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 3 COMAP 392/2022 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 4 COMAP 392/2022 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, 5 COMAP 392/2022 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 6 COMAP 392/2022 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 7 COMAP 392/2022 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;8 COMAP 392/2022
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 9 COMAP 392/2022 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.
10COMAP 392/2022
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 11 COMAP 392/2022 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.
12
COMAP 392/2022
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 13 COMAP 392/2022 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 14 COMAP 392/2022 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.15 COMAP 392/2022
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 16 COMAP 392/2022 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.
17COMAP 392/2022
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 1 (2002) 3 SCC 533 18 COMAP 392/2022 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 2 Comap No.25/2021 DD 17.04.2021 19 COMAP 392/2022 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 20 COMAP 392/2022 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 3 2018 SCC OnLine Bom 1042 4 (2006) 13 SCC 779 5 (1994) 3 SCC 521 21 COMAP 392/2022 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 22 COMAP 392/2022 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 23 COMAP 392/2022 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.24 COMAP 392/2022
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.
25COMAP 392/2022
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 26 COMAP 392/2022 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:
27COMAP 392/2022
"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 28 COMAP 392/2022 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. 29 COMAP 392/2022
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.C4.30 COMAP 392/2022
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 31 COMAP 392/2022 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.
32COMAP 392/2022
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. 33 COMAP 392/2022
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 34 COMAP 392/2022 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 35 COMAP 392/2022 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. . . . . . . . "
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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 37 COMAP 392/2022 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- 38 COMAP 392/2022 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 6 (2009) 16 SCC 504 39 COMAP 392/2022 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 40 COMAP 392/2022 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; 41 COMAP 392/2022
ORDER The appeal is dismissed with costs.
Sd/-
CHIEF JUSTICE Sd/-
JUDGE KNM/-