Andhra Pradesh High Court - Amravati
M/S.Sri Sai Investigation And Security ... vs Secretary4Ministry Of Railways on 19 April, 2022
*HONOURBLE SRI JUSTICE D.V.S.S. SOMAYAJULU
+ W.P.No. 13597 of 2018
% 19.04.2022
#M/s. Sri Sai Investigation & Security Services
Rep., by its Managing Partner
... Petitioner
Vs.
$ Secretary, Ministry of Railways,
Government of India, New Delhi and 2 others.
... Respondents
! Counsel for the petitioner : Sri C.V.Ram Mohan Reddy
! Counsel for the Respondents : Smt. Sasikala, standing counsel for
Railways.
< Gist:
> Head Note:
? Cases referred:
1 (2018) III LLJ 362 Bom
2 W.P.No.2702 of 2018
3 AIR 2003 SC 1216
4 2020 II LLJ 235 Mad
5 1996 SCR (5) Supp.447
6
1994 (3) SCC 521
7 AIR 1960 SC 588
2
HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
W.P.No.13597 of 2018
ORDER :
This writ petition is filed by the petitioner questioning the termination of two contracts by the respondent-Railways.
This Court has heard Sri C.V.Ram Mohan Reddy, learned counsel for the petitioner and Smt. Sasikala, learned standing counsel for the Railways.
Petitioner: Sri C.V.Ram Mohan Reddy, learned counsel for the petitioner took great pains to argue the matter at length. The petitioner is a contractor, who was participated in two tenders for Kakinada and Narsapur for the mechanised cleaning of coaches, cleaning of depot premises, garbage etc., which was floated by the respondent-Railways. The date of the tender is 04.07.2016. Tenders were finalized and letters of acceptance dated 27.12.2016 were issued for both the works. Formal contracts for both the works were executed in March 2017. The value of the Kakinada contract was Rs.3,65,87,811/- and the value of Narsapur contract was Rs.2,40,19,790/-. Learned counsel for the petitioner points out that basing on the minimum wages that were prevalent at the time of the filing of the tender, the petitioner had quoted the rates. However, on 28.04.2017, the minimum wages were revised by 42% with effect from 19.01.2017. Learned counsel submits that the minimum wages payable to the workers increased from Rs.250/- to Rs.359/- per day with retrospective effect from 19.01.2017. Learned counsel submits that this upset the entire planning and the financial basis of the contract. Learned counsel submits that despite the phenomenal increase in the rates due to the increase in the minimum wages, the 3 petitioner did his level best to absorb the loss and also to carry on the work. He points out that on 09.10.2017, after executing the work for sometime, the petitioner requested the respondent-Railways to foreclose the work and also relies upon a letter addressed by the Deputy Chief Labour Commissioner, Visakhapatnam, who advised the Railways to enhance the wages or to foreclose the contract since the wage hike is very high. Learned counsel points out that in reply to this, the Railways also addressed a letter stating that the foreclosure of the contract is under process. Learned counsel submits that despite this assertion, Railways went ahead and terminated the contract. Questioning the same, the writ petition is filed.
Among other grounds, learned counsel for the petitioner argues that the responsibility to pay the minimum wages is with the Railways as the principal employer and that both on grounds of justice and equity, the contractor should be indemnified and reimbursed for this extraordinary raise in the wages. He also raises an issue that the contract was not terminated in accordance with the terms of the contract. He relies upon a compilation of judgments in support of his argument which are as follows:
(1) Division Bench judgment of the Bombay High Court in WP.No.1996 of 2017 in A2Z Infraservices Limited v. Union of India, Ministry of Railways1.
(2) Judgment of the High Court of Bombay in M/s.
S.K.Enterprises, Through its Proprietor v. The Union of India, Ministry of Railways2.
1 (2018) III LLJ 362 Bom 2 W.P.No.2702 of 2018 4 (3) Judgment of Supreme Court of India in Government of Maharashtra v. M/s. Deokar's Distillery3 (4) M/s. Aarthi Enterprises, Rep., by its Partner G.Mythili v. Southern Railways, rep., by General manager, Senior Divisional Manager, Divisional Office, Commercial Branch, southern Railways, Deputy Chief Labour Commissioner (Central)4.
And also (5) The order of the Regional Labour Commissioner (Central() and Authority under Minimum Wages Act, 1948, Hyderabad in Application No.46/27/2018-E Learned counsel submits that most of these cases cited relate to the Railways only. Relying upon the first judgment of the Division Bench of the Bombay High Court, learned counsel argues that the Railways are duty bound to neutralize the cost of labour and that the principle of business efficacy should be pressed into service to interpret this contract and to grant relief to the petitioner against the extraordinary wages in the prices.
For respondents: In reply to this, Smt. Sasikala, learned standing counsel also argues at length. She points out that under the terms of the agreements, the primary responsibility rests upon the petitioner to pay the minimum wages. She relies upon clauses 15, 16 and 17 of the letter of intent in both the contracts and also the clauses 46 to 53 of Chapter III of the agreement to argue that it is the primary responsibility of the contractor to comply with the statutory requirements including the payment of minimum wages. Therefore, 3 AIR 2003 SC 1216 4 2020 II LLJ 235 Mad 5 the learned standing counsel submits that the petitioner cannot avoid his responsibility of paying the minimum wages. With regard to pre- closure, learned counsel submits that even the Railways were interested in pre-closing the agreement, but the same was not an unconditional agreement. It is pointed out that the petitioner company was put on notice that the contract would be closed by mutual agreement, provided the petitioner pays all the statutory dues to the labour etc. Wages were also to be paid by the contractor till the pre-closure. However, learned counsel points out that the petitioner did not pay the said wages leading to action according to the contract. She relies upon the letters dated 20.12.2017 issued to the petitioner by the Railways, wherein four conditions were stipulated. Learned counsel points out that even thereafter, the petitioner did not pay the wages and the Labour Enforcement Officer noticed the shortfall in payment. Ultimately, the learned counsel points out that on 15.02.2018, the Railways address a combined letter in both the contracts pointing out that as the petitioner failed to pay the wages, remit the EPF and ESI, the Railways have no other choice, but to initiate the procedure for termination. She points out that in both the agreements, seven day notice was issued on 12.02.2018 followed by a 48 hour notice in terms of clause 62 and ultimately the termination orders dated 10.03.2018 and 28.03.2018 were issued terminating the contracts. Therefore, learned standing counsel argues that as there is a clear breach of the terms of the contract and violation of the conditions, the Railways had no option but to terminate the contracts. She 6 relies upon a judgment of the Hon'ble Supreme Court of India in the case of Hindustan Steel Works v. The Commissioner of Labour5 to argue that the employer is not liable to pay the additional amount and that ultimately, even if the same is paid, they will have to recover it from the contractor.
COURT: This Court after hearing both the learned counsel, who took great pains to argue the matter realizes that there is no dispute essentially on the facts of the case.
The petitioner is a successful tenderer, who was awarded two works. Letters of acceptance was issued on 27.12.2016 for Kakinada and on 29.12.2016 for Narsapur. Formal contracts were concluded on 07.03.2017. In the interim period, the Government of India has revised the minimum wages with effect from 19.01.2017.
The first question that arises for the determination is, who is responsible for the payment of the minimum wages?. The letters of acceptance issued in the both the contracts are identical. They resulted in the formation of the contract. Clauses 15, 16 and 17 of this letters of acceptance, clearly states that the petitioner is liable for complying with the labour laws. Of significance, is clause 16, which clearly states that the petitioner is responsible for payment of minimum wages to the staff engaged by him. The proof of payment of minimum wages as witnessed by the Railway Officials should be submitted with every bill. It is made clear that bill will not be processed unless 5 1996 SCR (5) Supp.447 7 the proof is submitted for wage payment. The contract agreement entered into between both the parties is also similar. Clause 46 of this agreement deals with the "wages to labour". It clearly states that the contractor shall be responsible to ensure compliance with the provisions of Minimum Wages Act, 1948. Even if the Railways is called upon to make the payment to the workers by virtue of any claim or application made by them, the Railways have a right to claim the same from the contractor within 7 days. Railways are also entitled to recover the sum from any money due or accruing to the contractor under this or any other contract with the Railways.
Therefore, from a plain language interpretation of the contract, it is clear that the primary obligation to pay the wages as per the Minimum Wages Act always rests with the contractor only. The Railways, as a principal employer, even if they are called upon to pay any amount by virtue of a claim made by the workers, can recover the money within 7 days and from any money due under this contract or other contracts. This clause also strengthens this Court's conclusions. Therefore, in the opinion of this Court, there is no doubt that it is the 'contractor' alone who is liable to pay the minimum wages.
The view that the Railways can recover the money is also supported by the High Court of Madras judgment reported in M/s. Aarthi Enterprises case, wherein it was held that in case the minimum wages are enhanced, the principal employer is bound to reimburse the same on the petitioner making such 8 payment to employees. Therefore, if the petitioner proves that he had in fact paid the enhanced minimum wages and submits documents as per the contract, the petitioner would be entitled for reimbursement. In a judgment reported in Tarapore and Co. v. State of M.P.6, the Hon'ble Supreme Court of India also held that as the contractor was bound to pay the minimum wages and to follow the labour laws, there was an 'implied contract' to reimburse the increased payment made by the contractor on account of the raise in wages.
In the case on hand, the stand of the Railways is that the petitioner has failed to pay the wages and this has lead to the cancellation of the contract. The letters of contemporaneous period dealing with the issue are filed by both the parties. The petitioner addressed a letter dated 09.10.2017, wherein he assured the Railways that in view of the heavy burden, the contract should be foreclosed and they would be paying all the pending statutory dues till the date of pre-closure. On 12.12.2017, the Railways addressed a letter to the Labour Enforcement Officer stating that in his inspection report he noticed that the present petitioner failed to comply with the payment of minimum wages. With the counter affidavit, the respondents are also filed letter dated 20.10.2017 addressed to the petitioner in both the works. It was clarified that the petitioner had failed to pay the wages as per the latest revision, did not remit the PF and ESI and also pointed out about the 6 1994 (3) SCC 521 9 non-issuance of pay slips etc. It is agreed to pre-close the agreement with four conditions of which, the most important in this case is that the contractor shall in fact pay arrears of wages. On 29.12.2017, Railways in fact addressed a letter to the Labour Enforcement Officer pointing out that they are withholding a sum of Rs.6.10 lacks on account of the failure of petitioner to pay wages at Kakinada. This was followed by letter dated 05.02.2018 wherein the Railways clearly informed the petitioner that pre-closure is only possible on mutually agreed terms and that the request of increase in wages is not possible as per the agreement. Thereafter, it was categorically informed that in view of the failure of the petitioner to pay minimum wages, the Railways had no option, but to terminate the contracts. Thus, it is clear that there is no consensus on the aspect of pre-closure. Any variation in the terms of the contract can only be by mutual consent. If the Railways imposed certain conditions for the pre- closure and requested the petitioner to pay minimum wages till the closure, the petitioner could demand for pre-closure if he adheres to the conditions. Since he did not do so, in the opinion of this Court, the petitioner cannot rely on the issue of pre- closure of agreement.
As decided in the leading judgment of Alopi Parshad and Sons Ltd. vs. Union of India7, contractors are often faced with a rise in prices or changed circumstances during the course of the execution of the work. This by itself will not give them an 7 AIR 1960 SC 588 10 option to walk out the contract and will not also permit the Court to ignore the settled terms of contract. This leading judgment, in the opinion of this Court, is squarely applicable to the facts and circumstances of this case. Merely because the performance becomes more onerous the petitioner cannot avoid the same. The terms of the agreement are crystal clear and the petitioner is under an obligation to pay the wages. If the principal employer-Railways is called upon to pay the wages, they will recover it from the money due to the petitioner. There is no escalation clause in this contract also for the petitioner to claim the increase of wages. Therefore, in the opinion of this Court, the petitioner was duty bound to pay the minimum wages and thereafter seek reimbursement by submitting clear proper and adequate proof in terms of the agreement. Without doing so, he cannot absolve himself of his responsibility.
The next question that survives for consideration is about termination of the contract. As mentioned earlier, there is no consensus on the terms for the pre-closure. The letters addressed by the respondents clearly show that the wages were not being paid to the labour-workmen. Certain amounts and details are also highlighted in the counter affidavit filed which are not controverted. Thereafter, this Court notices that the respondents have given the seven day notice followed by a 48 hour notice as per clause 55 and then ultimately terminated the contract. The procedure stipulated under the contract was followed in the opinion of this Court.
11
Lastly, the submission of the learned counsel about the interpretation of the contract to give business efficacy needs to be answered. The learned counsel relied upon the Division Bench judgment in A2Z Infraservices Limited (1 supra). This judgment also clearly states that the terms of contract are always final. It was held in para 26 that the business efficacy test can only be applied in cases where the term that is sought to be read as a term intended by the parties. The Bombay High Court found that the Railways in that case also followed the same principle and granted price variation to the contractor till 18.01.2017 and thereafter the Railways refused to give the benefit to the contractor when the wages were escalated. There was also a price variation clause. In these circumstances, the Bombay High Court held that by applying the principle of business efficacy, the minimum wages are to be increased. It was held that as long as the contract is subsisting, the Railways are bound to reimburse the contract.
In the opinion of this Court, the terms of the present contract are crystal clear. Relevant clauses in the letters of acceptance and the general conditions are extracted earlier. By a process of interpretation, this Court cannot make out a new contract for the parties. Once the terms of the agreed contract are clear, and the contract does not suffer from any infirmity or ambiguity, this Court cannot rely on the 'business efficacy' test to bring in an implied term. This would amount to doing violence to the clear written terms of the contract. Besides, this is a matter of clear pleading which is lacking in this case. 12 Primary responsibility rests with the petitioner. He failed to discharge his statutory obligation. This led to the termination.
Therefore, in the opinion of this Court, the petitioner is not entitled to any relief.
The writ petition is therefore dismissed. No order as to costs. As a sequel, the miscellaneous petitions, pending if any, shall stand closed.
________________________ D.V.S.S.SOMAYAJULU,J Date : 19.04.2022 Note: L.R. copy be marked.
KLP