Orissa High Court
(Through Hybrid Mode) vs Shri R. K. Goyal on 28 July, 2022
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA No.06 of 2003
(Through Hybrid mode)
State of Orissa ... Appellant
Mr. S. N. Das, Advocate
(Addl. Standing Counsel)
-versus-
Shri R. K. Goyal ... Respondents
Mr. A. Sanganeria, Advocate
CORAM: JUSTICE ARINDAM SINHA
ORDER
Order No. 28.07.2022
25. 1. State is appellant. It is aggrieved by judgment dated 7th
September, 2001. The Court below said that award dated 15th April,
1998 had been received from the Tribunal to be made rule of Court. As
against such award, State initiated misc. case under sections 30 and 33
of Arbitration Act, 1940, to set it aside.
2. Mr. Das, learned advocate, Addl. Standing Counsel appears on
behalf of appellant and submits, the award is on majority view taken by
two out of three members in the Tribunal. By the view, the Tribunal
misconducted itself and the proceeding, in awarding claim for
escalation. Challenge in the appeal is confined to that claim. He draws
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attention to majority view taken on claim item no.30 in the reference. It
is reproduced below.
"The claimant claims Rs.14,18,041.75/- towards the
statutory rise in prices by 30% due to change of
Schedule of Rates in 1972 and 1975. The Respondent
denies that the claimant quoted his rates for this work
on 15.04.72 at the 1964 Schedule of rate and as he has
signed the agreement in July, 1972 and the 1972
Schedule of Rates came into force with effect from
1.1.1972. In our considered opinion, in view of
existence of Fair Wage clause in the Agreement and
time was not the essence of the contract and the delay
in execution of the work was due to the fault of the
Respondent and the agreement having been signed on
29.8.1972 and the 1972 Schedule of Rate having come
into force on 10.11.1972 (not on 1.1.1972) and the
1975 Schedule of Rate having come into force on
20.1.1975, the claim of statutory rise 20% excess
appears to be reasonable in view of the compulsive rise
in prices as has been held in the case of State of Orissa
Vs. Birat Chandra Dagara reported in AIR 1977
Orissa 142, on the value of work executed on or after
10.11.72 from the 2nd R/A bill dt. 22.11.72 upto the
final bill dt.23.7.76 i.e. on Rs.24,82,022/- which comes
to Rs.4,96,404/-."
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3. According to Mr. Das, the minority view is the view that ought
to have been view of the Tribunal. Said view is a well reasoned one,
which does not reveal misconduct. He places the view on said claim.
He submits, the contractor had upon earlier quoting higher rates, agreed
to the 1964 schedule of rates. The view says that claim of price
escalation is of reimbursement in nature and claimant had to furnish
documents of actually incurring expenditure co-relating to the
agreement rate, so as to claim extra payment. Material was supplied by
the department and cost recovered at agreed scheduled rates. No
documents like purchase voucher, cash memo or other similar types of
receipts were produced by claimant towards price rise on materials. So
also, similar omission in case of transportation higher charges bill.
There is observation in the view that there had been no statutory rise in
wage rates under provisions of Minimum Wages Act. So also there had
not been statutory rise in rates of materials or transportation charges
during the period of execution. He submits, this view is the correct
view and reiterates, the majority view prevailing was misconduct on
part of the Tribunal.
4. Mr. Sanganeria, learned advocate appears on behalf of the
contractor and relies on two judgments of the Supreme Court. They are
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firstly, Tarapore & Co. v. State of M.P., reported in 1994 (1)
Arbitration Law Reporter 341 (SC), paragraphs 26 and 27. Secondly,
on K. N. Sathyapalan (Dead) by Lrs. vs. State of Kerala, reported in
2006 (4) Arbitration Law Reporter 275 (SC), paragraphs 36 and 37.
5. The award is based on reasons given both by majority as well
as minority views. By impugned judgment the majority view was
upheld. It is to be seen whether, State's contention on the majority view
versus the minority view can lead to conclusion of misconduct on
former view being effective view of the Tribunal.
6. It will appear from above extract of majority view that basis of
awarding the escalation was coming into effect of 1972 scheduled
rates. By the view, value of work executed on or after 10th November,
1972, from 2nd R/A bill dated 22nd November, 1972 up to final bill
dated 23rd July, 1976, was awarded at Rs.4,96,404/-. The basis of the
award was that the claim of statutory rise of 20% excess appeared, to
the two members, to be reasonable in view of the compulsive rising
prices and as had been held in State of Orissa vs. Birat Chandra
Dagara, reported in AIR 1977 Orissa 142.
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7. The minority view expressed, inter alia, that escalation is
essentially a claim for reimbursement on price rise. In Tarapore and
Company (supra) the Supreme Court said by relied upon paragraphs
26 and 27, that it has to be seen whether there was an implied contract
to reimburse the increased wages as per the rates fixed under the
Minimum Wages Act, being statutory obligation and the terms of
contract being silent about payment of minimum wages. Facts in that
case were that wages were being increased from time to time, as would
appear from the decisions of the Wage Committee referred therein and
if appellant (before the Supreme Court) was being required to pay
wages as per those decisions, the Court read meeting of minds in so far
as claim of escalated payment on account of increase of fair wages is
concerned. The Court said, it has to be assumed that when appellant
was required to pay fair wages at increased rates, the authorities did
visualize that appellant would not do so by cutting down his profit.
Thus, the minority view on escalation being reimbursement and
necessity of proof of having incurred higher expenditure, finds support
from said judgment.
8. In K. N. Sathyapalan (supra) the Supreme Court found, it was
quite apparent appellant (before the Supreme Court) was prevented by
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unforeseen circumstances from completing work within stipulated
period of eleven months and that such delay could have been prevented
had the State Government sought to maintain law and order to not
allow the problem created at work site. It was further clear that rubble
and metal, which should have been available at the departmental quarry
had to be obtained from quarries situated at double the distance and
even more, resulting in doubling of transportation charges. Even space
for dumping excess earth was not provide by the employer, which
compelled dumping at a place far away from work site entailing extra
cost for the same. Those facts were there in that case and the Supreme
Court held, in the circumstances, the arbitrator appeared to have acted
within his jurisdiction in allowing some of the claims on account of
escalation of costs, which were referable to the execution of the work
during the extended period.
9. On pain of repetition, majority view in the impugned award
does not refer to substantiation of any fact requiring reimbursement on
account of escalation. Court finds, the Tribunal misconducted itself in
awarding escalation without obtaining satisfaction for basis of the
award, the law being settled that escalation is a claim for
reimbursement on higher costs incurred. There does not appear to be
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any dispute that materials were supplied by the department at agreed
scheduled rates and there was no evidence, documentary or otherwise
regarding incurring of higher costs on account of wages or
transportation.
10. Award on claim no.30 is set aside in appeal. The decree be
drawn-up accordingly.
11. The appeal is disposed of.
(Arindam Sinha)
Judge
Prasant
