Bombay High Court upholds railway in wage dispute and upholds arbitrator’s decision | Mumbai News

MUMBAI: The Bombay High Court on Tuesday upheld an arbitration award in favor of the Central Railway, dismissing a claim by a contractor seeking compensation for wage hikes following a government-imposed minimum wage hike.

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

The dispute arose out of a June 2016 contract between M/s Truly Pest Solution Private Limited and the Central Railway, for pest and rodent control services at multiple railway depots. It was a three year contract, worth approx ₹1.96 crore, running from November 30, 2016 to November 29, 2019. Following a government notification dated January 19, 2017, minimum wages for workers were increased. This significantly increased operating costs for the contractor. He then claimed additional compensation of € ₹20,91,522 to cover the higher labor costs, which the Central Railway disputed. The contractor issued a legal notice in December 2020 in which it invoked the arbitration clause to claim recovery of the wage difference.

Madam. Truly Pest Solution, through lawyer Shekhar Jagtap, first argued that the appointment of the arbitrator was invalid under Section 12(5) (ineligibility of certain people to be appointed as arbitrators) of the Arbitration and Conciliation Act, since he was a railroad employee, and it creates a conflict of interest. Jagtap then alleged that the contractor had to sign the waiver agreement under implied duress, with no viable alternatives due to contractual limitations, barring civil actions. He added that the 45% wage increase affected the contractor’s financial viability, justifying the claim for additional payment.

The Central Railway, represented by advocate Savita Ganoo, countered that the issue of appointment of an arbitrator raised by Ms. Truly Pest Solution was not valid under Section 34 (process and grounds for setting aside an arbitral award) of the Arbitration Act , as the contractor has waived his right to object in writing. He further argued that the contractor was aware of the expected wage increase prior to signing the contract and had the option to foreclose on the contract, but chose to proceed. She stated that the arbitrator had made a reasoned decision in accordance with the contract terms and applicable law.

Justice Rajesh S. Patil dismissed the petition of Ms. Truly Pest Solution and upheld the decision in favor of the Central Railway. The court found that the contractor voluntarily waived its right to object to the arbitrator’s suitability after signing an express waiver after the dispute arose. The contractor, who was aware of the arbitration terms, did not challenge the appointment of the arbitrator during the proceedings and only raised the issue after the arbitration award had been rendered, which the court regarded as a side issue.

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 declaration had been issued before the execution of the contract. Justice Patil underlined that judicial intervention in arbitration is limited to cases of patent illegality or procedural irregularities. In this case, the court considered the arbitration award well-reasoned, without grounds for interference.