MUMBAI: The Bombay High Court on Tuesday upheld an arbitral award in favor of the Central Railway, rejecting a contractor’s petition seeking compensation for increased wages after a government-imposed increase in minimum wages.

The contractor had argued that the arbitral award was invalid because the arbitrator, as a railway employee, was impartial. However, the court found no basis for the contractor’s challenge and upheld 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 Central Railway, for pest and rodent control services at several railway depots. It was a three-year contract, valued at approximately ₹1.96 crore, scheduled from November 30, 2016 to November 29, 2019. Following a government notification dated January 19, 2017, the minimum wage of laborers was increased. This significantly increased operating costs for the contractor. He then requested an additional reimbursement of ₹20,91,522 to meet the higher salary expenditure, contested by the Central Railway. The contractor issued a formal notice in December 2020, invoking the arbitration clause to request recovery of salary discrepancies.

MS. Truly Pest Solution, through advocate Shekhar Jagtap, initially argued that the appointment of the arbitrator was invalid under Section 12(5) (ineligibility of certain persons to be appointed as arbitrators) of the Arbitration and Conciliation Act, as he was a railway employee, and it creates a conflict of interest. Jagtap further claimed that the contractor had to sign the waiver agreement under implied duress, due to lack of viable alternatives due to contractual limitations barring civil legal action. He added that the 45% wage hike had impacted the financial viability of the contractor, justifying the request for additional payment.

The Central Railway, represented by advocate Savita Ganoo, countered that the issue of appointment of arbitrator raised by M/s Truly Pest Solution was not valid under Section 34 (process and grounds of annulment of an arbitration award) of the Arbitration Act, because the entrepreneur had waived his right to object in writing. He further argued that the contractor was aware of the anticipated salary increase before signing the contract and had the option to terminate the contract, but chose to continue. She said the arbitrator rendered a reasoned decision consistent with the terms of the contract and applicable law.

Justice Rajesh S Patil dismissed the petition of M/s Truly Pest Solution, upholding the decision in favor of the Central Railway. The court observed that the contractor voluntarily waived its right to object to the arbitrator’s eligibility, having signed an express waiver agreement after the dispute arose. The contractor, 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 was made, which the court ruled considered an afterthought.

The court also found the contractor’s financial claims unfounded, emphasizing that the contractor should have been prepared for the salary increase, since a draft notification had been issued before the execution of the contract. Justice Patil emphasized that judicial intervention in arbitration is limited to cases of patent illegality or procedural irregularity. In this case, the court found the arbitral award to be well reasoned and without grounds for interference.