LexM/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. versus M/S. CHOWGULE BROTHERS & ORS.
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A B [2010] 7 S.C.R. 962 M/S. RASHTRIYA CHEMICALS & FERTILIZERS LTD. v. M/S. CHOWGULE BROTHERS & ORS. (Civil Appeal No. 5286 of 2006) JULY 7, 2010 [AFTAB ALAM AND T.S. THAKUR, JJ.] Contract -Work contract - Initially granted for one year - Extendable on the same terms and conditions except the C statutory increase in the wages of dock labourers - Extension of contract - Contractor claiming enhanced amount on account of escalation by statutory increase in the wages of labourers during the extended period of contract - It also claimed an amount towards final payment due and payable D - Arbitrators by majority decision allowed the claim of contractor - Single Judge of High Court setting aside the award. - Division Bench upholding the award - Held: Contractor was not entitled to the claim on account of escalation due to statutory increase in wages of laboureres - E The relevant clause of the contract did not envisage escalation on the basis of the revision post commencement of the extended period - Arbitrators have no jurisdiction to make an award against the specific terms of the contract - However, contractor is entitled to the claim towards final F payment - Arbitration. Appellant-Company invited tenders initially for a period of one year (from 15.1.1983 to 14.1.1984). As per Clause 2.03 of the Tender Notice, the contract was extendable at the option of the appellant for a further G period of one year on the same terms and conditions except statutory increases in the wages of Dock Labourers. Respondent's tender was accepted by appellant and H 962 RASHTRIYA CHEMICALS & FERTILIZERS LTD. v. 963 CHOWGULE BROTHERS & ORS. work was granted for the period ending on 14.1.1984. In A October, 1983, the appellant in' terms of Clause 2.03 extended the contract for a further period of one year ending on 14.1.1985. The extension was accepted by the respondent-company asking the appellant to consider the revised wages of the Dock Labourers, which came B about during the period of one year. Appellant replied that Clause 2.03 provided for considering increases on account of statutory revisions made upto 15.1.1984 and not the increase under negotiations or those granted at a later date with retrospective effect. It called upon the c respondent-company on such basis to furnish documentary evidence regarding i~crease in wages upto 15.1.1984. The dispute was referred to a panel of three arbitrators. Two awards were passed by the arbitrators. D Majority award decided in favour of the respondent- company. Appellant filed arbitration petition. Single Judge of High Court allowed the petition, setting aside the award holding the same contrary to clause 2.03 of tender notice. The Court also held the claim barred by time. Division E Bench of High Court set aside the order of Single Judge restoring the majority award passed by the two arbitrators. Hence the present appeal. Partly allowing the appeal, the Court HELD: 1.1 Single Judge of the High Court was correct in holding that the award made by the Arbitrators F to the extent it directed payment of the additional amount was unsustainable. The Division Bench, however, fell in error in taking a contrary view and holding that the G interpretation placed by the Arbitrators was a plausible interpretation. [Para 15] [974-F-G] 1.2 The Note to clause 2.03 of NIT envisages that on H 964 SUPREME COURT REPORTS [2010] 7 S.C.R. A the completion of the first year and at the beginning of the extended contract period, the rates applicable shall have to be determined by reference to the revisions that have already come into effect as on the date of the commencement of the extended period. It is manifest B from a reading of the Note that once an option is exercised, the rate applicable to the extended period shall stand revised taking into consideration the revision of wages if any. Any such revision must of necessity be made as on the date of the commencement of the C extended period. Once that is done, the said rate would remain firm till the end of the second year. The contract does not, envisage settlement or revision of the rate by reference to any stage post commencement of the extended period. Even otherwise a contract for the 0 extended period could become effective only if rates applicable to that period are settled or are capable of being ascertained. Rates actually determined or determinable by reference to
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