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The Government of Kerala issued a notification dated 30th March, 1983, under the Minimum Wages Act, 1948 revising the minimum wages payable to the employees employed in the works stated in the notification w.e.f. 1st April, 1983. The contractor claims that he started paying revised minimum wages to the employees and applying the labour escalation formula, the Board made payments to the contractor for the work done from 1st April, 1983 till December, 1984. The Board, however, stopped making payment of labour escalation from January, 1985. By letter dated 28th April, 1986, Government of Kerala wrote to the Board that the works in question come under Item 31 of the Schedule added to the Schedule by Kerala Government by notification dated 23rd December, 1969 and the work undertaken by the contractor, though may include stone crushing as a part of their labour, but the notification dated 30th March, 1983 does not apply to the work of constructing a dam and hence the contractor's claim for escalation under notification dated 30th March, 1983 is not maintainable. Thus, the Board stopped clearing the bills for enhanced minimum wages claimed by the contractor. It is claimed by the contractor that a settlement entered with the workers regarding payment of enhanced wages as per 1983 notification, stipulated that the increased wages paid will be treated as advances to be adjusted later depending upon the decision of the dispute.

The validity of the letter/direction dated 28th April, 1986 of the State Government was considered by the Kerala High Court in judgment dated 25th September, 1990. By the said judgment, four writ petitions were disposed of by the High Court noticing that the Advocate General after obtaining instructions from the State Government agreed to withdraw the letters/direction dated 28th April, 1986 leaving it free to the authorities to take a decision in regard to the applicability of the notification dated 30th March, 1983 on an objective assessment of legal and factual position. In view of the withdrawal of the said letter, the Court relegated the parties to other remedies available to them to work out their respective rights. The parties were thus directed to work out their rights either before the Civil Court or before the other authorities under the Industrial Disputes Act or under the Payment of Wages or other relevant law applicable. In view of this decision, the State Government referred the dispute regarding the applicability of the notification dated 30th March, 1983 to the Industrial Tribunal. According to the contractor, he was making payment of enhanced wages to the employees as per the notification dated 30th March, 1983 despite that from January, 1985, the Board had stopped making payment of the labour escalation to the contractor. The increased payment said to have been made by the contractor to the employees was to be treated as advances to be adjusted later depending upon the decision of the dispute. By an award on 14th October, 1993 the Industrial Tribunal held that the revised minimum wages notification was applicable to the works in question and that the workmen concerned in the dispute are entitled for wage rates and other benefits fixed in the minimum wage notification issued by the State Government on 30th March, 1983 in the case of employees coming under Clauses 7 and 8 of Part I of the Schedule of Minimum Wages Act till a separate minimum wage notification is issued in relation to Item 31 of the First Schedule. The Tribunal further held that the additional wages received by the workmen shall be treated as part of the wages. It is not in dispute that the award has become final.

On the other hand, it was contended for the contractor that the obligation of the Board arises as soon as the wages payable to the workmen get enhanced on account of Government notification revising minimum wages and it does not contemplate any investigation into the question whether enhanced payments were in fact made or not. The contention further is that under the Minimum Wages Act and under the industrial law, the authorities do oversee the payments and make sure that the workmen are not denied such benefits. It was further contended that the Board did not contend in the earlier writ petition before the High Court or even before the industrial tribunal that the payment as per the notification was not made by the contractor and, in fact, the award of the industrial tribunal which has become final records the factum of payment at the enhanced revised rate to the workmen and further that the memorandum between the union and the contractor witnessed by the Deputy Labour Officer also notices the factum of such payment. It was stressed that, in fact, the contractor had sought issue of Writ of Mandamus directing the Board to discharge its obligation under the notification issued under the Minimum Wages Act, the directions contained in the judgment dated 25th September, 1990 and the award dated 14th October, 1993 and to further issue a Writ of Mandamus to the Board directing it to pay to the petitioner the amount shown in the settlement between the contractor and the workmen through its union alongwith the interest.

The contract was awarded in 1981. It was for construction of a dam. The expeditious construction of the dam was necessary for generation of hydro electric power in the State. The construction was at final stage and it is in public interest that the construction is completed without any further delay. The notification for minimum wages was issued in 1983 and admittedly it was applicable to the construction in question. The High Court considering the peculiar facts of the case and the inordinate delay which had already taken place in completion of the work and bearing in mind the fact that work of the dam was one of national importance and admittedly the labour escalation formula had been accepted, directed the payment of the amount worked out as per the formula to the contractor and further issued directions fixing time frame for the completion of the work. The formula regarding labour escalation payment was incorporated in the correspondence exchanged between the parties prior to entering into formal contract on 16th September, 1981. The facts broadly taken into consideration by the High Court were that the contractor initially in his letter dated 18th March, 1981 submitted along with the tender had suggested the additional financial liability to be borne as a consequence of increase in wages or other benefits to labour to be reimbursed with reference to actuals. During the negotiations, the Board expressed its unwillingness to accept such proposals of reimbursement of increased wages paid, after quantification of the actual disbursement of such increased wages and was willing to provide for revision in the rate structure on the basis of an agreed formula to take into account the increase in the minimum wages statutorily notified. In this view, the contractor suggested formula for revising the rate structure. The formula initially suggested by the contractor in his letters dated 21st May, 1981 and 5th June, 1981 was not accepted by the Board and the Chief Engineer in his letter dated 11th June, 1981 asked the contractor to modify the conditions in such a way that the terms and formula are acceptable to the Board. Thereupon, the contractor submitted the revised formula in his letter dated 15th June, 1981. This was accepted by the Board when it communicated to the contractor by letter dated 1st July, 1981 that the contract has been awarded to the contractor. The formula regarding labour escalation as described in the letter dated 15th June, 1981 was accepted by the Board subject to the stipulation that the minimum wages for ordinary `mazdoor' will not be less than Rs.13/- per day viz. the rate as per PWD Schedule for rates 1980 applicable to the locality. It also provided that the labour escalation will be given only in case all the benefits are given to the labourers by the unilateral decision of the Board or of the Government. It was thus evident that the contractor was entitled to at the rate structure revised as per agreed formula. It was also noticed by the High Court that the Board did not take a stand before the industrial tribunal that the contractor was not paying the minimum wages. The workmen through union entered into a Memorandum of Settlement with the contractor which showed payment at the revised rate which was amount sought to be recovered by the contractor from the Board. The award mentioned that the additional wages received by the workmen as advance shall be treated as part of their wages. The Board had accepted the award. In fact, the Board was making payment of advances to the contractor presumably to be adjusted against labour escalation as and when the dispute is settled.