Dismissed

M/S Durga Krishna Stores Private Ltd. v. the Union of India and 6 Ors.

Gauhati HC4 May 2018WA/168/2017

Case brief

AI extract

What is this about?

The Gauhati High Court dismissed the Railway's appeal against an order requiring contractors to disclose the source of stone ballast purchased from the open market to verify royalty payment before releasing security deposits.

What did the court decide?

The appeal was dismissed and the security deposit and earnest money were not released pending verification of the royalty payment status of the material source.

M/S Durga Krishna Stores Private Ltd. Vs… — Contract and Commercial Disputes | Gauhati HC (2018)

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GAHC010026832017

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THE GAUHATI HIGH COURT (HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)

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Case No. : WA 168/2017

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1:M/S DURGA KRISHNA STORES PRIVATE LTD

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HAVING ITS REGD. OFFICE AT CLUB ROAD, SILCHAR, DIST. CACHAR ASSAM REPRESENTED BY ONE OF ITS DIRECTORS, SHRI GOVIND KUMAR MUNDRA

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VERSUS

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1:THE UNION OF INDIA and 6 ORS

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REPRESENTED BY THE GENERAL MANAGER, NORTH EAST FRONTIER RAILWAYS, MALIGAON, P.O. GUWAHATI, DIST. KAMRUP M, ASSAM, PIN 781011

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2:THE GENERAL MANAGER NORTH EAST FRONTIER RAILWAYS MALIGAON GUWAHATI ASSAM PIN 781011

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3:THE CHIEF ENGINEER / CON NORTH EAST FRONTIER RAILWAYS MALIGAON GUWAHATI ASSAM PIN 781011

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4:THE DEPUTY CHIEF ENGINEER / CON-1 NORTH EAST FRONTIER RAILWAY LUMDING ASSAM PIN 782447

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5:THE XEN/CON/1/LMG NORTH EAST FRONTIER RAILWAY

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LUMDING ASSAM PIN 782447

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6:THE STATE OF ASSAM REPRESENTED BY THE SECY. TO THE GOVT .OF ASSAM FOREST DEPTT. DISPUR GUWAHATI 781006

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7:THE DIVISIONAL FOREST OFFICER NAGAON DIVISION HOJAI ASSAM PIN 78243

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Advocate for the Petitioner : MR.O P BHATI Advocate for the Respondent : GA, ASSAM

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-BEFORE-

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HON’BLE THE CHIEF JUSTICE MR. AJIT SINGH HON’BLE MR. JUSTICE PRASANTA KUMAR DEKA

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Advocate for the appellant : Mr. OP Bhati

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Advocate

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Advocate for the Respondents: Mr. B Sharma

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SC, Railway (R-1 to 5)

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Mr. SK Medhi

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Additional Advocate General, Assam

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Mr. SG Bhattacharjee

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SC, Forest

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Date of hearing & Judgment : 04.05.2018

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JUDGMENT & ORDER

(PK Deka, J)

Heard Mr. OP Bhati, learned counsel for the appellant. Also heard Mr. B Sharma, learned Standing Counsel for Railways, appearing on behalf of the respondents No. 1 to 5, Mr. SK Medhi, learned Additional Advocate General, Assam and Mr. SG Bhattacharjee, learned Standing Counsel for Forest.

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The present appellant is aggrieved by the order dated 07.04.2017 passed by the learned Single Judge in WP(C) No. 2189/2017 and preferred this appeal.

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The appellant/ petitioner was awarded the work “Supply and Manufacturing of machine crushed Stone Ballast on or near the BG formation at LMG main yard and sub yard and upto 2.781 Km in connection with Lumding-Silchar GC project” by the respondents railway vide Contract Agreement No. CON/LMG-SCL/1550 dated 27.03.2012. Amongst various terms, the said

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agreement includes the following term which is reproduced hereinbelow:-

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“ 2.13 TAXES .

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2.13.1 The rates quoted shall include all taxes, direct or indirect, leviable under Central, State or Local Bodies Act or Rules Octrois, Tolls, Royalty, monopoly, seigniorages, cess and similar imposts that may be prevailing from time to time in respect of land, structures and all materials supplied in the performance of this contract.

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2.13.2 Whenever forest produces like sand, stone, timbers etc. are used in the work, the contractor(s) will have to furnish documentary proof that requisite royalty on such produces has been paid to the concerned departments.

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............”

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During the continuation of the contract job, the respondent railway deducted the

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security from running bills of the petitioner/ appellant amounting Rs. 15,38,880/-. The earnest money of Rs. 4,01,900/- is also in the custody of the Railway. Thus, the total amount of security and earnest money of Rs. 19,40, 780/- is in the custody of the respondents Railway. The work was completed on 15.12.2016 and the final bill based on “No Claim

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Certificate” was also released by the respondents Railway. However, the said security amount along with the earnest money were not released though t he petitioner sought for its release. The respondent Railways on the contrary issued notice dated 20.02.2017 asking the respondent No. 7, the Divisional Forest Officer, Nagaon Division, Hojai, Assam to submit Forest Clearance Certificate in favour of the petitioner/ appellant though no such forest clearance certificate is required so far the present petitioner/ appellant is concerned as per the submission of the petitioner as the stone ballast does not fall within the category of forest produce. The said stone ballast was supplied by the petitioner/ appellant after purchasing against the payment of cost thereof from the open market. The railways, even on such contention of the petitioner did not release the security amount and the earnest money for which the petitioner/ appellant preferred8 the WP(C) No. 2189/2017 which was disposed of vide order dated 07.04.2017 by holding as follows:-

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“ Be that as it may, the stone and ballast also being a product of minor mineral being covered by the Assam Minor Mineral Concession Rule, 2013 and there being other pronouncement of this Court in respect of requirement of the verification of the authentic source of the stone and granular materials, specially rendered in Rana Construction and Others Vs. State of Assam and others, it is provided that the petitioner shall produce before the respondent railway authorities a copy of the purchase vouchers from the source from which the petitioner had purchased the stones and granular materials.

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Upon production of the aforesaid purchase vouchers, it would be open to the railway authorities to verify the authenticity of the source of the stones and granular materials. However, if the railway authorities upon verification finds out that the source of purchase of the material is from an authentic source, which had paid the due minor mineral royalty, the railway authorities shall not withhold the payment of the earnest money and the security deposit of the petitioner.”

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Being aggrieved by the said order, the petitioner/ appellant has preferred this writ appeal.

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Mr. Bhati submits that the petitioner/ appellant purchased the stone ballast from the

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market on payment of cost thereof and as such, the petitioner/ appellant is neither required

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to make the payment of royalty under the Forest (Conservation) Act, 1980 nor under the Mines and Minerals (Development and Regulation) Act, 1957 and the rules framed thereunder by the Government of Assam i.e. the Assam Minor Mineral Concession Rules, 2013. Referring the Notification No. FRS.1/2004/Pt/47 dated 01.09.2009 issued by the Government of Assam by exercising the power conferred under Section 32, 33, 34(2)(d) & (h) of the Assam Forest Regulation, 1891 and Clause 16 thereon which stipulates the rates of royalty on sand and stone payable by various departments both State and Central Government including the respondents railway, Mr. Bhati submits that the railways did not obtain any permit in respect of the materials supplied by the petitioner/ appellant from the forest department and as such, the respondents railway cannot insist for such Forest Clearance Certificate from the respondent No. 7 and held up the payment due to the petitioner. It is the contention that the said machine crushed stone ballast was purchased from the open market and the railway ought not insist for the said certificate from the forest department.

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Mr. Medhi, learned Additional Advocate General, Assam submits that by way of the Notification dated 01.09.2009 referred hereinabove, the rates of royalty on sand and stone etc. in exercise of the power conferred under the Assam Forest Regulation, 1891, the Government of Assam revised and notified the said revised royalty and as per the said notification stone falls within the category of forest produce under the Assam Forest Regulation, 1891. It is further pointed out that vide Government Notification of the Finance Department bearing No. BB56/2000/1 dated 17.06.2000, it was notified to all the public sector undertakings including railways that bill for construction works using forest produces will be paid by the Executing authority unless the forest department certifies that the forest produces so utilised have been collected from local sources and the necessary royalty/ price

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due to the Government has been paid. The Executing authority for the said purpose shall have to intimate the concerned territorial Divisional Forest Officers about the quantity of the forest produces like sand, stone and timber utilised in the construction and send the documents furnished by the contractors/ suppliers in support of such forest produces to enable the Divisional Forest Officers to verify the source and payment of the royalty. After scrutiny and verification of the supplied documents, the Divisional Forest Officer will intimate the outcome to the Executing authority within a period of 15 days. On receipt of the said intimation from the Divisional Forest Officers, bill for construction works shall be passed for payment and in cases where such certificates are not received, the Executing authority may pass the bills only after deduction of the amount due as royalty which should be deposited to the Government account. The said measures have been taken in order to avoid pilferage of the forest produces and as such, Mr. Medhi submits that the said exercise on the part of the railways is mandatory.

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Mr. Sharma, learned Standing Counsel, Railway, on the other hand supporting the contention of Mr. Medhi, submits that keeping in view the said notification dated 17.06.2000 of the Government of Assam, the respondents Railway vide letter dated 20.02.2017 sought for the required forest clearance certificate from the Divisional Forest Officer, respondent No. 7 against the quantity of stone ballast supplied by the petitioner/ appellant. Prior to the said letter dated 20.02.2017, the respondents Railway vide letter dated 06.12.2016 issued similar request to the Divisional Forest Officer, respondent No. 7 for furnishing the required certificate in favour of the petitioner/ appellant. In response to the said letter dated 06.12.2016, the respondent No. 7 vide letter dated 02.06.2017 informed the respondents Railway that the respondent No. 7 did not receive any transit pass or challan for

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transportation of forest produces in original or duplicate with reference to the said letter dated 06.12.2016. In addition to that, it was also intimated by the respondent No. 7 to the Railway that no formal permit for minor minerals was issued in favour of the petitioner/ appellant from the office of the said respondent No. 7. Thus, Mr. Sharma submits that as the stone ballast is covered under the Notification dated 01.09.2009 of the Government of Assam and the same being forest produce, the respondent Railway is insisting for forest royalty clearance certificate as per Clause 2.13 of the contract agreement.

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Considered the submissions of the learned counsel. Mr. Bhati wants to project the case of the petitioner/ appellant that he purchased the said stone ballast from the open market on direct payment and under such circumstances, it is the duty cast upon the Railway to verify the source from which the petitioner/ appellant procured the said item inasmuch as the petitioner/ appellant is not bound to trace out whether the vendor of the petitioner/ appellant had paid the forest royalty or not. On the other hand, if the notification dated 01.09.2009 of the Government of Assam is considered we can conclude that stone ballast is a forest produce and the Notification dated 17.06.2000 binds the respondents Railway and for the said reason Clause 2.13 was stipulated in the contract agreement which the petitioner/ appellant is very much aware. The respondents Railway is bound to abide by the Notification dated 17.06.2000 and keeping in view the said notification, the security of the petitioner/ appellant has not been released. In order to get it released, a duty is cast upon the petitioner/ appellant at least to inform the source from whom it purchased the said materials in order the Railway can verify if the materials so purchased by the petitioner/ appellant was purchased from a source which paid requisite forest royalty as per the notification dated 01.09.2009. Considering the same, we are of the opinion that the findings of the learned Single Judge is

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proper inasmuch as until and unless, the petitioner/ appellant informs the source from whom it purchased the said materials, the respondents Railway is unable to verify from the concerned Divisional Forest Officers whether the materials used in the said construction work were duly subjected to the necessary forest royalty as per the said Notification dated 17.06.2000. Accordingly, we find no merit in this writ appeal and the same is dismissed.

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JUDGE CHIEF JUSTICE

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Comparing Assistant

M/S Durga Krishna Stores Private Ltd. v. the Union of India and 6 Ors.

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M/S Durga Krishna Stores Private Ltd. v. the Union of India and 6 Ors.

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