Delhi High Court
Bhasin Construction Co. (P) Ltd. vs National Thermal Power Corporation ... on 2 December, 1994
Equivalent citations: 1994IVAD(DELHI)1135, 1995(32)DRJ438
JUDGMENT C.M. Nayar, J.
(1) The present judgment will dispose of suit Nos. 1496-A/86 arising from arbitration proceedings between the parties. The arbitrator, Shri R.S.Gupta has moved this Court under Section 14(2) of the Indian Arbitration Act and filed the award dated 7th May, 1986 and the proceedings. The respondent. National Thermal Power Corporation, New Delhi, (hereinafter called the 'Corporation') has impugned the award dated 7th May, 1986 by filing objections under Sections 30 and 33 of the Arbitration Act, 1940 (hereinafter referred to as the 'Act') . The other connected suit (Suit No. 1510-A/86) arises out of the award dated 15th May, 1986, rendered by the same arbitrator, in which the claim of the Corporation for refund of alleged excess payment of Rs-4,72,372.74 for labour escalation was rejected with costs. This matter is being disposed of by a separate judgment but the facts are common as they arise out of the same contract.
(2) The brief facts of the cases are that the respondent-corporation is a Government of India undertaking and is engaged in establishing a chain of Super Thermal Power plants in the country for generating and for transmitting power (electricity) . The Corporation has its registered office in New Delhi and has one such project in Shaktinagar, District Mirzapur, U.P. The project is known as Singrauli Super Thermal Power Project . The project has been located as close to the coal mines as possible. The project has its own railway system known as 'Merry Go Round' (M.G.R.) and railway siding for transporting coal from pit heads of the coal mines' to the coal Handling Unit of the project. The place of the project is near the border of Madhya Pradesh. The said M.G.R. railway system passes through certain places in Sidhi District of Madhya Pradesh and certain places in Mirzapur District of U.P. The construction of the railway system involves enormous earth work in formation for railway track and several bridges and culverts had to be constructed on the way and for the said construction of bridges and flyovers with approach banks at different places on the said railway system, the Corporation invited competitive quotation bid tenders from various civil works contractors of established repute. The petitioner company gave its competitive bid tender which was accepted. The quotation bid tenders as submitted were opened on June 16, 1978. The letter of acceptance was issued by the Corporation on October 13, 1978, in favor of the petitioner company and formal agreement dated February 20, 1979 was executed between the parties. The total value of the contract for which, the petitioner company agreed to work was Rs.l,17,61,372.00 . It is an admitted case of the parties that about 80 per cent of the work under the contract was to be done in District Mirzapur U.P. and the remaining work was to be executed in the adjoining Sidhi District in Madhya Pradesh.
(3) The disputes arose between the parties in respect of reimbursement/refund of variation of prices to the labour and it is contended on behalf of the petitioner that they are entitled to increased wages on the basis of escalation in accordance with the terms of the contract which provided for such payment. The claim was raised by the petitioner on March 7, 1981 and was based on the plea that when the formal contract was entered into between the parties the notification of 1974 provided payment of wages to the labour at the rate of Rs.2.00 per day. There was subsequent amendment of the notification on June 27, 1979 which fixed the minimum wages of the labour at the rate of Rs.4.00 per day.The disputes,as a conseuence, arose between the parties and the matter was referred to the arbitrator on August 9,1983,and the present award has been made in pursuance to such arbitration proceedings. The impugned award was made on May 7, 1986.
(4) The learned counsel for both the parties have relied on the same provisions of the contract which may now be referred to as below. Clause 7.1 of the Special Conditions of Contract may be reproduced as follows: For the purpose of calculation of reimbursement/refund on variation in prices, if there be any (plus or minus), the basis of calculation shall be as under:
____________________________________________________________________________ SI. No. Component Percentage Basis Base Price/Index ____________________________________________________________________________ a. Labour 25% Min. wages As on 30 component payable to days prior to for all unskilled the date set categories worker as for opening per. of tender.
____________________________________________________________________________ Payment of Minimum Wages Act applicable to the Project site in Site Dist.(M.P.)/ Mirzapur Distt. (U.P.) (5) The other provision which has been referred to before me by both the parties is 53-A(b) of the General Conditions of Contract and the same reads as under: "53- A(b) Labour : For the purpose of this contract the minimum wages of unskilled labour and of skilled and semi-skilled labour on the date of submission of the tender shall be taken as shown in Schedule D. If on account of any legislation, notification, labour award, the minimum wages of unskilled labour and of skilled and semi-skilled labour are increased at any time or times after the date of submission of the tender and the contractor has to pay any increased wages, then the corporation shall reimburse to the contractor the increase in the cost of labour not exceeding the increase permitted under the legislation, notification-labour award or duly approved binding agreement as aforesaid, subject to hereinafter provided. (b)(i) If any portion of the works has been given on a piece-work basis and the cost of such work has increased because of the increase in -minimum wages as aforesaid, the corporation shall reimburse to the contractor such increase not exceeding the amount calculated on the basis of the permitted increase for the portion of the labour component of the cost of such piece work. For this purpose the component of labour for each trade of work shall be based on the analysis of rates pertaining to the schedule of rates applicable as indicated in schedule 'A'. (ii) Provided however, no increase shall be payable if the increase is not more than 10% of the said wages and, if so, the increase shall be payable only on the excess over 10% and provided further that any such increase shall not be payable if such increase has become operative after the contract or extended date of completion of the works or items of work in question. (c) ................ (d) General: The contractor shall for the purpose of any claim for additional payment under this condition produce satisfactory documentary evidence in support thereof and shall at the request of the Engineer-in- charge furnish such information as may be required-by him. (i) The contractor shall within a reasonable time of becoming aware of any alteration in the prices or variation in wages or variation in premium, etc. as provided above, give notice thereof in writing to the corporation staling that the same is given pursuant to this condition together with all information relating thereto which he may be in a position to supply. Similarly if any refund is to be claimed from the contractor on account of reduction in price, the Engineer-in-charge shall give notice thereof to the contractor and follow the same procedure."
(6) Paragraph 31 of the Statement of Claim filed before the arbitrator may be reproduced as follows: "31.The claimants submit that having regard to the formula prescribed in condition No. 7 of the Special Conditions of Contract the various components for calculation of variation in price in respect of increase of labour charges were the assumed percentage of labour components at 25% of the entire value of the work; the base, wage, and the basis of the minimum wage under the Minimum Wages Act in Sidhi District in the State of Madhya Pradesh. At the time of submission of quotations and during a period of 30 days preceding the opening of the tender the minimum wage at Sidhi district in Madhya. Pradesh under the relevant provisions of the Minimum Wages Act in relation to unskilled labour was Rs. 2.00 per day. Applying the formula prescribed in condition No. 7 of the Special Conditions the amount of labour escalation that became payable consequent upon the revision of wages with effect from June 27, 1979 worked out to Rs-37,78,869.82. Appended hereto and marked annexure is a statement showing the calculation of the variations/escalation in respect of labour both in relation of value to be works carried out in the State of Madhya Pradesh and in the State of Uttar Pradesh."
The schedule attached with the statement of claim filed by the petitioner/claimant before the arbitrator with regard to the calculation of labour escalation for work done in U.P. as well as in M.P. may be reproduced as under: Calculation of labour escalation for work done against specification No. CC/12-113 dated 13.10.1978 of M/s National Thermal Power corporation Ltd for construction of bridges and flyovers for the Merry-Go-Round railway system and siding for Singrauli Super Thermal Power Project.
A. Base Labour Wages as per contract (refer (clause 7.1 page 7 of the special conditions of Contract and Annexure 'F' attached) Rs. 2.00 per day B. Formulae for calculation escalation: E = Value of work x 25 x (applicable wages - Base wages) - 10% 100 x Base wage C. Applicable wage in M.P. between 27.6.79 up to completion of work Rs. 4.00 per day D. Applicable wage in U.P. between 2.12.78 to completion of work Rs. 6.00 per day E. Gross value of work done Rs. 1,12,79,885.65 F. Value of work done in M.P. i.e. Bridge No. 18,36,22 & 50% of 10 (refer annexure 'B'&D attached) Rs. 30,94,384.09 G. Value of work done. in U.P. (E-F) Rs. 81,85,501.60 H. Value of work done in M.P. up to 26.6.79 (refer annex.'C' and 'E' attached) Rs. 5,70,975.91 I. Value of work eligible for escalation, in M.P. area (F-H) Rs. 25,23,408.18 Calculation of Escalation (i) Amount of escalation for work done in U.P. 81,85,501.6 x 25 x (6-2)-10% 100 2 = 40,92,750.80-4,09,275.08 Rs. 36,83,475.72 (ii) Amount of escalation for work done in M.P. 25,23,408.18 x 25 x (4-2)-10%. 100 2 = 6,30,852.05-63085.20 Rs. 5,67,766.84 Total value of labour escalation i + ii Rs. 42,51,242.56 Amount of labour escalation paid Rs. 4,72,372.74 Balance due from Ntpc against labour escalation Rs. 37,78,869.82"
The reading of the above statement will clearly indicate that the amount of escalation for the work done in U.P. by the petitioner was claimed as Rs.36,83,475.72 whereas the amount of escalation for work done in Madhya Pradesh was- only to the extent of Rs.5,67,766.84. It is an admitted case of the parties that the claim for escalation for U.P. has since been rejected and there is no challenge to the same in the present proceedings. The petitioner has also acknowledged that a sum of Rs 4,72,372.74 has already been received for the escalation amount for the work done in M.P. Therefore, the only amount which in fact has been claimed for escalation by the petitioner in the statement of claim would be as follows:
Total amount claim Rs. 5,67,766.84 Amount of labour escalation paid Rs. 4,72,372.74 Balance due from the respondent Rs. 95,394.10 (7) The first petition, being suit No. 1496-A/86 can be disposed of on the ground that the arbitrator has misread the claim of the claimant and has mis- conducted in law by awarding the amount which has not even been claimed by the claimant petitioner. In this context, reference may be made to the operative part of the Award dated 7th May,1986, as contained in paragraphs 24, 25 and 26 which may be reproduced as under: Issues No. 6 and No.7 "24.As aforesaid, the respondent corporation has reimbursed to the claimant Co. to the extent of 1/2 portion of the rise in minimum wages with regard to bridge No. 10 on the ground that its site is located at the border of Sidhi Distt.(M.P.) and Mirzapur distt. (M.P.). The former has so reimbursed the latter in the amount of Rs-1,53,530.26. It indeed looks funny that one would pay wages to half of the labour at the rate of Rs.4.00 per day and to the other half at the rate of Rs. 2.00 per day although all of them are doing the same work at the same place. My considered finding is that the respondent corporation is obliged to pay a similar amount (Rs-1,53,530.26) mote to the claimant co. on account of the said escalation in minimum wages for constructing that bridge. Then, by saying that the site of that bridge is on the border of the two districts it does not imply that half of that site is in one district and the other half in the other district. This decides these two issues. 25. Then, the claimant Co. is fully justified in claiming another amount of Rs-86,670.00 (para No. 27 of the claim, petition) because the corporation While permitting reimbursement of escalation in minimum wages in Sidhi district M.P. considered that rise in such wages on account of the notification of 27.6.1979 has been from Rs. 2.15 to Rs.4.00 per day. Actually such rise has been from Rs. 2.00 to Rs. 4.00 per day. A proportionate rise in the amount of Rs. 1,53,530.00, that has been referred to in para No. 24 above, would roughly work at Rs. 32,000.00 . Thus, the respondent corporation is liable to pay Rs. l,18,670.00 also, which is the aggregate of the aforesaid two amounts of money to the claimant Co. 26. It may be stated the respondent corporation in the matter of reference made by them for claiming certain money by way refund from the claimant Co. has further claimed interest on that money at the rate of Rs. 18.00 percent per annum. Thus, there is every justification for allowing interest at that rate on the aforesaid monies (Rs.2,72,200.00 ) found due to the claimant from the respondent corporation from the relevant date(s). As would appear from para No. 17 of the claim petition the claimant Co. had been demanding the additional money on account of escalation in minimum wages in Sidhi distt. (M.P.) for the works accomplished in that district including bridge No. 10 since prior to 15.9.81. Out of the total money then claimed a sum of Rs. 2,72,200.00 had been wrongfully withheld. Therefore, the respondent corporation shall also be liable to pay interest on that money to the claimant Co. at the rate of 18% per annum which till now works at Rs. 2,28,650.00 (roughly). Then, I would allow to the claimant Co. Rs. 10,000.00 against the respondent corporation towards the costs of their arbitration proceedings. Thus, the respondent corporation (National Thermal Power Corporation Ltd., New Delhi) shall in all pay to the claimant Co. Rs. 5,10,850.00 ."
(8) The arbitrator has reimbursed the claimant petitioner for the following amounts: a) towards bridge No.10 for Sidhi district (M.P.) and Mirzapur district (U.P.) Mirzapur district Up has been wrongly shown in award to be in Mp whereas it is in UP) Rs. 1,53.530.26 b) proportionate increase of 15 paisa i.e. difference between Rs. 2 and Rs. 2.15 on the above amount Rs. 32.000.00 c) claimant made in paragraph 27 of the statement of claim without taking into consideration provisions of clause 53A(b) that initial 10% was absorbed by the claimant Rs. 86,670.00 d) Total amount allowed Rs. 2,72,200.00 e) Interest on the amount at the rate of 18% Rs.2,28,650.00 f) Costsawardedagainsttherespondent corporation Rs. 10,000.00 ____________________ Rs. 5,10,850.00 ____________________ (9) The total amount awarded against the respondent corporation is in the sum of Rs. 5,10,850 which clearly indicates that the arbitrator has in fact given the award beyond the claim as made by the petitioner in the statement of claim filed before him. The escalation in wages in Sidhi district, M.P. with which I am concerned in the prevent case only related with increase in daily wages of the unskilled labour to Rs. 4.00 as contemplated by notification issued under Minimum Wages Act on 27th June, 1979. The petitioner did not raise any claims in respect of the sums as awarded by the arbitrator and has further admitted that a sum of Rs-4,72,372.74 out of the total claim of Rs-5,67,766.84 towards escalation has already been paid by the respondent corporation. Faced with this situation, the learned counsel for the petitioner merely contended that this point was not raised before the arbitrator and it will not be open for this court to adjudicate on the same. He has offered no explanation about the exaggerated/amount which has been awarded by the arbitrator in the sum of Rs.5,10,850.00 despite the fact that no such amount was claimed in the statement of claim. He also does not dispute the correctness of the statement of claim, which has been raised before the arbitrator and this will not entitle the petitioner to an amount more than Rs. 95,394.10, as referred to above in case the petitioner succeeds in the other connected petition.
(10) The learned counsel for the respondent has vehemently contended - that the arbitrator has committed gross act of misconduct and the award is liable to beset aside. He has referred to me to the judgments reported in K.P. Poulose Vs. State of Kerala and another ; M/s Mehta Teja Singh & Co. Vs. Union of India & another ; Orissa Mining Corporation Ltd. Vs. M/s Prannath Vishwanath Rawlley , ; Dandasi Sahu Vs. State of Orissa and Union of India Vs. M/s Jain Associates & Anr.
(11) It may not be necessary for me to refer to all the above cited judgments in detail. It will suffice to say that in the present case the award is vitiated as the arbitrator has not even referred to the claim made by the petitioner claimant and has awarded a sum of Rs.5,10,850.00 without reference to the relevant documents on record. This has obviously resulted in grave miscarriage of justice and is an act of mis- conduct on the part of the arbitrator. The Hon'ble Supreme Court in the case of Dandasi Sahu Vs. State of Orissa (supra) has clearly held that : "THEaward could be interfered with only limited circumstances as provided under Sections 16 and 30 of the Arbitration Act. In this situation we have to test the award with circumspection. Even with all the limitations on the powers of the court and probably because of these limitations, we have to hold that if the amount awarded was disproportionately high, having regard to the original claim made and the totality of the circumstances, it would certainly be a case where the arbitrator could be said to have not applied his mind amounting to legal misconduct."
(12) The above observations aptly apply to the facts of the present case and there has been no explanation whatsoever which has been offered by the learned counsel for the petitioner/claimant except to say that the point should have been agitated before the arbitrator by the respondent corporation. This plea indeed is meritless and cannot be sustained. . In my view, the arbitrator has not applied his mind and his findings will certainly amount to legal misconduct. There is an error apparent on the face of the award.
(13) For the aforesaid reasons, the award dated May 7, 1986, is set aside. There will be no order as to costs.