Case Note & Summary
The petitioners, M/s. PLR Projects Pvt. Ltd. and its Managing Director, filed a writ petition challenging the invocation of two bank guarantees dated 25.08.2008 and 14.05.2011, each for Rs.1,07,29,750, by the respondents, Western Coalfields Limited and its Chief General Manager. The bank guarantees were furnished in respect of a contract work. The respondents invoked the guarantees by letter dated 26.02.2013 on the ground that the petitioners had not paid wages to their employees as per the 'Law of the Land' under Clause 31.01 of the contract conditions, which they interpreted to include the National Coal Wage Agreement dated 24.01.2009. The petitioners had paid minimum wages under the Minimum Wages Act, which was applicable to the respondents' establishment as well. The court noted that the payment of minimum wages was never objected to by the respondents or any trade union. The court allowed the writ petition on 06.12.2013, holding that the invocation was on an alleged pretext and restrained the respondents from enforcing the bank guarantees. The court found that the 'Law of the Land' in Clause 31.01 refers to statutory minimum wages, not the higher rates under a collective agreement.
Headnote
A) Contract Law - Bank Guarantee - Invocation - Clause 31.01 of Contract Conditions - The respondents invoked bank guarantees alleging non-payment of wages as per National Coal Wage Agreement, but the petitioners had paid minimum wages under the Minimum Wages Act. The court held that 'Law of the Land' in Clause 31.01 refers to statutory minimum wages, not the higher rates under a collective agreement, and restrained invocation. (Paras 2-4)
Issue of Consideration
Whether the respondents could invoke the bank guarantees on the ground that the petitioners failed to pay wages as per the National Coal Wage Agreement, when the petitioners had paid minimum wages under the Minimum Wages Act.
Final Decision
The writ petition was allowed. The court restrained the respondents from invoking the bank guarantees.
Law Points
- Interpretation of contract clauses
- bank guarantee invocation
- minimum wages vs. agreed wages
- National Coal Wage Agreement
- Clause 31.01 of contract conditions
Case Details
2019 LawText (BOM) (04) 201
Writ Petition No.1183 of 2013
R.K. Deshpande, S.M. Modak
Shri M.G. Bhangde, Senior Advocate assisted by Shri Mayank Agnihotri for petitioners; Shri Rohan H. Chandurkar for respondents
M/s. PLR Projects Pvt. Ltd. and Mr. P.V. Midhun Reddy
The Western Coalfields Limited and The Chief General Manager (CMC), Western Coalfields Limited
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Nature of Litigation
Writ petition challenging invocation of bank guarantees by the respondent employer.
Remedy Sought
Restraining the respondents from enforcing the bank guarantees.
Filing Reason
The respondents invoked bank guarantees on the ground that the petitioners failed to pay wages as per the National Coal Wage Agreement, whereas the petitioners had paid minimum wages under the Minimum Wages Act.
Previous Decisions
The writ petition was allowed on 06.12.2013, holding that the invocation was on an alleged pretext.
Issues
Whether the respondents could invoke the bank guarantees on the ground that the petitioners failed to pay wages as per the National Coal Wage Agreement, when the petitioners had paid minimum wages under the Minimum Wages Act.
Submissions/Arguments
Petitioners argued that they paid minimum wages under the Minimum Wages Act, which was never objected to.
Respondents argued that 'Law of the Land' under Clause 31.01 includes the National Coal Wage Agreement, which prescribes higher wages.
Ratio Decidendi
The 'Law of the Land' in Clause 31.01 of the contract conditions refers to statutory minimum wages under the Minimum Wages Act, not the higher rates under a collective agreement like the National Coal Wage Agreement. Hence, the invocation of bank guarantees on the ground of non-payment of higher wages was unjustified.
Judgment Excerpts
It is not in dispute that the employees have been paid minimum wages applicable in terms of the provisions of the Minimum Wages Act, which was applicable even to the employees working in the establishment of the respondents.
Hence, on alleged pretext, suddenly the action of forfeiture of Bank guarantee
Procedural History
The writ petition was filed in 2013. On 06.12.2013, the court allowed the petition. The judgment was delivered on 01.04.2019.
Acts & Sections
