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The petition was filed on 7th July 2017 and came to be amended in view of the subsequent development i.e. the floating of two fresh tenders by the railways inviting bids for providing mechanized cleaning and On Board Housekeeping Services in the passenger coaches.

4 In response to the petition, the respondent Railways have filed their affidavits and have categorically denied the claim of the petitioner. As regards the contention of the petitioner about the recommendations of the Committee are concerned, it is stated in the affidavit that the recommendations of the committee were put up before the General Manager and subsequently referred to the HQ Finance, which has turned down the recommendations. The specific stand of the respondent is that no doubt, the Railway Tilak 9 WP-1996-17(J) Board (Ministry of Railways) has clarified that payment of revised minimum rates of wages to be paid by contractors 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. It is, however, the specific case of the respondent that the petitioner is not entitled to demand the said amount from the respondents. Along with the affidavit, the decision of the railways has also been placed on record, resolving to notify fresh tenders based on the pre-final revised standard bid document received from the Railway Board covering the new price escalation clause based on the latest board guidelines. A decision is also taken that till the contracts as per new price-escalation clause are awarded, necessary arrangements may be made by keeping adequate imprest. In a nutshell, the response of the respondents to the claim of the petitioner is that owing to the provisions of the contract and in the backdrop of the legal provisions, there is no basis for the claim that the railways should reimburse/neutralize full Tilak 10 WP-1996-17(J) compensation for the increased minimum wages as claimed by the petitioner.

5 We have heard Advocate Navroj Seervai, learned senior counsel for the petitioner and the learned senior counsel Advocate Ms.Rajani Iyer representing the respondent nos.1, 2 and 4.

The learned senior counsel Mr.Seervai would take us through the relevant clauses of the contract and would submit that the contract contained a PVC which permitted the amount payable on account of the price variation to be settled every quarter by a prescribed formula. He would submit that the clause ensured that in case of increase in the Consumer Price Index, the petitioner would be entitled for reimbursement so as to save the petitioner from the financial distress from inflation. He would submit that the petitioner is a contractor, whereas the Central Railway is the principal employer, and the petitioner's business being labour intensive, the PVC itself sets out that the total compensation payable to the petitioner under the contracts include the 55% Tilak 11 WP-1996-17(J) component towards the labour costs. The learned counsel would submit that at the time when he entered into the aforesaid contract, the prevalent rates of minimum wages payable to the employees engaged in the scheduled employment (employed in sweeping and cleaning) were governed by the notification dated 7/8/2008 in existence issued by the Ministry of Labour and the said notification was binding on him. Learned counsel Mr.Seervai, however, would submit that there was no issue as regards the payment of wages when they came to be revised by subsequent notification issued by the respondent no.3 on 30th September 2016 where the rates of wages were calculated by including the Variable Dearness Allowance (for short 'VDA') on the basis of rise in the average CPI number reaching 271.16 from 266.83 (Base 2001-100). The rates of wages applicable to the employment with which the petitioner is concerned, was hiked to Rs.374 - Rs.180 (Basic wages) and Rs.194 (VDA). The learned counsel would, however, submit that the difficulty arose when on 19.1.2017, the respondent no.3 in exercise of powers conferred under the provisions of Tilak 12 WP-1996-17(J) Minimum Wages Act, superceded the earlier notification and revised the minimum rate of wages payable to the employees engaged in the 'Employment of sweeping and cleaning'. The said notification came into effect from 19/1/2017 and revised the minimum rate of wage in Area-A to Rs.523/-. The said revised wage, according to the learned counsel, would comprise of basic rate of wages as well as special allowance (VDA) which was directed to be adjusted by Chief Labour Commissioner at an interval of six months commencing on 1st October and 1st April every year on the basis of average CPI for industrial workers (Base 2001-100). 6 Learned senior counsel Mr.Seervai would submit that the petitioner had no difficulty in paying the minimum wages prior to 19/1/2017, even if there was a hike in the rates of wages, since that was taken care of by the PVC. However, he would submit that his entire calculations would go astray if he is required to pay the revised rate of Rs.523/- per worker. The learned counsel would also submit that the Respondent railway having realization that they are Tilak 13 WP-1996-17(J) duty bound to deal with the hike in the minimum wages, have, therefore, undertaken an extensive exercise of constituting a committee of its High Ranking Officials who has agreed that Price Variation formula in the contract is based on CPI for wage escalation for which content/weightage for labour has been taken as 55%. However, in light of steep increase of minimum wages as compared to October 2016 (Rs.374) for "A" category to Rs.523/- for January 2017, whereas the WPI (Wholesale Price Index) in October 2016 was Rs.278/- and WPI in January 2017 is Rs.274/-. The Committee, has, therefore, scrutinized the grievance of the petitioner by considering 5 options and agreed as to the option of the labour component of the existing price variation being frozen till 19/1/2016 and kept as the base price and the subsequent increase to be adopted by using minimum wages paid on the actual basis of the Chief Labour Commissioner's notification. Learned senior counsel would submit that once the Committee has arrived at a decision by majority of 3 : 1, it was not open for the respondent no.4 to communicate that the proposal cannot be Tilak 14 WP-1996-17(J) accepted. He would also submit that there is no reasoning given by the Railway authorities while rejecting the said recommendations. Learned counsel would submit that what is to be looked into is the decision making process adopted by the respondents in declining the claim of the petitioner, which according to him, smacks of arbitrariness. He would place reliance on the judgment of the Hon'ble Apex Court in case of Nabha Power Limited (NPL) Vs. Punjab State Power Corporation Limited (PSPCL) & Anr1, to advance his submission that while construing the terms of commercial contract, "The principles of business efficacy to the transaction", must be intended at all events by both the parties. He would place reliance on the said judgment which recognizes MOORCOCK test of giving business efficacy as a part of 'five condition test' for an implied condition to be read into the contract. According to the learned senior counsel, the said judgment of the Hon'ble Apex Court squarely applies to the position of the present contract in question and though, according to him, the said judgment does not disturb the settled 1 2017 SCC Online 1239 Tilak 15 WP-1996-17(J) proposition of law that Court does not make contract for the parties or improve the contract between them, he would submit that the Courts are duty bound to look into the terms of contract to give efficacy to it.

It is to be noted that the calculation of price increase as per the PVC contained in the agreement is based on "Consumer Price Index" for industrial workers notified by Tilak 24 WP-1996-17(J) RBI on monthly basis. The notification dated 19/1/2017, however, suddenly changed the scenario, as a result of which the minimum wages have been increased by the whooping 40% which was an unprecedented increase and also unanticipated. This hike is not definitely covered by "Consumer Price Index" for Industrial Workers and issuance of the notification itself reveals that it is issued as "extra- ordinary notification". It is to be noted that the latest CPI for the industrial workers as issued by Reserve Bank of India on 10th January 2017 reflects that the CPI for January 2017 is reduced by one basis 275 to 274 as compared to 2016. In view of the reduction of the same Consumer Price Index, resultantly, situation that arose was, that there was increase in the minimum wages, but the Labour Index was reduced in comparison to the one existing as in December 2016. At that time, the Minimum Wages payable per day was Rs.374/-. However, in view of the notification dated 19th January 2017, there was a reduction in the Price Variation receivable on account of the increase in minimum wages. Tilak 25 WP-1996-17(J) 11 In this backdrop, the petitioner made an earnest request to the railways to share the burden of the revised minimum wages and requested a one time suitable increase to be incorporated to cater to the 40% increase in the minimum wages or to insert a clause in the contract insulating the contractor against the wage rise.

"The existing contracts for coach cleaning or similar coaching services maintenance contracts (eg.Watering/CTS/ AMOC(Bio Toilets)/OBHC or others) or station cleaning cleaning contracts in the Divisions, wherein request for foreclosure of contract have been received from the contractor, owing to inability expressed by the contractor to pay the increased minimum wages to labour, shall be Tilak 34 WP-1996-17(J) reviewed by the concerned Branch officers keeping in view the pending currency of the contract, the respective contractual issued involved and the merits in the contractor's request for foreclosure.