Kerala High Court
Abdul Latheef vs Indian Oil Corporation Ltd. on 13 January, 2006
Equivalent citations: 2006(4)KLT361
Author: A.K. Basheer
Bench: M. Ramachandran, A.K. Basheer
JUDGMENT A.K. Basheer, J.
1. This appeal is at the instance of the petitioner in an Arbitration proceeding pending before the District Court, Ernakularn. During the pendency of the proceeding, the petitioner moved an application praying for a direction to respondents 1 and 2 herein to deposit an amount of Rs. 1,06,30,047/- (Rupees One crore six lakhs thirty thousand and forty-seven only) towards payment allegedly due to him from respondent No. 3. The court below dismissed the application. Hence, this appeal under Section 37(1)(a) of the Arbitration and Conciliation Act. 1996.
2. The question that arises for consideration in this appeal is whether the appellant is an agent of respondent No. 2 and, if so, whether the appellant is entitled to enforce his claim by invoking the arbitration clause against respondents 1 and 2 by virtue of Section 194 of the Indian Contract Act.
3. Respondent No. 1, the Indian Oil Corporation Limited, Kochi Marketing Terminal (for short the Corporation') had appointed FACT Engineering and Design Organisation (hereinafter referred to as FACT), as the consultant for designing and execution of the Dock Line Project. FACT (respondent No. 2) in turn had entered into a contract with respondent No. 3. M/s. 1VRCL Infrastructures and Projects Limited (for short 'IVRCL') for execution of the entire mechanical and civil work of the Dock Line Project. It appears that the work was entrusted to M/s. IVRCL for a total sum of Rs. 2 crores 78 lakhs.
4. It is not in dispute that M/s. IVRCL had entrusted certain items of work in connection with the above Project to the appellant, who is a contractor engaged in the construction business. The entrustment was in terms of work orders issued in this regard. According to the appellant, M/s. IVRCL neglected to effect regular payments to him. The Corporation and the FACT were informed about the difficulty that was being faced by him relating to the execution of the work entrusted to him. However, no action was taken by respondent Nos. 1 and 2 to alleviate the grievance. On the contrary, respondent No. 2 (FACT) informed the appellant that it could not mediate in the dispute between the appellant and M/s. IVRCL. It was in the above circumstances that the appellant initiated the arbitration proceedings praying for appointment of an Arbitrator to resolve the pending dispute between him and M/s.IVRCL. An interlocutory application praying for the interim relief mentioned above, was moved in the said Arbitration proceedings which was dismissed by the District Court, as indicated earlier.
5. Respondents 1 and 2 in their respective counter affidavits filed before the court below, contended that the court had no jurisdiction to appoint an Arbitrator as requested by the appellant and that the application filed by the appellant for a direction to respondents 1 and 2 was totally misconceived. Respondent No. 3 (M/s. IVRCL) was entrusted with the responsibility to execute the work on the Dock Line Project with the funds provided by the Corporation. M/s.IVRCL was awarded the work by respondent No. 2 on the strength of a written agreement containing specific terms and conditions. Respondent No. 2 had no contractual relationship with the appellant.
6. Similarly, in the counter affidavit filed by M/s. IVRCL (respondent No. 3), it was admitted that the work of laying pipeline for the Project was awarded to it by respondent No. 2 with permission to give sub contract of some of the items of work to other persons. Accordingly, sub contract was given to appellant also to lay pipeline from Ernakulam Oil Tanker Berth to Kundannur Junction. As regards the allegation that amounts were not paid to the appellant for the work executed, it was contended that only a small amount remained unpaid. It was payable only on commissioning of the project. It was also specifically contended by M/s. IVRCL that there was no enabling clause which provided for appointment of an Arbitrator even if there was dispute between the appellant and respondent No. 3.
7. It is beyond controversy that appellant is not a party to the contract entered into between respondents 2 and 3. It is also the admitted position that there is no dispute between respondents 2 and 3. If any dispute arose between respondents 2 and 3, the agreement executed between them provided for invoking the. clause for appointment of an arbitrator. Thus, undoubtedly, the appellant is outside the purview of the arbitration clause in the agreement executed between respondents 2 and 3. Thus, the appellant cannot invoke the clause for appointment of an arbitrator on the face of the above agreement.
8. However, learned Counsel for the appellant has raised a contention that the appellant being an agent of respondent No. 2 by virtue of the provisions contained in Section 194 of the Contract Act, 1872, he is entitled to invoke the arbitration clause in the agreement executed between respondents 2 and 3. In other words, the contention is that since a sub agency was created between the appellant and respondent No. 3 with the explicit knowledge and consent of respondent No. 2, the appellant would step into the shoes of an agent in the business of the agency entrusted by the principal (respondent No. 2) to his agent (respondent No. 3) in view of the provisions contained in Section 194 of the Act.
9. Before dealing with Section 194 of the Act, it is profitable to refer to Section 182 of the Act which defines "agent" and "principal":
An "agent" is a person employed to do any act for another or to represent another in dealing with third persons. The person for whom such act is done, or who is so represented, is called the "principal".
Undoubtedly, relationship of "agency" is created when one person is appointed to act as the representative of another in dealing with third persons. By an agreement of agency, the agent is authorized to establish privity of contract between his employer and a third party. It is true that an agency need not be created expressly in writing and can be inferred from circumstances and conduct of parties. It is yet again true that it is not necessary at all that there should be any formal agreement expressly made for the purpose of relationship of agent and principal. Further, it is the settled position of law that concept of agency is a mixed question of fact and law, very largely depending upon evidence in a particular case.
10. In the case on hand, it is evident from the pleadings and materials on record that the appellant had no direct dealings with respondent No. 2 in connection with the work relating to the project in question. Even assuming that on one or two occasions respondent No. 2 had intervened in the dispute between the appellant and respondent No. 3, admittedly there was no privity of contract between the appellant and respondent No. 2. Similarly, even if respondent No. 2 had been aware that respondent No. 3 had given some sub contract to the appellant as contended by him, such a working arrangement between the appellant and respondent No. 3 would not result in creation of an agency between the appellant and respondent No. 2. First of all, it must have been established that there was a relationship of agency between respondent No. 2 and 3 either express or implied. In the nature of the transaction between the parties as revealed from the pleadings and materials on record, it is evident that respondent Nos. 2 and 3 had entered into a work contract on certain specified terms and conditions.
11. It may be noticed that the attempt of the appellant is to place himself in the position of an agent of respondent No. 2, though he had never been employed as such by respondent No. 2 at any stage. Admittedly, respondent No. 2 had nothing to do with the entrustment of the work to him by respondent No. 3.
12. It is in the above context we have to examine whether the provisions contained in Section 194 of the Act would enable the appellant to get the status of an agent. Section 194 reads thus:
194. Relation between principal and person duly appointed by agent to act in business of agency.-- Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him.
13. It is pertinent to note that respondent No. 3 had admittedly undertaken the contract to carry out the pipe laying work and other allied operations from respondent No. 2 on the strength of a written agreement. Therefore, stricto sensu, the relationship between respondents 2 and 3 cannot be that of a principal and agent at all. The appellant has admittedly undertaken some part of the work in connection with the project which was entrusted by respondent No. 2 to respondent No. 3. Even assuming that respondent No. 2 had given its tacit consent to respondent No. 3 to enter into sub contracts with others in respect of certain items of work, such a sub contractor cannot describe himself as a sub agent. There is no creation of agency at all between respondents 2 and 3 as revealed from the facts and circumstances of the case on hand and the relationship between them would never come in the realm of agency. The materials on record clearly indicate that respondent No. 2 had never recognised the appellant either as a sub agent or an agent as claimed by the latter. The above view is eminently possible since there is nothing on record to show that respondent No. 3 is an agent of respondent No. 2 or that the former had any authority, either express or implied, to name the appellant to act for the principal, viz. Respondent No. 2. Therefore, the contention raised by the learned Counsel that the provisions contained in Section 194 of the Act would come into play cannot be sustained at all. A perusal of the above statutory provision unambiguously shows that the contention raised by the petitioner in this regard is totally misconceived. If there is any dispute between the appellant and respondent No. 3. it will be open to them to sort it out in accordance with law. The appellant could not have dragged respondent No. 2 into litigation.
14. In the peculiar facts and circumstances, we do not make any further observations on this aspect, since admittedly proceedings are pending before the lower court. We hasten to add that we have not expressed any opinion on the merit of any of the contentions raised by the appellant. The observations made above are only prima facie impressions which need not weigh with the court below while deciding the issues that may come up for consideration at a later stage.
15. We have carefully considered the contention raised by the appellant in support of his plea for a direction to respondents 1 and 2 to deposit the amount which is allegedly due to him from respondent No. 3. We are satisfied that the court below was justified in not entertaining the above plea at that stage. It will be open to the appellant to make a motion before the court below to expedite the proceedings. We do not find any merit in the appeal. It is accordingly dismissed. No costs.