& Co. Vs. State of M.P  INSC 124 (16 February 1994)
B.L. (J) Hansaria B.L. (J) Jeevan Reddy, B.P. (J)
1994 SCC (3) 521 JT 1994 (2) 162 1994 SCALE (1)612
Judgment of the Court was delivered by HANSARIA, J.- The appellant impugns the
judgment of the High Court of Madhya Pradesh by which it has upheld the order
of the District Judge, Jabalpur, setting aside the award of the
arbitrators in exercise of power conferred by Section 30(a) of the Arbitration Act,
1940, hereinafter the Act.
award to be set aside was one which had come to be passed following the order
of the District Judge dated May 6, 1987 in
Civil Suit No. I-A/87 by which an earlier award had come to be remitted to the
arbitrator for reconsideration keeping in view the legal arguments advanced.
The first award owes its origin to the following question referred for
determination by the two arbitrators named in the order of the District Judge
passed on April 12,
the State is not liable to reimburse to the applicant Rs 3,42,69,847.00 for the
period August 7, 1979 to August 31, 1984 on account of difference in wages."
reference was made on an application made by the appellant under Section 20(1)
of the Act. That application was based on the terms of the agreement entered
into by the appellant with the State of Madhya Pradesh relating to construction of Bargi Masonry Dam. One of the
terms of the agreement as incorporated in clause 4.3.29(2) provided for
settlement of dispute arising out of contract by arbitration. The appellant's
averment was that after the contract was entered into, minimum wages were
raised by the State and the appellant was required to pay wages accordingly.
The rates quoted by the appellant, however, related to wages as were prevalent
at the time when the tender was invited. The revision of the wages upset all
the calculations as extra amount had to be paid on this count.
Superintending Engineer rejected the claim of reimbursement on the ground of no
escalation clause in the contract, whereupon the appellant called upon the
Superintending Engineer to appoint an arbitrator on behalf of the State. This
not having been done and the appellant having appointed one Brigadier D.R. Kathuria
as arbitrator, it approached the court to direct the State to file the
arbitration agreement and to make an order of reference.
did not oppose; indeed it filed no reply.
only this, it even 525 named one Shri V.M. Chitale as arbitrator while filing
the arbitration agreement.
these circumstances the aforesaid question was referred for determination by
the two named arbitrators.
the reference was entered into by the arbitrators the appellant claimed a sum
of Rs 3,42,69,847 on the aforesaid count. The State admitted that the
contractor was liable to pay the increased wages under the Minimum Wages Act,
but took a stand in paragraph 12 of its counter that the claimant was not
entitled to the increased amount on account of revision of wages and denied its
liability to reimburse.
arbitrators, however, by order dated November 20, 1986 awarded a sum of Rs 236 lakhs with
simple interest @ 12 per cent to the claimant-appellant. It may be stated that
by the time the award was passed one Shri K.C. Goel had stepped into the shoes
of Brigadier D.R. Kathuria.
State approached the District Judge to set aside the award, inter alia, on the
ground that the arbitrators had not decided the question of the liability of
the State to reimburse the claim due to escalation of wages which was one of
the matters referred to the arbitrators. This is what appears from the State's
petition filed on January 23, 1987 under Section 30 of the Act. When the matter
came to be taken up by the District Judge the main contention advanced was,
however, relating to quantum of award, as it would appear from paragraph 5 of
the order of the District Judge passed on May 6, 1987. The attack on this score
was on the ground that the arbitration could not have calculated the amount on
the task-basis of the sub-contractor and piece workers. The District Judge took
the view that the difference in wages was required to be calculated on
"actual basis" unless the parties agreed upon some other formula for
calculation. As the arbitrators had calculated the amount taking the labour
components as 35 per cent, the finding of the arbitrator was held to be based
on "wrong basis".
was also said about interest. The District Judge took the view that the whole
award was not required to be set aside and remitted the same as contemplated
under Section 16(1)(c) of the Act.
After the matter was taken up again by the arbitrators, the State brought to
their notice that as per the aforesaid remand order they were required to
decide the question whether the State was liable to pay escalation amount in
the light of the agreement. This is what finds place in paragraph 3 of the
submissions made before the arbitrators, a copy of which is at p. 226 of Volume
11. In the remand proceedings the appellant brought further materials on record
and also examined some witnesses. By a speaking order the arbitrators required
the State to pay to the claimant a sum of Rs 236 lakhs with simple interest @
12 per cent. Though the actual wages paid by the appellant on account of the
increased rates came to Rs 245 lakhs, but as the earlier award was for Rs 236 lakhs
this was the amount which came to be awarded by the arbitrators.
State again approached the District Judge to set aside the award by its application
dated October 31,
1987/November 2, 1987.
What is stated in paragraph 6 of this application is material which reads as
learned Arbitrators erred in fixing the liability to reimburse the escalated
wages in the face of clear condition in the agreement of contract, that they
are bound to comply with all labour laws and that the increases in the wages,
were made by the Labour Welfare Department and as such it is the responsibility
of the contractor to pay at the rates prescribed. There is no clause in the
work contract to allow claim towards escalated payments of wages."
District Judge by his order dated July 21, 1988 set aside the award being of the
view that the arbitrator did not at all consider whether the State was liable
to reimburse. Some defect was also found on the question of quantification. The
appellant carried the matter in appeal to the Madhya Pradesh High Court which
held in the impugned judgment that the arbitrators ought to have given their
finding insofar as primary question of liability was concerned which, however,
was not done. On the question of quantum also the High Court was not satisfied
inasmuch as in the second award also the same basis had been adopted as had
been done in the first award, which had been regarded as wrong by the District
the aforesaid facts, the main question which calls for our determination is
whether on the face of two awards and the cases put up by the parties can it
really be said that the arbitrators had acted beyond jurisdiction in awarding
the sum in question and had thereby misconducted themselves. Another question
which we shall have to answer, if we hold that the arbitrators had
jurisdiction, relates to quantum.
Sanghi appearing for the State has strenuously urged that the arbitrators
assumed jurisdiction which they did not have and thereby misconducted
themselves. We are reminded that if an adjudicating authority has no
jurisdiction it cannot assume it even if the same were to be acquiesced.
According to Shri Nariman, however, present was not a case where the arbitrator
lacked jurisdiction altogether. The argument, therefore seems to be that
present was not a case of patent lack of jurisdiction; if at all: it was a case
of latent lack of jurisdiction, in which case acquiescence would be material.
Did the arbitrators have jurisdiction? The question of jurisdiction is the real
bone of contention between the parties. Shri Sanghi has drawn our attention to
the following conditions in the tender notice. (As per paragraph 2.13 of tender
notice "all the conditions of tender notice will be binding on the
contractor and will form a part of the agreement to be executed by the
contractor...... ) Let us therefore note the relevant conditions of tender
2.2 The percentage of tender above or below schedule of rate, item rate, lump
sum (as the case may be) should be expressed both in words and figures and all
overwriting should be neatly scored out and 527 rewritten and corrections should
be duly attested prior to the submission of the tender.
2.19 The contractor shall pay not less than fair wages to labourers engaged by
him on the work (Copy of rules enclosed vide Annexure-B) (3)Para 10 of
Annexure-A The contractor shall observe all labour laws enacted by Govt. of
Madhya Pradesh or Govt. of India as amended from time to time, without having
any claim on Irrigation Department.
supplied) (4)Para 1 of Annexure-B The contractor shall pay not less than FAIR
WAGE to labourers engaged by him on the work.
wage' means wage whether for time or piece work notified at the time of
inviting tenders for the work and where such wages have not been so notified
the wages prescribed by the PWD (Irrigation Department) for the division in
which the work is done.
ours) (5) 4.3.15. Time-limit for unforeseen claims.
no circumstances whatever, shall the contractor be entitled to any compensation
from Government on any account unless the contractor shall have submitted claim
in writing to the Engineer-incharge within one month of the clause of such
Relying on the aforesaid terms of agreement, Shri Sanghi contends that the
appellant having been made known beyond doubt that it has to give tender as per
item rate or lump sum bearing in mind the fair wage at the time of inviting the
tender and para 10 of Annexure-A having required the contractor to observe all labour
laws amended from time to time without "having any claim on Irrigation
Department", if the appellant had paid to the labourers any increased
amount on account of rise of minimum wages which it was required to do because
of clause 2.19 of tender notice, it must be deemed to have agreed that it would
do so without having any claim on the Irrigation Department. In view of this, Shri
Sanghi urges that the arbitrators had no jurisdiction to fasten any liability
on the State on the aforesaid count, and by doing so they travelled outside the
contract. That in such a situation the award would be without jurisdiction is
contended on the basis of Associated Engineering Co. v. Government of A. P. I
and Managing Director, J & K Handicrafts, Jammu v. Good Luck CarpetS2.
Shri Nariman has not contested the legal proposition that an arbitrator cannot
travel beyond the contract, it is not necessary to labour on this point. It
would be enough if we take note of aforesaid two decisions, in first of which
it was stated clearly that an arbitrator cannot go out of contract 1 (1991) 4
SCC 93 : (1991) 2 SCR 924 2 (1990) 4 SCC 740 528 and if he does so the award
would be without jurisdiction.
that case the award was so found because of which it was stated in paragraph 30
that the award flew in the face of the contract and so it was set aside. In the
second decision this Court stated that if the question of jurisdiction of
arbitrator is raised, the only way to test the correctness is to look into the
agreement between the parties as reference can be one which is contemplated by
Nariman's emphasis on this facet of case is that the question as referred to
the arbitrators by the District Judge on April 12, 1985, if interpreted in the background
in which it was made, would show that the State had accepted its liability and
the reference was really on the question of quantification of the liability.
This is sought to be brought home by drawing our attention, inter alia, to the
fact that the appellant had approached the District Judge under Section 20 of
the Act after the Superintending Engineer had rejected the claim on account of
increase of wages, by taking a stand that there was no escalation clause under
the contract agreement, as would appear from the minutes of the meeting held on
April 7, 1984, a copy of which is at p. 125 of the additional documents filed
on behalf of the appellant to be referred as Volume II.
counsel then refers to the statement of claim as made before the arbitrators in
paragraph 16 of which it had been stated that in case of M/s SEW Construction
Private Limited, which too was given contract for construction of a part of the
dam in question, the Superintending Engineer despite finding that the claim on
account of escalation of wages was justified had not paid the same, whereupon a
sole arbitrator was appointed and the arbitrator gave an award on July 12, 1984
directing reimbursement on account of rise in fair wages and the award was honoured
by the State and payment was made in accordance with the award. As to this
averment, the only reply of the State in its counter was that this was
irrelevant as that agreement was entirely different. Shri Nariman urges that
this contention is incorrect inasmuch as there was one tender notice pursuant
to which contract was given not only to the appellant but to three others
including M/s SEW Construction Private Limited.
learned counsel also brings to our notice a communication of Superintending
Engineer dated August
7, 1984 to the Chief
Engineer of Bargi Dam wherein the claim of the appellant itself was regarded as
Our attention is then invited to the communications of the appellant to the Labour
Welfare Officer/Executive Engineer, Bargi Dam, as at pp. 70, 82, 97 and 100 of
Volume 11 by which the appellant used to bring to the notice of the aforesaid officials
stating that wages had been paid as per the circular/communications referred
therein dealing with payment of wages, rates of which were being raised from
time to time. In these communications, the appellant either used to state that
relevant muster rolls were available for scrutiny or enclose copies of the
same. Shri Nariman finally submits that the appellant having been asked to give
tender taking the fair wage "at the time of inviting tender" and
having been further asked not to pay less than "fair wage" and the
appellant being informed from time to 529 time by the government officials
either about the rise in rates of minimum wages or the one decided by the wage
committee of the concerned division of the Public Works Department, it is apparent
that the terms of the agreement did require the appellant to pay wages to the labourers
as per the rates of minimum wages fixed under the provisions of the Minimum
Wages Act, 1948, or as fixed by the wage committee; and so, merely because of
what has been stated in paragraph 10 of Annexure-A, it cannot be contended that
the appellant would have no claim on the Irrigation Department due to increase
of aforesaid wages. According to the learned counsel this paragraph in
Annexure-A has to be confined to the subject-matter of that annexure which is
"Model rules relating to labour water supply and sanitation of labour
camps". A perusal of that annexure shows that it deals with matters like
'sanitary facilities', 'latrines', 'drinking water', 'bathing facilities'. We
have noted that it is really Annexure-B which is relatable to fair wages.
Nariman buttresses his submissions by contending that the aforesaid was the
reading of the relevant clauses of agreement by the State itself as it would
appear from the stand taken by its counsel before the District Judge when he
examined the matter in the first instance, as, the "main contention"
then advanced was on the subject of calculation of the amount of reimbursement,
as it would appear from paragraph 5 of the District Judge order dated May 6,
apparent that if jurisdiction of the arbitrators would have been the main plank
of State's case, that would have been the main contention. It is because of
this the matter was remitted to the arbitrator under clause (c) of Section
16(1) of the Act and not under clause (a); the latter of which comes into play
when a point is left undetermined by an arbitrator. It is stated that in the
first award, as in the second, the arbitrators had not dealt specifically with
the question of liability of the State. Despite this the main contention on the
first occasion was concerning the calculation and not the liability.
The next leg of the argument of Shri Nariman is that mere absence of any clause
in the agreement that the contractor could lay claim on account of escalation
of wages is not conclusive as escalation is a normal incident and a claim of
escalation cannot be rejected merely because of absence of such a provision in
the agreement. This proposition of law is advanced by referring to P.M. Paul v.
Union of India3 and Continental Construction Co. Ltd. v. State of Mp.4
Nariman concludes by submitting that the present is not even a case of apparent
error of law which merited setting aside of award; and in any event, even if
there was any error, it was an error within jurisdiction and not error of
jurisdiction because of which the courts below had no jurisdiction to set aside
The aforesaid are the rival contentions relating to jurisdiction. Before we
express our views on this all important question, it deserves to be stated 3
1989 Supp (1) SCC 368 : (1989) 1 SCR 11 5 4 (1988) 3 SCC 82 530 that if an
authority would lack jurisdiction in the sense that the subjectmatter is not
amenable at all to its decision, i.e. the case be of patent lack of
jurisdiction, acquiescence of the parties would not be material inasmuch as it
is settled law that by agreement jurisdiction cannot be conferred. The present
is, however, not such a case inasmuch as the arbitration clause, 4.3.29,
reading as below:
any dispute as to the meaning or the specification, conditions etc. or as to
the quality of materials, workmanship etc. or any other matter, thing, dispute
or question whatsoever relating to or arising out of or in any way connected
with the contract whether arising during the period of the contract or after
the completion shall be referred to the Arbitration of two persons, one each to
be nominated by either party to the dispute, the two Arbitrators so appointed selecting
an Umpire." would show that any dispute relating to or arising out of or
in any way connected with the contract has to be referred to arbitration. The
present was definitely a dispute arising out of or connected with the contract.
The subject-matter of the dispute is thus squarely covered by the arbitration
clause and therefore we do not read patent lack of jurisdiction on the part of
arbitrators in having gone into the question of reimbursement. The best that
could be said is that the terms of the agreement being what they are, the
arbitrators had no jurisdiction to entertain the claim, and so, the present was
a case of latent lack of jurisdiction.
such a case acquiescence of the parties may be relevant.
do not, however, propose to decide the question relating to jurisdiction on the
narrow or technical ground of acquiescence seized as we are with an award which
is in the neighbourhood of Rs 2.5 crores; instead, we would address whether the
terms and conditions of the agreement at hand did permit entertaining of the
claim of the appellant on the score of escalation of wage rates. Despite this
approach to be adopted, it would be appropriate to say that the State did seem
to take a stand at the relevant time that the arbitrators had jurisdiction to
entertain the claim. We have said so because in the very first round of
litigation before the District Judge the " main contention" advanced
was relating to the calculation of the contract. It is apparent that if the
State would have been of the view that the arbitrators had no jurisdiction to
entertain the claim, the question of jurisdiction would have been put at the
forefront and not the question of quantum. It may be that this stance was taken
by the State because of its stand when a similar claim by M/s SEW Construction
Private Limited came to be made which was ultimately accepted. To us, it
appears that it is because of this that in the remand order the District Judge
did not mention about clause (a) of sub- section (1) of Section 16 of the Act
but referred to clause (c) and the thrust of the remand order was, if the same
is read in the light of the legal arguments advanced which were required to be
kept in view as stated in paragraph 9 of the remand order, to make fresh
calculation of the claim as the earlier calculation was found to be based on a
Let it now be seen as to whether the terms of the agreement, as these were, did
permit the arbitrators to entertain the claim at hand. Shri Nariman, in support
of this contention has strongly relied upon the decisions in P.M. Paul v. Union
of India3 and Continental Construction Co. v. State of M.P.4 In Paul case3 a
claim was made by the contractor to compensate for the extra amount he had to
spend due to escalation of prices caused due to the delayed completion of the
work. The delay had occurred because of some dispute in handing over of the
site. The arbitrators allowed the claim which was upheld by this Court. What is
relevant for our purpose is that while doing so the Bench observed at p. 121
that escalation is a normal incidence arising out of gap of time in this
inflationary age. This observation was made while meeting with contention
advanced on behalf of the Union of India that in the absence of any escalation
clause it was not permissible to the arbitrator to grant any claim on the
ground of escalation which contention was noted at 120 C. But this was a case
where the Government was at fault in failing to hand over the site as per the
the case of Continental Construction Co.4 the award of the arbitration on the
score of rise in prices of materials and labour charges was held bad because
the clauses in the contract had stipulated that the contractor would complete
the work despite such increases. Shri Nariman, however, brings to our notice
what was observed in paragraph 10. There reference was made to Tarapore and Co.
where it was held that: (SCC pp. 90-91, para 10) "... if the agreed fact
situation, on the basis of which agreement was entered into, ceases to exist,
the agreement to that extent would become otiose. If rate initially quoted by
the contractor became irrelevant due to subsequent price escalation...
contractor's claim for compensation for the excess expenditure incurred due to
the price rise could not be turned down on ground of absence of price
escalation clause in that regard in the contract. Agreement as a whole has to
Nariman urges, on the strength of the aforesaid two decisions, that the absence
of escalation clause in the present case would not, therefore, be conclusive to
deny the relief to the appellant. As to the judgment of this Court in
Associated Engineering Co. v. Govt. of A. P. I which has been relied on by Shri
Sanghi to urge that in the absence of escalation clause award could not have
been made, Shri Nariman contends that in that case there was a specific term in
the contract requiring the contractor to carry out "any other haul
roads", despite which the arbitrator had awarded some amount for
maintenance of haul roads. That award was thus in the teeth of specific
provision in the contract to the contrary. So, counsel urges, that what was
stated in Associated Engineering case' would not apply to the facts of the
Sanghi has strenuously urged that in the present case also there is an express
exclusion inasmuch as para 10 of Annexure-A states about 5 Tarapore and Co. v.
Cochin Shipyard Ltd., (1984) 2 SCC 680 532 laying no claim on the department
due to observance of amended labour laws. But as already noted Annexure-A deals
with different aspects of labour laws, whereas Annexure-B is on the subject of
fair wages, and so, what has been stated in the former cannot be read as
excluding the claim at hand.
The aforesaid shows that the present was not a case where on the basis of the
terms of the agreement entered between the parties it can be held that the
arbitrator had no jurisdiction to make the award because of there being no
express provision for it in the contract. Therefore, on the basis of what has
been stated in Good Luck Carpets2 according to which if a challenge is made to
the award on the ground that the arbitrator has no jurisdiction, the only way
to test the correctness is to look into the agreement itself because the
jurisdiction of the arbitrator flows from the reference and a reference can be
only with regard to such disputes which are contemplated by the agreement, it
cannot be held that the arbitrators had no jurisdiction to make the award
because of lack of specific provision permitting the claim at hand. This does
not conclude the matter. It has to be seen whether the term of the agreement
permitted entertainment of the claim by necessary implication. It may be stated
that we do not accept the broad contention of Shri Nariman that whatever is not
excluded specifically by the contract can be subject-matter of claim by a
contractor. Such a proposition will mock at the terms agreed upon. Parties
cannot be allowed to depart from what they had agreed. Of course, if something
flows as a necessary concomitant to what was agreed upon, courts can assume
that too as a part of the contract between the parties.
Let it now be seen whether the claim of the appellant because of the escalation
in the rates of aforesaid wages can be read as a necessary concomitant to that
which was agreed upon. As the increased payment owes its origin either to
increase in rates of wages pursuant to notifications issued in exercise of
power under clause (b) of sub-section 1(i) of Section 5 of the Minimum Wages
Act, 1948 (copies of some of which notifications are at pp. 62-67 and 95-96 of
Volume 11) or to increase in rates of wages by the wage committee of the
concerned division of the PWD (some of which determinations are at pp. 72-79
and 86-93) it has to be seen whether there was an implied contract to reimburse
the increased cost on account of rise of rates of wages on both the counts.
Payment of wages as per the rates fixed under the Minimum Wages Act being
statutory obligation and the terms of the contract being silent about payment
of minimum wages, as the relevant term (para 1 of Annexure-B) speaks of
"fair wages", which concept is different from minimum wages, as would
appear from what was stated by this Court in Hindustan Times Ltd. v. Their
Workmen6 which decision was cited with approval in Hindustan Antibiotics Ltd.
v. Their Workmen7, Workmen v. Gujarat Electricity Board' we hold that insofar
as increased 6 (1963) 1 LLJ 108, 112: (1964) 1 SCR 234: AIR 1963 SC 1332 7
(1967) 1 SCR 652: (1967) 2 LLJ 114, 124: AIR 1967 SC 948 8 8
(1969)ISCC266,269:(1969)2LLJ791,796 533 payment on account of rise in the rates
of minimum wages is concerned, the parties were not in any sort of agreement
express or implied to reimburse the same. The appellant paid as per these rates
not pursuant to any term of the contract but because of the mandate of law.
But then, the terms at hand did require the appellant (who is the contractor)
not to pay less than fair wages as would appear from what has been stated in para
2. 1 0 and para 1 of Annexure-B. The Explanation to latter para states that
where fair wages have not been notified these wages would be the one
"prescribed by the PWD (Irrigation Department) for the division in which
the work is done".
these wages were being increased from time to time as would appear from the
decisions of the wage committee referred to above; and if the appellant was
being required to pay wages as per these decisions, we do read a meeting of
mind insofar as the claim of escalated payment on account of increase of fair
wages is concerned. It has to be assumed that when the appellant was required
to pay fair wages at increased rates, the authorities did visualise that the
appellant would not do so by cutting down its profit. By asking the appellant
to give tender by taking into account the fair wages notified at the time of
inviting tenders, the authorities did give an impression that fair wages to be
paid would be the one then notified/prescribed, a la the Explanation to para 1.
In such a situation, if rates of fair wages were raised afterwards, the
tendered sum cannot be taken to be agreed amount for completing the contract,
in the face of the directions of the authorities requiring the appellant to pay
wages at rates higher than those prescribed or notified at the time of inviting
tenders. On this fact situation, we hold that the State had by necessary
implication agreed to reimburse this increased payment.
the aforesaid view of the matter, the contention of Shri Nariman that the error,
if any committed by the arbitrators, was an error within their jurisdiction
(the same being relatable to interpretation of the contract) and such an error
is not amenable to correction by courts as held in Sudarshan Trading Co. v.
Government of Kerala9 does not really survive for consideration, as in the case
where an arbitrator travels beyond the contract, the award would be without
jurisdiction, because of what was held in Associated Engineering Co. 1 and Good
Luck CarpetS2 cases.
error in the present case cannot be regarded as one within jurisdiction; the
same is really an error of jurisdiction insofar as that para of award is
concerned which is relatable to increase in minimum wages. Needless to say that
if an arbitrator acts beyond jurisdiction, the same would amount to misconduct
(see para 10 of Hindustan Construction Co. Ltd. v. State of J & K10 because
of which the award would become amenable of being set aside by a court.
need not also enter into the controversy whether the present was the case where
the arbitrators rejected the plea of non-liability sub silentio and for this
reason the award cannot be regarded as incomplete the same 9 (1989) 2 SCC 38
:(1989) 1 SCR 665 10 (1992) 4 SCC 217 534 having not been made "de praemissis",
that is, concerning all the matters referred to. This inference may, however,
be permissible here because of what has been opined in Santa Sila Devi v. Dhirendra
Nath Sen" and N. Chellappan v. Secretary, Kerala State Electricity
Boardl2. We would state the same as regards the argument of Shri Nariman that
if the view taken by the arbitrators be also possible, interference by the
Court is not permissible, to sustain which submission we are referred to State
of A.P. v. R.V. Rayanim13; Hind Builders v. Union of India14; Hindustan
Construction Co. v. State of J & K10 (para 10); and Jagdish Chander Bhatia
v. Lachhman Das Bhatia 15.
This being legal and factual position, we are of the opinion that the view
taken by the courts below that the award merited to be set aside on the ground
that the award was beyond the jurisdiction of arbitrators was not the correct
view to take insofar as the increased payment on account of rise in the rates
of fair wages are concerned.
would, therefore, reverse this finding qua the rise in the rates of fair wages,
while sustaining the same as regards rise in rates of minimum wages.
The two courts below have also found fault with the award because of the basis
adopted by the arbitrators in fixing the amount payable to the appellant the
same being a sum of Rs 236 lakhs. This has been so held because the basis of
making this computation was the same which had not found favour with the
District Judge when he had examined the soundness of the award in this first
instance, because of which he had remitted the award to the arbitrators to find
out the amount reimbursable on "actual basis" and not on
After the matter was remitted to the arbitrators they had, however, received
further documents of which reference has been made in the award itself. This
apart, two piece workers were also examined by the appellant as LCW 1 and CW 2
of which mention has been made in para 3 of the second award. In para 2 it has
been noted that the claimant furnished details of wages paid by it to the labourers
directly and also details of payments made to piece workers.
attention is also invited by Shri Nariman to what has been stated in paragraph
6 of the award relating to filing of two documents during resumed hearing. Shri
Nariman finally brings to our notice documents at pages 165 to 167 of the
aforesaid volume showing details of the payments made to piece workers for the
period in question. These were verified by the Labour Welfare Officer as it
would appear from page 168 which is a letter addressed by him to Superintending
Engineer, Bargi Dam, in which mention was made only about two discrepancies
these being: (1) wrong showing 11 (1964)3SCR410:AIR1963SC1677 12 (1975) 1 SCC
289 13 (1990) 1 SCC 433 : (1990) 1 SCR 54, 58 14 (1990) 3 SCC 338: (1990) 2 SCR
638,649 15 (1993) 1 SCC 548,557 535 of a sum of Rs 1,67,521.23 as payment made
to piece workers in August 1979; and (2) inclusion of Rs 16,222.30 as labour
charges, whereas the same was incurred towards transport charges. This shows
thoroughness of verification. Not only this, the appellant had even produced
vouchers of payment made to piece workers for verification as stated in the
aforesaid communication of the Labour Welfare Officer. The minutes as recorded
on November 29, 1986 (a copy of which is at pp. 245-246) would bear this
statement. The appellant had also made known to the arbitrators the
"percentage of increase" and "amount of increase" of amount
paid to labour through piece workers for different period by filing a tabular
statement, a copy of which is at page 189 of Volume 11.
From the above, it would appear that all that was possible on the part of the
appellant to prove actual payment was done. It is a different matter that
because of lapse of time many of the piece workers were not available and
despite notices issued to them only four replied of whom two were examined, as
noted in para 3 of the award. A 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.
Insofar as acceptance of 35% as labour component, which is the primary reason
for finding of fault as to quantum, Shri Nariman brings to our notice the
statement made at the end of the para 6 of the award according to which the
respondents (meaning the State and its Officers) had "tacitly
accepted" by their own actions 35% as the labour component in the type of
work done by the appellant. The award further states that the documents placed
on record in this regard "have not been denied by the respondent during
the arguments and have been taken on record".
Because of the above, we hold that the fault found by the High Court regarding
the basis on which the second award was made was not the correct view to be
taken. But, as we have held that the appellant is entitled to be reimbursed for
the extra payment made only on account of rise in the rates of fair wages and
as the arbitrators had not calculated the extra amount paid on this count
separately, we remit the case back to the High Court to give its finding on
this aspect, for which purpose parties would be allowed to place further
material on record, if prayed for. We make it clear that while calculating the
amount as stated earlier, the High Court would take into account that part of
enhanced rate of fair wage which was, if at all, above the rate of minimum
wages prevailing at the relevant time. We have said so because conceptually
fair wage is higher than minimum wage and is required to be so. We also state
that the total sum to be determined by the High Court would not, in any case,
exceed a sum of Rs 236 lakhs, which is the amount awarded by the arbitrators on
the second occasion also.
have another observation to make. The same relates to the rate of interest.
According to us, in the facts and circumstances and the equities involved, the
rate of interest on the sum which would be found due as aforesaid should be 9%
instead of 12% as awarded. The interest would be 536 calculated from 14th day of
September, 1987 which is the date of the second award. It may be stated that
the arbitrators have also made the interest payable from the date of award.
The appeal is allowed accordingly. No order as to costs.