TaxTMI 
TaxTMI 
1981 (9) TMI 310
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....12th Aug., 1962 and in the other zone on 13th September, 1962. The works were completed by 31st December, 1967. The contract agreements contain identical terms and conditions. By letter dated 18th August, 1971 the contractors, claimed additional payment for both the works on account of escalation in wages under the Minimum Wages Act, 1948 during the currency of the contracts. These claims were based on Clause 32 of the General Conditions of Contracts as modified by the parties. The employers did not accept these claims. The contractors then by their letter dated 17th April, 1972 named their arbitrator under Clause 76 of the General Conditions of Contracts for deciding the claims in respect of both the contracts. The employers in their reply by letter dated 3rd May, 1972 did not accept that the claims made by the contractors were justified or could go to arbitration. The employers, however, named their arbitrator. The arbitrators decided two preliminary issues by their order dated 6th September, 1973. These related to the questions (1) whether there were valid and binding contracts between the parties, and (2) whether the dispute raised by the contractors fell within the arbitration....
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....ubject to modification that may be made in individual cases, form part of every contract, Clause 32 of the General Conditions of Contracts reads as follows:-- "32. In respect of all labour directly or indirectly employed on the works, the contractor shall comply with all rules framed from time to time by Government (Central or State) or other local authority, and legislations governing labour for the protraction of health, sanitary arrangements, wages, welfare of safety of workers in building and construction works. The rules and other statutory obligations in regard to fair wages, the welfare measure and safety of labour etc., will be deemed to be part of the contract." The contractors submitted their tenders for the two works under a forwarding letter dated 25th November, 1961 (Ex. RD-6). The contractors wrote in this letter that in pricing their tender they had made the assumptions as mentioned in paras (1) to (z-1) of the letter. Para (f) of this letter is material and is as given below:-- "(f) that in case there is any increase in the wage structure by any legislation, we will be entitled to corresponding amount." In order to discuss the various points ....
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....25th July, 1962 as desired by the contractors. By letter dated 6th August, 1962 (Ex. RD-1) the employers asked the contractors to start the work. In reply the contractors wrote on 10th August, 1962 (Ex. RD-31) stating that they have taken up the work subject to clarifications on the points discussed in the meeting on 25th July, 1962. The employers then by letter dated 1st Sept., 1962 (Ex. RD-10) wrote to the contractors to depute their authorised representative to sign the contract agreements. It was mentioned in this letter that the question of clarification on the award letter after examination had been referred to the Head Office and the final decision arrived at will be incorporated as corrigendum to the contracts. The contractors in reply to this letter wrote on 17th October, 1962 to the employers (Ex. RD-12) stating that they agreed to accept the contracts subject to the conditions mentioned in this letter and in case the conditions mentioned were not accepted by the competent authority, the deletion of these conditions shall not be binding on them. With reference to Clause 32 of the General Conditions of Contracts and the modification mentioned in para (f) of the letter forw....
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....e that in the meeting held on 7th and 8th April, 1962 at Ranchi, it was agreed that any other changes in labour laws will be admitted for escalation of rates. This may kindly be confirmed at an early date." The employers, by letter dated 25th Dec., 1964 (Ex. RD-58) wrote to the contractors for filing labour contents of each item, on which the contractors by their letter dated 23rd Jan., 1965 (Ex. RD-16) enclosed the schedule of percentage of labour contents in respect of both the works. The employers by their letter dated 30th Nov., 1965 (Ex. D) sent to the contractors a copy of approved schedule of percentage of labour contents. As earlier stated, both the works were completed by the Act of Dec., 1967. The claims in respect of both the works on the ground of escalation in wages on the basis of Clause 32 as modified by the contract agreements were made by the contractors by their letter dated 18th Aug., 1971. The employers did not agree to the claim and, as stated by us earlier, reference to the arbitrators followed. The arbitration clause in the contract agreements in Clause 76 of the General Conditions of Contracts which reads as follows:-- "76. All questions, disp....
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....ether or not such work shall continue during the arbitration proceedings. Matters in question, dispute or difference other than the excepted matters, in respect of this contract to be submitted to arbitration as aforesaid, shall be referred for decision to- (i) a sole arbitrator who shall be the Chairman or any officer of the Employee nominated by the Chairman in that behalf in cases in which the claim in question is below Rs. 50,000/- and in cases in which the issues involved are not of a complicated nature. The Chairman or the officer nominated shall be the sole judge to decide whether or not the issues involved are of a complicated nature. (ii) The arbitration of two persons, one to be nominated by the Employer and the other by the Contractor or failing agreement between these two arbitrators to an Umpire appointed by them before proceeding with the Arbitration in respect of all claims of and above the value of Rs. 50,000/- and for all claims, irrespective of the amount or value of such claims, if the issue involved therein are of a complicated nature. Such submission shall be deemed to be a submission to arbitration and the decision of such a....
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....etter dated 7th Nov., 1962 (Ex. RD-32). The first point which the contractors raised in their letter dated 17th Oct., 1962 was as to the form of security. Clause 3 of the Invitation to Tender requires that upon the acceptance of the tender the successful tenderer shall deposit such further sum as along with the earnest money will amount to 21% of the value of the contract. Clause 3 requires that this deposit should be made in cash or in the form of Government security. The contractors in their letter dated 17th Oct., 1962 said on this point that they would deposit this amount in the form of insurance bonds. They also stated that they had already submitted insurance bonds for both the works. The employers' reply in their letter dated 2nd Nov., 1962 was that the point relating to conversion of security deposit into insurance bonds instead of bank guarantee was under consideration. In their letter dated 7th Nov., 1962 the contractors submitted that their request that security should be taken in the form of insurance bonds be kindly accepted. Now a proper construction of all the three letters along with the terms contained in the Invitation to tender which forms part of the contrac....
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....nsel is, however, not right in the submission which he also made that the arbitration clause by itself is a machinery to avoid uncertainty in the matters on which the parties had not agreed. This would amount to conceding the power of filing the gaps or supplementing the parties' contracts and it is well settled that the arbitrators have no such power unless it is expressly conferred by the contract which is not the case here (see Russel, 19th Edition, p. 28). The third point that contractors made in their letter dated 17th Oct., 1962 was a request for advance payment against hypothecation of old machinery or an advance payment of Rs. 15,00,000. This related to Clause 55 (B) of the General Conditions of contracts. The employers communicated their decision on this point in their letter dated 2nd Nov., 1962. It was stated that for items of old equipment purchased after the date of issue of tender payment of secured advance would be considered provided the engineer was satisfied regarding reasonableness of the prices paid and a declaration given by the contractors that they had not drawn any advance previously on the equipment from any other government undertaking. It is also ment....
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....een the parties in accordance with these minutes that the contractors shall be entitled to increased payment in case of increase of minimum wage rates of unskilled workers only and that the increased payment will be applied to the percentage of labour content in each item of work which the contractors would give for scrutiny and approval of the employers. The minutes then say "Any other changes in the labour law will be admitted for escalation". The word "any" appears to be a mistake for the word "no". The contractors, however, tried to make out some point in their favour because of this typographical mistake. In the award letter the employers accepted as already agreed that the contractors will be entitled to increased payment if there is an increase in the minimum wage rates of lowest category of workers, i. e. unskilled workers and that this increased payment would be applied to the percentage of labour content of each item of work which the contractors would submit for scrutiny and approval by the employers. In the award letter, however, the typographical mistake was corrected and it was clearly stated that no other changes in the labour laws will be admitted for escalation. It....
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....d not enable the contractors to make any claim of extra payment. The parties also agreed that the Factories Act was not applicable and, therefore, the question of being compensated on account of application of Factories Act was premature. As regards other laws, the parties differed on the point as to what was agreed in the meeting held on 7th and 8th April, 1962. According to the contractors, the minutes were correctly recorded to the effect that any other changes in the labour laws will be admitted for escalation. The point of view of the employers was that the word "any" was a mistake for the word "no" and that it was agreed that "no other changes in the labour laws will be admitted for escalation". The difference on this point, however, did not mean that the contracts did not come into existence or that there was such ambiguity or uncertainty which made the contracts void. The General Conditions of Contracts which contain. Clause 32 formed part of the contracts. According to Clause 32 it was for the contractors to follow the labour laws and any change in labour legislation could not affect the amount payable by the employers to the contractors under the contract agreements. Clau....
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....ry to give it business efficacy". (Gulab Chand v. Kudilal AIR 1959 Madh Pra 151) (at p. 162) (FB). Lord Denning has expressed or imposed a term whenever it is reasonable to do so in order to do what is fair and just between the parties (see The Discipline of Law, page 37). He expressed this view in the case of Liverpool City Council v. Irwin (1975) 3 All ER 658. In appeal, however, the House of Lords though agreeing with the conclusion of Lord Denning did not accept the broad proposition that the Court is entitled to read in by implication all reasonable terms. The House of Lords observed that terms may be implied on the basis of established usage or for giving business efficacy to the contracts or on the ground of necessity. ((1976) 2 All ER 39 (HL) at pp. 43, 44). A reference in this connection may also be made to Section 29 of the Contract Act which says that agreements, the meaning of which is not certain, or capable of being made certain, are void. A contract can become void under the section only when its terms cannot be made certain. Mere vagueness or uncertainty which can be removed by proper interpretation cannot make a contract void. In dealing with commercial and busines....
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....s or difference of any kind whatsoever arising out of or in connection with the contract" after first approaching the employers for their decision. The contractors lay their claims for extra payment on Clause 32 of the General Conditions as modified in the contract agreements, The disputes as to whether the contract was entered into at all or whether it was void ab initio do not fall within the ambit of the arbitration clause. But when the parties agree or it is found that a binding contract exists, and if it is necessary to have recourse to the contract to settle the dispute that has arisen then it is a "dispute arising out of the contract" falling within the jurisdiction of arbitrators. (See Heyman v. Darwins Ltd. 1942 AC 356; A. M. Mair & Co. v. Gordhandas Sagarmull, AIR 1951 SC 9; Union of India v. Salween Timber and Construction Co., AIR 1969 SC 488 and Umrao Singh v. State of M. P. 1976 MPLJ 91 at p. 99 : AIR 1976 Madh Pra 126 at pp. 133-134). The question whether there was increase in minimum wages during the currency of the contracts whether the contracts were operative from 28th May, 1972 or only from 7/8th Nov., 1972 and whether the contractors were justified in claiming ....
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....sion that the order of the arbitrators dated 6th Sept., 1973 is an interim award. Before an order of the arbitrators may be held to be an interim award, it must decide a part of the claim or an issue of liability. What the arbitrators did in this case was to decide a preliminary issue relating to their jurisdiction. As the order of the arbitrators does not decide the claim or even any part of the claim of any issue of liability, it cannot be held to be an interim award. The learned counsel for the contractors placed reliance in support of his submission on Anand Prakash v. Assistant Registrar, Cooperative Societies, AIR 1968 All 22, at p. 28. This case, in our opinion, cannot be read to decide that even a finding on a question of jurisdiction would amount to an interim award. We, therefore, held that the orders of the Additional District Judge were not orders either superseding an arbitration or setting aside an award. The orders were, therefore, not appealable. The question then is whether interference can be made in revision. As earlier pointed out by us, the argument of the learned counsel for the employers on this point is that the orders of the Court below do not suffer fro....