INDIAN RARE EARTHS LTD v. SRI.JACOB RAJAN CONTRACTOR

P.R.RAMAN & P.R.RAMACHANDRA MENON-------------------------------Arb.Appeal No. 11 of 2003 & Arb.Appeal No.28 of 2004-------------------------------Dated this the 6th October, 2009J U D G M E N TRaman, J.These appeals are against the common award anddecree in O.P.(Arb.)Nos. 50 of 1993 and 31 of 1993 respectively,on the file of the Additional Sub Court, Kollam. 2. In both these appeals, the appellant isM/s.Indian Rare Earths Ltd. and the respondent is one JacobRajan. The respondent herein undertook certain worksawarded by the appellant, Indian Rare Earths Ltd., in connectionwith bagging, transportation, shipping and stevedoring andminerals and the sand. Subsequent to the completion of thecontract, dispute arose regarding the amount payable to theclaimant, the respondent herein. In terms of the contract Arb.Appeals.Nos.11/2003 & 28/20042between the parties, the matter was referred for Arbitration. Thesole Arbitrator appointed conducted the proceedings and passedhis award dated 18.12.1992. The appellant filed a petitionbefore the Sub Court, Quilon, for setting aside the Arbitrationaward, whereas, the respondent preferred a petition for passing adecree in terms of the award. Both the above applications weretried together and disposed of by a common judgment.Technically, since there were two application, two appeals arepreferred. The correctness of the award as decreed by the courtbelow, is therefore, the issue that arise for consideration in theseappeals. 3. We have heard the parties. The first claimpertains to the recovery of the contribution due under theProvident Fund in respect of the employees engaged for thecontract work. Admittedly, the appellant is not the principalemployer as per the Employees' Provident Fund Act, but theultimate liability under the Act will fall on him, since the Principalemployer can recover the amount of contribution due from the Arb.Appeals.Nos.11/2003 & 28/20043immediate employer in respect of the employees engaged by orunder him, i.e., from the Contractor to whom the work isawarded. The Arbitrator held that in so far as the claimant didnot apply to the Provident Fund Commissioner for determinationof the applicability of the Provident Fund Act and produced anynon-liability certificate thereon, the deduction made by theemployer on the quantified amount of contribution are held to beneither illegal nor unauthorised. It was the contention of theclaimant that awarder of the work, viz., the principal employer,is an establishment exempted from the provisions of theEmployees Provident Fund Act though it is a coveredestablishment. The question as to whether such an exemptioncould be extended to the contract work was the dispute. Theprincipal employer, the appellant, in such circumstances, and inthe absence of any verdict granting specific exemption relating tothe contract work in question, sought to deduct the amount fromout of the final bill payable to the Contractor. In the concludingpart of the award, the Arbitrator directed the appellant herein to Arb.Appeals.Nos.11/2003 & 28/20044make a reference to the competent authority within a week'stime from the date of receipt of the award, and if necessary, tohave an appropriate ruling from the competent authority, and inthe event of the competent authority under the PF Act gives adecision that PF Act is not applicable to the claimant, then theworkers are not entitled to the PF benefits, and then the amountof Rs.24,250/= and Rs.26,263.86 withheld be released to theclaimant. It was further directed that in such an event, the saidamount will carry interest at the rate of 17.5% per annum, fromthe date of their deduction, i.e., 22.12.86 and 4.5.87 respectivelyupto the date of Award. 4. In so far as no appeal has been preferred by theclaimant, the deduction as given by the Arbitrator and affirmedby the decree passed by the court below, on which there cannotbe any dispute by the claimant, until a decision is rendered thatthe workers engaged by him are not entitled to the benefitsunder the P.F. Act. But the appellant has challenged the abovefinding. Arb.Appeals.Nos.11/2003 & 28/200455. No appreciable grounds have been raised beforeus in this appeal by the appellant. Ground 'A' in the appealmemorandum, pertains to the above issue, shows that it is notagainst the decision of the Arbitrator that a grievance has arisenfor the appellant to challenge the same, rather according to theappellant, after the award, they have already addressed a letterto the Regional Provident Fund Commissioner, Madurai, whosefinding was in favour of the appellant and the letter of theCommissioner was produced before the Sub Court, Kollam. Butthis aspect was not considered by the court below. As a matterof fact, during the course of hearing, the certificate issued by theRegional Provident Fund Commissioner, dated 15.7.93, wasproduced before us. This evidently is a letter issued subsequentto the award passed by the Arbitrator. The award of theArbitrator is dated 18.12.1992. Therefore, the appellant is rightin saying that the court below ought to have considered thesubsequent letter produced before it and pass appropriate orders Arb.Appeals.Nos.11/2003 & 28/20046based on such letter, as to whether the said letter exempts ormakes the Contractor liable for the amount in dispute. 6. We have gone through the said letter and wefind that it has been decided by the authority that bagging andloading employees employed for the work in question throughthe Contractor are to be enrolled as PF subscribers and it is theresponsibility of the principal employer to extend the benefit tosuch employees employed by the Contractor. In terms of theaward, it has been held that the claimant was not able to furnishany certificate to the effect that employees are not entitled forthe benefit arising under the PF Act. 7. True, in paragraph 2, it is stated that theappellant is covered, but an exempted establishment, and theProvident Funds are maintained by its Board of Trustees atBombay. Therefore, recovery in respect of bagging and loadingemployees employed through the Contractor is also to be takenand, therefore, the amount has to be remitted by the Board of Arb.Appeals.Nos.11/2003 & 28/20047Trustees at Bombay. Based on the first paragraph of the letter,the Employees Provident Fund Act is applicable to the employeesengaged in the work of bagging and loading, employed by theemployer. The correctness of the order passed by the AssistantProvident Fund Commissioner, if at all is a matter which theclaimant is entitled to challenge before the appropriate forum, ifso advised. 8. The next claim is regarding the penal interest,dealt with in paragraph 18 of the award under the head “Claimsfor Interest/Damages” The claimant had claimed damages forthe amount withheld by way of interest @ 17.5%, as the Bankrealised interest at that rate for the amounts outstanding. Theappellant contended that the contract does not provide forpayment of interest. They also contended that no amounts aredue to the claimant and deductions are made legally and onreasons stated. Hence, the question of damages/interest doesnot arise. Further, under the Interest Act, not more than 10%can be allowed on any amount due. The Arbitrator held that Arb.Appeals.Nos.11/2003 & 28/20048justice would be served by awarding interest at the rate of 17.5%per annum as claimed by the claimant for the award under ClaimNos.2, 3, 4, 5, 7 and 8. The appellant was also directed to paythe award amount, i.e., principal amount plus interest, to theclaimant within 60 days from the date of the receipt of theAward. In case of default, it was directed that the appellant willbe liable to pay interest at the rate of 22% per annum to theclaimant beyond the period of 60 days upto the actual date ofpayment. The court below confirmed the finding of theArbitrator while decreeing the suit. 9. It is now submitted by both sides that theappellant have already remitted an amount of Rs.65,174/=which, according to them, is the admitted amount, andtherefore, there is no liability to pay penal interest. As a matterof fact, the dispute arose because of the claim of the claimantthat more amounts are due and the Arbitrator found undervarious claims that amounts are payable to the claimant. Itnecessarily relate back to the date of the final bill. Therefore, we Arb.Appeals.Nos.11/2003 & 28/20049do not find any good reason to interfere with the interestawarded by the Arbitrator as confirmed by the court below.According to the appellant, amounts have already been paidtowards interest on 5.8.1993. It is open to the parties to file areconciliation statement between them and we do not find anyinterference, as such, is called for. 10. The next dispute is regarding the penalinterest. When the amount as admitted has been paid andfurther amount due or payable, as found by the Arbitratorcarries interest awarded, then the question of paying any penalinterest does not arise. The direction issued by the Arbitrator topay penal interest at the rate of 22% is contrary to the terms ofthe agreement. Accordingly, the same is set aside. 11. The next contention is that an amount ofRs.3749.99 has been withheld by the appellant, which accordingto the appellant, has been released on 29.2.1998 and this is Arb.Appeals.Nos.11/2003 & 28/200410accepted by the respondent. As such, no further deduction iscalled for in this regard. In the result, the appeals are disposed of in termsof what is stated above. P.R.RAMAN, JUDGEP.R.RAMACHANDRA MENON, JUDGE.nj. P.R.RAMAN & P.R.RAMACHANDRA MENON, JJ.-------------------------------ARB.APPEAL NOS.11/2003 & 28/2004 J U D G M E N TDated: 6th October, 2009. -------------------------------