Rites Ltd. vs Shabir Ahmed & Sons And Others
2010 Latest Caselaw 657 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+                          OMP No.13/2003


                                                 5th February, 2010



RITES LTD.                                                ...Petitioner
                           Through:     Mr. Anil Seth, Advocate.

              VERSUS

SHABIR AHMED & SONS AND OTHERS                              ....Respondents

Through: Mr. Girish Aggarwal, Advocate with Mr. Mughda Pandey, Advocate.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

1. Whether the Reporters of local papers may be allowed to see the judgment?

     2. To be referred to the Reporter or not?              Yes

     3. Whether the judgment should be reported in the Digest?            Yes

    %                            JUDGMENT (ORAL)



VALMIKI J.MEHTA, J

1. Only a limited issue is called for decision of this Court in this

petition under Section 34 of the Arbitration and Conciliation Act, 1996. What

the objector argues is that the Award should not have been passed against the

petitioner/RITES inasmuch as the petitioner was only acting as an agent of the

OMP 13/2003 Page 1 disclosed principal namely the Governor of Uttar Pradesh (U.P.). The petitioner,

therefore, contends that the Award which has been passed against the

petitioner/RITES could not have been passed and the Award had to be passed

against the owner being the disclosed principal namely Governor of U.P.

2. In my opinion, the contention of the counsel for the petitioner is

well founded and therefore the objections must succeed. The invitation to

tender which is filed at page 42 of the paper book shows that the petitioner was

acting for Governor of U.P. The relevant portion of this notice inviting tender

reads as under:

"2. Sealed Tenders are received by General Manager (CP) RITES for and behalf of the Governor of Uttar Pradesh for works detailed in the table-I in connection with the Upgradation of Technical Institutions in Uttar Pradesh (A World Bank aided project)".

3. The letter of Award dated 8.11.1996 was also issued in this case

signed for and on behalf of the Governor of U.P. The relevant portion of this

letter of Award reads as under:

No.ALMORA/GGP/1 Dated: 08.11.96 LETTER OF AWARD

M/S Shabir Ahmed & Sons.

Bhatkota Road, Pithorgarh-262501(UP)

Sub: Construction of Institute Building 42-Bedded Hostel Residence & External Services for Govt. Girls Polytechnic, Almora. Tender No. ALMORA/GGP/1.

Ref.

i) Our Notice Inviting Tender No. RITES/CM/UPP/44 dated 10.09.95 and Corrigendum to NIT No. RITES/CM/UPP/44 dated 29.09.95.

ii) Our letter No. Almora/GGP/1 dated 29.09.95.

iii) Your offer for the subject work opened on 12.10.1995 along with the complete set of tender documents comprising of Addendum/Corrigendum.

OMP 13/2003 Page 2 Vol I- Instructions to Bidders and General and special Conditions of Contract (Section 1,2,3 (A) and 3(B) Vol.II-(Section-4A) Technical Specifications (Civil) Vol.II-(Section-4B) Technical Specifications (Electrical) Vol.II-(Section-6) Bill of Quantities Vol.III-Format for Qualification, other Information and Appendices (Section 5,7,8 and 9)

(iv) Our letter No. Almora/GGP/1/464.c dated 18.10.95.

(v) Your letter No. SAS/125/85696 dated 17.11.95.

(vi) Documents submitted by you received in RITES Office on 13.12.95 comprising two (2) sheets.

(vii) Documents submitted by you received in RITES Office on 14.12.95 comprising four(4) sheets.

(viii) Documents submitted by you received in RITES Office on 27.12.95 comprising three (3) sheets.

              (ix)     Our letter No. Almora/GGP/1/850 dated 16.01.96
              (x)      Your letter No. NIL dated 31.01.96
              (xi)     Your letter No. SAS/95-96 dated 25.01.96

              xii)     Our letter No. Almora/GGP/1/945 a dated 22.02.96
              xiii)    Our telegram No. Almora/GGP 1 dated 26.02.96
              xiv)     Your letter No. Nil dated 27.02.96
              xv)      Your letter No. Nil dated 01.03.96
              xvi)     Your letter No. SAS/180/95-96 dated 29.02.96
              xvii)    Our Telegram of Acceptance No. Almora/GGP/1 dated 08.03.96

xviii) Our Express Telegram No. Almora/GGP/1 dated 15.4.96 xix) Your letter No. SAS/5/96-97 dated 19.04.96 xx) Our letter No. RITES/UPP/LKO/ALMORA/GGP/1/812-15 dated 16.09.96

RITES are pleased to issue you this letter of Award on behalf of Governor of Uttar Pradesh for the above mentioned work for acceptance of your bid at that rates stated in the Price Bid Document submitted by you at a total contract price of Rs.2,43,23.290.00(Rupees Two Crores Forty Three Lakhs Twenty Three Thousand Two Hundred Ninety and Paise Fifty only). (Final) figures as per detailed Price Bid Document attached herewith."

XXXXXXXXXXXX

Thanking you,

Yours faithfully, Sd/-

                                                                (Lt. Col. Arun Kumar)
                                                                General Manager (CP)
                                                               On behalf of Governor of
                                                                     Uttar Pradesh




OMP 13/2003                                                                                  Page 3

The aforesaid facts make it more than clear that the contract which was

entered into between the respondent No.1 and the Governor of U.P. acting

through the petitioner/RITES.

4. The counsel for the petitioner has drawn my attention to an

application dated 20.5.2002 filed by it before the Arbitrator and which

application was allowed by the Arbitrator vide his order dated 28.5.2002 and

which order reads as under:

"NO: RITES:CP:ARB::ALMORA:GM(Survey) Sole Arbitrator DT: 28.05.2002

From Arbind Kumar, Sole Arbitrator GM/Survey Room No.707, Sidhartha Building, Nehru Place, New Delhi 110 0 19.

In the matter of Arbitration regarding construction of Institute Building 42 Bedded Hostel, residences & External Services of Govt. Girls Polytechnic Almoracontract agreement No. RITES/CM/UPP/Agreement/Almora/GGP/1 dt. 17.12.96.

        M/s Shabir Ahmed & Sons                          Claimant
        Bhatkote Road,
        Pithoragarh-262 501

        AND
        1) M/s RITES Ltd.,
           Project Office,                          Respondent No.1
           1st Floor, Lekhraj Market-III,
           Indira Nagar,
           Lukhnow 226 016

        2)    The Director
              U.P.Technical Education Department,     Respondent No.2
              Kanpur.

Whereas M/s RITES through GM(P), 302 Vishal Bhawan, 95, Nehru Place, New Delhi-11 0019 on behalf of the Governor of Uttar Pradesh represented by the Director U.P Technical Education Department Rawatpur, Kanpur had

OMP 13/2003 Page 4 entered into contract with M/s Shabir Ahemad & Sons, Bhatkote Road, Pithoragarh-262 501 for construction of above referred buildings.

Whereas a request has now been made to me by M/s RITES Ltd., Project Office, 1st Floor, Lekhraj Market-III, Indira Nagar, Lucknow that M/s RITES were the Consultants/agency for execution of the work who carried out Project Management for & on behalf of and the contractor has no objection that employer be impleaded as party. Under the circumstances, the Director U.P. Technical Education Department, Rawatpur, Kanpur have been impleaded as respondent No.2 in the case.

Since the Director U.P.Technical Education Board, Rawatpur, Kanpur has been made respondent no.2 therefore, he is directed to send his representative for attending the hearing fixed on 12th June 2002 at 11.00 hrs. in the office of the undersigned. I also direct RITES Ltd. to send you the requisite statement of claims, pleadings in defence for the reference of respondent no.2.

Thanking you, Yours faithfully,

(Arbind Kumar) Sole Arbitrator & General Manager (Survey)"

5. The aforesaid facts makes it more than clear that the contractual

relationship was between the respondent No.1 who performed the work and the

Director U.P. Technical Education Department, Rawatpur, Kanpur through

Governor of U.P., who awarded the work. Petitioner/RITES was only acting for

and on behalf of the disclosed principal, namely, the Governor of U.P.

6. Sections 226 and 230 of the Contract Act, 1872 are relevant and

the same read as under:

"226. Enforcement and consequences of agent's contracts- Contracts entered into through an agent, and obligations arising from acts done by the agent, may be enforced in the same manner, and will have the same legal consequences as if the contracts had been entered into the acts done by the principal in person."

"230. Agent cannot personally enforce, nor be bound by, contracts on behalf of principal- In the absence of any contact to that effect an agent

OMP 13/2003 Page 5 cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them.

Presumption of contract to contrary- Such a contract shall be presumed to exit in the following cases:-

(1) where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad; (2) where the agent does not disclose the name of his principal; (3) where the principal, though disclosed, cannot be sued."

7. These Sections 226 and 230 make it more than abundantly clear

that once there is a disclosed principal, an agent incurs no liability and takes no

benefit, both of which liability and benefit is only of the disclosed principal.

8. The Award in this case in spite of the Governor of U.P. being

made a party, has been passed against the petitioner/RITES/agent whereas the

owner of the work is admittedly the Director U.P. Technical Education

Department, Rawatpur, Kanpur through Governor of U.P., respondent No.2 in

the present case.

9. In my opinion, the Award is therefore wholly illegal and needs to

be modified in terms of the law under Section 34 of the Arbitration and

Conciliation Act, 1996. I, therefore, while sustaining the Award with respect to

the relevant findings given therein order that the Award will be an Award

against the respondent No.2 i.e. the Director U.P. Technical Education

Department, Rawatpur, Kanpur through Governor of U.P. and not against the

present petitioner. Respondent No.2 obviously has not in any manner

challenged the Award or filed any objections thereto and none has appeared for

the respondent No.2 during the course of hearing of the present objections.

OMP 13/2003 Page 6

10. With the aforesaid observations, the objection petition is allowed

and disposed of to the extent mentioned above by modification of the Award,

leaving the parties to bear their own costs.

                                                   VALMIKI J.MEHTA, J

February 05, 2010
Ne




OMP 13/2003                                                               Page 7