Delhi District Court
M/S. Diwan Chand Builders vs (1) Govt. Of Nct Of Delhi on 16 October, 2018
IN THE COURT OF SH. M.P. SINGH, ADDITIONAL DISTRICT
JUDGE03 (CENTRAL), TIS HAZARI COURTS: DELHI
CS No. 265/17
New CS No. 613415/16
In the matter of:
M/s. Diwan Chand Builders
GL7, Ashoka Estate
24, Barakhamba Road, Delhi .......Plaintiff
Versus
(1) Govt. of NCT of Delhi
Through Executive Engineer
PWD Division - 28
SU Block, Pitam Pura, Delhi 88
(2) Project Manager/ Superintendent Engineer
Dr. Baba Sahib Ambedkar Project
P.W.D. (Delhi Govt.), Rohini Sector - 6
Delhi - 85 ......Defendants
Suit instituted on - 24.04.2006
Judgment pronounced on - 16.10.2018
JUDGMENT
1. Plaintiff is a registered partnership firm. Mr. Rishi Raj, plaintiff's power of attorney holder, instituted the present suit.
2. Defendants invited tenders for construction of 100 bedded Guru Govind Hospital at Raghubir Nagar, Delhi including construction of residential quarters (48 TypeI, 16 TypeII, 18 Type III and 6 TypeIV quarters) as also W/S, S.I. and connection up to one manhole (balance work). Plaintiff submitted its tender and it was accepted on CS No. 265/17, New CS No. 613415/16 Page 1 of 23 22.01.1998. Agreement No. 58/EE/PWD28/9798 was executed between the parties. The salient features of the work are as follows: Estimated Cost of work Rs. 1,38,81,825/ Tendered Amount Rs. 1,34,60,819/ Percentage 3.03% below Estimated Cost Stipulated date of start 01.02.1998 Stipulated date of completion 01.06.1999 Time allowed for completion 16 Months Actual date of completion 25.07.2002
3. Two important clauses of this agreement are clauses 2 and 25. These two clauses are being reproduced verbatim as under: Clause - 2 The time allowed for carrying out the work as entered in the tender shall be strictly observed by the contractor and shall be deemed to be essence of the contract and shall be reckoned from the tenth day after the date on which the order to commence the work is issued to the contractor. The work shall throughout the stipulated period of the contract be proceeded with all due diligence and the contractor shall pay as compensation an amount equal to 1% or such smaller amounts the Superintending Engineer (whose decision in writing shall be final) may decide on the amount of the estimated cost of the whole work as shown in the tender for everyday that the whole work remains uncommenced or unfinished after the proper dates. And further to ensure good progress during the execution of the work, the contractor shall be bound in all cases in which the time allowed for any work exceeds, one month (save for special jobs) to complete one eighth of the whole of the work before one fourth of the whole time allowed under the contract has elapsed; three eighths of the work, before one half of such time has elapsed and three fourths of the work before threefourths of such time has CS No. 265/17, New CS No. 613415/16 Page 2 of 23 elapsed. However, for special jobs if a timeschedule has been submitted by the contractor and the same has been accepted by the EngineerIncharge. The contractor shall comply with the said time schedule. In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the said estimated cost of the whole work for every day that the due quantity of work remains incomplete. Provided always that the entire amount of compensation to be paid under the Provisions of the Clause shall not exceed ten per cent of the estimated cost of the work as shown in tender.
Clause 25 Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship of materials used on the work or as to any other questions claim, right matter or thing whatsoever in any way arising out of or relating to the contract designs, drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the work or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, PWD incharge of the work at the time of dispute or if there be no Chief Engineer the administrative head of the said PWD at the time of such appointment it will be no objection to any such appointment that the arbitrator so appointed is a Government servant, that he has to deal with the matters to which the contract relates and that in the course of his duties as Government servant he has expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Engineer or administrative head as aforesaid at the time of such transfer vacation of office or inability to act, shall appoint another CS No. 265/17, New CS No. 613415/16 Page 3 of 23 person to act as arbitrator in accordance with the terms of the contract such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of the contract that no person other than a person appointed by and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the total amount of all the claim in dispute is Rs. 75,000/ (Rs. Seventy five thousand only) and above, the arbitrator shall give reasons for the award.
Subject as aforesaid the provisions of the Arbitration Act, 1940, or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause.
It is also a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute.
It is also a term of the contract that the contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the Govt. that the final bill is ready for payment the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Govt. shall be discharged and released of all the liabilities under the contract in respect of these claims.
The arbitrator(s) may from time to time with consent of the parties enlarge the time for making and publishing the award.
The decision of the Superintending Engineering regarding the quantum of reduction as well as justification thereof in respect of rates of sub standard work which may be decided to be accepted will be final and would not be open to arbitration."
4. The project got delayed. But the parties differ on the issue as to who was actually responsible for the delay. Nonetheless, CS No. 265/17, New CS No. 613415/16 Page 4 of 23 Superintending Engineer invoked clause 2 of the agreement and levied compensation of Rs. 6,77,600/ on the plaintiffcontractor. Besides this, several other disputes cropped up between the parties. Plaintiffcontractor wrote to defendants for appointment of an arbitrator. The Arbitrator entered the reference. Arbitrator adjudicated as many as 17 claims of the plaintiff and one counter claim of the defendants. Arbitrator vide his award dt. 08.05.2006 (which was after institution of the instant lis) held that plaintiff contractor (claimant) was entitled to Rs. 6,87,090/ from the defendants. Ld. Arbitrator inter alia observed, "This is in full and final settlement of all the above claims and counterclaim of the parties." On the crucial question of levy of compensation upon the plaintiffcontractor by Superintending Engineer under clause 2 of the agreement, Arbitrator held as follows (paragraph no. 3.0 of the award): "After perusal of the records and hearing both the parties, I find that the contention of the respondents was correct. I agree that the levy of compensation under clause 2 of the contract was an excepted matter where the decision of the Superintending Engineer was final and binding and the arbitrator had no jurisdiction to adjudicate this claim. Further as the respondents had already recovered this amount from the claimants before the case became subjudice; therefore the amount of Rs. 6,77,600/ recovered by the respondents cannot be refunded to the claimants. The claimants are, therefore, directed to approach the appropriate judicial form (sic. forum) for adjudication of this claim ."
5. It is thus the plaintiff is suing the defendants for recovery of compensation of Rs. 6,77,600/ levied upon it under clause 2 of the agreement, besides other reliefs.
CS No. 265/17, New CS No. 613415/16 Page 5 of 236. Before proceeding further, there are two Apex Court decisions that ought to be noted. In Vishwanath Sood vs. Union of India, AIR 1989 SC 952 it was held that the question of awarding compensation under clause 2 is outside the purview of the arbitrator and that the compensation determined under clause 2 either by the Engineerincharge or on further reference by the Superintending Engineer will not be capable of being called in question before the arbitrator. Subsequent thereto, in J.G. Engineers Private Limited.
vs. Union Of India & Anr., (2011) 5 SCC 758 it was held as follows: "10. A Civil Court examining the validity of an arbitral award under section 34 of the Act exercises supervisory and not appellate jurisdiction over the awards of an arbitral tribunal. A court can set aside an arbitral award, only if any of the grounds mentioned in sections 34(2)(a)(i) to (v) or section 34(2)(b)(i) and (ii), or section 28 (1)(a) or 28(3) read with section 34 (2)(b)(ii) of the Act, are made out. An award adjudicating claims which are `excepted matters' excluded from the scope of arbitration, would violate section 34(2)(a)
(iv) and 34(2)(b) of the Act. Making an award allowing or granting a claim, contrary to any provision of the contract, would violate section 34(2)(b)(ii) read with section 28(3) of the Act.
18. Thus what is made final and conclusive by clauses (2) and (3) of the agreement, is not the decision of any authority on the issue whether the contractor was responsible for the delay or the department was responsible for the delay or on the question whether termination/rescission is valid or illegal. What is made final, is the decisions on consequential issues relating to quantification, if there is no dispute as to who committed breach. That is, if the contractor admits that he is in breach, or if the Arbitrator finds that the contractor is in breach by being responsible for the delay, the decision of CS No. 265/17, New CS No. 613415/16 Page 6 of 23 the Superintending Engineer will be final in regard to two issues. The first is the percentage (whether it should be 1% or less) of the value of the work that is to be levied as liquidated damages per day. The second is the determination of the actual excess cost in getting the work completed through an alternative agency. The decision as to who is responsible for the delay in execution and who committed breach is not made subject to any decision of the respondents or its officers, nor excepted from arbitration under any provision of the contract.
19. In fact the question whether the other party committed breach cannot be decided by the party alleging breach. A contract cannot provide that one party will be the arbiter to decide whether he committed breach or the other party committed breach. That question can only be decided by only an adjudicatory forum, that is, a court or an Arbitral Tribunal."
7. We now come to the averments in the plaint. As per the plaintiff, the defendants are responsible for the delay in the project. The averments on this count in the plaint are as follows: I) Soon after award of the contract, plaintiff mobilized all its resources to start the work. Plaintiff authorized Vijay Babu as Administrative Officer and Dilawar Singh as Senior Engineer to take instructions and collect required drawings, layouts plans for smooth functioning of the work. Defendant no.1 was intimated about this vide letter dt. 27.01.1998. Plaintiff further authorized Sewa Ram (supervisor) to collect steel and cement from CPWD Departmental Store as per letter dt. 27.01.1998.
II) After mobilizing the resources, plaintiff noticed that there were several hindrances at the site. The site was full of filth and CS No. 265/17, New CS No. 613415/16 Page 7 of 23 rubbish. Water table was much higher than the ground level for which dewatering had to be done. Due to left out works of other agencies, there was too much slush/mud causing inconvenience to the labourers as also in storing the material. Defendants did not hand over all the working drawings. Plaintiff was supplied the first working drawing only in last week of February 1998 i.e. more than a month after the start of work.
III) Under the agreement it was the defendants who had to provide essential materials like cement, steel etc. Defendants, however, failed to give the materials on time due to which work had to be held up on several occasions. Plaintiff's work was also held up due to nonavailability of essential drawings. Defendants were informed regarding nonavailability/ short supplies of material vide letters dt. 17.02.1998 and 11.03.1998.
IV) Plaintiff intimated the defendants regarding supply of copy of agreement to its (plaintiff's) representative on 02.05.1998 i.e. three months after start of work. Although plaintiff started executing the work, shuttering had been laid and RCC slab work had been cast for two flats, yet this caused great inconvenience and confusion in the nomenclature of the agreement items resulting in delay. On 27.05.1998 plaintiff informed defendant no.1 the following: that till date drawings for window and doorframes had not been given and that planning/progress for the work could not be accelerated as slabs/steel reinforcement details were also not made available; that drawing no. 92003/OOM/A1 only had been issued wherein item no. 6.3 of glaze windows and item no. 6.4 of jali windows CS No. 265/17, New CS No. 613415/16 Page 8 of 23 did not tally with the supplied drawings; and that as per the agreement door shutters were to be placed within a month of the award of work to manufacturers, but the same could not done in the absence of details of door shutters.
V) On 28.05.1998 plaintiff brought to defendants' notice that it had executed work to the tune of Rs. 60,00,000/ and that slow progress of the work was completely due to nonavailability of stipulated materials, drawings/details etc. and due to shortage of funds with the department that caused considerable delay in procuring materials like cement and steel from the store division.
VI) On 29.05.1998 defendant no.1 served a notice upon the plaintiff under clauses 3(a), 3(b) and 3(c) of the agreement to show cause as to why action should not be taken against it. Plaintiff replied to this notice vide letter dt. 01.06.1998 and on considering the same, defendants took no action and the work continued.
VII) On 08.06.1998 and 01.08.1998 plaintiff informed the defendants that drawings details had not been received qua (a) slab details, (b) staircase structural drawings of type I & II, and (c) Opening for door/window clarification. Plaintiff further informed the defendants that nonavailability of cement from the stores was leading to slow progress and idling of labour, staff T & P machinery. Vide its intimation on 08.06.1998 plaintiff had informed the defendants that drawings and designs were not being made available as per the agreement. Vide its intimation on 01.08.1998 plaintiff also informed the defendants that its representative had been going to the Central Store to obtain the CS No. 265/17, New CS No. 613415/16 Page 9 of 23 steel with indent, issued by defendants, for 8 mm dia. steel that was urgently required for casting of RCC slabs. Defendants intimated that 8 mm steel was expected to be supplied by manufacturer by 03.08.1998 and due to this work was held up. It was only after three visits that only two tons of steel was made available resulting in slow progress of work.
VIII) Vide letter dt. 20.07.1998 plaintiff informed the defendants that in terms of the discussion held on 17.07.1998 shuttering of eight flats was complete and six flats already fix but the slab casting was held up as the electric contractor was unavailable for the electrical works and plaintiff was unable to further progress the casting of the slab work.
IX) Defendants continued committing fundamental breaches of contract regarding nonsupply of requisite materials and drawings on time as a result of which work was held up. On 26.08.1998 plaintiff again brought to defendants' notice that work was being held up for want of details qua steel windows for combination of jali and glazing window. In the absence of supply of materials by the defendants, work could not be expedited. Plaintiff had all men, material and resources required from its side for execution of the contract within the stipulated period and it was the defendants who were committing fundamental breaches of the contract. Contract was based on reciprocal promises and plaintiff was unable to execute the work on time due to absence of basic requirements of providing drawings and designs payments and materials to it.
CS No. 265/17, New CS No. 613415/16 Page 10 of 23X) Vide letters dt. 08.01.1999 and 25.01.1999 plaintiff intimated the defendants that as requisite funds for cements were unavailable in the Central Store, the same was not issued. It is averred that defendant admitted this vide letter dt. 13.01.1999. On 14.07.1999 defendants unilaterally extended the contract up to 31.12.1999. Vide letter dt. 06.06.2002 defendants again extended the time for completion of the work up to 31.07.2002.
XI) Plaintiff vide its letters dt. 25.01.1999, 24.12.2001 and 29.12.2001 requested for payment of R/A Bill for the substantial work that it had carried out. Plaintiff visited defendants' office on several occasions, but to no avail. The first R/A Bill was signed under duress withholding payment for over Rs. 15 lacs. This fact was brought to defendant's knowledge vide letter dt. 29.12.2001. Defendants neither recorded full measurement of work done before making the payment.
XII) Defendants fixed 04.03.2002 as the date for taking over 88 flats.
However, on 04.03.2002 none was present from defendants' side to take over the flats. Vide letter dt. 08.03.2002 plaintiff informed the defendants that a new date be fixed for taking over the flats. For this interregnum period plaintiff had to employ guards as the site was unsecure. The fact that the site was unsecure is evident from plaintiff's letter dt. 09.08.2000 reflecting that material lying at the site had been stolen and also from its letter dt. 23.04.1999 informing the defendants that on 17.01.1999 hospital security guard had fatally shot at two persons at the site.
CS No. 265/17, New CS No. 613415/16 Page 11 of 23XIII) Plaintiff vide its letter dt. 25.11.2002 informed the defendants that flats had been handed over and all the allottees were under occupation and that remaining 24 quarters that could not be allotted had also been handed over to the hospital authorities in May 2002 as per department's direction after getting it thoroughly checked in the presence of defendant's staff and Hospital authorities. Plaintiff also informed vide its letter dt. 16.01.2003 that if any defect occurs, it was ready to be moved during maintenance period. Defendant on 25.07.2002 recorded completion of the works, although the work was completed in March 2002.
8. Dispute having arisen, plaintiff vide letters dt. 09.12.2002 and 07.01.2003 requested the defendants to pay the dues amounting 20 lacs rupees that were withheld. Plaintiff received a notice dt. 23.12.2002 to show cause as to why full compensation should not be levied in terms of clause 2 of the agreement. Plaintiff sent its reply dt. 07.01.2003 informing, the defendants the following: that the notice was illegal, that there had been fundamental breaches in making available the design, drawings and materials on defendants' part, that time did not remain essence of contract, that defendants' letter reflected that plaintiff had completed the work in all respects and allotment of quarters was done long back in March 2002 and occupied by the hospital staff though work completion was recorded as 25.07.2002. Instead of making the payments, defendants vide letter dt. 06.03.2003 directed that the due amount would be withheld and would be taken as difference in cost of getting the balance work executed at plaintiff's risk and costs. Defendants, without considering this reply to the show cause notice and without giving any personal CS No. 265/17, New CS No. 613415/16 Page 12 of 23 hearing to the plaintiff, vide letter dt. 21.04.2003 levied compensation to the tune of Rs. 6,77,660/ @ Rs. 700 per day for the period from 01.12.1999 to 25.07.1999 under clause 2 of the agreement. Plaintiff responded to this vide its reply dt. 05.05.2003.
9. Plaintiff then vide letter dt. 20.06.2003 requested the defendants for appointment of Arbitrator. Defendants appointed Mr. A.K. Singhal (from Ministry of Urban Development and Poverty Alleviation) as the sole Arbitrator to decide and make award qua the dispute. Defendants illegally and arbitrarily deducted Rs. 6,77,600/ from payment to be made to the plaintiff. Plaintiff avers that it was not granted any personal hearing before levy of compensation.
Plaintiff also states that in Vishwanath Sood (supra) it has been held that in practice the amount of compensation would initially be levied by EngineerinChief and the Superintending Engineer comes into the picture only as some sort of revisional or appellate authority to whom the contractor appeals for redress and that Superintending Engineer's decision is to be in the nature of a considered decision which he has to arrive at after considering the various mitigating circumstances that may be pleaded by the contractor or his plea that he is not liable to pay compensation at all under this clause. Plaintiff avers that Superintending Engineer took no such considered decision and its reply to the show cause notice was not considered. On these averments, following reliefs are sought for in the plaint: (a) Declaratory decree that penalty levied under clause 2 is illegal and arbitrary; (b) Permanent injunction decree to restrain defendants from realising Rs. 6,77,600/ from plaintiff; (c) Decree for an amount of Rs. 6,77,600/; (d) Interest @ 24% per annum on Rs. 6,77,600/ with effect from 05.09.2003 till realization, and (e) Costs of the suit.
CS No. 265/17, New CS No. 613415/16 Page 13 of 2310. Defendants in their written statement, filed on 22.04.2009, state as follows: I) Plaintiff had already taken full and final payment on 08.01.2003; that section 11, CPC bars the present suit as Arbitrator has already adjudicated upon the dispute between the parties and plaintiff has already been paid the arbitral award amount of Rs. 6,87,090/; that arbitral award dt. 08.05.2006 is absolute; that on 19.07.2006 plaintiff gave an undertaking of full and final payment qua the dispute; that at the time of accepting the arbitral award plaintiff had given an undertaking before Executive Engineer that he would not raise any protest and that he had received payment from defendants against a receipt/cheque; that plaintiff is merely claiming more amount from defendants with a view to extort money which goes beyond the work, against the agreement and the arbitral ward; that suit is not maintainable for noncompliance of section 80, CPC; that plaintiff ought to have taken recourse to section 34, Arbitration and Conciliation Act, 1996 for setting aside the award.
II) Defendants deny that delay in the project is attributable to them. They submit that right from the very inception plaintiff did not carefully start the work; that clause 39 of the agreement specifically required the contractor to inspect the site to apprise itself about the conditions and accessibility to the site, nature of ground, working conditions including stacking of material and installation of T&P etc; that drawings were issued to the plaintiff on 28.01.1998 and which it (plaintiff) had received on CS No. 265/17, New CS No. 613415/16 Page 14 of 23 02.02.1998; that plaintiff failed to complete the essential pre requirement for execution of work such as construction of cement godown, water arrangement, required T&P like mixture vibrator etc. and building material etc.; that plaintiff itself delayed commencement of work and intentionally issued a letter dt. 07.02.1998 and in this regard defendants issued a letter dt. 28.02.1998 bearing no. 54 (515) PWD28/64; that plaintiff was supplied the drawings within time but it failed to start, maintain and continue the work as per the agreement despite availability of material like steel and cement with the defendants (except on 23 occasions for which only 15 days delay could be attributable) and despite repeated letters; that plaintiff has already taken benefit for delay of work on defendants' part; that defendants sent a letter to plaintiff to extend the time from 31.05.1999 to 31.12.1999 for completion of work and for slab casting; that plaintiff failed to carry out work within stipulated time; that defendants gave several notices to plaintiff and also extended time to complete the work and for this reason the payment could not be done; that defendants cannot be faulted for the delay as it was the plaintiff that failed to complete the work; that flats were not in complete shape; that defendants issued letters dt. 30.03.2002, 22.04.2002, 29.04.2002, 06.05.2002, 23.05.2002 and 04.06.2002 to the plaintiff; that during construction it was plaintiff's duty to secure the material in terms of the agreement; that plaintiff failed to rectify the defects vide letter dt. 22.12.2002; that plaintiff intentionally sent the letter to defendants to rectify the defects after receiving defendants' letters; that plaintiff cannot claim any money in CS No. 265/17, New CS No. 613415/16 Page 15 of 23 terms of the arbitral award; that decision of the competent authority is final and binding. Denying other averments, defendants seek dismissal of the suit.
11. In its replication plaintiff reiterated its averments as set out in the plaint and refuted those of the defendants as set out in the written statement.
12. Issues framed on 29.07.2009 are:
1. Whether suit is not maintainable under section 11 of CPC? OPD
2. Whether the suit is not maintainable in view of arbitration award having been accepted by the plaintiff? OPD
3. Whether the plaintiff is entitled to a decree of declaration that penalty levied under clause 2 is illegal and arbitrary? OPP
4. Whether the plaintiff is entitled to a decree of permanent injunction as prayed? OPP
5. Whether the plaintiff is entitled to a decree for Rs. 6,77,600/ as claimed? OPP
6. Whether the plaintiff is entitled to any interest on the amount claimed, if so, at what rate and for what period? OPP
7. Relief.
13. Mr. Rishi Raj (PW1) was the sole witness for the plaintiff. On defendants' behalf, Jagdish Prasad, Executive Engineer (PWD) entered the witness box as DW1.
14. Arguments heard. Record perused.
15. Issuewise findings are as follows.
CS No. 265/17, New CS No. 613415/16 Page 16 of 2316. Issue no. 1: The issue is whether suit is not maintainable under section 11, CPC, onus to prove being on the defendants. It is quite evident that the Arbitrator did not give any finding on the aspect of levy of compensation upon the plaintiff under clause - 2 of the agreement. The extract of the Order of Ld. Arbitrator (reproduced in paragraph no. 4 hereinabove) would show that levy of compensation under clause - 2 was held to be an 'excepted matter' upon which the decision of Superintending Engineer was held to be final and binding and beyond arbitration. Ld. Arbitrator had therefore directed the parties to approach the judicial forum for its adjudication. It is therefore crystal clear that the aspect of levy of compensation was not 'directly and substantially in issue' before Ld. Arbitrator. It is also crystal clear that the aspect of levy of compensation under clause - 2 of the agreement was not 'heard and finally decided' before Ld. Arbitrator. It is therefore manifest that there is absolutely no question of application of section 11, CPC to the case at hand. This issue is accordingly answered in plaintiff's favour and against the defendants.
17. Issue no. 2: - The issue is whether the suit is not maintainable in view of arbitration award having been accepted by the plaintiff, onus to prove being on the defendants. It is no doubt correct that the plaintiff had accepted the arbitral award. But the fact of the matter is that the arbitral award contained no finding on the aspect of levy of compensation under clause - 2 of the agreement. Therefore, the fact that plaintiff accepted the arbitral award does not in any manner prevent it from raising the claim qua the compensation clause. Defendants are acting in sweet ignorance of the fact that Ld. Arbitrator did not given any finding on the aspect of levy of compensation holding that the same was beyond the purview of CS No. 265/17, New CS No. 613415/16 Page 17 of 23 arbitration and directed the parties to approach the judicial forum. Further, the fact that plaintiff accepted the arbitral award and/or the payments from defendants in terms of the arbitral award does not in any manner estop it (plaintiff) under section 115, Evidence Act from raising the claim visàvis the levy of compensation under clause - 2. The requisite ingredients of section 115, Evidence Act are not satisfied. This issue is thus decided in plaintiffs favour and against the defendants.
18. Issues no. 3, 4, 5 and 6: - These issues are interlinked. They are being taken up together. Plaintiff's claims arising out of these four issues emanate from a written contract. In the plaint, plaintiff describes itself as a registered partnership firm. Given this, section 69 (2), Indian Partnership Act, 1932 would come into application. This provision requires that no suit to enforce a right arising out of a contract shall be instituted by or on behalf of a firm against any third party unless the firm is registered and the persons suing are or have been shown in the Register of Firms as partners in the firm.
19. Plaintiff in order to show its registration relies on a document that is in the nature of certified copy Ex. PW1/139 ('Form B') obtained from Registrar of Firms. This document ('Form B') shows that plaintiff firm was given registration number of 2619 and it was so registered on dt. 03.12.1975. Therefore, the fact that plaintiff firm had been so registered with Registrar of Firms way back in 1975 is not in doubt. However, the fact of the matter is that this document Ex. PW1/139 ('Form B') does not show as to who were the partners of the firm.
20. At this stage, certain extract from crossexamination of PW1 Rishiraj can be referred to and which is as follows:
CS No. 265/17, New CS No. 613415/16 Page 18 of 23"Apart from document Ex. PW1/139, I have no other document to show registration of my firm. I had furnished the other documents pertaining to partnership of my firm before this Court earlier. I was not a partner in the firm Diwan Chand Builders. I am not a partner in the firm Diwan Chand Builders. Volt. I am in fact working on behalf of my late father who was a partner in Diwan Chand Builders. My father passed away in year 2002 and the transaction in question pertains to 19992000. Volt. It was me who had performed the contract on behalf of the plaintiff firm and I had collected the amount awarded by the arbitration.
Q. Is it correct that at the time of filing of the suit you got Power of Attorney from only your father and from no other partner of the firm?
A. Because no other partner was alive.
When I filed the suit in 2006 no partner of the firm Diwan Chand Builders was alive. It is also correct that no other person was added in the firm on death of the partners of Diwan Chand Builders. Volt. In CPWD after a firm is registered CPWD or PWD does not permit addition of any new partner; however deletion of a partner is permissible because as per them addition amounts to a new firm.
Apart from the Power of Attorney filed by me on record, I have no other attorney document from Diwan Chand Builders or my father or the partners thereof in respect of the present case. It is wrong to suggest that I am deposing falsely."
21. Mr. Rishi Raj (PW1) deposes that he is the attorney of his father who was a partner of the plaintiff firm. It is Mr. Rishi Raj, who signed and verified the plaint and filed the same. There can be nothing in wrong in Mr. Rishi Raj signing, verifying and filing the plaint, provided his father is proved to have been a partner of the firm. There are many judicial rulings to hold that partner of a registered firm can authorise someone else to file a suit on firm's behalf. But such a partner must be shown in the Register of Firms to be a partner of the CS No. 265/17, New CS No. 613415/16 Page 19 of 23 firm. Decisions reported as Ms. Sapna Ganglani vs. M/s R. S. Enterprises & Anr., AIR 2008 Karnataka 178 and Girdhari Lal vs. Spedding Dinga Singh and Co., AIR 1954 HP 52 can fruitfully be referred to. Apex Court decision in Purushottam & Company vs. Mani Lal & Sons, AIR 1961 SC 325 can also be referred to in this regard. According to oral evidence of Mr. Rishi Raj (PW1), his father was a partner of the plaintiff firm. However, except for this self serving ipse dixit of PW1 Mr. Rishi Raj, there is nothing in writing to suggest that his father was a partner of plaintiff firm. The best evidence to the effect that father of Mr. Rishi Raj (PW1) was actually a partner of plaintiff firm was the certified copy of the requisite document/Form showing his name as a partner obtainable from Registrar of Firms. Such certified copy showing father of PW1 Rishi Raj to be the partner of the plaintiff firm is not placed on record. This Court would not go by mere oral evidence of PW1 Rishi Raj as proof of the fact that his father was a partner of plaintiff firm. It bears repetition to state that one of the essential requirements of section 69 (2), Indian Partnership Act, 1932 is that 'persons suing are or have been shown in the Register of Firms as partners in the firm.' Inasmuch as PW1 Mr. Rishi Raj claims to have been authorised by his father to institute the instant suit, it was incumbent on him to show that his father 'is shown in the Register of Firms as partner in the firm'. And on this count the only and only evidence and the best evidence that can be acceptable is the documentary evidence from the office of Registrar of Firms. Section 114, Evidence Act mandates that a Court may presume that an evidence which could have been produced but is not produced, would, if produced have been unfavourable to the person who withholds it. Therefore, this Court holds that it is not proved on CS No. 265/17, New CS No. 613415/16 Page 20 of 23 record that father of Mr. Rishi Raj (PW1) was shown as a partner of plaintiff firm in the Register of Firms. Consequently, authorisation issued in favour of Mr. Rishi Raj (PW1) by his father to sign and verify the plaint and institute the suit on behalf of plaintiff firm can be of no avail. Therefore, it is held that the present suit is not on proper basis.
22. There is one more reason to hold that the instant suit is not on proper basis. The aforesaid extract of oral evidence of PW1 Rishi Raj would show that the plaintiff firm had no partners when the present suit was filed in 2006 as all its partners had passed away. This in effect means that when the suit was filed, plaintiff was a dissolved firm as it had no partners. There are judicial decisions to hold that even a dissolved firm can institute a suit. Decision reported as Messers American Furnishing House, New Delhi vs. Udal Ram Bhurji, AIR 1968 Del 163 : 1967 SCC OnLine Del 60 can be referred to in this regard wherein the following observations occur : "5. Apart from the fact that Order 30, Rule 2(3) provides a complete answer to the objection taken by the defendant in the case, there are authorities to show that there is nothing in law prohibiting the dissolved firm from filing a suit in the name of the firm, provided they were partners at the time of accrual of the cause of action and the firm was in existence then. Reliance on the decision in AIR 1948 Oudh 284 does not appear to be warranted by the facts of that case. That decision itself did not have any occasion to deal with the point that is actually raised before me. The following quotation from that judgment itself will make this clear: "The second preliminary issue was raised by the plaintiff who claimed that he sued as a dissolved partnership. But he had already admitted that at the time of filing the suit the firm was still in existence."
23. Under the law, a dissolved firm can very well sue provided at the time of accrual of cause of action it (the firm) was in existence. There is no evidence to show as to how many partners did plaintiff CS No. 265/17, New CS No. 613415/16 Page 21 of 23 firm have. There is neither any evidence to show as to when did the individual partners pass away, except qua father of PW1 Mr. Rishi Raj, who is stated to have passed away in 2002. There is also no evidence to show that plaintiff was in existence, as a partnership firm, at the time of accrual of cause of action. All the partners of the plaintiff firm could certainly not have passed away at the same time and to say so would be a remote possibility. Under the law (section 42, Indian Partnership Act, 1932), subject to contract between the partners, a firm is dissolved the moment a partner dies. In the absence of any evidence one can only make guess works. If it was a partnership of only two individuals, the firm would have automatically dissolved the moment a partner died {CIT vs. Seth Govind Ram Sugar Mills, AIR 1966 SC 24} and any clause in the contract amongst partners to the effect that the firm would continue notwithstanding the death of a partner would be of no avail. In CIT vs. Seth Govind Ram (supra) Apex Court observed, "It may be that pursuant to the wishes or the directions of the deceased partner the surviving partner may enter into a new partnership with the heir of the deceased partner, but that would constitute a new partnership." Therefore, if plaintiff was a firm of two individuals, it was necessary to show that both the partners were alive on the date of accrual of cause of action and the firm was in existence on that date. Conversely, if plaintiff was a firm of more than two individuals it was necessary to show firstly, that contract amongst partners provided that firm would not stand dissolved and would continue to transact business notwithstanding death of a partner, and secondly that at least two partners were alive as on the date of accrual of action. Accepting that father of PW1 Mr. Rishi Raj passed away in 2002, there is no evidence CS No. 265/17, New CS No. 613415/16 Page 22 of 23 to show that he had been continuing business of the firm with other partner(s) at the time of accrual of cause of action. If father of PW1 Mr. Rishi Raj was the sole surviving partner on the date of accrual of cause of action with all other partners dead, there was no partnership firm in existence then. Conversely, even if there was any other surviving partner (with other partners dead) along with father of PW1 Mr. Rishi Raj in the firm, the question is whether the firm could be said to be in existence at the time of accrual of cause of action. It all depended on the contract between the partners. Plaintiff did not place on record its partnership deed to show as to what was the contract between the partners in the event of death of a partner. In the absence of requisite evidence on this score, this court will not hold in favour of the plaintiff.
24. These four issues are therefore decided against the plaintiff and in favour of defendants.
25. Relief - This suit stands dismissed. No order as to costs. Decree sheet be drawn up. File be consigned to record room.
Digitally signed by MURARIMURARI PRASAD SINGH PRASAD Date:
SINGH 2018.10.16
ANNOUNCED IN THE OPEN 16:50:05
+0530
COURT ON 16.10.2018
(M. P. SINGH)
ADJ03 (CENTRAL)
TIS HAZARI COURTS:
DELHI
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