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2021 (5) TMI 1076

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..... ng cess on the First (Supply) contract. This is apparent from the communication of the UPPTCL dated 1st June 2018 to the Bank (Respondent No. 2). Clause 8 of the Special Conditions of the Contract merely says that duties, taxes, fees etc. as are legally applicable, shall be paid at actuals by the contractor. This clause does not enable UPPTCL to withhold payments or to realize cess by revocation of a Performance Guarantee. The clear statutory scheme of the BOCW Act excludes a supply contract from within its ambit. On behalf of the Respondent No. 1, it is pointed out that several public authorities and corporations, such as the Delhi Metro Rail Corporation and Karnataka Power Transmission Corporation Limited, have issued instructions that no cess under the BOCW Act is leviable on a contract for supply of goods. Copies of the KPTCL circulars dated 22.8.2012 and 28.8.2012 to this effect are annexed to the Rejoinder of the Respondent No. 1 in the High Court. The Respondent No. 1 is apparently not a contractor, within the meaning of Section 2(1)(g) of the BOCW Act in respect of the first, second and fourth contracts. Nor is the Respondent No. 1 employer within the meaning of Se .....

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..... clauses of contract, specifications or drawings or any of them. UPPTCL has changed its stand only after the CAG report. Cess in respect of of the First Contract has been deducted only in view of the audit objection raised by the Office of Comptroller and Auditor General (CAG). It is well settled that availability of an alternative remedy does not prohibit the High Court from entertaining a writ petition in an appropriate case. The High Court may entertain a writ petition, notwithstanding the availability of an alternative remedy, particularly (1) where the writ petition seeks enforcement of a fundamental right; (ii) where there is failure of principles of natural justice or (iii) where the impugned orders or proceedings are wholly without jurisdiction or (iv) the vires of an Act is under challenge. The action of UPPTCL in forcibly extracting building cess from the Respondent No. 1 in respect of the first contract, solely on the basis of the CAG report, is in excess of power conferred on UPPTCL by law or in terms of the contract. In other words, UPPTCL has no power and authority and or jurisdiction to realize labour cess under the Cess Act in respect of the first contract by .....

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..... Objects and Reasons for the BOCW Act, it is estimated that about 8.5 million workers in the country are engaged in building and other construction works. Building and other construction workers are one of the most numerous and vulnerable segments of the unorganised labour in India. The building and other construction works are characterised by their inherent risk to the life and limb of the workers. The work is also characterised by its casual nature, temporary relationship between employer and employee, uncertain working hours, lack of basic amenities and inadequacy of welfare facilities. 3. The Statement of Objects and Reasons further state in view of the circumstances explained above, it has been considered necessary to constitute Welfare Boards in every State so as to provide and monitor social security schemes and welfare measures for the benefit of building and other construction workers. For the said purpose, it has been considered appropriate to bring in a comprehensive legislation by suitably amplifying the provisions of the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Bill, 1988 which was introduced in the Rajya Sa .....

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..... tion of power, water works (including channels for distribution of water), oil and gas installations, electric lines, wireless, radio; television, telephone, telegraph and overseas communication dams, canals, reservoirs, watercourses, tunnels, bridges, viaducts, aquaducts, pipelines, towers, cooling towers, transmission towers and such other work as may be specified in this behalf by the appropriate Government, by notification, but does not include any building or other construction work to which the provisions of the Factories Act, 1948 (63 of 1948), or the Mines Act, 1952 (35 of 1952), apply. 7. Under Section 2(1)(e) of the BOCW Act building worker means a person who is employed to do any skilled, semiskilled or unskilled manual, supervisory, technical or clerical work for hire or reward, whether the terms of employment be express or implied, in connection with any building or other construction work but does not include any such person- (i) who is employed mainly in a managerial or administrative capacity; or. (ii) who, being employed in a supervisory capacity, draws wages exceeding one thousand six hundred rupees per mensem or exercises, either by the nature of the .....

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..... may be applicable at any time after such commencement, within a period of sixty days from the date on which this Act becomes applicable to such establishment, make an application to the registering officer for the registration of such establishment: Provided that the registering officer may entertain any such application after the expiry of the periods aforesaid, if he is satisfied that the applicant was prevented by sufficient cause from making the application within such period. 8. Revocation of registration in certain cases.- If the registering officer is satisfied, either on a reference made to him in this behalf or otherwise, that the registration of any establishment has been obtained by misrepresentation or suppression of any material fact or that the provisions of this Act are not being complied with in relation to any work carried on by such establishment, or that for any other reason the registration has become useless or ineffective and, therefore, requires to be revoked, he may, after giving an opportunity to the employer of the establishment to be heard, revoke the registration. 9. Appeal.- (1) Any person aggrieved by an order made under Sect .....

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..... ration of building worker shall stand restored. xxx xxx xxx 22. Functions of the Boards. ( 1) The Board may (a) provide immediate assistance to a beneficiary in case of accident; (b) make payment of pension to the beneficiaries who have completed the age of sixty years; (c) sanction loans and advances to a beneficiary for construction of a house not exceeding such amount and on such terms and conditions as may be prescribed; (d) pay such amount in connection with premia for Group Insurance Scheme of the beneficiaries as it may deem fit; (e) give such financial assistance for the education of children of the beneficiaries as may be prescribed; (f) meet such medical expenses for treatment of major ailments of a beneficiary or, such dependent, as may be prescribed; (g) make payment of maternity benefit to the female beneficiaries; and (h) make provision and improvement of such other welfare measures and facilities as may be prescribed. xxx xxx xxx 24. Building and Other Construction Workers' Welfare Fund and its application.- (1) There shall be constituted by a Board a fund to be called the Building and .....

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..... shall have separate cooking place bathing, washing and lavatory facilities 35. Creches.- (1) In every place where in more them fifty female building workers are ordinarily employed, there shall be provided and maintained, a suitable room or rooms for the use of children under the, age of six years of such female workers. xxx xxx xxx 36. First-aid. Every employer shall provide in all the places where building or other construction work is carried on such first-aid facilities as may be prescribed. xxx xxx xxx 38. Safety Committee and safety officers. ( 1) In every establishment wherein five hundred or more building workers are ordinarily employed, the employer shall constitute a Safety Committee consisting of such number of representatives of the employer and the building workers as may be prescribed by the State Government. xxx xxx xxx 40. Power of appropriate Government to make rules for the safety and health of building workers. (1) The appropriate Government may, by notification, make rules regarding the measures to be taken for the safety and health of building workers in the course of their employment and the 14 equipment an .....

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..... vernment may by notification specify to be emergent works. 10. A perusal of the various provisions of the BOCW Act makes it amply clear that the said Act has been enacted for the welfare of only building and other construction workers and to make adequate provisions for their safety, health and financial security. 11. The Cess Act has been enacted to provide for the levy and collection of cess on the cost of construction incurred by employers, with a view to augment the resources of the Building and Other Construction Workers Welfare Boards, constituted under the BOCW Act. 12. Section 3(1) of the Cess Act, which is the charging section, provides for the levy and collection of a Cess for the purposes of the BOCW Act, at such rate not exceeding two per cent, but not less than one per cent, of the cost of construction incurred by an employer, as the Central Government may, by notification in the Official Gazette, from time to time specify. 13. Sub-Section (2) of Section 3 of the Cess Act provides that the Cess levied under Sub-Section (1) shall be collected from every employer in such manner and at such time, including deduction at source, in relation to a building or .....

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..... to exempt. Notwithstanding anything contained in this Act, the Central Government may, by notification in the Official Gazette, exempt any employer or class of employers in a State from the payment of cess payable under this Act where such cess is already levied and payable under any corresponding law in force in that State. 7. Power of Entry Any officer or authority of the State Government specially empowered in this behalf by that Government may-- (a) with such assistance, if any, as he or it may think fit, enter at any reasonable time any place where he or it considers it necessary to enter for carrying out the purposes of this Act including verification of the correctness of any particulars furnished by any employer under section 4; (b) do within such place anything necessary for the proper discharge of his or its duties under this Act; and (c) exercise such other powers as may be prescribed. 8. Interest payable on delay in payment of cess. If any employer fails to pay any amount of cess payable under section 3 within the time specified in the order of assessment, such employer shall be liable to pay interest on the amount to be paid .....

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..... ncement of work and every year thereafter at the notified rates on the cost of construction incurred during the relevant period. (3) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the levy of cess pertains to building and other construction work of a Government or of a Public Sector Undertaking, such Government or the Public Sector Undertaking shall deduct or cause to be deducted the cess payable at the notified rates from the bills paid for such works. (4) Notwithstanding the provisions of sub-rule (1) and sub-rule (2), where the approval of a construction work by a local authority is required, every application for such approval shall be accompanied by a crossed demand draft in favour of the Board and payable at the station at which the Board is located for an amount of cess payable at the notified rates on the estimated cost of construction: Provided that if the duration of the project is likely to exceed one year, the demand draft may be for the amount of cess payable on cost of construction estimated to be incurred during one year from the date of commencement and further payments of cess due shall be made as per the provisions of sub- .....

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..... ndorse a copy thereof to the employer, to the Board and to the Cess Collector and despatch such order within five days of the date on which such order is made. (2) The order shall inter alia, specify the amount of cess due, cess already paid by the employer or deducted at source and the balance amount payable and the date, consistent with the provision of Rule 4, by which the cess shall be paid to the Cess Collector. (3) If on scrutiny of information furnished, the Assessing Officer is of the opinion that employer has undercalculated or miscalculated the cost of construction or has calculated less amount of cess payable, he shall issue notice to the employer for assessment of the cess. (4) On receipt of such notice the employer shall furnish to the Assessing Officer a reply together with copies of documentary or other evidence in support of his claim, within fifteen days of the receipt of the notice: Provided that the Assessing Officer may, in the course of assessment, afford an opportunity to the assessee to be heard in person, if he so requests to substantiate his claim. (5) If the employer fails to furnish the reply within the period specified under .....

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..... h payment and proof thereof. A copy of such application shall be endorsed to each of the Assessing Officer and the board concerned. (2) On receipt of such application, the Central Government may, if it feels necessary, seek a report from the State Government concerned. (3) On examining the grounds, facts and merits of such application the Central Government may, by notification in the Official Gazette, issue an order exempting the employer or class of employers, as the case may be, from payment of cess payable under the Act where such cess is already levied and payable under such corresponding law. (4) Assessment proceedings shall be stopped by the Assessing Officer for a period of thirty days commencing from the date of the receipt of a copy of the application under sub-rule (1) to him, or till the order of the Central Government under sub-rule (3) is conveyed to an employer or class of employers who made the application under sub-rule (1), whichever is earlier. 12. Penalty for non-payment. (1) An Assessing Officer, if it appears to him that an employer has not paid the cess within the date as specified in the assessment order or has paid less cess, inc .....

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..... on the lower side or if the basis of assessment is wrong, it shall remand back the assessment order to the Assessing Officer along with his observations to rectify the wrong. (6) An order remanded back under sub-rule (5) shall be disposed of by the Assessing Officer within one month in view of the observation made by the Appellate Authority: Provided that if the amount of cess is proposed to be enhanced the assessee shall be given an opportunity of being heard. (7) No appeal shall lie against the order of the Appellate Authority under this rule. (8) If the Appellate Authority is of the opinion that the quantum of penalty imposed is on the higher side or not correctly made it shall suitably modify or set aside the order of the Assessing Officer, as the case may be. (9) The appeal under this rule shall be disposed of by making a speaking order and a copy of such order shall be sent to each of the appellant, the Assessing Officer and the Board within five days of the date on which such order is made. (10) An order in appeal reducing the amount of cess shall also ask the Board to refund the excess cess. (11) An order in appeal reducing, enhanci .....

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..... arrangement. 1.5.3 Electrical / Mechanical Auxiliaries other Major Misc. works a) 2x1000kVA, 33/0/4kV Transformers b) D.G Set c) Air conditioning Plant for each building d) Lighting system for complete switchyard, buildings, streets and stores etc. e) SDH communication system PLCC communication f) AC DC Auxiliary Power supply system including Batteries, Battery charges, AC DC distribution boards g) Fire Fighting equipment h) Any other work necessary for completion of sub-station Sub-para 5 of the said letter under the sub-heading Nature of Contract clearly provided that the work for the 765kV sub-stations on single source responsibility, turn-key basis shall be awarded through following four separate contracts:- FIRST CONTRACT Supply and Delivery of Equipment Material SECOND CONTRACT Handling, Erection, Testing and Commissioning Works THIRD CONTACT Civil Works FOURTH CONTRACT Three years O M 21. In terms of the said Fra .....

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..... s. Any such breach or default or occurrence in any of the Contracts shall not relieve the Contractor of any of his responsibility/obligation under the other Contracts and no time extension shall be given to the Contractor on these grounds. The equipment/material to be supplied by the Contractor under the first Contract when installed and commissioned under the second Contract shall give satisfactory performance in accordance with provisions of the Contract. The signing of three (3) separate Contracts shall in no way dilute the insurance responsibility and obligations of the Contractor. 25. The total value of (i) the First Contract (Supply) was 2750933042.00 (Two Hundred and Seventy Five Crores Nine Lakhs, Thirty Three Thousand and Forty Two), (ii) the Second Contract (Erection) was Rs. 40129510.00 (Four Crores One Lakh, Twenty Nine Thousand Five Hundred and Ten), (iii) the Third contract (Civil) was Rs. 193808465.00 (Nineteen Crores Thirty Eight Lakhs Eight Thousand Four Hundred and Sixty Five) and (iv) the Fourth contract (Operations and Maintenance) was Rs. 35737200.00 (Three Crores, Fifty Seven Lakhs Thirty Seven Thousand and Two Hundred). 26. In this context, it would .....

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..... THIRD CONTACT Civil Works FOURTH CONTRACT Three years O M The first and second Contracts shall cover all works, other than civil works, required to complete total scope under these specifications. The THIRD Contact shall cover all civil works including required materials under its scope. The first Contract shall cover supply and delivery of all equipments and materials as per Schedule of Prices of respective Contract and any other item required to complete the scope of work for completion of substation including their performance and guarantees. The second Contract shall cover unloading, handling at site, erection, testing and commissioning of all the equipments and materials to be supplied by the Contractor under first Contract and any other work require to complete the scope for commissioning and handing over of the entire substation. The third Contract shall cover all Civil Works including materials to complete the scope for commissioning and handing over of the entire substation. The Contractor shall be fully responsible for timely execution of all the activities under above three (3) Con .....

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..... f such variation is likely to exceed 10% of the Contract value of any Contract, the variation shall be allowed by concerned Engineer of Contract after taking prior concurrence of competent authority. SCC 3.5 Liquidated Damages for Delays in Completion Period Damages for delay in completion under clause 32 of Form A shall be applicable with the condition that the liability of delay shall be increased from 10% if the transformer for the first phase of Unnao sub-station do not reach site up to December, 2010. tn view of turn-key nature of contract liquidated damages shall be levied only in case of delay on contractual completion period of that phase of sub-station. SCC 8.1 The prices of imported items, if any, shall be inclusive of all taxes, duties, license fees, import/custom duties etc. legally payable. Any such taxes, duties and levies shall be Contractor s account and no separate claim on this account shall be entertained by the Purchaser. 30. Pursuant to the said First Contract (Supply Contract) the Respondent submitted two performance bank guarantees on 30th August 2012, that is bank guarantee No. 2012/272 issued by Corporation Bank, Mumbai for an amount of .....

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..... n supply of equipment and materials. 36. The Respondents also made representations to the UPPTCL for setting aside the demand for cess alleged to be outstanding, on the ground that the first contract was exempted from cess under the BOCW Act and the Cess Act 1996. 37. UPPTCL did not release the Performance Bank Guarantee of Rs. 7 crore odd furnished by the Respondent No. 1, to secure recovery of an amount of Rs. 2.6 crores towards cess. Later, the Respondent No. 1 extended the validity of the bank guarantee until 30th November, 2018, and further extended the bank guarantee till February 2019. 38. In the meanwhile, by a letter dated 1st June 2018, the Superintending Engineer, UPPTCL informed the Respondent No. 2 Corporation Bank that consequent upon successful performance of the transformer and isolators supplied by the Respondent No. 1, the bank guarantees against the first (supply) contract were partly discharged as detailed in the said letter. The Bank was instructed to retain an amount of Rs. 2,60,68,814/- from BG No. 2012/2 dated 30.8.2012 of Rs. 7,10,68,130/- and issue an amended Bank Guarantee extending its validity. 39. By a letter dated 29th December 2018, the S .....

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..... t of 1996 as amended, before the same could be realized from a contractor. The High Court found that in the absence of any order for levy and assessment under the Cess Act of 1996 recovery could not be made pursuant to an audit objection of CAG. 45. There does not appear to be any provision in the first contract, second contract, third contract, or fourth contract or in the Special Conditions of Contract or the General Conditions for Supply of Plant and the Execution of work which enables UPPTCL to withhold any amount from the bills raised by the Respondent No. 1 on UPPTCL towards any taxes, cess or any other statutory dues of the contractor. Nor has the UPPTCL adverted to any specific provision of the contract which enables UPPTCL to do so. Clause 8.1 of the Special Conditions of Contract relied upon by UPPTCL reads that the prices of imported items, if any, shall be inclusive of all taxes, duties, licence fees, import/customs duties etc. legally payable. Any such taxes, duties levies shall be on Contractor s account and no separate claim on the Account shall be entertained by the purchaser. This clause does not authorize UPPTCL to deduct taxes etc. from bills. 46. Clauses 2 .....

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..... e as represents the cost of making good such minor defects and any sum so retained shall, subject to the provisions of Clause 36, become due upon such minor defects being made good. If the Purchaser desires that the plant or any portion thereof should not be dispatched by the Contractor when it is due for dispatch, the Contractor shall store such plant or portion at his works and be responsible for all risk. For such storage the Purchaser shall pay to the Contractor at a rate to be mutually agreed upon between the parties, but not exceeding 5s (five Shillings) per ton per week payable quarterly, plus interest at one percent per annum above the current rate of the State Bank of India on 80% of the Contract value of the plant or portion thereof so stored, for the period from the date on which the said plant or portion becomes, due and is ready for shipment upto the date on which it is actually shipped. (A) In the event of the Supplier/Contractor/Company not being able to supply the materials or to carry out works in accordance with the terms of this Contract, the Government/Purchaser/Owner shall have the right to recover any sum advanced in accordance with the Clause 25 .....

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..... c. as are legally applicable, shall be paid at actuals by the contractor. This clause does not enable UPPTCL to withhold payments or to realize cess by revocation of a Performance Guarantee. 49. In Dewan Chand Builders and Contractors vs. Union of India reported in (2012) 1 SCC 101, this Court examined the object of the BOCW Act of welfare of workers engaged in building and construction work, and held:- The background in which the BOCW Act was enacted, is set out in the Statement of Objects and Reasons appended to the Bill preceding its enactment. To better appreciate the legislative intent, it would be instructive to refer to the following extract from the Statement of Objects and Reasons: It is estimated that about 8.5. Million workers in the country are engaged in building and other construction works. Building and other construction workers are one of the most numerous and vulnerable segments of the unorganized labour in India. The building and other construction works are characterized by their inherent risk to the life and limb of the workers. The work is also characterized by its casual nature, temporary relationship between employer and employee, uncertain .....

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..... or through a contractor, or by the employment of building workers supplied by a contractor, the contractor. The extension of the liability on to the contractor is with a view to ensure that, if for any reason it is not possible to collect Cess from the owner of the building at a stage subsequent to the completion of the construction, it can be recovered from the contractor. The Cess Act and the Cess Rules ensure that the Cess is collected at source from the bills of the contractors to whom payments are made by the owner. In short, the burden of Cess is passed on from the owner to the contractor. 50. In Lanco Anpara Power Limited v. State of Uttar Pradesh and Ors. Reported in (2016) 10 SCC 329, this Court held:- 37. We now advert to the core issue touching upon the construction of Section 2(1)(d) of the BOCW Act. The argument of the appellants is that language thereof is unambiguous and literal construction is to be accorded to find the legislative intent. To our mind, this submission is of no avail. Section 2(1)(d) of the BOCW Act dealing with the building or construction work is in three parts. In the first part, different activities are mentioned which are to be co .....

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..... ss under the Cess Act read with BOCW Act is leviable in respect of building and other construction works. The condition precedent for imposition of cess under the Cess Act is the construction, repair, demolition or maintenance of and/or in relation to a building or any other work of construction, transmission towers, in relation inter alia to generation, transmission and distribution of power, electric lines, pipelines etc. Mere installation and/or erection of pipelines, equipments for generation or transmission or distribution of power, electric wires, transmission towers etc. which do not involve construction work are not amenable to Cess under the Cess Act. Accordingly no intimation or information was given or any return filed with the Assessing Officer under the Cess Act or the Inspector under the BOCW Act in respect of the First and Second Contracts, either by UPPTCL or by the Respondent No. 1. 54. A contractor who enters into a pure Supply Contract is statutorily exempted from levy under the BOCW Act. The Contract in question is a Supply Contract as would be evident from Clause 8.7 of the Special Conditions of Contract which states: The contract shall be a Divisible .....

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..... L to issue the impugned communication to realize cess solely on the basis of the report of the CAG. 61. In Centre of Public Litigation v. Union of India reported in (2012) 3 SCC 1, this Court held that when CAG report was subject to scrutiny of the Public Accounts Committee and the Joint Parliamentary Committee, it would not be proper to refer to findings and conclusions contained therein. In this context, reference may also be made to the decision of this Court in Arun Kumar Agrawal v. Union of India and Others reported in (2013) 7 SCC 1, where this Court held:- 56. CAG may be right in pointing out that public monies are to be applied for the purposes prescribed by Parliament and that extravagance and waste are minimised and that sound financial practices are encouraged in estimating and contracting, and in administration generally. xxx xxx xxx 67. The question that is germane for consideration in this case is whether this Court can grant reliefs by merely placing reliance on the CAG's Report. The CAG's Report is always subject to parliamentary debates and it is possible that PAC can accept the ministry's objection to the CAG Report or reject .....

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..... taken by the State or its administrative authorities may go wrong and sometimes they may achieve the desired results. Criticisms are always welcome in a parliamentary democracy, but a decision taken in good faith, with good intentions, without any extraneous considerations, cannot be belittled, even if that decision was ultimately proved to be wrong. xxx xxx xxx 12. Reference in this regard may also be made to the judgment of this Court in Centre for Public Interest Litigation v. Union of India [(2012) 3 SCC 1 : AIR 2012 SC 3725], wherein it was held that when the CAG report is subject to scrutiny by the Public Accounts Committee and the Joint Parliamentary Committee, it would not be proper to refer to the findings and conclusions contained therein. The Court even went on to say that it is not necessary to advert to the reasoning and suggestions made, as well. 63. In this Case, there is apparently no dispute, difference or controversy between UPPTCL and the Respondent No. 1 as to the true construction, meaning or intent of any part of the conditions of contract or to the manner of execution or the quality or description or payment for the same. Nor is there any dis .....

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..... n arbitration within the meaning of the Indian Arbitration Act, 1940 or any statutory modification thereof The Arbitrator may from time to time with consent of the parties enlarge the time for making and publishing the award. Upon every or any such reference, the cost of an incidental to the reference and award respectively shall be in the discretion of the arbitrator, who shall be competent to determine the amount thereof or direct the same to be taxed as between solicitor and clients or as between party and party and to direct by whom and to whom and in what manner the same shall be borne and paid. Work under the contract shall, if reasonably, possible, continued during the Arbitration proceedings and no payments due to payable by the UPPTCL shall be withheld on account of such proceeding. In case refusal/neglect by such nominee Chairman, UPPTCL may nominate another person in his place. 66. Even though there is an arbitration clause, the Petitioner herein has not opposed the writ petition on the ground of existence of an arbitration clause. There is no whisper of any arbitration agreement in the Counter Affidavit filed by UPPTCL to the writ petition in the High .....

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