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Bombay High Court backs railway in wage dispute, affirms arbitrator’s decision

ByKaruna Nidhi
Nov 13, 2024 07:46 AM IST

The Bombay High Court upheld an arbitration ruling favoring Central Railway, rejecting a contractor's claim for wage increase compensation.

MUMBAI: The Bombay High Court on Tuesday upheld an arbitration ruling in favour of the Central Railway, dismissing a claim by a contractor seeking compensation for increasing wages after a government-mandated minimum wage hike.

Bombay High Court backs railway in wage dispute, affirms arbitrator’s decision
Bombay High Court backs railway in wage dispute, affirms arbitrator’s decision

The contractor had argued that the arbitration ruling was invalid as the arbitrator, as a railway employee, was impartial. However, the court found no merit in the contractor’s challenge, and affirmed the arbitrator’s decision, pointing out that the contractor had signed a waiver of objection.

The dispute arose from a June 2016 contract between M/s Truly Pest Solution Private Limited and the Central Railway, for pest and rodent control services across multiple railway depots. It was a three-year contract, valued at approximately 1.96 crore, set to run from November 30, 2016, to November 29, 2019. Following a government notification dated January 19, 2017, minimum wages for labourers were raised. This significantly increased the operating costs for the contractor. He subsequently claimed additional reimbursement of 20,91,522 to cover the higher wage expenses, which the Central Railway disputed. The contractor issued a legal notice in December 2020, invoking the arbitration clause to seek recovery of the differential wages.

M/s. Truly Pest Solution, through advocate Shekhar Jagtap, first argued that the arbitrator’s appointment was invalid under section 12(5) (ineligibility of certain people to be appointed as arbitrators) of the Arbitration and Conciliation Act, as he was a railway employee, and it creates a conflict of interest. Then Jagtap asserted that the contractor had to sign the waiver agreement under implied coercion, lacking any viable alternatives due to contractual limitations barring civil court actions. He added that the 45% hike in wages impacted the contractor’s financial viability, justifying the claim for additional payment.

The Central Railway, represented by advocate Savita Ganoo, countered that the issue of arbitrator’s appointment raised by M/s Truly Pest Solution were not valid under section 34 (process and grounds for setting aside an arbitral award) of the Arbitration Act, as the contractor had waived his right to object in writing. He further argued that the contractor was aware of the anticipated wage increase before signing the contract and had the option to foreclose the contract but chose to continue. She stated that the arbitrator issued a reasoned decision in line with the contract terms and applicable law.

Justice Rajesh S Patil dismissed M/s Truly Pest Solution’s petition, upholding the decision in favour of the Central Railway. The court observed that the contractor had voluntarily waived his right to object to the arbitrator’s eligibility, having signed an express waiver agreement after the dispute had arisen. The contractor, aware of the arbitration terms, did not challenge the arbitrator’s appointment during the proceedings and raised the issue only after the arbitral award was rendered, which the court viewed as an afterthought.

The court also found no merit in the contractor’s financial claims, noting that the contractor should have been prepared for the wage increase, as a draft notification had been issued before the contract’s execution. Justice Patil underscored that judicial intervention in arbitration is limited to cases of patent illegality or procedural irregularity. In this case, the court found the arbitral award well-reasoned, with no grounds for interference.

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