance (a) by virtue of Section 74, Sub-section (1) of the Act, and (b) even if it is not an incumbrance under Section 74(1), independently of the provisions of Section 74, it is an incumbrance in the sense of being a burden on the estate which passes on the death of the deceased. We will deal with each of these contentions separately. But we must first appreciate the position as it prevails in the light of the provisions of Sections 5, 36 and 44. Under Section 5, the charge is on the property which passes on the death of the deceased. Under Section 36, Sub-section (1), the principal value of the property shall be estimated to be the price which, in the opinion of the Controller, it would fetch if sold in the open market at the time of the death of the deceased, and, lastly, it is while determining the value of an estate, that is, under Section 36, that debts and incumbrances have to be allowed. It was contended on behalf of the revenue before us by Mr. Rama Rao, learned advocate for the revenue, that debts and incumbrances must be debts incurred by the deceased during his lifetime and incumbrances created by him in his lifetime, otherwise, they are not debts and incumbrances contemplated by Section 44. For this purpose, he has contended that there is a subtle distinction between the time of death of the deceased and the time when | https://indiankanoon.org/doc/718944/ |
085843722685-12 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | contended that there is a subtle distinction between the time of death of the deceased and the time when the estate passes on the death of the deceased, as pointed out by several authorities which we will notice shortly hereafter. The passing of the property may take place even a split-second after the death of the deceased, but the death of the deceased must precede even by a split-second the moment of passing of the property. Under Section 36(1) it is the moment of death which is material and not the moment when the property passes and, runs the argument of the revenue, under Section 44 it is while determining the value of the estate for the purpose of estate duty, that is, while estimating the price of the property which in the opinion of the Controller it would fetch if sold in the open market at the time of the deceased's death, which is distinct from the time of passing of the property, that debts and incumbrances have to be taken into account, and it is, therefore, contended that if debts and incumbrances have to be allowed as at the moment of death of the deceased then it must by necessary implication be debts and incumbrances incurred and created respectively by the deceased. So far as the rest of the deductions in Part VI are concerned, they throw no light on this aspect of the case and, therefore, we will have to consider the question independently without any help being derived from the rest of the provisions of Part VI or Section 44. Ever since the decision of the House of Lords in what is known as Graham's Trustee's case [1971] SLT 46 (HL), it is well settled that there is a distinction between the moment of death and the moment of passing of the property. The decision in Graham's Trustee's case [1971] SLT 46 (HL) has been followed by the High Courts of India, for example, in Bharatkumar Manilal Dalal | https://indiankanoon.org/doc/718944/ |
085843722685-13 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | followed by the High Courts of India, for example, in Bharatkumar Manilal Dalal v. Controller of Estate Duty , at page 210, where the Gujarat High Court has pointed out the decision in Inland Revenue v. Graham's Trustees [1971] SLT 46 (HL). Lord Donovan, following the earlier decision in In re Magan [1922] 2 IR 208n, observed that "the death in contemplation of law must precede the passing" and In re Smith [1951] 1 Ch 360 ; 3 EDC 188 (Ch D) that "it is only when the person in question has expired, after the last breath has left the body, that the property passes and the liability to estate duty arises". In M.CT. Muthiah v. Controller of Estate Duty the Madras High Court followed the distinction between the moment of death of the deceased and the moment of passing of the property, again the decision being based on the decision of the House of Lords in Graham's Trustee's case [1971] SLT 46 (HL). We respectfully agree with the decisions of the Gujarat High Court and the Madras High Court when they follow the principles laid down in the Graham's Trustee's case [1971] SLT 46 (HL) by the House of Lords and when they point out the subtle distinction between the moment of man's death which must precede even by a split-second the moment when that person's property passes. | https://indiankanoon.org/doc/718944/ |
085843722685-14 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 7. However, this distinction between the moment of death and moment of passing of the property for the practical purpose of administering the Estate Duty Act is hardly of any value particularly when considering the question of "debts" and "incumbrances". In our opinion, it is only in the light of the interpretation of the provisions of Sections 36(1), 53 and 74 which indicate the intention of the legislature that the question before us can be solved. Under Section 36(1), it is the principal value of the property which in the estimation of the Controller is the price it would fetch if sold in the open market at the time of deceased's death which is the material figure. The words "fetch in open market" have been construed by the Supreme Court in Pandit Lakshmi Kant Jha v. Commissioner of Wealth-tax . The Supreme Court while interpreting Section 7(1) of the Wealth-tax Act pointed out that the provisions of Section 7(1) of the Wealth-tax Act and Section 36(1) of the Estate Duty Act are in pari materia and it has been pointed out that the value of an asset, other than cash, for the purpose of Section 7(1) of the Wealth-tax Act, should be the same as its value for the purpose of Section 36(1) of the Estate Duty Act. It is also pointed out that Section 36, Sub-section (1) of the Estate Duty Act was based upon Section 7(5) of the U.K. Finance Act, 1894, and Section 60, Sub-section (2) of the U. K. Finance Act, 1910, while Section 48 of the Estate Duty Act was based upon Section 7(3) of the U.K. Finance Act, 1894. The following passage from Green's Death Duties, page 393, sixth edition, has been cited with approval by Khanna J., speaking | https://indiankanoon.org/doc/718944/ |
085843722685-15 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | page 393, sixth edition, has been cited with approval by Khanna J., speaking for the Supreme Court, at pages 104, 105 : | https://indiankanoon.org/doc/718944/ |
085843722685-16 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | "The price which property 'fetches' is the gross price paid by the purchaser, without deduction for the vendor's costs and expenses. This is so, even where the property is subject to a trust for sale. But if the property to be valued is merely a share in an unadministered estate, or in the proceeds of sale of trust property which must be realised for the purpose of distribution, the expenses of the executors or trustees under the old title should be taken into account."
8. The following passage from Dymond's Death Duties, fourteenth edition, page 569, has also been cited by Khanna J. (page 105) :
"The price which the property fetches is the gross sale price, without deduction for the costs of sale, except that, if the property is part of an unadministered estate or a share of property subject to a trust already in operation which involves conversion, or if the property consists of certified chattels of national, etc., interest, allowance for costs may be made."
9. The Supreme Court in Pandit Lakshmi Kant Jha's case approved of the following passage from the speech of Lord Reid in Duke of Buccleuch v. Inland Revenue Commissioners [1967] AC 506 at page 525 (HL):
" I an confirmed in my opinion by the fact that the Act permits no deduction from the price fetched of the expenses involved in the sale (except in the case of property abroad under Sub-section (3))."
10. The Supreme Court also approved the following passage from the speech of Lord Morris in the same case of Duke of Buccleuch [1967] 1AC 506, 536 (HL) : | https://indiankanoon.org/doc/718944/ |
085843722685-17 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | "The value of a property is to be estimated to be the price which it would 'fetch' if sold in the open market at the time of the death of the deceased. This points to the price which a purchaser would pay. The net amount that a vendor would receive would be less. There would be costs of and incidental to a sale. It would seem to be harsh or even unjust that allowances cannot be made in respect of them. But the words of the statute must be followed." | https://indiankanoon.org/doc/718944/ |
085843722685-18 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 11. It was pointed out that similar observations were made by Lord Hodson and Lord Guest. The Supreme Court accepted these observations as laying down the correct law. | https://indiankanoon.org/doc/718944/ |
085843722685-19 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 12. It is, therefore, clear that when Section 36(1) of the Estate Duty Act uses the words "the price which in the opinion of the Controller it would fetch if sold in the open market at the time of the deceased's death" what has to be taken into consideration is the gross amount without any deduction which the purchaser would pay in respect of the property, and it is contended on behalf of the revenue by Mr. Rama Rao that the purchaser would pay the open market value for the property and deduction for estate duty would be the deduction out of the total value thus estimated, namely, what the purchaser would pay in respect of the property. Mr. Anjaneyulu has in this connection relied upon the decision of the Gujarat High Court in Commissioner of Wealth-tax v. Smt. Shirinbanoo . The question before the Gujarat High Court was regarding the value of a property which was subject to a mortgage and the question was what was the net value of the particular property which was under consideration. B. K. Mehta J., delivering the judgment of the Gujarat High Court, observed at page 742 :
"The ambit of Section 2(m) of the Wealth-tax Act had come up for consideration in Spencer & Co. Ltd. v. Commissioner of Wealth-tax , where the Madras High Court was concerned with the question of deduction, under Section 2(m) of the Wealth-tax Act, of Rs. 31,26,000, being the amount the assessee, Spencer & Company, agreed to pay by way of consideration for purchase of sundry assets of another company..... This
decision of the Madras High Court has been confirmed by the Supreme Court in Commissioner of Wealth-tax v. Spencer & Co. Ltd. [1973] 88 ITR 429. | https://indiankanoon.org/doc/718944/ |
085843722685-20 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | Mr. Kaji, the learned advocate on behalf oi the revenue, therefore, attempted to persuade us that the exception in Section 2(m) of the Wealth-tax Act indicates that debts even though secured would go to increase the aggregate value of the debts and not reduce the aggregate value of the assets. We are of the opinion that Mr. Kaji has while urging this contention lost sight of the pertinent point that what is to be evaluated is not the assets simpliciter but the asset which is encumbered. In our opinion where an asset which has been brought to the charge of wealth-tax is an encumbered asset, for purposes of determining the value of such asset, the amount of debt which is charged on that property has to be excluded for purposes of evaluating the said asset. It is no doubt true that net wealth, according to Section 2(m) of the Act, is the amount by which the aggregate value of assets of a person exceeds the aggregate value of his debts. However, according to Section 7, subject to any rules made in that behalf, the value of any asset, other than cash, would, for purposes of the Act, be the price which in the opinion of the Wealth-tax Officer it would fetch if sold in the open market on the valuation date. It is, therefore, clear to us that while aggregating the value of all assets it is the valuation of a particular asset which is to be estimated and in estimating such valuation what the taxing officers have to bear in mind is that price which such asset would fetch if sold in the open market on the valuation date. It is no doubt true that for purposes of determining the net wealth which is the basis of the liability of wealth-tax, the amount by which the aggregate value of an asset of a person exceeds the aggregate value of the debt is to be looked into. But none the less, while estimating the valuation of an encumbered asset, the price which such asset would fetch, if sold | https://indiankanoon.org/doc/718944/ |
085843722685-21 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | estimating the valuation of an encumbered asset, the price which such asset would fetch, if sold in the open market, is first to be ascertained and the only method of evaluating an encumbered asset is to consider the valuation of the asset less the valuation of encumbrance thereon." | https://indiankanoon.org/doc/718944/ |
085843722685-22 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 13. It is the last sentence on which considerable reliance has been placed by Mr. Anjaneyulu on behalf of the accountable person.
14. In our opinion, the decision in Kesoram Industries and Cotton Mills Ltd. v. Commissioner of Wealth-tax , delivered in the context of wealth-tax for the purpose of considering whether income-tax payable wsa a debt owed within the meaning of the relevant Section of the Wealth-tax Act and the decision of the Supreme Court in H.H. Setu Parvati Bayi v. Commissioner of Wealth-tax , also delivered in the context of the Wealth-tax Act which says that the wealth-tax payable by the assessee is also a debt within the meaning of the same Section of the Wealth-tax Act, are hardly of any assistance in considering the problem before us, because what has been observed in the context of the Wealth-tax Act and what has been laid down for the purpose of that Act is hardly of any assistance for the purpose of deciding as to whether the estate duty payable in respect of an estate which passes on the death of the deceased is part of the debts and incumbrances within the meaning and plain object of Section 44 of the Estate Duty Act. It is true that in Kesoram Industries' case , which was followed in Setu Parvati Bayi's case , the Supreme Court has made observations regarding what is a debt and how the courts should approach the question of what amounts to a debt, generally speaking, in the language of the law. In Kesoram Industries' case , Subba Rao J. (as he then was), delivering the judgment of the majority of the learned judges of the Supreme Court who decided the case, summarised the position thus (page 780): | https://indiankanoon.org/doc/718944/ |
085843722685-23 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | "We have briefly noticed the judgments cited at the Bar. There is no conflict on the definition of the word 'debt'. All the decisions agree that the meaning of the expression 'debt' may take colour from the provisions of the concerned Act: it may have different shades of meaning. But the following definition is unanimously accepted :
'A debt is a sum of money which is now payable or will become payable in future by reason of a present obligation : debitum in praesenti solvendum in futuro.' The said decisions also accept the legal position that a liability depending upon a contingency is not a debt in praesenti or in futuro till the contingency happened. But if there is a debt the fact that the amount is to be ascertained does not make it any the less a debt if the liability is certain and what remains is only the quantification of the amount. In short, a debt owed within the meaning of Section 2(m) of the Wealth-tax Act can be defined as a liability to pay in praesenti or in futuro an ascertainable sum of money."
15. Again, at page 784 of the report, the position has been summarised in the following words by Subba Rao J. (as he then was), delivering the majority judgment: | https://indiankanoon.org/doc/718944/ |
085843722685-24 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | ".....A debt is a present obligation to pay an ascertainable sum of money, whether the amount is payable in praesenti or in futuro : debitum in praesenti, solvendum in futuro. But a sum payable upon a contingency does not become a debt until the said contingency has happened. A liability to pay income-tax is a present liability though it becomes payable after it is ^quantified in accordance with ascertainable data. There is a perfected debt at any rate on the last day of the accounting year and not a contingent liability. The rate is always easily ascertainable. If the Finance Act is passed, it is the rate fixed by that Act; if the Finance Act has not yet been passed, it is the rate proposed in the Finance Bill pending before Parliament or the rate in force in the preceding year, whichever is more favourable to the assessee. All the ingredients of a ' debt' are present. It is a present liability of an ascertainable amount....." | https://indiankanoon.org/doc/718944/ |
085843722685-25 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 16. However, what has been pointed out at page 780 of the report as to what amounts to "debt" in the context of the statute, has to be borne in rnind, viz., that the meaning of the expression "debt" may take colour from the provisions of the concerned Act. The provisions of Sections 53 and 74 are the relevant provisions of the Estate Duty Act, in the light of which we have to determine as to what amounts are "debts" and what amounts are "encumbrances" within the meaning of Section 74. Mr. Anjaneyulu for the accountable person has rightly contended that the principal section which is before us is Section 44. It is under that section that deductions or allowances have to be made; but, we cannot overlook the fact that the meaning of the words "debts" and "encumbrances" --particularly in the context of the controversy before us--has to be judged in the light of the other provisions of the Act. | https://indiankanoon.org/doc/718944/ |
085843722685-26 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 17. Section 53 of the Estate Duty Act, as pointed out above, provides for the liability of the accountable person. The accountable person may be either a legal representative, or a trustee, guardian, committee or other person, in whom any interest in the property so passing, or the management thereof at any time, is vested ; or every person in whom any interest in the property so passing is vested, or who is in possession by alienation or other derivative title. Such legal representative or other person is accountable for the whole of the estate duty on the property passing on the death, but such accountable person is liable only to the extent of the assets of the deceased which he actually received, or which but for his neglect or default, he might have received. The provisions of Section 53 were considered by a Division Bench of the Gujarat High Court (consisting of Bhag-wati C.J. and myself) in Commissioner of Income-tax v. Mrs. Indumati Ratan-lal [1968] 70 ITR 353 (Guj). The principal question before the Division Bench of the Gujarat High Court in that case was whether interest paid on a loan borrowed for the purpose of payment of estate duty was deductible for the purposes of income-tax. The amount had been borrowed by the assessee on her own behalf and on behalf of her minor son, for payment of the estate duty on the death of her husband. While considering the liabilities of the legal representatives, etc., the provisions of Section 53 of the Estate Duty Act came up for consideration before the Division Bench. After considering the provisions of Section 53, Bhagwati C.J., delivering the judgment of the Division Bench, observed, in so far as the provisions of Section 53 are concerned (pages 357, 358): | https://indiankanoon.org/doc/718944/ |
085843722685-27 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | "The liability of every accountable person is thus a personal liability, though it is limited in extent to the assets of the deceased actually or constructively received by him ; qualitatively it is a personal liability and not a liability payable only out of the assets of the deceased : the assets of the deceased actually or constructively received merely constitute the limit of the liability."
18. Thus, so far as the liability for payment of estate duty is concerned, it is a personal liability of the accountable person and we respectfully agree with the interpretation placed by the Gujarat High Court on Section 53 of the Estate Duty Act. In the light of that decision--particularly in view of the fact that the liability for payment of estate duty is a personal liability of the accountable person--it cannot be said that it is a "debt" contemplated by Section 44. Estate duty being a liability not of the estate itself, which passes to the accountable person or which the accountable person comes into possession of, but a personal liability of the accountable person himself, it is difficult to accept the contention urged on behalf of the accountable person before us that estate duty is "debt" contemplated by Section 44 of the Act. | https://indiankanoon.org/doc/718944/ |
085843722685-28 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 19. Under Section 74(1) of the Estate Duty Act, a charge of estate duty on property, passing on the death of the deceased, is created. We have already set out Section 74(1) hereinabove. But it has to be noticed that it is a first charge on the immovable property, passing on the death of the deceased, in whomsoever the property may vest on his death. The property so passing may be movable or immovable; it may include agricultural land as well. But the words about which some controversy has been raised before us in the context of Section 44 are "after the debts and encumbrances allowable under Part VI of this Act" occurring in Section 74(1) of the Act. It has been contended on behalf of the revenue that the words "after the debts and encumbrances allowable" go to qualify the words "shall be a first charge on the immovable property so passing", occurring earlier ; whereas, it has been contended by Mr, Anjaneyulu, on behalf of the accountable person, that these words, which are under immediate consideration before us, qualify the words "immovable property so passing". It is obvious that, if estate duty has to be the first charge on the immovable property passing on the death of the deceased--if provision is not made for the debts and encumbrances which the deceased had either incurred or created on his own property--the person in whose favour such debts' or encumbrances are created, would be at a disadvantage and, therefore, the debts and encumbrances which are allowable under Part VI of the Act, rank in priority over the payment of estate duty. It is for this purpose that Section 74(1) which creates a first charge in respect of the estate duty, so far as the immovable property is concerned, also provides that the first charge must rank in priority "after the debts and | https://indiankanoon.org/doc/718944/ |
085843722685-29 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | property is concerned, also provides that the first charge must rank in priority "after the debts and encumbrances" allowable under Part VI of the Act. If it ranks in priority "after the debts and encumbrances" allowable under Section 44, then, it is obvious that it cannot form part of those debts and allowances, after which it ranks in priority. It is not possible for us to accept the contention advanced on behalf of the accountable person that the words "after the debts and encumbrances allowable under Part VI of this Act" qualify the words "immovable property so passing" occurring in the earlier part of Section 74(1). There is no reason to place such an interpretation on those qualifying words, so far as immovable property passing on the death of the deceased is concerned. Section 74(1) of the Act clearly provides that, for the purpose of payment of estate duty, first charge on the immovable property so passing, shall rank in priority "after the debts and encumbrances" allowable under Part VI of the Act. It is, therefore, obvious that estate duty can never form part of the debts and encumbrances allowable under Part VI of the Act, after which alone it ranks in priority. Section 44, which deals with debts and encumbrances to be allowed while determining the principal value of an estate which passes on the death of a deceased, is one of the Sections in Part VI of the Act, and, therefore, so far as Section 44 is concerned, the debts and encumbrances mentioned therein can never include estate duty payable on the estate which passes on the death of the deceased. | https://indiankanoon.org/doc/718944/ |
085843722685-30 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 20. We may point out that this interpretation which has appealed to us had also appealed to the Division Bench of the Mysore High Court in V. Pramila v. Controller of Estate Duty , where a Division Bench, consisting of Govinda Bhat C.J. and Srinivasa Iyengar J., has held that estate duty payable on the death of a deceased person is not liable to be deducted under Section 44 of the Act and, in arriving at this conclusion, the Division Bench has relied upon the interpretation of Section 74(1) of the Act. The reasoning which appealed to the learned judges of the Mysore High Court is practically on the same lines as the reasoning which has appealed to us, though there is a slight difference between our respective approaches. What is more important is that Govinda Bhat C.J., delivering the judgment of the Mysore High Court, has pointed out at page 225 :
"The Act (Estate Duty Act) is modelled after its counterpart in the United Kingdom and not infrequently do we refer to the English law and practice on most of the issues arising under the Act. Section 5(1) of the Act corresponds to Section 1 of the U. K. Finance Act, 1894 (57 & 58 Vict. c. 30). Section 44 of the Act corresponds to Section 7(1) of the U. K. Finance Act, 1894. The language of Section 44 of the Act and of Section 7(1) of the U. K. Finance Act, 1894, are identical. Although estate duty has been in force in the United Kingdom since 1894, it was never contended under the said Act that estate duty is liable tto be deducted in determining the principal value of the estate of a deceased person." | https://indiankanoon.org/doc/718944/ |
085843722685-31 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 21. A perusal of the standard text books, like Green's Death Duties, seventh edition, and Dymond's Death Duties, fourteenth edition, confirms this conclusion of the learned judges of the Division Bench of the Mysore High Court. It is, therefore, clear that, at least so far as the practice in England is concerned, in determining the principal value of an estate, which passes on the death of a deceased person, estate duty is never deducted as one of the debts and encumbrances on the estate which so passes. If English practice or procedure is to be of any guide, the question referred to us must be decided against the accountable person. However, we are not deciding the said question merely on the basis of practice and procedure in England, but on an interpretation of the provisions of the Estate Duty Act before us.
22. We do not want to decide the question before us on a mere metaphysical approach--as it is called--to the problem as to what is meant by "moment of death of the deceased" and the moment at which the estate passes on the death of a deceased person. There may be a little difference between the two; but, for all practical purposes, it is very difficult to arrive at a conclusion with almost a metaphysical distinction, as drawn in Graham's Trustee's case [1971] SLT 46 (HL). In our opinion, therefore, in the light of the provisions of the Estate Duty Act, it must be held that, at least in the light of Section 74(1) of the Act, the debts and encumbrances which are spoken of in Section 44 are not the debts and encumbrances referred to in Section 74(1). | https://indiankanoon.org/doc/718944/ |
085843722685-32 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 23. The only point which now requires to be considered is whether, apart from the provisions of Section 74(1) of the Act, estate duty can be said to be an encumbrance in the sense of a burden on the estate which passes on the death of a deceased person. It is true that, under Section 53, the liability of an accountable person is to the extent of the estate received by the accountable person, either actually or constructively; but that, as pointed out by Bhagwati CJ. in Indumati Ratanlal's case [1968] 70 ITR 353 (Guj), limits the personal liability of the accountable person under Section 53(1). A charge by way of further security to the revenue, is created on such immovable property which passes on the death of the deceased. It is undoubtedly true that estate duty is a burden on the estate which passes on the death of a deceased person. In that sense, on a broader interpretation of the word "encumbrance ", it can be said to be an encumbrance subject to which the "estate passes on the death of the deceased. But, in this case, we are not concerned with encumbrances in general; we are concerned only with the expressions "debts" and "encumbrances "occurring in Section 44 of the Act. | https://indiankanoon.org/doc/718944/ |
085843722685-33 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 24. The next question relates to the determination of the principal value which a property would fetch if sold in the open market at the time of the deceased's death, as contemplated by Section 36(1) of the Estate Duty Act. It is, no doubt, true that estate duty would be a burden on the estate, but it is not the type of encumbrance which is contemplated by a mortgage created under the provisions of the Transfer of Property Act, or a charge created under Section 100 of the Transfer of Property Act. It is a burden of the type which has to be discharged by the accountable person, because the principal liability for payment of estate duty is that of the accountable person. In the notional sale which is contemplated by Section 36(1) of the Act, for the purposes of ascertaining the market value of the property as at the moment of the passing of the property on the death of a deceased person, what is to be taken into consideration is, what the property would fetch if sold in the open market, as explained by the Supreme Court in Pandit Lakshmikant Jha's case . If the payment of estate duty is a liability cast on the accountable person and if it is not an encum- brance within the meaning of Section 44 of the Act but a first charge on the immovable property passing on the death of a deceased person as contemplated by Section 74(1), then, the market value of the property, i.e., in the sense what a willing purchaser would offer to pay for the property which passes oa the death of a deceased person, would be the total value which it would fetch, viz., including estate duty, and not excluding estate duty, as would be the case if there had been a mortgage or any other charge contemplated under the Transfer of Property Act, or Section 74(1) of the Estate Duty Act. In Shirinbanoo's case , the court was concerned with | https://indiankanoon.org/doc/718944/ |
085843722685-34 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | of the Estate Duty Act. In Shirinbanoo's case , the court was concerned with a regular mortgage to which the property was subject; but, if an encumbrance in the sense of the broader meaning of that term is to be considered, a willing purchaser of the property who is not liable to pay estate duty himself, would not pay a price less estate duty payable on the estate. Under these circumstances, even the alternative meaning of the word "encumbrance", for which Mr. Anjaneyulu for the accountable person has contended, cannot help the accountable person in this case. | https://indiankanoon.org/doc/718944/ |
085843722685-35 | Controller Of Estate Duty vs Estate Of Late Omprakash Bajaj on 20 July, 1976 | 25. Our conclusion, therefore, is that estate duty is neither a debt nor an encumbrance and is not an encumbrance either within the meaning of Section 74(1) of the Act, or within the broader meaning of the word "encumbrance" referred to above. In view of this conclusion, it must follow that estate duty payable on the estate was not deductible while computing the estate duty payable on the principal value of the estate passing on the death under the Estate Duty Act. The question referred to us is, therefore, answered in the negative, i.e., in favour of the revenue and against the accountable person. The accountable person will pay costs of this reference to the Controller of Estate Duty. Advocate's fees Rs. 250. | https://indiankanoon.org/doc/718944/ |
66d95abf72c5-0 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | ORDER S. Dasaratharama Reddy, J. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-1 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 1. The Superintending Engineer, Thermal-IH, Andhra Pradesh State Electricity Board (briefly referred to as 'the Board') issued tender notice PCT V3/91 dated 8-12-1991 inviting quotations in two parts, namely, Prequalification and Technical Bids. (Part-I) and Price Bids (Part-II) for the supply, erection and commissioning of 220 K.V. Switchyard extension for Vijayawada Thermal Power Station (briefly referred to as 'V.T.P.S.')Stage-IIIat Ibrahimpatnam, Krishna District. As per Clause 1 (a) of Annexure-1 to the Tender Specifications, one of the prequalification requirements is that "the bidder musthave, with total responsibility, successfully designed,engineered, supplied, erected, tested and commissioned two EHV Sub-stations of 220KV or higher voltage comprising of atleast six bays during the past six years which must be in satisfactory operation for a period of two years. "Clause l(c) requires "that the bidder must have financial standing to execute works of this nature and cost and produce evidence in support." Clause-3 however says "Notwithstandingany thing stated above, the Board reserves the right to assess the bidder's capability and capacity to execute the contract, should the circumstances warrant such assessment in the overall interest of the Board". The appellant, the 4th respondent and three others, who are not parties to this appeal, submitted their tenders in two parts. The Board opened the Part-I bids of all tenders on 11th March, 1992 and sent them to Desein Private Ltd., New Delhi, the 3rd respondent, which was appointed by the Board as consultant for this Project under agreement dated 21-12-1990, for their evaluation report. The Chief Engineer of the Board recommended opening of Part-II bids of the appellant and two others who are not parties to this appeal. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-2 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | recommended opening of Part-II bids of the appellant and two others who are not parties to this appeal. Though this was initially approved by all the members of the Board except the Chairman, later, on recirculation, all the members agreed with the views of the Chairman to open Part-II bids of all the tenderers. Accordingly, Part-II bids of all the tenderers were opened on 30-4-1992 and evaluated by the Board as follows:- | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-3 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Sl. Name of the tenderer Price quoted Price evaluated
No. by the Board
Rs. Rs.
1. Controls & SchematicsLtd. 2,18,43,650/- 2,76,54,014/-
(4th respondent).
2. Crompton Greaves Ltd. 2,84,29,100/- 2,87,23,822/-
3. Alluminium Industries Ltd. 2,14,86,145/- 3,13,23,986/-
4. Larsen & Tubro Ltd. 3,10,97,737/- 3,32,55,905/-
5. Bhanu Construction Company 3,12,96,835/- 3,34,03,387/-
Ltd. (Appellant). | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-4 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 2. As per the above evaluation, the price quoted by the appellant as well as the price evaluated by the Board on that quotation is the highest, while the price quoted by the 4th respondent is the second lowest and the evaluated price thereon is the lowest of all. The Board held negotiations with the 4th respondent and awarded the contract to it for Rs. 2,37,43,650/- by letter of intent dated 18-9-1992. The appellant has filed the writ petition for declaring the impugned proceedings as illegal and for a direction to the Board to award contract to it, contending that--
(1) (a). The tender of the 4th respondent is invalid as it was filed by a consortium of three companies;
(b) Even assuming that the experience of three consortium partners can be taken into consideration, they do not possess the prequalification requirements prescribed by the Tender Notice and hence the tender of the 4th respondent ought to have been rejected.
2. The designs and drawings of the 4th respondent are not in accordance with tine tender prequalifications and as such its tender should have been rejected.
3. The decision of the Board to open Part-II bids without waiting for the report of the consultant on the prequalification requirements or all the tenderers is contrary to the Tender Notice.
4. The Board is bound to,accept the recommendations made by its consultant.
5. In any event, the exercise of the power by the Board differing from the opinion of the Consultant was mala fide with an intention to help the 4th respondent.
6. The method of evaluation of the tenders adopted by the Board is not correct and the evaluated price with reference to the price quoted by the appellant will be the lowest, if correct evaluation is made. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-5 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 7. The Board should have taken the previous experience of the appellant into consideration and awarded the contract to it, even if the rate quoted by it is higher, and lastly,
8. The Board has acted mala fide in not only agreeing to pay the 4th respondent higher price than what has been quoted by it but also to confer some extra benefits on it. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-6 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 3. The Board has filed counter-affidavit and additional counter-affidavit. The stand of the Board is that the recommendation of its consultant is not binding on it; that the evaluation of prequalification bid is not covered by the agreement with the consultant which is only concerned with designing, engineering, construction and commissioning of the project; that the Board has not given the contract to the appellant because of the higher price quoted by it and not because of its unsound financial incapacity that after the report of the Consulant was received on 11-5-1992, the matter was referred to the Financial Adviser of the Board on 7-7-1992 for arthimatical verification and after receipt of report from him on 16-7-1992, referred the matter to the Stores Purchase Committee which met on 18-8-1992 and wanted the 4th respondent to be called for negotiations with Negotiating Committee consisting of Member (Project). Member (Accounts) and Member (Secretary) and accepting its recommendations, the Board accepted the tender of 4th respondent on 18-9-1992; that the appelIant has not raised any objection against the opening of the price bids till 1-9-1992; and that in case of Rayalaseema Thermal Project also persons not qualified in the prequalification bids including the appellant were considered and awarded contracts and that there is nothing unusual in the case of VTPS. The Board has also stated that there is nothing irregular or arbitrary in the evaluation of the price bids which were not always referred to the consultant. The Board has also denied the allegation of mala fides and stated that Sri V.V. Reddy, the then Chairman died on 3-5-1992. It is also the case of the Board that even if the offer of tine 4th respondent is rejected, the appellant would not have got the contract as the evaluated bid offered by | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-7 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | respondent is rejected, the appellant would not have got the contract as the evaluated bid offered by the Crompton Greaves Ltd., will be the lowest. The learned counsel has also produced before us the file relating to this contract. From the file it is seen that the Board has accepted Hie offer Of the 4th respondent on 28-4-1993 and awarded the work to it for Rs. 2,37,43,650. The learned counsel for the Board has stated that the work has commenced at the end of April, 1993 and that the 4th respondent is satisfactorily executing the work. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-8 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 4. The 4th respondent has filed counter-affidavit almost similar to that of the Board. It has also averred that if previous experience is made the only eligibility, it results in monopoly; that there is no prohibition of submitting the tender through consortium; that the Consultant did not disqualify the 4th respondent on this aspect; that the opinion of the Consultant on the prequalification is not complete and that the appellant who has never raised any objection before the Board till the time of consideration of price bids, cannot now raise any objection after having lost the contract.
5. The learned single Judge rejected all the contentions of the appellant and dismissed the writ petition.
6. Sri B.S.A. Swamy, the learned counsel for the appellant has raised the following contentions:-
I. Prequalification bid:-
(a) The evaluation of the prequalification bids was not done by the Board properly and that the tender of the 4th respondent ought to have been rejected since it is in effect by consortium of companies which is not permitted by the tender notice.
(b) Even assuming that the consortium is eligible to quote, it does not fulfil the prequalification requirement as per the opinion of the consultant which is binding on the Board.
(c) The Board ought not to have opened the price bids without receipt of the report of the consultant on prequalification bids and the price bids were opened in order to help the 4th respondent.
(d) Non-obstante clause cannot nullify the main operative provision and hence cannot be invoked at all.
(e) Even otherwise, the clause can be invoked only after opening of price bids and not before.
(f) Even if the Board can invoke non-obstante Clause before opening price bids, it has not recorded any valid reasons to differ from the report of the Consultant. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-9 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | II: Price bids:-
(g) The price bids ought to have been referred to the Consultant as per the agreement.
(h) The method of evaluation of the price bids adopted by the Board is incorrect and arbitrary and if the bids are properly evaluated, the price quoted by the appellant will be the lowest,
(i) The appellant was being awarded contracts by the Board eversince 1984 and the Board cannot deny the present contract on the ground that it has no financial capability to execute the work.
(j) The action of the Board is vitiated by mala fides as the Board accepted the offer of the 4th respondent though the designs and drawings submitted by it are not in accordance with the Tender specifications and the Board has not only agreed to pay the 4th respondent higher price than what has been quoted by it, but also agreed to confer some extra benefit on it. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-10 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Preliminary objection:
7. Before considering the various contentions urged regarding prequalification bids, a preliminary objection raised by the respondent may be takenup. The respondents say that the appellant, having not raised any objection at the time of evalution of price bids before the Board considering the tender of the 4th respondent cannot raise the same in this Court having lost the award of the contract. They rely on Manual Thomas v. State, in which the following observations of the Kerala High Court are apposite: | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-11 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | "It is however, necessary to advert to one or two contentions pressed for our aceptance by the appellants. It was contended that the 4th respondent did not satisfy the qualifications prescribed for pretender registration and it was therefore wrong to have allowed the 4th respondent to submit tenders. This contention is based on the fact that the prequalification tender notification stated that the contractors/firms who have carried out building construction worth more than Rs. 150/- lakhs per single multistoreyedR.C.C. building alone need apply and that the 4th respondent did not construct any single build ing worth more than Rs. 150/- lakhs, though they have constructed buildings worth more than that amount and even though they would have undertaken to construct buildings of greater value. This contention is not acceptable for more than one reason. When the 4 th respondent participated as a tenderer and the tenders were opened in the presence of the parties, the appeIlants knew that the 4th respondent was all owed to be a tenderer on that ground. The appellants, then thought, that as the4th respondent's tender amount was higher, the appellants had a better chance than the 4th respondent and therefore it did not matter whether the 4th respondent was allowed to submit its tender or not. When once their tenders were rejected, they raised this objection then. The appellants were therefore sitting on the fence and cannot be allowed to raise this contention now". | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-12 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 8. This is opposed by the learned counsel for the appellant who contends that there can be no estoppel against the statute or against waiver of fundamental rights and relies on Air India v. Nergesh Meerza , A.C. Jose v. Sivan Pillai, and Olga Tellis v. Bombay Municipal Corporation, .
9. In all these cases, it was held that there can be no estoppel against the statute and that no one can be estopped from contending that the act complained of is a violation of any fundamental right. There is no d ispute about this proposition. Here, no statutory provision or regulation is challenged as unconstitutional and the complaint of the appellant is that the Board has not followed the terms of the tender specification. We fail to see how these cases help the appellant. The learned counsel has also feebly attempted to distinguish the decision of Kerala High Court1, on the ground that there both were qualified tenderers. We have no hesitation in holding that the decision of Kerala High Court is apposite and in Kerala case one of he tenderers was unqualified. Accordingly, we uphold the plea of the respondents that the appellant is not entitled to raise this contention at this stage.
10. Now let u.s examine the various contentions raised by the learned counsel for the appellant.
Contention 1 (a) | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-13 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Contention 1 (a)
11. According to Sri B.S.A. Swamy, the learned counsel for the appellant, the prequalification requirement as per Tender Notice dt. 8-12-1991 is that the bidder should have commissioned at least two E.H.V. Sub-stations of 220 K.V. by himself and that the expression "by himself" means one person either natural person or legal entity and that it does not include consortium. It is significant to note that the words "by himself" are not found in Clause 1 of Annexure-1 to Bid Qualification Requirements. The learned counsel relies on Clause 4 of General Conditions of Contracts which reads as follows:
"The contractor shall not, without the consent in writing of the Engineer or purchaser which shall not be unreasonably withheld, assign or sub-let his contract." | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-14 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 12. According to the learned counsel, this implies that a consortium cannot tender and as the offer of the 4th respondent is on behalf of the consortium consisting of itself, M/s. Information Managementlndia Pvt. Ltd., Hyderabad and M/s. Sapphire Construction Company, Vijayawada, the 4th respondent is not qualified to participate in the tenders. On the other hand, the Board and the 4th respondent contend that the 4th respondent is a manufacturer of L.T. Switch gear penels, while M/s. Information Management India Pvt. Ltd., is Engineering and Design Consultant and M/s. Sapphire Construction Company deals in installation, testing and commissioning work and all the three of them are independently doing other contracts for the Board and even assuming that the contractor cannot sub-let the contract, it does not follow that consortium cannot participate in the bid in the absence of specific prohibition to that effect. It is also their contention that Clause 4 relied on by the appellant does not prohibit sub-letting of the contract and on the other hand implies that the contract can be sub-let, but with the permission of the Board. It is also their contention that the consultant did not disqualify the 4th respondent on this aspect. The respondents also contend that if the Clause is interpreted to mean that consortium cannot bid it amounts to encoruraging monopoly of existing contractors and such an interpretation has to be avoided. They also rely on Clause 11.08.00 (vi) of sub-section (A) of Section VIII of Technical Specifications which says mat the tenderer while submitting tender must indicate the name of the Sub-contractor to whom he intend s to sub-contract part of the work and the nature and extent of such work. They relay on the decision of the Supreme Court in Rasbihari v. State of Orissa, . In that case, the Governmetn of Orissa, instead of inviting tenders for sale | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-15 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | . In that case, the Governmetn of Orissa, instead of inviting tenders for sale of Kendu leaves, invited offers from individuals who carried out contracts in the previous year without default to the satisfaction of the Government and excluded new entrants. The Supreme Court held that the Scheme was violative of Articles 14 and 19(1)(g) of the Constitution. The Supreme Court held as follows: | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-16 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | "The classification based on the circumstance that certain exising con tractors had carried out their obligations in the previous year regularly and to the satisfaction of the Government is not based in any real and substantial distinction bearing a just and reasonable relation to the object sought to be achieved i.e., effective execution of the monopoly in the public interest. Exclusion of all persons interested in the trade, who were not in the previous year licensees is ex facie arbitrary: it had no direct relation to the object of preventing exploitation of plockers and growers of kendu leaves, nor had it any just or reasonable relation to th securing of the full benefit from the trade, to the State. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-17 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Validity of the law by which the State assumed the monopoly to trade in a given commodity has to be judged by the test whether the entire benefit arising therefrom is to ensure to the State, and the monopoly is not used as a cloak for conferring privte benefit upon a limited class of persons. The scheme adopted by the Government first of offering to enter into contracts with certain named licensees, and later inviting tenders from licensees who had in the previous year carried out their contracts satisfactorily is liable to be adjudged void on the ground that it unreasonably excludes traders in Kendu leaves from earring on their business. The scheme of selling Kendu leaves to selected puchasers or of accepting tenders only from a specified class of purchasers was not "integrally and essentially" connected with the creation of the monopoly and was not on the view taken by this Court in Akadasi Pudhan's case, protected by Article 19 (6) (ii); it had therefore to satisfy the requirement of reasonableness under the first part of Article 19 (6). No attempt was made to support the scheme on the ground that it imposed reasonable restrictions on the fundamental rights of the traders to carry on business in kendu leaves. The High Court also did not consider whether the restrictions imposed upon persons excluded from the benefit of trading satisfied the test of reasonableness under the first part of Article 19(6). The High Court examined the problem from the angle whether the action of the State Government was vitiated on account of any oblique motive, and whether it was such as a prudent person carrying on business may adopt. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-18 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | No explanation has been attempted on behalf of the Stateas to why an offer made by a well known manufacturer of bid is interested in the trade to purchase the entire crop of kendu leaves for the year 1968 for rupees three crores was turned down. If the interests of the State alone were to be taken into consideration the State stood to gain more than rupees one crore by accepting that offer. We are not suggesting'that merely becuase that offer was made, the Government was bound to accept it. The Government had to consider, as prudent businessman whether, having regard to the circumstances, it should accept the offer, especially in the light of the financial position of the offerer, the security which he ws willing to give and the effect which the acceptance of the offer may have on the other traders and the general public interest. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-19 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | The learned Judges of the High Court have observed that in their view the exercise of the discretion was not shown to be arbitrary, nor was the action shown to be lacking in bona fides. But that conclusion is open to criticism that the Government is not shown to have considered the prevailing prices of kendu leaves about the time when offers were made, the estimated crop of kendu leaves, the conditions in the market and the likelihood of offerers at higher prices carrying out their obligations, and whether it was in the interests of the State of invite tenders in the open market from all persons whether they had or or had not taken contracts in the previous year. If the Government was anxious to ensure due performance by those who submitted tenders for purchase of kendu leaves, it was open to the Government to devise adequate safeguards in that behalf. In our judgment, the plea that the action of the Government was bona fide cannot be an effective answer to a claim made by a citizen that his fundamental rights were infrigned by the action of the Government, nor can the claim of the petitioners be defeated on the plea that the Governmet in adopting the impugned scheme committed an error of judgment. That plea would have assisted the Government if the action was in law valid and the objection was that the Government erred in the exercise of its discretion. It is unnecessary in the circumstances to consider whether the Government acted in the interest of their party men and to increase party funds in devising the schemes for sale of Kendu leaves in 196 ."
13. The learned counsel for the 4th respondent contends that in view of the above judgment the terms of the contractors have to be interpreted as not to exclude bid by consortium and not ristricting it to the contractors who have experience in the type of work. We agree with the respondents and reject the contention of the appellant. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-20 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Contention No. 1 (b):-
14. The next contention is that even assuming that consortium is eligible to quote, the 4th respondent does not fulfi the prequalification requirement of adequate experience. The learned counsel for the appellant Sri B.S. A. Swamy. relies on the report of tine consultant though it is marked confidential. We are surprised how the appellant could procure copy of this confidential parer and more so file it in this Court. According to the consultant, the 4th respondent does not meet the specified qualifying criteria regarding experience in the execution of two 220 K.V. or higher voltage switchyards traction sub-stations with at least 6 Bays; their proposal are also deficient in respect of several technical details; and the structural desings enclosed by the 4th respondent are found to be totally inadequate and unacceptable. According to him as per the agreement dated 21-12-1990 entered into between the Board and the consultant, the opinion of the consultant is binding on the Board. On the other hand, Sri C.V. Nagarjuna Reddy, the learned counsel for the Board and Sri K. Subrahmanya Reddy, the learned senior counsel for the 4th respondent say that the consultant was asked to give opinion only on technical a spects and not on prequalification requirement and that its opinion on prequalification bid is not binding on the Board. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-21 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 15. Dehors the report of the consultant, the Chief Engineer of the Board was of the opinion that the consortium and another tenderer Alluminium Industries Ltd., had no adequate required experience for this project and hence, are not eligible to tender. But the Board took a decision to open the price bids of all the tenderers including the appellant, who was also disqualified from the financial aspect, evidently invoking non-obstante clause about which we shall deal in succeeding paragraphs. Further, the report of the consultant was received by the Board on 11-5-1992 while price bids were opened on 30-4-1992. Thus, the question whether the report of the consultant is binding on the Board and whether the Board ought to have rejected the tender of the 4th respondent following the report of the consultant are both academic. However, as these are relevant for deciding the next contention or the appellant, we have to consider them. The relevant clauses of the agreement may now be noticed.
"Cl.1.1(d): DESEIN should study the Existing State I & II units; and design to specify schemes for the proposed State III units making provision for interconnections wherever possible such as Auxiliary Steam system, DM Water Makeup system, Compressed Service Air system, Instrumentation Air system, Oil Handling system, Electrical systems, Communication systems, Trippers and Coal Bunkers Feeding systems etc. Cl. 2.1:DESEIN shall assume full responsibility for engineering adequacy, quality, co-ordination and timely completion of design construction, start up commissioning and all other activities, the execution of the Project as developing on them under the provisions of this contract. Desein shall be fully responsible for the complete designing and engineering of all the Civil, Electrical, Mechanical and Instrumention works of the Project." | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-22 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Cl. 2.3 (h): Tender drawings and specifications shall be prepared with the utmost expedition and promptly furnished to the Board.
Cl. 2.4: Study and evaluate the offers received technically and economically and make purchase recommendations to the Board within a month from the date of receipt with complete technical and financial analysis. Where a composite tender for Civil, Electrical and Mechanical works is invited, DESEIN shall furnish their analysis for the complete tender including Civil Works, the analysis for all the tenders shall be submitted in 25 copies. In case where confirmations/clarifications on technical details are necessary from the bidders, these shall be obtained directly only once by DESEIN with copies to the Board. While furnishing the analysis DESEIN shall indicate loading for all the technical and commercial deficiencies apart from giving the final list or confirmations/ clarifications still to be obtained from the bidders before placing the orders. Were the lowest offer is not recommended for acceptance, DESEIN shall furnish a list of deviations from the specifications giving the reasons why these are not acceptable.
Cl. 13: Variation in Scope of Work:
The Board reserves the right to delete any item or items of work from the scope of the consultants and execute the same by itself or through any other agency separately appointed by the Board. This provision shall apply at any time during currency of the contract. The total contract price in such case shall stand suitably adjusted by proportionately reducing the cost of the deleted item from the contract price. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-23 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 16. Thus, from the above it can be seen that the Consultant is responsible for engineering adequacy, quality coordination and timely completion of designing construction and commissioning and other activities in the execution of the project. In particular, the consultant has to study and review the details of the engineering specific features and scope of plant and equipment to be supplied by the Board or other suppliers. It shall also carry out the basic duties and various systems of the station and prepare basic engineering and consortium designing for the same. It shall also prepare technical specifications and draft enquiry document for the supply and erection of all power station branches and equipment such as boilers without auxiliaries, lifts etc. It shall also draft as many specifications as are necessary for the completion of the project. Thus, the agreement does not provide for giving any opinion by the consultant on the prequalification requirement of the tenderers and even assuming mat the consultant could give its opinion. There is no clause in the agreement to the effect that such an opinion is binding on the Board.
Contention No. 1 (c):-
17. The next contention is that in order to help the 4th respondent, the Board opened the Part-II price bids without waiting for the consultant's report regarding Part-I prequalification technical bids of all the tenderers and that it is contrary to the tender notice. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-24 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 18. The learned counsel for the appellant contended that the Board anticitipating that the consultant is likely to disqualify the 4th respondent, opened the price bids of all the tenderers in order to help the 4th resondent in whom Sri V.V. Reddy, the then chairmam of the Board was interested. The contention or the Board is that the consultant is not required to give report on the prequalification requirement of the tenderers and hence there is no obligation to wait for the report of the consultant and that it is competent to open the price bids in over all interest of the Board invoking the non-obstante clause 3 of Annexure-I to bid Qualification requirements, which reads as follows:
"Notwithstanding anything stated above the Board reserves the right to assess the tenderer's capability to execute the contract should the circumstances warrant such assessment in the overall interest of the Board". | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-25 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 19. The further case of the Board is that it is usual practice of the Board and that in the case of Rayalaseema Thermal Power Project, Muddnuru, Cuddapah District also similar decision was taken by the Board and contract was awarded to the appellant. It is also the further contention of the Board that the Board does not consist of the Chairman alone, but of other members also who were responsible officers of high rank and there is nothing suggest that they were pressurised by the then Chairman. It is further contended that though the apellant, 4th respondent and the Alluminum Industries Ltd., were not qualified for the prequalification requirement, the 5 members of the Board evidently invoking the non-obstante clause, were of the opinion that price bids of the appellant may be opened, and when the Chariman suggested opening of all the bids, the members concurred with his suggestion. In the counter, the allegation of mala fides is denied. It is also stated by the learned counsel for the Board that Sri V. V. Reddy, who was the then Chairman and who was to lay down his office on 4-5-92, died on 3-5-1992 long before filing of the Writ Petition.
20. The submission of the appellant proceeds on the assumption that it is qualified to submit the tender. Sri Swamy, the learnd counsel for the appellant contends that financial capacity is not one of the prequalification requirements and that the appellant cannot be disqualified on that count. Clause 1 (c) of Annexure-1, which prescribes Bid qualification requirements, reads as follows:
"The bidder must have financial standing to execute works of this nature and cost and produces evidence in support".
21. Thus, Sri Swamy is not right in contending that financial capacity is not one of the prequalification requirements and that the appellant is not disqualified on that count. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-26 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 22. We have already held while dealing with the preceding contention that the consultant is not required to give its opinion on the prequalification eligibility of the tenderers, that its duty is only to advise the Board on technical aspects and that such a report is not binding on the Board. Hence, it follows that the Board need not wait for the receipt of the report of the consultant before opening the price bids. In fact the Chief Engineer of the Board recommended opening of the price bids excluding the bid of the 4th respondent and the bid of Alluminium Industries Ltd., even before receipt of the report of the consultant. Thus, the grievance of the appellant seems to be more against opening of the bid of the 4th respondent and not so much against the timing of the opening of the bids as such.
23. Another contention is that when the Board came to the conclusion that the appellant is not eligible a s per prequalification requirement, it ought to have returned the appellant's bid istead of opening the bid along with other bids. We fail to appreciate how the appellant is prejudiced by this. If its bid were to be lowest, the appellant would have been granted the contract and thus having taken the chance, the appellant without then raising this plea, cannot now complain having lost the constract. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-27 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 24. We have perused the file produced by the learned counsel for the Board. The Chief Engineer in his note to the Board has not expressed his view about the financial status of the bidders, except by merely saying that the financial statements of the bidders are enclosed. He recommended that the appellant may be considered as qualified on the ground of having experience and that the 4th respondent does not have the required experience and hence it is disqualified. He accordingly recommended opening of price bids of all the tenderers except 4th respondent and Alluminiurn Industries Ltd. This note was approved by the five members of the Board who however did not record any reasons. But the Chairman Sri V.V. Reddy endorsed on 21-4-1992 as follows:
"When we can consider the tender of M/s. Bhanu, I do not see why we cannot open other tenders. Better all tenders are opened." | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-28 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Then the file was recirculated to the members who agreed with the views of the Chairman. The allegation that the price bids of all the tenderers were opened in order to help the 4th respondent is without substance since the offers of all the tenderers were in sealed covers and not known to anybody until they were opened. Though no reasons are recorded by the Board, as to why price bids of all the tenderers were opened, the reason suggested in the counter was that the Board invoked the non-obstante Clause 3. Sri Swamy contends that giving reasons in the counter is not enough in the absence of those reasons finding place in the file and relies on the decision of the Supreme Court in Mohinder Singh v. Chief Election Commr., This is without substance since there is no reason recorded by other members as to why the price bids of the appellant whose financial capacity was not discussed, should be opened, that too, even before receipt of the report of the consultant. We must not forget that these are administrative matters and one cannot expect the authorities to record detailed reasons in support of the decisions which are generally preceded by deliberations. Of course, it would have been better had the Board indicated some reasons in the note file. But merely because they have not noted, we cannot hold that the Board is not competent to indicate the reason in the counter-affidavit. So the decision of the Supreme Court is distinguishable. Further, the learned counsel for the appellant has proceeded on the premises that the Board in its counter has justified its action on the ground that it will result in saving of Rs. 75 lakhs to the Board. There is no such reason disclosed either in the counter-affidavit or additional counter-affidavit. Thus, we hold that the Board has not acted illegally in invoking the non-obstante clause and in considering bids of all the tenderers, and even before receipt of the report of the consultant by invoking non-obstante clause. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-29 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Contention No. 1 (d):-
25. It is next contended by Sri Swamy, the learned counsel for the appellant that the non-obstante clause cannot be interpreted to have effect of scuttling the clear mandatory term in the tender notice and relies on the decision of the Supreme Court in Dominion of India v. Sreen Bhai in which it is held that, ". ...it is however necessary to observe that althogh ordinarily there should be a close approximation between the non-obstante clause and the operative part of the section the non-obstante clause need not necessarily and always be co-extensive with the operative part, so as to have the effect of cutting down the clear terms of an enactment. If the words of the enactment are clear and are capable of only one interpretation on a plain and grammatical construction of the words thereof a non-obstante clause cannot cut down the construction and restrict the scope of its operation. In such cases the non-obstante clause has to be read as clarifying the whole position and must be understood to have been incorporated in the enactment by the Legislature by way of abundant caution and not by way of limiting the ambit and scope of the operative part of the enactment...."
26. In that case, Clause 3 of Requisitioned Land (Continuance of Powers) Ordinance (19 of 1946) fell for consideration. The Clause reads as follows:.
Cl. 3: 'Continuance of requisitions':-
Notwithstanding the expiration of the Defence of India Act, 1939 (35 of 1939), and the rules made thereunder, all requisitioned lands shall continue to be subject to requisition until the expiry of this Ordinance and the apporpriate Government may use or deal with any requisitioned land in such manner as may appear to it to be expedient." | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-30 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 27. We fail to seen how this decision is of any assistance to the appellant. The other decisions relied on by the learned counsel for the apellant in Chief Inspector of Mines v. K.C. Thapars , L.I.C. of India v. S.V. Oak , Flnnmnar Nath v. Tek Chand, and Chief Justice of A.P. v. L.V.A. Dikshitulu do not throw any light on the point in discussion.
Contention No. 1(b):-
28. The next contention of the learned counsel for the appellant is that the non-obstante clause can be invoked only after the price bids are opened and not carrier. We are afrid we cannot agree. The non-obstante clause does not make any such distinction or restriction.
29. The learned counsel for the appellant relies on the decision of the Supreme Court in Ramana v. International Airport Authority of India, . In that case, the tender notice by the International Airport Authority, which is a statutory body stated that:
"the sealed tenders in the prescribed form are hereby invited from Registered II Class Hoteliers having at least 5 year's experience for putting up and running a II Class Restaurant and two Snack Bars at this Airport for a period of 3 years". | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-31 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 30. But the Airport authority has accepted the tender of the person who does not satisfy the requirement of the tender notice. It was held by the Supreme Court that the requirement mentioned in the tender notice is a condition of eligibility which is an objective test and not a subjective one and accordingly it was observed that it is a well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it profasses its actions to be judged and it must scrupulously observe those standards on pain of invalidation of an act in violation of them. It has further held that, "It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms of largess, the Government cannot act arbitrarily at its sweat will and like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norm which is not arbitrary, irrational or irrelevant. The power of discretion of the Government in the matter of grant of largess including award of jobs, contracts quotas, licences etc.,must be confined and structured by rational, relevant and nondiscriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory."
Later again the Court observed:
"The Corporation acting as an instrumentality or agency of Government, obviously be subject to the same limitation in the filed of constitutional and administrative law as Government itself though in the eye of law there is distinct and legal entities." | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-32 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 31. It can be seen that the minimum requirement prescribed in that tender notice was absolute and there was no power of relaxation available to the authorities unlike in the present case. Thus, this case is distinguishable.
32. The learned counsel for the appellant relied on two other decisions of the Supreme Court in M. Lachia Setty & Sons Ltd. v. Coffee Board Bangalore, and Harminder Singh v. Union of India, for the propositation that offer of a person not eligible to participate in the tender, cannot be considered by the Government. In M. Lachia Setty & Sons Ltd., case, as per condition No. 6 of conditions of sale, the Coffee Board does not bind itself to accept the highest or any bid and the Board need not assign any reasons for doing so and its decision shall be final and conclusive. The highest bid was not accepted by the Coffee Board for some reason and the Coffee Board thereupon acepted the lawest bid of and her tenderer. The Supreme Court on construction of that condition held that the Coffee Board is empowered to accept the lower bid in preference to any higher bid. We fail to see how this helps the appellant. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-33 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 33. The next case relied on by the learned counsel for the appellant is Haraminder Singh's case, . In that case, tenders were invited for supply of mik. Though the tender of Harminder Singh, the appellant therein was the lowest, the Government accepted the higher tender of Government Milk Scheme. The award of contract of milk scheme was set aside by the Supreme Court on the ground that the tenders were to be adjudged on their own intrinsic merits in accoidure with the terms and conditions of that tender notice and that as the tender notice do not indicate any preference to any Government Undertaking, the authority concerned acted arbitrarily in allowing 10% price to Government Milk Scheme. This decision is not relevant since as in International Air Port' Authority's case (12 supra), in this case also there is no power of relaxation available to the authorities unlike the present case. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-34 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 34. On the other hand, the learned Counsel for the respondents relied on M/s. G.J. Fernandes v. State of Karnatakai, which deals with the permissibility of relaxation of prequalification requirements. It is held in the said decision, "Thirdly, the conditions and stipulations in a tender notice like this have two types of consequences. The first is that the party issuing the tender has the right to punctiliously and rigidly enforce them. Thus, if party does not strictly comply with the requirements of paras III, V or VI of the Notification Inviting Tenders (NIT), it is open to the Karnataka Power Corporation Ltd., (KPC) to decline to consider the party for the contract and if a party conies to Court saying that the KPC should be stopped from doing so, the Court will decline relief. The second consequence, indicated by this Court in earlier decisions, is not that the KPC cannot deviate from these guidelines at all in any situation but that any deviation, if made, should not result in arbitrariness or discrimination. It comes in for application where the non-conformity with, or relaxation from, the prescribed standards results in some substantial prejudice or injustice to any of the parties involved or to public interest in general. For example, in this very case, the KPC made some changes in the time frame originally prescribed. These changes affected all intending applicants alike and were not objectionable. In the same way, changes or relaxations in other directions would be unobjectionable unless the benefit of those changes or relaxations were extended to some but denied to others. The fact that a document was belatedly entertained from one of the applicants will cause substantial prejudice to another party who wanted, like wise, an extension of time for filing a similar certificate or document but was declined the benefit. It may perhaps be said to cause prejudice also to a party which can show that if had refrained from applying for | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-35 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | be said to cause prejudice also to a party which can show that if had refrained from applying for the tender documents only because it thought it would not be able to produce the document by the time stipulated but would have applied had it known that the rule was likely to be relaxed. But neither of these situations is present here. Sri Vaidhyanathan says that in this case one of the applicants was excluded at the preliminary stage. But it is not known on what grounds that application was rejected nor has that party come to Court with any such grievance. The question, then, is whether the course adopted by the KPC has caused any real prejudice to the appellant and other parties who had already supplied all the documents in time and sought no extension at all? It is true that the relaxation of time schedule in the case of one party does affect even such a person in the sense that he would otherwise have had one competitor less. But, we are inclined to agree with the respondent's contention that while the rule in Ramana's case (supra) will be readily applied by Courts to a case where a person complains that a departure from the qualifications has kept him out of the race, injustice is less apparent where the attempt of the applicant before Court is only to gain immunity from competition. Assuming for purposes of argument that there has been a slight deviation from the terms of the NIT, it has not deprived the appellant of its right to be considered for the contract; on the other hand, its tender has received due and full consideration. If, save for the delay in filing one of the relevant documents, MCC is also found to be qualified to tender for the contract, no injustice can be said to have been done to the appellant by the consideration of its tender side by side with that of the MCC and in the KPC going in for a choice of the better on the merits". | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-36 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | 35. Thus, we hold that non-obstante clause can be invoked even before opening of price bids and that as both the appellant and the 4th respondent did not satisfy the prequalification requirements, the Board invoked the non- obstante Clause and opened the price bids of all the tenderers and there is nothing illegal about it.
Contention No. 1 (f):-
36. The next contention of the learned Counsel for the appellant is that even if the Board can invoke non-obstante clause before opening price bids, it has not recorded any valid reasons to differ from the report of the consultant. This is ex facie without substance since the price bids were opened on 30-4-1992 while the consultant's report was received on 11-5-1992. Thus, we reject this contention II. Price Bids:-
37. Contention No. II (g):- The learned counsel for the appellant next contended that the price bids ought to have been referred to the Consultant for evaluation. This is opposed by the Counsel for the Board who contends that evaluation of price bids is not covered by the agreement with the Consultant. To appreciate this contention, it is necessary to refer to Clauses 2.1,2.4 and 5.1 of the agreement. Though clauses 2.1 and 2.4 are extracted elsewhere in this judgment, they are extracted again here for the sake of convenience:
2.1: DESE1N shall assume full responsibility for Engineering adequacy, quality, co-ordination and timely completion of design construction strartup commissioning and all other activities, the execution of the Project as devolving on them under the provisions of this contract. DESEIN shall be fully responsible for the complete designing and engineering of all the Civil, Electrical, Mechanical and Instrumentation works of the Project. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-37 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Cl.2.4: Study and evahtate the offers received technically and economically and make purchase recommandations to the Board within a month from the date of receipt with complete technical and financial analysis. Where a composite tender for Civil, Electrical and Mechanical works is invited, DESEIN shall furnish their analysis for the complete tender including Civil works, the analysis for all the tenders shall be submitted in 25 copies. In case where confirmations/clarifications on technical details are necessary from the bidders, these shall be obtained directly only once by DESEIN with copies to the Board. While furnishing the analysis, DESEIN shall indicate loading for all the technical and commercial deficiencies part from giving the final list of confirmations/ clarifications still to be obtained from the bidders before placing the orders. Where the lowest offer is not recommended for acceptance, DESEIN shall furnish a list of deviations from the specifications giving the reasons why these are not acceptable. | https://indiankanoon.org/doc/16663/ |
66d95abf72c5-38 | Bhanu Construnctions Company ... vs A.P. State Electricity Board, ... on 1 March, 1994 | Cl. 5.1: For all services indicated in Article No. 2 herein above including for the services of Resident erection and commissioning supervisory Engineers as detailed in Clauses 2.31 and 2.32, Board shall pay DESEIN a lumpsum firm fee of Rs. 105.25 lakhs (Rupees One Hundred and Five lakhs twenty five thousand only), as per the following breakup details:
38. No doubt, these clauses indicate that the Consultant can also evaluate the bids. But according to the Board it is not always obligatory on its part to refer price bids for evaluation to the Consultant whose main function is to advise on the technical side. The learned counsel for the Board has filed list of 34 contracts relating to Rayalaseema Thermal Power Project and V.T.P.S. State-Ill in respect of which price bids were not earlier sent to the Consultant to show that there is nothing unusual about the procedure adopted in the instant case. We agree with this plea of the respondents.
Contention No. II(h):-
39. The next contention is that the method of evaluation of the price bids adopted by the Board is incorrect and arbitrary and if the bids are properly evaluated, the price quoted by the appellant would be the lowest.
40. As already seen, the prices quoted by the appellant and the 4th respondent and the avaluated prices by the Board are as follows:
Quoted price. Evaluated price.
Rs. Rs.
1. M/s. Bhanu Construction
Co. Ltd. (Appellant). 3,12,96,835 3,36,03,387
2. M/s. Controls & Schematics
Pvt. Ltd. (4th respondent) 2,18,43,650 2,76,54,014 | https://indiankanoon.org/doc/16663/ |