Delhi High Court
Kashyapi Infrastructure Pvt Ltd vs National Buildings Construction ... on 1 November, 2019
Author: Rajiv Sahai Endlaw
Bench: Rajiv Sahai Endlaw
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 1st November, 2019.
+ CS(COMM) 1280/2016
KASHYAPI INFRASTRUCTURE PVT LTD ..... Plaintiff
Through: Mr. Sanjeev Agarwal & Mr. Ekansh
Agarwal, Advocates.
Versus
NATIONAL BUILDINGS CONSTRUCTION CORPORATION
LIMITED & ANR ..... Defendants
Through: Mr. Aditya Parolia & Mr. Akshay
Srivastava, Advocates for D-1 with Mr.
Anurag Singhal (Engineer Incharge).
CORAM:
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
1. On 16th September, 2019, the following order was passed :-
"1. The plaintiff has instituted this suit for recovery of a
principal amount of Rs.3,43,43,650/- and interest till the date
of institution of suit of Rs.76,74,251/- from the defendant no.1
National Building Construction Corporation (NBCC) along
with pendent lite and future interest. The Commissioner of
Income Tax has been impleaded as defendant No.2 though no
relief has been claimed against it.
2. The suit was entertained and the defendant no.1 NBCC
filed its written statement and to which replication was filed by
the plaintiff.
3. The defendant no.2 Commissioner of Income Tax against
which, in any case, no relief was claimed, did not appear and
vide order dated 21st July, 2017 was proceeded against ex
parte.
CS(COMM) 1280/2016 Page 1 of 22
4. On the pleadings of the plaintiff and the defendant no.1,
on 21st July, 2017 the following issues were framed:-
"i. Whether in terms of the Memorandum of
Understanding between the defendant No.1 and
defendant No.2, defendant No.1 is merely an executing
agency and not liable to pay to the plaintiff? OPD(1)
ii. Whether the plaintiff is entitled to a decree for a
sum of ₹4,20,17,901/- against the defendant No.1
along with the interest as per contract dated 3 rd
September, 2011? OPP.
iii. Whether amounts payable to the plaintiff for the
works under the contract can be recovered from
defendant No.2 directly by the plaintiff? OPD(1)
iv. Relief."
and the parties relegated to evidence.
5. The plaintiff examined two witnesses and the defendant
no.1 examined only one witness and the evidence closed.
6. The suit, ripe for final hearing came up before this Court
on 18th December, 2018 and on which date as well as on
subsequent dates adjournments were sought on behalf of the
counsel for the defendant no.1. Ultimately, the order dated 1st
August, 2019 reprimanding the defendant no.1 was passed,
which has resulted in the counsel for the defendant no.1 today
appearing before this court.
7. The counsel for the defendant no.1, at the outset, states
(i) that the defendant no.1, on behalf of defendant no.2, had
engaged the plaintiff as a contractor for certain civil works of
construction to be carried out for the defendant no.2 and the
plaintiff has instituted this suit for recovery of the balance
amount due with respect thereto; (ii) that the counsel for the
defendant no.1 now on studying the matter has realized that
the defendant no.1 was to make payments to the plaintiff only
on receipt of payment from the defendant no.2; attention in
this respect is invited to Clause 37.3 forming part of Clause 37
of the General Conditions of Contract between the plaintiff
and the defendant no.1 and which Clause 37 is as under:-
CS(COMM) 1280/2016 Page 2 of 22
"37.0 PAYMENTS
37.1 The bill shall be submitted by contractor each
month on or before the date fixed by the Engineer-in-
Charge for all works executed in previous months. The
contractor shall prepare computerized bills using the
program as approved by Engineer-in-Charge as per
prescribed format/pro-forma. The Contractor shall
submit five numbers of hard copies and one soft copy
of floppy/CD for all bills. Subject to clause 37.3 herein
below, the payment due to the contractor shall be made
within fifteen days of getting the measurements verified
from the Engineer-in-Charge or his
subordinate/representative and certification of bill by
the Engineer-in-Charge
37.2 All running payments shall be regarded as
payments by way of advance against the final payment
only and not as payments for work actually done and
completed and/or accepted by NBCC and shall not
preclude the recovery for bad, unsound and imperfect
or unskilled work to be removed and taken away and
reconstructed or re-erected or be considered as an
admission of the due performance of the Contract, or
any part thereof, in this respect, or the accruing of any
claim, nor shall it conclude, determine or affect in any
way the powers of the NBCC under these conditions or
any of them as to the final settlement and adjustments
of the accounts or otherwise, or in any other way
vary/affect the contract. The final bill shall be
submitted by the contractor within three months of the
completion of work, otherwise NBCC‟s certificate of
the measurement and of the total amount payable for
the work accordingly shall be final and binding on
contractor. Each Running Bills should be
accompanied by two sets of at-least 20 (twenty)
photographs as per direction of Engineer-in-charge
taken from various points depicting status of work as
on Report/Bill date along with Monthly Progress
Report for the concerned month in the pro-forma to be
CS(COMM) 1280/2016 Page 3 of 22
given/approved by Engineer-in-Charge. Intermittent
progress Photographs as and when required shall also
be provided by the Contractor at his own cost as per
direction of Engineer-in-Charge. No payment of
running account bill shall be released unless it is
accompanied by progress photographs and Monthly
Progress Report as above.
37.3 It is clearly agreed and understood by the
Contractor that notwithstanding anything to the
contrary that may be stated in the agreement between
NBCC and the contractor, the contractor shall become
entitled to payment only after NBCC has received the
corresponding payment(s) from the client/Owner for
the work done by the contractor. Any delay in the
release of payment by the client/Owner to NBCC
leading to a delay in the release the corresponding
payment by NBCC to the contractor shall not entitle
the contractor to any compensation/interest from
NBCC.
37.4. All payments shall be released by way of e-
transfer through RTGS in India directly at their Bank
account by the Corporation."
(emphasis added);
and, (iii) that the defendant no.1 has not received the
payments claimed by the plaintiff from the defendant no.2 and
the suit be adjourned by four weeks to enable the defendant
no.1 to take up the matter with the defendant no.2.
8. I have enquired from the counsel for the defendant no.1,
whether the defendant no.1 admits the principal amount of
Rs.3,43,43,650/- claimed by the plaintiff in the suit to be due to
the plaintiff.
9. The counsel for the defendant no.1 states that the
defendant no.1 has admitted the sum to be due, in the written
statement itself and today Engineer-in-Charge of the subject
project, Mr. Anurag Singhal is present in the court and he also
instructs that the said principal amount is due to the plaintiff.
CS(COMM) 1280/2016 Page 4 of 22
10. I have enquired from the counsel for the defendant no.1,
whether Clause 37.3 supra has been the subject matter of any
adjudication. As far as the arbitration proceedings are
concerned, it appears that as per dicta in Jaiprakash
Associates Ltd. (JAL) Vs. Tehri Hydro Development
Corporation India Ltd. (THDC) 2019 SCC OnLine SC 143,
the Arbitrator cannot allow the claim against the defendant
no.1 owing to such an agreement.
11. The counsel for the defendant no. 1 as well as the counsel
for the plaintiff state that they have not checked the said
aspect.
12. The counsel for the defendant no.1 has further contended
that the defendant no.1 was merely an agent of the defendant
no.2 and the plaintiff can seek recovery of the amounts due
only from the defendant no.2, and which has not been done,
and not from the defendant no.1. Attention in this regard is
invited to the Agreement dated 30th March, 2011 between the
defendant no.2 and the defendant no.1 in which the defendant
no.2 is described as the „Owner‟ and the defendant no.1 as the
„Executing Agency‟ and particular attention is invited to
Clauses 2 to 4.19 of the said Agreement as under:-
"2.0 SCOPE OF WORK
Inviting of tenders, award of work for "Construction of
Office Building for Income Tax Office on plot A- 2 /D
SECTOR - 24 at Noida (U.P.) including Preliminary
Survey, Soil Investigation, Architectural drawing and
design, Supervision and monitoring of works, estimation
and Bill of Quantities for civil, internal electrical, sanitary
and plumbing works including the external services and
area development (as per annexure attached).
3.0 GENERAL
3.1 "EXECUTING AGENCY" shall undertake the work
as "DEPOSIT WORK". The rules, regulations and
procedures applicable to the Deposit Works of CPWD will
be applicable to their works. However, 20% of the total
project cost is required to be deposited initially by the
"OWNER" and shall be recouped every month by the
CS(COMM) 1280/2016 Page 5 of 22
"OWNER" on submission of monthly requirement by the
"EXECUTING AGENCY" along with expenditure
statement incurred in the previous month. Any money paid
in advance shall be secured by an Indemnity Bond to be
furnished by the "EXECUTING AGENCY" in favour of the
"OWNER".
3.2 The "OWNER" will also pay to NBCC 7% (Seven
percent) of the actual cost of the project by way of its
Agency Charges. the service tax as applicable shall be
charged to Project cost.
3.3 The project is a fixed cost project & no cost
escalation shall be permitted.
RESPONSIBILITIES OF THE "EXECUTING AGENCY"
4.0 The responsibilities of the "EXECUTING
AGENCY" shall include preliminary survey, soil
investigation (chargeable to the "OWNER") and supplying
all drawings, and designs, estimates and bill of quantities,
details of phasing of building and rendering advice.
4.1 The "EXECUTING AGENCY" shall forthwith take
possession of the site from the "OWNER" and shall
nominate one responsible Engineer for execution of the
project.
4.2 The "EXECUTING AGENCY" shall execute the
works at the estimated cost of Rs.24,20,00,000.00 (Rupees
Twenty Four Crores twenty lakhs only) which is based on
the CPWD plinth area rates of 01.10.2007 enhanced with
cost index of 136 as on 01.04.2010 approved norms and as
per requirement furnished by the "OWNER" for the
project. This estimate shall also include agency charges
payable to the "EXECUTING AGENCY". This estimate
also includes 3% contingency charges.
4.3 Tender shall be invited by the "EXECUTING
AGENCY" after due publicity or through its registered
contractors, who have been registered based on wide
publicity and contractor shall be appointed by the
"EXECUTING AGENCY" in consultation with the
approval of the "OWNER".
CS(COMM) 1280/2016 Page 6 of 22
4.4 The "EXECUTING AGENCY" shall give
periodically (but not later than once a month) copies of the
expenditure certified by its representative on the project,
for reimbursement of expenditure incurred from the funds
advanced to the "EXECUTING AGENCY". On completion
of work, the accounts of the work shall be closed and a
final statement shall be submitted for settlement, alongwith
refund of excess deposit received, if any, audited by a
Registered Chartered Accountant. The "OWNER",
reserves the right to get the work and payments made
technically checked and audited periodically (at
reasonable intervals) as well as final payment by its own
officer/independent government/private agency mutually
acceptable.
4.5 The payments by the "OWNER" shall be made by
transfer of funds in a Bank Account to be opened in any
one of the Nationalized Banks.
4.6 All designs, drawings, bills of quantities, etc. for the
work shall be supplied by the "EXECUTING AGENCY"
for all buildings, services and development works.
4.7 The "EXECUTING AGENCY" shall be fully
responsible for the structural safety of the building against
seismic forces and follow all the relevant BIS Code in this
respect. Innovative methods of design of high rise
structures shall have to be followed in deciding the
structural frames of the building. Wind actions shall also
be considered, if found necessary to conform to the
requirements of B.I.S. Code.
4.8 The services of a proof consultant shall be utilized,
if required, by the "OWNER" for counter checking of the
design/drawings submitted by the "EXECUTING
AGENCY". The services of the proof consultant shall be
arranged by the "OWNER" at their own cost.
4.9 The "EXECUTING AGENCY" will make its best
endeavour to reduce the cost of construction by any change
of specification, method of construction, value engineering
of any innovative or economical design. Such reduction in
the cost of construction shall be made with the approval of
the "OWNER" without affecting/prejudicing or
CS(COMM) 1280/2016 Page 7 of 22
endangering in any way the safety or security of the
building constructed by the "EXECUTING AGENCY".
4.10 The "EXECUTING AGENCY" shall be fully
responsible for the quality and structure safety of the
construction. The "EXECUTING AGENCY" shall make its
contractor responsible for rectification of any defect within
the warranty period, which shall be for period of 12
months from the date of handing over of any building,
service or part of the project. Security Deposit of the
contractor shall be refunded only after expiry of such
warranty period and rectification of defects.
4.11 The "EXECUTING AGENCY" shall be also
responsible for proper structure, workmanship and liability
for defects of the building constructed by it for a period of
twelve months from the date of handing over.
4.12 Any defects discovered and brought to the notice of
the "EXECUTING AGENCY" during the period aforesaid
shall be rectified by the "EXECUTING AGENCY"
forthwith at its own costs and expenses. In the event of the
failure on the part of the "EXECUTING AGENCY" to
rectify the defects within a reasonable period, the same
may without prejudice to any other rights available to it in
law, be rectified by the "OWNER" for and on behalf of the
"EXECUTING AGENCY" and at the cost and expenses of
the "EXECUTING AGENCY", after due notice to it.
4.13 The "OWNER" shall have the right to deduct or set
off the expenses incurred by it in rectifying the defects as
aforesaid from or against any amount due and payable or
becoming due and payable by the "OWNER" to the
"EXECUTING AGENCY" under this Agreement.
4.14 The "EXECUTING AGENCY" shall unless
otherwise specified, be fully responsible for procurement of
all materials and services for the construction as
contemplated by this Agreement.
4.15 The "EXECUTING AGENCY" shall follow the
Standard latest CPWD specifications and the latest BIS
Specifications and Codes of Practices as corrected upto
date of signing of this Agreement. The "EXECUTING
AGENCY" shall follow the GRIHA rating system as per the
CS(COMM) 1280/2016 Page 8 of 22
DPE Circular No.DPE/13(2)/10-Fin. Dated 11.03.10 and
ensure that the building meets the requirement of at least 3
- star rating.
4.16 The "EXECUTING AGENCY" shall follow its
documents/Manual for inviting tenders.
4.17 The "EXECUTING AGENCY" shall give in writing
the budget of the funds required in proportion to the work
to be done during the next year as required by the
"OWNER" from time to time. Funds requirement for next
year before close of each year shall be furnished during
third quarter of each financial year.
4.18 The "EXECUTING AGENCY" may supply, in a
phased manner to the contractor(s) site plan, soil
investigation report, layout plan, all building plans
(architectural as well as structural) all services plans and
any other designs and detailed drawings required for the
execution of the project, as well as the specifications for all
items of work, detailed description of item of work, bills of
quantities along with copies of details of measurement.
Four copies of the drawings/revised drawings, if any, shall
be supplied and one copy of the other details and
documents shall be supplied to the "OWNER".
4.19 The "EXECUTING AGENCY" shall provide
necessary assistance to the "OWNER" in arranging water,
sewerage and electricity connections from the concerned
authority for which it will obtain estimates from the
concerned authorities. These amounts as per estimates will
be deposited by the "OWNER" directly with the concerned
authorities. "
13. Per contra the counsel for the plaintiff has argued, (i)
that the defendant no.1 has not paid the costs imposed on 4 th
April, 2019; (ii) that a reading of the entire Clause 37 of the
General Conditions of Contract would show that the defendant
no.1 was not responsible, only for the period of delay, but not
for non-payment as is the case in the present facts; and, (iii)
that vide Clause 83 as under:-
CS(COMM) 1280/2016 Page 9 of 22
"83.0 CONTRACT COORDINATION PROCEDURES,
COORDINATION MEETINGS AND PROGRESS
REPORTING
The Contractor shall prepare and finalize in consultation
with NBCC, a detailed contract coordination procedure
within 15 days from the date of issue of Letter of Intent for
the purpose of execution of the Contract.
The Contractor shall have to attend all the meetings at any
place in India at his own cost with NBCC, Owners/Clients
or Consultants of NBCC/Owner/Client during the currency
of the Contract, as and when required and fully cooperate
with such persona and agencies involved during these
discussions. The Contractor shall not deal in any way
directly with the Clients/Owners or Consultants of
NBCC/Owner/Clients and any dealing/correspondence if
required at any time with Clients/Owners/Consultants shall
by through NBCC only.
During the execution of the work, Contractor shall submit
at his own cost a detailed Monthly progress report to the
Engineer-in-charge of NBCC by 5th of every month. The
format of monthly progress report shall be as approved by
Engineer-in-Charge of NBCC."
of the General Conditions of Contract between the plaintiff
and the defendant no.1, the plaintiff could not have sued or
claimed the money directly from the defendant no.2.
14. The counsel for the plaintiff has also drawn attention to
the letter dated 16th December, 2014 Ex.DW1/C produced by
the defendant no.1, written by the defendant no.1 to the
defendant no.2 and in which the defendant no.1, out of the
total payment due of Rs.2420.0 lakhs, has admitted to receipt
of Rs.2385.68 lakhs from the defendant no.2, leaving a
balance of Rs.308.74 lakhs.
15. On enquiry, it is stated that the total amount due from the
defendant no.1 to the plaintiff is of Rs.2499.88 lakhs and out of
which, a sum of Rs.2100 lakhs only has been received. It is
contended that even the entire amount admittedly received by
the defendant no.1 from the defendant no.2 has not been
released to the plaintiff and should have been released.
CS(COMM) 1280/2016 Page 10 of 22
16. However, neither counsel has computation as to how
much would be the charges of the defendant no.1 under its
Agreement with the defendant no.2, on the total amount
received by the defendant no.1 from the defendant no. 2.
17. I have also enquired from Mr. Anurag Singhal Engineer-
in-Charge present in the court, how could the total amount
claimed by the defendant no.1 to be due of Rs.2420 lakhs, be
less than the total due to the plaintiff of Rs.2499.84 lakhs.
18. Mr. Anurag Singhal response is that Rs.2420 lakhs was
the original sanctioned project cost but subsequently it was
revised to Rs.2499 lakhs + Rs.849 lakhs, besides other
charges. Attention is invited to the letter dated 19th May,
2014/2nd June, 2014 Ex.DW1/D stating the completion cost to
be Rs.26,94,41,201/- inclusive of NBCC charges and admitting
receipt of Rs.23,85,68,000/-
19. The counsel for the plaintiff has also argued that even the
limitation for the defendant no. 1 to recover the balance
amount from defendant no. 2 has expired.
20. The aforesaid shows the state of affairs which results
from proper attention being not paid to the proceedings in the
suit at each and every stage thereof, with issues being framed
which do not reflect the controversy and evidence which was
not required being led, taking up time, which was not required
to be spent.
21. The counsel for the plaintiff, on enquiry whether the
plaintiff has proved that the entire amount claimed by the
plaintiff has been received by the defendant no.1 from the
defendant no.2, states that the plaintiff has not, save for the
letters aforesaid produced by the defendant no.1.
22. The only legal questions arising for adjudication are:
(i) Whether in view of Clause 37.3 in the General
Conditions of Contract between the plaintiff and the
defendant no.1, the plaintiff, without proving the
defendant no. 1 to have received the monies claimed from
the defendant no.2, is not entitled to make the claim or be
CS(COMM) 1280/2016 Page 11 of 22
entitled to a decree for recovery against the defendant no.
1?
(ii) Whether the aforesaid Clause 37.3 is void?
(iii) What is the effect, if any, of the plaintiff not seeking
recovery of monies from the defendant no.2 under
Sections 70 and/or under Section 226 read with Section
230 of the Contract Act since it is the defendant no.2 who
is stated to be the beneficiary of the works carried out by
the plaintiff?
(iv) Whether the entire monies received by the
defendant no.1 from the defendant no.2 are payable to the
plaintiff or the defendant no.1‟s liability under Clause
37.3 aforesaid is after adjusting its own charges due
under its Agreement with the defendant no.1?
(v) Whether in the circumstances aforesaid, the
plaintiff, even if held entitled to recover any monies from
the defendant no.1 under a decree of this Court, is
entitled to any interest from the defendant no.1?
(vi) Whether the bar contained in Clause 83 of the
General Conditions of Contract between the plaintiff and
defendant no.1 is also a bar to the plaintiff suing the
defendant no.1 for recovery of its dues?
23. Since the counsels admit that they have not applied
themselves to the aforesaid questions, it is deemed appropriate
to grant an opportunity to the counsels to properly address on
the aforesaid aspects including by reference to any precedent.
24. The counsel for the defendant no.1 states that the
defendant no.1, on 20th July, 2019 has paid a sum of
Rs.32,06,948/- and receipt whereof the counsel for the plaintiff
admits.
25. List on 1st October, 2019.
26. Mr. Anurag Singhal Engineer-in-Charge of the project to
remain present in the Court on the next date of hearing also."
CS(COMM) 1280/2016 Page 12 of 22
2. On 1st October, 2019, adjournment was sought by the counsel for the
defendant No.1 stating that Income Tax Department had to be approached
for the monies claimed by the plaintiff and the hearing adjourned to today.
3. The counsel for the plaintiff and the counsel for the defendant No.1
have been heard on the legal questions framed in the order dated
16th September, 2019 aforesaid.
4. The counsel for the plaintiff has drawn attention to the entire clause
37 of the General Conditions of Contract which has been reproduced in the
order dated 16th September, 2019 and has contended that Clause 37.3 thereof
when read along with Clauses 37.1 and 37.2, indicates that what is provided
in Clause 37.3 is only to take care of the delays in the defendant No.1
getting the monies from the defendant No.2 and does not apply to a case of
no monies having been received. It is contended that going by the said
Clause, the plaintiff cannot be held to be not entitled to any monies from the
defendant No.1 with whom the plaintiff had entered into the Contract. It is
argued that as far as the defendant No.2 is concerned, the plaintiff has no
privity of contract therewith and could not have approached the defendant
No.2 for payment. Attention is also drawn to the cross-examination by the
plaintiff of DW-1 Anurag Singhal, the Deputy General Manager (Engg.) of
the defendant No.1, recorded on 17th November, 2018, where he has inter
alia deposed as under :-
"No legal action was taken by defendant no.1 for recovery the
amounts due from defendant no.2 under the subject contract.
Defendant no.1 did not issue any legal notice to defendant
no.2 to make payment of the amounts due under the subject
contract. I am aware about the terms and conditions of the
contract between plaintiff and defendant no.1. There is no
CS(COMM) 1280/2016 Page 13 of 22
term or condition in the contract between plaintiff and
defendant no.1 authorising the plaintiff to directly seek
payment of amounts due under the contract from defendant
no.2. It is correct that the payments, if any, are made by
defendant no.1 to the plaintiff under the subject contract and
no payments are made by defendant no.2 directly to the
plaintiff. It is correct that the bills in respect of the subject
contract are raised by the plaintiff against defendant no.1 and
not against defendant no.2."
5. It is yet further contended that Clause 37.3, if read in the manner
contended by the counsel for the defendant No.1, is void for uncertainty
under Section 29 of the Contract Act, 1872. With respect to the query
contained in the order dated 16th September, 2019 qua Section 70 of the
Contract Act, it is contended that the plaintiff was not bound to claim the
monies due from the defendant No.2 owing to lack of privity with the
defendant No.2. It is further contended that Section 70 would not apply in
the facts, as in the present case the plaintiff has a contract with the defendant
No.1 and which contract itself in Clause 83 of the General Conditions of
Contract thereof provides that the plaintiff is not to contact the defendant
No.2. Reliance is placed on State of West Bengal Vs. B.K. Mondal and
Sons AIR 1962 SC 779 holding that in cases falling under Section 70, a
person doing something for another is unable to sue for specific
performance of the contract or ask for damages for breach of contract for the
simple reason of lack of privity of contract; a claim under Section 70 is not
on the basis of a contract and is on the basis of a person having done
something for another and which has been accepted by the other. It is argued
that here, since the plaintiff carried out the work, balance payments
therefore are due in terms of the Contract with the defendant No.1. It is yet
CS(COMM) 1280/2016 Page 14 of 22
further argued that the onus to prove that the defendant No.1 has not
received the amounts admitted by the defendant No.1 to be due to the
plaintiff, was on the defendant No.1 and the defendant No.1 has not
discharged the said onus. It is contended that the defendant No.1 has still
not taken any action against defendant No.2 and according to the plaintiff,
the said claim by defendant No.1 against defendant No.2 would now be
barred by time. It is also contended that the defendant No.1 and the
signatory of the written statement filed on its behalf are also guilty of false
verification of pleadings inasmuch as the defendant No.1 in para 11 of reply
on merits in its written statement denied the amounts claimed by the plaintiff
though the said amounts have been admitted to be due.
6. The counsel for the defendant No.1 has drawn attention to the
Agreement dated 3rd September, 2011 at page 147 of Part IIIA file, to
contend that defendant No.1 had entered into the Agreement with the
plaintiff as the agent of the disclosed principal defendant No.2. Reliance in
this regard is placed on Rites Ltd. Vs. Shabir Ahmed & Sons and Others
2010 SCC OnLine Del 463, being an objection petition under Section 34 of
the Arbitration & Conciliation Act, 1996 to an arbitral award and in which
judgment, the arbitral award against the petitioner Rites Ltd. was modified
for the reason of the tenders having been received by the petitioner Rites
Ltd. "for and on behalf of Governor of Uttar Pradesh" and holding that the
petitioner Rites Ltd. was acting merely as an agent of a disclosed principal,
namely, State of Uttar Pradesh.
7. Attention in this regard is also drawn to judgment dated 21 st March,
2012 of this Court in OMP No.84/2006 titled Rites Limited Vs. Vidhyawati
CS(COMM) 1280/2016 Page 15 of 22
Construction Co. & Anr. and in OMP No.49/2006 titled Vidhyawati
Construction Company Vs. Rites Limited and Prem Nath Motors Limited
Vs. Anurag Mittal (2009) 16 SCC 274 and Vivek Automobiles Limited Vs.
Indian Inc. (2009) 17 SCC 657.
8. On enquiry, whether in the agreement entered into by Rites Ltd.
subject-matter of the judgments aforesaid also had an equivalent Clause 83
of the subject Contract, the counsel for the defendant No.1 contends that
there is no such mention in the judgment and he otherwise does not know.
9. To deal with the aforesaid contentions, it is deemed appropriate to
reproduce hereunder the first three paragraphs of the Agreement dated 3 rd
September, 2011 between the plaintiff and the defendant No.1,which are as
under :-
"This agreement made this 3rd Day of September, 2011
between the National Buildings Construction Corporation
Limited [NBCC], a company incorporated under the
Companies Act, 1956 having its Registered Office at NBCC
Bhawan, Lodhi Road, New Delhi-110003 (hereinafter referred
to as the "NBCC" which expression shall include its
administrators, successors, executors and assigns) of one part
and M/s Kashyapi Infrastructure Pvt. Ltd. 12/45, Vasundhra,
Ghaziabad (U.P.) (hereinafter referred to as the „Contractor‟
which expression shall unless the context requires otherwise
include its administrators, successors, executors and permitted
assigns) of the other part.
WHEREAS, NBCC, had invited tenders as per Tender document
vide NIT No. 80/2011, for "Construction of Office Building
for Income Tax Office on Plot A-2/D, Sector 24 at Noida
(UP).." (Hereinafter referred to as the "PROJECT") on behalf
of Commissioner of Income Tax, Ghaziabad, Under Central
Board of Direct Taxes, Department of revenue Ministry of
CS(COMM) 1280/2016 Page 16 of 22
Finance (Govt. of India) (Hereinafter referred to as the
"OWNER")
AND whereas M/s Kashyapi Infrastructure Pvt. Ltd. 12/45,
Vasundhra, Ghaziabad (U.P.) has also submitted the above
referred tender and NBCC has accepted their aforesaid tender
and is awarding the contract for "Construction of Office
Building for Income Tax Office on Plot A-2/D, Sector 24 at
Noida (UP).." on the terms and conditions contained in its
Letter of Award No. NBCC/ED-RBG (E&I)/ITO
/Noida/2011/3412 dated 1st August, 2011 and the documents
referred to therein, which have been unequivocally accepted by
M/s Kashyapi Infrastructure Pvt. Ltd., vide their acceptance
given on our letter of award resulting into contract."
10. It is evident from a reading of the aforesaid that the Agreement in the
present case was entered into by the defendant No.1 in its own name and on
its own behalf, with the plaintiff and the defendant No.1 is not found to have
entered into the Agreement with the plaintiff in the name of the President of
India or the Commissioner of Income-Tax, as the case was in the judgment
cited by the counsel for the defendant No.1. Merely because one of the two
contracting parties in the contract discloses that it was entering into the
agreement for the benefit of another person, would not make such other
person a party to the contract, more so when the contract contains a clause
as Clause 83, as reproduced in the order dated 16 th September, 2019. The
said Clause is indicative of the defendant No.1, under its Agreement with
the defendant No.2, dealing with the plaintiff in its own right, holding in its
own right lien over the amounts due to the plaintiff. Not only so, the
defendant No.1, in Clause 84 aforesaid of the Standard Form of Agreement
which the successful bidder i.e. the plaintiff was made to sign, also provided
CS(COMM) 1280/2016 Page 17 of 22
that the Agreement to be entered into by the plaintiff was with the defendant
No.1 and not with the President of India or with the Commissioner of
Income-Tax.
11. Though, the counsel for the defendant No.1 has also drawn attention
to the Agreement dated 30th March, 2011 entered into by the defendant No.1
with the defendant No.2 (on page 1 part III B file) but therefrom also is
unable to point out any clause authorising the defendant No.1 to enter into
agreements for the subject works, for and on behalf of the President of India.
It was for this reason only that the recital of the Agreement entered into by
the defendant No.1 with the plaintiff is different from that of the Agreement
entered into by Rites Ltd. in the cases cited by the counsel for the defendant
No.1.
12. The counsel for the defendant No.1 has today also drawn attention to
Clauses 6.5 and 6.6 of the Agreement dated 30 th March, 2011 entered into
between the defendants No.1 & 2 and substantial portions of which have
already been reproduced in the order dated 16th September, 2019 and which
provide for the compensation levied by the defendant No.1 on the plaintiff,
for any breach by the plaintiff of the terms of the Agreement, being passed
on to the „OWNER‟ described the said Agreement as the „President of India
acting through the Commissioner of Income-Tax‟ and the cost of the
arbitration award related to the Agreement/court decree and/or the cost
payable as a result of direction/order of any court attributed to the OWNER
in respect of the work done or to be done under the contract to be paid to the
OWNER. However, the same also, in my view, will not absolve the
defendant No.1 of liability to the plaintiff. Moreover, it is not the case that
CS(COMM) 1280/2016 Page 18 of 22
the Agreement dated 30th March, 2011 between the defendants No.1 and 2
was disclosed by the defendant No.1 to the plaintiff at the time of the
defendant No.1 entering into the Agreement with the plaintiff. Significantly
the Agreement between the two defendants also provides for arbitration,
only between the two defendants, and does not cover the plaintiff and there
is no arbitration clause in the Agreement between the defendant No.1 and
the plaintiff. If the defendant No.1 was entering into the contract with the
plaintiff for and on behalf of defendant No.2, the agreement would have
provided for arbitration of disputes arising from the contract in accordance
with the agreement between the two defendants.
13. Though the counsel for the defendant No.1 has also drawn attention to
a letter dated 1st August, 2011 of the defendant No.1 to the plaintiff to show
that the same was for „Construction of Office Building for Income-Tax
Office‟ but the same would also, for the reasons already given, not absolve
the defendant No.1 of the liability and make the Income-Tax Officer liable
for the work which the defendant No.1 awarded to the plaintiff.
14. The counsel for the defendant No.1 in the same vein has also drawn
attention to Page 33 of Part III A file being the Memorandum attached to the
Form of Tender issued by the defendant No.1 as proof to show that the same
also discloses Central Board of Direct Taxes as the Client/Owner but again
to no avail. Rather in the present case, the document dated 3 rd June, 2011 at
page 11 of Part III A file being a Notice inviting tender also shows the
tender to have been invited by the defendant No.1 in its own name and not
for and on behalf of the President of India, Commissioner of Income-Tax or
Central Board of Direct Taxes. Thus, merely because the plaintiff was
CS(COMM) 1280/2016 Page 19 of 22
aware that the contract which the defendant No.1 was entering into with the
plaintiff was for construction of a building, not for own use of defendant
No.1 but for the Income-Tax Office, would still not make the defendant
No.1 a non-party to the contract with the plaintiff.
15. The counsel for the defendant No.1, with respect to Clause 83 in the
General Conditions of Contract has contended that the same also provides
that the plaintiff was to attend all meetings including the meetings with the
Owner/Client i.e. Income-Tax Office. However, in my view, the said
imposition on the plaintiff would not come in the way of the plaintiff suing
the defendant No.1 for its dues and which are not in dispute.
16. Though the plaintiff has impleaded Commissioner of Income-Tax as
defendant No.2 but has not sought any recovery of money from the
defendant No.2.
17. The counsel for the defendant No.1 has also argued that Clause 83 is
not a bar to the plaintiff suing the defendant No.2.
18. Having found the defendant No.1 to be not absolved from the liability
for the undisputed dues under the Agreement with the plaintiff, for the
reason of defendant No.1 having entered into the contract on principal to
principal basis and not as an agent, it cannot be said that the defendant No.1
merely for the reason of having disclosed the person on whose behalf it was
getting the work done from the plaintiff, would be absolved from the
liability under the Agreement.
19. Clause 4.14 of the Agreement dated 30th March, 2011 between the
two defendants and which has been reproduced in the order dated
16th September, 2019, also shows that it was the defendant No.1 who was
CS(COMM) 1280/2016 Page 20 of 22
responsible for procurement of all materials and services for the
construction, as distinct from procuring materials and services on behalf of
the defendant No.2.
20. On enquiry it is also told that tax on payments made by defendant
No.2 to defendant No.1 was deducted by defendant No.2 in the name of
defendant No.1 and tax on payments made by defendant No.1 to the plaintiff
was deducted by the defendant No.1 in its own name. The same also shows
the nature of the Agreement between the plaintiff and the defendant No.1
and the Agreement between the two defendants.
21. No merit is thus found in the defence of the defendant No.1 to the
suit.
22. I have given an opportunity to the counsels to address on the aspect of
interest. The counsel for the defendant No.1 has merely stated that interest
was agreed in Clause 37.3 to be not paid.
23. However, I tend to agree with the counsel for the plaintiff in this
respect and it cannot be said that the defendant No.1, which has withheld the
admitted dues of the plaintiff, not only till the institution of the suit but even
after the institution of the suit and not taken any action for recovery of the
monies from the defendant No.2, can be said to be not liable for interest
under the said Clause. The clause to that effect would be against public
policy and void.
24. The plaintiff thus, is found entitled to recovery of principal amount of
Rs.3,43,43,650/- from the defendant No.1. The plaintiff has claimed interest
on the said amount from 23rd May, 2015, being the date of the Completion
Certificate.
CS(COMM) 1280/2016 Page 21 of 22
25. However, I find the claim for interest @ 15% per annum to be
excessive; though the counsel for the plaintiff contends that the plaintiff was
paying interest at the said rate to the Banks but there is no evidence to the
said effect.
26. In the facts and circumstances, it is deemed appropriate to award a
pre-suit interest to the plaintiff @ 9% per annum; pendente lite interest @
7% per annum; future interest for a period of three months from this decree
also @ 7% per annum and the future interest beyond three months herefrom
@ 15% per annum.
27. A decree is accordingly passed, in favour of the plaintiff and against
the defendant No.1, of recovery of the principal amount of Rs.3,43,43,650/-
with pre-suit interest @ 9% per annum, pendente lite interest @ 7% per
annum; future interest for a period of three months from this decree also @
7% per annum and future interest beyond three months herefrom @ 15% per
annum.
28. The plaintiff shall also be entitled to costs of the suit with professional
fee and miscellaneous expenses computed at Rs.2.5 lacs.
29. The amounts stated to have been paid by the defendant No.1 to the
plaintiff during the pendency of the suit shall be deducted from the decretal
amount.
30. Decree sheet be prepared.
RAJIV SAHAI ENDLAW, J.
NOVEMBER 01, 2019/'AA' (corrected & released on 13th November, 2019) CS(COMM) 1280/2016 Page 22 of 22