Case BriefsSupreme Court

Supreme Court:

“Construction workers do not assist only in building infrastructure, but they also assist in building the nation, in their own small way.”

After it was brought to the notice of the bench of Madan B. Lokur and Deepak Gupta, JJ that under the Building and Other Construction Workers‘ Welfare Cess Act, 1996, more than Rs. 37,400 crores have been collected for the benefit of construction workers, but only about Rs. 9500 crores have been utilized ostensibly for their benefit, the Bench issued various directions after stating:

“No State Government and no Union Territory Administration (UTA) seems willing to fully adhere to and abide by (or is perhaps even capable of fully adhering to and abiding by) two  laws solemnly enacted by Parliament, namely, the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (the BOCW Act) and the Building and Other Construction Workers‘ Welfare Cess Act, 1996 (the Cess Act).”

The Court, hence, asked the Ministry of Labour and Employment, the State Governments and the UTAs to:

  • put in place and strengthen the registration machinery, both for the registration of establishments as well as registration of construction workers at the earliest.
  • establish and strengthen the machinery for the collection of cess.
  • frame one composite Model Scheme for the benefit of construction workers in consultation with all stakeholders including NGOs who are actually working at the grassroots level with construction workers. The scheme should include within it, inter alia, issues and concerns of education, health, social security, old age and disability pension and other benefits that are necessary for living a life of dignity as postulated by the Constitution of India.
  • conduct a social audit on the implementation of the BOCW Act so that in future there is better and more effective and meaningful implementation of the BOCW Act.

The Court also issued certain general directions for the implementation of the BOCW Act:

  • Every State Government and UTA shall constitute a State Advisory Committee, if not already constituted.
  • Every State Government and UTA shall constitute an Expert Committee and frame statutory Rules under Section 62 of the BOCW Act, if such statutory Rules have not already been framed.
  • The State Governments and UTAs must appoint Registering Officers for registration of establishments and construction workers.
  • Every State Government and UTA should establish a Welfare Board in terms of Section 18 of the BOCW Act. It must be appreciated that this is not a body that can be created by an executive order. The law requires that the Welfare Board shall be a body corporate having perpetual succession and a common seal.
  • Every State Government and UTA should establish a Welfare Fund for the benefit of the construction workers, with appropriate rules for utilisation of the funds.
  • all construction workers should be given identity cards and should be registered in terms of Section 12 of the BOCW Act.
  • The Ministry of Labour and Employment shall actively consider
  • making available to the construction workers the benefits of The Maternity Benefit Act, 1961 and The Minimum Wages Act, 1948, The Employees‘ State Insurance Act, 1948, the Employees‘ Provident Funds and Miscellaneous Provisions Act, 1952, as well as (to the extent possible) the Mahatma Gandhi National Rural Employment Guarantee Act, 2005.
  • The Ministry of Labour and Employment should also consider whether projects of the Government of India in the railways, defence and other establishments are brought within the purview of the BOCW Act.
  • The Monitoring Committee which has had quite a few meetings so far should pro-actively ensure full compliance of the provisions of the BOCW Act, the Cess Act and the directions issued by this Court.

The Court asked the Union of India to take a decision on the management of the cess already collected. Noticing that the benefits and entitlements that have accrued to the construction workers cannot be passed on to them due to the passage of time, with the whereabouts of some of them not known. Accordingly, a decision will have to be taken by the Union of India on the gainful utilization of the cess already collected so that the Welfare Boards are not unjustly enriched – the beneficiaries having unfortunately lost out. [National Campaign Committee for Central Legislation on Construction Labour v. Union of India, 2018 SCC OnLine SC 236, decided on 19.03.2018]

Case BriefsSupreme Court

Supreme Court: Refusing to interfere with the decision of the Gujarat High Court directing Essar Steel India Ltd. (ESL) to pay electricity duty amounting to Rs. 562 Crores together with interest totaling Rs. 1038.27 Crores to the State of Gujarat, the bench of Dr. A.K. Sikri and Ashok Bhushan, JJ said that the statutory conditions for grant of exemption as contained in Section 3(2)(vii)(a) of the Bombay Electricity Duty Act, 1958 can neither be tinkered with nor diluted.

ESL holds 42% shares in Essar Power Ltd. (EPL) which is a duly incorporated company under the provisions of Companies Act, 1956, which is a generating company selling/supplying electrical energy. The Court noticed that both ESL and EPL are distinct separate legal entities and merely because ESL might have 42% shares holding in EPL, it cannot be said that ESL is generating electricity jointly with EPL and EPL is generating electricity jointly with ESL for use of electricity by ESL.

It was further stated that even assuming ESL and EPL are jointly generating the energy for the use of   industrial   undertaking   which   are   jointly generating the energy, the Gujarat Electricity Board to whom 300 MW has been allocated cannot be held to be   industrial   undertaking   which   is   jointly generating the energy with appellant. The Statutory scheme   for   grant   of   exemption   has   to   be   strictly construed.   EPL   is   not   jointly generating energy with Gujarat Electricity Board and it is selling the energy to the extent of 300 MW to Gujarat   Electricity   Board.   Hence, the   conditions   of   the statutory provisions of Section 3(2)(vii)(a) of the Act are not fulfilled. [Essar Steel India Ltd. v. State of Gujarat, 2017 SCC OnLine SC 522, decided on 02.05.2017]

Case BriefsSupreme Court

Supreme Court:  In the issue involving the Power Purchase Agreement (PPA) entered into by the Government and the Adani Enterprises, where the Power Generating Company had pleaded that the rise in price of coal consequent to change in Indonesian law would be a force majeure event which would entitle the respondents to claim compensatory tariff, the bench of P.C. Ghose and R.F. Nariman, JJ held that the change in the Indonesian Law was neither the fundamental basis of the contract dislodged nor was any frustrating event and that alternative modes of performance were available, albeit at a higher price.

The respondents had pleaded before the Appellate Tribunal for Electricity to either discharge them from the performance of the PPA on account of frustration, or to evolve a mechanism to restore the petitioners to the same economic condition prior to occurrence of the change in law as the rise in the price of Indonesian coal, according to them, was unforeseen inasmuch as the PPAs have been entered into sometime in 2006 to 2008, and the rise in price took place only in 2010 and 2011 and that such rise in price was not within their control at all. The Tribunal had granted the relief of compensatory tariff to the respondents.

Setting aside the order of the Tribunal, the Court held that changes in the cost of fuel, or the agreement becoming onerous to perform, are not treated as force majeure events under the PPA itself. Taking note of the clauses of the PPA, the Court said that nowhere do the PPAs state that coal is to be procured only from Indonesia at a particular price. In fact, it is clear on a reading of the PPA as a whole that the price payable for the supply of coal is entirely for the person who sets up the power plant to bear. The fact that the fuel supply agreement has to be appended to the PPA is only to indicate that the raw material for the working of the plant is there and is in order. It was, hence, held that an unexpected rise in the price of coal will not absolve the generating companies from performing their part of the contract for the very good reason that when they submitted their bids, this was a risk they knowingly took.

Regarding the question as to whether the change in Indonesian Law would amount to change in law, the Court said that the change Indonesian law would not qualify as a change in law under the guidelines read with the PPA, change in Indian law certainly would. Rejecting the contention that a commercial contract is to be interpreted in a manner which gives business efficacy to such contract, that the subject matter of the PPA being “imported coal”, the expression “any law” would refer to laws governing coal that is imported from other countries, the Court said that there are many PPAs entered into with different generators. Some generators may source fuel only from India. Others, as is the case in the Adani Haryana matter, would source fuel to the extent of 70% from India and 30% from abroad, whereas other generators, as in the case of Gujarat Adani and the Coastal case, would source coal wholly from abroad. The meaning of the expression “change in law” under clause 13 of the PPA cannot depend upon whether coal is sourced in a particular PPA from outside India or within India. The meaning will have to remain the same whether coal is sourced wholly in India, partly in India and partly from outside, or wholly from outside.

The Court, hence, directed the Central Electricity Regulatory Commission to go into the matter afresh and determine what relief should be granted to those power generators who fall within clause 13 of the PPA, based on the decision of the Court. [Energy Watchdog v. Central Electricity Regulatory Commission, 2017 SCC OnLine SC 378, decided on 11.04.2017]