Tarapore And Company vs 1. National Thermal Power ...
2008 Latest Caselaw 1426 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  CS(OS)2790/1993

%                              Date of decision : 22.08.2008


TARAPORE AND COMPANY                 ....... Petitioner.
                Through: Mr Jagdeep Kishore with
                     Ms Rekha Gupta, Advocates


                                 Versus


1. NATIONAL THERMAL POWER CORPORATION
   LTD

2. RASHTRIYA PARIYOJAJA NIRMAN       ......               Respondents

NIGAM LTD Earlier known as NATIONAL PROJECT CONSTRUCTION CORPN LTD

Through : Mr K.L. Budhiraja with Mr paritoshBudhiraja, Advocates for Respondent No.2.

CORAM :-

HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
     1. Whether reporters of Local papers may
        be allowed to see the judgment?                YES

     2. To be referred to the reporter or not?         Not Necessary

     3. Whether the judgment should be reported        Not Necessary
        in the Digest?


RAJIV SAHAI ENDLAW, J


A.     The petitioner has applied under Section 20 of the Arbitration

Act 1940 on the ground, that the respondent No.2 had entered into

a contract containing an arbitration agreement with the petitoner in

relation to the works assigned by respondent No.1 to the respondent

No.2 and that differences had arisen in relation to the subject

matter of the said agreement between the respondent No.2 and the

petitioner and for the said agreement to be filed in court and for

appointment of a retired judge of this court as arbitrator to

adjudicate the said disputes and differences. Notice of the petition

was issued to both the respondents. The respondent No.1 was

proceeded ex parte on 11th July, 1995 and remains ex parte. On 11th

July, 1995 the following issues were framed:

"1. Whether the arbitration agreement between National Thermal Power Corporation and respondent No.2 as reproduced in annexure P-1 can be enforced by the petitioner as against respondent No.2? OPP

2. Whether the petition is within time? OPP (Onus objected to)

3. Whether the petition has been signed, verified and instituted by an authorized person on behalf of the petitioner? OPP

4. If it is proved that there is arbitration agreement between the parties, whether matter cannot be referred to the arbitration for the reasons stated in the written statement? OPD

5. Relief."

B. The petitioner and the respondent No.2 filed their affidavits

by way of evidence. Neither of the parties applied for cross

examination of the witness of the other.

C. The counsel for the petitioner and the respondent No.2 have

been heard. My issue-wise findings are as under:

On Issue No.1

1. The petitioner approached the court on the plea that a

contract dated 19th October, 1983 had been executed between the

petitioner and the respondent no.2; that the general conditions of

contract between the respondent No.1 and the respondent No.2

form part of the terms and conditions governing the contract

between the petitoner and the respondent No.2; that the said

general conditions of contract between respondents No. 1 and 2

contain an arbitration clause; that the respondent No.1 had been

impleaded as a Performa respondent for this reason; that though the

said general conditions of contract provided for the arbitration of

the General Manager of the respondent No.1 or of some person

appointed by the Chairman and Managing Director of the

respondent No.1 but the appointment of an arbitrator was sought

from the court; that the contract of petitioner with respondent No.2

was back to back contract between respondent No.1 and respondent

No.2; that the petitioner had issued notice dated 2nd August, 1983 to

the respondent No.2 for appointment of sole arbitrator but the

respondent failed to comply with the said notice.

2. The respondent No.2 in its reply averred that the petition

was not maintainable as there was no arbitration agreement

between the petitioner and the respondent No.2; it denied that the

contract between the petitioner and the respondent No.2 was on

back to back basis to the contract between the respondent No.1 and

the respondent No.2; it was averred that the contract between the

respondent No.1 and the respondent No2 was separate and had

nothing to do with the contract between the petitioner and the

respondent No.2 and as such the arbitration clause in the contract

between the respondents No 1 and 2 was not an agreement between

the petitioner and the respondent No.2.

3. The petitioner in its rejoinder reiterated that its contract

with the respondent was on a back to back basis to the contract

between the respondent No.2 and the respondent No.1 and that the

conditions of contract and general conditions of contract between

the respondents No. 1 and 2 were applicable to the contract

between the petitioner and the respondent No.2. The petitioner also

relied upon letter dated 12th May, 1990 of the respondent No.2

where the respondent No.2 had taken a stand that the payments by

the respondent No.2 could be released in favour of the petitoiner

only after receipt from the respondent No.1 and stating that the

contract with the petitioner was on a back to back basis.

4. The affidavits by way of evidence of the witnesses of

petitoiner and the respondent No.2 merely reiterated the pleadings

aforesaid. The respondent No.2 also filed letter dated 21st April,

1990 of the petitioner to the respondent No.2 (and which was

admitted by petitioner) as Exhibit R2/1 in which the petitioner in

response to a letter dated 13th April, 1990 of the respondent No.1,

had taken a stand that the contract of the petitioner with the

respondent No.2 was not on back to back basis as claimed by the

respondent No.2 in the letter dated 13th April, 1990.

5. The Arbitration Act 1940 in Section 2(a) thereof defines

the arbitration agreement as meaning a written agreement to

submit present or future differences to arbitration, whether an

arbitrator is named therein or not. It is therefore to be seen

whether any such written agreement exists between the petitioner

and the respondent No.2. The contract between the petitioner and

the respondent No.2 was reduced into writing dated 19th October,

1983 proved as Exhibit P3. The respondent No.2 vide the said

letter awarded the works mentioned therein to the petitioner on the

terms and conditions contained therein. The terms and conditions

specified therein refer to the contract of the respondent No.2 with

the respondent No.1 to define the scope of work of the petitioner

but does not refer to the agreement generally and does not contain

any clause that the terms and conditions between the respondent

No.1 and respondent No.2 shall mutatis mutandi or otherwise apply

to the contract between the petitioner and the respondent No.2.

6. The petitioner returned a copy of the said letter to the

respondent No.2 with its signatures in token of acceptance of the

terms and conditions contained therein and the same has been

proved as Exhibit R2/2. The respondent No.2 is a juristic person

and a governmental undertaking. There are authorisation / rules /

powers entrusted to each and every officer of such an undertaking.

Entering into an agreement by such undertakings is a formal act /

exercise and in the present case has been done formally by issuance

of Exhibit P3 / Exhibit R2/2 as aforesaid to the petitioner and by

receiving signatures of the petitioner on a copy of the same. When

the parties have reduced the terms and conditions agreed between

them into writing, the said writing unless the contrary is proved is to

be considered as the sole repository of the terms and conditions

settled between the parties. The parties then cannot be permitted

to setup terms and conditions contrary or inconsistent therewith.

The same is the spirit of Sections 91 and 92 of the Indian Evidence

Act, 1872. The petitioner has neither pleaded nor proved any other

agreement, besides that in Exhibit P3 / Exhibit R2/2.

7. The writing between the petitioner and the respondent

No.2 neither expressly nor by implication nor by reference contains

any arbitration agreement. The counsel for the petitioner urged

that the respondent No.2 did not deny the arbitration agreement in

response to the legal notice got issued by the petitioner and denied

the existence of the arbitration clause for the first time in reply to

the petition only. In my opinion the same is irrelevant. Under the

1940 Act there could not be arbitration agreement by one party

pleading the same and by the other party not denying the same. It

is only in 1996 Act that a provision has been made that an

arbitration agreement can be considered to be in writing if in an

exchange of statements of claim and defence in which the existence

of the agreement is alleged by one party and not denied by the other

(See section 7(4)(c) of the Arbitration and Conciliation Act 1996).

However, the said principle cannot be applied to the 1940 Act. As

far as the case of the petitioner of the agreement of the petitioner

with the respondent No.1 being on back to back basis to the

agreement between the respondents No. 1 and 2 is concerned, it is

not so provided in Exhibit P3 / Exhibit R2/2. In the absence of the

written agreement between the parties providing so, simply because

respondent No.2 assigned part of the work, assigned to it by the

respondent No.1, to the petitioner, it cannot be said that the

agreements were on back to back basis. Even though the letter

dated 12th May, 1990 of the respondent No.2 relied upon by the

petitioner in its rejoinder to set up a case of contract on back to

back basis has not been proved in evidence but if looked into, calls

the contract of the petitioner with respondent No.2 on back to back

basis only for the purposes of release of payments by the respondent

No.2 to the petitioner. The petitioner, however, itself disputed the

said position vide exhibit R2/1 (supra). The petitioner having at the

contemporaneous time disputed that the agreements were on a back

to back basis, cannot be permitted to setup a contrary case.

Moreover, the letter dated 12th May, 1990 is issued by a unit officer

of the respondent No.2 while the agreement dated 19th October,

1983 Exhibit P3 is signed by the General Manager of the respondent

No.2 and normally a unit officer would not be entitled to add to an

agreement which had been made by the General Manager.

8. The counsel for the petitioner relied upon M/s Dalmiya &

Co. Ltd v International Airport Authority of India 1994 IV AD

(Delhi) 437 and G. Ramachandra Reddy v Chief Engineer AIR

1994 SC 2381. However, in both these, the existence of arbitration

agreement was not in dispute and I do not find these judgments

relevant to the present lis.

9. I, therefore, hold that there is no arbitration agreement

between the petitioner and the respondent No.2. I also find that it

was not agreed between the petitioner and the respondent No.2 that

the arbitration agreement between the respondents No 1 and 2 can

be enforced by the petitioner against the respondent No.2. The

issue No.1 is thus decided against the petitioner and in favour of the

respondent No.2.

Though, upon decision of the issue No.1, the petition is liable to be

dismissed but since issues were framed, I proceed to decide the

other issues also.

On Issue No.2.

1. The petition states that the cause of action arose from

time to time when various letters were written by the petitioner

calling upon respondent to help them in execution of the work and

the cause of action lastly arose when notice dated 2nd August, 1993

for appointment of sole arbitrator was sent and the respondent

failed to comply with the said notice.

2. The respondent has pleaded that the work was completed

in February, 1987 and the final bill was submitted by the petitioner

on 9th December, 1987; that the final bill for the work was of Rs

20,42,934/- which was duly accepted by the petitioner and that full

and final payment had already been made as per duly accepted final

bill; that the petitioner had subsequently raised an alleged final bill

for Rs 1,24,03,910.75 and which was rejected by the respondent

No.1 vide its letter dated 10th April, 1989 and thus the claim was

barred by time.

3. The petitioner in its rejoinder admitted that the work was

completed in 1987 and the final bill was submitted on 9th December,

1987 but pleaded that the respondent No.2 in its letter dated 21 st

September, 1989 had intimated the petitioner that if the petitioner

was willing to give an undertaking agreeing to receive 50% of the

amount of claim as released from respondent No.1, the claim of the

petitioner would be sent to the respondent No.1. The petitioner

pleaded that this clearly meant that the payment was to be released

by the respondent No.2 to the petitioner only after receipt from the

respondent No.1. Upon the failure of respondent No.2 to disclose

the payment received from the respondent No.1, the petitioner had

written directly to the respondent No.1 and the respondent No.1

had vide its letter dated 25th February, 1994 to the petitioner

received by the petitioner after the institution of the petition

informed that the respondent No.1 had released full and final

payment to the respondent No.2 upon the respondent No.2

submitting No Demand Certificate on 25th October, 1993. It was

argued that the final payment would have been released by the

respondent No.1 to the respondent No.2 only after the No Dues

Certificate dated 25th October, 1993. It was therefore urged that

the claim could not be barred by time. The claim by the petitioner is

for the works done, extra work done, extra materials used at the

instance of the respondent No.2 and for escalation charges. The

agreement between the parties Exhibit P3 / Exhibit R2/2 in clause 8

provides that monthly running account payment was to be released

on the basis of quantities actually executed by the petitioner and

recorded at the close of every month and the payments were to be

released within 7 days from the date of submission of detailed bill

based on joint measurements. However, it was further provided

that the final quantities payable for the works executed shall in no

case exceed the quantities paid by the respondent No.1 to the

respondent No.2 and "therefore the final bill and monthly R.A. Bill

quantities payable to you shall be limited to the quantities billed and

paid" by the respondent No.1 to the respondent No.2.

4. Article 18 of Schedule I of the Limitation Act provides the

limitation of three years from the date when the work is done for the

recovery of price of work done by the plaintiff for the defendant,

where no time of payment has been fixed. In the present case,

however, time for payment has been fixed as after the receipt of

payment by the respondent No.2 from the respondent No.1.

5. The witness of the respondents in his affidavit has

referred to acceptance by the petitioner as full and final settlement

and with a further endorsement of no further claim for escalation.

However, no such document has been proved by the respondent

No.2.

6. That the agreement between the parties appears to

suggest that payments by the respondent No.2 to the petitioner

were to depend on the payments by the respondent No.1 to the

respondent No.2. If that were to be so, then the claim of the

petitioner does not appears to be barred by time. However, since

these are section 20 proceedings in which only affidavit evidence

has been led and since upon the finding on issue No.1, the petition

is to be dismissed, I refrain from giving any final finding on this

issue and leave it to be decided by examination and cross

examination of witnesses in appropriate proceedings, if any

instituted,

On Issue No.3.

1 The witness of the petitioner Shri R.K. Anand has stated

that he has instituted, signed and verified the petition on behalf of

the petitioner. The petitioner is stated to be a registered

partnership firm; the certificate of registration has been proved as

Exhibit P1 and the power of attorney in favour of the said Shri R.K.

Anand executed by one of the registered partners of the petitioner

has been proved as Exhibit P2. The petitioner has thus proved due

institution of filing of the petition. The Issue No.3 is decided in

favour of the petitioner and against the respondent No.2.

Issue No.4.

The said issue appears to have been framed on the plea of

the respondent No.2 of full and final settlement. However, as

aforesaid, the said document has not been proved by the respondent

No.2. The said issue is, therefore, decided in favour of the

petitioner and against the respondent No.2.

Issue No.5.

In view of the finding on issue No.1, the petition is

dismissed, however, with no order as to costs.

RAJIV SAHAI ENDLAW, J.

August 22, 2008.

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