KERALA STATE ELECTRICITY BOARD AND ANR.versusKURIEN E. KALATHIL AND ORS.

             KERALA STATE ELECTRICITY BOARD AND ANR.                                 A
                                          v.
                        KURIEN E. KALATHIL AND ORS.

                                  JULY 19, 2000

             [S. RAJENDRA BABU AND Y.K. SABHARWAL, JJ.]                              B


         labour laws:

         Minimum Wages Act, 1948:
                                                                                     c
            State Electricity Board-Contract for construction of a dam with a
     contractor-Government notification enhancing minimum wages-
    Consequently enhanced wages paid by contractor-Claim by contractor
    from Electricity Board-Held permissible-Remedy for such a claim-Held
     not permissible under writ jurisdiction but under private law-However in        D
     view of lapse of time and danger of miscarriage of justice Supreme Court
     itself examined the matter-Declined to interfere with the order of payment
    passed by High Court in writ jurisdiction.

         Constitution of India, 1950:

         Article 226: Writ jurisdiction-Held not a proper forum for interpretation
                                                                                     E
    and implementation of a clause of a contract.

         Contract-Held does not become statutory contract merely because it
    has been awarded by a statutory body.

          The appellant-Electricity Board entered into an agreement with the
                                                                                     F
    respondent-contractor on 16th September, 1981 for construction ofa dam for
    generation of hydro electric power in the State. Thereafter, the Government
    of Kerala issued a notification dated 30th March, 1983, under the minimum
    Wages Act, 1948 revising the minimum wages payable to the employees
    employed in the works stated in the notification w.e.f. 1st April, 1983. The     G
    respondent-contractor claimed that he started paying revised minimum wages
    to the employees. Accordingly, applying the labour escalation formula, the
    Electricity Board made payments to the contractor for the work done from
    1st April, 1983 to December 1984. However, from January 1985 onwards the

J   Board stopped making payment of labour escalation on the ground that the
                                         581
                                                                                     H
    582                     SUPREME COURT REPORTS [2000) SUPP. I S.C.R.

A notification dated 30th March, 1983 does not apply to the work of constructing
    a dam. The State Government referred the dispute regarding the applicability
    of the notification to the Industrial Tribunal. By an award dated 14th October,
    1993 the Industrial Tribunal held that the notification was applicable to the
    work in question and that the workmen concerned in the dispute were entitled
B   to wage rates and other benefits fixed in the minimum wage notification. The
    contractor made payment of a sum of Rs. 9,93,93,868 towards the escalated
    minimum wages to the workmen for the period commencing from 1st January,
    1985 to 31st March, 1993 and consequently claimed that he was entitled to
    reimbursement for the said amount His further case was that he entered into
    a Memorandum dated 4th July, 1994 with the workmen through their Union
C   giving effect to the award of the Industrial Tribunal and that the said settlement
    was endorsed by the Labour Officer. In the meanwhile, the Board made
    payments of various amounts as advances to the contractor under various heads
    to enable him to proceed with the work. However, by its letter dated 23rd
    December, 1994, the Electricity Board ordered recovery of these advances
    amounting to Rs. 3.65 corers with interest from the works bill of the
D   contractor from January, 1995 onwards.

          The contractor filed a writ petition in the Kerala High Court for
    quashing the letter dated 23rd December, 1994 as well as for directions to
    the Board to make payment of amount of labour escalation with interest.
E   During the pendency of this writ petition the Electricity Board terminated
    the contract The contract.or filed another writ petition before the High Court
    The High Court held the termination of the contract was arbitrary, unjust
    and not in public interest. It directed the Electricity Board to pay to the
    contractor the labour esealation amounts with interest@ 18%.

F         In appeal to this Court it was contended on behalf of the appellant-
    Electricity Board that (i) the dispute relating to interpretation of a clause in
    a contract and implementation of such a clause cannot be made subject matter
    of a writ petition and remedy of the aggrieved person lies in approaching the
    Civil Court or some other appropriate forum; (ii) in the absence of proof of
    actual payment of enhanced wages to the workmen, the contractor is not
G   entitled to get reimbursement of any amount from the Board; and (iii) all
    contracts entered into by a body whose existence may be governed by the
    provisions of a statute are not statutory contracts.

          Allowing the appeal in part, the Court

H         HELD: I. The interpretation and implementation of a clause in a contract
             KERALA STA TE ELECTRICITY BOARD 1•. KURIEN E. KALA THIL           583

cannot be the subject matter of a writ petition. Whether the contract envisages       A
actual payment or not is a question of construction of contract If a term of a
contract is violated, ordinarily the remedy is not writ petition under Article 226.
The contractor should have been relegated to other remedies. (588-D; 589-Cf

      2. A contract would not become statutory simply because it is for
construction of a public utility and it has been awarded by a statutory body.         B
Clearly, the High Court fell into an error in coming to the conclusion that
the contract in question was statutory in nature. (588-E-Ff

      3. A statute may expressly or impliedly confer power on a statutory body
to enter into contracts in order to enable it to discharge its functions. Dispute     C
arising out of the terms of such contracts or alleged breaches have to be settled
by the ordinary principles of law of contract The fact that one t •the parties
to the agreement is a statutory or public body will not of itself affect the
principles to be applied. The disputes about the meaning of a covenant in a
contract or its enforceability have to be determined according to the usual
principles of the Contract Act Every act of a statutory body need not necessarily     D
involve an exercise of statutory power. Statutory bodies, like private parties,
have power to contract or deal with property. Such activities may not raise
any issue of public law. In the present case, it has not been shown how the
contract is statutory. The contract between the parties is in the realm of private
law. It is not a statutory contact The disputes relating to interpretation of the     E
terms and conditions of such a contract could not have been agitated in a
petition under Article 226 of the Constitution of India. That is a matter for
adjudication by a Civil Court or in arbitration if provided for in the contract
Whether any amount is due and if so, how much and refusal of the appellant
to pay it is justified or not, are not the matters which could have been agitated
and decided in a writ petition.1588-F-H; 589-A-BJ                                     F

      4. However, despite holding that the disputes in question could not be
agitated in a writ petition and thus the High Court wrongly assumed
jurisdiction in the facts of the case, yet it is not a case wherein court shall
exercise its power under Article 136 of the Constitution. Dismissal of writ           G
petition of the contractor at this stage is likely to result in miscarriage of
justice on account of lapse of time which may now result in the foreclosure of
all other remedies which could otherwise be availed of by the contractor in
the ordinary course. Those remedies are not efficacious at the present stage
and, therefore, in view of peculiar circumstances of the case the Court has
examined the factors which weighed with the High Court in granting relief             H
    584                    SUPREME COURT REPORTS (2000] SUPP. I S.C.R.

A to the respondent-contractor. (589-C, D, E)
          5. It was noticed by the High Court that the Board did not take a stand
    before the Industrial Tribunal that the contractor was not paying the minimum
    wages. The workmen through Union entered into a Memorandum of Settlement
    with the contractor which showed payment at the revised rate which was the
B   amount sought to be recovered by the contractor from the Board. In the
    circumstances, the contention that there was no proof of actual payments of
    enhanced wages by contractor to the workmen cannot be accepted. The
    directions given by the High Court for payment to the contractor in the
    impugned judgment except in respect of the rate of interest awarded by the
C   High Court do not call for interference. Having considered the totality of the
    circumstances, it would be just and proper to award interest 9% per annum
    instead of 18%. 1590-E, F; 591-A, BJ

          CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4092 of2000.

D         From the Judgment and Order dated 2.4.98 of the Kerala High Court in
    Crl. O.P. No. 283 of I 995.

                                       WITH

          Civil Appeal Nos. 4093-95 of2000.
E
         K.N. Rawal, V.R. Reddy, Ms. Malini Poduval, Ms. Lansinglu R.
    Manukrishnan, Ravindran, Vinod M.P. Dilip Pillai, Ramesh Babu M.R. and B.V.
    Deepak for the appearing parties.

          The Judgment of the Court was delivered by
F
          Y.K. SABHARWAL J. Leave granted.

           An agreement dated 16th September, 1981 was executed between the
    first respondent (for short 'the contractor') and the Kerala State Electricity
G   Board (for short 'the Board') for construction of a dam. This was pursuant
    to a tender notice issued by the Board inviting tenders; tenders submitted by
    the contractor; correspondence exchanged between the parties and the
    negotiations held. A supplementary agreement was also executed; extensions
    for completion of work were granted and there were deviations of works as
    well which aspects are, however, not necessary to be narrated for the purpose
H   of the disposal of these matters.
       KERALA STA TE ELECTRICITY BOARD 1•. KURIEN E. KALA TH!L [Y .K. SABHAR WAL, J.) 585


           The Government of Kerala issued a notification dated 30th March, 1983,           A
     under the Minimum Wages Act, 1948 revising the minimum wages payable to
     the employees employed in the works stated in the notification w.e.£ 1st April,
     1983. The contractor claims that he started paying revised minimum wages to
     the employees and applying the labour escalation formula, the Board made
     payments to the contractor for the work done from 1st April, 1983 till December,
     1984. The Board, however, stopped making payment of labour escalation from             B
     January, 1985. By letter dated 28th April, 1986, Government of Kerala wrote
     to the Board that the works in question coine under Item 31 of the Schedule
     added to the Schedule by Kerala Government by notification dated 23rd
     December, 1969 and the work undertaken by the contract~r, though may
     include stone crushing as a part of their labour, but the notification dated 30th      C
     March, 1983 does not apply to the work of constructing a dam and hence the
     contractor's claim for escalation under notification dated 30th March, 1983 is
     not maintainable. Thus, the Board stopped clearing the bills for enhanced
     minimum wages claimed by the contractor. It is claimed by the contractor that
     a settlement entered with the workers regarding payment of enhanced wages
     as per 1983 notification, stipulated that the increased wages paid will be             D
     treated as advances to be adjusted later depending upon the decision of the
     dispute.

            The validity of the letter/direction dated 28th April, 1986 of the State
     Government was considered by the Kerala High Court in judgment dated 25th              E
     Septemb>!r, 1990. By the said judgment, four writ petitions were disposed of
-I   by the High Court noticing that the Advocate General after obtaining
     instructions from the State Government agreed to withdraw the letters/direction
     dc1ted 28th April, 1986 leaving it free to the authorities to take a decision in
     regard to the applicability of the notification dated 30th March, 1983 on an
     objective assessment of legal and factual position. In view of the withdrawal          F
     of the said letter, the Court relegated the parties to other remedies available
     to them to work out their respective rights. The parties were thus directed to
     work out their rights either before the Civil Court or before the other authorities
     under the Industrial Disputes Act or under the Payment of Wages or other
     relevant law applicable. In view of this decision, the State Government referred       G
     the dispute regarding the applicability of the notification dated 30th March,
     1983 to the Industrial Tribunal. According to the contractor, he was making
     payment of enhanced wages to the employees as per the notification dated
     30th March, 1983 despite that from January, 1985, the Board had stopped
     making payment of the labour escalation- to the contractor. The increased
     payment said to have been made by the contractor to the employees was to               H
     586 .                  SUPREME COURT REPORTS [2000) SUPP. I S.C.R.

A    be treated as advances to be adjusted later depending upon the decision of
     the dispute. By an award on 14th October, 1993 the Industrial Tribunal held
     that the revised minimum wages notification was applicable to the works in
    question and that the workmen concerned in the dispute are entitled for wage
    rates and other benefits fixed in the minimum wage notification issued by the
    State Government on 30th March, 1983 in the case of employees coming
B   under Clauses 7 and 8 of Part I of the Schedule. of Minimum Wages Act till
    a separate minimum wage notification is issued in relation to Item 31 of the
    First Schedule. The Tribunal further held that the additional wages received
    by the workmen shall be treated as part of the wages. It is not in dispute that
    the award has become final.
c
          There is no dispute that the workmen are entitled to enhanced wages
    in terms of the notification dated 30th March, 1983. The Board does not
    dispute its liability to reimburse the contractor if in fact the payment of
    enhanced wages has been made by the contractor to the workmen in "terms
    of notification. The Board, however, claims that the contractor has failed to
D   prove the payment of enhanced wages to the workmen.

           According to the contractor, he made payment of a sum ofRs.9,93,93,868
     towards the escalated minimum wages to the workmen for the period
     commencing from !st January, 1985 to 3 lst March, 1993 and he is entitled to
E    be reimbursed for the said amount. The contractor is said to have entered into
    a memorandum dated 4th July, 1994 with the workmen through their union
    giving effect to the award of the industrial tribunal and the said settlement
                                                                                      •
    has also been endorsed by the Labour Officer and it shows payment of
    aforesaid sum having been made by the contractor. The Board accepted the
    award but at the same time, constituted a committee to go into the matter of
F   making payment by the contractor in implementation of the award of the
    tribunal. The Committee gave its report which was filed alongwith the counter
    affidavit of the Board in the High Court. The report inter alia notices that
    muster roll produced by the contractor indicates payment of minimum wages
    but states that the committee cannot certify the authenticity of payment in
G   the absence of other documents like wages pay slips/returns. It seems, in the
    meanwhile, the Board was making payments of various amounts as advances
    to the contractor under the various heads to enable the work to proceed.
    However, on 23rd December, 1994, the Board ordered recov'!ry of these
    advances amounting to Rs.3.65 crores with interest from the works bill of the
    contractor from January, 1995 onwards. This led to the contractor filing a writ
H   petition (0.P. 283 of 1995) in the High Court seeking quashing of the letter
   KERALA STATEELECTRICITY BOARD 1•. KURIEN E. KALATHIL (Y.K. SABHARWAL, J.] 587


dated 23rd December, 1994 as also praying for issue of directions to the Board     A
for paying to the contractor the amounts of labour escalation with interest.
During the pendency of the writ petition, under interim orders, a sum of Rs.4
crores in instalments was paid to the contractor. These directions, it seems,
were issued considering the public interest involved in the early construction
of the dam. While the writ petition (OP No. 283 of 1995) was pending, the          B
Board passed an order on 26th February, 1997 terminating the contract. This
led to filing of another writ petition (OP No. I 0759 of 1997). Both these writ
petitions were disposed of by the common impugned judgment. The High
Court has held the termination of the contract to be arbitrary, unjust and not
in public interest and has directed the Board to pay to the contractor the
labour escalation amounts. It has been further directed that the Board shall       C
pay to the contractor interest @ 18% on the amounts shown in the statement
Exhibit P20.

       Mr. Rawal, learned Additional Solicitor General has put forth two
contentions. The first contention is about the maintainability of the writ
petition ( O.P. 283of1995) wherein directions as aforesaid for payment were        D
issued by the High Court. Learned counsel submits that the writ petition is
not the proper and appropriate remedy. The second contention is that the
contractor, in absence of proof of actual payments of enhanced wages to the
workmen, is not entitled to get reimbursement of any amount from the Board.
Learned counsel submits that in case the contractor proves payment to the          E
workmen as per the notification dated 30th March, 1983, the Board will have
no difficulty for reimbursement.

      aaborating the first submission, learned counsel for the appellant submits
that the dispute relating to interpretation of a clause in a contract and
implementation of such clause cannot be made subject matter of a writ petition     F
and remedy of the aggrieved person lies in approaching the Civil Court or
some other appropriate forum. It was further contended that all contracts
entered into by a body whose exisience may be governed by the provisions
of a statute are not statutory contracts.

      On the other hand, it was contended for the contractor that the obligation   G
of the Board arises as soon as the wages payable to the workmen get
enhanced on account of Government notification revising minimum wages
and it does not contemplate any investigation into the question whether
enhanced payments were in fact made or not. The contention further is that
under the Minimum Wages Act and under the industrial law, the authorities          H
    588                     SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A do oversee the payments and make sure that the workmen are not denied
    such benefits. It was further contended that the Board did not contend in the
    earlier writ petition before the High Court or even before the industrial tribunal
    that the payment as per the notification was not made by the contractor and,
    in fact, the award of the industrial tribunal which has become final records
B   the factum of payment at the enhanced revised rate to the workmen and
    further that the memorandum between the union and the contractor witnessed
    by the Deputy Labour Officer also notices the factum of such payment. It was
    stressed that, in fact, the contractor had sought issue of Writ of Mandamus
    directing the Board to discharge its obligation under the notification issued
    under the Minimum Wages Act, the directions contained in the judgment
C   dated 25th September, 1990 and the award dated 14th October, 1993 and to
    further issue a Writ of Mandamus to the Board directing it to pay to the
    petitioner the amount shown in the settlement between the contractor and the
    workmen through its union alongwith the interest.

          We find that there is a merit in the first contention of Mr. Rawal. Learned
D Counsel has rightly questioned the maintainability of the writ petition. The
    interpretation and implementation of a clause in a contract cannot be the
    subject matter of a writ petition. Whether the contract envisages actual
    payment or not is a question of construction of contract? If a tenn of a
    contract is violated, ordinarily the remedy is not the writ petition under Article
E   226. We are also unable to agree with the observations of the High Court that
    the contractor was seeking enforcement of a statutory contract. A contract
    would not become statutory simply because it is for construction of a public
    utility and it has been awarded by a statutory body. We are also unable to
    agree with the observation of the High Court that since the obligations
    imposed by the contract on the contracting parties come within the purview
F   of the Contract Act, that would not make the contract statutory. Clearly, the
    High Court fell into an error in coming to the conclusion that the contract in
    question was statutory in nature.

           A statute may expressly or impliedly confer power on a statutory body
G   to enter into contracts in order to enable it to discharge its functions. Dispute
    arising out of the tenns of such contracts or alleged breaches have to be
    settled by the ordinary principles of law of contract. The fact that one of the
    parties to the agreement is a statutory or pul;lic body will not of itself affect
    the principles to be applied. The disputes about the meaning of a covenant
    in a contract or its enforceability have to be detennined according to the
H   usual principles of the Contract Act. Every act of a statutory body need not
  KERALA STATE ELECTRICITY BOARD v. KUR!EN E. KALATHIL [Y.K. SABHARWAL, J.) 589

necessarily involve an exercise of statutory power. Statutory bodies, like          A
private parties, have power to contract or deal with property. Such activities
may not raise any issue of public law. In the present case, it has not been
shown how the contract is statutory. The contract between the parties is in
the realm of private law. It is not a statutory contract. The disputes relating
to interpretation of the terms and conditions of such a contract could not
have been agitated in a petition under Article 226 of the Constitution oflndia.     B
That is a matter for adjudication by a civil court or in arbitration if provided
for in the contract. Whether any amount is due and if so, how much and
refusal of the appellant to pay it is justified or not, are not the matters which
could have been agitated and decided in a writ petition. The contractor should
have been relegated to other remedies.                                              C
      Ordinarily, in view of aforesaid conclusions on the first contention, we
would have allowed the appeal and directed dismissal of the writ petition (O.P.
283 of 1995) without examining the second contention. However, despite
holding that the disputes in question could not be agitated in a writ petition
and thus the High Court wrongly assumed jurisdiction in the facts of the case, D
yet we are not inclined in the exercise of our power under Article 136 of the
Constitution, to dismiss the writ petition of the contractor at this stage
because that is likely to result in miscarriage of justice on account of lapse
of time which may now result in the foreclosure of all other remedies which
could otherwise be availed of by the contractor in the ordinary course. Those E
remedies are not efficacious at the present stage and, therefore, in view of
peculiar circumstances of the case, we have examined the second contention
and the factors which weighted with the High Court in granting relief.

       The contract was awarded in 1981. It was for construction of a darn. The
expeditious construction of the dam was necessary for generation of hydro F
electric power in the State. The construction was at final stage and it is in
public interest that the construction is completed without any further delay.
The notification for minimum wages was issued in 1983 and admittedly it was
applicable to the construction in question. The High Court considering the
peculiar facts of the case and the inordinate delay which had already taken G
place in completion of the work and bearing in mind the fact that work of the
dam was one of national importance and admittedly the labour escalation
formula had been accepted, directed the payment of the amount worked out
as per the formula to the contractor and further issued directions fixing time
frame for the completion of the work. The formula regarding labour escalation
payment was incorporated in the correspondence exchanged between the H
    590                      SUPREME COURT REPORTS [2000] SUPP. I S.C.R.

A     parties prior to entering into formal contract on 16th September, 1981. The
      facts broadly taken into consideration by the High Court were that the
     contractor initially in his letter dated 18th March, 1981 submitted along with
     the tender had suggested the additional financial liability to be borne as a
     consequence of increase in wages or other benefits to labour to be reimbursed
     with reference to actuals. During the negotiations, the Board expressed its
B    unwillingness to accept such proposals of reimbursement -Of increased wages
     paid, after quantification of the actual disbursement of such increased wages
     and was willing to provide for revision in the rate structure on the basis of
     an agreed formula to take into account the increase in the minimum wages
     statutorily notified. In this view, the contractor suggested formula for revising
C    the rate structure. The formula initially suggested by the contractor in his
     letters dated 21st May, 1981 and 5th June, 1981 was not accepted by the
     Board and the Chief Engineer in his letter dated 11th June, 1981 asked the
     contractor to modify the conditions in such a way that the terms and formula
    are acceptable to the Board. Thereupon, the contractor submitted the revised
    formula in his letter dated 15th June, 1981. This was accepted by_ the Board
D   when it communicated to the contractor by letter dated I st July, 1981 that the
    contract has been awarded to the contractor. The formula regarding labour
    escalation as described in the letter dated 15th June, 1981 was accepted by
    the Board subject to the stipulation that the minimum wages for ordinary
    'mazdoor' will not be less than Rs. 13 per day viz. the rate as per PWD
E   Schedule for rates 1980 applicable to the locality. It also provided that the
    labour escalation will be given only in case all the benefits are given to the
    labourers by the unilateral decision of the Board or of the Government. It was
    thus evident that the contractor was entitled to at the rate structure revised
    as per agreed formula. It was also noticed by the High Court that the Board
    did not take a stand before the industrial tribunal that the contractor was not
F   paying the minimum wages. The workmen through union entered into a
    Memorandum of Settlement with the contractor which showed payment at the
    revised rate which was amount sought to be recovered by the contractor from
    the Board. The award mentioned that the additional wages received by the
    workmen as advance shall be treated as part of their wages. The Board had
G   accepted the award. In fact, the Board was making payment of advances to
    the contractor presumably to be adjusted against labour escalation as and
    when the dispute is settled.

          In view of the aforesaid facts, the High Court directed the Board to
    discharge its obligation under the contractual provisions. It was noticed that
H   earlier the Boarrl ~.ad made payment to the contractor for enhanced wages
  KERALA STATE ELECTRICITY BOARD"· KURIEN E. KALA THIL [Y.K. SABHARWAL, l .) 59 J

from 1st April, 1983 to 31st December, 1984. Under the circumstances, declining A
to accept the second contention, we refrain from interfering with the directions
for payment given in the impugned judgment except in respect of the rate of
interest awarded by the High Court.

      The High Court has directed the Board to pay to the contractor the
amounts shown in the Statement EX. P-20 alongwith interest @ 18% per                B
annum. Having considered the totality of the circumstances, we feel that it
would be just and proper to award interest @ 9% per annum instead of 18%.
In the statement EX.P-20, the contractor has calculated interest @ 18% per
annum. The interest amount would now be calculated at 9% instead of 18%
per annum. The impugned judgment of the High Court is modified accordingly.         C
       The appeals are thus partly allowed as above leaving the parties to
bear their own costs.

T.N.A.                                                 Appeals partly allowed.