Cherian Varkey Construction Company Private Limited v. Kerala State Coastal Area Development Corporation Limited and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE VIJU ABRAHAM** ## **FRIDAY, THE 18[TH] DAY OF AUGUST 2023 / 27TH SRAVANA, 1945** ## **WP(C) NO. 855 OF 2022** ## **PETITIONER:** CHERIAN VARKEY CONSTRUCTION COMPANY PRIVATE LIMITED, 5TH FLOOR, ALPHA PLAZA, KP VALLON ROAD, KADAVANTHRA, KOCHI-682020, REPRESENTED BY ITS DIRECTOR, MR.REJI M CHERIAN. BY ADVS.SANTHOSH MATHEW ALICE J KANATTVIJAY V. PAULKARTHIKA MARIAARUN THOMASANIL SEBASTIAN PULICKELANANDA PADMANABHAN UNNIKRISHNAN MATHEW NEVIN THOMAS ABI BENNY AREECKAL NANDA SANAL GOKUL ASOK ## **RESPONDENTS:** |1|KERALA STATE COASTAL AREA DEVELOPMENT CORPORATION| |---|---| ||LIMITED 1ST FLOOR, CHALACHITHRA KALABHAVAN BUILDING,| ||VAZHUTHACAUD, JAGATHY P O, THIRUVANANTHAPURAM-695014,| ||REPRESENTED BY ITS MANAGING DIRECTOR.| |2|CHIEF ENGINEER KERALA STATE COASTAL AREA DEVELOPMENT| ||CORPORATION LIMITED, 1ST FLOOR, CHALACHITHRA KALABHAVAN| ||BUILDING, VAZHUTHACAUD, JAGATHY P O,| ||THIRUVANANTHAPURAM-695014,| |3|HARBOUR ENGINEERING DEPARTMENTGOVERNMENT OF KERALA,| ||KAMALESWARAM, MANACAUD P O, THIRUVANANTHAPURAM-695009.,| ||REPRESENTED BY THE CHIEF ENGINEER.| |4|EXECUTIVE ENGINEER HARBOUR ENGINEERING DEPARTMENT| ||(MALAPPURAM DIVISION), PONNANI NAGARAM P OM, PONNANI,| ||MALAPPURAM-679583.| ||BY ADVS.NINU M.DAS ADVOCATE GENERAL OFFICE KERALA| SENIOR GP – SRI.BIMAL K NATH THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 18.08.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: **W.P.(C).No.855 of 2022 1** ## **VIJU ABRAHAM,J** ## **-----------------------** **W.P.(C).No.855 of 2022 ------------------------------------Dated this the 18[th] day of August, 2023** ## **JUDGMENT** The above writ petition is filed seeking a declaration that the terms and conditions contained in Exts.P1 and P2 shall govern the contract for the tendered work and for a direction to the respondents to forthwith pay GST at applicable rates on all bills raised by the petitioner along with interest in respect of the tendered work. 2. Petitioner is the successful bidder of the tendered work, being the lowest bidder and his tender was accepted and Ext.P3 selection notice was issued and thereafter, petitioner entered into Ext.P4 agreement with the 1[st] respondent. The site was handed over by the Executing Agency for the commencement of the work and thereafter, the **W.P.(C).No.855 of 2022 2** petitioner raised part bills against the completed portion of the work from time to time. The first part bill was duly verified and passed in favour of the petitioner. Though the said bill was raised on 23.12.2020, the same was kept on hold till 23.01.2021 by the 4[th] respondent for want of some clarification on payment of GST and was then submitted to the 2[nd] respondent without admitting the GST at applicable rates on the bill after making necessary statutory deduction towards GST @ 2%. Thereafter, the 1[st] respondent duly recommended the first part bill for payment vide order dated 10.2.2021, without admitting GST at applicable rates that was payable to the petitioner as per the terms of Ext.P1 tender. Likewise, the 2[nd] , 3[rd] and 4[th] part bills were also sanctioned and submitted for payment by the 4[th] respondent to the 2[nd] respondent without admitting GST at applicable rates. As the respondent did not pay GST at applicable rates on the value of work executed despite the express terms of Ext.P1 tender and ## **W.P.(C).No.855 of 2022 3** Ext.P2 instructions, the petitioner duly sent GST invoices to the 1[st] respondent requesting payment of GST as per the tender terms. While so, the 1[st] respondent vide Ext.P16 letter addressed to the 3[rd] respondent forwarded the minutes of the meeting of the technical evaluation committee dated 6.3.2021 and informed respondents 3 and 4 that the committee had decided to sanction payment of GST at the then applicable rates on the bills raised by the petitioner with respect to the tendered work, and directed respondents Nos.3 and 4 to submit the bills accordingly. In spite of Ext.P16, the 3[rd] and 4[th] respondents have not taken any action to release pending GST payments and the 4[th] respondent has instead sought further clarifications from the 1[st] respondent even though further clarifications was unnecessary and uncalled for. Petitioner submits that due to the non-payment of the GST legally due to him, petitioner is put to serious prejudice. Petitioner also relies on Ext.P17 circular wherein ## **W.P.(C).No.855 of 2022 4** it is specifically directed that when the bills for any goods or services or both or public works procured are processed, the payment has to be made to the contractor for the total value of the works at contract rates and the applicable GST rate. Petitioner further submits that as per Exts.P1 and P2 under the head bid prices under Clause 3.3.3, rates quoted by the bidder shall include cost of all materials and conveyance, labour charges, hire charges of plant and machinery overheads and all incidental charges for execution of the contract and that the rate quoted shall also include all statutory taxes except GST which will be paid separately as per the prevailing Government orders and all other relevant Government orders as on the date of submission of the tender and such tax shall be paid by the contractor. On the basis of the said Clause in Ext.P2, the petitioner would contend that the petitioner was directed to quote the rate excluding GST and therefore, the respondents are liable to pay GST amount. In ## **W.P.(C).No.855 of 2022 5** support of their contentions, petitioner relies on the judgment in _**CA George v. State of Kerala and Others, 2019 (4) KLT online 3268)**_ and also the judgment in _**Sebastian Jose v. State of Kerala (2021 (5) KLT 445)**_ and also the judgment in WA No.1710/2021, passed in an appeal filed against _**Sebastian Jose's**_ case supra. 3. A detailed counter affidavit as well as an additional counter affidavit has been filed on behalf of the 1[st] respondent, wherein it is stated that the petitioner is not entitled for the GST amount claimed. The 1[st] respondent relies on Clause 3.3.5 to contend that GST or any other tax applicable shall be payable by the contractor in respect of this contract and Government will not entertain any claim whatsoever in respect of the same. The petitioner is aware of the inclusion of the tax component and essentially the petitioner in such circumstances is required to quote his rate inclusive of the tax component. The 1[st] respondent relying on Ext.R1(i) would submit that ## **W.P.(C).No.855 of 2022 6** the said circular was issued by the Government so as to avoid ambiguity in the earlier Government Circular in this regard and Ext.R1(i) specifically mandates that in the tender document, the rate quoted by the contractor is exclusive of GST, but inclusive of all other tax and duties, etc., but however, the contractor should indicate separately applicable GST in his tender documents and bills for any goods, services or works procured by any Government department or agency are processed the payment has to be made to the contractor for the total value of work plus the applicable GST. The petitioner cannot get the benefit of Ext.P17 order because administrative sanction and technical sanction for the project were issued even prior to the issuance of Ext.P17 and the said order cannot have a retrospective effect. 4. A detailed counter affidavit has been filed by the 4[th] respondent wherein it is stated that at the time of issuance of Ext.P17 circular, the existing DSR and cost indices published were **==> picture [427 x 673] intentionally omitted <==** **----- Start of picture text -----**<br> ||||||||| |---|---|---|---|---|---|---|---| |W.P.(C).No.855 of 2022 7| |inclusive of all taxes including VAT/GST. In the| |instant case, the estimates were prepared by the| |petitioner on the basis of the earlier cost of| |indices published by the PWD and this cost of| |indices was inclusive of the VAT/GST and since the| |petitioner|quoted|for|tender,|in|response|to| |Ext.P1, on the basis of the cost of indices which| |included VAT/GST, they are not entitled to the| |benefit of Ext.P17. It is further submitted that| |if the petitioner had quoted their rates on the| |basis of the cost of indices which excluded the| |VAT/GST|component,|then|they|could|have|been| |granted the benefit of GST over and above the| |contract rates, in accordance with Clause 9 of| |Ext.P17. On the basis of the same, it is|the| |contention|of|the|4|[th]|respondent|that|the| |petitioner is not entitled for the benefit of| |Ext.P17. The 4|[th]|respondent also relies on Clause| |3.3.5 of Ext.P2, which specifically mandates that| |GST or any other tax applicable shall be payable| |by the contractor in respect of the contract and| **----- End of picture text -----**<br> **W.P.(C).No.855 of 2022 8** Government will not entertain any claim whatsoever in respect of the same and that changes in tax payable due to amendments to tax rules from time to time shall be borne by the contractor. 5. I have heard both sides including the learned Government Pleader. 6. Petitioner relies on Clause 3.3.3 of Ext.P2, which mandates that the rate quoted by the bidder shall be exclusive of GST and on the basis of the same, it is the contention of the petitioner that as his rates quoted were excluding GST, he is entitled for payment of GST at the applicable rate on all bills raised by the petitioner. Whereas the respondents relying on the very same Clause and Clause 3.3.5 would contend that it is specifically stated that the GST amount will be paid separately as per the prevailing Government orders and all other relevant Government orders as on the date of submission of the tender and such taxes shall be paid by the contractor and further as per Clause 3.3.5 GST or any other tax **W.P.(C).No.855 of 2022 9** applicable shall be payable by the Contractor in respect of this contract and Government will not entertain any claim whatsoever in respect of the same. Petitioner relies on the judgment in _**CA George's**_ case, supra, wherein it is specifically held that in paragraph 13 which reads as follows: _“13. Though learned Government Pleader points out that all other contractors have quoted the rates inclusive of taxes, we do not think that we should venture to consider the approach taken by other contractors. In the case on hand, this particular contractor had made a quote based on the tender document supplied to him and when in the BoQ, he is expected to give the rate for each item and he was called upon to give the rate “without taxes”, he could only give a rate without taxes. His experience in the field and the approach of the PWD authorities are irrelevant matters in considering a specific contract. Therefore, it could be seen that the acceptance of the offer made by the petitioner was not in terms with the tender. His quoted price was without taxes and he cannot be called upon to undertake the work inclusive of all taxes. Under such circumstances, we have no hesitation to hold that the 3[rd] respondent was not_ ## **W.P.(C).No.855 of 2022 10** _justified in terminating the contract at the risk and cost of the contractor. It is also settled law that when an offer is made in a tender, acceptance has to be unconditional. If any conditions are imposed in the acceptance letter, it does not become valid as such. The termination of the contract is therefore totally illegal and arbitrary.”_ The said judgment was followed in _**Sebastian Jose's**_ case supra, paragraphs 11, 13, 14 and 15, of which reads as follows: _“11. In this context it is apposite to refer to the judgment cited by the learned counsel for the petitioner in Writ Appeal No.445 of 2018 dated 18.12.2019. The said decision is reported as C.A.George v. State of Kerala & Ors., (2019 (4) KLT online 3268=AIR 2021 NOC 77). Though the situation in the abovesaid case was slightly different, the issue considered by the Court was whether the petitioner in that case was called upon to give the bid amount without the taxes or as exclusive of the taxes. After referring to the issues involved therein it was held by this Court that “the conditions of the notice inviting tender by itself does not amount to a contract. A contract comes into existence only when the price quoted by the_ ## **W.P.(C).No.855 of 2022 11** _contractor is accepted by the department. In the document which provides for the price bid, when there is clear instruction that the price should be without taxes, the bidder cannot be blamed for having not incorporated the tax element in the bid document. Yet another contention urged is that without taxes indicates that it is without service tax. If that be the case, it ought to have been specifically mentioned in the BoQ and therefore, such a contention is not sustainable.” 13. Viewed in the above perceptive, it is limpid that, since the terms “except goods and service tax” was specified in Clause 3.3.3 of Ext.P1, the petitioner could only have quoted the bid amount, without including the GST. 14. Yet another contention raised by the respondents relate to the rates quoted by other contractors as inclusive of GST. The answer to this contention need not detain this Court for long as the same is also answered by the Division Bench of this Court, in the case of C.A.George (supra) where this Court had held in Paragraph 13 thus:“13. Though learned Government Pleader points out that all other contractors have quoted the rates inclusive of taxes, we do not think that we should venture to consider the approach taken by other_ ## **W.P.(C).No.855 of 2022 12** _contractors. In the case on hand, this particular contractor had made a quote based on the tender document supplied to him and when in the BoQ, he is expected to give the rate for each item and he was called upon to give the rate “without taxes”, he could only give a rate without taxes. His experience in the field and the approach of the PWD authorities are irrelevant matters in considering a specific contract.” 15. In view of the above, the claim of the writ petitioner is justifiable and Ext.P9 is contrary to the settled propositions of law. Accordingly, I declare that the terms and conditions contained in Ext.P1 shall govern contract for the work titled NABARD RIDF XX11 infrastructural works in Kurinjikkal Construction of Bridge across Puzhakkalthode and set aside Ext.P9. It is also held that petitioner was not bound to include GST in the bid quoted by him pursuant to Ext.P1 NIT. This Writ Petition is therefore allowed as above.”_ The said judgment in _**Sebastian Jose's**_ case was upheld in WA No.1710 of 2021. Another aspect to be considered is Ext.P16, which is issued by the 1[st] respondent intimating 4[th] respondent that a decision was taken in the technical evaluation ## **W.P.(C).No.855 of 2022 13** committee to sanction 12% GST amount on the bills of the subject work and the 4[th] respondent was informed to submit the bills accordingly. Petitioner also relies on Ext.P17, specifically Clause 9, which mandates that the bills for any goods, services or works procured by any Government department or agency are processed the payment has to be made to the contractor for total value of work plus the applicable GST. Admittedly, going by Clause 3.3.3 of Ext.P2, the petitioner was directed to quote the rates exclusive of GST amount. Since the department itself has directed that the petitioner shall submit the tender rates exclusive of GST rates, the petitioner cannot be found fault with in quoting an amount exclusive of GST. 7. In the light of the above facts and circumstances, I am of the opinion that the matter has to be reconsidered by the respondents since the contention of the petitioner is that though request has been made before the authorities, the ## **W.P.(C).No.855 of 2022 14** same has not been considered or any decision has been taken in this regard. Therefore, I am inclined to dispose of the writ petition with a direction to respondents 1 and 4 to consider the request of the petitioner for payment of GST at applicable rates on all bills raised by the petitioner taking into consideration Exts.P16 and P17 and the judgments of this Court in _**CA George's**_ case supra and _**Sebastian Jose's**_ case supra and the judgment in WA No.1710/2021, after affording an opportunity of being heard to the petitioner. A decision in this regard shall be taken within an outer limit of one month from the date of receipt of a copy of this judgment. With the above said direction, the above writ petition is disposed of. sd/- ## **VIJU ABRAHAM, JUDGE** pm ## **W.P.(C).No.855 of 2022 15** ## **APPENDIX OF WP(C) 855/2022** PETITIONER EXHIBITS |Exhibit P1|TRUE COPY OF THE NOTICE INVITING TENDER| |---|---| ||DATED 19.06.2019 ISSUED BY THE 2ND| ||RESPONDENT.| |Exhibit P2|TRUE COPY OF THE RELEVANT PAGES OF| ||INSTRUCTIONS TO BIDDERS PROVIDED WITH| ||THE NOTICE INVITING TENDER DATED| ||19.06.2019.| |Exhibit P3|TRUE COPY OF THE SELECTION NOTICE DATED| ||29.12.2019 ISSUED TO THE PETITIONER.| |Exhibit P4|TRUE COPY OF THE CONTRACT AGREEMENT| ||DATED 09.01.2020 BETWEEN THE PETITIONER| ||AND THE 1ST RESPONDENT.| |Exhibit P5|TRUE COPY OF THE PROCEEDINGS OF THE 1ST| ||RESPONDENT DATED 10.02.2021.| |Exhibit P6|TRUE COPY OF THE PROCEEDINGS OF THE 1ST| ||RESPONDENT DATED 29.03.2021.| |Exhibit P7|TRUE COPY OF THE PROCEEDINGS OF THE 1ST| ||RESPONDENT DATED 13.07.2021.| |Exhibit P8|TRUE COPY OF THE PROCEEDINGS OF THE 1ST| ||RESPONDENT DATED 01.09.2021.| |Exhibit P9|TRUE COPY OF THE TAX INVOICE DATED| ||16.03.2021 IN RESPECT OF THE 1ST PART| ||BILL.| |Exhibit P10|TRUE COPY OF THE TAX INVOICE DATED| ||10.04.2021 IN RESPECT OF THE 2ND PART| ||BILL.| |Exhibit P11|TRUE COPY OF THE TAX INVOICE DATED| ||16.07.2021 IN RESPECT OF THE 3RD PART| ||BILL.| |Exhibit P12|TRUE COPY OF THE TAX INVOICE DATED| **W.P.(C).No.855 of 2022 16** 06.09.2021 IN RESPECT OF THE 4TH PART BILL. Exhibit P13 TRUE COPY OF THE LETTER DATED 29.01.2021 SENT BY THE PETITIONER TO THE 1ST RESPONDENT. Exhibit P14 TRUE COPY OF THE LETTER DATED 15.02.2021 SENT BY THE PETITIONER TO THE 1ST RESPONDENT. Exhibit P15 TRUE COPY OF THE LETTER DATED 02.09.2021 SENT BY THE PETITIONER TO THE 1ST RESPONDENT. Exhibit P16 TRUE COPY OF THE LETTER DATED 25.05.2021 SENT BY THE 1ST RESPONDENT TO THE 3RD AND 4TH RESPONDENTS. Exhibit P17 TRUE COPY OF CIRCULAR NO.18/2019/FIN DATED 01.03.2019 ISSUED BY THE FINANCE (INDUSTRIES AND PUBLIC WORKS-B) DEPARTMENT OF THE GOVERNMENT OF KERALA. RESPONDENT EXHIBITS Exhibit R1 A TRUE COPY OF THE TECHNICAL SANCTION SLIP WITH THE DESCRIPTION OF WORK AND ESTIMATE. PETITIONER EXHIBITS Exhibit R1 C TRUE COPY OF THE GOVERNMENT ORDER GO (RT) NO-635/2019/F&P DATED 24.8.2019 Exhibit R1 D TRUE COPY OF THE CIRCULAR DATED 1.3.2019 BEARING NO.18/2019 FIN ISSUED BY THE FINANCE DEPARTMENT. RESPONDENT EXHIBITS Exhibit R 1 B TRUE COPY OF THE RELEVANT PORTION OF THE DETAILED ESTIMATE AS PER THE COST INDEX OF THE YEAR 2016. ## **W.P.(C).No.855 of 2022 17** Exhibit R1(e) The true copy of Notice Inviting Tender (NIT) was initially issued on 18/02/2019. A true copy of the NIT vide No. 2737/F/KSCADC/2018 and PQ Tender No. ET-76/18-19 issued by 1st respondent dated 18/02/2019 Exhibit R1(f) A true copy of the NIT vide No. 2737/F/KSCADC/2018 and PQ Re e-Tender No. ET-76/18-19 issued by 1st respondent dated 19/06/2019 Exhibit R1(g) A true copy of the Administrative Sanction accorded vide the proceedings of the Chief Executive Officer, KIIFB as per ORDER NO: FSH006-01/APR3/2019/KIIFB dated 11/02/2019 Exhibit R1(h) A true copy of the Technical Sanction Slip under File No. 2737/F/2018/KSCADC and TS No. 80/PRICE/KSCADC/2018-2019 dated 15/02/2019 Exhibit R1(i) A true copy of the Government Circular No. 90/2017.dated 14/12/2017 Exhibit R1(j) A true copy of the letter No.A1/190/2021/EEM issued by the 4th respondent dated 28/09/2021 Exhibit R1(k) A true copy of the Circular No. CE/Admn/PLA/EMP/1014(A)/05 issued by Office of the Chief Engineer, Public Works Department dated 06/03/2019 Exhibit R1(l) A true copy of the relevant page of the Final estimate signed and stamped