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M/s PMR Infrastructures Pvt Ltd. v/s The Government of A.P., Reptd by its Principal Secretary, Irrigation and Command Area Development, Hyderabad& Others

    WRIT PETITION No. 12940 of 2011

    Decided On, 08 September 2011

    At, High Court of Andhra Pradesh


    For the Appellant: T.Niranjan Reddy, Advocate. For the Respondents: AGP for Irrigation and CAD.

Judgment Text

This Writ Petition is filed for a Mandamus to direct the respondents to include 1% of total value of the work towards labour cess as concluded in agreement No.2/2009-10 pertaining to the work of excavation of link channel from Mylavaram Reservoir South Canal to feed Kamalapuram Tank in Kadapa District by declaring the action of the respondents in deducting 1% towards labour cess from the bills of the petitioner, without adding the same in the payment of bills, as arbitrary, illegal and unconstitutional.

I have heard Sri T.Niranjan Reddy, learned counsel for the petitioner and learned Assistant Government Pleader for Irrigation and Command Area Development appearing for the respondents.

The petitioner, which is a Special Class Contractor in civil works, was entrusted with the above-mentioned work following the tender process. Agreement No.SEH No.2/2009-10, dated 20.11.2009, was entered between the petitioner and respondent No.2 for execution of the said work. The petitioner’s tender with 5% excess over the estimated rates was accepted. During the course of execution of work, the respondents have deducted 1% towards labour cess from the petitioner’s bills. The petitioner represented to the respondents to reimburse the said amount. As the request of the petitioner was not acceded to, it has filed the present Writ Petition.

At the hearing, learned counsel for the petitioner placed reliance on Clause (G) of Schedule-C of the agreement which reads as under:-

'Estimated amount and L.S.Provisions : Rs.6,84,19,985/-

Estimated contract value of tender item : Rs.6,02,45,537/-

Estimate rate

L.S. Provisions

a) Technical agents : Rs.2,58,300/-

b) Insurance charges : Rs.2,26,523/-

c) For VAT at 2.80%

(4% on & 70%) : Rs.16,86,875/-

d) Land Acquisition including

15% Solatium charges :Rs.46,39,445/-

e) 1% Towards Labour chess(sic cess) : Rs.6,02,456/-

f) Quality control charges at 0.5% : Rs.3,01,228/-

g) Others : Rs.4,59,621/-

Total : Rs.81,74,448/-

Learned counsel for the petitioner submitted that under item-(e) of Clause-(G) of the agreement, reproduced above, a provision is made to add Rs.6,02,456/- towards 1% labour cess payable to the petitioner and therefore, refusal to make payment of this amount to the petitioner is not only contrary to the specific term of the agreement but also the same constitutes arbitrariness. He placed reliance on the common order, dated 22.10.2009, in Writ Petition Nos.11269 of 2009 and batch and contended that this Court has already issued a Mandamus directing the respondents to include 1% cess in the estimates for the works which they propose to undertake, if the work continues for or beyond twelve months and involves engagement of ten workers or more and that the respondents shall not deduct any amount towards cess, unless the corresponding amount is included in the estimates.

Respondent No.2 filed a counter-affidavit wherein it is inter alia stated that Clause 26.17 II of the agreement provides for recovery of 1% from the Contractor’s gross work bills towards Andhra Pradesh Construction Welfare Fund; that as per U.O.Note No.4763/PF-5-F8(A)/07-1, dated 04.02.2008 of the Government, a provision was made to make L.S. provision at 1% of the estimate amount towards labour cess under the Building and other Construction Workers Welfare Cess Act, 1996 (for short ‘the 1996 Act’) in all the estimates sanctioned from 26.06.2007 onwards, as an amendment to Annexure-I of G.O.Ms.94, I and CAD Department, dated 01.07.2003, and hence, the provision is added in the L.S. items of estimate but not in the contract amount. It is further averred that the agreement provides certain provisions in part-II of Schedule-A in which the provisions are categorized for reimbursement such as Life Insurance, Technical Agent, VAT on deduction in the contract value, whereas payment towards 1% labour cess is not provided for reimbursement to the Contractor. It is further averred that respondent No.2 directed respondent No.3 in Memo No.W8 MRC/DB/JTO.7/72, dated 03.05.2010, to add the cess amount in the memo of bills of payment before going for deduction from the bills payments by following the financial codal rules; that in the meantime, the Pay and Accounts Officer, TGP, Mamillapalli, Kadapa, and next superior officer-Director of Accounts, Works and Projects of Kadapa in Review Memo No.JDWA/Kadapa/ITC/F.57/2010-11 Kadapa 583, dated 24.03.2011, has communicated to the effect that the labour cess of 1% should not be added to the total value of the work done. It is further maintained that as the agreement does not provide for reimbursement to the agency by adding the 1% labour cess to the agreement and deduction thereon, the petitioner’s request for payment is not agreed to.

Under Clause-(G) of Schedule C of the agreement, which is reproduced herein above, the inclusion of 1% towards labour cess in the Contractor’s bills is provided. Therefore, the averment contained in the counter-affidavit that the agreement does not provide for such payment to the Contractor is patently contrary to the specific term of the agreement. On his own showing respondent No.2 has initially directed respondent No.3 to first include this item for payment to the Contractor and then deduct the same from the bill. However, respondent No.2 is subsequently guided by the purported memo, dated 24.03.2011, issued by the Audit Department. It is also of relevance to note that even the estimate prepared with respect to the contract in question included 1% labour cess at Serial No.24. This was obviously done in pursuance of the common order of this Court in above-mentioned batch of the Writ Petitions. In the said order, this Court has taken note of the legislative history of the 1996 Act and held that the burden of payment of cess must be borne by the agency that undertakes the construction and that the same is not the obligation of the Contractor. This Court also placed reliance on U.O.Note, dated 28.02.2008, of the Finance department which provided for addition of 1% of labour cess payable under the 1996 Act to the estimates in respect of the ongoing works wherever the agreement do not contain such a clause and the estimates will be revised accordingly for all the payments made after 26.06.2007. This Court, eventually, gave the directions to the respondents therein to include 1% cess in the estimates for the works which they propose to undertake, if the same continue for or beyond twelve months and involved engagement of ten workers or more and that the respondents shall not deduct any amount towards cess, unless the corresponding amount is included in the estimates.

Obviously, in consonance with U.O. note, dated 28.02.2008, and the final order of this Court referred to above, the respondents have included 1% labour cess in the estimates of the present contract and also made a provision for inclusion of the same in the bills under Clause-(G) of Schedule C of the agreement, as noticed above.

In the face of the above indisputable facts, it does not lie in the mouth of the respondents to deny their liability to bear 1% cess.

As regards the stand taken by the respondents by placing reliance on Part-II of Additional Provisions in the counter-affidavit, a careful reading of the same shows that the head note is not happily worded. A literal construction of the said head note would only show that the petitioner will be entitled to payment on production of Insurance Policies copies of appointment orders for item (2), which relates to provision towards Technical agents only. No pro

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vision for reimbursement is made even for item Nos.1 and 3, which relate to provision towards insurance and VAT. In my opinion, Clause-(G) of Schedule C of the said agreement being the substantive term of the contract prevails over the Additional Provisions under Part-II, when there is conflict between the two provisions. Mere omission of the item relating to 1% labour cess in the Additional Provisions under Part-II would not deprive the Contractor of payment in the light of the existence of the substantive provision under the contract and also the background in which such a provision is made. For the above-mentioned reasons, the Writ Petition is allowed. A writ of Mandamus shall issue as prayed for. As a sequel to disposal of the Writ Petition, W.P.M.P.No.15741 of 2011 filed by the petitioner is also disposed of as infructuous.