2018 (5) TMI 414 - SC - Indian Laws

Whether the Award of the arbitrator and the findings of the High Court are contrary to the express provision of Clause 19, according to which no escalation is permissible to the contractor for, inter alia, increase in wages of labour due to statutory hike, which the contractor may have to incur during the execution of the work on any account? Held that - On a plain reading of Clause 6.3 read with Clause 19, it is evident that it was particularly made clear that no escalation would be reimbursed even in the case of Regulation. Hence, in the presence of such clauses, which respondent voluntarily agreed before accepting the contract, any departure cannot be allowed - the respondent cannot claim reimbursement of excess of minimum wages on account of hike due to the Notification of the Government of Haryana. If any departure would be allowed from the terms and conditions of the contract, then it would destroy the basic purpose of the contract provided such conditions shall not be arbitrary. It is a settled law that the process of interpretation is based on the objective view of a reasonable person, given the context in which the contracting parties made their agreement. On a perusal of the said two paragraphs of the impugned judgment, we fail to understand that on what parameters the High Court has interpreted Clause 19 in light of Clause 25 of the Contract. The respondent-Contractor in the present case is not entitled to claim any escalation in minimum wages as it would be against the condition of Clause 19 read with Clause 6.3 - appeal allowed.

Summary

Issues:
- Interpretation of the arbitration award and findings of the High Court regarding the escalation of wages for the contractor during the execution of the contract.

Analysis:
The case involved two appeals against a common judgment of the High Court of Delhi. The Union of India was the appellant, and the Contractor was the respondent. The dispute arose from the rejection of additional claims by the Contractor, leading to arbitration. The Arbitrator's Award favored the Contractor, which was upheld by the High Court. The main issue focused on whether the Award and High Court's findings contradicted the contract's Clause 19, which prohibited escalation reimbursement to the contractor for labor wage increases during the contract execution.

The appellant argued that Clause 19 clearly stated no escalation reimbursement for labor wage increases during the contract, including statutory hikes. The respondent contended that the challenges did not fall under Section 34 of the Arbitration and Conciliation Act, as they related to contract interpretation within the Arbitrator's jurisdiction. The High Court's decisions were reasoned and based on legal principles, according to the respondent.

The Supreme Court emphasized the objective of arbitration to provide a speedy and effective resolution. It highlighted Clause 19 of the contract, which explicitly barred reimbursement for wage escalations. The Court also referenced Clause 6.3, reinforcing the restriction on reimbursement for wage increases, even due to regulations. The Division Bench of the High Court had interpreted Clauses 19 and 25 differently, leading to a faulty conclusion favoring the contractor.

The Supreme Court criticized the High Court's interpretation, noting that Clauses 19 and 25 addressed distinct issues and should not be conflated. The absence of specific provisions allowing wage reimbursement in the contract meant the contractor could not claim escalation in minimum wages. The Court concluded that the High Court had erred in law, allowing the appeals, setting aside the lower courts' decisions and the Arbitrator's Award. Each party was directed to bear its own costs.