In Brief
The Kerala State Electricity Board contracted with a construction contractor for building a dam. After minimum wage increases were notified, the contractor claimed labour escalation charges and later additional work. The High Court directed payment of approximately Rs.12.92 crores. The Supreme Court set aside this judgment, holding: (1) The contractor's ex post facto change from appropriating payments toward principal to claiming adjustment toward interest was unjustified; (2) No subsequent interest was payable as the prior orders contained no such direction; (3) Labour and material escalation must be calculated monthly, not at uniform rates; and (4) Referral to arbitration without written party consent violated CPC Section 89. The Court allowed the appeals, treating prior payments as full settlement of all Ex.P59 claims.
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