TRIVENI CONSTRUCTIONS Vs. MILITARY ENGINEER SERVICES

JUDGEMENT

(1.) This application, under Sec. 11(6) of the Arbitration and Conciliation Act, 1996 (for short "the Act") read with Scheme for Appointment of Arbitrators, 1996, is filed by the applicant seeking appointment of a sole Arbitrator to adjudicate the claims and disputes between the applicant and the respondents.

(2.) The case of the applicant, in brief is that, it is a Partnership firm registered under Micro, Small and Medium Enterprises Development Act, 2006 and it is engaged in the business of construction and also undertakes Government work contracts. It is further case of the applicant that Respondent No.1 invited tenders for replacement of existing AC sheets with Galvalume sheets in stores Buildings (05 Nos, BLDG Nos.19/01, 19/2, 19/3, 19/4 and 19/5) including Gas House Bldg No.17 inside factory area at Medak, vide tender published on 22/11/2019. The respondent No.1 accepted the applicant's bid for the subject tender work for a sum of Rs.2,16,91,366.00 and declared the applicant as successful bidder vide proceedings dt.6/2/2020. It is further case of applicant that bid amounts quoted were only for completion of work by the applicant and the said bid amount was excluding the GST @ 12% and labour welfare cess @ 1% and it was expressly agreed between the applicant and the Respondents that the GST and labour welfare cess are to be charged over and above the bid amounts. However, during internal financial audit it came to light that the Respondent Nos.1 and2 have been deducting the GST @ 12% and labour welfare cess @ 1% from the principal bid amount instead of paying additional amounts to the tune of 13% which includes GST and labour welfare cess over and above the bid consideration. The applicant submitted a letter dtd. 22/1/2022 to the Respondent No.3 and informed the disparity in the internal financial audit and requested the Respondents to immediately release the amounts of the taxes and repay tax amounts deducted along with interest @ 24% per annum including penalties, if any, till the date of payment. The Accounts Officer addressed a letter dtd. 14/2/2022, to the Respondent No.3 and the applicant, stating that as per their office records the applicable GST and labour welfare cess have been credited from time to time with public fund account as per Government of India norms. To the said letter, the applicant gave a reply vide letter dtd. 18/6/2022 and stated that the bid amounts did not include statutory taxes i.e., GST @ 12% and labour welfare cess @ 1% and that the Respondents deducted the said statutory taxes from his quoted rates and therefore, the applicant requested the respondents to release the said statutory taxes i.e. GST @ 12% and labour welfare cess @ 1% to the applicant over and above the tendered amount quoted within 15 days from the date of receipt of letter and it is further stated that the said communication should be treated as notice under Condition No.70 of IAFW-2249 forming part of the agreement. The Respondent No.3 vide its letter dt.23/6/2022 stated that the GST amounts were being uploaded against the GST number provided by the applicant to the department and the lumpsum amounts of a particular month was deposited with Reserve Bank of India and the labour welfare cess was also being deposited with the Telangana State Building and other Construction Workers Welfare Board, Hyderabad through a crossed cheque wherever any amount recovered on account of LEC. It is further case of applicant that due to non-payment of statutory taxes to the tune of Rs.29,00,000.00 to the applicant as per the tender condition, he was constrained to issue a letter dtd. 11/7/2022 invoking Arbitration clause as per condition No.70 of IAFW-2249. However, the respondent No.2 vide letter dtd. 19/7/2022 stated that as per condition No.70 of IAFW-2249 general conditions of contract, if any, dispute arises between the parties, the same shall be referred to sole arbitrator, who would be a serving officer duly appointed by the Engineer-in-Chief, New Delhi. The Respondent No.2 further stated that the Applicant accepted the final bill process on 8/7/2022 without protest and therefore, taking recourse to arbitration in view of condition No.70 of IAFW-2249 would be at the own risk of the applicant and refused to settle the dispute amicably. Therefore, the applicant is constrained to file the present Arbitration Application for appointment of a Sole Arbitrator as per the provisions of Sec. 11 and other relevant provisions of the Arbitration and Conciliation Act, 1996.

(3.) A counter affidavit has been filed by the respondent No.1, wherein inter alia it is stated that the applicant-firm was awarded a contract bearing No.CE (Fy)/HYD/MDK/02 of 2019-20 for Replacement of existing AC sheets with Galvalume sheets in Store Buildings (05 nos. Bldg No.19/01, 19/02, 19/03, 19/04 and 19/05) including Gas House Building No.17 inside Factory at Ordinance Factory Medak for an amount of Rs.2,16,91,366.00. As per the work order, the work was commenced on 1/3/2020 and the work was physically completed by the contractor on 29/5/2021 subject to completion of rectification of defects as pointed out while issuing completion certificate by AGE (Indep) Fy Eddumilaram vide letter No.8220/CE/84/E8 dtd. 29/5/2021 and requested to rectify the defects by 28/6/2021. It is further submitted that the complete details of recovered amount on account of GST/LEC against CA No.CE (Fy)/HYD/MDK/26 of 2019-20 also intimated to the applicant contractor vide letter dtd. 23/6/2022. Inspite of receiving all the details of payments, applicant is making allegations against the Department that the statutory taxes were neither paid to the applicant nor deposited with the Central Government against the credit of applicant-firm. The amount so deducted against GST from all works executed by the applicant-contractor during the period was already deposited with the authorities vide Form GSTR 7A TDS. With regard to Labour welfare cess, the same is deposited with Telangana State Building and other Construction Workers Welfare Board, Hyderabad through a crossed cheque whenever any amount recovered on account of LEC. It is further stated in the counter affidavit that after lapse of almost 2 years, the applicant with an intention to receive further payments raised this claim of tax returns and when the same was not accepted by the respondents, the applicant has filed the present Arbitration Application. It is further stated that as per Condition 65 of IAFW- 2249, no further claims shall be made by the contractor after submission of Final Bill and they shall be deemed to have been waived and extinguished. Further, since the applicant contractor has signed the final bill without any reservation and as the final bill was processed and paid to the contractor vide D.V.No.02 of Sep, 2022, no claims whatsoever shall be entertained and prayed for dismissal of application.