JUDGMENT
D.K. Jain, J.
1. This is an application under Section 8 and 11
of the Arbitration and Conciliation Act, 1996 ((for
short the Act), praying for appointment of an
arbitrator to resolve the disputes and differences,
which are stated to have arisen between the applicant
and National Thermal Power Corporation, hereinafter
referred to as NTPC, the respondent herein.
2. Shorn of unnecessary details, the material
facts leading to the filing of the present application
are:
A works contract for the construction of a
school building was awarded by the NTPC to one
M/s. Gangotri Enterprises Limited (hereinafer referred
to as the GEL), vide letter dated 1 July 19998. Since
the GEL could not complete the work on time, the said
work is stated to have been assigned to the applicant
by GEL with the consent of the respondent. According
to the September 1999, finally approved on 7 October 1999,
had agreed that the balance work could be entrusted to
the appellant. In terms of the said arrangement, the
applicant was to execute the work, as per the contract
of GEL with NTPC; get the work executed measured;
submit the bills as per the rates settled in terms of
the contract and the NTPC was to make direct payment
of the running bills to the applicant in their name.
It is also averred that for documentation of this
arrangement an agreement was also entered into on 31
August 1999 between GEL and the applicant. Disputes
relating to payment for the work done by the applicant
having arisen between the applicant and the NTPC, the
applicant claims to have requested the NTPC to get
these settled by appointing an arbitrator in terms of
Clause 56 of the General Conditions of Contract,
governing the contract between GEL and NTPC. The said
clause provides that all questions and disputes
relating to the designs, drawings, quality of
workmanship or any other question, claim or right etc,
shall be referred to the sole arbitration of the
General Manager, NTPC and if he is not willing to act
as such, to the sole arbitration of some other person,
appointed by the Chairman & Managing Director of NTPC
Having failed to get any response from the NTPC, the
present application was filed.
3. In the reply filed on behalf of NTPC, the
application is resisted mainly on the ground that
there is no privity of contract between the applicant
and the NTPC nor is there any arbitration agreement
between them and, therefore, the present application
is misconceived. It is also stated that the NTPC has
not given any approval to GEL to sub-contract any
portion of the contract to the applicant. It is
pointed out that the applicant was only a piece rate
worker (PRW) of GEL and the engagement of the
applicant cannot be considered as sub-contracting of
the work in favor of the applicant in terms of clause
37 of the agreement. It is asserted that NTPC is not
a party to the agreement dated 31 August 1999 between
the applicant and GEL and the NTPC has only agreed to
release payments to the applicant directly for the
work which was to be executed by the applicant on
behalf of GEL.
4. I have heard learned counsel for the parties.
5. It is submitted by learned counsel for the
applicant that GEL having assigned the contract in
favor of the applicant and NTPC having accepted the
applicant as the sub-contractor, the applicant has
stepped into the shoes of GEL insofar as the rights
and obligations under the contract dated 1 July 1998
are concerned qua NTPC, and, therefore, the present
application is maintainable. Relying on the decision
of the Constitution Bench of the Supreme Court in
Konkan Railway Corporation Ltd. v. Rani
Construction, , it is also urged that
while dealing with this application under Section 11
of the Act, this court is not supposed to go into any
contentious issues which may be raised by the
respondent in defense.
Learned counsel for the NTPC, on the other
hand has vehemently submitted that from the documents
available on record it is evident that neither GEL had
assigned their rights under the contract in favor of
the applicant nor had the NTPC accepted the applicant
as a sub-contractor. It was only a working
arrangement whereby the applicant was asked to execute
the remaining contracted work on behalf of GEL and
they were to receive payments for the said work for
and on behalf of GEL. To buttress his said stand, learned
counsel has placed reliance on the correspondence
exchange between all the three parties – the
applicant, GEL and the NTPC. It is thus submitted
that there being no arbitration agreement between the
applicant and the NTPC, the present application is not
maintainable.
6. Section 8(1) of the Act provides that a
judicial authority before which an action is brought
in a matter which is the subject matter is brought
in a matter which is the subjectmatter of an
arbitration agreement shall, if a party so applies,
refer the parties to arbitration. Existence of an
arbitration agreement between the parties is a
pre-requisite for invoking jurisdiction of a judicial
authority either under Section 8 or 11 of the Act.
Section 7 of the Act states that an “arbitration
agreement” means an agreement by the parties to submit
to arbitration all or certain disputes which have
arisen or which may arise between them in respect of a
defined legal relationship, whether contractual or
not. It is true that the Apex Court in Konkan Railway
Corporation Limited and Ors. v. Mehul Construction
Co. , , approved in the aforenoted
decision of the Constitution bench, has observed that
there is nothing in Section 11 which contemplates
decision by the Chief Justice or his designate on any
controversy that the other party may raise and the
only function of the Chief Justice or his designate
under the said section is to fill the gap left by a
party to the arbitration agreement and all the
contentious issues are to be left to the decision of
the arbitrator/arbitrators. But the question which
requires consideration in the present case is as to
whether there is at all any privity of contract
between the applicant and the NTPC, as claimed by the
applicant and denied by the respondent. If no
contract exists between the applicant and the NTPC,
all other questions, in particular the scope of powers
of this court under Section 8 and 11 of the Act would
be of academic interest only and need not be gone
into.
7. As noted above, the stand of the applicant is
that the works contract dated 1 July 1998 was assigned
to them by GEL and, therefore, all the rights and
obligations flowing there from bind the applicant and
the first respondent. This position is disputed by
the NTPC, whose stand is that GEL continued to be the
contractor and they were dealing with the applicant as
an agent of GEL and, therefore, the present
applicant by the applicant is not maintainable.
8. The term “assignment” is not defined.
According to Black’s Law Dictionary (Sixth Edition),
“assignment” means “The act of transferring to another
all or part of one’s property, interest, or rights. A
transfer or making over to another of the whole of any
property, real or personal, in possession or in
action, or of any estate or right therein. The
transfer by a party of all of its rights to some kind
of property, usually intangible property such as
rights in a lease, mortgage, agreement of sale or a
partnership. Tangible property is more often
transferred by possession and by instruments conveying
title such as a deed or a bill of sale”.
The Indian Contract Act, 1872 also contains
provisions relating to assignment but these nowhere
lay down what the assignments are. In Khardah Company
Limited v. Raymon and Company, the
Supreme Court observed that an assignment of a
contract might result by transfer either of rights or
of the obligations there under. But there is well
recognised distinction between these two classes of
assignments. As a rule obligations under a contract
cannot be assigned, except with the consent of the
promise and when such consent is given, it is really
a novation resulting in substitution of liabilities.
On the other hand, rights under a contract are
assignable, unless the contract is personal in its
nature or the rights are incapable of assignment
either under the law or under an agreement between the
parties.
The doctrine of assignment is also known to
the insurance law and an assignment of the policy is a
transfer of the contract of insurance with all its
rights and liabilities to the transferee and,
therefore, it is substitution of a new assured for all
intents and purposes.
9. Thus, broadly speaking, an assignment is in
the nature of a transfer by one to another of his
interest or rights is one’s property and vests in the
latter the former’s interests, rights and remedies in
respect of the subject matter. In such a case, the
latter by virtue of the assignment in his favor will
be in position to enjoy the rights of the former in
his own name. Obviously, the factum of an assignment
or for that matter a transfer of the contract has to
be gathered from a specific document in this behalf or
at least from contemporaneous action/contract on the
part of the parties.
10. Bearing in mind the above principle, I revert
to the facts in hand to determine as to whether there
was any assignment or transfer of the contract dated 1
July 1998 by GEL in favor of the applicant. To
answer the question is would be necessary to refer to
some of the documents, relied upon by both the sides.
11. The first document in line, on which reliance
is placed by the applicant, is the copy of the minutes
recorded in the file of the NTPC, approving the
arrangement for direct payment to the applicant.
Since a lot of emphasis is laid by the learned counsel
for the applicant on these nothings, for the sake of
ready reference, it would be expedient to extract the
relevant portions thereof:
“Considering the urgency of the work for
handing over the building on or before
30.11.1999, the Sr. Manager was entrusted
the job of getting an agreement (back to
back) with the existing PRW of M/s. GEL and
M/s. GEL so that the work should not stop
for want of payment against the RA bill of
PRW. Accordingly, Sr. Manager along with
M/s. Sethi Construction Company (PRW) had a
meeting with Mr. Markandey Shukla, one of
the Director of M/s. GEL at Lucknow and made
an agreement for direct payment to PRW. A
Power of Attorney in the name of Proprietor
of M/s. Sethi Construction Company i.e.,
Shri R.K. Sethi was got signed on
non-judicial paper and the same is enclosed
herewith.
With this, NTPC shall have the powers to
release the payments directly to M/s. Sethi
Construction Company on behalf of M/s. GEL
against their RA bills.
Submitted for approval of Competent
Authority.
xxxx xxxx xxxx xxxx xxxx
The above said arrangement i.e., payment to
M/s. Sethi Construction PRW engaged by
M/s. Gangotri may be agreed to working the
parts as stated above. As natural
behavior M/s. Gangotri Construction with
the stipulation of undue harassment by NTPC
is also built up which is in line with the
arrangement made for Part-II 2nd residue
work of M/s. Gangotri.
Sd/- Illegible 7/9
DGM ((F)
As per c 37 of GCC the work can be
sub-contracted with the prior written
approval of the Accepting Authority.
S.M.(F) Sd/- 11/9
xxxx xxxx xxxx xxxx
As per the note of M(C) it is seen that the
work was already being executed from PRW
being appointed by M/s. GEL on this basis
the provisional extension was also granted
up to 30.11.99. From this it flows that
sub-contractor was already working with
BTPS as per Clause 37 of the GCC I fail
to understand how Clause 37 of the GCC is
attracted now as pointed out above. The
noting on the file of Phase-II are not
enclosed as pointed out above in note dt.
11.9.99. However M(L) is on record and
same are re-iterated. We should also keep
in mind the past conduct of the contractor
in dealing with the NTPC (BTPS). May
proceed as per the contract. Sr. M
(C-T/S)
Sd/- M.K. Kaul 27.9.99
Subject: Construction of New Block in
Notre Dam School in BTPS Staff Colony at
BTPS.
The remarks of Manager (Law) may please be
seen. The work is of important nature and
we are mainly depending on the sub-agency
M/s. Sethi Construction Company who is
advancing with the progress of work in the
absence of the representative of M/s. GEL.
as done in case of Phase-II, II raising
where the sub-contractor was given direct
payment on behalf of M/s. GEL as per
agreement reached between them a similar
agreement has been formed between M/s. GEL
and M/s. Sethi Construction Company,
Proposal to process payment to M/s. Sethi
Construction Company, the Sub-agency
engaged by M/s. GEL as per the agreement may
be agreed to.
.935/1.10.99
DGM (Civil)
DGM (F)
The proposal to sub-contract the work as
per the proposal of GEL may be granted to
Reg XI specific clearance from M (Law) may
be obtained before release of payment
directly. However DGM (F) may kindly see.
DGM (F) 30.9.99
As per the GCC, the payment may be made to
the 2nd party, i.e., to Sethi Construction
Company. Similar arrangement has been made
for Ph-II works. As proposed payment of
R/A bill may be given M/s. Sethi
Construction Co.
(Emphasis supplied)
12. The next document referred to above, is the
agreement dated 31 August 1999 between GEL (referred
to in the agreement as the first party and the
applicant, referred to as the second party). Relevant
clauses of the said agreement read thus:
“2. WHEREAS, the second party has
approached the first party and has requested
to executed the entire balance work as on
date under the direct supervision of
National Thermal Power Corporation of
National Thermal Power Corporation Ltd. to
their full satisfaction and the first party
has agreed to get the entire balance work
Executed second party on terms and
conditions hereinafter and on the assurance
of the second party has obtained written
permission from M/s National Thermal Power
Corporation Ltd.
3. The running Account Bill shall be paid
directly by M/s. N.T.P.C. Ltd., BTPS, to the
Second Party in which M/s. National Thermal
Power Corporation has agreed on the request
to M/s. Gangotri Enterprises Ltd. to accept
the authorised signatures of the Second
Party on Measurement Books and bills etc.,
and the cheques will be made out in the name
of Second Party instead of the First Party.
4. It has mutually been agreed between the
Parties that the amount of security Deposit,
Income Tax Deduction, Mobilisation Advance
Deduction and interest thereon or any other
recoveries done by the NTPC (the second
party is not claim for that amount by the
first party).
5. All the disputes rising out of and
between the parties shall be brought before
the Dy. General Manager (Civil), National
Thermal Power Corporation Ltd., Badarpur
Thermal Power Station, Badarpur for
Settlement or arbitration and shall be
within the jurisdiction of Delhi court.”
13. The General Power of Attorney dated 31 August
1999, referred to in the afore-extracted minutes, is
to the following effect:
“KNOW ALL MEN by this power of attorney, I,
Markanday Shukla S/o Shri S.P. Shukla,
Director of M/s. Gangotri Enterprises Ltd.,
having its registered office at B-158,
Sec.-A, Mahangar; Lucknow-6 and local
office at P-32, South Extension, Part-II,
New Delhi do hereby appoint/nominate and
constitute Shri Rajender Kumar Sethi S/o
Late Shri Shadari Lal Sethi R/o A8-A9, Gali
No. 2, Arjun Nagar, Delhi-51 as my true and
lawful General Attorney in the name and on
behalf of aforesaid Company to do and
execute the balance work of Construction of
Block of Notri Dame School in Pmt Colony at
BTPS awarded by M/s. N.T.P.C. Ltd. BTPS
Badarpur, New Delhi vide letter of award
No. 10285/BTPS/CC/98-99/03 Dt. 1/7/98 and
all or any of the following acts, deeds or
things by the said attorney in connection
with the above work.
1. To sign the measurement books, prepare
and submit the bills to the department, get
the cheques prepared in his own name and
receive payments on behalf of the co.
2. To appear and argue his stand on behalf
of the co. before Senior Officers of
N.T.P.C. Ltd.
3. Generally to do all such acts deed and
things as our said attorney shall think
expedient for the process purposes aforesaid
as effectually in all respects as we would
be ourselves relating to the aforesaid work.
We hereby rectify and agree to rectify
confirm all whatever our said attorney shall
lawfully do or cause to be done by virtue of
this deed which will remain irrevocable till
the completion of the above work.”
(Underlined for emphasis)
14. It is pertinent to note that at the request
of the application, the NTPC had issued a certificate
dated 11 April 2001, the relevant portion of the said
certificate reads thus:
“A Contract Agreement was entered into
between, BTPS and M/s. Gangotri Enterprises
Limited (M/s. GEL), B-158, Sector-A,
Mahanagar, Lucknow (UP) for construction of
Notre Dame School Building in Permanent
Colony at BTPS vide LOA
No. 10285/BTPS/CC/98-99/03 dated 01.07.98.
Against execution of this work by M/s. GEL,
payments up to Running Account Bills (RAB)
No. 3(Civil portion) were made to them.
However, pursuant to an agreement to Aug, ’99
between M/s. GEL and M/s. Sethi Construction
Co. (Regd. Office at 110, Ram Nagar Extn,
Delhi-51) payments for the balance work
which was done by M/s. Sethi Constructions
Company was to be made directly to M/s. Sethi
Constructions Company after RAB No. 3 of
Civil portion till the completion of work,
as detailed below:
And accordingly, in line with this
agreement, for all subsequent RAB payments,
cheques of net payable amount were made
favoring M/s. Sethi Construction Co. after
deducting tax as spelt out below. Income
tax (TDS) at the applicable rates was
deducted from all the said payments made
directly to M/s. Sethi Construction Co. and
deposited into Govt. Account. TDS
certificate for the same have been/are being
issued to M/s. GEL”
15. A bare reading of the afore-extracted
documents leaves little room for doubt that the
applicant was dealing with the NTPC for and on behalf
of GEL as their general power of attorney holder. On
the strength of the afore-extracted minutes, heavily
relied upon of the afore-extracted minutes, heavily
relied upon by learned counsel for the applicant, it
is difficult to hold that the applicant was accepted
by the NTPC as a sub-contractor in terms of Clause 37
of the general conditions of contract, which, though
provides for appointment of a sub-contractor by the
contractor but such an appointment has to be with the
prior written approval of the accepting authority i.e.
NTPC. Further, the said clause also stipulates that
employment of piece rate workers shall not be deemed
as sub contracting. It is not in dispute that GEL had
employed the applicant as a piece rate worker (PRW).
In my view, the NTPC is not at all concerned with the
underlying contract/agreement, which the applicant had
entered into with GEL on 31 August 1999.
16. In my considered opinion there is no privity
of contract between the applicant on the one hand and
the NTPC on the other hand and, therefore, the present
application under Section 8 and 11 of the Act by the
applicant is misconceived. Applicant’s remedy may lie
elsewhere.
17. For the foregoing reasons, the application
fails and is accordingly dismissed.