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

The contractor claimed that the arbitration award was invalid since the arbitrator, as a railway employee, was impartial. However, the court found no merit in 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 multiple railway depots. It was a three-year contract, valued at approximately $1.96 crore, which will run from November 30, 2016 to November 29, 2019. Following a government notification dated January 19, 2017, the minimum wages of workers have been increased. This significantly increased operating costs for the contractor. He subsequently requested an additional refund of $20,91,522 to cover the higher salary expenses, which the Central Railway disputed. The contractor issued a legal notice in December 2020, invoking the arbitration clause to seek recovery of differential wages.

EM. Truly Pest Solution, through advocate Shekhar Jagtap, first argued that the appointment of the arbitrator was invalid under section 12(5) (ineligibility of certain persons to be appointed arbitrators) of the Arbitration and Conciliation Act as he was an employee railway, and creates a conflict of interest. Jagtap then claimed that the contractor had to sign the waiver agreement under implied duress, with no viable alternatives due to contractual limitations that preclude civil lawsuits. He added that the 45% increase in salaries affected the financial viability of the contractor, justifying the claim for additional payment.

The Central Railway, represented by Advocate Savita Ganoo, responded that the issue of appointment of arbitrator raised by M/s Truly Pest Solution was not valid under Section 34 (process and grounds for setting aside an arbitral award) of the Arbitration Act, since the contractor 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 execute the contract, but decided to continue. He stated that the arbitrator issued a reasoned decision in accordance with the terms of the contract and the applicable law.

Justice Rajesh S Patil dismissed the petition of M/s Truly Pest Solution and upheld the decision in favor of the Central Railway. The court noted that the contractor had 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 terms of the arbitration, did not challenge the appointment of the arbitrator during the proceedings and raised the issue only after the arbitration award was rendered, which the court considered an afterthought.

The court also found no merit in the contractor’s financial claims, noting that the contractor should have been prepared for the salary increase, since a draft notice had been issued before the execution of the contract. Justice Patil stressed that judicial intervention in arbitration is limited to cases of patent illegality or procedural irregularity. In this case, the court found that the arbitration award was well reasoned and there were no grounds for interference.