Full Judgment Text
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS. 2675-2676 OF 2013
(@ SPECIAL LEAVE PETITION (CIVIL) NOS.4241-4242 OF 2009)
NTPC LTD. APPELLANT
VERSUS
BHASIN CONSTRUCTION P. LTD. RESPONDENT
O R D E R
1. Leave granted.
2. These appeals are directed against the
judgment and order passed by the High Court of Delhi in
FAO (OS) Nos. 116 and 118 of 1995, dated 04.12.2008,
whereby and whereunder, the learned Division Bench has
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allowed FAO (OS) Nos. 116 of 1995 and has set aside the
judgment and order passed by the learned Single Judge
in Suit No. 1510-A of 1986, dated 02.12.1994 and while
disposing FAO (OS) No.118 of 1995, has directed the
appellant-corporation to pay to the respondent–company
a sum of Rs.95,394.10/- along with interest at the rate
of 9% per annum on the said amount from the date of the
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award i.e. 07.05.1986 till the date of payment. The
awards dated 15.05.1986 and 07.05.1986 passed by the
learned Arbitrator are modified to the above extent and
accordingly, are made rule of court by the Division
Bench.
3. The brief facts of the case are:
The appellant, National Thermal Power
Corporation Limited (for short ‘NTPC’) is a Government
Company registered under the provisions of the
Companies Act, 1956. It is engaged in
construction/project for generation, operation,
transmission and maintenance of super thermal power
projects in India.
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4. Some time in the year 1978, the NTPC had
invited tenders for the work of construction of bridges
and fly-overs for merry-go-round (M.G.M.) railway
system and sidings for the Singrauli Super Thermal
Power Project. The said construction work was to be
carried out both in the Mirzapur District of Uttar
Pradesh (approximately 80% of the total construction
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work) and the Sidhi District of Madhya Pradesh
(approximately 20% of the total construction work in
areas adjoining the construction sites in Uttar
Pradesh).
5. The respondent-Bhasin Construction Private
Ltd. (for brevity, ‘the Construction Company') had
participated in the said tender process. In the bid
offered by the Construction Company, it had quoted the
'fair wages' payable to the skilled, unskilled or semi-
skilled labourers on the date of the settlement of the
contract at Rs.2.70/-. The then existing rates of
‘minimum wages’ payable to the labourers as per the
governing laws in the States of Uttar Pradesh and
Madhya Pradesh were Rs.6/- and Rs.2/- respectively.
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6. Since the bid amount quoted by the
Construction Company was the lowest among all the
tenders received by the NTPC, the bid so offered by the
Construction Company was accepted by the NTPC.
Accordingly, the NTPC had issued a Letter of Intent
dated 13.10.1978 to the Construction Company awarding
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the work of aforesaid construction. The Construction
Company had accepted the said Letter of Intent issued
by the NTPC, by their letter dated 18.11.1978. After a
series of communications, the parties had entered into
an agreement dated 20.02.1979. The tender documents
comprising of Special Conditions of the Contract and
General Conditions of the Contract were annexed to the
said agreement. In toto, the construction contract was
valued at Rs.1,17,61,372/-.
7. During the subsistence of the contract between
the parties, the rate of 'minimum wages' in respect of
employment of unskilled workers for construction and
maintenance was revised and had escalated to Rs.4/- per
day by the Government of State of Madhya Pradesh vide
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the Notification No.342-I-4936-XVI, dated 27.06.1979.
Since the lis pertains to ‘minimum wages’ payable to
labourers in the State of Madhya Pradesh only, we would
not saddle the judgment by noticing the co-lateral
changes effected in the State of Uttar Pradesh.
8. Consequently, the Construction Company, vide
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its letter No.BCC/710/1093, dated 07.03.1981, made a
claim of Rs.5,67,766.84/- towards labour escalation for
the work done in Sidhi District, Madhya Pradesh, for
the period from 01.02.1979 to 01.12.1980 and
Rs.36,83,475.72/- for the work done in the State of
Uttar Pradesh on the basis of the increase in the rate
of 'minimum wages' payable to the labourers. In the
said escalation bill, the Construction Company had
claimed escalation at the rate of Rs.3.00/- with effect
from 01.02.1979 and Rs.4.00/- with effect from
01.04.1979. After considering the escalation bill so
submitted, the NTPC had paid a total sum of
Rs.4,72,372.74/- to the Construction Company for the
work carried out in State of Madhya Pradesh, vide
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cheques dated 15.07.1981, 31.07.1981, 28.06.1982 and
22.07.1982, but denied their claim in respect of State
of Uttar Pradesh. Thereafter, a series of
communications ensued between the parties; however,
their respective claims could not be settled. Later
NTPC, having noticed that the Construction Company had
wrongly claimed a sum of Rs.4,72,372.74/-, requested
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the Construction Company to refund the aforesaid sum,
by their letter dated 07.10.1983.
9. Since the parties had disputed the claim, in
terms of Clause 57 of the agreement, they had referred
the dispute for arbitration before the Sole Arbitrator.
The parties had raised two separate claims for
adjudication and decision before the Sole Arbitrator.
The Construction Company had claimed a sum of
Rs.37,78,869.82/- [Rs.36,83,475.72/- (for Uttar
Pradesh) + Rs.5,67,766.84/- (for of Madhya Pradesh) –
Rs.4,72,372.74/- (amount of labour escalation already
paid)] as balance due from NTPC alongwith interest
towards the increased wages paid by them to the
labourers, whereas the NTPC had denied the said claim
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of the Construction Company and further claimed a
refund of Rs.4,72,372.74/- with interest at the rate of
18% p.a. from the date of payment till the date of
refund of the amount.
10. While deciding the claim made by the
Construction Company, the learned Arbitrator had raised
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ten issues for his consideration and decision. The
issues so framed were:-
“(1) What were the minimum wages for unskilled
labour in Madhya Pradesh during the relevant
period?
(2) What were the minimum wages for unskilled
labour in Uttar Pradesh during the relevant
period?
(3) What were the fair wages for unskilled
workers at the time of the contract at the
places where works were to be executed?
(4) What has been the effect of the increase in
minimum wages on fair wages?
(5) Is the contract indivisible as claimed as
regards the payment of wages to unskilled
workers for the works executed at the place (s)
in M.P. and at different places of U.P. and if
so, to what result?
(6) Is the work site No.10 located in M.P. or
both in M.P. and U.P.?
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(7) Is the claimant entitled to recover
escalation in wages for the whole of the No.10
and if so, to what extent?
(8) What amount was actually spent by the
claimant Co. on the payment of wages to
unskilled labour on account of escalation in
minimum wages?
(9) Is the Claimant Company entitled is more
payment, even if they did not pay more wages to
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unskilled workers on account of such escalation
in wages?
(10) Is the Claimant Company entitled to recover
any interest in this regard and, if so, to what
amount?
(11) Relief.”
11. Since the question before us is limited to
liability for payment of money for escalation in rates
of minimum wages in Madhya Pradesh, we would not notice
the discussion and decision made by the learned
Arbitrator in respect of work carried out in Uttar
Pradesh. The learned arbitrator has considered issue
Nos. 1, 3, 5 and 9 collectively and recorded his
findings that minimum wages (fair wages) for labour in
Sidhi District, Madhya Pradesh was Rs.2.00/- upto
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26.06.1979 and pursuant to the notification was raised
to Rs.4.00/- and further that the contract is not
divisible and thereby wages payable in Uttar Pradesh
and Madhya Pradesh could not be calculated in isolation
with each other. He has relied upon Clauses 7.1(a)
and 7.3 of the Special Conditions of the Contract and
Clause 53-A(b) of the General Conditions of the
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Contract and has concluded that the claim for
reimbursement on account of increase in ‘fair wages’
payable by the Construction Company would be admissible
under the contract only, when there has been escalation
in ‘minimum wages’ on account of the notification
issued by the appropriate State Government under the
payment of Minimum Wages Act, however, such
reimbursement would be subject to whether or not the
Construction Company has paid such increased ‘fair
wages’ on account of the said escalation. In so far as
issue No.8, the learned Arbitrator has concluded that
for the works carried out at the sites/sides located in
Sidhi District, Madhya Pradesh the Construction Company
had to pay and has paid increased wages to unskilled
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labourers from Rs.2.00/- to Rs.4.00/- per day with
effect from 27.6.1979. While considering issue No.6
and 7, the Sole Arbitrator has agreed with the claim
made by the Construction Company in respect of
construction work of Bridge No. 10 situated at the
border of the two States that the minimum wages payable
for all labourers would be the same irrespective of
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whether the work is carried out by them in the Madhya
Pradesh or Uttar Pradesh and consequently, directed the
NTPC to make the payment of the amounts for escalation
in minimum wages in Madhya Pradesh. In conclusion the
learned Arbitrator has thought it fit to direct the
NTPC to pay a sum of Rs.5,10,850/- to the Construction
Company.
12. On the claim made by the NTPC, the learned
Arbitrator in his award dated 15.05.1986 has concluded
that the NTPC is required to reimburse the Construction
Company in accordance with the agreement between them
for payment of escalated ‘minimum wages’ from Rs.2.00/-
to Rs.4.00/- and rejected the claim of the NTPC for
refund of the monies already paid to the Construction
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Company.
13. Outcome of the proceedings of the learned
Arbitrator resulted in filing of two suits before the
High Court of Delhi by the parties. While the learned
Arbitrator had filed the Award, dated 07.05.1986, and
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proceedings before the High Court as required under
Section 14(2) of the Arbitration Act, 1940, the NTPC
has questioned the Award dated 7.5.1986 by filing its
objection under Section 30 and 33 of the Act in Suit
No.1496-A of 1986. The other connected suit (Suit
No.1510-A of 1986) arises out of the Award dated
15.05.1986, wherein the claim made by NTPC for refund
of the monies paid to Construction Company was rejected
by the learned Arbitrator.
14. The learned Single Judge of the High Court in
the judgment and order dated 02.12.1994 in Suit
No.1496-A of 1986, has observed that the escalation
claim of the Construction Company in respect of the
work carried out in the State of Madhya Pradesh could
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only be a sum of Rs.5,67,766.84/- and keeping in view
the escalation costs already paid by the NTPC, the
Construction Company would be entitled for payment of
Rs.95,394.10/- only. The learned Single Judge has also
come to the conclusion that the learned Arbitrator had
erroneously awarded a sum of Rs.5,10,850/- which is
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beyond the claim made by the Construction Company and,
accordingly, has set aside the Award, dated 07.05.1986.
By a separate order, dated 02.12.1994 in Suit No.1510-A
of 1986, has delved into the question of “basic wage”
considered under Clause 7.1(a) so as to carry out the
escalation calculations and concluded that the learned
Arbitrator has erroneously considered the escalation
from Rs.2.00/- instead of Rs.2.70/-, which infact was
admittedly paid by the Construction Company as fair
wages to the labourers in Sidhi District, Madhya
Pradesh. Keeping the aforesaid fair wages paid by the
Construction Company as basic wages, the learned Single
Judge has calculated the difference payable at the rate
of Rs.1.03/-, considering escalated amount of Rs.2.97/-
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after 10% absorption as per Clause 53-A(b) of the
General Conditions of Contract. Consequently, the
learned Single Judge has modified the Award dated
15.05.1986 and observed that the Construction Company
has paid a sum of Rs.2,09.376.74/- in excess of the
amounts due under the contract and accordingly directed
it to refund the said amount to NTPC with interest at
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the rate of 12% per annum thereon from the date of
payment till realization.
15. Being aggrieved by the aforesaid order passed
by the learned Single Judge, the Construction Company
had filed two appeals, one against the orders passed in
Suit No.1510-A of 1986 and the other against the order
passed in Suit No.1496-A of 1986. The appeals are
numbered as FAO (OS) No.116 of 1985 and FAO (OS) No.118
of 1995. However, the NTPC being satisfied with the
aforesaid judgment and orders passed by the learned
Single Judge had not carried the matter in further
appeal before the Division Bench.
16. The Division Bench, by the impugned judgment
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and order dated 04.12.2008, has allowed the FAO (OS)
No.116 of 1985 and made the Award dated 15.05.1986 rule
of Court. However, the Division Bench, in FAO (OS)
No.118 of 1995, has modified the impugned judgment and
order of the learned Single Judge and directed the NTPC
to make payment of Rs.95,394.10/- to the Construction
Company for the increase in minimum wages from
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Rs.2.00/- to Rs.4.00/-. It is the correctness or
otherwise of the said order which is the subject matter
of these appeals by special leave.
17. We have heard learned counsel for the parties
and carefully perused the documents on record. In our
view, to appreciate the contentions canvassed by the
learned counsel for the parties, the Clauses 7.1(a) and
7.3 of the Special Conditions and Clauses 16.2 and 53-A
(b) of the General Conditions of the Contract between
the parties are required to be noticed:
“Special Conditions of Contract (SCC):
Clause 7.1 For the purpose of calculation of
reimbursement/refund on variation in prices, if
there be any (plus or minus), the basis of
calculation shall be as under:-
Clause 7.3 The price variation of different
components under 7.1. a, b & c above shall be
subjected to the ceilings as stipulated under
clause 53-A “General Conditions of Contract” for
admissibility of reimbursement/refund on
variation in prices.”
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General Conditions of Contract:
Clause 16.2:
“The contractor shall pay to the labourers
employed by him either directly or through sub-
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contractor wages not less than 'fair wages' as
defined in the contractors' labour regulations”.
Clause 53 A (b):
“Reimbursement/Refund on variation of price:
(a) …
(b) Labour: For the purpose of this contract the
minimum wages of unskilled labour and the
skilled labour and of semi-skilled labour on the
date of submission of the tender shall be taken
as shown in Schedule-D on account of any
legislation, notification, labour award, the
minimum wages of unskilled labour, of skilled
labour and of semi-skilled labour are increased
at any time or times after the submission of the
tender and the contractor has to pay any
increased wages then the corporation shall
reimburse to the contractor the increase in the
cost of labour not exceeding the increase
permitted under the legislation, notification,
labour award or duly approved binding agreement
as aforesaid, subject to hereinafter provided-”
(b)(i).....
(b)(ii) “Provided however no increase shall be
payable if the increase is not more than 10% of
the said wages and, if so, the increase shall be
payable only on the excess over 10% and provided
further that any such increase shall not be
payable if such increase has become operative
after the contract or extended date of
completion of the works or items of work in
question....”
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18. Clause 7.1(a) of the Special Conditions of
Contract relates to refund on variation in prices of
various components of works contract; one such
component being ‘Labour’. It explains that basic index
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for calculation there would be the minimum wages
payable to the unskilled labour as per applicable rates
in Sidhi District, Madhya Pradesh under the Minimum
Wages Act. Clause 7.3 speaks of price variation of
different components prescribed under 7.1 a, b and c
and that would be subjected to the ceilings as
stipulated under Clause 53-A of General Conditions of
the Contract for the purpose of admissibility of
reimbursement/ refund on variation in prices.
19. Clause 16 of the General Conditions of the
Contract defines the meaning of the expression ‘fair
wages’. It adopts the meaning as defined in Regulation
16 of the Contractors' Labour Regulations. It means
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“fair wages” to include wages for weekly day of rest
and other allowances, whether for time or piece work,
after taking into consideration, the prevalent market
rates for similar employment in the neighborhood, but
shall not be less than the market rates of the wages
fixed under the Payment of Minimum Wages Act, 1948.
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20. Schedule ‘D’ to these General Conditions of
the Contract pertains to the minimum wages which are
contemplated as per ‘Payment of Minimum Wages Act’ as
notified by the appropriate State Government applicable
to the concerned project site.
21. Clause 53-A(b) of the General Conditions of
the Contract is in two parts. The first part speaks of
payment of the minimum wages to unskilled labour and
the skilled labour and semi-skilled labourers on the
date of submission of the tenders and the same shall be
taken as shown in Schedule-D of the contract, i.e.,
under the Payment of the Minimum Wages Act. The second
part of the Clause speaks of the increase of wages on
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account of a legislation, by issuance of a notification
or by passing the labour award in respect of the
minimum wages of unskilled labour and of skilled labour
and of the semi-skilled labour at any time after the
submission of the tender. The Construction Company,
after such increase, is required to pay the increased
wages and on proof of such payment of the said
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increased wages having been made, the NTPC is required
to reimburse the increased wages paid to its workers to
the contractor. The proviso appended to Clause 53-A(b)
provides that the increased wages need not be paid by
the NTPC, if the increase in wages is not more than 10%
of the said wages. The other part of the proviso speaks
of the payment of increased wages to the contractor, if
the increase is in excess of 10% and again such a
payment need not be made by the Corporation, if such
increase has become operative after the completion of
the contract or extended date of completion of the
works or items of work in question.
22. Having noticed the relevant clauses in the
contract between the parties, we advert to the
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reasoning and conclusions drawn in the two Awards
passed by the learned Arbitrator, dated 07.05.1986 and
15.05.1986 and the judgment and order passed by the
learned Single Judge and the Division Bench of the High
Court of Delhi.
23. It is neither in dispute nor could be disputed
by the parties that the Construction Company at the
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relevant point of time of execution of 20% of the
construction work in Sidhi District, Madhya Pradesh was
paying Rs.2.70/- as the ‘fair wages’ to the
unskilled/semi-skilled labourers on the date of
submission of their tender, since the Construction
Company had specifically stated in the escalation bill
submitted to the NTPC that the amount paid as ‘fair
wages’ to labourers at Sidhi District, Madhya Pradesh
was Rs.2.70/-.
24. The learned Arbitrator, keeping in view the
possible construction that could be placed on Clauses
7, 16 and 53-A(b) of the General Conditions of the
Contract, has thought it fit to allow only the
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increased wages paid by the respondent-Company from
Rs.2.70/- to Rs.4.00/-, i.e. , from the ‘fair wages’ as
quoted in the escalation bill to the increased ‘minimum
wages’. The learned Single Judge has more or less
accepted this view of the learned Arbitrator and on the
basis of the said rates has rightly concluded that the
amount that requires to be paid by NTPC is only a sum
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of Rs.95,394.10/-. He has arrived at this figure
keeping in view Rs.1.03/- as the difference of amount
payable as per the contract. However, the Division
Bench of the High Court, while modifying the
conclusions reached by the learned Single Judge has
thought it fit to direct the NTPC to pay the escalated
wages by taking into account the difference of the
minimum wages as payable on the date of submitting the
tender and the increased minimum wages, i.e., Rs.2.00/-
to Rs.4.00/-.
25. The learned counsel for the appellant,
Mrs.Rachana Joshi Issar has taken trouble to convince
us, that, what would be payable by the NTPC to the
Construction Company is only the difference between the
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‘fair wages’ paid by the contractor and the ‘minimum
wages’ fixed by way of legislation. Therefore, she
would submit that what is payable to the Construction
Company by the NTPC is only a sum of Rs.1.03/- after
making the calculations as provided under proviso to
Clause 53-A(b) of the General Conditions of the
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Contract.
26. Per Contra , Ms. Binu Tamta, learned counsel
for the Construction Company would submit that the
Division Bench of the High Court is justified in
directing the NTPC to pay the difference of the minimum
wages that was fixed by the State of Madhya Pradesh at
the time of offering the tender and the increase of the
minimum wages by way of notification during the
subsistence of the contract.
27. We have considered the rival submissions
canvassed by the learned counsel for the parties. We
are of the view that what is brought forth for our
consideration and decision is, whether the NTPC is
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required to make payment of escalated labour charges to
the Construction Company from the amount of the
statutory ‘minimum wages’ as on the date of submission
of tender forms or ‘fair wages’ as quoted in the tender
form submitted by the Construction Company. Therefore,
the entire case of the parties would revolve only on
the mathematical calculation that requires to be done.
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28. Admittedly, the Construction Company while
offering its tender forms to NTPC had specifically
stated that the ‘fair wages’ payable to their labourers
for the construction work at Sidhi District in the
State of Madhya Pradesh is Rs.2.70/- though, at the
relevant point of time the minimum wages prescribed for
the said work was only Rs.2.00/-. Subsequently, the
minimum wages payable in the State of Madhya Pradesh
was revised by the State Government by issuing
Notification dated 27.06.1979 to Rs.4.00/-. If that is
so, in the light of Clause 7 of Special Conditions of
Contract and Clauses 16 and 53-A(b) of the General
Conditions of Contract read with the tender documents
and escalation bill submitted by the Construction
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Company, it is abundantly clear that what is required
to be paid to the Construction Company by the NTPC is
only the difference between Rs.4.00/- and Rs.2.70/-,
subject to other calculations as provided in the
proviso to Clause 53-A of the General Conditions of
Contract.
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29. In our considered opinion, the learned Single
Judge had rightly concluded that the difference shall
be calculated between the ‘fair wages’ paid by the
Construction Company before issuance of the
notification and the increased minimum wages after
issuance of the notification and if it is calculated in
that manner, what requires to be paid is Rs.1.03/-
after making necessary adjustments as provided under
second proviso to Clause 53-A(b). However, the learned
Division Bench had erroneously calculated the amounts
payable based on the difference of minimum wages at the
time of submission of tender forms and as increased by
the Notification. The aforesaid amount shall carry
interest at the rate of 9% per annum from the passing
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of the Award, dated 07.05.1986, till the date of actual
payment.
30. With these observations and directions, we set
aside the judgment and order passed by the Division
Bench of the High Court in part. To the extent
indicated in the order, the appeals are partly allowed.
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Parties to bear their own costs.
Ordered accordingly.
.......................J.
(H.L. DATTU)
.......................J.
(DIPAK MISRA)
NEW DELHI,
MARCH 7, 2013.
JUDGMENT
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