IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMAN & THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON TUESDAY, THE 6TH OCTOBER 2009 / 14TH ASWINA 1931 Arb.A.No. 11 of 2003(E) ----------------------- OP (Arb.) 50/1993 of ADDL.SUB COURT, KOLLAM .................... APPELLANT/PETITIONER -------------- INDIAN RARE EARTHS LTD., MANAVALAKURICHI PLANT, MANAVALAKURICHI, KANYAKUMARI DIST. AND FOR AND ON BEHALF OF INDIAN RARE EARTHS LTD., MUMBAI AND MINERALS DIVISION, KOLLAM. BY ADV. SRI.A.M.SHAFFIQUE, SENIOR ADVOCATE RESPONDENT(S): RESPONDENT ------------------- SRI.JACOB RAJAN CONTRACTOR, MOUNT CARMEL, NEYYATINKARA. BY ADV. SRI.K.L.VARGHESE SMT.SANTHA VARGHESE THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 06/10/2009, ALONG WITH Arb.APPEAL NO.28 OF 2004, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.RAMAN & P.R.RAMACHANDRA MENON ------------------------------- Arb.Appeal No. 11 of 2003 & Arb.Appeal No.28 of 2004 ------------------------------- Dated this the 6th October, 2009 J U D G M E N T Raman, J. These appeals are against the common award and decree in O.P.(Arb.)Nos. 50 of 1993 and 31 of 1993 respectively, on the file of the Additional Sub Court, Kollam. 2. In both these appeals, the appellant is M/s.Indian Rare Earths Ltd. and the respondent is one Jacob Rajan. The respondent herein undertook certain works awarded by the appellant, Indian Rare Earths Ltd., in connection with bagging, transportation, shipping and stevedoring and minerals and the sand. Subsequent to the completion of the contract, dispute arose regarding the amount payable to the claimant, the respondent herein. In terms of the contract Arb.Appeals.Nos.11/2003 & 28/2004 2 between the parties, the matter was referred for Arbitration. The sole Arbitrator appointed conducted the proceedings and passed his award dated 18.12.1992. The appellant filed a petition before the Sub Court, Quilon, for setting aside the Arbitration award, whereas, the respondent preferred a petition for passing a decree in terms of the award. Both the above applications were tried together and disposed of by a common judgment. Technically, since there were two application, two appeals are preferred. The correctness of the award as decreed by the court below, is therefore, the issue that arise for consideration in these appeals. 3. We have heard the parties. The first claim pertains to the recovery of the contribution due under the Provident Fund in respect of the employees engaged for the contract work. Admittedly, the appellant is not the principal employer as per the Employees' Provident Fund Act, but the ultimate liability under the Act will fall on him, since the Principal employer can recover the amount of contribution due from the Arb.Appeals.Nos.11/2003 & 28/2004 3 immediate employer in respect of the employees engaged by or under him, i.e., from the Contractor to whom the work is awarded. The Arbitrator held that in so far as the claimant did not apply to the Provident Fund Commissioner for determination of the applicability of the Provident Fund Act and produced any non-liability certificate thereon, the deduction made by the employer on the quantified amount of contribution are held to be neither illegal nor unauthorised. It was the contention of the claimant that awarder of the work, viz., the principal employer, is an establishment exempted from the provisions of the Employees Provident Fund Act though it is a covered establishment. The question as to whether such an exemption could be extended to the contract work was the dispute. The principal employer, the appellant, in such circumstances, and in the absence of any verdict granting specific exemption relating to the contract work in question, sought to deduct the amount from out of the final bill payable to the Contractor. In the concluding part of the award, the Arbitrator directed the appellant herein to Arb.Appeals.Nos.11/2003 & 28/2004 4 make a reference to the competent authority within a week's time from the date of receipt of the award, and if necessary, to have an appropriate ruling from the competent authority, and in the event of the competent authority under the PF Act gives a decision that PF Act is not applicable to the claimant, then the workers are not entitled to the PF benefits, and then the amount of Rs.24,250/= and Rs.26,263.86 withheld be released to the claimant. It was further directed that in such an event, the said amount will carry interest at the rate of 17.5% per annum, from the date of their deduction, i.e., 22.12.86 and 4.5.87 respectively upto the date of Award. 4. In so far as no appeal has been preferred by the claimant, the deduction as given by the Arbitrator and affirmed by the decree passed by the court below, on which there cannot be any dispute by the claimant, until a decision is rendered that the workers engaged by him are not entitled to the benefits under the P.F. Act. But the appellant has challenged the above finding. Arb.Appeals.Nos.11/2003 & 28/2004 5 5. No appreciable grounds have been raised before us in this appeal by the appellant. Ground 'A' in the appeal memorandum, pertains to the above issue, shows that it is not against the decision of the Arbitrator that a grievance has arisen for the appellant to challenge the same, rather according to the appellant, after the award, they have already addressed a letter to the Regional Provident Fund Commissioner, Madurai, whose finding was in favour of the appellant and the letter of the Commissioner was produced before the Sub Court, Kollam. But this aspect was not considered by the court below. As a matter of fact, during the course of hearing, the certificate issued by the Regional Provident Fund Commissioner, dated 15.7.93, was produced before us. This evidently is a letter issued subsequent to the award passed by the Arbitrator. The award of the Arbitrator is dated 18.12.1992. Therefore, the appellant is right in saying that the court below ought to have considered the subsequent letter produced before it and pass appropriate orders Arb.Appeals.Nos.11/2003 & 28/2004 6 based on such letter, as to whether the said letter exempts or makes the Contractor liable for the amount in dispute. 6. We have gone through the said letter and we find that it has been decided by the authority that bagging and loading employees employed for the work in question through the Contractor are to be enrolled as PF subscribers and it is the responsibility of the principal employer to extend the benefit to such employees employed by the Contractor. In terms of the award, it has been held that the claimant was not able to furnish any certificate to the effect that employees are not entitled for the benefit arising under the PF Act. 7. True, in paragraph 2, it is stated that the appellant is covered, but an exempted establishment, and the Provident Funds are maintained by its Board of Trustees at Bombay. Therefore, recovery in respect of bagging and loading employees employed through the Contractor is also to be taken and, therefore, the amount has to be remitted by the Board of Arb.Appeals.Nos.11/2003 & 28/2004 7 Trustees at Bombay. Based on the first paragraph of the letter, the Employees Provident Fund Act is applicable to the employees engaged in the work of bagging and loading, employed by the employer. The correctness of the order passed by the Assistant Provident Fund Commissioner, if at all is a matter which the claimant is entitled to challenge before the appropriate forum, if so advised. 8. The next claim is regarding the penal interest, dealt with in paragraph 18 of the award under the head “Claims for Interest/Damages” The claimant had claimed damages for the amount withheld by way of interest @ 17.5%, as the Bank realised interest at that rate for the amounts outstanding. The appellant contended that the contract does not provide for payment of interest. They also contended that no amounts are due to the claimant and deductions are made legally and on reasons stated. Hence, the question of damages/interest does not arise. Further, under the Interest Act, not more than 10% can be allowed on any amount due. The Arbitrator held that Arb.Appeals.Nos.11/2003 & 28/2004 8 justice would be served by awarding interest at the rate of 17.5% per annum as claimed by the claimant for the award under Claim Nos.2, 3, 4, 5, 7 and 8. The appellant was also directed to pay the award amount, i.e., principal amount plus interest, to the claimant within 60 days from the date of the receipt of the Award. In case of default, it was directed that the appellant will be liable to pay interest at the rate of 22% per annum to the claimant beyond the period of 60 days upto the actual date of payment. The court below confirmed the finding of the Arbitrator while decreeing the suit. 9. It is now submitted by both sides that the appellant have already remitted an amount of Rs.65,174/= which, according to them, is the admitted amount, and therefore, there is no liability to pay penal interest. As a matter of fact, the dispute arose because of the claim of the claimant that more amounts are due and the Arbitrator found under various claims that amounts are payable to the claimant. It necessarily relate back to the date of the final bill. Therefore, we Arb.Appeals.Nos.11/2003 & 28/2004 9 do not find any good reason to interfere with the interest awarded by the Arbitrator as confirmed by the court below. According to the appellant, amounts have already been paid towards interest on 5.8.1993. It is open to the parties to file a reconciliation statement between them and we do not find any interference, as such, is called for. 10. The next dispute is regarding the penal interest. When the amount as admitted has been paid and further amount due or payable, as found by the Arbitrator carries interest awarded, then the question of paying any penal interest does not arise. The direction issued by the Arbitrator to pay penal interest at the rate of 22% is contrary to the terms of the agreement. Accordingly, the same is set aside. 11. The next contention is that an amount of Rs.3749.99 has been withheld by the appellant, which according to the appellant, has been released on 29.2.1998 and this is Arb.Appeals.Nos.11/2003 & 28/2004 10 accepted by the respondent. As such, no further deduction is called for in this regard. In the result, the appeals are disposed of in terms of what is stated above. P.R.RAMAN, JUDGE P.R.RAMACHANDRA MENON, JUDGE. nj. P.R.RAMAN & P.R.RAMACHANDRA MENON, JJ. ------------------------------- ARB.APPEAL NOS.11/2003 & 28/2004 J U D G M E N T Dated: 6th October, 2009. -------------------------------