National Thermal Power ... vs Bhasin Construction Co. (P.) Ltd.
1994 Latest Caselaw 795 Del

JUDGMENT

C.M. Nayar, J.

1. The present suit Impugned the award dated 15th May, 1986. The arbitrator had rejected the claim of the petitioner/claimant for refund of Rs. 4,72,372.74 with interest which was allegedly paid to the respondent for the labour escalation for work done in the Sidhi District, Madhya Pradesh. It will not be necessary to refer to the factual details of contract between the parties as the same have since been referred to in Suit No. 1496-A/86 The facts related to the terms and conditions of the contract are common. The arbitrator in the present case has upheld the amount paid to the respondent and has rejected the submissions of the petitioner.

2. The concept of 'fair wage' as payable to the labour is indicated in the following provisions of the General Conditions of Contract which read as follows :

"16.2. The contractor shall pay to labour employed by him either directly or through sub-contractors wages not less than fair wages as defined in the Contractors Labour Regulations.

16.3. The contractor shall in respect of labour employed by him or his sub-contractors comply with or cause to be complied with the Contractors Labour Regulations in regard to all matters provided therein

16.4. The contractor shall comply with the provisions of payment of Wages Act, 1936, Minimum Wages Act, 1948. Employers' Liability Act, 1938, Workmen's Compensation Act, 1923, Industrial Disputes Act, 1947, Maternity Benefit Act, 1961 and Mines Act, 1952 (Contract Labour Regulation and Abolition Act) 1970 or any modifications thereof or any other law relating thereto and rules made there under from time to time.

3. The definition of fair wages under the Contractors Labour Regulations may also be reproduced as under :

"Fair wage means wages, which shall include wages for weekly day of rest and other allowance, whether for time or piece work, after taking into consideration prevailing market rates for similar employments in the neighborhood but shall not be less than the minimum rates of wages fixed under the payment of Minimum Wages Act."

4. Learned counsel for the petitioner has contended that the respondent in compliance with the concept of 'fair wage' has obviously taken into consideration that the fair wage at the relevant time was Rs. 4/- per day which is also supported by the Collector's order dated February 18, 1978. This order was passed prior to the date of execution of the contract. The respondent, therefore, would have taken into account the prevailing fair wages and the payment of Rs. 4,72,372.74 was made in error and the same was liable to be refunded.

5. The learned counsel for the respondent, on the other hand, has contended that the escalation is governed by the provisions of Clause 53-A(b) of the General Conditions of Contract which will imply that'the minimum wages of unskilled labour, of skilled labour and of semi-skilled labour on the date of submitting of the tender shall be taken as shown in Schedule D. If on account of any legislation, notification, labour award, the minimum wages of unskilled labour, of skilled labour and semi-skilled labour are increased at any time or times after the submission of the tender and the contractor has to pay any increased wages, then the corporation shall reimburse to the contractor the increase in the cost of labour not exceeding the increase permitted under the legislation ... He has, therefore, argued that the maximum amount which the respondent is entitled in view of the subsequent notification dated 27th June, 1979 will be @ Rs. 4/- per day as this is the rate which is prescribed under the Minimum Wages Act. The amount accordingly has to be worked out on the basis of difference between Rs. 2/- which was prescribed under the 1974 notification and Rs. 4/- per day as prescribed by the 1979 notification subject to the contribution of 10% of the respondent and the escalated amount as worked out is payable despite the fact that the respondent has been paying even higher wages of Rs. 5/- and Rs. 6/- per day. He has also reiterated that he has led sufficient evidence before the arbitrator to prove the payment to the workers at a higher rate even as compared to the rate of Rs. 4/- per day and it will not be open for this court to interfere in the findings of fact which have been recorded by the arbitrator.

6. The amount of Rs. 4,72,372.74 which was paid to the claimant as contended by the petitioner was on the basis of the increase in minimum wages from Rs. 2/- to Rs. 4/- per day and it is alleged that the said amount was paid on persuasion by the respondent that on account of Gazette notification of 27th June, 1979 the respondent was entitled to the escalation in wages. The said amount was paid under a bona fide mistake and the petitioner corporation called upon the respondent company to refund the same. The claim was disputed and the matter was referred to the sole arbitration of the same arbitrator as in Suit No. 1496-A/86. The claim was also raised in respect of clause 56.2 of the General Conditions of the Contract which indicates that if any overpayment has been made to the contractor it shall be recoverable by the corporation. The respondent was obliged to pay the 'fair wages', the minimum of which was wages as notified by the appropriate Government under the Minimum Wages Act. The arbitrator after hearing both the parties came to the conclusion that no refund was due to the corporation.

The operative paragraph of the award reads as under :

"I have no hesitation in saying that this claim of the corporation is meaningless. If the pleas of the corporation are accepted that will make clause 7.1 of the Special Conditions and the said clause 53-A(b) of the General Conditions of the contract redundant. On one hand we are taking pride that we are keeping the interest of labour employed paramount in our mind, that it was made obligatory on the contractor that the workers are paid minimum wages (atleast) as notified by the appropriate State Government under the Payment of Minimum Wages Act and that the labourers are not exploited. Not only this provision has been made in the contract that if during the relevant period there happens to be upward revision in minimum wages because of any notification by the appropriate State Government under the payment of Minimum Wages Act and the contractor has to pay higher wages to labour on account of such upward revision in minimum wages, the corporation shall be obliged to reimburse the contractor (respondent Co.) to the extent of such upward revision in minimum wages as per notification by the appropriate State Government under the payment of Minimum Wages Act which reimbursement shall be over and above the original value of the bid tender. On the other hand, the corporation is backing out from that obligation by coming forward with their present claim. Let alone proof, there is no averment by the corporation that the said notification revising the minimum wages to Rs. 4/- per day for unskilled labour (in this matter it is not relevant if the revision ws from Rs. 2/- or from Rs. 2.15 per day) was not honoured and wages were not paid in accordance with the notification. Even if the respondent Co. had been paying higher wages to unskilled labour since before the notification of 27.6.1979 it is wholly immaterial because the respondent Co. had to cost their tender for the works in Sidhi Distt. (M.P.) on the basis of the Minimum Wages (Rs. 2/- or Rs. 2.15) per day then in force there under. The payment of Minimum Wages Act and in view of Special Condition No. 7.1 and General Condition No. 53-A(b) of the contract the respondent Co. becomes entitled to reimbursement in the event of and to the extent (after giving discount as provided in clause 53-A(b)(ii) of the General Conditions) of any escalation in minimum wages for such labour under the Payment of Minimum Wages Act during the stipulated period, which escalation did take place as aforesaid. The claim, therefore, cannot be sustained and I hereby dismiss it with costs of these arbitration proceedings (which I assess at Rs. 10,000/-) payable by the claimant corporation to the respondent company."

7. The arbitrator has held that there was no averment by the corporation that the notification revising the minimum wages to Rs. 4/- per day for unskilled labour was not honoured and wages were not paid in accordance with the notification.

8. On the basis of the law, as settled, the learned counsel for the respondent has contended that the jurisdiction of this court in setting aside an award is limited and where the arbitrator on interpretation of arbitration clause has arrived at a conclusion which was conceivable and possible this court cannot modify the same or sit in appeal on the findings of the arbitrator by re-examining and reassessing the materials. The reasonableness of the reasons given by the arbitrator can also not be challenged and appraisement of evidence by the arbitrator is never a matter which the court questions and considers. The interpretation of contract is a matter for the arbitrator and the amount awarded by the arbitrator by taking a particular view of the contract as has been done in the present case cannot be substituted by this court in the present proceedings. He has cited the following judgments to reiterate his submissions :

M/s. Hindustan Tea Co. v. M/s. K. Sashikant & Co. and another ; Purl Construction Pvt. Ltd. v. Union of India ; M/s. Sudarsan Trading Co. v. The Government of Kerala and another ; Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) Pvt. Ltd. and another ; Food Corporation of India v. Joginderpal Mohinderpal and another and State of Rajasthan v. Puri Construction Co. Ltd. and another. .

9. There is not doubt about the legal propositions which have been consistently laid down by the Hon'ble Supreme Court for the exercise of powers for interference in the award of the arbitrator. The judgments, however, don not preclude this court from examining the facts which are admitted by the parties and to find out whether the arbitrator has not misconstrued the same and arrived at conclusions which are not supported wither by facts on record or by the law. The arbitrator may have relied upon material but it has to be seen that there was some basis to base the findings and which have not to be fanciful. In the present case, I am not inclined to re-apprise the evidence and come to the conclusion on that basis that the respondent was paying a 'fair wage' at the inception of the contract and no amount as a result of escalation can be held due. The arbitrator has clearly said that the resulting notification of 27th June, 1979 would entitle the respondent to claim escalation @ Rs. 4/- per day. This finding cannot be interfered with on the facts and circumstances of the present case. There is, however, one error which has been committed by the arbitrator on taking the base figure of Rs. 2/- for the minimum wage as provided by the 1974 notification and he has not gone into the question of the actual 'fair wage' which was being paid by the respondent company. The arbitrator had to take into account that in case the respondent company was paying a higher wage and has claimed the escalation amount on that basis, the base fire of Rs. 2/- will become irrelevant. Of course, there is no doubt that even ir the respondent company was paying higher wages than Rs. 4/- per day, the maximum escalation which would be available can not exceed Rs. 4/- per day. That will not, however, mean that in case the respondent company was paying more than rs. 2 per day as it was considered to be a 'fair wage', the difference has to be calculated from Rs. 2/- irrespective of the amount paid to the labour. The learned counsel for the petitioner has referred me to an affidavit dated 8th April, 1985 of Shri R. B. Pathak, an Officer of the Corporation indicating that the claim submitted by the respondent showed the basic wage of unskilled labour as Rs. 2.70 per day. The relevant paragraph of this affidavit which was filed before the Arbitrator may be reproduced as follows :

"That I say and submit that the claimant vide its letter No. BCC/110/1093 dated 7.2.1981 raised for the first time its claim for labour escalation amounting to Rs. 25,16,955.63 for labour escalation for the work done in Madhya Pradesh area from 1.2.1979 to 1.12.1980 and for the work done in Uttar Pradesh area from 1.12.1978 to 1.12.1980 (copy of the Bill attached and marked Annexure I). The above claim was submitted by the claimant showing the basic wage of unskilled labour as Rs. 2.70 per day and applicable wage to Rs. 3/-, Rs. 4/-, Rs. 5/- per day in M.P. area and Rs. 6/- per day in U.P. area over the period and claiming the difference in the wages as escalation. The claimant claimed escalation from the very commencement of the work i.e., 1.2.1979 even though no notification to increase the minimum wage was issued by the M.P. Government before 27.6.1979 and further the U.P. Government did not at all issue any notification raising the minimum wage during the entire currency of the contract."

10. The communication of the respondent company dated 7th March, 1981 to the petitioner corporation reads as follows :

"Enclosed please find our labour escalation bill for work done up to 1.12.1980 against the above contract. This may please be processed and payment made at an early date."

11. The 'Annexure' with letter dated 7th March, 1981 clearly indicates the claim of the respondent company for labour for escalation was on the basis of the basic wage as having been accepted at Rs. 2.70 per day. This obviously was the 'fair wage' which was considered by the respondent company as payable to the labour. The relevant annexure reads as follows :

Labour Escalation Bill (From 1.2.1979 to 1.12.1980)

Formulae for Escalation = Value of work done x 25 x Applicable wage

-------------------

Basic Wage

----------

Basic wage as per contract = Minimum wage of Basic Wage unskilled worker at Sidhi on May 1975 = Rs. 2.70 per day.

Period value of work Basic Wage Applicable Calculation Escalation amount to be net amount wage Absorbed Payable

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 1.  For Madhya Pradesh Works 
     (a) 1.2.1979 to 31.3.1979 5,051.53 2,703.00 5,051.53   25 x 3-2.70
                                                          x ---------                                                            100 x 2.7         140.32 14.03. 
     (b) 1.4.1979 to 30.9.79, 58,585.49 2,704.002 58585     25 x 4-2.7
                                                          x ---------                                                            100 x 2.7         31,126.036 464.64 24,661.39. 
     (c) 1.10.1979 to 1.12.1980 13,84,414.30 2,70 5.00 13844 14.3
         25 x 5-2.7
       x -----------   2,94,828.97 34.610.39 2.60.218.61.         100 x 2.7 
 II.  For U.P. Works 
     (a) 1.12.1978 to 1.12.1980 79,55,863.30 2,70 6.00 7955863.3 x 
         25 x 6-2.7
         ----------  24,30,958.20 1,98,896.58 22,32,061.60         100 x 2.7 
 ------------------------------------------------------------------------------
         Total                                            25,16,955.63 
------------------------------------------------------------------------------ 
 
 

 (Rupees Twenty Five Lacs Sixteen Thousand Nine Hundred Fifty Five and Paise Sixty Three Only)  
 

In view or the above arbitrator has erred in taking the basic wage from Rs. 2/- or from Rs. 2.15 per day on the basis of 1979 notification which was not even the amount claimed in the first instance by the respondent company. The correct amount payable as has been contended by the learned counsel for the petitioner will work out as follows :

"Before the Arbitrator, the claim dated 7.3.1981 was placed wherein the respondent showed "Basic Wage" as Rs. 2.70 and Rs. 4/- as a result of notification dated 27.6.1979. If 10% of escalation were to be absorbed by the respondent i.e., upon Rs. 2.97 and if an actual payment of Rs. 4/- per day was made then the respondent would have been at best entitled to difference of Rs. 1.03 as against the difference of Rs. 1.85 per day as awarded. The entitlement works out as under :

    If on Rs. 1.85 per day amount of escalation was    Rs. 4,72,372.74 
    On Rs. 1.03 per day respondent is entitled to      Rs. 2,62,996.00 
    Excess payment made                                Rs. 2,09,376.74"   
 
 

12. The figures as stated above are not denied by counsel for both the parties. The learned counsel for the respondent could not explain and that the company was paying at a higher wage, even higher than Rs. 4/- such at Rs. 5/- of Rs. 6/- per day and the maximum which was payable to the respondent was on the basis of 1979 notification by working out the base rate from Rs. 2/- to Rs. 4/- and after taking into account the percentage of 10% which was to be absorbed by the respondent. I am not inclined to accept this contention as it will obviously go against the initial claim of the respondent and will cause manifest injustice to the petitioner. The arbitrator should have examined this aspect and arrived at a conclusion which was based on the admitted figures. The award dated 15th May, 1986 is accordingly modified to the extent that the respondent company shall refund a sum of Rs. 2,09,376.74 which was over and above the amount it was entitled to. The petitioner shall also be entitled to interest @ 12% per annum on this amount from the date of payment to the respondent till realisation. There will be no order as to costs.