Bengaluru Metro Rail Corporation Ltd vs Karnataka Commercial And Industrial ...
2024 Latest Caselaw 5552 Kant

Karnataka High Court

Bengaluru Metro Rail Corporation Ltd vs Karnataka Commercial And Industrial ... on 22 February, 2024

Author: Chief Justice

Bench: Chief Justice

                             1
                                             COMAP 392/2022

   IN THE HIGH COURT OF KARNATAKA AT BENGALURU

      DATED THIS THE 22ND DAY OF FEBRUARY, 2024

                         PRESENT

THE HON'B LE MR.P.S.DINES H KUM AR, CHIEF JUSTICE

                           AND

  THE HON'BLE MR. JUSTICE T.G.SHIVASHANKARE GOWDA

                 COMAP NO.392 OF 2022

 BETWEEN:

 BENGALURU METRO RAIL CORPORATION LTD.
 A COMPANY REGISTERED UNDER
 THE COMPANIES ACT, 1956, HAVING ITS
 REGISTERED OFFICE AT BMTC COMPLEX
 3RD FLOOR, KH ROAD, SHANTHINAGAR
 BENGALURU-560 027, REP. HEREIN BY
 ITS MANAGING DIRECTOR                       ... APPELLANT

 (BY SRI.S.SRIRANGA, SR. ADV. FOR
     SMT.SUMANA NAGANAND, ADV.)

 AND:

 1.     KARNATAKA COMMERCIAL AND INDUSTRIAL
        CORPORATION PRIVATE LIMITED, HAVING ITS
        REGISTERED OFFICE AT 28, BELLARY ROAD
        GANGENAHALLI, DENA BANK, BENGALURU-560 032
        REP. BY ITS AUTHORIZED SIGNATORY

 2.     SECURITY AND INTELLIGENCE SERVICES INDIA
        LIMITED, HAVING ITS REGISTERED OFFICE AT 106
        RAMANASHREE ARCADE, IST FLOOR, 18TH M G ROAD
        TRINITY CIRCLE, BENGALURU-560 001, REP. BY ITS
        AUTHORIZED SIGNATORY

 3.     JUSTICE R GURURAJAN
        NO.504, 5TH FLOOR
        CHITRAPURA APARTMENTS
                               2
                                                  COMAP 392/2022

      15TH CROSS, MALLESHWARAM
      BENGALURU-560 003                      ... RESPONDENTS

(BY SRI.K.N.PHANINDRA, SR. ADV. FOR
    SRI.ARNAV BAGALWADI, ADV. FOR 1 & 2 A/W
    MS. LEELA P. DEVADIGA, ADV.)

      THIS COMAP IS FILED UNDER SECTION 13(1A) OF THE
COMMERCIAL COURTS ACT, 2015 READ WITH SECTION 37 OF
THE ARBITRATION AND CONCILICATION ACT, 1996, PRAYING
TO CALL FOR RECORDS IN COM.A.P.NO.84/2020 ON FILES OF
LEARNED LXXXVI ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE BENGALURU (CCH-87) (COMMERICAL COURT), AS
WELL AS THE ARBITRAL RECORDS WHICH ARE BEFORE THE
SAID COURT.

     THIS COMAP HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT   ON 08.02.2024 AND COMING ON FOR
PRONOUNCEMENT      OF    JUDGMENT     THIS    DAY,
T.G.SHIVASHANKARE     GOWDA    J., DELIVERED   THE
FOLLOWING:


                    JUDGMENT

In this appeal, the appellant has challenged the

judgment dated 25.07.2022 passed in

Com.A.P.No.84/2020 on the file of the LXXXVI

Additional City Civil Judge, Bangalore (CCH No.87) (for

brevity 'the Commercial Court') in dismissing its suit.

2. Appellant herein was the petitioner before the

Commercial Court and respondent before the Sole

Arbitrator. The respondents herein were the

respondents before the Commercial Court and

claimants before the Sole Arbitrator. Hence, for the

sake of convenience, parties shall be referred as per

their status before the Sole Arbitrator.

3. Brief facts of the case are, claimant No.1 is

engaged in the business of providing facility

management services to public and private sector

entities whereas, claimant No.2 is a private security

solutions provider in India and Australia.

3.1. The respondent is a joint venture of the

Government of India and the Government of Karnataka

and is a special purpose vehicle entrusted with the

responsibility of implementation of the Bangalore Metro

Rail Project.

3.2. The respondent had floated a Request for

Proposal (the 'RFP') on 21.08.2012 bearing

No.BMRCL/M&M/HKS.R3/2012/1 calling for bids from

agencies for providing (i) cleaning and housekeeping

services; (ii) security allied services and (iii) services

for customer care and Ticket office Machine for Reach

3 and Reach 3A of the Bangalore Metro Rail Project.

3.3. The claimants, acting as a consortium,

submitted a bid on 05.11.2012 in response to the RFP,

quoting an amount of Rs.73,19,63,628/-. Claimant

No.1 had acted as the lead member of the consortium.

The claimants stood the 'L1' bidder. Post-bid

negotiations took place between both sides. Claimant

No.1 submitted a revised bid on 04.06.2013 for a sum

of Rs.64,62,48,000/-. The reduction of price offer was

made on the clear understanding that the respondent

would be responsible for any additional costs arising on

account of enhancement in statutory liabilities. The

revised financial offer made by the claimants was

based on an assumed minimum wage applicable in the

first year of the contract and that minimum wage

would be escalated by 11%. Any change in minimum

wage would have an immediate and direct impact on

the total costs offered. The respondent was specifically

made liable for bearing any increase in statutory dues,

under the revised financial offer. The revised offer was

accepted and Letter of Acceptance ('LOA' for short)

was issued by the respondent on 15.06.2013. On

24.07.2013, the respondent issued an Addendum to

the LOA enclosing the Summary of Costs in Form 9B as

per the terms of the RFP ('Addendum to LOA). Form

9B indicated that any increase in statutory obligation

would be considered for payment by the respondent.

Accordingly, contract was executed on 24.08.2013.

3.4. Clause 1 of the contract expressly makes the

RFP, the bid, revised proposal, the LOA, the Addendum

to the LOA and Summary of Costs, as part and parcel

of the contract. Pursuant to the contract, the

claimants commenced operations from February 2014.

The invoices from April 2014 included the enhanced

costs due to escalation of statutory outgoings borne by

the claimants. The respondent made payments as per

the said invoices from April 2014 to August 2014. The

respondent having done so started deducting an

amount equivalent to the minimum wages captured in

the invoices for the period from April 2014 to

December 2014 in three instalments in the months of

October 2014, November 2014 and December 2014.

3.5. Claimant No.1 issued several letters to the

respondent on 10.02.2015, 11.03.2015, 27.03.2015,

29.08.2016, 11.02.2017 and 27.02.2017 detailing the

framework of the agreement between the parties and

bringing to the respondent's attention the terms of the

revised proposal and the addendum of the LOA

requesting the respondent to settle the dues arising

out of the increase in the minimum wages and to

release the amounts withheld.

3.6. The terms of the Contract are crystal clear

regarding the respondent's obligation to pay any

increase in statutory obligation. As such, the

respondent's obligation to do so constitutes an integral

part of the consensus ad idem between the parties and

the Contract. The respondent in breach of its

obligations under the Contract has failed to pay a sum

of Rs.15,72,93,845/-.

3.7. The claimants have provided the details of

commencement of arbitration by referring the matter

to the arbitration and therefore, the arbitration

proceedings came to be initiated by appointing the

Arbitral Tribunal by the Indian Council of Arbitration,

New Delhi.

4. The claim before the Arbitral Tribunal is

contested by the respondent by filing the statement of

objections on the following grounds:-

i) The claims made by the Claimant are contrary to the contractual provisions as well as express provisions of Law which bind both the parties and therefore, cannot be allowed;

ii) The claims made by the Claimant are speculative and therefore cannot be granted;

iii) The present claim has been filed with the oblique motive of harassing the Respondent;

iv) The Claimant has either suppressed or misrepresented the facts leading up to the filing of this claim to suit its own needs.

Hence, the claims are liable to be rejected."

5. It is their case that, they invited Tender on

21.08.2012 for providing services for cleaning and

housekeeping services, security allied services and

services for customer care and ticket office machine

(TOM) for Reach 3 and Reach 3A. The Tender

submission was made on 05.11.2012.

5.1. After evaluation of bids, the joint venture of

the claimants was accepted. The amount quoted by

the claimants at Rs.73,19,63,629/- was reduced after

negotiation by the Tender Negotiation Committee in its

meeting dated 09.05.2013 and 29.05.2013. As per

the negotiations, the revised offer was submitted by

the claimants on 04.06.2013. The negotiation resulted

in savings of Rs.8,57,11,554/- and the LOA was issued

on 15.06.2013. After holding a meeting on

29.05.2013, the matter was referred by the

respondent to the Tender Evaluation Committee (TEC)

for taking final decision. Accordingly, the TEC held

meeting on 07.06.2013 making recommendation for

accepting the Tender for Rs.64,62,48,000/-.

5.2. The respondent sent the LOA for the revised

price as recommended by the TEC on 15.06.2013

along with the Summary of Cost in Form No.9B, which

was later formed as part of LOA in the form of

Addendum to LOA.

5.3. Form No.9B did not indicate 'minimum

wages' in the statutory obligation. The claimants sent

an unconditional acceptance to the same. Pursuant to

the same, a Contract was signed on 24.08.2013

between the parties, which came into force for a period

of 36 months with effect from 01.10.2013. The LOA

dated 15.06.2013 and the Summary of Costs - Form

No.9B dated 24.07.2013 are to be construed to be part

of the agreement.

5.4. The claim of the claimants relating to

increase in the minimum wages paid to employees of

the claimant, is only an after-thought. The summary

of costs in Form No.9B does not contain any term

containing stipulation to pay increase in the minimum

wages. Therefore, the document relied upon by the

claimant dated 04.06.2013 becomes redundant. The

invoices filed by the claimants including their claim for

increase in minimum wages was initially processed,

after audit objection, since increase in minimum wages

is not part of contract, the same was recovered in the

subsequent bills.

5.5. The increase in minimum wages was also the

subject matter of price negotiation and in the meeting

held on 29.05.2015, it was omitted to be included in

the contract documents. For any subsequent

variations, the legal requirement is to take steps for

alteration and amendment of the contract as envisaged

under Section 62 of the Indian Contract Act. Hence,

additional claim by the claimants has no legal effect

against the respondent for consideration as contractual

terms.

6. After completion of the pleadings, the Arbitral

Tribunal has framed the following issues:

"1) Whether the Claimant proves that in terms of the contract dated 24.8.2013 there exists an obligation on the part of the Respondent to pay the increase in minimum wages under the Act.

2) Whether the Claimant proves that the Respondent committed a breach of the terms of the contract dated 24.08.2013.

3) Whether the Claimant proves that the Respondent deducted an amount equivalent to minimum wages captured in the invoices for the period April 2014 to December, 2014, in three instalment in the months of October 2014, November 2014 and December 2014.

4) Whether the Claimant proves that it is entitled for a direction to the Respondent -

                 a)     to pay an amount           of
            Rs.15,72,93,845/-     on    account    of
            increase in statutory obligation.



                b)    to pay an amount of
           Rs.1,45,59,026-35 being the loss

suffered due to unilateral deduction in requirement from that specified in the Addendum to LOA.

5) Whether the Claimant proves that it is entitled for a direction to the Respondent to pay interest on claims (a) and (b) above at the rate of 18% p.a. from the date on which the said amount is found due and payable until the dates of payment thereof?

6) Whether the Respondent proves that the claims made by the Claimant are contrary to the contractual conditions?

7) Whether the Respondent proves that the increase in the minimum wages was the subject matter of price negotiation held on 29.05.2015 and further whether the Respondent further proves that by inadvertence the subject item relating to minimum wages was omitted to be included in the contract document in terms of the averment made in para-11 of the Statement of Objection?

7. Before the Arbitral Tribunal, both parties have

led evidence. The Arbitral Tribunal after hearing the

arguments on both sides answered the above issues in

favour of the claimants and by its award, directed the

respondent to pay Rs.12,13,15,047/- to the claimants,

reserving liberty to the claimants to submit the revised

invoices towards the claim amount of Rs.3,59,78,798/-

and the claim of Rs.1,45,59,026.35 made by the

claimants stood rejected. It is further awarded that

the respondent to pay future interest @ 10% from the

date of award till the date of settlement. Aggrieved

respondent has challenged the award under Section 34

of the 34 of the Arbitration and Conciliation Act, 1996

before the Commercial Court on the identical grounds.

8. Before the Commercial Court, both parties are

duly represented by their respective Advocates. After

hearing both sides, the Commercial Court has

formulated the following points for its consideration:

1) Whether the petitioner (respondent before the tribunal) proves that the arbitral award dated 06.03.2020 passed by the sole arbitrator i.e., respondent No.3 is in conflict with the public policy of India as provided U/S

34(2)(b) (ii) of Arbitration and Conciliation Act, 1996?

2) Whether the petitioner (respondent before the tribunal) has made out sufficient grounds for setting aside the arbitral award?

3) What Order?"

9. The Commercial Court has answered point

Nos.1 and 2 in the negative and while answering point

No.3 dismissed the petition. Aggrieved by the same,

the respondent has filed the instant appeal on various

grounds.

10. We have heard the arguments of

Sri.S.Sriranga, learned Senior Counsel supported by

Smt.Sumana Naganand, learned counsel for the

appellant/respondent and Sri.K.N.Phanindra, learned

Senior Counsel supported by Sri.Arnav Bagalwadi,

along with Ms.Leela P.Devadiga, learned Counsels for

claimants.

11. Shri Sriranga, learned Senior Counsel praying

for allowing of the appeal has contended that the

claimants are entitled for payments as per the terms of

the Contract. Before agreeing to the terms, there was

a negotiation, variation was discussed, such as, PF,

ESI, Bonus, Gratuity and thereupon the claimants have

submitted Summary of Costs in Form No.9B. As per

the bidder letter and the terms of the contract, the

claimants are required to raise the invoices. In terms

of the variation in minimum wages, initially the

respondent has considered and made payments to the

claimants. The audit team has objected for the same,

as there is no term of contract for payment of

enhanced minimum wages and for this reason, the

payments so made earlier in excess of the terms of the

agreement was deducted and agreed rate of minimum

wages being cleared. The claimants are submitting

series of invoices as per Ex.C9. After evaluation, the

amount has been paid, the different sets of invoices do

not tally with each other, there are four sets of

documents produced and the Arbitral

Tribunal has refused to mark those documents.

11.1. Before the Commercial Court, it was urged

that the award passed by the Arbitral Tribunal is

opposed to public policy, contract does not permit

reimbursement of enhanced minimum wages. No

documents are placed before the Arbitral Tribunal for

quantification of Rs.15 Crores increase due to increase

in minimum wages. There is no material explaining

the issue of accord and satisfaction. The claimants

have made original bid in the Tender at

Rs.73,19,63,628/-. After negotiation, accepted price

was Rs.64,62,48,000/-. The concession offered by the

claimants was Rs.8,57,15,628/-. Even if that

concession is considered, the present claim made by

the claimants including all aspects, the enhancement

at Rs.15 Crores is more than Rs.7 Crores than the

original bid. From the time of pre-bid stage, no claim

was made by the claimants for the enhanced minimum

wages.

11.2. The Commercial Court in the impugned

judgment has recorded its finding that the public policy

has not been violated. The respondent will not fall

under the ambit of Minimum Wages Act, there is no

obligation for the respondent to pay the enhanced

minimum wages. The Arbitral Tribunal so also the

Commercial Court have failed to consider these aspects

making over burden of Rs.15 Crores to the exchequer

of the respondent, which is contrary to the terms of

the Tender, negotiations, acceptance by both parties,

increase in minimum wages and its reimbursement

were not agreed between the parties in terms of the

Contract; claimants have no right to seek for

enhancement and reimbursement. This basic aspect is

not considered by the Arbitral Tribunal as well as the

Commercial Court and sought for interference.

11.3. To buttress his arguments, he has relied on

decision in Padma Sundara Rao (dead) and Others

-vs- State of T.N. and others1 and a judgment of

(2002) 3 SCC 533

Co-ordinate Bench of this Court in Union of India -

vs- M/s.Warsaw Engineers and Others 2.

12. Per contra, Shri Phanindra, learned Senior

Counsel praying for dismissal of appeal has contended

that the parties are bound by the Contract of Tender.

Though there is no direct contract with reference to the

liability on the part of the respondent to pay the

enhanced minimum wages, there is a specific

expression in the terms of the contract that the

respondent has agreed to pay the enhanced

components such as, PF, ESI, Bonus, Gratuity, etc.,

which are directly connected to the minimum wages.

During negotiation, the respondent has agreed to

make good of the variation of these aspects. When

these components are agreed, impliedly the

respondent has agreed to pay the variation in the

minimum wages. There are no specific term either in

the Tender or in the Contract that the variation in

enhancement of minimum wages by the statutory

Comap No.25/2021 DD 17.04.2021

orders has to be borne by the claimants. Taking into

consideration the surrounding circumstances and the

terms of the agreement, there was consensus for

payment of variation in minimum wages before the

Arbitral Tribunal as well as the Commercial Court. He

has placed reliance on Form No.9B and also the terms

of Exs.C4, C5, C6, and C7. According to learned

Senior Counsel, vide Ex.C4, parties have mutually

agreed to meet the requirement of increase of any

statutory obligations including minimum wages.

12.1. Learned Senior Counsel further emphasized

that the minimum wages guaranteed by the

Government is a part of social welfare legislation,

statutory obligations like PF, ESI, Bonus, Gratuity,

Service Tax, in terms of various statutes framed by the

Government have to be complied. The parties cannot

contract out from these enactments. The Arbitral

Tribunal has specifically observed and recorded the

terms of the contract and impliedly expressed that

both parties have mutually agreed to make good of the

statutory obligations.

12.2. To buttress his arguments, he has relied on

decisions in:

(i) A2Z Infraservices Limited -vs- Union of India and others3;

(ii) Food Corporation of India -vs- A.M.Ahmed & Co. and Another4;

(iii) Tarapore & Co. -vs- State of M.P.5

13. In reply to the said arguments, Sri Sriranga

has made a distinction that the price variation clause

has been agreed upon in A2Z Infraservices Limited

(supra). In the instant case, the variation in minimum

wages does not form a part of the agreement under

Ex.C7. In Food Corporation of India and Tarapore &

Co.'s cases (supra), the Hon'ble Apex Court has

rendered the judgments based on the factual situation,

which differs from the instant case. He has mainly

stressed upon the judgment of the Hon'ble Apex Court

2018 SCC OnLine Bom 1042

(2006) 13 SCC 779

(1994) 3 SCC 521

in Padma Sundara Rao's case (supra) to contend that

every judgment is precedent based on factual aspects.

Unless the facts are identical, the judgments relied

upon by the parties cannot be a precedent.

14. We have given our anxious consideration to

the arguments addressed on behalf of both parties and

perused the records.

15. In the light of the rival contentions urged on

both parties, the points that arise for our consideration

are:

(i) Whether the condition of escalation of minimum wages falls within the framework of the contract between the claimants and the respondent?

(ii) Whether the impugned judgment passed by the Commercial Court is perverse and calls for our interference?

Reg. Point No.1:

16. The undisputed facts of the case is,

claimant No.1 is engaged in the business of

providing facility management services to public and

private sector entities whereas, claimant No.2 is a

private security solutions provider in India and

Australia. The respondent is a joint venture of the

Government of India and the Government of

Karnataka and is a special purpose vehicle entrusted

with the responsibility of implementation of the

Bangalore Metro Rail Project. The respondent for

providing better services to the commuters calls for

the Tender inviting the interested persons to submit

their quote for providing services, such as, (i)

Cleaning and house keeping services (ii) Security

allied services and (iii) Services for Customer Care &

Ticket Office Machine (TOM) for Reach-3 and 3(A)

from the expert agencies either as individuals or as

a Joint Venture/Consortium. The claimants have

submitted their original bid at Rs.73,19,63,628/-.

The TEC made negotiations with the claimants and

thereafter the revised price bid at Rs.64,62,48,000/-

thereby concession of Rs.8,57,15,628/- was offered

by the claimants. The revised bid was accepted by

the respondent, both parties entered into a contract

under Ex.C7, Work Order was issued to the

claimants, who deployed their human resources,

rendered services, raised the invoices and their

invoices were accepted and payment was

processed.

17. Ex.C7 specifically contemplates that the

following documents shall be deemed to form and

be read and construed as part of contract, viz:

i) Request for proposals including Key details

ii) Instructions to Bidders

iii) Scope of work

iv) General conditions of contract

v) Special conditions of contract

vi) Written clarifications issued by BMRCL

vii) Addendums/corrigendum, if any

viii) Prequalification bid

ix) Technical bid

x) Financial bid

xi) Revised offer submitted on 04.06.2013

xii) LOA dated 15.06.2013 and your unconditional acceptance.

xiii) Addendum to LOA dated 24.07.2013 and your unconditional acceptance

xiv) Other conditions agreed to and documented if any.

xv) Summary of Costs - Form 9B.

18. The issue is only regarding revised offer

submitted on 04.06.2013 as mentioned in (x), (xi) and

Summary of Costs - Form 9B as described above.

19. According to the claimants, by virtue of

escalation of minimum wages under the statute, they

are burdened with a sum of Rs.15,72,93,845/-. The

Arbitral Tribunal has awarded Rs.12,13,15,047/-,

reserving liberty to the claimants to produce revised

invoices in respect of Rs.3,59,78,798/- and disallowed

the claim of Rs.1,45,59,026-35. In view of the same,

the claimants have to satisfy the respondent through a

revised invoices to an extent of Rs.3,59,78,798/-. The

claimants have not challenged the disallowance of

Rs.1,45,59,026-35.

20. Now, in view of the above, the dispute

between both parties is narrowed down to escalation of

minimum wages for the deployed human resources by

the claimants whether to be borne by the claimants or

by the respondent.

21. As seen from the material on record, Ex.C7 is

the Contract Agreement between the claimants and the

respondent signed on 24.08.2013. The said contract is

not elaborate, it is very cryptic. It has 15 documents

as referred supra as a part of the agreement. In view

of this, it is required to peruse each one of the said

documents meticulously.

22. First document is the request for proposals

including Key details. There are instructions to the

bidders, explaining the scope of the work, general and

special conditions of the contract, written clarifications

issued by the BMRCL, Addendums/corrigendum,

prequalification bid, technical bid, financial bid. These

are the process of Tender narrated in item Nos.1 to 10.

After opening of the financial bid, the Tender

Evaluation Committee has evaluated each component

of the bid. The claimants being the lowest bidder

cannot be asked to revise their bid by reducing the

quantum. After negotiation, the claimants have offered

concession of Rs.8,57,15,628/-. The offer letter of the

claimants starts from 04.06.2013. Ex.C4 is part of the

agreement. On submission of Ex.C4, the respondent

issued the letter of acceptance on 15.06.2013 under

Ex.C5. An addendum under Ex.C6 was issued along

with summary of cost described as Form No.9B.

23. It is pertinent to note that, along with Ex.C4,

the claimants have attached the costing for three years

of the Tender in respect of 4 categories of services

offered, such as (i) Cleaning and house keeping (ii)

Security and Allied services (iii) Services for Customer

Care and Ticket office Machine (iv) Security and Ex-

servicemen. The costing were based on minimum

wages of the Karnataka State at relevant point of time.

This costing refers to statutory obligation on minimum

wages along with PF, Gratuity to be paid to the human

resources for the Year-1, Year-2 and Year-3. In letter

of acceptance (Ex.C5), the respondent has accepted

the revised proposal dated 04.06.2013 (Ex.C4). Plain

reading of Ex.C4 shows that claimants have made a

specific statement as:

"As mutually agreed between BMRCL and KCIC, any increase in statutory obligation like Minimum Wages, PF, ESI, Bonus, Gratuity, Service Tax and the likes will be duty claimed from BMRCL."

This offer is referred to in Ex.C5:

"This is to notify you that your tender dated 05/11/2012 and your revised proposal dated 04/06/2013 for providing services for a) Cleaning & Housekeeping Services b) Manpower for Security & Allied Services and c) Manpower for Customer Care & operating the Ticket Office Machine (TOM) for Reach 3 & 3A for the contract price of Rs.64,62,48,000/-(Rupees Sixty four crores sixty two lakhs forty eight thousand only) is hereby accepted for a period of three years."

24. It is pertinent to note that in Ex.C5, three

conditions are mentioned regarding variation of

minimum wages. According to respondent, even if

original bid is accepted, the burden was

Rs.8,57,15,628/-, but the claim is excess. This

argument is untenable for the simple reason that

during negotiation of commercial bid, the offer of the

claimants is accepted by the respondent, then

parties are bound by the terms and conditions

enumerated in the contract of agreement. More is

argued relying on note made in Form No.9B, which

reads as follows:

(i) . . . .

(ii) . . . .

(iii) Any increase in statutory obligation like PF, ESI, Bonus, Gratuity and Service Tax will be considered for payment.

When Ex.C4 specifically contemplates minimum

wages aspect, absence of minimum wages in Form

No.9B cannot exclude the liability of the respondent

to make good of the variations in minimum wages.

25. It is pertinent to note that the PF, ESI,

Bonus, Gratuity and Service tax are sub-components

of minimum wages. As and when there is revision of

minimum wages, sub-components will gain

increment. The respondent has agreed to pay

increment of the variation in minimum wages but

strenuously contended that they have not agreed to

make good of the variation of the minimum wages.

26. Ex.R9 is the Minutes of the Tender

Evaluation Committee, letter of acceptance was

issued on this basis. Clause-9 of Minutes says:

Evaluation of Financial Package refers that, the

Committee insisted the claimants to reduce their

service charges apart from critically cutting down

some of the components in man power cost. The

Committee has also taken into consideration the fact

that minimum wages for manpower has almost

doubled from the time the previous contract for

Reach-1 was awarded about 3 years back. The

Tender Evaluation Committee has also taken into

consideration the revised offer of the Bidder

mentioning that any increase in statutory obligation

like PF, ESI, Bonus, Gratuity, Service Tax and the

likes will be duly borne by BMRCL. Here is the catch

as the Tender evaluation was carried on, on

08.06.2013 whereas, the offer letter of the claimants

under Ex.C4 was on 04.06.2013. The Tender

Evaluation Committee had considered Ex.C4.

Unfortunately, while drafting the notings without any

reason, the word "minimum wages" is absent. The

recommendation of the Tender Evaluation

Committee reads as under:

"11. RECOMMENDATIONS:-

In view of the above, the Bid Evaluation Committee is of the opinion that the offer of M/s KCIC can be accepted with the following conditions/ modifications. With the following modifications the total cost of the work will be Rs.64,62,48,000/- (Annexure-2).

i) Separate rate for Ex-servicemen guard and civilian guard as Rs. 11776/- and Rs. 10005/-

respectively.

ii) The Bidder should submit the monthly statement with proof of making the payment to the employee including all allowances as agreed by BMRCL.

iii) Consider the claim due to increase in statutory obligation like PF, ESI, Bonus, Gratuity, Service Tax if claimed by the Bidder.

iv) The LOA shall cover the details of payment to employee accepted by BMRCL and other conditions as brought above."

(emphasis supplied)

27. In these recommendations also, the word

"minimum wages" is absent. It is interesting to note

that neither in the agreement nor in any of the

tender valuation documents, there is any averment

that the revised offer of claimants was accepted by

the respondent excluding the minimum wages. On

the contrary, we find a specific recital in the

agreement placing obligation on the contractor at

Clause-4 of the Contract Agreement which reads

thus:

"4. OBLIGATION OF THE CONTRACTOR

The contractor shall ensure full compliance with Tax laws/ Labour laws / Minimum wages Act and all other laws of India applicable in the performance of this contract and shall be solely responsible for the same. . . . . . . . ."

The respondent while accepting the offer of the

claimants imposed obligation that the claimants shall

comply with the Tax laws, Labour laws, Minimum

Wages Act and all other laws of India applicable in

the performance of this contract and shall be the

sole responsible for the same.

28. When the claimants have specifically stated

in their offer letter under Ex.C4 that they will duly

claim from the respondent any increase in statutory

obligation like Minimum Wages, PF, ESI, bonus,

Gratuity, Service Tax and the likes, the Tender

Evaluation Committee in its recommendation at

Ex.R-1 did not reject it. The Tender Evaluation

Committee has categorically recommended for

acceptance of the offer under Ex.C4.

29. The respondent has not placed any material

to show that increase in minimum wages shall be

borne by the claimants. Unless it is expressly

communicated to the claimants that he has to bear

the increase in the minimum wages, it cannot be

accepted as the agreement includes it. When Ex.C4

becomes the part of the agreement, there is an

obligation on the part of the respondent to pay

statutory increase in minimum wages.

30. In Padma Sundara Rao (supra) at para-9

of the judgment, the Hon'ble Apex Court held as

under:

"9. Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morris in Herrington Vs. British Railways Board9 . Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases."

This principle is not disputed by the claimants.

Whatever decisions relied upon by the parties has to

be applied to the case on hand on a factual matrix.

31. In A2Z Infraservices Limited (supra), a

Division Bench of Bombay High Court referring to

controversy involving the price variation clause as

contained in the agreement and as to the

construction/interpretation of the said clause and

whether it would insulate the petitioner on account

of increase in the minimum wages, since the

minimum wage fixation orders are based on the very

same Consumer Price Index. It has also discussed

about the stand taken by the respondent in that case

that the Railway Tribunal has clarified that the

payment of revised minimum rate of wages to be

paid by the contractor to the contract labourers is

statutory obligation, however, the contract

conditions of the subject contract were duly agreed

and signed by the petitioner and therefore, they are

binding on him and he is duty bound to honour and

comply the same. At para-54, it has held as under:

"54. . . . . . . . . . . . . . .In such circumstances, we are of the considered view that the respondent railways though are at liberty to put an end of the existing contract of the petitioner by following the prescribed mode, but as along as the said contract continues, the petitioner company cannot be deprived of the neutralization for the increase in the cost of labour owing to the extraordinary notification dated 19/1/2017, revising the minimum wages applicable to the industry of mechanized sweeping and cleaning with effect from the date of coming into its force. We are of the considered view that the railway is duty bound to neutralize the said cost of labour to the petitioner under clause (12) of the PVC contract by applying the principles of 'business efficacy', and by including the stipulation of payment of wages as per the Minimum Wages Act as an implied

stipulation in the PVC. The respondent Railway is also liable to continue to compensate the petitioner for the increase in cost of labour in terms of notification dated 19/1/2017 as long as the contract subsists. . . . . . . . . ."

The order of the Bombay High Court has been upheld

by the Hon'ble Apex Court in S.L.P.(Civil) Diary

No.39582/2018.

32. In Food Corporation of India (supra),

the Hon'ble Apex Court while dealing with power of

the Arbitrator to award compensation for cost

escalations during currency of contract, held at

paragraphs-10, 24 and 25 as under:

"10. In our opinion, the argument of the learned Senior Counsel for FCI that there is no clause in the contract providing for escalation to reimburse the expenses and, therefore, the arbitrator had exceeded his jurisdiction has no substance. The issue of jurisdiction of the arbitrator to go into the claim of the claimant towards compensation and neutralisation of the extra expenditure incurred on account of statutory wage revisions had already concluded in the earlier proceedings arising out of the application filed by the claimant firm under Section 20 of the Arbitration Act for appointment of the arbitrator. . . . . . . . "

xxxxxxxxxxxxxxxxxxxxxxx

24. The Corporation had raised a specific question before the arbitrator that escalation in rates claimed by the contractor could not be granted for the simple reason that the agreement did not provide for any grant of the escalated rates during the tenure of contract and hence no enhanced rates other than the rates agreed upon can be granted. The learned arbitrator specifically rejected the above contention on the basis of the subsequent acceptance of responsibility by FCI.

25. In our view, the arbitrator has not misconducted himself and that the award has been passed in consonance with the principles of natural justice. The High Court of Madras has also upheld the award of arbitrator rightly holding that there is no error apparent on the face of the record."

(Emphasis supplied)

33. In Tarapore & Co.'s case (supra), the

Hon'ble Apex Court was dealing with liability on the

part of the Government to pay extra amount to the

contractor on account of payment of enhanced

wages to labour by the contractor pursuant to

statutory revision of minimum wages by

Government. In that case, the Arbitral Tribunal

awarded the amount of Rs.236 Lakhs to the

contractor on account of increase of wages under the

Minimum Wages Act. The said award was at the first

instance reversed and remanded by the District

Judge and after remand, the Arbitral Tribunal

awarded Rs.245 Lakhs as against its earlier award of

Rs.236 Lakhs and said matter has been again

challenged before the District Judge, who set aside

the said award. When the matter came up before

the Madhya Pradesh High Court, it was held that

such award by the Arbitrator was beyond

jurisdiction. The Hon'ble Apex Court at paragraphs-

27, 30 and 33 held that the litigant cannot be asked

to do what is not possible on his part to do or get

done. He cannot be made to suffer for no fault on

his part directing payment of variation in the

minimum wages by the Government to the Tarapore

& Company.

34. The judgments of Food Corporation of

India and Tarapore & Co. have been referred to by

the Hon'ble Apex Court in Union of India -vs-

Saraswat Trading Agency and Others6. The

award in dispute is in respect of interest component

and not the minimum wages.

35. As contended by the respondent, the

judgments have to be considered on factual matrix

of each case. It is pertinent to note that the offer

letter of the claimants under Ex.C4 has been

recommended to be accepted by the Tender

Evaluation Committee and pursuant to it, the Letter

of Acceptance was issued as per Ex.C5 and

addendum to Letter of Acceptance as per Ex.C6 with

Form No.9B has been issued to the claimants. Ex.C7

being the contract of agreement which makes the

Ex.C4 as part of the agreement and in the absence

of the Tender Evaluation Committee not rejecting the

claim of the claimants, it is impliedly accepted.

36. A Tender of this nature involves huge

amount of liability against the respondent. As we

(2009) 16 SCC 504

see from the documents, there are many loose-ends

from the request for proposal till issuance of Letter of

Acceptance and entering into a contract. These

loose-ends make way for the pilferage of public

funds. If the contract agreement or Letter of

Acceptance has specifically mentioned that the

increase in the minimum wages on account of the

statutory obligation has to be borne by the

claimants, this arbitration could have been avoided

by the respondent. The respondent cannot pick and

choose here and there which are beneficial to them.

The totality of the records clearly point out that the

respondent has accepted to make good of any

increase in statutory obligation like minimum wages

to the respondent. Hence, the terms under

Ex.C7/Contract Agreement make it clear that the

respondent has accepted the offer of the claimants

to pay increase in minimum wages. Then the

argument of respondent that payments towards

variation is opposed to public policy falls to the

ground. Accordingly, we answer point No.(i).

Reg. Point No.(ii):

37. We have perused the arbitral award and

also the order of the Commercial Court. The Arbitral

Tribunal while directing the respondent to reimburse

the increase in minimum wages, specifically recorded

that there is term in the contract. We do not see

any illegality nor the Arbitral Tribunal has exceeded

in its jurisdiction. The Arbitral Tribunal considered

the totality of the Tender, offer and acceptance and

the binding nature on the liability. The Commercial

Court has rightly appreciated that there is no

illegality committed by the Arbitral Tribunal to

exercise jurisdiction under Section 34 of the

Arbitration and Conciliation Act, 1996. While

answering point Nos.(i) and (ii), we do not find any

error to interfere in the impugned order. The appeal

is devoid of merits. In the result, the following;

ORDER

The appeal is dismissed with costs.

Sd/-

CHIEF JUSTICE

Sd/-

JUDGE

KNM/-