HC: Courts can’t rewrite contract between parties
Kolkata, Oct 22, 2024
Courts cannot rewrite a contract between the parties, the Calcutta High Court said while setting aside an award granted by Arbitral Tribunal in favour of a private company demanding service tax reimbursement from South Eastern Railway.
Justice Sabyasachi Bhattacharyya on Oct 7 observed that violation of this concept is tantamount to “contravention with the fundamental policy of Indian law and being in conflict with the most basic notions of justice.”
The SER had approached the HC challenging the award set by the tribunal, whereby it was asked to reimburse service tax amounting to Rs 49,53,763 along with the interest paid by the tenderer to the tax authorities. The counsel for railway argued that clause 2.2 of the contract stated that the rates quoted by the company will include all incidental charges which includes VAT, sales tax, excise duty, and octroi.
The private company’s case was that the estimate relied upon did not include service tax as a component. According to tax authorities, by a notification on May 27, 2014, service tax was made inapplicable for work done for the railways. The exemption was withdrawn on March 1, 2015.
Justice Bhattacharyya noted that the tender was floated on April 14, 2015 and the bids were opened on May 27, 2015. The letter of award (LoA) was issued to the company on June 25, 2015 and the agreement was done on Sept 26, 2015. By that time, the service tax was applicable again.
“The bidders took a calculated commercial risk… 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,” the court noted.
The judge said the estimate relied upon by the tribunal to interpret the clause was neither a part of the contract nor an agreement between the parties but an internal document of the railway for arriving at the estimated bare price of the work.
[The Times of India]
