JUDGMENT

O.M.P. (COMM) 170/2017

1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 assails the Arbitral Award dated 11.01.2009, read with the order dated 26.02.2009 passed by the Arbitral Tribunal on an application filed by the petitioner under Section 33(1) of the Arbitration and Conciliation Act, 1996.

2. The disputes between the parties pertain to a contract for construction of civil works of pressure shafts and power house complex of the `Nathpa Jhakri Hydro-Electric project'. The subject matter of the dispute is the alleged quantum increase in the minimum wages payable to labour during the course of execution of the contract. It is the case of the respondent (claimant before the Arbitral Tribunal) that, as of 30 days prior to submission of the bid, the minimum wage of unskilled labour, as notified by the State Government of Himachal Pradesh was Rs.22/- per day. It is submitted that after submission of the bid, the minimum wage was increased to Rs.24/- per day w.e.f. 14.11.1993 and thereafter to Rs.26/- per day w.e.f. 01.10.1994. It is stated that thereafter, there was a quantum increase in minimum wage to Rs.45.75/- per day w.e.f. 01.03.1996. The claims raised before the Arbitral Tribunal were founded on the assertion that such increase in the minimum wage could not have been foreseen by the respondent/claimant and that the additional cost occasioned thereupon was also not taken into account by the claimant while tendering; the same was also not contemplated in the indexing of any inputs to the Price Adjustment Formula as contained under Clause 70 of the General Conditions to the Contract ("GCC"). It was contended that the financial impact of increase in minimum wages, being occasioned owing to "subsequent legislation", is payable to the respondent (claimant) in terms of Clause 70 (v) of the GCC.

3. Prior to reference of the aforesaid dispute to arbitration, the respondent/claimant is stated to have raised its claims before the concerned Engineer-in-Charge of the petitioner; the respondent/claimant is also stated to have taken recourse to filing an appeal before the CMD of the petitioner. The dispute/s having remained unresolved, the respondent (claimant) thereafter sought reference of the same to the Dispute Review Board ("DRB") prior to initiation of arbitration. The relevant contractual clause on the basis of which the claim was raised by the respondent/claimant on account of increase in minimum wages, is reproduced hereinbelow:

".........

Changes in Costs and Legislation

Clause-70 Increase or Decrease of Costs.

(i) Price Adjustment Factor

The amount payable to the Contractor and valued at base rates and prices in the Interim payment certificates issued by the Engineer-in-charge pursuant to sub-clause-60 (i) hereof shall be adjusted in respect of the increase or decrease in the indexed costs of labour, materials and fuel and lubricants in accordance with the following principles and procedures:

a) The cost of electrical energy supplied by the NJPC at fixed prices shall be excluded from the scope of price adjustment;

b) Price adjustment shall apply only for work carried out within the stipulated time or extensions granted by the NJPC and shall not apply to work carried out beyond the stipulated time for reasons attributable to the Contractor;

c) Price adjustment shall be calculated for the local and foreign components of the payment for work done in the manner explained in the sub-clause (iii) hereof.

d) The price adjustment shall be determined during each quarter from the formulae as detailed hereinafter under sub-clause (iii) of this Clause.

The following expressions and meanings are assigned to the value of the work done during each quarter:

R=Total value of work done during the quarter excluding cost of electrical energy supplied by the NJPC at fixed prices and any adjustment in payments resulting from legislative or statutory action as per sub clause (v) of this clause.

RI=Portion of `R. a