W.P.(T) Nos.4885, 4886, 4904 & 4905 of 2022

Facts of the Case

M/s. Techno Electric And Engineering Company Limited was awarded a rural electrification contract under the Deen Dayal Upadhyay Gramin Jyoti Yojna by Jharkhand Bijli Vitran Nigam Limited (JBVNL). The pre-GST tender's Clause 10.7, after a pre-bid clarification and Clause 28 of the Letter of Award dated 09.06.2017, was amended to provide for equitable adjustment of the contract price for the "impact of GST" on "affected transactions" "in totality," dropping an earlier restriction that had confined such adjustment to direct transactions alone. Following the introduction of GST, JBVNL paid the petitioner the GST impact on both direct and indirect (bought-out) transactions until August 2019, covering roughly 80% of the work, but from September 2019 abruptly stopped payment and began recovering the previously reimbursed GST impact of approximately Rs.52 crore from the petitioner's running bills, without explanation, prompting four connected writ applications before the Jharkhand High Court.

Issues Involved

  1. Whether, on a true construction of the amended Clause 10.7, Pre-Bid Clarification, and Clause 28 of the Letter of Award, JBVNL was contractually obliged to reimburse GST impact on indirect (bought-out) transactions as well as direct transactions.
  2. Whether JBVNL's unilateral withholding and recovery of previously paid GST impact was arbitrary and violative of Article 14 and the doctrine of promissory estoppel.
  3. Whether a writ petition was maintainable to enforce a money claim arising from a contractual dispute against a State instrumentality.

Petitioner's Arguments

  • Senior counsel submitted that the amended Clause 10.7, read with the Pre-Bid Clarification and Clause 28 of the Letter of Award — both integral parts of the Contract Agreement — clearly obliged JBVNL to reimburse GST impact on "affected transactions" "in totality," without carving out indirect transactions.
  • It was argued that JBVNL's own conduct in paying such reimbursement until August 2019 confirmed this construction, and that its subsequent invocation of Clause 31 to reintroduce the deleted restriction amounted to an impermissible attempt to bring back through the backdoor what the parties had expressly agreed to delete.
  • Reliance was placed on Supreme Court precedent that a writ against a State instrumentality is maintainable even in contractual and money-claim matters where the State's action is arbitrary and violates Article 14.

Respondent's Arguments

  • JBVNL contended that Clause 10.7, though amended, had to be read together with Clause 31, which it argued strictly prohibited differential GST impact on indirect transactions, and that REC's clarificatory letters confirmed reimbursement was intended to be restricted to direct transactions and any earlier payment was only provisional.

Court Order / Findings

  • The Court held that the amended Clause 10.7, read with the Pre-Bid Clarification and Clause 28 of the Letter of Award, unambiguously covered GST impact on "affected transactions" "in totality," and that Clause 31 could not be read to resurrect the very restriction the parties had deliberately deleted from Clause 10.7.
  • Applying settled contract-interpretation principles and noting JBVNL's own conduct of reimbursing indirect-transaction GST impact until August 2019, the Court found the sudden withholding from September 2019, without any explanation to the contractor, to be arbitrary, violative of promissory estoppel, and contrary to Article 14.
  • The Court affirmed that writ jurisdiction was maintainable notwithstanding the contractual nature of the dispute, given the public character of JBVNL's action, and directed JBVNL to calculate and pay the withheld GST-impact amount with statutory interest in terms of the amended work order, within 12 weeks. All four writ applications were disposed of accordingly.

Important Clarification

  • Where a change-in-law clause is amended by the parties' clear and documented conduct (a pre-bid clarification, an award-letter clause, and years of consistent payment practice) to remove a restriction, a general "order of precedence" or an unamended companion clause cannot be invoked later to reinstate the deleted restriction.
  • Writ jurisdiction under Article 226 remains available against a State instrumentality even for enforcing a purely contractual, money-claim entitlement, where the instrumentality's conduct is shown to be arbitrary and in breach of Article 14 or promissory estoppel.

Sections Involved

  • GST change-in-law / tax-impact reimbursement clauses in government works contracts — governing equitable adjustment of contract price on introduction of GST.
  • Article 14, Constitution of India — non-arbitrariness requirement applicable to State instrumentalities even in contractual dealings.
  • Section 64A, Sale of Goods Act, 1930 — statutory entitlement to pass on tax changes in a contract of sale of goods, relied on as reinforcing the petitioner's claim.

Decision – In Favour of

The decision is in favour of the assessee-contractor, with JBVNL directed to pay the withheld GST impact together with statutory interest in accordance with the amended work order.

Case Details

Court: High Court of Jharkhand at Ranchi
Case Number: W.P.(T) Nos.4885, 4886, 4904 & 4905 of 2022
Coram: Hon'ble Mr. Justice Rongon Mukhopadhyay and Hon'ble Mr. Justice Deepak Roshan
Date of Judgment: 26.07.2023 (pronounced)

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