2026 INSC 76 1

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4513 OF 2025

PRAKASH ATLANTA (JV) … Appellant

versus

NATIONAL HIGHWAY S AUTHORITY OF INDIA … Respondent

WITH

C.A. No. 5416 of 2025

C.A. No. 5302 of 2025

C.A. No. 5301 of 2025

C.A. No. 5304 of 2025

C.A. No. 5412 of 2025

J U D G M E N T

SANJAY KUMAR, J

1. These civil appeals, sourced in arbitral awards passed under the

Arbitration and Conciliation Act, 1996

1

, seek to raise questions about the

interpretation and implementation of two enactments – ‘The Building and

Other Construction Workers (Regulation of Employment and Conditions

1

For short, the ‘Arbitration Act’

2

of Service) Act, 1996’

2

, and ‘The Building and Other Construction Workers’

Welfare Cess Act, 1996’

3

. Prakash Atlanta (JV) filed the first of these

appeals, viz., Civil Appeal No. 4513 of 2025, while National Highways

Authority of India

4

is the appellant in the other five appeals, viz., Civil

Appeal Nos. 5301, 5302, 5304, 5412 and 5416 of 2025. Insofar as the

appeals filed by NHAI are concerned, a common issue arises therein. The

issue is as to whether the BOCW Act and the Cess Act can be treated as

‘subsequent legislation’ for the purposes of the contracts entered into by

NHAI with its contractors, the respondents in NHAI’s five appeals. By way

of their awards passed in favour of the said respondents, the arbitral

tribunals held that these Acts did qualify as ‘subsequent legislation’.

2. This being the milieu, it would be apposite to first note the statutory

schemes of the BOCW Act and the Cess Act. Both these enactments had

their origin in Ordinances promulgated on 03.11.1995. These Ordinances

were followed by the later Ordinances dated 05.01.1996, 27.03.1996 and

20.06.1996. Finally, both the enactments took shape on 19.08.1996, with

the sanction of the Parliament. The BOCW Act came into force on

01.03.1996, as per Section 1(3) thereof. The Cess Act, on the other hand,

came into force even earlier on 03.11.1995, as per Section 1(3) thereof.

The preamble to the BOCW Act states that it is an Act to regulate the

2

For short, ‘the BOCW Act’

3

For short, ‘the Cess Act’

4

For short, ‘NHAI’

3

employment and conditions of service of building and other construction

workers and to provide for their safety, health and welfare measures and

for other matters connected therewith or incidental thereto. The Cess Act

is linked to the BOCW Act, as is evident from its preamble and Statement

of Objects and Reasons, which state that it is an Act to provide for levy

and collection of cess on the cost of construction incurred by employers

with a view to augmenting the resources of the Building and Other

Construction Workers’ Welfare Boards constituted under the BOCW Act.

3. Section 1(4) of the BOCW Act states that the said enactment would

apply to every establishment which employs, or had employed on any day

of the preceding twelve months, ten or more building workers in any

building or other construction work. Section 2(1)(a) thereof defines

‘appropriate Government’ to mean the Central Government in cases

falling within Clauses (i) and (ii). Section 2(1)(a)(ii) pertains to public sector

undertakings which may be specified by the Central Government, under

notification, that employ building workers either directly or through a

contractor. The ‘Explanation’ thereto provides that a public sector

undertaking (PSU) means any corporation established by or under any

Central, State or Provincial Act or a Government company, which is

owned, controlled or managed by the Central Government. Section

2(1)(a)(iii) states that, in relation to any other establishment which

employs building workers, either directly or through a contractor, the

4

Government of the State in which that other establishment is situated

would be the appropriate Government. Section 2(1)(c) defines ‘Board’ to

mean a Building and Other Construction Workers’ Welfare Board

constituted under Section 18(1) thereof. Section 2(1)(d) defines ‘Building

or other construction work’ to include construction, alteration, repairs,

maintenance or demolition of, or in relation to, amongst others, roads also.

Section 2(1)(i) defines ‘employer’ inclusively and it reads as follows:

‘(i) “employer”, in relation to an establishment, means the owner thereof,

and includes,—

(i) in relation to a building or other construction work carried on by or under

the authority of any department of the Government, directly without any

contractor, the authority specified in this behalf, or where no authority is

specified, the head of the department;

(ii) in relation to a building or other construction work carried on by or on

behalf of a local authority or other establishment, directly without any

contractor, the chief executive officer of that authority or establishment;

(iii) in relation to a building or other construction work carried on by or

through a contractor, or by the employment of building workers supplied by

a contractor, the contractor.’

4. Section 2(1)(k) defines ‘Fund’ to mean the Building and Other

Construction Workers’ Welfare Fund, constituted under Section 24(1)

thereof. Chapter III of the BOCW Act pertains to ‘Registration of

Establishments’. Section 6 therein is titled ‘Appointment of registering

officers’ and states that the appropriate Government may, by order notified

in the Official Gazette, appoint gazetted officers of the Government to be

registering officers for the purposes of the BOCW Act, duly defining the

limits within which such registering officers shall exercise the powers

5

conferred upon them by or under the said enactment. Section 7 thereof

pertains to registration of establishments and requires every employer to

make an application to the registering officer for registration of the

establishment to which the BOCW Act applies within a period of sixty

days. The proviso thereto, however, empowers the registering officers to

entertain belated applications upon being satisfied that there was

sufficient cause for the delay. Section 10 deals with non-registration and

states that no employer of an establishment to which the BOCW Act

applies who has either failed to get the establishment registered, or whose

registration has been revoked and has attained finality, shall employ

building workers in the establishment after expiry of the stipulated period.

5. Chapter IV of the BOCW Act is titled ‘Registration of Building

Workers as Beneficiaries’. Section 11 therein provides that, subject to the

provisions of the enactment, every building worker registered as a

beneficiary thereunder shall be entitled to the benefits provided by the

Board from its Fund under the enactment. Section 12 deals with

registration of building workers as beneficiaries. Section 12(1) defines

eligibility of building workers for registration as beneficiaries under the

BOCW Act. The other sub-sections provide the procedure for registration

to be carried out and stipulate that the Secretary of the Board shall

maintain such registers as may be prescribed in relation to the building

workers who have been registered as beneficiaries.

6

6. Section 15 of the BOCW Act requires every employer to maintain a

register showing the details of employment of beneficiaries employed in

the building or other construction work undertaken by him. Section 16 of

the BOCW Act pertains to contributions by the building workers who are

registered as beneficiaries and stipulates that they must contribute to the

fund at the rate per month as prescribed by the State Government, by

notification in the Official Gazette, and Section 17 of the BOCW Act

provides that failure on the part of the beneficiary to pay his contribution

for a continuous period of not less than one year would result in his

ceasing to be a beneficiary.

7. Chapter V of the BOCW Act, comprising Sections 18 to 27, deals

with the Buildings and Other Construction Workers’ Welfare Boards.

Section 18 therein deals with constitution of State Welfare Boards. Section

18(1) provides that every State Government shall appoint and constitute

a Welfare Board to exercise the powers conferred on, and perform the

functions assigned to, it under the BOCW Act, by notification. Section

18(2) provides that the Board shall be a body corporate having perpetual

succession and a common seal. Section 18(3) states that the Board shall

consist of a Chairperson nominated by the Central Government and such

number of members, not exceeding 15, as may be appointed by the State

Government. Section 22 of the BOCW Act details the functions of the

Welfare Board.

7

8. Section 24 of the BOCW Act pertains to the ‘Building and Other

Construction Workers’ Welfare Fund and its application’. This fund is to be

constituted by the Welfare Board and all grants and loans made to the

Board by the Central Government; all contributions made by the

beneficiaries; all sums received from such other sources as may be

decided by the Central Government should be credited to the said fund.

Sections 40 and 62 of the BOCW Act empower the appropriate

Government to make Rules, be it with regard to the measures to be taken

for the safety and health of building workers in the course of their

employment and the equipment and appliances to be provided to them for

ensuring their safety, health and protection during such employment, or

for carrying out the provisions of the BOCW Act. In exercise of power

thereunder, the Building and Other Construction Workers’ (Regulation of

Employment and Conditions of Service) Central Rules, 1998

5

, were

framed by the Government of India, vide G.S.R. 689 (E) dated 19.11.1998,

published in the Gazette of India, Extraordinary, dated 19.11.1998.

9. The Cess Act, as is manifest from its preamble and Statement of

Objects and Reasons, is complementary to the BOCW Act. Section 2(a)

thereof defines ‘Board’ to mean the Welfare Board constituted under

Section 18(1) of the BOCW Act by the State Government. Section 2(b)

5

For short, ‘the BOCW Rules’

8

defines ‘Fund’ to mean the Building and Other Construction Workers’

Welfare Fund, constituted by that Board. Section 3 thereof deals with levy

and collection of cess. Section 3(1) states that there shall be levied and

collected a cess for the purposes of the BOCW Act at such rate, not

exceeding two per cent but not less than one per cent of the cost of

construction incurred by an employer, as the Central Government may, by

notification in the Official Gazette, from time to time specify. In exercise of

power under Section 3(1) of the Cess Act, the Ministry of Labour,

Government of India, issued Notification No. S.O. 2899 dated 26.09.1996,

published in the Gazette of India, Extraordinary, dated 12.10.1996, in

modification and supersession of Notification dated 17.05.1996,

specifying the cess for the purpose of the BOCW Act @ 1 per cent of the

cost of construction incurred by an employer. Section 3(2) states that the

cess levied under Section 3(1) should be collected from every employer

in such manner and at such time, including deduction at source, in relation

to a building or other construction work of a Government or of a PSU, etc,

as may be prescribed. Section 3(3) states that the cess collected under

Section 3(2) shall be paid by the State Government collecting the cess to

the Board, after deducting the cost of collection of such cess, not

exceeding one per cent of the amount collected.

10. Section 14 of the Cess Act empowers the Central Government to

make Rules for carrying out the provisions thereof by notifying the same

9

in the Official Gazette. Pursuant thereto, the Building and Other

Construction Workers’ Welfare Cess Rules, 1998

6

, were framed by the

Government of India, vide G.S.R. 149 (E) dated 26.03.1998, published in

the Gazette of India, Extraordinary, dated 26.03.1998. Rule 2(f) defines

‘Cess Collector’ to mean an officer appointed by the State Government for

collection of cess under the Act. Rule 2(g) defines ‘Assessing Officer’ to

mean a gazetted officer of a State Government or an officer of a local

authority, holding an equivalent post to a gazetted officer of the State

Government, appointed by such State Government for assessment of

cess under the BOCW Act. Rule 3 of the Cess Rules, titled ‘Levy of cess’,

provides that, for the purpose of levy of cess under Section 3(1) of the

BOCW Act, the cost of construction shall include all expenditure incurred

by an employer in connection with the building or other construction work,

subject to certain exclusions. Rule 4 of the Cess Rules is titled ‘Time and

manner of collection’. It reads as follows:

‘4. Time and manner of collection.— (1) The cess levied under sub-

section (1) of section 3 of the Act shall be paid by an employer, within

thirty days of completion of the construction project or within thirty days

of the date on which assessment of cess payable is finalised, whichever

is earlier, to the cess collector.

(2) Notwithstanding the provisions of sub-rule (1), where the duration of

the project or construction work exceeds one year, cess shall be paid

within thirty days of completion of one year from the date of

commencement of work and every year thereafter at the notified rates on

the cost of construction incurred during the relevant period.

6

For short, ‘the Cess Rules’

10

(3) Notwithstanding the provisions of sub-rule (1) and sub-rule (2),

where the levy of cess pertains to building and other construction work of

a Government or of a Public Sector Undertaking, such Government or

the Public Sector Undertaking shall deduct or cause to be deducted the

cess payable at the notified rates from the bills paid for such works.

(4) Notwithstanding the provisions of sub-rule (1) and sub-rule (2),

where the approval of a construction work by a local authority is required,

every application for such approval shall be accompanied by a crossed

demand draft in favour of the Board and payable at the station at which

the Board is located for an amount of cess payable at the notified rates

on the estimated cost of construction:

Provided that if the duration of the project is likely to exceed one year,

the demand draft may be for the amount of cess payable on cost of

construction estimated to be incurred during one year from the date of

commencement and further payments of cess due shall be made as per

the provisions of sub-rule (2).

(5) An employer may pay in advance an amount of cess calculated on

the basis of the estimated cost of construction along with the notice of

commencement of work under section 46 of the Main Act by a crossed

demand draft in favour of the Board and payable at the station at which

the Board is located:

Provided that if the duration of the project is likely to exceed one year,

the demand draft may be for the amount of cess payable on cost of

construction estimated to be incurred during one year from the date of

such commencement and further payment of cess due shall be made as

per the provisions of sub-rule (2).

(6) Advance cess paid under sub-rules (3), (4) and (5), shall be adjusted

in the final assessment made by the Assessing Officer.’

11. Rule 4(3) above manifests that, unlike a case falling under Rules

4(1) and (2), if the levy of cess pertains to the building and other

construction work of a Government or of a PSU, that Government or PSU

should deduct or cause to be deducted the cess payable at the notified

rate from the bills paid for such works. Rule 4(6) states that the advance

cess paid under Rule 4(3) shall be adjusted in the final assessment made

by the Assessing Officer. Further, Rule 5 of the Cess Rules stipulates that

11

the proceeds of the cess collected under Rule 4 should be transferred by

the Government, PSU, etc., to the Welfare Board within thirty days of its

collection. Rule 6 is titled information to be furnished by an employer and

provides that every employer, within thirty days of commencement of his

work, shall furnish to the Assessing Officer, information in Form I and any

change or modification in the information, so furnished, should be

communicated to the Assessing Officer immediately and not later than

thirty days from the date of affecting the modification or change.

12. Rule 7 pertains to ‘Assessment’. Rule 7(1) provides that the

Assessing Officer, on receipt of information in Form I from an employer is

required to make an order of assessment within a period not exceeding

six months from the date of receipt of information in Form I, indicating the

amount of cess payable by the employer. A copy thereof is to be furnished

to the employer; to the Welfare Board; and to the Cess Collector within

five days of the date on which such order is made. Rule 7(2) provides that

the order shall, inter alia, specify the amount of cess due, cess paid by the

employer or deducted at source and the balance amount payable and the

date, by which the cess should be paid to the Cess Collector.

13. We deemed it necessary to deal with and set out the contents of the

BOCW Act, the Cess Act and the concomitant Rules to stress upon how

exhaustive, comprehensive and detailed were the schemes of these two

welfare legislations and the steps and measures to be taken thereunder.

12

14. It is, however, a matter of record that the BOCW Act and the Cess

Act just remained on paper owing to the failure of the appropriate

Governments in taking necessary steps and measures, as provided in

those welfare legislations, to give full effect to them. A 3-Judge Bench of

this Court took note of this sorry state of affairs in National Campaign

Committee, C.L., Labour vs. Union of India and others

7

and directed

the State Governments and Union Territories (UTs) which had not framed

Rules under Section 62 of the BOCW Act to adopt the Rules already

framed by the Delhi Government in that regard. Further directions were

issued on 18.01.2010 for implementation of the Acts by such States/UTs

without further delay. One such direction was with regard to constitution

of Welfare Boards, with adequate full-time staff, by each State/UT within

three months. By order dated 10.09.2010, a 3-Judge Bench of this Court

observed that time had come to enforce the earlier orders for

implementation of the BOCW Act and directed the Central Government to

call for the necessary information from the States/UTs concerned and to

issue directions for setting up Welfare Boards within eight weeks, in terms

of the earlier order dated 18.01.2010.

15. The Central Government was also asked to furnish a status report

with regard to implementation of the BOCW Act and the guidelines given

7

(2009) 3 SCC 269

13

in the earlier order dated 18.01.2010. Contempt proceedings were

initiated for non-implementation of the directions of this Court in the orders

dated 18.01.2010, 13.08.2010 and 10.09.2010. Notices were issued to

the authorities of the Central Government, Lakshadweep, Meghalaya and

Nagaland in that regard, vide order dated 15.03.2011. Thereafter, by order

dated 28.11.2011, another 3-Judge Bench of this Court granted an

opportunity to enable each defaulting State to explain as to why contempt

action should not be taken.

16. By order dated 07.02.2012, taking note of substantial compliance by

most of the States, this Court closed the contempt cases, but with further

directions to ensure full compliance. Again, by order dated 16.10.2015, a

3-Judge Bench noted further inaction on the part of stakeholders in giving

effect to these legislations, as only about 1.5 crores out of 4 crore

construction workers had been registered with the authorities concerned.

Further directions came to be issued for full and proper implementation of

these Acts on 30.10.2017. This Court took note of the dismal situation in

the context of misuse of the BOCW Act, as ₹29,000 crores had been

collected but not even 10 per cent thereof was spent for the benefit of

construction workers. The matter was accordingly adjourned to enable the

Secretary in the Ministry of Labour, Government of India, to report. Having

heard the Secretary on 10.11.2017, this Court directed involvement of civil

society in the effective management of the BOCW Act and adjourned the

14

matter to enable the Secretary to hold a meeting with the Labour

Secretaries of all the States/UTs within a time frame to ensure proper and

complete implementation. The matter was heard again on 19.03.2018 and

further directions were given by this Court. The matter was directed to be

listed on 01.05.2018 to ascertain whether timelines were fixed by the

authorities concerned for compliance with such directions. The last

reported order of this Court in this regard is National Campaign

Committee for Central Legislation on Construction Labour (NCC-CL)

vs. Union of India and others

8

.

17. It is, thus, clear that neither the BOCW Act nor the Cess Act were

actually implemented till this Court intervened and actively monitored the

steps to be taken therefor from time to time. It is owing to this lassitude

and lethargy on the part of the States, UTs and stakeholders that the

present litigation arises. The failure on the part of several States in

constituting Welfare Boards and in appointing authorities to give effect to

these enactments lays foundation for the present conundrum. The

contention of NHAI is that, notwithstanding the delayed constitution of

Welfare Boards and lack of effective implementation, both the enactments

should be construed to have come into effect on the dates notified, i.e.,

01.03.1996 (BOCW Act) and 03.11.1995 (Cess Act) and they cannot,

8

(2018) 5 SCC 607

15

therefore, be taken to be ‘subsequent legislation’ under its contractual

clauses. NHAI would contend that, as the rate of the cess to be collected,

i.e., @ one per cent of the cost of construction, was specified by the

Central Government as long back as on 26.09.1996, the respondents in

its five appeals cannot claim ignorance thereof and they ought to have

factored in the same in their price bids while submitting tenders for its

works. NHAI would argue that, as per Rule 4 of the Cess Rules, deduction

at source was to be effected if the work pertained to a Government or a

PSU and, therefore, the cess was deductible irrespective of the

constitution of Welfare Boards. NHAI would further argue that, if the Cess

Act is to be given effect by linking it to constitution of Welfare Boards, such

interpretation would undermine and defeat the very scheme and intent

underlying these welfare legislations, as that would mean that they came

into operation on different dates in different States/UTs depending upon

the constitution of Welfare Boards in such States/UTs.

18. NHAI would rely on the judgments of various High Courts holding

that the Cess Act came into force on 03.11.1995 itself and not when the

Welfare Boards were constituted. Reference is made to the decisions of

the Delhi High Court in Delhi Metro Rail Corporation Limited vs.

Simplex Infrastructures Limited

9

and BBEL-MIPL Joint Venture vs.

9

2011 SCC OnLine Del 3603

16

National Highway Authority of India

10

; of the Andhra Pradesh High

Court in Coromandel Prestcrete (P) Ltd. vs. State of Andhra Pradesh

and others

11

; of the Madras High Court in M.E.S. Builders' Association

of India vs. Union of India and others

12

, and of the Sikkim High Court

in Sikkim Urja Limited vs. Abir Infrastructure Pvt. Ltd. and others

13

.

19. At this stage, we may note that a Bench of this Court heard

arguments in a batch of matters, including the special leave petitions of

Gammon-Atlanta (JV) and PCL Suncon (JV), from which the present Civil

Appeal Nos. 5416 and 5302 of 2025 arise. Notably, Civil Appeal No. 7141

of 2012, titled Gammon Rizzani (JV) vs. Delhi Metro Rail Corporation

Limited, arising out of the common judgment of the Delhi High Court

reported in Delhi Metro Rail Corporation Limited vs. Simplex

Infrastructures Limited (supra), was also part of the said batch.

Judgment was reserved in those cases on 08.04.2015 but, on 03.08.2015,

all the matters were reopened and adjourned to a later date. Again, on

12.10.2015, the Bench reserved judgment in the matters. However, the

matters were again reopened on 16.11.2015 and posted for rehearing.

The order dated 16.11.2015 recorded the two doubts that had compelled

such rehearing. The order dated 16.11.2015 reads thus:

10

2015 SCC OnLine Del 10222

11

2008 SCC OnLine AP 355

12

2010 SCC OnLine Mad 2919

13

2025 SCC OnLine Sikkim 50

17

‘(i) whether the judgment rendered in Dewan Chand Builders and

Contractors vs.Union of India and Others (2012) 1 SCC 101, as held in

paragraph 18, that The Cess Act and the Cess Rules have become

operative in the whole of NCT of Delhi with effect from January, 2002,

would confer the benefit on the contractors in view of Clause 70.8 of the

Contract or it shall not in view of the language employed in Clause 34.2

of the said instrument in respect of the National Highways Authority

cases;

(ii) whether the conclusion arrived at in Dewan Chand Builders and

Contractors case correctly states the law or it has to be differently

understood for the purpose of applicability of the Act qua the workers and

for the purpose of coming into force of the Act as regards deposit or

realization.’

20. Thereafter, NKG Infrastructure, Hindustan Construction Co. Ltd. and

DIC-NCC (JV) filed their cases in 2017, 2018 and 2019 respectively and

they were clubbed with the pending cases of Gammon-Atlanta (JV) and

PCL Suncon (JV). In fact, on 20.02.2020, when DIC-NCC (JV)’s case

came up for consideration, this Court was informed that identical issues

arose for consideration in the matters pertaining to Delhi Metro Rail

Corporation Limited and other connected matters and it was directed that

all the matters be clubbed for joint hearing. The special leave petition of

Prakash Atlanta (JV) then came to be tagged with NHAI’s cases.

Thereafter, by order dated 26.10.2020, it was observed that NHAI’s five

cases raised common questions of law and they would be heard first. The

appeals relating to Delhi Metro Rail Corporation Limited were detagged

and directed to be listed as per procedure. Leave was granted in these

cases on 25.03.2025. That is how the appeal filed by Prakash Atlanta (JV)

and NHAI’s five appeals are now before us.

18

21. Reference was made in the aforestated order dated 16.11.2015 of

the Bench to the earlier decision of this Court in Dewan Chand Builders

and Contractors vs. Union of India and others

14

. That decision arose

out of the judgment dated 28.02.2007 of a Division Bench of the Delhi

High Court, reported in Builders Association of India vs. Union of India

and another

15

, which dealt with the validity of the BOCW Act and the Cess

Act. While upholding the two Acts, the Division Bench had observed that

they were not notified for application in Delhi till the year 2002. The

Division Bench expressed concern at the tardy implementation of these

welfare enactments, alluding to the fact that the Rules framed under

Section 62 of the BOCW Act were brought into force in Delhi only on

10.01.2002. In Dewan Chand Builders (supra), this Court affirmed the

judgment of the Division Bench of the Delhi High Court and observed: -

‘18. Although both the statutes were enacted in 1996, the Central

Government in exercise of its powers under Section 62 of the BOCW Act

notified the Delhi Building and Other Construction Workers' (Regulation

of Employment and Conditions of Service) Rules, 2002 (for short "the

Delhi Rules") vide Notification No. DLC/CLA/BCW/01/19 dated

10.1.2002. Accordingly, the Government of NCT of Delhi constituted the

Delhi Building and Other Construction Workers' Welfare Board vide

Notification No. DLC/CLA/BCW/02/596 dated 2-9-2002. Thus, the Cess

Act and the Cess Rules are operative in the whole of NCT of Delhi w.e.f.

January 2002.’ (emphasis is ours)

This Court further observed that the levy of cess on the cost of

construction incurred by the employers on the building or construction

14

(2012) 1 SCC 101

15

(2007) 139 DLT 578 (DB)

19

works is to ensure sufficient funds for Welfare Boards to undertake social

security schemes and welfare measures for building and construction

workers. It was observed that the fund so collected is directed towards the

specific ends spelt out in the BOCW Act and, therefore, applying the

principle laid down in the decisions of this Court, it was clear that the said

levy is a fee and not a tax. It was noted that the fund is set apart and

appropriated specifically for the performance of a specified purpose; that

it is not merged into the public revenues for benefit of the general public,

and as such, a nexus between the cess and the purpose for which it is

levied is established, satisfying the element of quid pro quo in the scheme.

22. In A. Prabhakara Reddy and Company vs. State of Madhya

Pradesh and others

16

, the appellants therein had entered into contracts

with the Government of Madhya Pradesh between December, 2002 and

March, 2003. The Madhya Pradesh Building and Other Construction

Workers’ Welfare Board was constituted only on 09.04.2003, followed by

a publication in the Official Gazette on 10.04.2003. The appellants

unsuccessfully challenged imposition of the cess liability on them before

the High Court. Their argument before this Court, thereafter, was that if

demand of cess is made on construction works undertaken or even

contemplated on issuance of work orders before constitution of the

16

(2016) 1 SCC 600

20

Welfare Boards, then such demand would amount to making the Cess Act

operate retrospectively and that would be illegal. This Court noted that the

scheme of the BOCW Act or the Cess Act did not warrant that unless all

workers are duly registered or the Welfare Fund is created or welfare

measures are made available, no cess can be levied, despite the

constitution of the Welfare Board. In other words, per this Court,

registration of workers and providing welfare services to workers was not

a condition precedent for the levy of cess as rendering of such services

can reasonably be undertaken only after cess is levied, collected and

credited to the Welfare Fund. It was observed that the task of registering

workers and providing them benefits may take some time and that would

not affect the liability to pay the levy as per the Cess Act, as any other

interpretation would defeat the rights of the workers, whose protection is

the principal aim and primary concern and objective of the BOCW Act and

the Cess Act. It was in these circumstances that this Court rejected the

challenge by the appellants and dismissed their appeals.

23. This being the case law on the BOCW Act and the Cess Act, we are

conscious of the fact that, in essence, we are examining the validity of

arbitral awards in five of these six appeals which were passed against

NHAI and in favour of the respective claimants before the arbitral

tribunals, viz., the respondents in those appeals. The scope of

interference by a Court, in exercise of jurisdiction under Section 34 or

21

Section 37 of the Arbitration Act, now stands settled by the Constitution

Bench judgment in Gayatri Balasamy vs. ISG Novasoft Technologies

Limited

17

. The majority view therein held that modification of an arbitral

award is permissible only on limited grounds, i.e., when the arbitral award

is severable and the invalid portion can be severed from the valid portion

thereof; when clerical, computational or typographical errors therein are

amenable to correction or any other manifest errors are present which can

be corrected, provided such modification does not involve a merits-based

evaluation; by modifying the post-award interest in certain situations and

circumstances; and where exercise of power by the Supreme Court under

Article 142 of the Constitution is necessitated, albeit with great care and

caution, and within the limits of such power.

24. In Associate Builders vs. Delhi Development Authority

18

, this

Court noted that the expression ‘public policy of India’ in Section

34(2)(b)(ii) of the Arbitration Act was given a wider meaning in Oil &

Natural Gas Corporation Ltd. vs. Saw Pipes Ltd.

19

. It was held therein

that the concept of public policy connotes some matter which concerns

public good and public interest. It was observed that what is for public

good or in public interest or what would be injurious or harmful to the public

good or public interest has varied from time to time but an arbitral award

17

(2025) 7 SCC 1

18

(2015) 3 SCC 49

19

(2003) 5 SCC 705

22

which, on the face of it, is patently in violation of statutory provisions,

cannot be said to be in public interest. It was further observed that such

an award is likely to adversely affect the administration of justice. This

Court, therefore, held that, in addition to the narrower meaning given to

the term ‘public policy’ by a 3-Judge Bench of this Court in Renusagar

Power Co. Ltd. v. General Electric Co.

20

, an arbitral award can be set

aside if it is patently illegal. The result was that an arbitral award could be

set aside if it was contrary to the fundamental policy of Indian law; or the

interest of India; or justice or morality; or if it is patently illegal. It was

observed that illegality must go to the root of the matter but, if the illegality

is of trivial nature, it cannot be held that the award is against public policy.

It was further held that if the award is so unfair and unreasonable that it

shocks the conscience of the Court, it would be opposed to public policy.

25. Thereafter, in Oil and Natural Gas Corporation Limited vs.

Western Geco International Ltd.

21

, a 3-Judge Bench of this Court added

three other distinct and fundamental juristic principles which must be

understood as part and parcel of the fundamental policy of Indian law. The

first is the principle that in every determination that affects the rights of a

citizen or leads to civil consequences, whether by a Court or other

authority, such Court or authority is bound to adopt what is, in legal

20

1994 Supp (1) SCC 644

21

(2014) 9 SCC 263

23

parlance, called ‘judicial approach’. The second principle is that a Court

and so also a quasi-judicial authority, while determining rights and

obligations of parties before it, must do so in accordance with the

principles of natural justice. It was observed that, in addition to audi

alteram partem, the Court/ authority deciding the matter must apply its

mind to the attendant facts and circumstances as non-application of mind

is a defect that is fatal to any adjudication. It was, therefore, held that the

requirement that an adjudicating authority must apply its mind is so deeply

embedded in our jurisprudence that it can be described as the

fundamental policy of Indian law. The last principle is that a decision which

is perverse or so irrational that no reasonable person would have arrived

at the same cannot be sustained. Decisions that fall short of the standards

of reasonableness were, therefore, held liable to challenge in a Court of

law and even in statutory processes wherever the same were available.

26. It was further held in Associate Builders (supra) that when a Court

is applying the public policy test to an arbitral award, it does not act as a

Court of appeal and, consequently, errors of fact cannot be corrected. A

plausible view by the arbitrator on facts necessarily has to pass muster as

the arbitrator is the ultimate master of the quantity and quality of evidence

to be relied upon when he delivers his award. It was observed that an

award based on little evidence or on evidence which does not measure

up in quality to a trained legal mind would not be invalid on this score.

24

Once it is found that the arbitrator’s approach was not arbitrary or

capricious, then he is the last words on facts.

27. As long back as in the year 2006, in McDermott International Inc.

vs. Burn Standard Co. Ltd. and others

22

, this Court affirmed that

construction of a contract is within the jurisdiction of the arbitrator and

interpretation thereof is a matter for the arbitrator to determine, even if it

gives rise to a question of law. This was affirmed in National Highways

Authority of India vs. ITD Cementation India Limited

23

, wherein this

Court held that construction of the terms of a contract is primarily for an

arbitrator to decide and he is entitled to take the view that he holds to be

the correct one, after considering the material and after interpreting the

terms of the contract. It was observed that the Court, while considering a

challenge to an arbitral award, does not sit in appeal over the findings and

decision therein, unless the arbitrator construed the contract in such a way

that no fair-minded or reasonable person would do. We may note that, in

this case, the issue was whether additional costs owing to a change in the

seigniorage fee had been taken into account in the indexing of inputs,

while providing for price adjustment in the contract. NHAI had contended

that the said levy was already factored into the indexing price formula and,

therefore, no further payments were to be made to the contractor.

22

(2006) 11 SCC 181

23

(2015) 14 SCC 21

25

28. In that context, this Court had observed that the terms and

conditions of the bid stipulated that all duties, taxes and other levies

payable by the contractor under the contract, as of the date 28 days prior

to the deadline for submission of bids, were to be included in the rates and

prices and in the bid submitted by the bidder. On facts, this Court found

that the seigniorage fee on stone, sand, and earth was enhanced after the

contract was executed by and between the parties and the arbitral tribunal

had unanimously found that the contractor had incurred additional costs

because of the change in the rates of the seigniorage fee pursuant to the

change in legislation and that it would be entitled to be paid such costs.

This Court, accordingly, held that construction of the terms of the contract

by the arbitral tribunal was completely consistent with the principles laid

down in earlier decisions of this Court and that, upon construing the

material on record, the arbitral tribunal concluded that the matter would

be covered by the ‘subsequent legislation’ clause. This Court, therefore,

confirmed that the view taken by the arbitral tribunal after considering the

material on record and the terms of the contract was certainly a possible

view, to say the least, and that no reason was made out to interfere.

29. In UHL Power Company Limited vs. State of Himachal

Pradesh

24

, a 3-Judge Bench of this Court reiterated that if there are two

24

(2022) 4 SCC 116

26

plausible interpretations of the terms and conditions of the contract, then

no fault can be found if the arbitrator proceeds to accept one interpretation

as against the other. Again, in Ssangyong Engineering and

Construction Company Limited vs. National Highways Authority of

India

25

, this Court held that construction of the terms of a contract is

primarily for an arbitrator to decide unless the arbitrator construes the

contract in a manner that no fair-minded or reasonable person would; in

short, that the arbitrator’s view is not a plausible view to take.

30. In Dyna Technologies Private Limited vs. Crompton Greaves

Limited

26

, a 3-Judge Bench of this Court held that an arbitral award

should not be interfered with in a casual and cavalier manner, unless the

perversity of the award goes to the root of the matter, without there being

a possibility of an alternative interpretation that may sustain it. It was held

that Section 34 is different in its approach and cannot be equated with

normal appellate jurisdiction and that its mandate is to respect the finality

of the award and the parties’ autonomy to get the dispute adjudicated by

an alternative forum as provided by law. This Court cautioned that if Courts

were to interfere with awards in the usual course on factual aspects, then

the commercial wisdom behind opting for alternative dispute resolution

would stand frustrated.

25

(2019) 15 SCC 131

26

(2019) 20 SCC 1

27

31. In MMTC Limited vs. Vedanta Limited

27

, this Court observed that

the position is well settled that the Court exercising jurisdiction under

Section 34 does not sit in appeal over an arbitral award and can interfere

on the limited grounds provided under Section 34. Referring to the

amendment of Section 34 with effect from 23.10.2015, this Court

observed that the ambit of contravention of public policy has been

modified to the extent that it now means fraud or corruption in the making

of the arbitral award, violation of Sections 75 or 81 of the Arbitration Act,

contravention of the fundamental policy of Indian law and conflict with the

most basic notions of justice or morality. It was noted that the newly

inserted Section 34(2A) provides that, in domestic arbitrations, violation of

public policy would also include patent illegality appearing on the face of

the arbitral award. It was also noted that interference under Section 37

cannot travel beyond the restrictions laid down in Section 34 of the

Arbitration Act, i.e., Courts cannot undertake independent assessment of

the merits of the award and must only ascertain that exercise of power by

the Court under Section 34 has not exceeded the scope of the provision.

It was observed that in case an arbitral award has been confirmed under

Section 34 and, thereafter, in appeal under Section 37, this Court would

be extremely cautious and slow in disturbing such concurrent findings.

27

(2019) 4 SCC 163

28

32. In Sumitomo Heavy Industries Limited vs. Oil and Natural Gas

Corporation Limited

28

, this Court observed that, while considering a

challenge to an arbitral award, neither the Court exercising jurisdiction

under Section 34 of the Arbitration Act nor the Court sitting in appeal under

Section 37 thereof would exercise appellate jurisdiction over the findings

and decisions of the arbitrator. Once the award is held to be a plausible

one, interference by the Court is not called for.

33. In OPG Power Generation Private Limited vs. Enexio Power

Cooling Solutions India Private Limited and another

29

, a 3-Judge

Bench of this Court, upon a comprehensive recce of relevant case law,

held that the legal position which emerges, after the amendment of the

Arbitration Act in 2016, is that the phrase ‘in conflict with the public policy

of India’ must be accorded a restricted meaning in terms of Explanation 1

as the expression ‘in contravention with the fundamental policy of Indian

law’ by use of the word ‘fundamental’ before the phrase ‘policy of Indian

law’ made the expression narrower in its application than the phrase ‘in

contravention with the policy of Indian law’. This was held to mean that

mere contravention of law is not enough to make an award vulnerable and

to bring the contravention within the fold of the ‘fundamental policy of

Indian law’, the award must contravene all or any of such fundamental

28

(2010) 11 SCC 296

29

(2025) 2 SCC 417

29

principles that provide a basis for administration of justice and

enforcement of law in this country. Further, by way of inexhaustive

illustrations, the Bench observed that (a) violation of the principles of

natural justice; (b) disregarding orders of superior courts in India or the

binding effect of the judgment of a superior court; and (c) violating laws of

India linked to public good or public interest could be considered to be in

contravention of the fundamental policy of Indian law. The Bench,

however, cautioned that, while assessing whether there is a contravention

of the fundamental policy of Indian law, the extent of judicial scrutiny must

not exceed the limit as set out in Explanation 2 to Section 34(2)(b)(ii).

It was further noted that, ordinarily, the terms of the contract should be

understood in the way the parties wanted and intended them to be.

34. NHAI’s applications under Section 34 of the Arbitration Act in

relation to the arbitral awards of Gammon-Atlanta (JV), Hindustan

Construction Co. Ltd. and PCL Suncon (JV) (Civil Appeal Nos. 5416, 5304

and 5302 of 2025) were before Act No. 3 of 2016, whereby the provisions

of the Arbitration Act, including Section 34 thereof, stood amended with

retrospective effect from 23.10.2015. NHAI’s applications under Section

34 of the Arbitration Act against the arbitral awards pertaining to NKG

Infrastructure Limited and DIC-NCC (JV) (Civil Appeal Nos. 5301 and

5412 of 2025) were filed after such amendment. Therefore, three of the

five arbitral awards presently under scrutiny would have to be reviewed in

30

the light of the law laid down in Associate Builders (supra) while the other

two would have to be examined in the light of the amended Section 34 of

the Arbitration Act, including the ground of patent illegality falling under

Section 34(2A) thereof. In that context, the changed outlines of Section

34 of the Arbitration Act are pointed out and NHAI would contend that

perversity would form part of ‘patent illegality’, the ground that was

introduced in Section 34(2A). NHAI contends that the arbitral awards must

also be held to be in breach of Section 28(1)(a) of the Arbitration Act,

which requires the arbitrator to decide the dispute in accordance with the

substantive law in force in India. Be it before or after the amendment of

the Arbitration Act, it is clear that neither the Courts exercising jurisdiction

under Sections 34 and 37 of the Arbitration Act nor this Court, in exercise

of jurisdiction under Article 136 of the Constitution, would undertake a

merits-based evaluation or sit in appeal over a plausible and possible view

on facts taken by the arbitral tribunal.

35. In this scenario, we may again re-examine the BOCW Act and the

Cess Act. The argument of NHAI is that these Acts came into effect in the

years 1996 and 1995 respectively and, therefore, they cannot be treated

as ‘subsequent legislation’ for the purposes of its contractual clauses.

However, we must note that the preamble to the Cess Act categorically

states that the said enactment was made to provide for levy and collection

of cess on the cost of construction incurred by employers with a view to

31

augment the resources of the Welfare Boards constituted under the

BOCW Act. Therefore, the Cess Act being brought into effect from

03.11.1995 is totally incomprehensible as the BOCW Act was brought into

effect only on 01.03.1996. This was clearly a case of putting the cart

before the horse! Even thereafter, the Cess Act could not have been given

effect in a vacuum before constitution of Welfare Boards under the BOCW

Act, as augmenting of ‘Welfare Board resources’ cannot arise even before

such Boards came into existence. This being one aspect, it is the

established position that no effective steps were taken either by the

Central Government or by the Governments of the States/UTs in this

country to implement the provisions of the BOCW Act and the Cess Act

until they were prodded to do so, time and again, by this Court, vide its

orders in the case filed by the National Campaign Committee. It was only

pursuant to the persistent efforts made by this Court that necessary

machinery was put in place in different States/UTs on different dates.

36. Though the Central Government issued Notification dated

26.09.1996 stipulating the rate of cess @ one per cent, no steps were

taken to monitor the actual implementation of the Acts so as to ensure that

the prescribed one per cent cess was levied, collected and deposited. In

fact, Welfare Boards were not even constituted under Section 18 of the

BOCW Act for a long time. However, the BOCW Act and the Cess Act

clearly envisage appropriate machinery being put in place for timely levy,

32

collection and deposit of cess. In the absence of such machinery, the

question of levying and collecting cess cannot logically arise. More so as,

in the absence of Welfare Boards which could accept such cess once it is

collected, the same invariably had to be placed by the State in its

consolidated fund and used for public purposes. Such appropriation would

have impacted the very validity of such collection and would have made it

debatable whether the distinction drawn by this Court between a ‘tax’ and

a ‘fee’ in the context of this cess could still be maintained.

37. Though reference was made by NHAI to Rule 4(3) of the Cess Rules

in the context of deduction at source of the cess leviable upon buildings

and other construction works of a Government or a PSU from the bills paid

for such works, we may note that as per Rule 5 of the Cess Rules, upon

such collection, the Government or PSU is required to transfer the same

to the Welfare Board within thirty days of its collection. Obviously, in the

absence of a Welfare Board, even if the cess is deducted at source, be it

by a Government or by a PSU while making bill payments, the same could

not be deposited as per Rule 5. Notably, though NHAI placed reliance on

Rule 4(3), it is an admitted fact that it did not resort to any such deduction

at source and recoveries were sought to be made by NHAI only

subsequently. It is, therefore, patently clear that, though the BOCW Act

and the Cess Act, along with the Rules framed thereunder, remained on

the statute book for eons, they were not given actual effect owing to the

33

complete absence of the required machinery for the levy, collection,

deposit and utilisation of the cess to be collected thereunder for the benefit

of building and other construction workers. The failure to effectively

implement the BOCW Act and the Cess Act has to be laid squarely at the

door of the authorities, i.e., the Central Government and the Governments

of the States/UTs concerned.

38. This being the backdrop for the arbitral awards under scrutiny, we

will now consider the contractual terms between the NHAI and the

respondents in its appeals. In three of the five cases, i.e., in the contracts

relating to Hindustan Construction Co. Ltd., PCL Suncon (JV) and NKG

Infrastructure Limited, the BOCW Act and the Cess Act were specifically

mentioned amongst the labour legislations that were to be complied with

by them (Clause 34.2). However, in the contracts of Gammon-Atlanta (JV)

and DIC-NCC (JV), no mention was made of the BOCW Act and the Cess

Act. While so, Clause 14.3 and Clause 70.8 (‘Subsequent Legislation’) in

the contract document provided that the time-frame of twenty-eight days

before the last date for submission of the bid was crucial to ascertain what

should be factored into the prices and rates in the bid offer. In the event a

particular aspect was not to be factored into the bid price at that point of

time as per the extant legal regime but it came into focus thereafter, due

to a change in the scenario, it qualified as ‘subsequent legislation’

attracting the procedure under Clause 70.8.

34

39. We may note that NHAI has a prescribed template for its contracts.

Volume I thereof pertains to the ‘Bidding Document’. Clause 14.3 falls in

Section I therein, titled ‘Invitation for Bids’. Clause 14 deals with ‘Bid

Prices’ and Clause 14.3 therein states as follows:

‘All duties, taxes and other levies payable by the Contractor under the

Contract or for any other cause as of the date 28 days prior to the

deadline for submission of bids, shall be included in the rates and prices

and the total bid price submitted by the bidder and the evaluation and

comparison of bids by the Employer shall be made accordingly.’

40. Clause 70.8, titled ‘Subsequent Legislation’, forms part of Section

IV Part 2, titled ‘Conditions of Particular Application’ (COPA). It reads thus:

‘If, after the date 28 days prior to the latest date for submission of tenders

for the Contract there occur in the country in which the Works are being

or are to be executed changes to any National or State Statute,

Ordinance, Decree or other Law or any regulation or by-law of any local

or other duly constituted authority, or the introduction of any such State

Statute, Ordinance, Decree, Law, regulation or by-law which causes

additional or reduced cost to the Contractor, other than under the

preceding Sub-Clauses of this Clause, in the execution of the Contract,

such additional or reduced cost shall, after due consultation with the

Employer and the Contractor, be determined by the Engineer and shall

be added to or deducted from the Contract Price and the Engineer shall

notify the Contractor accordingly, with a copy to the Employer.

Notwithstanding the foregoing, such additional or reduced cost shall not

be separately paid or credited if the same shall already have taken into

account in the indexing of any inputs to the Price Adjustment Formulae

in accordance with the provisions of Sub-Clauses 70.1 to 70.7.’

41. In the context of the aforestated factual and legal position, we may

now deal with the each of the appeals individually. In Civil Appeal No. 4513

of 2025, Prakash Atlanta (JV) is the appellant and NHAI is the respondent.

Tenders were invited by NHAI for the construction of a segment of the

Lucknow Bypass in the year 2001. Prakash Atlanta (JV) submitted its bid

for the work on 21.03.2001 and emerged successful. It entered into a

35

contract with NHAI on 10.08.2001. It is an admitted fact that, in the

contract dated 10.08.2001, specific mention was made of the BOCW Act

and the Cess Act amongst the labour legislations that the appellant, being

the contractor, would have to abide by. There was neither a clause akin to

Clause 14.3 in its contract nor was there a ‘subsequent legislation’ clause,

akin to Clause 70.8. NHAI terminated the contract with the appellant on

14.03.2008. However, disputes had arisen between the parties during the

subsistence of the contract and the Dispute Resolution Expert, to whom

the matter was referred, held in favour of Prakash Atlanta (JV).

42. Aggrieved thereby, NHAI initiated arbitration proceedings.

Significantly, these proceedings were initiated in the year 2002 and went

on till June, 2004, but NHAI never raised the issue of the levy and

collection of cess under the BOCW Act and the Cess Act during the course

of such proceedings. The arbitral tribunal rendered its award on

26.06.2004, dismissing NHAI’s claims while accepting the counter-claim

of Prakash Atlanta (JV) towards price adjustment for extra items. NHAI’s

application under Section 34 of the Arbitration Act against the arbitral

award dated 26.06.2004 was dismissed, vide order dated 15.12.2011, by

a learned Judge of the Delhi High Court in OMP No. 339 of 2004. The

appeal filed by NHAI under Section 37 of the Arbitration Act against this

order was dismissed by a Division Bench of the Delhi High Court, vide

order dated 03.02.2012 in FAO(OS) No. 55 of 2012. Special Leave

36

Petition (Civil) No. 17736 of 2012 filed by NHAI was dismissed as

withdrawn on 05.07.2012, taking note of the submission made that NHAI

intended to apply for review of the said judgment. The NHAI did so in

Review Petition No. 419 of 2012 but met with only limited success,

irrelevant to the present adjudication. Long after the termination of the

appellant’s contract in March, 2008, the Government of Uttar Pradesh

issued Circular dated 17.02.2010 stating that the provisions of the BOCW

Act should be made applicable to all projects being executed on or after

04.02.2009 and that cess @ 1% of the project price should be deposited

in the fund. Admittedly, this was the first instance of the levy of cess under

the BOCW Act and the Cess Act in the State of Uttar Pradesh. As per the

Circular, the cess was to be levied on all projects which were ongoing on

04.02.2009, irrespective of when they had commenced.

43. It was only during the course of the execution proceedings in

Execution Petition No. 165 of 2012 initiated by Prakash Atlanta (JV) in

connection with the arbitral award dated 26.06.2004 that NHAI attempted

to adjust the amount allegedly payable by Prakash Atlanta (JV) towards

the cess under the BOCW Act and the Cess Act for the period that it had

worked. NHAI tendered a sum of ₹3,13,26,990/- to the appellant as

against its claim for ₹7,70,43,623/- along with interest. However, by order

dated 09.11.2012, the executing Court, viz., a learned Judge of the Delhi

High Court, held that the deduction of 1% cess on a pro-rata basis against

37

the value of work completed by the appellant till 2008 was permissible,

though it was prior to the cut-off date, viz., 04.02.2009. Aggrieved by this

order, the appellant filed EFA (OS) No. 4 of 2012. However, the same was

dismissed on 12.02.2013 by a Division Bench of the High Court, observing

that the cess is to be calculated on the entire cost of the project; that it

was made applicable to projects that were ongoing on 04.02.2009 and, as

the subject project stood concluded only in 2012, i.e., after 04.02.2009,

the appellant was liable to bear the cess liability for the extent of work

executed by it prior to termination of its contract. Aggrieved by this

judgment, Prakash Atlanta (JV) is before this Court by way of this appeal.

44. In Civil Appeal No. 5301 of 2025 filed by NHAI, the work awarded to

NKG Infrastructure Ltd., the respondent therein, was the balance work of

constructing a segment of the Lucknow Bypass and the contract was

signed on 25.02.2009. Clause 34.2 referred to the BOCW Act and the

Cess Act, along with other labour legislations, that the respondent/

contractor had to abide by. Clause 14.3 and Clause 70.8, viz., the

‘subsequent legislation’ clause were also applicable. NKG Infrastructure

Ltd. had submitted its bid for the subject contract on 05.12.2008, more

than 28 days prior to the Circular dated 17.02.2010 issued by the

Government of Uttar Pradesh, notifying the levy of cess under the BOCW

Act and the Cess Act from 04.02.2009. The question that arises is whether

the ‘subsequent legislation’ clause would apply or whether the respondent

38

is to bear the levy of cess, in terms of the Circular dated 17.02.2010 and

owing to the inclusion of the BOCW Act and the Cess Act (Clause 34.2).

By award dated 24.11.2015, the arbitral tribunal held in favour of the

respondent and directed NHAI to reimburse a sum of ₹1,14,05,033/- to

the respondent, being the amount of cess wrongly deducted by it. The

arbitral tribunal opined that there was a clear admission on the part of

NHAI that the BOCW Act was made applicable in the State of Uttar

Pradesh only from 04.02.2009. This admission was inferred from NHAI’s

letter dated 09.03.2010, wherein it clearly mentioned that the BOCW Act

was applicable in the State of Uttar Pradesh with effect from 04.02.2009

on construction projects which continued on or after 04.02.2009 and 1%

cess was payable on the total project cost. The arbitral tribunal opined that

the ‘subsequent legislation’ clause would apply. Relying on the decision of

the Delhi High Court in Gammon-Atlanta (JV), the arbitral tribunal held

that NKG Infrastructure Ltd. was entitled to reimbursement. This award

was confirmed by a learned Judge of the Delhi High Court, vide order

dated 02.11.2016 in O.M.P. (COMM) No. 60 of 2016, NHAI’s application

under Section 34 of the Arbitration Act. The same stood confirmed by a

Division Bench of the Delhi High Court, vide order dated 10.01.2017,

whereby the appeal in FAO (OS) (COMM) No. 11 of 2017 filed by NHAI

under Section 37 of the Arbitration Act stood dismissed, following the

earlier Division Bench judgment in the case of Gammon-Atlanta (JV).

39

45. In Civil Appeal No. 5302 of 2025 filed by NHAI, the respondent is

PCL Suncon (JV). It submitted its bid on 14.05.2001. NHAI and PCL

Suncon (JV) entered into contract dated 20.09.2001, whereby it was to

execute 4-laning and strengthening of National Highway No. 2 in the State

of Jharkhand. Clause 34.2 included the BOCW Act and the Cess Act

amongst the labour legislations that the respondent, PCL Suncon (JV),

was required to abide by. Further, this contract also contained Clause 14.3

and Clause 70.8, viz., the ‘subsequent legislation’ clause. Admittedly, it

was only on 01.08.2007 that the Government of Jharkhand issued S.O.19

dated 01.08.2007, notifying the Building and Other Construction Workers’

(Regulation of Employment and Conditions of Service) Jharkhand Rules,

2006, which were to be given effect in the State of Jharkhand from the

date of their publication in the Gazette. The question that arose was

whether the respondent was liable to bear the levy of cess or whether it

would be covered by the ‘subsequent legislation’ clause. By award dated

24.02.2013, the arbitral tribunal held in favour of the respondent and

directed NHAI to reimburse the amount deducted from the respondent’s

bills towards cess. The arbitral tribunal noted that the welfare measures

to be undertaken by the State Government under the BOCW Act could not

be made operative till Rules were framed for carrying out the functions

under the said Act. Taking note of Rule 5 of the Cess Rules, which required

the cess collected to be transferred to the Welfare Board within 30 days

40

of its collection, the arbitral tribunal noted that if any such cess had been

levied and collected in the year 2001 when the contract was entered into,

as there was no Welfare Board in existence, the cess would have been

appropriated to the consolidated fund of the State which is used for public

purposes. In that manner, the character of the cess collected would have

changed from fee to tax, thereby rendering the Cess Act itself open to

challenge. The arbitral tribunal noted that this was the reason why the

State Government had decided to levy and collect cess only from

01.08.2007, when the Jharkhand Rules were notified in the Gazette. As

the Jharkhand Rules were obviously a ‘subsequent legislation’ and were

crucial for the levy and collection of cess under the BOCW Act and the

Cess Act, the arbitral tribunal applied the ‘subsequent legislation’ clause

and held PCL Suncon (JV) entitled to reimbursement of the cess deducted

from its bills. This award stood confirmed under Section 34 of the

Arbitration Act when a learned Judge of the Delhi High Court rejected

NHAI’s application thereunder, vide order dated 30.09.2013, corrected on

08.01.2014. Aggrieved thereby, NHAI preferred an appeal under Section

37 of the Arbitration Act in FAO (OS) No. 128 of 2014 but the same came

to be dismissed by a Division Bench of the High Court on 11.03.2014,

following the earlier decision in the case of Gammon Atlanta (JV).

46. As regards Civil Appeal 5304 of 2025 filed by NHAI, Hindustan

Construction Co. Ltd. is the respondent therein. Hindustan Construction

41

Co. Ltd. submitted its bid on 15.07.2005 for award of the work relating to

4-laning of National Highway No. 28 from Km 92.00 to Km 135.00 of the

Lucknow-Ayodhya Section. The contract between them was executed on

21.10.2005. Clause 34.2 therein included the BOCW Act and the Cess Act

while Clause 14.3 and the ‘subsequent legislation’ clause (Clause 70.8)

were also included. This matter also pertains to the State of Uttar Pradesh

and, therefore, the Circular dated 17.02.2010 fixing the cut-off date,

04.02.2009, was the first instance whereby levy of cess under the BOCW

Act and the Cess Act came to be imposed. The issue was whether the

respondent was liable to bear such levy. By award dated 22.07.2014, the

arbitral tribunal held in favour of the respondent and directed NHAI to

reimburse ₹4,21,38,074/- towards the cess that had been deducted from

its bills. The arbitral tribunal noted that the State of Uttar Pradesh had

taken effective measures to implement the BOCW Act and the Cess Act

only on 04.02.2009 and NHAI did not even attempt to recover cess from

Hindustan Construction Co. Ltd. till March, 2010. The argument of NHAI

that Clause 34.2 specifically mentioned the BOCW Act and the Cess Act

and provided for recovery of cess was rejected. It was held that recovery

of cess could not have been made when the necessary machinery

therefor was not in place. It was observed that constitution of Welfare

Boards was necessary for levy and collection of cess and without the

same being in place, the question of such levy and collection did not arise.

42

The arbitral tribunal, accordingly, applied the ‘subsequent legislation’

clause as the State Government’s notification was issued long after the

bid related date in terms thereof and, in consequence, constituted

‘subsequent legislation’ thereunder. The sum of ₹10,76,959/- was directed

to be reimbursed to Hindustan Construction Co. Ltd. along with interest

thereon. We find that, in the case of Hindustan Construction Co. Ltd., the

NHAI deducted a much larger sum towards cess but only deposited

₹3,30,000/- with the Welfare Board. The award stood confirmed when a

learned Judge of the Delhi High Court rejected the application filed by

NHAI under Section 34 of the Arbitration Act on 20.04.2017. NHAI’s

appeal under Section 37 of the Arbitration Act came to be dismissed on

23.03.2018 by a Division Bench of the Delhi High Court, following the

earlier Division Bench decision in the case of Gammon-Atlanta (JV).

47. In Civil Appeal No. 5412 of 2025, NHAI is again the appellant while

DIC-NCC (JV) is the respondent. The contract between the parties was in

relation to rehabilitation and upgradation of Garamore-Gagodhar Road

Section of National Highway-8 and National Highway-15 in the State of

Gujarat. The Gujarat Government framed the Gujarat Building and Other

Construction Workers’ (Regulation of Employment and Conditions of

Service) Rules, 2003, and the same were published in the Gujarat

Government Gazette Extraordinary dated 18.08.2003. Thereafter, on

18.12.2004, the Gujarat Government notified that its Principal Secretary,

43

Labour and Employment Department, would hold the office of the Building

and Other Construction Workers’ Welfare Board for the purpose of the

BOCW Act until a Board was duly constituted. Further, vide Resolution

dated 30.01.2006, the Government of Gujarat instructed all Government

Departments, PSUs, and local authorities to pay cess as per the BOCW

Act and the Cess Act. They were advised to incorporate this cess in their

estimates for all new works. Significantly, reference was made therein to

the Notification dated 03.01.2005, whereby all Heads of Departments of

the Government, all Executive Heads of PSUs, and all Executive Heads

of local authorities were notified as Cess Collectors and Assessing

Officers. Reference was also made to the Resolution passed by the

Building and Other Construction Workers’ Welfare Board to collect the

cess with effect from 18.12.2004. It was directed that the cess payable by

Government Offices, PSUs, local authorities to Cess Collectors was to be

made in the challan prescribed under the major head, minor head and

sub-head stipulated therein. Admittedly, DIC-NCC (JV) submitted its bid

on 10.12.2023 and a letter of acceptance was issued to it on 22.11.2004.

The ad-hoc Welfare Board, as noted earlier, was constituted thereafter on

18.12.2004 and the contract between the parties came to be executed on

23.12.2004. The contract required compliance with labour legislations and

was worded inclusively. However, no mention was made of the BOCW Act

and the Cess Act therein. Clause 14.3 and Clause 70.8, pertaining to

44

‘subsequent legislation’, were included. The arbitral award dated

18.07.2017 held in favour of the respondent on the issue of deductions

made from its bills to the tune of ₹3,93,77,776/- by NHAI towards cess

and directed release of the bank guarantee furnished by the respondent

for that sum. The arbitral tribunal noted that the Government had framed

Rules under Section 62 of the BOCW Act on 18.08.2003. It constituted an

ad hoc Welfare Board on 18.12.2004 and passed a resolution on

30.01.2006 that Cess Collectors were to deposit with the Welfare Board

the cess collected with effect from 18.12.2004. The arbitral tribunal,

therefore, concluded that the BOCW Act and the Cess Act became

operative in the State of Gujarat only upon such instructions being issued

and, therefore, the same could not be made applicable to a contract which

was based on DIC-NCC (JV)’s bid submitted on 10.12.2003. The arbitral

tribunal noted that upon the insistence of NHAI, DIC-NCC (JV) had

furnished a bank guarantee for ₹3,93,77,776/- towards the cess claimed

by NHAI and, accordingly, directed release thereof. It was also noted that,

had it been the intention of NHAI that DIC-NCC (JV) was liable to pay cess

from December, 2004 itself, i.e., after the contract was entered into

between the parties, it would have made deductions right from then but it

had failed to do so and it was only on 13.03.2012 that NHAI stated that

audit objections had been raised and asked DIC-NCC (JV) to deposit the

cess component of over ₹3,50,00,000/-, failing which it threatened to

45

recover the same from its bank guarantees. The arbitral tribunal applied

the ‘subsequent legislation’ clause and held in favour of DIC-NCC (JV).

The same came to be confirmed by a learned Judge of the Delhi High

Court under Section 34 of the Arbitration Act, vide order dated 12.10.2018.

NHAI’s appeal under Section 37 of the Arbitration Act in FAO (OS)

(COMM) No. 20 of 2019 was dismissed by a Division Bench of the Delhi

High Court on 14.03.2019.

48. Civil Appeal No. 5416 of 2025 pertains to Gammon-Atlanta (JV).

Gammon-Atlanta (JV)’s bid for the award of work relating to National

Highway-5 in the State of Orissa (now, Odisha), from Km 387.700 to Km

414.000 (Khurda to Bhubaneshwar), was submitted on 17.10.2000. The

contract was entered into by and between them on 20.12.2000. The

contract provided for compliance with labour legislations, as detailed in

Annexures-A and A1. However, the Annexures were only inclusive in

nature and not exhaustive. Neither the BOCW Act nor the Cess Act was

mentioned among the labour legislations enumerated by way of illustration

therein. Clause 14.3 and the ‘subsequent legislation’ clause in Clause

70.8 were included. It was on 02.08.2002 that the State of Orissa framed

the Orissa Building and Other Construction Workers’ (Regulation of

Employment and Conditions of Service) Rules, 2002. However, it was only

by Notification No. 1455/LE dated 11.02.2004 that the State Government

appointed all Assistant Labour Officers, District Labour Officers working in

46

the field, the Labour Commissioner, the Joint Labour Commissioner and

the Assistant Labour Commissioners posted in the Directorate of the

Labour Commissioner, Orissa, as Cess Collectors. Provision was made

by the State Government, under Resolution dated 15.12.2008 published

in the Orissa Gazette Extraordinary dated 18.12.2008, for the Orissa

Building and Other Construction Workers’ Welfare Board to function from

the Office of the Labour Commissioner, Orissa, Bhubaneshwar, with eight

designated staff, as per the sanction of the Finance Department. The said

Resolution also made it mandatory for the collection and remittance of the

cess @ 1% from the date of issuance of the said Resolution. By award

dated 20.02.2012, the arbitral tribunal held in favour of the respondent,

Gammon-Atlanta (JV), on the issue of recovery of the cess payable under

the BOCW Act and the Cess Act. The arbitral tribunal opined that NHAI

could not have recovered the cess amount from Gammon-Atlanta (JV) in

view of the ‘subsequent legislation’ clause. The award recorded, in para

14.29.8, that the amount recovered towards cess was ₹1,04,96,006/-, but

only ₹3,30,225/- therefrom was paid by NHAI to the Welfare Board and

NHAI adjusted the recovery in excess thereof against liquidated damages.

This action on the part of NHAI was held to be unlawful and the arbitral

tribunal directed reimbursement of the deducted amount along with

interest. These findings of the arbitral tribunal stood confirmed under

Section 34 of the Arbitration Act by a learned Judge of the Delhi High Court

47

on 17.07.2012. Further, NHAI’s appeal against the said order came to be

dismissed by a Division Bench of the Delhi High Court, vide order dated

14.08.2013, passed in FAO (OS) No. 366 of 2013. Reliance was placed

by the Division Bench on the observations of this Court in Dewan Chand

Builders (supra), which held to the effect that the BOCW Act and the Cess

Act become operative only upon notification of the Rules framed under

Section 62 of the BOCW Act. As, in this case, the bid was submitted by

the appellant in the year 2000 and the notification in question was issued

in the year 2008, the Division Bench opined that the reasoning of the

arbitral tribunal could not be found fault with. This judgment was applied

in the later decisions which are the subject matter of the other appeals.

49. These being the factual matrices of the appeals on hand, learned

senior counsel/counsel, appearing for the respondents/contractors, would

contend in unison that, when reasoned arbitral awards have been passed

after considering all the facts and circumstances, including the terms and

conditions of the contract, and the same have been confirmed by the

Courts exercising jurisdiction under Sections 34 and 37 of the Arbitration

Act, this Court ought not to interfere with the same.

50. Having given our earnest consideration to all aspects of the matter,

we find that the ultimate obligation to bear the statutory levy of the subject

cess would lie with the ‘employer’, under Section 3(2) of the Cess Act.

‘Employer’ in relation to an establishment is defined by Section 2(1)(i) of

48

the BOCW Act to mean the ‘owner’ thereof but includes the ‘contractor’, if

the building or construction work is carried on by or through such

contractor or by employment of workers provided by such contractor. This

being one aspect of the matter, the crucial issue, insofar as ‘contractors’

are concerned, is whether they could have factored in the levy of such

cess in their bid prices at the time they submitted their bids when such a

levy was not even in existence then. This question would arise,

irrespective of whether the contracts made a mention of the BOCW Act

and the Cess Act. The answer is simple - the contractors could not have

factored such cess component into their bid prices prior to a mechanism

being put in place for its collection, as that would have led to unjust and

unlawful enrichment on their part. In consequence, the question would

arise as to when the liability to pay the subject cess commences. The

observations in para 12 of A. Prabhakara Reddy (supra) are of guidance.

This Court held therein that after the Cess Act and the Rules came into

effect and the Welfare Board was constituted, with the notification

specifying the rate of cess to be levied upon the cost of construction

incurred by the employer already in place, the authorities were duty-bound

to collect the cess by raising demands in respect of the ongoing

construction works and it was not necessary to wait till such building and

construction workers were registered under Section 12 of the BOCW Act

or till welfare measures were provided to them. Therefore, the constitution

49

of Welfare Boards is the sine qua non for giving effect to the BOCW Act

and the Cess Act and the cess in connection therewith could not have

been levied or collected before the constitution of such Welfare Boards.

51. In this regard, we find that Gammon-Atlanta (JV) submitted its bid

on 17.10.2000 and the Cess Act was notified in the State of Orissa only

on 15.12.2008. PCL Suncon (JV) submitted its bid on 14.05.2001 and it

was only pursuant to the Rules framed by the Government of Jharkhand,

notified on 01.08.2007, that cess was levied under the provisions of the

BOCW Act and the Cess Act. PCL Suncon (JV) submitted its bid on

14.05.2001 and its contract was signed on 20.09.2001. Notification of the

Rules framed by the Jharkhand Government under Section 62 of the

BOCW Act was on 01.08.2007, whereby the provisions of the BOCW Act

and the Cess Act were given effect. As regards DIC-NIC (JV), the

submission of its bid was on 10.12.2003 and collection of cess in the State

of Gujarat started from 18.12.2004, i.e., long after the submission of its

bid. NKG Infrastructure Limited submitted its bid on 05.12.2008, long prior

to the notification dated 17.02.2010 brought out by the Government of

Uttar Pradesh, giving effect to the provisions of the BOCW Act and the

Cess Act from 04.02.2009. Hindustan Construction Co. Ltd.’s bid was

submitted on 15.07.2005, which culminated in the contract agreement

dated 21.10.2005, and it was only long thereafter, i.e., on 17.02.2010, that

the Government of Uttar Pradesh gave effect to the provisions of the

50

BOCW Act and the Cess Act from 04.02.2009. Prakash Atlanta (JV)

submitted its bid for the work on 21.03.2001 and its contract itself stood

terminated on 14.03.2008, long before the Government of Uttar Pradesh’s

Notification dated 17.02.2010. Therefore, in none of these cases were

Welfare Boards in existence when the bids were submitted by the

contractors and the question of them factoring the levy of cess into their

prices while submitting their bids did not arise.

52. The issue, in effect, boils down to whether the failure of the

respondents to factor in their bid prices the cess payable under the BOCW

Act and the Cess Act can be said to be in keeping with Clause 14.3,

thereby attracting the ‘subsequent legislation’ procedure in Clause 70.8.

In essence, it would come down to interpretation of these terms of the

contract. The argument of NHAI that the ‘subsequent legislation’ clause

only pertains to changes in existing laws or introduction of new laws

overlooks the fact that there was a specific timeframe of twenty-eight days

mentioned therein which was linked to the last date for submission of the

bids and that is the basis on which the arbitral tribunals construed and

interpreted that provision. Having considered the arbitral awards passed

by the arbitral tribunals in the five appeals filed by NHAI, we find that the

interpretation and construction of those terms and clauses by the arbitral

tribunals cannot be said to be arbitrary, perverse or patently illegal. Given

the situation obtaining in relation to the two Acts at the relevant time, the

51

arbitral awards cannot be said to have violated the public policy of India

or be in breach of Section 28(1)(a) of the Arbitration Act. Once the view

taken by the arbitral tribunal is found to be a plausible and possible one

on facts and not an unreasonable one, it is not for the Courts, under

Sections 34 or 37 of the Arbitration Act, or for this Court to sit in appeal or

substitute its view for that of the arbitral tribunal.

53. NHAI would contend that the decision in Dewan Chand Builders

(supra) is being misconstrued as that decision pertained to the validity of

the BOCW Act and the Cess Act and the date of coming into force thereof

was not in issue. It is contended that a stray sentence or observation made

in a judgment cannot be taken to be its ratio decidendi. However, the

observation made in para 18 of Dewan Chand Builders (supra) was not

a stray observation as this aspect had also been considered by the Delhi

High Court and this Court affirmed the same. Further, the later decision of

this Court in A. Prabhakara Reddy (supra) put it beyond the pale of doubt

that constitution of the Welfare Boards was essential to give actual effect

to the BOCW Act and the Cess Act.

54. It is further contended on behalf of NHAI that, as there was no

‘subsequent legislation’ clause in Prakash Atlanta (JV)’s contract, the

decision in the context of the other appeals cannot be extended to it.

However, even in the absence of such contractual clauses, we must take

note of the fact that NHAI never raised the issue of recovery of cess during

52

the course of the arbitral proceedings or even thereafter. Having filed a

review petition before the High Court, pursuant to the liberty granted by

this Court, NHAI did not raise this issue even then. It was only during the

execution proceedings that it came up with the idea of deducting the cess

allegedly due from Prakash Atlanta (JV) from the amounts payable to it

under the arbitral award. Further, this attempt was made by the NHAI only

in September, 2012, long after the Notification dated 17.02.2010 was

issued by the Uttar Pradesh Government. Thus, 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. Further, the same rationale with regard to factoring the cess

component in its bid in the year 2001, without a corresponding reality,

would arise in the case of Prakash Atlanta (JV) also as it does in the other

appeals. Had the Government of Uttar Pradesh not brought out the

Notification dated 17.02.2010 on the lines that it did or if it had made the

payment of cess prospective from that date, instead of applying it to all

ongoing contracts as on 04.02.2009, Prakash Atlanta (JV) would have

been unjustly enriched had it factored in such levy of cess into its price.

Its failure to factor in such levy, therefore, cannot be found fault with at this

late stage and it cannot be visited with such liability with retrospective

effect, long after the termination of its contract. This appeal must also be

53

decided on the same lines as the appeals filed by NHAI, notwithstanding

its factual narrative being entirely different.

55. As regards the additional issue raised in Civil Appeal No. 5304 of

2025, pertaining to Hindustan Construction Co. Ltd., we may note that

Claim 4 before the arbitral tribunal pertained to ‘withholding of part of the

payment due towards price adjustment on foreign currency portion from

interim payment certificates.’ The arbitral tribunal noted in the award that

this issue turned upon analysis of the contract to ascertain whether it

provided for additional adjustment of 85% of the foreign currency

component over and above 85% provided in the formula. Having perused

the relevant terms of the contract - Clause No. 72.2 in Section 4, Part 1 of

Volume I, titled ‘Conditions of contract’, along with Clauses 70.3 and 70.4

of the COPA in Section 5 Part 2 of Volume I, the arbitral tribunal noted that

the contract provided for payment in two currencies, i.e., Indian Rupees

(90%) and Euros (10%). Further, the arbitral tribunal found that the

contract provided for price adjustment for both currencies as per the

formulae set out in Clause 70.3 of the COPA. Construing these terms, the

arbitral tribunal noted that the portion of the work done, that is, ‘R’ and the

portion of ‘R’ which was payable in foreign currency was set out in the

contract. It was noted that the word used was payable ‘R’ and not

adjustable foreign currency (‘Rf’). The Tribunal, accordingly, observed that

‘Rf’ used in the formula is the portion of ‘R’ payable in foreign currency

54

and not the adjustable one. It was also noted that the contract required

the bidder to provide the break-up of total foreign currency component and

the contract indicated 15% as non-adjustable which, in other words,

meant that 85% was adjustable. Therefore, the arbitral tribunal opined that

when the Note (15% non-adjustable) is read with the formula under

Clause 70.3 (viii) of the COPA, it is clear that 85% of the Euro component

is adjustable and, therefore, there cannot be further 85% adjustment as

the same would result in 72.2% adjustment which is not in keeping with

the terms of the contract. The arbitral tribunal also took note of the

submission on behalf of NHAI that there was a mistake in the formula

given in Clause 70.3 of the COPA and opined that there was no room for

it to correct the so-called mistake in the contract, if any. The arbitral

tribunal, accordingly, affirmed that a harmonious reading of the relevant

provisions suggested that 85% of the Euro component alone could be

adjusted and not over and above that.

56. We may note that NHAI filed written submissions on this claim, viz.

Claim 4, though no arguments were advanced by it during the course of

the hearing. Therein, it sought to place its own take on how Clause 70.3

and the formulae prescribed therein are to be construed and acted upon.

However, as the arbitral tribunal dealt with this contractual term and also

noted the submission made on behalf of NHAI that there was a mistake in

the formula itself, we can find no fault with the arbitral tribunal in holding

55

that it could not undertake correction of such mistake and in giving effect

to the contract and the formulae prescribed therein as per its construction,

which we find to be reasonable. The award insofar as it pertains to this

claim, therefore, falls beyond the scope of interference by this Court.

57. As these appeals focus only upon the issue of cess payable under

the BOCW Act and the Cess Act and arguments were also advanced only

on that issue, the note submitted by NHAI touching upon other claims in

relation to Gammon-Atlanta (JV)’s award, i.e., with regard to the refund of

liquidated damages together with interest; recovery of alleged penalty for

not providing vehicles to the Engineer; claim for refund of interest on

discretionary advance; claim regarding recovery of earthwork pertaining

to clearing and grubbing; and claim for interest pendente lite and future

interest are not considered. In any event, these claims also turned upon

the contractual terms and interpretation thereof and a merits-based

evaluation of such findings of the arbitral tribunal is beyond the ken of this

Court, just as it was beyond the ken of the Courts exercising jurisdiction

under Section 34 and 37 of the Arbitration Act. Further, we may note that

limited notice was issued in these matters only on the issue of cess

payable under the BOCW Act and the Cess Act. It is, therefore, not open

to NHAI to enlarge the scope of these matters at this late stage.

58. IA No. 84855 of 2015 was filed for intervention in Civil Appeal No.

5416 of 2025. M/s. Centrodorstroy, the intervener, entered into contracts

56

with NHAI in relation to works to be carried out in Uttar Pradesh in 2001.

It claims to have completed the works under contract packages IIC and

IIIC on 27.05.2010 and 25.03.2009 respectively. In view of the

Government notifying the UP Rules of 2009 with effect from 04.02.2009,

NHAI deducted amounts from its bills towards the cess payable under the

BOCW Act and the Cess Act. Arbitration proceedings having been

initiated, awards were passed on 03.11.2016 and 18.05.2018 in its favour.

The amount payable under the awards was released to the intervener

under affidavit of undertaking dated 06.03.2016. Though the awards were

never challenged, they were made subject to the outcome of the pending

appeals before this Court. It is on this ground that M/s. Centrodorstroy

sought to intervene before this Court so as to make itself heard. In the

light of our decision in these appeals, we do not deem it necessary to

consider the additional grounds sought to be urged by it. The intervention

application is, accordingly, rejected along with the additional grounds.

59. We may now sum up our conclusions as under:

(i) The observation made by this Court in Dewan Chand Builders

(supra) to the effect that the Cess Act along with the Rules framed

thereunder became operative in the whole of the NCT of Delhi from

January, 2002 was an affirmation of the finding in that regard by the

Division Bench of the Delhi High Court.

57

(ii) The BOCW Act and the Cess Act were brought into force on the

dates notified therein but could not have been given effect to till Welfare

Boards were constituted under Section 18 of the BOCW Act.

Notwithstanding the dates from which these two enactments were brought

into force, the BOCW Act and the Cess Act remained dormant, in fact,

owing to the failure of the appropriate Governments in taking necessary

measures to bring the provisions thereof into actual effect.

(iii) 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.

(iv) As pointed out in A. Prabhakara Reddy (supra), constitution of

Welfare Boards was essential and was a condition precedent for levy and

collection of the cess in relation to the BOCW Act and the Cess Act. The

registration of workers or providing of welfare measures to them, however,

are not pre-conditions for the levy and collection of such cess.

(v) Mere mention of the BOCW Act and the Cess Act in Clause 34.2 of

its contracts by NHAI had no significance or import in the absence of the

requisite machinery being put in place by the authorities concerned for

levy, collection and deposit of the cess with the Welfare Boards.

58

(vi) If an arbitral tribunal’s view is found to be a possible and plausible

one, it cannot be substituted merely because an alternate view is possible.

Construction and interpretation of a contract and its terms is a matter for

the arbitral tribunal to determine. Unless the same is found to be one that

no fair-minded or reasonable person would arrive at, it cannot be

interfered with. If there are two plausible interpretations of the terms of a

contract, then no fault can be found if the arbitrator accepts one such

interpretation as against the other. To be in conflict with the public policy

of India, the award must contravene the fundamental policy of Indian law,

which makes it narrower in its application.

(vii) We find that the arbitral awards in NHAI’s five appeals turned upon

interpretation and construction of identical terms in the contract and as the

view taken by the arbitral tribunals was not only a plausible and possible

one but also a justified one, on facts, we find no reason to interfere

therewith. The awards are not perverse, patently illegal or opposed to the

public policy of India. Further, we do not find the awards to be in breach

of Section 28(1)(a) of the Arbitration Act.

60. On the above analysis, we find no merit in the appeals filed by NHAI

against the orders of the High Court affirming the arbitral awards

pertaining to Gammon-Atlanta (JV), PCL Suncon (JV), NKG Infrastructure

Limited, Hindustan Construction Co. Ltd. and DIC-NCC (JV). The appeals,

viz., C.A. Nos. 5301, 5302, 5304, 5412 and 5416 of 2025 are accordingly

59

dismissed. 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.

IA Nos. 77056 of 2013 and 2 of 2013 are allowed, permitting

additional facts, documents and annexures to be placed on record.

Other pending applications shall stand disposed of.

……………………...J

[SANJAY KUMAR]

.……………………...J

[ALOK ARADHE]

New Delhi;

January 20, 2026.