Post-GST Arbitral Awards for Pre-GST Contracts: Price Revisions are Taxable; Damages are GST-Free.

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication [including communication through electronic means]

(a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and

(b) a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

(a) Agreeing to the obligation to refrain from an Act.

(b) Agreeing to the obligation to tolerate an act or a situation.

(c) Agreeing to the obligation to do an act.

Facts of the case – The applicant was tasked with crushing boulders into aggregates for shotcreting and concrete works. After receiving approval for quarry allotment from THDC, the applicant began mining and constructing approach roads. However, within 15 days, the quarry was re-allotted based on a No Objection Certificate from THDC. This prevented the applicant from producing aggregates, forcing them to procure materials from private agencies at significantly higher market rates.

Arbitral Tribunal’s verdict- The Tribunal found that the quarry given to KCT had local issues, which forced them to buy materials from third parties and request reimbursement for extra costs. Since THDC owned all the land for quarrying, KCT had no other options. Based on the situation and partial access to the quarry, the Tribunal approved the claim in part.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- This claim is linked to Claim No. 1. The applicant was unable to mine boulders from the quarry allotted by THDC due to local agitations over rehabilitation and compensation. As a result, the applicant had to lease a quarry from a third party for 23 months to continue work without disruption. Thus, the applicant seeks reimbursement of the monthly rent paid for the leased quarry, applicable to all three Packages.

Arbitral Tribunal’s verdict- The applicant informed THDC about the lack of a suitable quarry and submitted evidence, including receipts. The Tribunal found the apportionment of the claim across three packages reasonable and awarded the amount accordingly.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- The contract between the applicant and the THDC required THDC to provide an Alimak Raise Climber for excavating pilot shafts from bottom to top, as specified in the tender document. However, THDC was unable to provide the equipment at the start of the work, leading to a change in construction methodology. The applicant was instructed to excavate shafts 1 and 2 from top to bottom, while shafts 3 and 4 required strengthening measures due to geological conditions. As the methodology differed from the original plan, the work became additional, and the applicant calculated the claim based on revised rates and executed quantities.

Arbitral Tribunal’s Verdict- Clause 35 of the contract stated that extra work, as directed by the EIC, would be carried out by the contractor. Due to changes in the construction methodology, the work was different from the original plan, making it extra work. The applicant calculated the claim using revised rates and applied them to the quantities executed on-site, providing full details of the claim. THDC did not offer an alternative calculation or identify any errors in the claim. The Tribunal found the claim to be justified and awarded the amount accordingly.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the Case- The applicant initially used 33-grade cement for the HPP Civil works as instructed, but during testing, it failed to meet the required strength. THDC then directed the use of 43-grade cement, which was more expensive. The claim is for reimbursement of the additional cost of using 43-grade cement for the updated quantities, including price adjustments for all packages.

Arbitral Tribunal’s Verdict- The Tribunal concluded that THDC instructed the applicant to use 43-grade cement, as evidenced by multiple communications. The Tribunal found the applicant’s claim for the rate difference justified and supported by the evidence presented, with no valid objection raised by THDC.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- The applicant-built infrastructure for its employees on land initially allotted by THDC for executing the contract. However, this land later became submerged while the work was ongoing. As a result, the applicant had to relocate to new land provided by THDC. Thus, the applicant was forced to construct official and residential accommodation twice during the currency of contract. and construct residential and office facilities again, incurring additional costs during the contract period.

Arbitral Tribunal’s Verdict- The applicant did not notify THDC at the time of setting up labour facilities in submerged areas or when directed by the EIC to shift these facilities to new locations due to impounding activities. However, the Tribunal found the applicant’s claim for the cost of constructing new facilities at the relocated sites to be valid, as no errors in the claim were demonstrated by THDC. The applicant was not entitled to reimbursement for dismantling the old facilities or for supervision charges, as the claim was for reimbursement rather than extra work. The total amount awarded was apportioned across the contract packages proportionately.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- The claim relates to extra work items executed over an extended period during the project. Clause 35 of the GCC states that extra work items do not invalidate the contract, and the contractor is obligated to carry them out as directed. However, this provision cannot be used to significantly expand the scope of work beyond the original contract. Clause 36 allows price adjustments for BOQ items, variations, and extra work items whose rates are determined under Clause 35. The claimant argues that the same principle applies to numerous extra items ordered over the years, with their rates fixed early on, even though the work continued until the project’s completion.

Arbitral Tribunal’s verdict- The arbitral Tribunal noted that the CMD of the Respondent, in a letter, acknowledged the Claimant’s claim as admissible but accepted only one of the proposed methods for determining the rate of extra items. This method, under Clause 35(ii) of the GCC, involved periodic analysis of rates with supporting documents for the relevant period. The Tribunal found no evidence from the Respondent to prove that the calculations and quantifications were inconsistent with Clause 36 of the GCC. It rejected the Respondent’s contention that the claim was prohibited under the clause. Based on the sufficient evidence provided by the Claimant, the Tribunal upheld the claim and awarded amounts corresponding to the respective packages.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- By the time the Respondent issued its letter, the Machine Hall excavation had already been completed below 600m across its full length. However, the decision to construct the compressors and receivers’ room was made later, making the excavation work for these rooms significantly different from that of the Machine Hall. This delay adversely impacted productivity and increased excavation costs. The work was completed in September 1999, and the Claimant submitted a rate analysis, arguing that the BOQ rate was inapplicable due to the challenging working conditions. While the Respondent made payments, it did so at the Machine Hall rate, which the Claimant found unacceptable.

Arbitral tribunal’s verdict- The excavation of the compressors and receivers’ room required additional effort and qualifies as an extra item, warranting rate determination under Clause 35 of the GCC. The Tribunal, therefore, allows this claim and holds that the Claimant is entitled to a revised rate, with the total amount payable determined accordingly.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- Initially, the contract provided that THDC would supply all materials for cable anchors free of cost. However, this provision was later removed through an amendment. The Claimant subsequently submitted a claim for the cost of materials used in the pre-stressed cable anchor work up to January 2000. The claim included rates for both blind-type and through-type cable anchors. However, the Respondent rejected the claim, stating that, under the amended contract, the Claimant was responsible for arranging the materials.

Arbitral tribunal’s verdict- The entire contract, including BOQ items 13 and 14 and Clause 5.11 of the Technical Specifications, was drafted by THDC. Even after removing the phrase “from materials supplied by THDC,” ambiguity remained about whether the rates for BOQ items 13 and 14 included the cost of materials to be provided by the Claimant. The Delhi High Court in Flowmore Ltd. v. Skipper Ltd. (2023) held that any ambiguity in a contract must be interpreted against the party that drafted it. Applying this principle, the Tribunal finds that the Claimant reasonably believed that the rates for BOQ items 13 and 14 did not include the cost of materials. Therefore, the Tribunal awards the Claimant an amount under this claim.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- The Respondent orally instructed the Claimant to use muck excavated from Packages II and III to fill the area between the hill slope and the walls of the Tail Race Tunnel exit/portal in a restricted space and in layers. This work was challenging, requiring careful manoeuvring of dumpers and spreading of muck with a dozer in a confined area, resulting in additional expenditure for the Claimant.

Arbitral tribunal’s verdict- THDC claimed that the area in question was designated as a disposal area but provided no evidence to support this contention. The Tribunal determined that the work performed by KCT was not simple muck disposal but backfilling, which contributed to strengthening the TRT structure. The Claimant initially sought payment for the muck based on prior correspondence and appeals but later revised the claim in the SoC using CWC Guidelines of 1997. The Tribunal held that KCT is entitled to the amount initially claimed.

Nature- The payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for nonfulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- The applicant offered lump sum rebates linked to specific conditions, which were included in the BOQ. These rebates applied to the total value of work done in each RA bill until the full rebate amounts were recovered by THDC. Once the recovery was complete, the rebate no longer applied to subsequent RA bills. The rebates did not affect the rates of individual BOQ items but were tied to the overall value of work done.

Arbitral tribunal’s verdict- The Tribunal held that price adjustments should be based on the value of work done at the BOQ rates specified in the contract, not on the rebated value. The applicant’s application of the rebate to price adjustments was not considered binding, as the terms of the contract govern the parties’ rights and obligations. The Tribunal found that THDC had deducted excess amounts from the applicant’s bills for rebates and ruled in favour of the applicant.

Nature- This is clearly towards deductions which were made earlier from the applicant’s invoice as rebates and the said amounts are now claimed by the applicant in lieu thereof. It is understood that since the earlier amounts were deducted by THDC, Service Tax/VAT/ CST/ Other erstwhile taxes were also not devolved on these amounts. Now this payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for non-fulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- The Claimant offered an additional 0.5% rebate for payments under interim/RA bills made within 15 days as per Clause 38.2. However, the Respondent wrongly and arbitrarily applied this rebate to price adjustment bills under Clause 36.0 of the GCC, which was not intended.

Arbitral tribunal’s verdict- The additional 0.50% rebate was applicable only to interim bills submitted under Clause 38.2 of the GCC, provided payment was made within 15 days of submission. The Tribunal found that the Respondent’s reliance on the letter of intent alone was incorrect, as the agreement must be read together with the price bid. Accordingly, the Tribunal held that the 0.50% rebate applied only to payments for interim bills and not to price adjustments.

Nature- This is clearly towards deductions which were made earlier from the applicant’s invoice as rebates and the said amounts are now claimed by the applicant in lieu thereof. It is understood that since the earlier amounts were deducted by THDC, Service Tax/VAT/ CST/ Other erstwhile taxes were also not devolved on these amounts. Now this payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for non-fulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Facts of the case- When settling the final bill, several items payable to the Claimant were either omitted or ignored by the Respondent without any valid explanation. The bill included claims for work done, reimbursement for admixtures, withheld amounts, royalty reimbursements, deductions for the 0.5% rebate, and other unpaid amounts.

Arbitral Tribunal’s verdict- Since the Final Bill was accepted and the No Claim Certificate was not voluntarily obtained from KCT, the Tribunal will consider the claim for non-payment of amounts due under the Final Bill on its merits. However, the Tribunal will take into account THDC’s argument that KCT had signed the measurements of quantities in the Measurement Books at the relevant time. The Tribunal has awarded a reduced amount compared to the amount originally claimed.

Nature- This is clearly towards deductions which were made earlier from the applicant’s invoice as rebates and the said amounts are now claimed by the applicant in lieu thereof. It is understood that since the earlier amounts were deducted by THDC, Service Tax/VAT/ CST/ Other erstwhile taxes were also not devolved on these amounts. Now this payment has been made to compensate for injury, loss or damage suffered by the applicant due to breach of the contract by THDC as suitable conditions for the execution of the contract was not provided. There is no agreement to tolerate the act. The payment is for non-fulfilling the contract. Moreover, the payment is ‘de hors’ contract and hence such payment cannot be considered as consideration instead such payments are in the form of liquidated damages.

Section 142 (11)

(a) notwithstanding anything contained in section 12, no tax shall be payable on goods under this Act to the extent the tax was leviable on the said goods under the Value Added Tax Act of the State;

(b) notwithstanding anything contained in section 13, no tax shall be payable on services under this Act to the extent the tax was leviable on the said services under Chapter V of the Finance Act, 1994; (32 of 1994.)

“On reading of the aforementioned provisions of the Contract, it becomes clear that providing the quarry area on “as is where is basis” was the obligation of the Respondent. The Respondent was the owner of the land needed for the quarrying boulders, sand etc. for Tehri Dam Project. For obtaining the land for quarrying, the Claimant was dependent on the Respondent. There was no quarrying area, which was available outside the land owned by the Respondent, which could be exploited for the purpose of extracting boulders and other quarrying material.

Therefore, the arbitral Tribunal is of the view that making the quarry area available to the Claimant for quarrying, was the obligation of the Respondent”

“55.

(vii) The Respondent’s next contention is that change in methodology would not amount to extra work in terms of Clause 35 of the Contact. In this regard, we find that vide its letter dated 10.04.1997 THDC informed the Claimant that change in methodology in the CGS was submitted by the Claimant and was approved by THDC. Therefore, it is beyond any doubt that there was a change in construction methodology. The said change was on account of inability of the Respondent to make Alimak Raise Climber available in terms of the Contract and instructing the Claimant to execute the work of Pilot Shaft 1 & 2 from top to bottom. For CGS 3 &4, the work of executing Pilot Shaft from bottom to top was not possible due to geological conditions without taking strengthening measures.

(ix) Clause 35 of the Contract required extra items of work as directed by the EIC, would be carried out by the Contractor. With the change in methodology, the work did not remain the same for which the rate was quoted in the relevant BOQ item hence it became the extra work. The Claimant has quantified its claim by working out the new rates on the basis of analysis of rate and applied the rate so derived to the quantities executed at the site.”

(a) made to a registered person shall be the location of such person;

(b) made to any person other than a registered person shall be,—

(i) the location of the recipient where the address on record exists; and

(ii) the location of the supplier of services in other cases.

(a) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(b) the date immediately following sixty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof [by the supplier, in cases where invoice is required to be issued by the supplier; or]

(c) the date of issue of invoice by the recipient, in cases where invoice is to be issued by the recipient:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply: