SC Rejected Cess Deduction belated at Exeution Stage of Arbitral Award without statutory backing
The Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and the Building and Other Construction Workers Welfare Cess Act, 1996.
On 10.8.2021, the appellant and NHAI had entered into a contract for construction of a segment of the Lucknow Bypass. The contract specifically mentioned that the contractor would have to abide by the Building and other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) and the Building and Other Construction Workers Welfare Cess Act, 1996 (Cess Act).
During subsistence of the contract, NHAI initiated arbitration proceedings in 2002 and went on till June, 2004. However, NHAI never raised the issue of levy and collection of cess under BOCW Act and the Cess Act during the said proceedings.
On 26.6.2004, the Arbitral Tribunal dismissed NHAI claims and allowed counter claim of the appellant for price adjustment for extra items.
Section 34 petition of NHAI was dismissed on 15.12.2011 and section 37 appeal was also dismissed on 3.2.2012. On 5.7.2012, SLP of NHAI was dismissed as withdrawn.
The contract was terminated on 14.3.2008.
On 17.2.2020, the Government of Utter Pradesh issued the circular that the BOCW Act is applicable to all projects executed on or after 4.2.2009 and cess of 1% of the project price should be deposited in the fund.
In the award execution petition of the appellant, NHAI deducted the cess on pro-rata basis against the value of work completed till 2008.\
HELD that it was clearly an afterthought on the part of NHAI. This clutching at straws so as to reduce its own liability by NHAI must necessarily be recognized for what it is worth.
The Cess Act is complementary to the BOCW Act and was enacted for augmenting the resources of the Welfare Boards, constituted under Section 18 of the BOCW Act. Therefore, in the absence of such Welfare Boards, levy and collection of cess under the Cess Act did not arise, given the scheme and structure of the two Acts and the Rules.
Insofar as Civil Appeal No. 4513 filed by Prakash Atlanta (JV) is concerned, we find that neither the executing Court nor the appellate Court was justified in holding it liable to pay cess under the BOCW Act and the Cess Act in relation to a contract entered into by it in the year 2001 which stood terminated in the year 2008, long thereafter, in the year 2012, on the basis of the Government of Uttar Pradesh’s notification of the Rules with effect from 04.02.2009. C.A. No. 4513 of 2025 is, accordingly, allowed setting aside the said orders. NHAI shall, in consequence, release the amount that has been adjusted from out of the amounts payable by it in relation to Prakash Atlanta (JV)’s arbitral award dated 26.06.2004 along with interest payable thereon as per the said award.
Judgment dated 20.1.2026 of the Supreme Court in Civil Appeal No.4513 of 2025 of Prakash Atlanta (JV) Vs. National Highways Authority of India with connected civil appeals.
