Himachal Pradesh High Court
____________________________________________________ vs Himachal Pradesh State Electricity ... on 29 June, 2017
Author: Vivek Singh Thakur
Bench: Vivek Singh Thakur
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA.
.
Arbitration Case No. 11 of 2017
Date of Decision: 29.6.2017
____________________________________________________
Shyam Indus Power Solution Pvt. Ltd. ...Petitioner
Versus
Himachal Pradesh State Electricity Board Ltd. ...Respondent
Coram:
The Hon'ble Mr. Justice Vivek Singh Thakur, Judge.
Whether approved for reporting?1 Yes.
_____________________________________________________________
For the Petitioner: Mr.Pankaj Kumar, Advocate with
Mr.Neeraj Gupta & Mr.Janesh
Gupta, Advocates.
For the Respondent: Mr.Rakesh Sharma, Advocate.
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Vivek Singh Thakur, Judge (oral)
For a dispute with respect of liability to pay tax, arising out of a contract between petitioner and respondent for a work awarded to petitioner by respondent for design, manufacturing, supplying, erection, testing and commissioning of electrical substation at the designated placed and other allied civil works i.e. site development, control room building etc., present petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (herein after referred to as the Act) for appointment of Arbitrator to adjudicate the dispute in question.
2. Terms of contract between the parties relating to liability to pay taxes and levies, detailed in the ITB of Bid Document and General Terms and Conditions of Contract (GCC), are not 1 Whether reporters of Local Papers may be allowed to see the judgment? yes ::: Downloaded on - 01/07/2017 23:58:24 :::HCHP ...2...
Arbitration Case No. 11 of 2017 disputed. Relevant clauses relating to the payment of taxes as .
contained in ITB are as under:-
"13.0 Taxes and Levies 13.1 As indicated in Clause 32.2 of Section ITB of the Bid Document, in case of Award of Contract, a bidder shall have to enter into following three separate Contract Agreements covering the entire Scope of the Partial/Total Turnkey Package:
i) For Supply of Material/Equipments
ii) For Erection Works
iii) For civil works 13.2. All Levies, Duties, Central Sales Tax, VAT, Works Contract Tax, Service Tax etc. payable on Equipment/Material Components, Sub-assemblies, Raw Materials and any other items used for the Contractor's consumption or dispatched directly to the Site Stores of the Contractor from his Sub-
Supplier, associated Civil Works and Erection Works shall be included in the Bid Price and any such Taxes, Duties, Levies etc., not considered by the Bidder but payable as applicable on the date of Bidding shall be to Bidder's account and no separate Claim in this behalf shall be entertained & payable by the HPSEB Ltd.
13.3 The Bidder shall specify all Taxes and Duties including the Work Contract Tax. Any Tax payable on the Cost of the items of supply under the Works Contract shall also be included by the Bidder in his Bid Price and the HPSEB Ltd. shall incur/bear no liability whatsoever in respect of such Works Contract Tax. However, the HPSEB Ltd. will deduct Works Contract Tax out of the Contractor's bills and remit the same to the concerned Authorities as per statutory stipulations. Necessary TDS Certificates will be issued to the bidder. 13.4 The HPSEB Ltd. will deduct Tax at Source as per applicable law from the proceeds payable to the bidder. 13.5 Service Tax applicable if any shall be borne by the Service Provider only. The onus to deposit the tax with the authorities 11 concerned shall rest with the contractor. The ::: Downloaded on - 01/07/2017 23:58:24 :::HCHP ...3...
Arbitration Case No. 11 of 2017 payment by HPSEB Ltd. shall be made against documentary proof.
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13.6 As regards the Income Tax, Surcharge on Income Tax and any other Corporate Tax, the HPSEB Ltd. shall not incur/bear any Tax liability whatsoever. The Bidder shall be liable and responsible for Payment of such Taxes as mandated under the provisions of the Law.
13.7 Notwithstanding anything stated in the Sub-Clause 13.1 to 13.7 above, HPSEB Ltd. shall have the right to make deduction at Source from the amounts payable to the bidder against this Contract in respect of any Tax liability as may be Mandatory in terms of the Law. The HPSEB Ltd. shall not incur/bear any liability in this regard but shall issue necessary TDS Certificate in respect of such deductions made.
13.8 Whenever concessional rate of Excise Duty/Sales Tax is indicated by the bidder, it shall be confirmed whether, any increase in the rates that becomes applicable during the execution of the Contract would be absorbed by the Bidder.
Bidder shall note that in the absence of such conformation, the Bids will be evaluated taking into account the maximum rate of Excise Duty/Sales Tax applicable.
13.9 The HPSEB Ltd.'s liability for all Taxes and Duties under the Contract shall be limited to only those indicated by the Bidder in the Bid Proposal Sheets.
13.10 No Claim for any increase towards the Statutory Variation regarding enhancement of existing Tax or Duty or introduction of a new Tax or Duty applicable shall be entertained by the HPSEB Ltd. during the extended period of Contract, if any, if the extension of the Contract is required due to the causes attributable to the Contractor.
13.11 Before quoting, the Bidder shall ascertain from the concerned Tax Authorities of Government of HP, the applicability of Work Contract Tax, Service Tax etc. in respect of this Package and include the same in the quoted Price. No separate Claim in this regard shall be entertained by the HPSEB Ltd., as it is the responsibility of the Bidder to pay all these Taxes."
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Arbitration Case No. 11 of 2017
2. Undisputed clauses of contract (GCC) relating to .
settlement of dispute and arbitration are as under:-
"E. RESOLUTION OF DISPUTES.
55.0 Settlement of disputes:
55.1 Any dispute(s) or difference(s) arising out of or in connection with the Contract shall, to the extent possible, be settled amicably between the Parties.
55.2 If any dispute or difference of any kind whatsoever arises between the Employer and the Contractor, arising out of the Contract for the Performance of the Works whether during the progress of the Works or after its Completion or whether before or after the termination, abandonment or breach of the Contract, it shall, in the first place, be referred to and settled by the Project Manager, who, within a period of thirty (3) days after being requested by either Party to do so, shall give written Notice of his decision to the Employer and the Contractor.
55.3 Save as hereinafter provided, such decision in respect of every matter so referred shall be final and bidding upon the Parties until the Completion of the Works and shall forthwith be given effect to by the Contractor who shall proceed with the Works with all due diligence.
56.0 Reconciliation of Accounts:
The Contractor shall prepare and submit every month, a statement covering Payments Claimed and the Payments received vis-à-vis the Works executed, for reconciliation of Accounts with the Employer The Contractor shall also prepare and submit a detailed Account of Employer Issued Materials received and utilized by him for reconciliation purpose in a format to be discussed and finalized with the Employer before the Award of Contract.
57.0 SETTEMENT OF DISPUTES BY ABITRATION:
All matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequences or relating to this Contract whether or not obligations of either of both parties under this Contract be subsisting at the time of such dispute and whether or not this ::: Downloaded on - 01/07/2017 23:58:24 :::HCHP ...5...
Arbitration Case No. 11 of 2017 Contract has been terminated or purported to be terminated or completed, shall be referred to the Sole Arbitration of Chairman-
.
cum-Managing Director or his nominee. The Award of the Arbitrator shall be binding on the parties to this Contract. "In case, the Arbitrator to whom dispute/difference, so referred, is unable to function as such at any stage for any reasons, whatsoever or his award being set aside by the Court for any other reason, the other Arbitrator, shall be appointed by Chairman-Cum-Managing Director, HPSEB Ltd. or his nominee. Such Arbitrator shall be entitled to proceed with the reference from the stage at which it had been left by his predecessor or to conduct the proceedings afresh as he may deem fit or as the case may be.
Party invoking arbitration shall specify the dispute(s) to be referred to the arbitration under this clause together with the amount(s) claimed respect of each dispute. If work under the contract has not been completed when a dispute or any matter what-so-ever is referred to arbitration, the contractor shall not be entitled to suspend such work to which the dispute relates.
If the contractor(s) omit/neglect to prefer any claim(s) in writing within 90 (Ninety days of the date on which the dispute arises during the execution of the works for which such dispute is sought to be raised or date of intimation of the preparation of the bill thereof, whichever is earlier, the claim of the contractor will be deemed to have been waived any absolutely barred and the HPSEB Limited shall be discharged and released of all the liabilities under the contract in respect of such item(s). Likewise all dispute(s) referred to above shall be preferred as provided above within 90 (Ninety) days of execution of work(s) otherwise all claim(s) shall stand extinguished. Provided, in the event of the rejection of contractor's claim(s) by the HPSEB Limited, the contractor shall within 30 (Thirty) days after receiving intimation in writing of such decision shall give notice in writing to the HPSEB Limited requesting the dispute(s) may be referred for arbitration in all cases referred for arbitration, the Arbitrator shall assign reasons under the all circumstances on which the ::: Downloaded on - 01/07/2017 23:58:24 :::HCHP ...6...
Arbitration Case No. 11 of 2017 decision is based. The decision of the Arbitrator shall be conclusive, final and binding on the parties.
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Subject to the provisions of the contract to the contrary as aforesaid the provisions of the "Arbitration and Conciliation Act, 1996" or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to all arbitration proceedings under this clause.
In case of any inflict, and or inconsistency in the provisions of IFB and ECC & GCC the provisions of GCC will prevail."
3. For execution of work awarded to petitioner, material was brought from outside the State, upon which Entry Tax was to be paid to Excise and Taxation Department of State of Himachal Pradesh. For payment of said Entry Tax, Excise and Taxation Authorities had issued notice to parties and petitioner was also directed to deposit Entry Tax for material brought from outside the State.
4. Petitioner claimed that according to Section 3 (4) of Himachal Pradesh Tax on Entry of Goods into Local Area, 2010 (HPTEGLA 2010), no entry tax under this Section is levyable upon petitioner in respect of goods brought from outside the State in the course of interstate trade or commerce, as these goods are specified in Schedule-II of HPTEGLA Act. For this reason in response to demand/direction of taxation authorities, petitioner took a stand that Entry Tax payable to Excise and Taxation Department is to be paid by respondent.
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Arbitration Case No. 11 of 2017
5. Relying upon clause 13.2 contained in ITB of the bid .
document, respondent claims that liability to pay all taxes including the tax which may be levyable upon respondent is of the petitioner and therefore, respondent has a right to deduct tax at source as per applicable law and to pay it to the concerned authority for which the petitioner has agreed by signing the contract.
6. On retention/deduction of amount by respondent from running bills of petitioner, petitioner objected the said deduction and ultimately when dispute was not resolved, sent a legal notice dated 10.9.2016 to respondent, disputing the liability of petitioner to pay Entry Tax with further request to refer the dispute to arbitration, in terms of clause 57 of the GCC, but the respondent has failed to act upon the notice sent by petitioner. Hence the present petition.
7. Petition is contested by respondent on two grounds.
First, the petition is not constituted in accordance with Rule 2 of the Appointment of Arbitrators by the Chief Justice of Himachal Pradesh High Court Scheme, 2006 (herein after referred to as the Scheme). Clause 2 of this Scheme reads as under:-
"2. Submission of request.--The request to the Chief Justice under sub-section (4), sub-section (5), or sub-section (6) of section 11 of the Act shall be made in writing and should be accompanied by the original arbitration agreement or a duly certified/attested copy thereof. The request in writing shall be supported by an affidavit and contain the following particulars:
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Arbitration Case No. 11 of 2017
(b) a brief statement of the case describing its general nature as well as the disputes between the parties, the issues .
involved and the approximate value of the disputes, including, in broad terms the date when the cause of action accrued to file the application;
(c) all the material facts and particulars requisite for obtaining relief(s) under sub-section (4), sub-section (5) or sub- section (6) of Section 11 of the Act.
(d) Relief or remedy sought."
8. By referring this provision, it is submitted that request for appointment of arbitrator must be in writing shall be supported by an affidavit and the affidavit must contain particulars mentioned in sub clauses (a) to (d) of clause 2, whereas in present case, though affidavit in support of petition has been filed, but it does not contain the particulars as required to be contained in it as per clause 2 of the Scheme.
9. Plea of respondent is misconceived, as Clause 2 provides that request should be in writing and it shall be supported by an affidavit and further the request should contain the particulars provided in sub-clauses (a) to (d) of clause 2 of the Scheme. It is not that all these particulars should be mentioned in the affidavit, rather request containing all these particulars is to be supported by an affidavit and in present case entire information, as required to be furnished in request in compliance of clause 2 of the Scheme, is mentioned in the petition and contents of the petition have been duly supported by an affidavit, filed along with the ::: Downloaded on - 01/07/2017 23:58:24 :::HCHP ...9...
Arbitration Case No. 11 of 2017 petition. Therefore, first contention of respondent is not .
sustainable.
10. Second contention of the respondent is that dispute referred in present petition does not fall within the scope of agreement. It is contended that levy of tax and its liability is to be decided by the expert authority of Taxation Department and therefore, dispute in question cannot be referred for arbitration and there is no clause in the agreement so as to refer such a dispute to arbitrator. According to him, dispute is not covered under clauses 55 and 57 of the contract.
11. According to the petitioner, tax in question is not covered under clause 13 of ITB of bid document and therefore, respondent has no right to deduct the same at source from running bills of petitioner, whereas, according to respondent, clause 13.2 provides that all levies, duties and taxes etc., whether levyable upon or payable either by respondent or petitioner, are included in the bid price and thus Entry Tax leviable upon material brought from outside State for execution of work awarded to the petitioner, is to be deducted from the petitioner as the respondent has been directed by Excise and Taxation authority to pay Entry Tax on this material as petitioner, instead of paying the said tax, has replied to Excise and Taxation Authority to recover the said tax from respondent, whereas according to contract all taxes are to be borne by petitioner.
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Arbitration Case No. 11 of 2017
12. So far as levy of entry tax is concerned, it is not .
disputed by either of party. Only dispute is about according to terms of contract, who shall make payment of the said tax, whether this tax is included in clause 13 of ITB or not is basic issue in dispute.
13. Petitioner is relying upon clauses of contract for its claim for nonpayment of tax by it. Whereas, respondent is also relying upon the terms and conditions of contract for deduction of tax paid by it for bringing material from outside the State for execution of work awarded to petitioner. Therefore, there is a dispute arising out of contract.
14. Clause 57 of contract provides that all matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequences or relating to the contract whether or not obligations of either of both parties under the contract subsisting at the time of such dispute whether or not to contract has been terminated or purported to be terminated or completed, shall be referred to sole arbitrator-
Chairman-cum-Managing Director or his nominee.
15. Petitioner had asked respondent to refer the dispute to sole Arbitrator, as provided under clause 57 of the contract, but respondent has failed to act in accordance with contract and therefore, present petition is maintainable.
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Arbitration Case No. 11 of 2017
16. According to Section 11 (6 A) of the Act, this Court has .
only to confine itself to the examination of existence of an arbitration agreement and in present case arbitration agreement exists between the parties and question whether dispute raised in present petition is arbitrable, under clause 57 of the contact, petitioner is liable, for payment of Entry Tax levied upon respondent by Excise and Taxation Department and respondent has right to deduct the said amount from running bills of petitioner, or not, shall be subject matter for consideration by Arbitrator and parties are at liberty to agitate all issues before Arbitrator.
17. During course of hearing, learned counsel for the petitioner submits that Hon'ble Mr.Justice Arun Kumar Goel, Judge (Retired) is already adjudicating the arbitration matter between the same parties and in case of allowing the petition, it would be appropriate to appoint him as Arbitrator. Without acceding to the claims of petitioner with respect to existence of dispute referable to Arbitrator, Learned counsel for respondent under instructions submits that in such eventuality respondent is not averse to appointment of Hon'ble Mr. Justice Arun Kumar Goel, Judge (Retired) as Arbitrator.
18. In view of above discussion and submissions of learned counsel for the parties, petition is allowed and Hon'ble Mr.Justice Arun Kumar Goel, Judge (Retired) is appointed as Sole Arbitrator with consent of parties to adjudicate the matter in accordance with ::: Downloaded on - 01/07/2017 23:58:24 :::HCHP ...12...
Arbitration Case No. 11 of 2017 law and in terms of agreement by making a speaking reasoned .
award. He shall be entitled for fee as per Schedule. Registry is directed to transmit necessary communication in this regard to the Sole Arbitrator immediately.
19. Petition stands disposed of on above terms.
29th June, 2017
(KRS)
r to (Vivek Singh Thakur)
Judge
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