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Price variation clause must be extended to ensure contractor`s compliance of minimum wages payable to contract workers   Jun 06, 2018

In a landmark judgment, a Division Bench of the Bombay High Court in A2Z Cleaning Services V/s. Union of India through Chairman Railway Board (Writ Petition No.1996 of 2017) held that, the Contractor will need to be reimbursed the increase in the minimum wages payable to his employees, consequent to the statutorily notified revision in the minimum wages.
Briefly stated, the Cleaning agency entered into a contract with the Railways for a period of 3 years for mechanised cleaning of coaches, watering of rakes and provision of On Board House Keeping Services. Subsequently, the minimum wages applicable to employees working in the scheduled employment of sweeping and cleaning was increased by 40% and as a result the contractor had to pay Rs.523/- per day instead of Rs.374/- per day which entailed an additional expenditure of more than Rs.9 crores. After repeated representations by the Cleaning Agency the Railways constituted a four member Committee to recommend a suitable solution for compensating the Agency for the increase in the cost of labour. As the Railways rejected the recommendations of the Committee, the Writ Petition was filed by the Agency which contended that it was left in a financial lurch on account of the sudden hike in the rate of minimum wages which the contractor was duty bound to abide. The Judges observed that the Price Variation Clause in the contract cannot be considered to be restrictive but will also cover within its ambit the escalated minimum rate of wages. Their Lordships referred, in particular to clause 14 of the agreement which mandated the contractor to abide by statutes like the Minimum Wages Act, Workmen Compensation Act, etc. which are instances of beneficial legislation in the larger interest of the labour class and it is rather a bounden duty of the Railway in ensuring that such statutory mandates are strictly adhered to. Consequently the High Court directed the Railway to pay the difference in the amount incurred till date since the Minimum wages have been revised.

Members may note that the contractual consideration fixed between a principal employer and the Contractor cannot be allowed to negate or defeat the statutory obligations that are beneficial to the contract workmen.

Download the Text of the judgment.  


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