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Issues Involved:
1. Jurisdiction of arbitrators 2. Liability of the State for wage escalation 3. Quantum of reimbursement 4. Rate of interest on the awarded sum Issue-wise Detailed Analysis: 1. Jurisdiction of Arbitrators: The primary contention was whether the arbitrators had the jurisdiction to award the sum in question. The State argued that the arbitrators assumed jurisdiction they did not have, thereby misconducting themselves. The appellant countered that the arbitrators did not lack jurisdiction altogether. The court examined the arbitration clause (Clause 4.3.29) and determined that the dispute was covered by the arbitration clause, thus the arbitrators did not lack jurisdiction. The court noted, "the present was definitely a dispute arising out of or connected with the contract." Therefore, the arbitrators did not act beyond their jurisdiction, and the award was not without jurisdiction. 2. Liability of the State for Wage Escalation: The court examined whether the terms of the agreement permitted the claim for wage escalation. The State contended that the contract did not allow for claims towards escalated payments of wages, as per the tender notice conditions. The appellant argued that the contract implied an obligation to reimburse increased wages due to statutory changes. The court held that while the contract did not explicitly provide for reimbursement of minimum wages, it did imply reimbursement for increased fair wages. The court stated, "the State had by necessary implication agreed to reimburse this increased payment." 3. Quantum of Reimbursement: The court reviewed the quantum of reimbursement awarded by the arbitrators. The District Judge had previously remitted the award to the arbitrators to calculate the amount on an "actual basis" rather than a "notional basis." The arbitrators, after receiving further documents and examining witnesses, awarded a sum of Rs. 236 lacs. The court found that the appellant had provided sufficient evidence to support the actual payments made. The court held, "all that was possible on the part of the appellant to prove actual payment was done." However, since the court determined that the appellant was only entitled to reimbursement for the rise in fair wages, it remitted the case back to the High Court to calculate the amount accordingly. 4. Rate of Interest on the Awarded Sum: The arbitrators had awarded interest at a rate of 12% per annum. The court, considering the facts and circumstances, reduced the rate of interest to 9% per annum. The interest would be calculated from the date of the second award, 14th September 1987. The court stated, "the rate of interest on the sum which would be found due as aforesaid should be 9% instead of 12% as awarded." Conclusion: The Supreme Court allowed the appeal in part. It held that the arbitrators had jurisdiction and that the State was liable to reimburse the appellant for the increased fair wages. The court remitted the case back to the High Court to determine the quantum of reimbursement for the rise in fair wages, with the total sum not exceeding Rs. 236 lacs. The rate of interest on the awarded sum was reduced to 9% per annum, calculated from 14th September 1987. No order as to costs was made.
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