High Court Of Andhra Pradesh

State of Andhra Pradesh, represented by its Special Chief Secretary to Government, Transport, Roads & Buildings (B.I) Department & Others V. National Academy of Construction, Hyderabad, represented by its Director General, Sri R.C.Sinha & Another

WRIT APPEAL Nos. 2117, 2120, 2121, 2124, 2145, 2146, 2157, 2158, 2159, 2160, 2171, 2172, 2173 & 2202 of 2005 & WRIT APPEAL No. 760 of 2008. 21-07-2010

JUDGMENT

(per Hon’ble Sri Justice V.V.S.Rao)

In the State of Andhra Pradesh, construction of Roads and Buildings (R&B) by the Government, entrusting the works to contractors, is regulated by the Andhra Pradesh Detailed Standard Specification besides the relevant Law of Contracts and Tax Laws. After entrustment of the work, the R&B contractor is required to execute the contract in the form prescribed therefor. The contract comprehensively provides for the terms and conditions with regard to specifications, items of work executed, on which rate/rates tax is payable by the contractor, deductions to be made, delay in execution of the work, dispute resolution and the like. If any dispute arises, during the course of or after execution of the contract, such dispute has to be resolved either through arbitration or in a Civil Court.

In 1998, the Government of Andhra Pradesh established the National Academy of Construction (NAC) by orders in G.O.Ms.No.103, Transport, Roads & Buildings (R.III) Department, dated 16.6.1998, with the objective of achieving development of the construction industry, and engaging in activities for the promotion of education, training, research, professionalism and skill formation in the construction industry. So as to ensure adequate availability of funds to NAC, the Government of Andhra Pradesh invented a novel method of forced contributions for construction of the Institute of Construction Technology of India (ICTI) and its maintenance. It appears that the Builders Association of India (BAI) represented to the Government for contributing funds and suggested that it would be appropriate “if the contribution from the contractors is made mandatory and made part of the agreement condition in all contracts pertaining to all departments of the Government and the Corporations under their administrative control”. The Government, therefore, issued G.O.Ms.No.92, T,R&B (B.I) Department, dated 19.5.1998 directing the Executive Engineers to conclude supplemental agreements with the contractors for works under execution, and for those works to be entrusted in future, to deduct 0.25% of the gross amount of the bill and remit it to the ICTI. As a sequal thereto, the Engineer-in-Chief and the Chief Engineer, R&B, issued circular memoranda dated 25.5.1998 and 06.7.1998.

About two years after G.O.Ms.No.92 was issued, the Government issued yet another order vide G.O.Ms.No.61, T,R&B (R.III) Department, dated 11.4.2000, directing inclusion of a clause in the tender notices and agreements for recovery of 0.25% from the gross bill of the contractors, with a view to mobilise funds for the NAC. As per this G.O., all departments of the State, as well as Government Corporations, were required to include such a condition in the tender documents and the agreements for collection of 0.25% from the gross bill of contractors towards contribution to the NAC. The contribution was made mandatory, whether or not the contractor was willing to voluntarily part with 0.25% of the gross bill amount as his/her contribution. The Government also directed that such a condition be included in the tender documents and agreement forms from 01.4.2000. A similar order, being G.O.Ms.No.98, Irrigation & CAD Department, dated 05.7.2000, was issued directing inclusion of such a clause from 01.6.2000. Thus insofar as the contracts in R&B Department are concerned with effect from 01.4.2000, and insofar as the contracts in Irrigation & CAD Department were concerned with effect from 01.6.2000, the contractors are compulsorily required to contribute 0.25% of the gross bill amount as their contribution to NAC.

G.O.Ms.No.92, dated 19.5.1998, issued by the R&B Department and G.O.Ms.No.98, dated 05.7.2000 issued by Irrigation & CAD Department, were challenged before this Court by filing writ petitions. The Engineer-in-Chief opposed the writ petitions inter alia contending that the authorised collection of 0.25% is on a voluntary basis, and that BAI had expressed no objection for such collection. For the sake of ready reference, we may quote from the counter affidavit in W.P.No.23750 of 2000 (corresponding to W.A.No.2117 of 2005).

It is submitted that, the Government has examined the matter and it is felt that the contract agreement which is based on APSS & APPWD Codes does not contemplate incorporation of the clause/provision for deduction of amounts to any privately managed organisation and that the deduction cannot be made part of a contract. Such collections have to be purely on voluntary basis outside the contract of agreements. … … In the above circumstances and for accommodating the request Builders Association of India, the Government in G.O.Ms.No.92, T,R&B (B.I) Department, dated 19.5.1998, has permitted the Executive Engineers to conclude supplemental agreements with the contractors for works under execution and to be entrusted in future basing on the request of the Builders Association of India, to deduct 0.25% of gross amount of bill and remit it to “Institute of Construction Technology of India” at Hyderabad for construction of building and for meeting the expenditure in running the institute. … … It is submitted that, the contribution by the contractors has been contemplated only because the Builders Association of India have agreed for doing so. Government have ordered to get such collections purely on voluntary basis outside the contract agreements. For this purpose alone, the Government has permitted the Executive Engineers to conclude the supplemental agreements with the contractors to enable to deduct 0.25% of gross amount of bills. In G.O.Ms.No.92, T,R&B (B.I) Department, dated 19.5.1998, it was clearly indicated by the Government about the voluntary contribution.

(emphasis supplied)

The learned Single Judge, by the impugned judgment, set aside the two impugned G.Os holding that the impugned deduction of 0.25% from gross bills as contribution to NAC, “is not traceable to any law for the time being in force”, and that the resolution of the Builders Association of India itself, “does not take away rights of petitioners to challenge the impugned order more particularly when said G.O. is issued without any statutory authority”.

In these appeals, the Government Pleader for R&B, the Counsel for NAC and the Counsel for writ petitioners (respondents in these appeals) made their submissions.

The emphasis by the Government Pleader is on the plea that a clause was included in the agreement between the contractee and the contractor whereunder the latter is required to make contribution and, therefore, the impugned orders are justified. He also submits that in all the Government contracts after 01.4.2000, necessary amendments have been made authorising the Executive Engineers to deduct 0.25% from the gross bill of the contractor for being remitted to the NAC and, therefore the contractors cannot be permitted to go back on the binding covenant in the agreement.

In all the affidavits accompanying the writ petitions, the petitioners made categorical averment that the contract they entered into with concerned official does not include any such clause. This allegation remains uncontraverted in the counter affidavits. In the absence of any denial in the counter affidavits applying the principles of non-traverse, we have to hold that insofar as these appeals are concerned, the contracts by the appellants with the respondents do not contain any clause authorising the R&B Department to deduct the contribution for NAC. It is well settled that the uncontraverted affidavit averments ordinarily are deemed to have been admitted. In writ petitions the dispute is decided based on “affidavit evidence”, and hence this principle has considerable significance (see C.S.Rowji v State of A.P. (AIR 1964 SC 962), Naseem Bhanu v State of U.P. (1993 Supp (4) SCC 46) and Hindustan Petroleum Corporation Ltd v Darius Shapur Chenai (2005 AIR SCW 4796)). The appellants have also not placed before us the copies of the agreements which allegedly contain such a binding clause.

The levy and collection of charges like administrative charges or revenue collection charges in the field of excise laws (in relation to intoxicating liquor) has been the subject matter of litigation. The Andhra Pradesh Excise Act, 1968, by Section 28(2), requires every licensee to pay the fees as prescribed. The Andhra Pradesh Distilleries Rules, 1970, provided that every distillery licensee shall provide space for the office/residence of excise staff and pay expenses of their salaries and allowances. The same was challenged before this Court successfully. The Supreme Court reversed the same in Government of A.P. v Anabeshahi Wine and Distilleries Pvt. Ltd ((1988) 2 SCC 25).

In Gupta Modern Breweries v State of J&K ((2007) 6 SCC 317), the Excise Commissioner, Government of Jammu and Kashmir (J&K), issued orders directing the brewery owners to pay the amounts towards salaries of Excise department officials. The same was challenged as ultra vires the J&K Excise Act, 1901. The levy was upheld by the J&K High Court. In the appeal before the Supreme Court, reliance was placed on the decision in Anabeshahi Wine and Distilleries Pvt. Ltd. The Supreme Court did not agree with the contention of the State of J&K and distinguished Anabeshahi Wine and Distilleries Pvt. Ltd. It was held that unless there is a statutory backing for levy and collection of administrative charges, such expropriation would be unconstitutional. The observations relevant are as follows.

Admittedly, in the present case there is no such provision in the Act or Rules. Therefore, the decision in Government of A.P. v Anabeshahi Wine and Distilleries Pvt Ltd., (1988) 2 SCC 25, is not applicable in the facts of the case at hand. … … It is now well settled principle of law that the regulatory powers are generally to be widely construed. However, empowering the State Government to impose taxes, fees or duties and such demands must be authorised by the Statute and must contain sufficient guidelines.

There is no dispute that the contractors are nothing to do with the resolution passed by the BAI. We, therefore, fail to understand as to how the Government Order issued based on the alleged resolution of BAI authorising mandatory contributions to NAC can be enforced against contractors. It is brought to the notice of this Court that BAI is a body of persons engaged in the construction of buildings, and it is not an association of contractors who are engaged in construction of roads. Be that as it is, by reading the Government Orders being G.O.Ms.No.92, dated 19.5.1998, G.O.Ms.No.61, dated 11.4.2000 and G.O.Ms.No.98, dated 05.7.2000, it is very clear that the Government itself contemplated the mandatory contributions to be made by the contractors. The law does not permit such extraction by forceful contributions. As rightly held by the learned Single Judge, the Government Orders lack legal sanction and, therefore, they cannot be sustained.

In the result, for the above reasons, the writ appeals are dismissed with costs.

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