Delhi High Court
Raj And Associates And Anr. vs Videsh Sanchar Nigam Limited And Ors. on 30 July, 2004
Equivalent citations: 2004(2)ARBLR614(DELHI), I(2005)BC509, 113(2004)DLT318, 2004(76)DRJ60
Author: Vikramajit Sen
Bench: Vikramajit Sen
JUDGMENT Vikramajit Sen, J.
1. The Plaintiffs Firm has filed this Suit for recovery of Rs. 9,70,417/- in which it has arrayed Videsh Sanchar Nigam Limited ('VSNL' for short) as Defendant No. 1, Rail India Technical & Economical Services Limited ('RITES' for short) as Defendant No. 2. and the Bank of India ('BoI' for short), Muzaffarnagar Branch as Defendant No. 3. The Prayers in the Plaint are reproduced below in order to adumbrate that it fails to indicate against which of the Defendants the prayer for recovery is directed:
"a) be pleased to grant a decree for recovery of sum of Rs. 6,10,896.00 (Rupees Six Lacs Ten Thousand Eight Hundred & Ninety six only), the balance amount of payment on the said work plus Rs. 1,32,580.00 (Rupees One lac Thirty Two Thousand Five Hundred & Eighty Only) amount of FDRs plus Rs. 62,000.00 (Rupees Sixty Two Thousand only) amount of Bank guarantee, total amount of Rs. 9,70,417.00 (Rupees Nine Lacs Seventy Thousand Four Hundred & Seventeen Only), in favor of the plaintiffs and against the defendant.
b) this Hon'ble Court be further pleased to pass decree in favor of the plaintiff and against the defendant to pay the interest of Rs. 1,64,941.00 (Rupees One lac Sixty Four Thousand Nine Hundred & Forty One only) on the amount of Rs. 6,10,896.00 (Rupees Six Lacs Ten Thousand Eight Hundred & Ninety Six only), on the aforesaid balance amount of the work not paid at an interest of 18% per annum from 22.03.1999 to 22.09.2000.
c) this Hon'ble Court be further pleased to grant 18% future interest.
d) Cost of the suit be awarded".
2. The Plaintiffs' had entered into a contract for supply and installation of false flooring in the HUB building at VSNL SAN, Chattarpur, New Delhi-110030. It is asseverated that upon completion of the Works in June, 1998 the Plaintiffs were paid an amount of Rs. 20,13,820/-, which is approximately eighty per cent of the contract value. It has then been pleaded that the Defendants had not fulfillled their obligations under the Contract, the details of which are not relevant for the present decisions. It is averred that Defendants No. 1 and 2 demanded an amount of Rs. 1,32,580/- in the form of FDRs together with a Bank Guarantee for an amount of Rs. 62,000/- which had been duly deposited. It has been pleaded that the Plaintiffs have not been informed of any defects in the Works. It appears that the Plaintiffs had filed a Writ Petition which was disposed of observing, inter alia, that the parties "would be at liberty to avail of remedies as available in arbitration or in civil forum as the case may be". The Plaintiffs' demand for the balance amount due, the release of the FDRs and the Bank Guarantee did not have the desired result and hence the present Suit has been filed.
3. In the course of arguments, learned counsel for the Plaintiffs conceded that no relief has been claimed against the Bank of India and it may, therefore, be struck of from the array of the parties. I am satisfied that Defendant No. 3, Bank of India, is neither a necessary nor a proper party. It is, therefore, struck of from the array of parties.
4. Defendant No. 1 has filed a copy of the Agreement For Construction Management Services between itself and RITES dated 29.1.1998, Clause VIII of which stipulates the resolution of inter se disputes through Arbitration. This document has not been disputed by any of the parties. It thereafter transpires that RITES entered into an agreement with the Plaintiffs on 15.6.1998 for and on behalf of VSNL as its Consultant. The tendered document is, however, in the name of VSNL albeit through RITES. Clause 25 contains the agreement to resort to arbitration. It has not been disputed by any of parties hereto that RITES acted as the agent of VSNL.
5. The immediate question that arises is whether RITES is a necessary party. It is the duty of the Court under Order I Rule 10 that the name of any party improperly joined, whether as Plaintiff or Defendant, be struck off.
6. A reading of Section 230 of the Indian Contract Act, 1872 will clarify that RITES is not a necessary party in these proceedings as it enunciates that in the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal, nor is he personally bound by them. Sections 231 and 232 carves out a pragmatic and mercantile exception in that if the agent has not disclosed his principal, or if the principal is not learnt of during the performance of the contract, the agent may be proceeded against independently. The position in this Suit has been complicated by RITES' demand for arbitration of disputes through the aegis of arbitration vis-a-vis VSNL and itself. RITES has also disclosed the existence of the Arbitration Clause between the Plaintiffs and VSNL. It is in this factual matrix that the Plaintiffs now pray that the disputes be referred to arbitration. However, learned counsel for VSNL contends that the disputes cannot be referred to arbitration and that they must necessarily be adjudicated by this Court in this civil action.
7. IA No. 217/2002 is an application filed on behalf of RITES under Section 8 of The Arbitration & Conciliation Act, 1996 filed on 4.1.2002 praying for a direction against the Plaintiff to refer the disputes to arbitration. The Plaintiffs in its Reply has firstly submitted that the application is not maintainable but has thereafter recorded that it has no objection to the matter being referred to the arbitration. IA No. 8752/2002 is the second application filed by RITES under Section 8 of the Arbitration & Conciliation Act, 1996 filed on 23.9.2002 praying for a direction against Defendant No. 1 to refer the disputes to arbitration. This application has been contested by VSNL, which had filed its Written Statement also containing a Counter Claim for a sum of Rs. 30,14,256/- on 20.3.2002. I am of the view that even RITES is not a necessary or proper party to the present Suit and it is, therefore, struck off from the array of parties. Being an agent of VSNL, RITES cannot, in law, enforce the terms of the Contract which it had entered into as an agent, especially in view of the presence of its principal, VSNL. If it has any claim or disputes between itself and its principal, namely, VSNL, it must file a separate action. The result is that both the applications, bearing No. 217/2002 and 8752/2002, are dismissed as not maintainable.
8. The Counter Claim is directed to be separated from this file, and be tried as a separate suit. Order VIII Rule 6A of the CPC clarifies that a Counter Claim must seek a relief against the Plaintiff, which is not the case before me.
9. What remains to be considered is whether this Court should continue with the hearing of the present Suit or refer the Plaintiff and the only remaining Defendant, VSNL, to arbitration. It has already been mentioned above that in response to the first application all rights for referral of disputes to arbitration the Plaintiffs had adopted two positions - firstly that the application was not maintainable and secondly that the disputes may be referred to arbitration ostensibly for an early decision thereon. Significantly, since the Plaintiff had already filed a Writ Petition which was disposed of granting liberty to it to initiate civil or arbitration proceedings, the Plaintiffs were well aware of the existence of an Arbitration Clause. Clearly and indubitably, instead of pursuing the path of arbitration, the Plaintiffs instead filed a civil action for the recovery of its dues. Similarly, fully conscious of the existence of an Arbitration Clause VSNL had decided to renounce its rights to enforce arbitral proceedings and has instead traversed the avenue of the civil suit not merely by resisting the Plaintiffs' claim but by filing its own Counter Claim in respect of which Court Fee of Rs. 30,800/- has been paid. During the course of arguments of this 'comedy of errors' the Plaintiffs have joined issue with RITES and has contended that the Court is duty bound to refer the parties to arbitration because the existence of an Arbitration Clause in the Agreement between the parties has been brought to its notice, especially in view of the fact that none of the parties have demurred on its existence. This is also the view taken in Magma Leasing Limited vs. NEPC Micon Limited and another, AIR 1998 Calcutta 94. In my view once the Plaintiff opts to file a suit it is no longer open to him to pray to the Court that the parties be referred to arbitration. The present case is not one where the Plaintiff can be heard to plead ignorance of the existence of the arbitration clause. Furthermore, counsel for the Plaintiff had made an oral request that such a referral should take place but this submission does not fall within the purview of Section 8 which specifically envisages that a request of this nature should be contained in a written application. I am fortified in this view by the pronouncement in Garden Finance Limited v. Prakash Inds. Ltd. and another, . It has been contended by counsel for Defendant No. 2 that this Court is duty bound to refer the parties to arbitration no sooner it is made aware of the existence of an arbitration clause. I cannot accede to this argument in view of the following pronouncements in Sukanya Holdings (P) Limited v. Jayesh H. Pandya and another, :
"For interpretation of Section 8, Section 5 would have no bearing because it only contemplates that in the matters governed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act. Except Section 8, there is no other provision in the Act that in a pending suit, the dispute is required to be referred to the arbitrator. Further, the matter is not required to be referred to the Arbitral Tribunal, if: (1) the parties to the arbitration agreement have not filed any such application for referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed before submitting first statement on the substance of the dispute; or (3) such application is not accompanied by the original arbitration agreement or duly certified copy thereof. This would, therefore, mean that the Arbitration Act does not oust the jurisdiction of the civil court to decide the dispute in a case where parties to the arbitration agreement do not take appropriate steps as contemplated under sub-sections (1) and (2) of Section 8 of the Act".
10. In these circumstances I direct that the suit must continue between the Plaintiff and Videsh Sanchar Nigam Limited, the sole Defendant. Both the IAs No. 217/2002 & 8752/2002 are dismissed.