Back
1993 Supreme(Del) 194
High Court Of Delhi
MAINTECH ENGINIRS - Appellant
Versus
JOTINDRA STEEL AND TUBES LIMITED - Respondent
Suit 3027A of 1989
Decided On : 03/18/1993
G.S.Agrawal, P.S.MOHINDRU
In the absence of a specific term for arbitration in a sub-contract and privity of contract between the sub-contractor and the principal, an arbitration clause in the agreement between the principal and the contractor is not applicable to the sub-contractor.
Headnote:
ARBITRATION - AGREEMENT - EXISTENCE - SUB-CONTRACTOR - NO PRIVITY OF CONTRACT BETWEEN SUB-CONTRACTOR AND PRINCIPAL - NO SPECIFIC TERM FOR ARBITRATION IN SUB-CONTRACT - NO AGREEMENT BETWEEN PARTIES TO REFER DISPUTE TO ARBITRATOR - ARBITRATION CLAUSE IN AGREEMENT BETWEEN RESPONDENTS AND PRINCIPAL NOT APPLICABLE TO SUB-CONTRACTOR - PETITION DISMISSED.
Fact of the Case:
Petitioner, a partnership firm, entered into a sub-contract with respondent No. 2, a division of respondent No. 1, for work at Panipat Thermal Power Station. Petitioner claimed that the terms of payment applicable to respondent No. 2 in its contract with BHEL, the principal, were to be applicable to the petitioner on a back-to-back basis and that disputes were to be referred to the arbitration of the General Manager, BHEL. Respondent No. 2 contested the existence of a valid arbitration agreement and claimed that all payments had been made to the petitioner as per the terms of the sub-contract.
Finding of the Court:
The court found that there was no privity of contract between the petitioner and BHEL and that the arbitration clause in the agreement between the respondents and BHEL was not applicable to the petitioner. The court also found that there was no specific term for arbitration in the sub-contract between the petitioner and the respondents and that the petitioner had failed to prove the existence of an agreement to refer disputes to arbitration.
Issues: 1. Whether there exists a valid arbitration agreement between the parties? 2. Whether the disputes mentioned in the petition are covered by the arbitration agreement? 3. Whether the petition is barred by time?
Ratio Decidendi: The court held that the mere fact that the terms of payment applicable to respondent No. 2 in its contract with BHEL were to be applicable to the petitioner on a back-to-back basis did not imply an agreement to refer disputes to arbitration. The court also held that the absence of a specific term for arbitration in the sub-contract between the petitioner and the respondents and the lack of privity of contract between the petitioner and BHEL negated the existence of an agreement to refer disputes to arbitration.
Final Decision: The court dismissed the petition with costs.
( 1 ) M/s. Maintech Engineers has moved this petitionunder Section 20 of the Indian Arbitration Act, 1940 (hereinafter referred toas "the Act"), with a prayer that the respondents be directed to file theagreement between the parties, in Court, and make a reference of the disputesbetween the parties to the arbitration of the General Manager. Bharat Heavyelectricals Limited (BHEL), which is in consonance with the Arbitrationagreement between the parties.
( 2 ) BRIEFLY stated, the averments made in the petition are, that thepetitioner is a partnership firm, duly registered under the. Indian Partnership act and Shri Parvinder Singh is one of its registered partners and iscompetent to sign, verify and institute the suit. It is also pleaded that therespondent No. 1 is a company, duly incorporated under the Companies Actand respondent No. 2 is a division of respondent No. 1. It is further pleadedthat the petitioners are consultants and maintenance specialists in dieselengines, steam plants, gas turbines, chilling systems, pipe lines, air conditioning systems, control systems and automation, and that respondent No. 2 wasawarded the work of erection of boilers etc. of the Haryana State Electricityboard at the Panipat Thermal Power Station by the Bharat Heavyelectricals Ltd. It is also claimed that respondent No. 2 sub-let a part of thework for erection of pressure parts, non-pressure parts and structurals at thepanipat Thermal Power Station vide letter of Intent dated 14/01/1985. It is further pleaded that petitioners were also awarded the work forthe application of insulating and refractory materials and sheet metal covering and dueting at Panipat Thermal Power Station vide letter of Intent dated 25/02/1985. It is also claimed that in pursuance of the aforesaidletters of Intent, the works allotted to the petitioner were completed to entiresatisfaction of the Engineer Incharge at the site and the work was accordinglyhanded over by the respondents to the Haryana State Electricity Board bythe Bharat Heavy Electricals Limited. It is also claimed that it was agreedbetween the parties that the terms of payment, as applicable to respondentno. 2 in its contract with BHEL shall be applicable to the petitioner also onback to back basis and the payment will be made for the work done by thepetitioner on the measurements certified by the BHEL. There was also astipulation that the work already completed partially, would be paid on proportionate basis.
( 3 ) FURTHER averments made in the petition are that the petitioner hassubmitted the running bills to respondent No. 2 for the work carried out andagainst which only part payments have been made and that there have beenvarious meetings between the parties representatives in respect of the settlement of the bills and the respondent No. 2 had been giving assurances toreconsider the bills of the petitioner and to release the payment but to noeffect. It has further been pleaded that the petitioner wrote letter dated25. 5. 1989 demanding a sum of Rs. 9,16,421. 44. 00in respect of Until III andrs. 26,90,029. 60 in respect of Unit-IV and a consolidated final bill for all theitems in respect of both the units was submitted to respondent No. 2 whohas not settled the dispute. It has, thus, been pleaded that since the respondents have failed to settle the claim of the petitioner, the same is required tobe referred to the arbitrator and the respondents having failed to do so, thepresent petition has been filed.
( 4 ) THIS petition has strongly been contested by the respondents, whohave inter alia pleaded that the petitioner is not a partnership firm, dulyregistered under the Partnership Act. It is also claimed that Respondentno. 1. through its Engineering Division, respondent No. 2 was awardedcontract for erection of boiler at Panipat Thermal Power Station and part. ofthis work was allotted to the petitioner regarding which, letters of intentdated 141. 1985, 25. 2. 1985 were issued, which su
