advocatemmmohan

Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 — Sections 18, 24 — Operation of Act — When effective

Though the BOCW Act was brought into force on 01.03.1996, its provisions could not be given actual effect until Welfare Boards were constituted under Section 18 — In absence of Welfare Boards, levy, collection and utilisation of cess could not arise — The enactment remained dormant in fact, owing to failure of appropriate Governments to implement statutory machinery.
(Paras 35–38, 50, 59(ii)–(iii))

Building and Other Construction Workers’ Welfare Cess Act, 1996 — Sections 3 & 14 — Levy of cess — Condition precedent

Cess Act is complementary to the BOCW Act and enacted solely to augment resources of Welfare Boards — In absence of constitution of Welfare Boards, levy and collection of cess under the Cess Act could not arise — Constitution of Welfare Boards is sine qua non for levy and collection of cess.
(Paras 9, 35–37, 50–51, 59(iii)–(iv))

BOCW Act & Cess Act — Date of enforcement versus date of operability

Though the Acts were notified in 1995–96, they remained ineffective in practical terms until statutory machinery was created — Mere existence of statute on the statute book does not imply enforceability in absence of implementation framework — Welfare legislation cannot operate in vacuum.
(Paras 14–17, 35–38, 59(ii))

Arbitration and Conciliation Act, 1996 — Sections 34 & 37 — Scope of interference

Courts cannot re-appreciate evidence or substitute their interpretation where arbitral tribunal has adopted a plausible and reasonable view — Construction and interpretation of contract fall primarily within arbitral jurisdiction — Interference is impermissible unless award is perverse, patently illegal or contrary to fundamental policy of Indian law.
(Paras 23–33, 52, 59(vi))

Contract — ‘Subsequent legislation’ clause — Interpretation

Clause fixing a cut-off date of 28 days prior to submission of bids governs determination of liabilities to be factored into bid prices — Where levy of cess became enforceable only after such cut-off date due to later constitution of Welfare Boards or issuance of State notifications, such levy qualifies as ‘subsequent legislation’ under contractual clauses.
(Paras 38–40, 52)

Contractor — Liability to pay cess — When arises

Contractors could not have factored cess into bid prices when no statutory machinery for levy or collection existed — Factoring such levy earlier would have resulted in unjust enrichment — Liability to pay cess arises only after Welfare Boards are constituted and levy mechanism becomes operational.
(Paras 36–38, 50–52)

Dewan Chand Builders case — Interpretation affirmed

Observation in Dewan Chand Builders v. Union of India that BOCW Act and Cess Act became operative in Delhi only after notification of Rules was not stray — It affirmed High Court findings — Later decision in A. Prabhakara Reddy clarified that constitution of Welfare Boards is condition precedent for effective levy.
(Paras 21–22, 53, 59(i), (iv))

Public policy — Patent illegality — Test

An arbitral award is not contrary to public policy merely because an alternate interpretation is possible — Violation must strike at fundamental policy of Indian law — Plausible interpretation of contractual terms cannot be interfered with.
(Paras 24–33, 52, 59(vi))

Execution proceedings — Recovery of cess — Impermissibility

Where cess liability did not exist during subsistence of contract, recovery cannot be imposed retrospectively during execution of arbitral award — Post-contract notifications cannot fasten liability on terminated contracts.
(Paras 42–44, 54)

Result

Appeals filed by NHAI dismissed — Appeal filed by Prakash Atlanta (JV) allowed — Deduction of cess from arbitral award amounts held impermissible — NHAI directed to refund adjusted amounts with interest.
(Paras 60)

ANALYSIS OF THE JUDGMENT

1. Core issue

Whether the BOCW Act, 1996 and the Cess Act, 1996, though notified in 1995–96, could be treated as operative legislation before constitution of Welfare Boards, so as to deny contractors the benefit of “subsequent legislation” clauses in NHAI contracts.

2. Court’s central finding

The Supreme Court held that:

Mere notification of the Acts did not make them operational.

Until Welfare Boards were constituted and statutory machinery created:

no levy could be raised,
no cess could be collected, and
no fund could be credited.

3. Dormancy of the Acts

The Court took judicial notice of:

decades of non-implementation,
repeated monitoring orders in National Campaign Committee cases,
massive unutilised cess collections,
absence of Boards and authorities in most States.

Result: the Acts remained dormant in fact.
(Paras 14–17, 35–38)

4. Complementary nature of the two Acts

The Court emphasised:

Cess Act exists only to fund Welfare Boards.
Levy without Boards would collapse the fee–tax distinction.
Collection without utilisation would violate statutory purpose.

Hence, cess could not precede Board constitution.
(Paras 35–37)

5. Application to contracts

Across all six appeals:

bids were submitted before Welfare Boards existed,
State notifications enforcing cess came much later,
contractors could not have priced a non-existent levy.

Accordingly, arbitral tribunals correctly applied:

Clause 14.3 (bid reference date), and
Clause 70.8 (subsequent legislation).
(Paras 38–52)

6. Arbitration law reaffirmed

The Court reiterated settled principles:

Contract interpretation belongs to arbitrator.
Two plausible views → arbitrator’s view prevails.
Courts under Sections 34 & 37 cannot act as appellate forums.

No award was found:

perverse,
patently illegal, or
contrary to public policy.
(Paras 23–33, 52)

7. Prakash Atlanta (JV) — special case

Contract executed in 2001.
Terminated in 2008.
UP Rules notified only in 2010 with retrospective sweep.

Court held:

NHAI’s attempt to deduct cess during execution proceedings was an afterthought.
Liability could not be imposed retrospectively on a terminated contract.
(Paras 42–54)

RATIO DECIDENDI

Though the Building and Other Construction Workers Act, 1996 and the Welfare Cess Act, 1996 were notified in 1995–96, their provisions could not be given effect to until Welfare Boards were constituted under Section 18 of the BOCW Act; in the absence of such Boards, levy and collection of cess did not arise, and contractors who submitted bids prior to creation of the statutory machinery could not be fastened with cess liability, making subsequent State notifications “subsequent legislation” within the meaning of contractual clauses.

LEGAL SIGNIFICANCE

This judgment conclusively holds that:

Statutory notification ≠ operational enforceability
Welfare Board constitution is condition precedent
Cess cannot exist in institutional vacuum
Contractors cannot price imaginary levies
Arbitral interpretation of ‘subsequent legislation’ stands protected
IBC-style non-interference principles apply equally to infrastructure arbitration

ADVOCATEMMMOHAN

Thursday, January 22, 2026

Whether the BOCW Act, 1996 and the Cess Act, 1996, though notified in 1995–96, could be treated as operative legislation before constitution of Welfare Boards, so as to deny contractors the benefit of “subsequent legislation” clauses in NHAI contracts.