Kerala State Electricity Board vs Kurien E. Kalathil

2. The dispute between the appellant-Board and the respondent- contractor had a chequered history. Brief facts which led to filing of these appeals are as follows:- Appellant-Kerala State Electricity Board 1 (KSEB) entered into an agreement on 16.09.1981 with respondent- contractor for construction of a composite dam across Karamanthodu at Padinjarethara in connection with Banasura Sagar Scheme (Kuttiyadi Augmentation Scheme). After commencement of work, Government of Kerala issued a notification dated 30.03.1983, by which minimum wages payable to certain categories of workers employed in works mentioned in notification was revised with effect from 01.04.1983. The respondent- contractor claimed labour escalation charges from 01.04.1983 to December, 1984. The Government of Kerala referred the matter to the industrial tribunal for adjudication of the dispute with regard to the claim of workmen employed for the construction of dam for the wage rates and other benefits fixed in the Minimum Wages Notification issued by the State Government. The industrial tribunal passed the award dated 14.10.1993 holding that the notification of Government of Kerala was applicable to workmen employed by the respondent-contractor.

3. Respondent-contractor filed O.P.No.283 of 1995 claiming an amount of Rs.6,32,84,050/- towards labour escalation charges and an amount of Rs.7,66,35,927/- being interest at the rate of 18% per annum payable under Ex.P20 in respect of various bills issued by the respondent-contractor for the period 15.01.1985 to 31.10.1994. When the said writ was pending, the appellant-Board terminated the contract 2 with respondent-contractor, which again came to be challenged before the High Court by filing O.P.No.10759 of 1997 against termination of contract and for the payment of works done (Ex.P59) by respondent- contractor. The High Court disposed of both the petitions by a common judgment dated 02.04.1998 holding that the termination of contract was arbitrary and directed the appellant-Board to pay the amount claimed by the respondent-contractor for payment of labour escalation as per Ex.P20 with interest at the rate of 18% per annum which the contractor claimed separately. The High Court also directed the appellant-Board to pay the amount claimed by the respondent-contractor under Ex.P59 towards additional work done by the respondent-contractor.

4. Being aggrieved, KSEB approached this Court by way of appeal in C.A.No.4092 of 2000 reported in Kerala State Electricity Board and Another v. Kurien E. Kalathil and Others, (2000) 6 SCC 293. In para (11) of the judgment, this Court observed that the contract between the parties is in the realm of private law and not a statutory contract and the matter could not have been agitated in the writ petition. However, having regard to the fact that the contract was of the year 1981 and that the notification for minimum wages was issued in 1983 and in the peculiar facts and circumstances, this Court did not interfere with the order of the High Court directing the payment of amount to the 3 respondent-contractor as per Ex.P20; but reduced the rate of interest claimed under Ex.P20 from 18% per annum to 9% per annum. So far as Ex.P59 is concerned, there was no direction by this Court. Review petition filed by the appellant-Board came to be dismissed by this Court vide order dated 07.12.2000. Appellant-Board has so far paid an amount of Rs.12,82,96,320/- under Ex.P20 which was accepted by the respondent-contractor without any demur.

5. Three years after the payment under Ex.P20, respondent- contractor filed I.A.No.6 of 2006 seeking direction of the court to make payments due under judgment of this Court, with further interest to be paid forthwith. In I.A. No.6 of 2006, this Court has passed the following order:

6. Respondent-contractor filed W.P.(C) No.31108 of 2007 before the High Court seeking for a direction to the appellant-Board to release the amount as directed by the High Court and affirmed by this Court. By the impugned judgment dated 28.01.2009, the High Court allowed the writ 4 petition directing the Board to pay: (i) Rs.4,12,58,224/- under Ex.P20 [Rs.2,29,34,559/-(principal) plus Rs.1,83,23,665/-(Interest)]; and (ii) Rs.8,79,71,154/- [Rs.5,81,53,892/- (principal) plus Rs.2,98,17,262/- (interest)] towards the amount payable for additional work done after adding labour escalation charges and material escalation charges as per Ex.P59. The High Court held that the total amount payable under Ex.P20 and Ex.P59 as on 31.12.2008 was Rs.12,92,29,378/- which is to be paid by the appellant-Board within three months with 9% simple interest from 01.01.2009 till date of payment. So far as the claim as to the additional work done, the High Court directed the parties to mutually discuss among themselves on disputed items in appeal. Further with the consent of the counsel for the parties, the High Court referred the matter to the sole arbitrator Justice K.A. Nayar, former Judge of the High Court of Kerala to resolve the dispute relating to items which they could not amicably resolve. The appellant-Board filed review bearing R.P. No.542 of 2009, which came to be dismissed on 23.06.2009. Being aggrieved, the appellant-Board is before us.

adjusted against principal amount Interest 2.6.02 to 17.8.02 454822 22734120 1221156 17.08.02 Amount received (1675978) 454822 0 Out of Rs.16,75,978/- received the interest as on this date Rs.454822/- is wiped off and balance Rs.1221156/-

In the present case, since there is no direction for future interest, in view of sub-section (2) of Section 34 CPC, it must be deemed that the court has refused such interest. The respondent-contractor cannot claim further interest on the amount payable under Ex.P20 beyond the date of judgment of the High Court (02.04.1998) and in any event not beyond the date of judgment of this Court (19.07.2000).

26. The impugned judgment of the High Court directing the appellant- Board to pay Rs.4,12,58,224/- in Ex.P20 [Rs.2,29,34,559/- (principal) plus Rs.1,83,23,665/- (subsequent interest)] under Ex.P20, is set aside.

31. The High Court proceeded to observe that the contention of the appellant that only Rs.1,55,65,817/- is payable under Ex.P59 cannot prima facie be accepted as the measurement was taken by the Board after ten years of the judgment (Ex.P1); whereas the contractor's claims were made then and there by the contractor on actual measurement. After so referring to the dispute between the parties, the High Court observed that there is dispute with regard to the actual measurements of certain additional works as well as the contractual rates, the same has to be factually verified and calculations are to be made and that the matter has to be discussed with the parties. The High Court directed the appellant-Board to pay Rs.8,79,71,154/-[Rs.5,81,53,892/- (principal) plus Rs.2,98,17,262/- (interest)]. The split-up figure of principal amount of Rs.5,81,53,892/- is as under:-

33. The High Court has directed the appellant to pay subsequent interest of Rs.2,98,17,262/- on the amount directed to be paid under Ex.P59. As discussed earlier, there was no direction either by the High Court or by this Court to pay future interest qua Ex.P20. In the earlier 25 round of litigation, the High Court only directed the appellant to pay the amount as ordered in Ex.P20. In view of the express provision of sub- section (2) of Section 34 CPC, no future interest is payable under Ex.P59. The direction of the High Court to pay future interest of Rs.2,98,17,262/- on the claims made under Ex.P59 is not sustainable and is liable to be set aside.

[Underlining added]

39. Referring the parties to arbitration has serious civil consequences. Once the parties are referred to arbitration, the proceedings will be in accordance with the provisions of Arbitration and Conciliation Act and the matter will go outside the stream of the civil court. Under Section 19 of Arbitration and Conciliation Act, the arbitral tribunal shall not be bound by the Code of Civil Procedure and the Indian Evidence Act. Once the award is passed, the award shall be set aside only under limited grounds. Hence, referring the parties to arbitration has serious civil consequences procedurally and substantively. When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, the High Court ought not to have referred the parties to arbitration.

43. IN EXERCISE OF JURISDICTION UNDER ARTICLE 136 OF THE CONSTITUTION OF INDIA-WHETHER THIS COURT CAN INTERFERE:

[Underlining added]

46. While we set aside the impugned judgment, what is the order/direction to be passed is the point falling for consideration. As discussed earlier, under Ex.P20, the appellant-Board has made excess payment of Rs.1,74,75,247/-. By order dated 20.02.2017, this Court directed the appellant to pay a sum of rupees five crores subject to furnishing of undertaking by respondent-contractor. As per Ex.P59, the respondent-contractor claimed Rs.5,55,62,597/- for the work done; material escalation and labour escalation charges claimed additionally. The admitted amount under Ex.P59 was only Rs.1,55,65,817/-. As discussed earlier, the amount claimed under Ex.P59 also will not carry subsequent interest. Material escalation and labour escalation charges additionally claimed are to be calculated only on monthly basis. Since an amount of Rs.6,74,75,247/- (Rs.1,74,75,247/- plus Rs.5,00,00,000/-) has been paid to the respondent-contractor, it is directed that the same be treated as full quit of all the claims under Ex.P59 including tender excess, material and labour escalation charges.

47. Conclusion:- In the result, the impugned judgment of the High Court is set aside and these appeals are allowed with the following observations and directions:-

The direction of the High Court to pay future interest of Rs.2,98,17,262/- on the claims made under Ex.P59 is set aside;

(iv) When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, the High Court ought not to have referred the parties to arbitration. Hence, the award dated 29.10.2012 passed by the arbitrator Justice K.A. Nayar is set aside and the Arbitration Appeal No.Z-47 of 2013 filed by the appellant- Board pending before the High Court of Kerala is allowed;

(v) The amount of Rs.1,74,75,247/- paid under Ex.P20 which is in excess of the claim under Ex.P20 and the amount of rupees five crores paid to the respondent-contractor vide order of this Court dated 20.02.2017 be treated as payment under Ex.P59 for additional work including tender excess, material escalation and labour escalation charges and in full quit of all claims under Ex.P59;

(vi) Parties to bear their respective costs.

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