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TMI Blog2024 (10) TMI 332X X X X Extracts X X X X X X X X Extracts X X X X ..... e unambiguous, contravention of the same by the Arbitral Tribunal tantamounts to a patent illegality within the contemplation of Section 34 (2-A) of the 1996 Act. The Estimate, which was relied on by the Arbitral Tribunal to interpret the clause, is neither a part of the contract nor an agreement between the parties but, as discussed above, is an internal document of the petitioner/Railway for arriving at the estimated bare price of the work. Furthermore, the estimate deals only with the wages of the workmen in terms of the Minimum Wages Act and does not constitute the rates to be quoted by the individual bidders. The estimate merely provided the minimum rates, since if rates were quoted below the same, it would imply that the workmen would be deprived of their legitimate dues under the Minimum Wages Act. It was for the bidders to take into account such minimum price and add to it their own estimates of taxes payable, in the light of Clause 2.2 which mandates that the rates must include all taxes and duties etc. which are applicable to the work done under the tender. Hence, the reliance by the Arbitral Tribunal on the Estimate to interpret Clause 2.2 was patently perverse and illeg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclude all incidental charges, inter alia including VAT, Sales Tax, Excise Duty, Octroi and other taxes and duties, etc. 6. As per the Tax Authorities, the nature of services provided by the respondent became liable to service tax since July, 2012. However, by a subsequent Notification dated May 27, 2014, Service Tax was made inapplicable for work done for the Railways. Such exemption was again withdrawn by a Notification dated March 1, 2015. The said Notification was implemented by a further Notification dated May 26, 2015. Thus, as on the date of opening of the bids in the tender-in-question, Service Tax had been reimposed in respect of works done for the Railways. 7. It is contended that the Arbitral Tribunal deviated from the contract between the parties, particularly Clause 2.2 thereof, by directing Service Tax plus interest to be borne by the petitioner-Railway, although the rates quoted by the bidders, as per Clause 2.2, were to include all incidental charges, including taxes and duties. Thus, the award violated Section 28 (3) of the 1996 Act and is accordingly vitiated by patent illegality, which is a ground of challenge under Section 34 of the said Act. Learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al proceeded on a logical basis on the premise of the materials on record and came to a plausible conclusion, there is no scope of interference under Section 34 of the 1996 Act. 15. Learned counsel for the respondent cites Associate Builders v. Delhi Development Authority, reported at (2015) 3 SCC 49 and National Highways Authority of India v. Hindustan Construction Co. Ltd., reported at (2024) 6 SCC 809 for the proposition that the correspondence exchanged between the parties as well as the material placed before the Arbitral Tribunal are to be considered for the purpose of construing the contract. In the present case, the Arbitral Tribunal rightly considered the estimate and other materials before it while passing the impugned award. 16. Learned counsel appearing for the respondent next cites UHL Power Co. Ltd. v. State of Himchal Pradesh, reported at (2022) 4 SCC 116 , where the Supreme Court took the view that the interpretation of the relevant clauses of the agreement by the Tribunal, if possible or plausible, could not be interfered with merely because another view could have been taken. 17. In K. Sugumar v. Hindustan Petroleum Corpn. Ltd., reported at (2020) 12 SCC 539 , the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ility of Service Tax to work done for the Railways is concerned, a Notification dated May 27, 2014 made Service Tax inapplicable to Railway works. Such exemption was, however, withdrawn by a subsequent Notification dated March 1, 2015 with effect from April 1, 2015, by which the Railways were made liable to pay 100 per cent of Service Tax. However, the said Notification was implemented only by a further Notification of May 26, 2015. 27. Thus, Service Tax was again made applicable to work done for the Railways on May 26, 2015, with effect from April 1, 2015. 28. In respect of the tender-in-question, the bids were opened on May 27, 2015, the day after the implementation of the Notification for Service Tax was published. The LoA was issued in favour of the respondent a month thereafter on June 25, 2015 and the agreement was entered into between the parties in pursuance thereof after three months on September 26, 2015. Hence, as on the date of issuance of the LoA and the subsequent agreement, the parties ought to have been aware of applicability of Service Tax to Railway works. 29. Thus, the respondent was well aware that Service Tax was payable in respect of the work to be done by it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le expenses on account of taxes and duties and nothing compelled the bidders to restrict the quotation only to the estimated amount. Since the applicability of Service Tax was already public knowledge prior to the agreement being entered into part by the parties, nothing prevented the respondent from seeking clarification or recusing from the work if it had any objection to paying Service Taxes. 36. Thirdly, when the Estimate was drawn up on March 27, 2015, it was never the intention of the Railway Authorities to include any component of tax therein. It was merely a working basis for calculating the rough Estimate of the wages payable to the workmen by the contractors. 37. Hence, the Estimate was not a reflection, nor was it intended to be so, of the actual prices to be quoted by the bidders. The Estimate was, as it suggests, merely a calculation of the probable wages payable to the workmen in terms of the Minimum Wages Act. It was entirely for the bidders to take into account the probable tax components to arrive at their respect quotation of rates. Hence, the Estimate was a perverse basis for interpreting the contract, since it had no connection whatsoever with the contract nor w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s facts and cannot be blindly applied to all and sundry cases. It is equally well-settled that when the terms of a contract are unambiguous, no external aid need be resorted to for the purpose of interpretation of the same. In the present case, the expression and other taxes and duties etc. in Clause 2.2, without any iota of ambiguity and doubt, mandates that the rate quoted by the tenderer has to include all taxes and duties and the like applicable to the works under the contract. Therefore, there is no scope of taking aid of any further document to interpret the same. 43. Also, the Estimate, which was relied on by the Arbitral Tribunal to interpret the clause, is neither a part of the contract nor an agreement between the parties but, as discussed above, is an internal document of the petitioner/Railway for arriving at the estimated bare price of the work. Furthermore, the estimate deals only with the wages of the workmen in terms of the Minimum Wages Act and does not constitute the rates to be quoted by the individual bidders. The estimate merely provided the minimum rates, since if rates were quoted below the same, it would imply that the workmen would be deprived of their legi ..... 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