State can’t deny extra payment to contractor citing terms of contract when it increases minimum wages: Karnataka High Court

Key points

• The High Court of Karnataka held that the State cannot deny payment of the differential amount to a contractor who incurred higher wage costs due to revised minimum wages during a subsisting contract, merely because the contract was based on earlier rates, and directed the Karnataka Legislative Assembly (KLA) secretariat to pay ₹3.5 crore with 12% interest to a manpower-supplying firm.
• “A contract entered into by the State cannot override statutory obligation.
• Any clause in the contract which has the effect of defending a statutory mandate is unenforceable in law.
• The doctrine is well settled that there can be no estoppel against the Statute,” the court observed.
• Model employer Therefore, the Court made it clear that “even assuming that the contract did not provide for escalation and there is a clause indicating that any escalation revision shall be borne by the contractor, the State being an instrumentality under Article 12...