[Cites 10, Cited by 0]
Calcutta High Court
Limited And Anr vs R S Construction And Anr on 2 February, 2026
Author: Debangsu Basak
Bench: Debangsu Basak
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OC-6
OCD-5
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL APPELLATE DIVISION
ORIGINAL SIDE
APOT/332/2025
IA No.GA-COM/1/2026
MANAGING DIRECTOR BIHAR STATE POWER GENRATION COMPANY
LIMITED AND ANR.
-VERSUS-
R S CONSTRUCTION AND ANR.
Present :
The Hon'ble Justice Debangsu Basak
-And-
The Hon'ble Justice Md. Shabbar Rashidi
For the Appellant : Mr. Umesh Prasad Singh, Adv.
Mr. K. R. Thaker, Sr. Adv.
Mr. Shaunak Mukhopadhyay Adv.
Mr. S. K. Poddar, Adv.
Mr. Kumar Manish, Adv.
For the Respondent No.1 : Mr. Prashant Kumar, Adv.
Ms. Bhawna Tekriwal, Adv.
HEARD ON : 02.02.2026
DELIVERED ON : 02.02.2026
DEBANGSU BASAK, J.:-
1. Appeal is directed against the judgment and order dated December 4,
2025 passed in AP-COM/21/2023.
2. By the impugned judgment and order, learned Single Judge dismissed a
challenge under Section 34 of the Arbitration and Conciliation Act, 1996
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assailing the award dated September 17, 2023 passed by the sole
arbitrator.
3. Learned senior advocate appearing for the appellant submits that, there
is a typographical error in the cause title of the memorandum of appeal.
He seeks leave to correct such error. He submits that, Bihar State Power
Generation Company is a limited liability company within the meaning of
the Companies Act, 2013 and should be described as such. He seeks
leave to insert the word "limited" in the cause title of the memorandum of
appeal.
4. Learned senior advocate appearing for the appellant submits that,
initially a tender was floated. The respondent no.1 became the
successful tendered in respect of such tender. Tender was awarded. He
points out that the tender was ultimately between the respondent no.1
and Bihar State Power Generation Company Limited and Bihar State
Power Holding Company Limited.
5. Learned senior advocate appearing for the appellant submits that,
disputes and differences arose between the respondent no.1 and Bihar
State Power Generation Company Limited and Bihar State Power Holding
Company Limited. Such disputes and differences were sought to be
referred to arbitration. He refers to the statement of claim. He submits
that, in the statement of claim neither Bihar State Power Generation
Company Limited nor Bihar State Power Holding Company Limited were
made party respondents. Rather the Managing Director, Bihar State
Power Generation Company Limited and the Chairman of Bihar State
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Power Holding Company Limited were party respondents. Arbitration
proceeded on such basis. Award was passed as against the Managing
Director, Bihar State Power Generation Company Limited and Chairman,
Bihar State Power Holding Company Limited.
6. Learned senior advocate appearing for the appellant refers to the
impugned judgment and order. He submits that, none of the parties to
the arbitration agreement were before the arbitral tribunal for the award
to be passed, was not taken into consideration. In particular, he refers
to paragraph 38 of the impugned judgment and order.
7. Learned advocate appearing for the respondent no.1 submits that,
although, arbitration proceedings was initiated against the Managing
Director, Bihar State Power Generation Company Limited and the
Chairman, Bihar State Power Holding Company Limited, nonetheless by
virtue of the ratio of the decisions rendered by the Hon'ble Supreme
Court in (2022) SCC 355 (Bhupesh Rathod vs. Dayashankar Prasad
Chaurasia & Anr.) and 2025 (2) SCC 417 (OPG Power Generation Pvt.
Ltd. vs. Enexio Power Cooling Solutions India Pvt. Ltd. & Anr.), the
same did not vitiate the award. According to him, learned Single Judge
was correct in rejecting such contention of the appellant.
8. Leave is granted to the learned Advocate on Record of the appellant to
correct the cause title of the memorandum of appeal.
9. Under the provisions of the Act of 1996, arbitration agreement comes
into existence if the same is in writing. The Act of 1996 postulates that,
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exchange of correspondence can constitute an arbitration agreement, in
a given case.
10. In the facts and circumstances of the present case, there is an
arbitration agreement in writing. However, the agreement is between the
respondent no.1 on one part and Bihar State Power Generation Company
Limited and Bihar State Power Holding Company Limited on the other
part.
11. The issue is whether or not the Managing Director, Bihar State Power
Generation Company Limited or the Chairman, Bihar State Power
Holding Company Limited are separate legal entities other than the
companies of their respective companies or not.
12. An existing Company within the meaning of the Companies
Act, 2013 is a distinct and separate legal entity from its shareholders or
the natural persons in management thereof. Such a Company is to be
sued or sued in its incorporated name. The issue in the previous
paragraph is therefore answered by holding that the Managing Director
and Chairman of the two Companies of the two respective Companies are
separate and distinct legal entities than the Companies in which they are
employed.
13. Under Section 230 of the Indian Contract Act an agent who acts for a
disclosed principal is not bound by the contracts entered into on behalf
of the disclosed principal. There is no contract to the contrary.
Circumstances to presume to the contrary does not exist. In the facts
and circumstances of the present case, the Managing Director of Bihar
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State Power Generation Company Limited as also the Chairman, Bihar
State Power Holding Company Limited are agents of disclosed principals.
They cannot be sued, therefore, for the defaults, if any, allegedly
committed by the disclosed principals to the respondent No. 1 under the
provisions of Section 230 of the Indian Contract Act, 1872, in respect of
the contract in question.
14. Bhupesh Rathod (supra) is a decision rendered under the provisions of
the Negotiable Instruments Act, 1881 and Sections 138 and 142 thereof.
A criminal complaint was lodged by a natural person accompanied by a
Board Resolution of the Company authorising such natural person to
initiate legal action. In the facts of that case, it was held that such
complaint cannot be dismissed only on the ground that the name of the
Managing Director is mentioned first following the post held by him in
the company, although the complaint was not found to be perfect. In the
facts and circumstances of the present case, it is the Managing Director
and the Chairman of the two respective companies who are sought to be
sued. We already noted the provisions of Section 230 of the Contract
Act.
15. OPG Power Generation Pvt. Ltd. (supra) is on the Act of 1996. It
considers an issue as to whether an arbitration agreement is binding on
a non-signatory to such agreement. It invokes the doctrine or group of
companies. It is of the view that the group of companies doctrine is
premised on ascertaining the intention of the non-signatory to be party to
an arbitration agreement. The doctrine requires the intention to be
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gathered from additional factors such as direct relationship with the
signatory parties, commonality of subject-matter, composite nature of the
transaction and performance of the contract. In the facts and
circumstances of the present case, the doctrine of group of companies is
not attracted. In this case, a limited liability company is sought to be
sued through its disclosed agent, which is not permissible under Section
230 of the Contract Act, 1872.
16. Neither the Managing Director of Bihar State Power Generation Company
Ltd. nor the Chairman, Bihar State Power Holding Company Ltd. entered
into any arbitration agreement with respondent no.1 for a valid reference
for an arbitration to be made in respect of the disputes between the
respondent no.1 and those two legal entities. If, at all, there are disputes
and differences between the respondent nos.1 and the two legal entities
of which the Managing Director and the Chairman were sought to be
sued against.
17. In such circumstances, as the award passed are against two individuals,
who are separate and distinct from the persons with whom the claimant
in the arbitration proceedings entered into the arbitration agreement, the
award cannot be sustained.
18. In such perspective, the Court under Section 34 of the Act of 1996 erred
in exercising jurisdiction vested upon it in law. In such scenario, the
impugned judgment and order is set aside. The award dated September
17, 2023 passed by the learned arbitrator is set aside.
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19. APOT/332/2025 along with the connected application is disposed of
without any order as to costs.
(DEBANGSU BASAK, J.)
20. I agree.
(MD. SHABBAR RASHIDI, J.)
A/s.
