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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
NTPC Ltd - Petitioner
Versus
Larsen and Toubro Limited - Respondent
O.M.P. (COMM) 560 of 2020 and O.M.P. (COMM) 524 of 2020
Decided On : 26-11-2021
Arbitration and Conciliation Act, 1996 - Section 34 - Minimum Wages Act, 1948 - Section 4 - Indian Evidence Act, 1872 - Contract Agreement - Arbitral award - Reimbursement of actual costs/expenditure - Claim minimum rates of wages - Dispute between the parties relates to L&T’s claim for additional payment on account of increase in the cost of labour resulting from the increase in the minimum rates of wages payable to various categories of labour in terms of Notification - According to L&T, the said notification constituted a change in the law resulting in L&T incurring additional costs, which was required to be reimbursed in terms of Clause 31.4.3 of the SCC included in the Contract Agreement.
Finding of the Court: Arbitral Tribunal noted that the minimum rate of wages had two components - the basic rate of wage and a cost of living allowance which was required to be computed by the Competent Authority at such intervals as may be specified - It is well settled that The Indian Evidence Act, 1872 does not apply to Arbitral Proceedings. An arbitral tribunal is required to evaluate the material placed before it to draw its inference. In the present case, the Arbitral Tribunal had found that there was material on record to support L&T’s claim that it had incurred amount as additional expenditure on account of increase in the basic minimum rates of wages - Parties had already agreed to the labour components of different works on a notional basis under Appendix - 2 of the Contract Agreement and therefore, L&T’s quantification of its claim on the basis of the labour components was required to be accepted - Court finds that the award passed by the Arbitral Tribunal directing NTPC to pay the amounts that may be determined in future along with interest from the date of filing of the Statement of Claims after having concluded that L&T had failed to establish the amount claimed by it, reflects illegality that strikes at the root of the matter. The impugned award to that extent is patently illegal on the face of the award - Impugned award set aside.
Result: NTPC [OMP (COMM)] is partly allowed and L&T’s petition [OMP (COMM)] is dismissed.
JUDGMENT :
Vibhu Bakhru, J.
1. The parties have filed these petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an arbitral award dated 12.06.2020 (hereinafter ‘the impugned award’) delivered by the Arbitral Tribunal constituted of three members, Mr. Arun Kumar, I.A.S (Retd.), Justice M.Y. Eqbal (Retd.) and Justice Dr Mukundakam Sharma (Retd.) as the Presiding Arbitrator (hereafter ‘the Arbitral Tribunal’).
2. The controversy in the present case arises in the following context:
2.1 Tenders were invited by NTPC Limited (hereafter ‘NTPC’) for implementation of contracts relating to setting up of the Khargone Super Thermal Power Project (hereinafter ‘the Project’). The work was divided into three packages as under:
| Contract Package 1 | CIF Supply (Indian Port of Entry) |
| Contract Package 2 | Ex-works (India) Supply |
| Contract Package 3 | Inland Transportation, Inland Insurance, Civil Works, Structural Works, Installation. Testing & Commissioning of EPC Package (Indian Port and Entry) |
2.2 Larsen and Toubro Limited (hereafter ‘L&T’) had participated in the bidding process pursuant to the aforesaid notice inviting tenders. L&T’s bid for the contracts was accepted and on 31.03.2015, NTPC issued three Notifications of Awards in favor of L&T.
2.3 Thereafter, contracts for all the aforesaid packages were signed by the parties on 03.04.2015.
2.4 The impugned award was rendered in the context of the disputes that have arisen between the parties in connection with the third contract package (hereafter ‘the Contract Agreement’) for the ‘supply and erection including civil works of EPC Package Khargone Super Thermal Power Project’ awarded to L&T by NTPC by the Notification of Award on 31.03.2015.
2.5 The dispute between the parties relates to the L&T’s claim for payment of additional amounts as compensation for the increase in costs on account of increase in the basic minimum wage rates notified in terms of notification no. S.O.188 (E) dated 19.01.2017 (hereafter ‘the Notification’) issued under the Minimum Wages Act, 1948.
2.6 By its various communications, L&T stated that the increase in minimum wages of construction workers had severely affected the labour cost portion in executing the contracts and requested NTPC to consider reimbursement of additional costs in terms of Clause 31.4.3 of the Special Conditions of Contract (hereafter ‘SCC’), which provided for reimbursement of increased expenses, inter alia, resulting from any change in law.
2.7 NTPC rejected L&T’s claim stating that price adjustment for compensation for any increase in the minimum wages was covered in Appendix-2 of the Contract Agreement.
2.8 L&T did not accept NTPC’s stand and requested NTPC to appoint an adjudicator for settlement of the disputes. By the award passed by the adjudicator on 07.10.2018, NTPC was directed to reimburse L&T in terms of Clause 31.4.3 of the SCC.
2.9 Aggrieved by the award passed by the adjudicator, NTPC invoked Clause 6.2 of the General Conditions of Contract (hereafter ‘GCC’) read with Clauses 4 and 42 of the SCC and referred the matter to arbitration for adjudication of the disputes.
3. The claims made by L&T before the Arbitral Tribunal are set out below:
| CLAIM | PARTICULARS | AMOUNT |
| Claim no.1 | Impact due to revision in minimum wages | Rs.99 crores (revised to Rs.103.2 crores/-) |
| Claim no.2(a) | Interest @14% per annum on monthly payments due from March 2017 till 31st December 2018 | Rs.13.03 crores/- |
| Claim no.2(b) | Interest @14% per annum on monthly payments due from 1st January, 2019 till date of payment |
|
| Claim no.3 | To pay increased costs on account of the notification dated 19.01.2017 from 1st January 2019 till completion of the contract within a time period and in default, interest. |
|
| Claim no.4 | Costs of |
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