{"id":31120,"date":"2002-07-09T00:00:00","date_gmt":"2002-07-08T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/sethi-construction-company-vs-chairman-managing-director-on-9-july-2002"},"modified":"2019-01-10T10:33:47","modified_gmt":"2019-01-10T05:03:47","slug":"sethi-construction-company-vs-chairman-managing-director-on-9-july-2002","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/sethi-construction-company-vs-chairman-managing-director-on-9-july-2002","title":{"rendered":"Sethi Construction Company vs Chairman & Managing Director, … on 9 July, 2002"},"content":{"rendered":"
Delhi High Court<\/div>\n
Sethi Construction Company vs Chairman & Managing Director, … on 9 July, 2002<\/div>\n
Equivalent citations: 2003 41 SCL 314 Delhi<\/div>\n
Author: D Jain<\/div>\n
Bench: D Jain<\/div>\n<\/p>\n
<\/pre>\n
JUDGMENT<\/p>\n
 D.K. Jain, J. <\/p>\n
 1. This is an application under Section 8 and 11
\nof the Arbitration and Conciliation Act, 1996 ((for
\nshort the Act), praying for appointment of an
\narbitrator to resolve the disputes and differences,
\nwhich are stated to have arisen between the applicant
\nand National Thermal Power Corporation, hereinafter
\nreferred to as NTPC, the respondent herein.\n<\/p>\n
 2. Shorn of unnecessary details, the material
\nfacts leading to the filing of the present application
\nare:\n<\/p>\n
  A works contract for the construction of a
\nschool building was awarded by the NTPC to one
\nM\/s. Gangotri Enterprises Limited (hereinafer referred
\nto as the GEL), vide letter dated 1 July 19998. Since
\nthe GEL could not complete the work on time, the said
\nwork is stated to have been assigned to the applicant
\nby GEL with the consent of the respondent. According
\nto the September 1999, finally approved on 7 October 1999,
\nhad agreed that the balance work could be entrusted to
\nthe appellant. In terms of the said arrangement, the
\napplicant was to execute the work, as per the contract
\nof GEL with NTPC; get the work executed measured;\n<\/p>\n
submit the bills as per the rates settled in terms of
\nthe contract and the NTPC was to make direct payment
\nof the running bills to the applicant in their name.
\nIt is also averred that for documentation of this
\narrangement an agreement was also entered into on 31
\nAugust 1999 between GEL and the applicant. Disputes
\nrelating to payment for the work done by the applicant
\nhaving arisen between the applicant and the NTPC, the
\napplicant claims to have requested the NTPC to get
\nthese settled by appointing an arbitrator in terms of
\nClause 56 of the General Conditions of Contract,
\ngoverning the contract between GEL and NTPC. The said
\nclause provides that all questions and disputes
\nrelating to the designs, drawings, quality of
\nworkmanship or any other question, claim or right etc,
\nshall be referred to the sole arbitration of the
\nGeneral Manager, NTPC and if he is not willing to act
\nas such, to the sole arbitration of some other person,
\nappointed by the Chairman & Managing Director of NTPC
\nHaving failed to get any response from the NTPC, the
\npresent application was filed.\n<\/p>\n
 3. In the reply filed on behalf of NTPC, the
\napplication is resisted mainly on the ground that
\nthere is no privity of contract between the applicant
\nand the NTPC nor is there any arbitration agreement
\nbetween them and, therefore, the present application
\nis misconceived. It is also stated that the NTPC has
\nnot given any approval to GEL to sub-contract any
\nportion of the contract to the applicant. It is
\npointed out that the applicant was only a piece rate
\nworker (PRW) of GEL and the engagement of the
\napplicant cannot be considered as sub-contracting of
\nthe work in favor of the applicant in terms of clause
\n37 of the agreement. It is asserted that NTPC is not
\na party to the agreement dated 31 August 1999 between
\nthe applicant and GEL and the NTPC has only agreed to
\nrelease payments to the applicant directly for the
\nwork which was to be executed by the applicant on
\nbehalf of GEL.\n<\/p>\n
 4. I have heard learned counsel for the parties.\n<\/p>\n
 5. It is submitted by learned counsel for the
\napplicant that GEL having assigned the contract in
\nfavor of the applicant and NTPC having accepted the
\napplicant as the sub-contractor, the applicant has
\nstepped into the shoes of GEL insofar as the rights
\nand obligations under the contract dated 1 July 1998
\nare concerned qua NTPC, and, therefore, the present
\napplication is maintainable. Relying on the decision
\nof the Constitution Bench of the Supreme Court in
\n Konkan Railway Corporation Ltd. v. Rani
\nConstruction,<\/a> , it is also urged that
\nwhile dealing with this application under Section 11
\nof the Act, this court is not supposed to go into any
\ncontentious issues which may be raised by the
\nrespondent in defense.\n<\/p>\n
 Learned counsel for the NTPC, on the other
\nhand has vehemently submitted that from the documents
\navailable on record it is evident that neither GEL had
\nassigned their rights under the contract in favor of
\nthe applicant nor had the NTPC accepted the applicant
\nas a sub-contractor. It was only a working
\narrangement whereby the applicant was asked to execute
\nthe remaining contracted work on behalf of GEL and
\nthey were to receive payments for the said work for
\nand on behalf of GEL. To buttress his said stand, learned
\ncounsel has placed reliance on the correspondence
\nexchange between all the three parties – the
\napplicant, GEL and the NTPC. It is thus submitted
\nthat there being no arbitration agreement between the
\napplicant and the NTPC, the present application is not
\nmaintainable.\n<\/p>\n
 6. Section 8(1) of the Act provides that a
\njudicial authority before which an action is brought
\nin a matter which is the subject matter is brought
\nin a matter which is the subjectmatter of an
\narbitration agreement shall, if a party so applies,
\nrefer the parties to arbitration. Existence of an
\narbitration agreement between the parties is a
\npre-requisite for invoking jurisdiction of a judicial
\nauthority either under Section 8 or 11 of the Act.
\nSection 7 of the Act states that an “arbitration
\nagreement” means an agreement by the parties to submit
\nto arbitration all or certain disputes which have
\narisen or which may arise between them in respect of a
\ndefined legal relationship, whether contractual or
\nnot. It is true that the Apex Court in  Konkan Railway
\nCorporation Limited and Ors. v. Mehul Construction
\nCo.<\/a> , , approved in the aforenoted
\ndecision of the Constitution bench, has observed that
\nthere is nothing in Section 11 which contemplates
\ndecision by the Chief Justice or his designate on any
\ncontroversy that the other party may raise and the
\nonly function of the Chief Justice or his designate
\nunder the said section is to fill the gap left by a
\nparty to the arbitration agreement and all the
\ncontentious issues are to be left to the decision of
\nthe arbitrator\/arbitrators. But the question which
\nrequires consideration in the present case is as to
\nwhether there is at all any privity of contract
\nbetween the applicant and the NTPC, as claimed by the
\napplicant and denied by the respondent. If no
\ncontract exists between the applicant and the NTPC,
\nall other questions, in particular the scope of powers
\nof this court under Section 8 and 11 of the Act would
\nbe of academic interest only and need not be gone
\ninto.\n<\/p>\n
 7. As noted above, the stand of the applicant is
\nthat the works contract dated 1 July 1998 was assigned
\nto them by GEL and, therefore, all the rights and
\nobligations flowing there from bind the applicant and
\nthe first respondent. This position is disputed by
\nthe NTPC, whose stand is that GEL continued to be the
\ncontractor and they were dealing with the applicant as
\nan agent of GEL and, therefore, the present
\napplicant by the applicant is not maintainable.\n<\/p>\n
 8. The term “assignment” is not defined.
\nAccording to Black’s Law Dictionary (Sixth Edition),
\n“assignment” means “The act of transferring to another
\nall or part of one’s property, interest, or rights. A
\ntransfer or making over to another of the whole of any
\nproperty, real or personal, in possession or in
\naction, or of any estate or right therein. The
\ntransfer by a party of all of its rights to some kind
\nof property, usually intangible property such as
\nrights in a lease, mortgage, agreement of sale or a
\npartnership. Tangible property is more often
\ntransferred by possession and by instruments conveying
\ntitle such as a deed or a bill of sale”.\n<\/p>\n
 The Indian Contract Act, 1872 also contains
\nprovisions relating to assignment but these nowhere
\nlay down what the assignments are. In  Khardah Company
\nLimited v. Raymon and Company,  the
\nSupreme Court<\/a> observed that an assignment of a
\ncontract might result by transfer either of rights or
\nof the obligations there under. But there is well
\nrecognised distinction between these two classes of
\nassignments. As a rule obligations under a contract
\ncannot be assigned, except with the consent of the
\npromise and when such consent is given, it is really
\na novation resulting in substitution of liabilities.
\nOn the other hand, rights under a contract are
\nassignable, unless the contract is personal in its
\nnature or the rights are incapable of assignment
\neither under the law or under an agreement between the
\nparties.\n<\/p>\n
 The doctrine of assignment is also known to
\nthe insurance law and an assignment of the policy is a
\ntransfer of the contract of insurance with all its
\nrights and liabilities to the transferee and,
\ntherefore, it is substitution of a new assured for all
\nintents and purposes.\n<\/p>\n
 9. Thus, broadly speaking, an assignment is in
\nthe nature of a transfer by one to another of his
\ninterest or rights is one’s property and vests in the
\nlatter the former’s interests, rights and remedies in
\nrespect of the subject matter. In such a case, the
\nlatter by virtue of the assignment in his favor will
\nbe in position to enjoy the rights of the former in
\nhis own name. Obviously, the factum of an assignment
\nor for that matter a transfer of the contract has to
\nbe gathered from a specific document in this behalf or
\nat least from contemporaneous action\/contract on the
\npart of the parties.\n<\/p>\n
 10. Bearing in mind the above principle, I revert
\nto the facts in hand to determine as to whether there
\nwas any assignment or transfer of the contract dated 1
\nJuly 1998 by GEL in favor of the applicant. To
\nanswer the question is would be necessary to refer to
\nsome of the documents, relied upon by both the sides.\n<\/p>\n
 11. The first document in line, on which reliance
\nis placed by the applicant, is the copy of the minutes<\/p>\n
recorded in the file of the NTPC, approving the
\narrangement for direct payment to the applicant.
\nSince a lot of emphasis is laid by the learned counsel
\nfor the applicant on these nothings, for the sake of
\nready reference, it would be expedient to extract the
\nrelevant portions thereof:\n<\/p>\n
 “Considering the urgency of the work for
\nhanding over the building on or before
\n30.11.1999, the Sr. Manager was entrusted
\nthe job of getting an agreement (back to
\nback) with the existing PRW of M\/s. GEL and
\nM\/s. GEL so that the work should not stop
\nfor want of payment against the RA bill of
\nPRW. Accordingly, Sr. Manager along with
\nM\/s. Sethi Construction Company (PRW) had a
\nmeeting with Mr. Markandey Shukla, one of
\nthe Director of M\/s. GEL at Lucknow  and made
\nan agreement for direct payment to PRW. A
\nPower of Attorney in the name of Proprietor
\nof M\/s. Sethi Construction Company i.e.,
\nShri R.K. Sethi was got signed on
\nnon-judicial paper and the same is enclosed
\nherewith.\n<\/p>\n
 With this, NTPC shall have the powers to
\nrelease the payments directly to M\/s. Sethi
\nConstruction Company  on behalf of M\/s. GEL
\nagainst their RA bills.\n<\/p>\n
 Submitted for approval of Competent
\nAuthority.\n<\/p>\n
 xxxx xxxx xxxx xxxx xxxx<\/p>\n
 The above said arrangement i.e., payment to
\nM\/s. Sethi Construction PRW engaged by
\nM\/s. Gangotri may be agreed to working the
\nparts as stated above. As natural
\nbehavior M\/s. Gangotri Construction with
\nthe stipulation of undue harassment by NTPC
\nis also built up which is in line with the
\narrangement made for Part-II 2nd residue
\nwork of M\/s. Gangotri.\n<\/p>\n
Sd\/- Illegible 7\/9   <\/p>\n
 DGM ((F) <\/p>\n
 As per c 37 of GCC the work can be
\nsub-contracted with the prior written
\napproval of the Accepting Authority.\n<\/p>\n
 S.M.(F) Sd\/- 11\/9
\n xxxx xxxx xxxx xxxx<\/p>\n
 As per the note of M(C) it is seen that the
\nwork was already being executed from PRW
\nbeing appointed by M\/s. GEL on this basis
\nthe provisional extension was also granted
\nup to 30.11.99. From this it flows that
\nsub-contractor was already working with
\nBTPS as per Clause 37 of the GCC I fail
\nto understand how Clause 37 of the GCC is
\nattracted now as pointed out above. The
\nnoting on the file of Phase-II are not
\nenclosed as pointed out above in note dt.
\n11.9.99. However M(L) is on record and
\nsame are re-iterated. We should also keep
\nin mind the past conduct of the contractor
\nin dealing with the NTPC (BTPS). May
\nproceed as per the contract. Sr. M
\n(C-T\/S) <\/p>\n
 Sd\/- M.K. Kaul 27.9.99   <\/p>\n
 Subject: Construction of New Block in
\nNotre Dam School in BTPS Staff Colony at
\nBTPS.\n<\/p>\n
 The remarks of Manager (Law) may please be
\nseen. The work is of important nature and
\nwe are mainly depending on the sub-agency
\nM\/s. Sethi Construction Company who is
\nadvancing with the progress of work in the
\nabsence of the representative of M\/s. GEL.
\n as done in case of Phase-II, II raising
\nwhere the sub-contractor was given direct
\npayment on behalf of M\/s. GEL as per
\nagreement reached between them a similar
\nagreement has been formed between M\/s. GEL
\nand M\/s. Sethi Construction Company,
\nProposal to process payment to M\/s. Sethi
\nConstruction Company, the Sub-agency
\nengaged by M\/s. GEL as per the agreement may
\nbe agreed to.\n<\/p>\n
 .935\/1.10.99   <\/p>\n
 DGM (Civil) <\/p>\n
DGM (F) <\/p>\n
 The proposal to sub-contract the work as
\nper the proposal of GEL may be granted to
\nReg XI specific clearance from M (Law) may
\nbe obtained before release of payment
\ndirectly. However DGM (F) may kindly see.\n<\/p>\n
 DGM (F) 30.9.99   <\/p>\n
 As per the GCC, the payment may be made to
\nthe 2nd party, i.e., to Sethi Construction
\nCompany. Similar arrangement has been made
\nfor Ph-II works.  As proposed payment of
\nR\/A bill may be given M\/s. Sethi
\nConstruction Co.\n<\/p>\n
(Emphasis supplied)  <\/p>\n
 12. The next document referred to above, is the
\nagreement dated 31 August 1999 between GEL (referred
\nto in the agreement as the first party and the
\napplicant, referred to as the second party). Relevant
\nclauses of the said agreement read thus:\n<\/p>\n
 “2. WHEREAS, the second party has
\napproached the first party and has requested
\nto executed the entire balance work as on
\ndate under the direct supervision of
\nNational Thermal Power Corporation of
\nNational Thermal Power Corporation Ltd. to
\ntheir full satisfaction and the first party
\nhas agreed to get the entire balance work
\nExecuted second party on terms and
\nconditions hereinafter and on the assurance
\nof the second party has obtained written
\npermission from M\/s National Thermal Power
\nCorporation Ltd.\n<\/p>\n
 3.  The running Account Bill shall be paid
\ndirectly by M\/s. N.T.P.C. Ltd., BTPS, to the
\nSecond Party in which M\/s. National Thermal
\nPower Corporation has agreed on the request
\nto M\/s. Gangotri Enterprises Ltd. to accept
\nthe authorised signatures of the Second
\nParty on Measurement Books and bills etc.,
\nand the cheques will be made out in the name
\nof Second Party instead of the First Party.\n<\/p>\n
 4. It has mutually been agreed between the
\nParties that the amount of security Deposit,
\nIncome Tax Deduction, Mobilisation Advance
\nDeduction and interest thereon or any other
\nrecoveries done by the NTPC (the second
\nparty is not claim for that amount by the
\nfirst party).\n<\/p>\n
 5. All the disputes rising out of and
\nbetween the parties shall be brought before
\nthe Dy. General Manager (Civil), National
\nThermal Power Corporation Ltd., Badarpur
\nThermal Power Station, Badarpur for
\nSettlement or arbitration and shall be
\nwithin the jurisdiction of Delhi court.”\n<\/p>\n
 13. The General Power of Attorney dated 31 August
\n1999, referred to in the afore-extracted minutes, is
\nto the following effect:\n<\/p>\n
 “KNOW ALL MEN by this power of attorney, I,
\nMarkanday Shukla S\/o Shri S.P. Shukla,
\nDirector of M\/s. Gangotri Enterprises Ltd.,
\nhaving its registered office at B-158,
\nSec.-A, Mahangar; Lucknow-6 and local
\noffice at P-32, South Extension, Part-II,
\nNew Delhi  do hereby appoint\/nominate and
\nconstitute Shri Rajender Kumar Sethi S\/o
\nLate Shri Shadari Lal Sethi R\/o A8-A9, Gali
\nNo. 2, Arjun Nagar, Delhi-51 as my true and
\nlawful General Attorney in the name and on
\nbehalf of aforesaid Company to do and
\nexecute the balance work of Construction of
\nBlock of Notri Dame School in Pmt Colony at
\nBTPS awarded by M\/s. N.T.P.C.  Ltd. BTPS
\nBadarpur, New Delhi vide letter of award
\nNo. 10285\/BTPS\/CC\/98-99\/03 Dt. 1\/7\/98 and
\nall or any of the following acts, deeds or
\nthings by the said attorney in connection
\nwith the above work.\n<\/p>\n
 1. To sign the measurement books, prepare
\nand submit the bills to the department, get
\nthe cheques prepared in his own name and
\nreceive payments on behalf of the co.\n<\/p>\n
 2. To appear and argue his stand on behalf
\nof the co. before Senior Officers of
\nN.T.P.C. Ltd.\n<\/p>\n
 3. Generally to do all such acts deed and
\nthings as our said attorney shall think
\nexpedient for the process purposes aforesaid
\nas effectually in all respects as we would
\nbe ourselves relating to the aforesaid work.\n<\/p>\n
 We hereby rectify and agree to rectify
\nconfirm all whatever our said attorney shall
\nlawfully do or cause to be done by virtue of
\nthis deed which will remain irrevocable till
\nthe completion of the above work.”\n<\/p>\n
(Underlined for emphasis) <\/p>\n
 14. It is pertinent to note that at the request
\nof the application, the NTPC had issued a certificate
\ndated 11 April 2001, the relevant portion of the said
\ncertificate reads thus:\n<\/p>\n
 “A Contract Agreement was entered into
\nbetween, BTPS and M\/s. Gangotri Enterprises
\nLimited (M\/s. GEL), B-158, Sector-A,
\nMahanagar, Lucknow (UP) for construction of
\nNotre Dame School Building in Permanent
\nColony at BTPS vide LOA
\nNo. 10285\/BTPS\/CC\/98-99\/03 dated 01.07.98.
\nAgainst execution of this work by M\/s. GEL,
\npayments up to Running Account Bills (RAB)
\nNo. 3(Civil portion) were made to them.
\nHowever, pursuant to an agreement to Aug, ’99
\nbetween M\/s. GEL and M\/s. Sethi Construction
\nCo. (Regd. Office at 110, Ram Nagar Extn,
\nDelhi-51) payments for the balance work
\nwhich was done by M\/s. Sethi Constructions
\nCompany was to be made directly to M\/s. Sethi
\nConstructions Company after RAB No. 3 of
\nCivil portion till the completion of work,
\nas detailed below:\n<\/p>\n
 And accordingly, in line with this
\nagreement, for all subsequent RAB payments,
\ncheques of net payable amount were made
\nfavoring M\/s. Sethi Construction Co. after
\ndeducting tax as spelt out below. Income
\ntax (TDS) at the applicable rates was
\ndeducted from all the said payments made
\ndirectly to M\/s. Sethi Construction Co. and
\ndeposited into Govt. Account. TDS
\ncertificate for the same have been\/are being
\nissued to M\/s. GEL”\n<\/p>\n
 15. A bare reading of the afore-extracted
\ndocuments leaves little room for doubt that the
\napplicant was dealing with the NTPC for and on behalf
\nof GEL as their general power of attorney holder. On
\nthe strength of the afore-extracted minutes, heavily
\nrelied upon of the afore-extracted minutes, heavily
\nrelied upon by learned counsel for the applicant, it
\nis difficult to hold that the applicant was accepted
\nby the NTPC as a sub-contractor in terms of Clause 37
\nof the general conditions of contract, which, though
\nprovides for appointment of a sub-contractor by the
\ncontractor but such an appointment has to be with the
\nprior written approval of the accepting authority i.e.
\nNTPC. Further, the said clause also stipulates that
\nemployment of piece rate workers shall not be deemed
\nas sub contracting. It is not in dispute that GEL had
\nemployed the applicant as a piece rate worker (PRW).
\nIn my view, the NTPC is not at all concerned with the
\nunderlying contract\/agreement, which the applicant had
\nentered into with GEL on 31 August 1999.\n<\/p>\n
 16. In my considered opinion there is no privity
\nof contract between the applicant on the one hand and
\nthe NTPC on the other hand and, therefore, the present
\napplication under Section 8 and 11 of the Act by the
\napplicant is misconceived. Applicant’s remedy may lie
\nelsewhere.\n<\/p>\n
 17. For the foregoing reasons, the application
\nfails and is accordingly dismissed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Delhi High Court Sethi Construction Company vs Chairman & Managing Director, … on 9 July, 2002 Equivalent citations: 2003 41 SCL 314 Delhi Author: D Jain Bench: D Jain 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 […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[14,8],"tags":[],"class_list":["post-31120","post","type-post","status-publish","format-standard","hentry","category-delhi-high-court","category-high-court"],"yoast_head":"\nSethi Construction Company vs Chairman & Managing Director, ... on 9 July, 2002 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/sethi-construction-company-vs-chairman-managing-director-on-9-july-2002\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Sethi Construction Company vs Chairman & Managing Director, ... on 9 July, 2002 - 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