Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018

Jharkhand High Court

Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018
IN THE HIGH COURT OF JHARKHAND AT RANCHI
Arb. Appeal No. 14 of 2012
.....

Bharat Coking Coal Limited, Dhanbad. --- --- ---- Appellant Versus Shri Tarun Banerjee --- --- ---
Respondent

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CORAM: The Hon'ble Mr. Justice Aparesh Kumar Singh For the Appellant : Mr. Indrajit Sinha, Adv.

For the Respondent : Ms. Khushboo Kataruka, Adv.

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10/04.10.2018 Heard learned counsel for the parties.

This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is directed against the
order dated 7th September 2012 passed by the learned Civil Judge (Sr. Division) No.1, Dhanbad in
Misc. (Arbitration) Case No.06 of 2010 whereunder the objection of the applicant/appellant herein
under Section 34 of the Act of 1996 for setting aside the award dated 12th November 2009 has been
rejected.

The undisputed factual matrix of the case is that claimant/respondent herein was vide work order
dated 11th August 1988 awarded contract of rendering Municipal Service at D and E Blocks of Bhuli
township valued at Rs.2,41,552/- under agreement no.3275-3276 dated 14th October 1988. The
contract value was Rs.1,48,672/- between 1st August 1988 to 31st March 1989 and from 1st April
1989 it was increased to Rs.2,41,552/-. It is also not in dispute that the contract was extended at the
same annual rate up to 7th June 1998. Certain dispute arose between the parties. The claimant
approached the learned Sub-Judge -I, Dhanbad in Title (Arbitration) Suit No.34/1997 under
Sections 2(b), 2(c) read with Section 7, 8 and 9 of the Arbitration and Conciliation Act for reference
of the dispute to an arbitrator in terms of Clause-9 which reads as under :-

"9. Arbitration All disputes or differences whatsoever arising between the parties out
of or relating to the construction, meaning and operation or effect of this contract or
breach there of shall be settled by a sole arbitrator appointed by the CMD of B.C.C.L.
and award of arbitrator shall be final and binding on the parties concerned. The
arbitrator may from time to time with the consent of the parties enlarge the time for
making and publishing the award. The arbitration proceeding shall be in accordance
with the Arbitration Act, 1940."

The learned court referred the dispute for adjudication of a sole arbitrator.
Chairman-cum-Managing Director, BCCL pursuant thereto through letter dated 24th July 2006

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 Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018

appointed the sole arbitrator who entered into reference vide order dated 8th September 2006.
Claim statements were submitted, defence were submitted thereto and para-wise reply to the
defence statement was also submitted by the claimant. Respondent also submitted a reply thereto.
Five claims were raised by the claimant, out of which he withdrew Claim no.1 and 3, claim no.4 was
rejected by the arbitrator with which the claimant was not aggrieved. Therefore, adjudication took
place on Claim no.2 and 5. Claim no.2 is essentially relating to increase in minimum wages for the
period 16.10.1990 to 18.07.1993, 19.07.1993 to 20.12.1995, 21.12.1995 to 31.03.1998 and 07.04.1998
to 08.06.1998. Clause 2(xiii) of the general terms and condition of the contract quoted hereunder
was taken note of by the arbitrator to award an amount of Rs.9,52,326.24 towards increase in
minimum wages pursuant to the notification of the Government of Bihar in favour of the claimant.

Clause-2(xiii) of the agreement reads as under :-

"2(xiii). The contractor/contractors shall not pay less than the minimum wages to the labourers
engaged by him/them as per Minimum Wages Act or such other legislation or award or the
minimum wages fixed by the respective State Government as may be in force and in this matter the
decision of the Company shall be and final binding."

Claim No.5 relates to interest. Contract stipulated a term that no interest was payable on amount
withheld under the items of the Agreement. However, learned Arbitral Tribunal found no reason on
the part of the respondent for non-payment of the amount due to increase in the labour wage due to
revision of minimum wage rate by the Government to the claimant. Therefore, it held that interest
was payable to compensate the loss suffered by the Claimant on account of payment made by him to
the labourers from time to time due to statutory increase of labour wage. Accordingly a sum of Rs.
6,83,000/- was awarded under this claim. The award was delivered on 12th November 2009
directing the respondent/appellant herein to pay Rs.16,35,300/- (9,52,300 + 6,83,000 under Claim
No. 2 and 5 respectively) to be paid along with interest @ 12% per annum from the date of the award
till the date of the payment, in case respondent fail to pay the same award within four months' time.

Challenge was made under Section 34 by the respondent-BCCL before the learned Civil Judge
(Senior Division) No.1, Dhanbad which has been rejected by the impugned order dated 7th
September 2012.

Learned counsel for the appellant has questioned the impugned decision inter alia on the following
grounds :-

(i) The claimant had raised a claim of Rs.1,45,706 and odd pertaining to period up to
1994 before the learned Sub-Judge-I, Dhanbad, but while submitting its claim before
the sole arbitrator it was increased by claiming revised labour wages from 1990 till
1998.

(ii) Extension of agreement was made with the consent of the parties till 1998,
however claimant never raised a protest on the issue of revision in labour wages
pursuant to the Government notification issued from time to time.

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 Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018

(iii) The award of interest under Claim No.5 was contrary to the terms of the contract
whereunder no interest was payable on amount withheld under the item of the
agreement.

(iv) Learned Sub-Judge-I, Dhanbad in the challenge, by the impugned order has
failed to record any cogent reason while rejecting the objection raised by the
appellant.

Learned counsel for the appellant has relied upon a judgment rendered by the Apex Court in the
case of Kanchan Udyog Limited Vs. United Spirits Limited reported in (2017) 8 SCC 237, para 23 on
the plea of waiver by conduct. He has submitted that extension of agreement from time to time were
accepted without demur or protest. The claimant never raised question of increase in the minimum
wages. As such, such a claim should be treated as abandoned by waiver.

Learned counsel for the Claimant/Respondent herein submits that the award is well reasoned. It is
not against the Public Policy. Existence of arbitration agreement is not in dispute. Appointment of
arbitrator was never objected by the BCCL. Clause 2(xiii) of the agreement provides that the
contractor shall not pay less than the minimum wages to the labourers engaged by him as per the
Minimum Wages Act or such other legislation or award or the minimum wages fixed by the
respective State Governments as may be in force. The claim for increase in minimum wages made
from 16.10.1990 was rightly raised as unpaid dues and accordingly decided by the learned
Arbitrator. Learned counsel for the claimant/respondent further submits that interest under Claim
No.5 has not been awarded on any amount withheld but it is a recompense for the loss suffered by
the claimant on a sum due but not paid. Learned Arbitrator while passing the award has however
granted post decreetal interest @ 12% only instead of 18% as required under Section 31 of the Act of
1996. The appellant failed to make out any ground available under Section 34 of the Act calling for
interference by the learned Sub Judge. As such appeal is without any merit and deserves to be
dismissed.

Learned counsel for the Claimant/ Respondent has relied upon a judgment rendered by the Apex
Court in the case of Tarapore & Co. Vs. State of M.P. reported in (1994) 3 SCC 521, para 26 and 27
on the proposition that payment of wages as per the rates fixed under the Minimum Wages Act
being statutory obligation was bound to be honoured even in case the terms of the contract was
silent. In the present case the agreement stipulates Clause 2(xiii) for payment of increase in
minimum wages payable to labourers by the contractor which the BCCL was also bound to honour.

I have considered the submission of learned counsel for the parties and the relevant material facts
borne from record. I have also perused the impugned order dated 07.09.2012 and the award dated
12.11.2009. The scope of interference under Section 37 of the Act of 1996 in such matters is limited.
The claim for increase in minimum wages made from 16.10.1990 before the learned Arbitrator
cannot be said to be untenable only for the reason that in the suit instituted for appointment of an
Arbitrator a claim of Rs.1,46,706/- was made for a period up to 1994. An increase in statutory wages
from 1990 as per Government notification had remained due. Clause 2(xiii) of the agreement
provides that the contractor shall not pay less than the minimum wages to the labourer engaged by

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 Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018

them as per the Minimum Wages Act or the minimum wage fixed by the respective State
Government as per the notification in force. Increase in minimum wages by virtue of notification of
the Government of Bihar during the relevant period is not in dispute. It is neither in dispute that the
original agreement between the parties was extended till June 1998. No other terms of the
agreement were varied or novated except the period of the work. The award of Rs.9,52,306.24/-
under Claim No.2 therefore was neither contrary to the agreement nor fit to be discarded on facts.
[See (2006) 13 SCC 779; FCI Vrs. A.M. Ahmed & Co. & Anr.]. The Arbitrator under Claim No. 5 has
awarded an amount as compensation on account of non-payment of increase in statutory wages to
be paid to the labourers by the Contractor. As per appellant, Clause-5 of the General Terms and
Conditions stipulates "No interest is payable on amounts withheld under the item of agreement". In
this regard, it is profitable to rely upon a recent judgment rendered by the Apex Court in the case of
Reliance Cellulose Products Ltd. Versus Oil and Natural Gas Corporation Ltd. in Civil Appeal No.
1110/2010. The Apex Court, on a conspectus of the decisions that have been discussed therein, held
that under the 1940 Act, an Arbitrator has power to grant pre-reference interest under the Interest
Act, 1978 as well as pendente lite and future interest. Since interest is compensatory in nature and is
parasitic upon the principal sum not having been paid in time, the Court has frowned upon clauses
that bar the payment of interest. It has therefore evolved the test of strict construction of such
clauses and has gone on to state that unless there is a clear and express bar to the payment of
interest that can be awarded by an Arbitrator, clauses which do not refer to claims before the
Arbitrators or disputes between the parties and clearly bar payment of interest, cannot stand in the
way of an Arbitrator awarding pre-reference or pendente lite interest. It further observed that unless
a contractor agrees that no claim for interest will either be entertained or payable by the other party
owing to dispute, difference or misunderstanding between the parties or in respect of delay on the
part of the Engineer or in any other respect whatsoever, leading the Court to find an express bar
against payment of interest, a clause which merely states that no interest will be payable upon
amounts payable to the contractor under the contract, would not be sufficient to bar an Arbitrator
from awarding pendente lite interest under 1940 Act.

In the present case, the general terms and conditions, quoted above, cannot be said to create an
express bar on the Arbitrator in awarding pre-reference or pendente lite interest. As such the
amount awarded under Claim No.5 also cannot be said to be without jurisdiction. The scope of
interference under Section 34 of the Act of 1996 is limited on the following grounds:-

"34. Application for setting aside arbitral award. -

(1) Recourse to a Court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if -

(a) the party making the application furnishes proof that-

(i) a party was under some incapacity; or

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 Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018

(ii) the arbitration agreement is not valid under the law to which the parties have
subjected it or, failing any indication thereon, under the law for the time being in
force; or

(iii) The party making the application was not given proper notice of the appointment
of an arbitrator or of the arbitral proceedings or was otherwise unable to present his
case; or

(iv) The arbitral award deals with a dispute not contemplated by or not falling within
the terms of the submission to arbitration, or it contains decisions on matters beyond
the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated

from those not so submitted, only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in
accordance with the agreement of the parties, unless such agreement was in conflict
with a provision of this Part from which the parties cannot derogate, or, failing such
agreement, was not in accordance with this part; or

(b) The Court finds that -

(i) The subject-matter of the dispute is not capable of settlement by arbitration under
the law for the time being in force, or

(ii) The arbitral award is in conflict with the public policy of India.

Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in

conflict with the public policy of India, only if,--

The making of the award was induced or affected by fraud or corruption or was in
violation of Section 75 or Section 81; or

(i) It is in contravention with the fundamental policy of Indian law; or

(ii) It is in conflict with the most basic notions of morality or justice.

Explanation 2.--For the avoidance of doubt, the test as to whether there is a

contravention with the fundamental policy of Indian law shall not entail a review on
the merits of the dispute.

....................."

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 Bharat Coking Coal Limited vs Shri Tarun Banerjee on 4 October, 2018

The appellant has not been able to show that there was no valid arbitration
agreement between the parties. Appointment of an Arbitrator was made after proper
notice in course of judicial proceeding. Appointment of an Arbitrator was not
opposed by the Appellant before the learned Court, neither was such a challenge to
jurisdiction made before the Arbitral Tribunal. The Appellant submitted to the
jurisdiction of the Arbitral Tribunal and is prevented from raising any question about
lack of jurisdiction. The composition of Arbitral Tribunal also cannot be said to be in
teeth of the agreement of the parties. The award on Claim No. 2 and 5 as discussed
above is not in contravention of public policy i.e. against the fundamental policy of
Indian law or against the basic notion of morality of justice. Learned Civil Judge,
Senior Division-I, Dhanbad has accorded due consideration to the rival submission of
the parties and rightly come to the conclusion that no ground under Section 34 of the
Act of 1996 were made out.

Learned counsel for the appellant submits that sometime may be granted for
compliance of the award since execution case is pending against the appellant.
Appellant is allowed one month time from today to comply with the award. Learned
Executing Court would not take any coercive steps during the period of one month.
However, it would be open to the Executing Court thereafter to proceed in
accordance with law in case the Award is not executed.

For the reasons recorded hereinabove and on consideration of totality of facts and
circumstances, this Court does not find any ground to interfere in the impugned
order. The instant appeal being devoid of merit is accordingly dismissed. Interim
order stands vacated. Pending I.A.s are closed.

(Aparesh Kumar Singh, J.) Shamim/

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