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Murali (Advocate and Corporate Consultant)     28 May 2010

Clarification on contractual obligation

'X' submitted a technical bid for suppy of BATS to a society controlled

by Govt of AP. One of the terms included by 'X' is that invoice will be

done directly by his principal and payment will be made to 'X'.'X' also

enclosed a letter from one of his principal authorising him as a

distributor to quote and contract on their behalf. 'X's' bid being the

lowest was accepted and later on a rate contract was entered into. In

the rate contract, there was no mention about payment to principals but

it was stated rate quoted my 'X' being the lowest was accepted and

having accepted the tender, it is decided by both parties to enter into

late contract. Now the authority refuses to accept the invoices by

'X's's principals. This arrangement was basically to save VAT/CST to

the tune of 16%. 'X' made this clear in his correspondance. I request a

frank opinion whether 'X' can insist for acceptance of the invoices by

his principal and payment to 'X' especially when consent is given by

'X's' principal. Does the above term constitute any avoidance of tax or

is it valid tax saving


 3 Replies

ramarao v b (director - marketing)     02 June 2010

Though it is a valid tax saving measure, if rate contract does not specify that the payment is to be mde to the Prinicpal against his invoice, nothing can be done. Once the Contract is signed the offer becomes invalid.

That is why in ISO 9000 there is a contract review. The Contract has to be as per the Offer. it is the contractors' responsibilty to see that all the clauses that he has given in his offer are given in the Contract.

Once the Contract is signed by both the parties, no reference to any other document can be valid.

Murali (Advocate and Corporate Consultant)     13 June 2010

Dear Sir,

Thank you very much for your clarification and it is really helpful.


Murali Krishna W

VG Subramanian (Manager )     15 June 2010

Could someone clarify as to the vital differences between Adjudication and Arbitration in the context of

Indian Contract Act, 1872. I understand the contract law in some of the countries insists on the process of adjudication. How is this technically different from Arbitration.

In my view, Arbitration clause in our country  is being well enforced.





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