TMI Blog2006 (10) TMI 456X X X X Extracts X X X X X X X X Extracts X X X X ..... he users, gift, hospital/suppliers and other commodities and gunny/twine bales imported at the Port of Tuticorin at the FCI Storage Godowns in and around Tuticorin for a period of two years from the date of contract i.e. 08.04.1981 in pursuance of Work Order No. SPC.1(1)/80 dated 20.04.1981 issued by the Senior Regional Manager, FCI, Madras. The respondent contractor/ claimant submitted his offer on 20.02.1981along with covering letter. On 07.04.1981, a communication was issued by the FCI to the claimant accepting their offer which had been reduced through negotiation to 397% ASOR. According to the FCI, a perusal of the said tender document shows that in addition to cargo handling work at the Port, the respondent-contractor had to perform various other duties including unloading of food grains from railway wagons, machine-stitching of food grain bags, loading into trucks and other vehicles, etc. etc. According to the FCI, the tender agreement did not provide for any escalation clause and also stated that other than the rates agreed between the parties, the contractor would not be entitled to any other payments. On 01.09.1981, the Tamil Nadu Government issued a notification in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithdrawal of the O.P. filed before the Tuticorin Court to the High Court. The FCI, upon being informed by the Registry of the High Court regarding transfer of OPs and their renumbering as O.P.Nos. 441 and 441A of 1993, filed objections to the Award under Sections 30 and 33 of the Arbitration Act which was numbered as O.P. No. 697 of 1993. A learned Single Judge of the High Court dismissed the objections filed by the FCI by holding the same to be time-barred and made the Award as rule of Court and passed decree in terms of the Award. The FCI preferred an appeal to the Madras High Court which was dismissed by the Division Bench of the said Court on 14.07.1997. The High Court, vide judgment and order in special leave petition Nos. 21377-21379 of 1997, set aside the dismissal and remanded the matter back to the Division Bench of the High Court for disposal on merits. The Division Bench, after dismissing the objections filed by the FCI, passes a decree in terms of the Award together with interest @ 12% p.a. from the date of the decree till the date of the payment. Aggrieved by the dismissal of the appeal by the High Court, the FCI preferred the above appeals. We heard Mr. K. Mohan, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he escalation in rates of labour and materials can only be granted on the basis of agreement; 9. He also relied on 2002 (1) SCC 659 State of Rajasthan vs. New Bharat Construction Company for the proposition that award of 9% interest for the period 08.08.1989 to 10.04.1992 and 12% interest for the future is excessive. He placed strong reliance on para 8 of the said judgment wherein this Court reduced the rate of interest from 18% and 15% to 6% through out; 10. He also drew our attention to the award passed by the arbitrator, orders passed by the different courts and also the relevant clauses in the agreement with reference to the appointment of wages etc.; 11. Concluding his argument, Mr. Mohan submitted that the High Court has completely erred in not noticing that the award suffers from the gross errors apparent on the face of the record and that the arbitrator has not gone into the evidence as to the amount of enhanced wages actually paid by the respondent to the workers and has merely awarded an assumed amount without giving any reason as to how the amount was arrived at. Mr. Anand Padmanabha, learned counsel, made the following submissions by way of reply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable, no final decision was taken during the tenure of contract including extended period of three months which the claimant was called upon to continue for the storage operations. 6. Large amounts were expended by the claimants to meet this extra cost incurred to pay the new wage structure and additional benefits given to labour as per the directives of the Government. The unexpected expenditure incurred by the wage hike, necessitated immediate requirement of enormous outlay which crippled the claimants resources. Consequently, the claimants had to raise additional funds from private sources at exorbitant interest to meet these contingencies. Instead of resorting to a cease work out of frustration in contract by a supervening event which was not within the contemplation of the parties at the time of entering into the contract, the claimants had carried on with the work effectively making enhanced wage payments in sizable amounts on the strength and faith of the assurance given by the FCI hierarchy. The huge expenditure incurred in mobilizing resources at exorbitant interest to meet the emergent situation had created additional burden on the claimants by way of accumulation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evision should not be referred to arbitration and that the said claim was non-arbitrable. However, the learned Subordinate Judge, Tuticorin by order dated 16.02.1987 in O.P. No. 49 of 1986 rejected the said contention holding that the said claim was arbitrable. On appeal filed by the FCI before the High Court the High Court also confirmed the same by order dated 01.03.1989 in CMA No. 291 of 1987. This Court also dismissed the special leave petition No. 5213 of 1989 filed by the FCI by order dated 05.05.1989. Thus, the FCI is barred by res judicata from raising the same issue again in the present proceedings. Even on merits, the claimants firm is entitled to be paid the said compensation, in view of clause 7 of the contract dealing with payment of wages. PAYMENT OF WAGES TO WORKERS: The contractors shall pay not less than minimum wages to the workers engaged by them on either time-rate basis or piece rate basis on the work. Minimum wages both for the time rate and for the piece rate work shall mean the rate(s) notified by the appropriate authority at the time of inviting tenders for the work. Where such wages have not been so notified by the appropriate authority, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stevedoring Agency for 1297% ASOR for port operations alone (vide Ex.C24) as against the claimants rate of 397% ASOR for port as well as godown and railhead operations combined, which was offered prior to the introduction of the new working pattern and increased wages in labour rates. According to the claimants, the tenders for godown operations were separately called for and was awarded by the Food Corporation at a rate of 777% ASOR which was the lowest tender received. The percentage and the figures of this statement submitted by the claimants are accepted to be correct by the respondents FCI. The claimants reiterated that this will be ample justification and testimony to prove and establish the rates that prevailed for the port operations and godown operations in Tuticorin at the time of execution of the work by the claimants and thereafter. The rates are reflected in terms and ASOR by virtue of the acceptance of these percentage by the Food Corporation for the subsequent years work obtained as the lowest offer on the competitive tenders invited by the Food Corporation. It was also stated that the other users of Tuticorin Port viz. M/s SPIC and Railways had also accepted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the wages of the workmen employed in the cargo handling was sharply increased to almost three-fold consequent upon the settlement arrived under Section 12(3) of the Industrial Disputes Act. The State Government notified the same in the Gazette on 01.09.1981. In view of the statutory increase in the wages payable to the port labourers, the claimant made a representation dated 07.09.1981 to the FCI to revise the rates in respect of the contract besides pointing out that the Claimant would be constrained to discontinue the work as the work at the contracted rates would result in large loss. The claimant again wrote a letter on 23.12.1981 to the FCI detailing the handling cost in view of the revised wage pattern and for early order on the representation. In the said letter, the claimant has also mentioned that it had offered its explanations on 22.12.1981 to the Committee appointed by the FCI and visited the FCI in this behalf. The Committee constituted by the FCI made a report dated 15.01.1982 to the FCI after inspecting the place of contract and after examining the issue. The said Committee recommended for allowing the escalated rates specified therein, supplementing with details. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Monday the 29th March, 1982 at the port and at Godowns in the absence of a decision on your demand for escalation of rates, please be informed that, our Regional office at Madras have already taken up the matter with Head Office, New Delhi and a decision is awaited. In the meantime please arrange to continue the work at the port as well as at the godowns without any interruption. However, the FCI by its letter dated 13.04.1982 accorded sanction of 488% of ASOR instead of 397% ASOR in relation to old port operations and which would workout to an increase of 91% only and 430% of ASOR instead of 397% of ASOR for the operations at new port and which would come to an increase of 31% only . The claimant accepted the same under protest and without prejudice by its letter dated 17.04.1982 and requested the FCI, New Delhi for review of the decisions of the above grant of marginal relief. It is seen from the records that the contract period was from 08.04.1981 to 07.04.1983 for a period of two years. Wage revision came into effect from 01.09.1981. From 07.09.1981 to 28.02.1984, the contractor made various representations during the currency of the contract. The FCI did not all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -6 of 2003 that the FCI had deposited only a sum of ₹ 39,97,362/- on 22.08.2003 which is 50% of the principal amount in the award and that the FCI had not deposited 50% of the total amount awarded which includes the principal amount of ₹ 79,94,724/- and interest @ 9% p.a. from 08.08.1989 till date of publication of the award i.e. 10.04.1992 and future award @ 12% p.a. till the date of realization. Therefore, an application was moved to pass appropriate orders directing the FCI to deposit the balance of the amount as per the directions of this Court dated 25.07.2003. In clarification of the order dated 25.07.2003, this Court directed the FCI to deposit half of the amount awarded by the arbitrator with interest and permitted the contractor to withdraw the said amount on furnishing bank guarantee of a nationalized bank to the satisfaction of the Registrar of this Court. 3 months time was granted for depositing the amount. Pursuant to the Court s order, an amount of ₹ 1,04,10,664/- has been deposited and kept in FD and the same is renewed from time to time. Accordingly, the amount has been released to the contractor on their submitting the bank guarantee to cover t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the parties. The Government stated that he was not entitled to increased rates. The High Court, after considering the correspondence exchanged between the parties has taken the view that the government was liable to make extra payment for the work done as there was no dispute that the rates of material, etc. had increased during the extended period of two years and the contractor was entitled to such extra payment. This Court, after considering the relevant material on record, was also of the view that both in equity and in law the contractor is entitled to receive extra payment and the High Court was right in deciding the question in contractor s favour. This Court held that the liability to make this extra payment has been properly saddled on the Municipal Corporation. The second judgment is in P.M. Paul vs. Union of India, AIR 1989 SC 1034. In this case, the dispute that was referred to the arbitrator was as to who is responsible for the delay, what are the repercussions of the delay in completion of the building and how to apportion the consequences of the responsibility. The arbitrator found that there was escalation and, therefore, he came to the conclusion that it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, the arbitrator had not misconducted himself in awarding the amount as he has done. The above two cases, in our opinion, squarely apply to the facts and circumstances of the case on hand. Escalation, in our view, is normal and routine incident arising out of gap of time in this inflationary age in performing any contract of any type. In this case, the arbitrator has found that there was escalation by way of statutory wage revision and, therefore, he came to the conclusion that it was reasonable to allow escalation under the claim. Once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the FCI, the Corporation was liable for the consequences of the delay, namely, increase in statutory wages. Therefore, the arbitrator, in our opinion, had jurisdiction to go into this question. He has gone into that question and has awarded as he did. The Arbitrator by awarding wage revision has not misconducted himself. The award was, therefore, made rule of the High Court, rightly so in our opinion. In our opinion, having considered the totality of the circumstances, we feel that it would be just and prope ..... X X X X Extracts X X X X X X X X Extracts X X X X
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