Back-to-back subcontract liability cannot defeat a subcontractor's claim absent express transfer of liability in the main contract.

A back-to-back subcontract does not, by itself, shift a subcontractor's payment claim to the employer or novate the main contract; absent an express covenant transferring liability in the main contract, the contractor remains primarily liable under the subcontract. An earlier admission of liability and a later inconsistent denial cannot defeat that obligation, and such inconsistency supports enforcement of the award in favour of the subcontractor. The Supreme Court sustained the concurrent findings and rejected the challenge to the subcontractor's claim.

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Issues: (i) Whether the subcontractor's payment claim could be defeated on the ground that the subcontract was on a back-to-back basis with the main contract, so that liability depended on the employer's liability under the main contract. (ii) Whether the contractor was bound by its earlier admission and inconsistent stand taken in the connected arbitrations.

Issue (i): Whether the subcontractor's payment claim could be defeated on the ground that the subcontract was on a back-to-back basis with the main contract, so that liability depended on the employer's liability under the main contract.

Analysis: In the absence of any covenant in the main contract transferring subcontractor liability to the employer, the contractual relationship between the employer and the main contractor remained distinct from that between the main contractor and the subcontractor. A back-to-back arrangement in the subcontract could not, by itself, novate the main contract or fasten primary liability on the employer. The subcontractor's claim therefore remained enforceable against the contractor as the employer in the subcontract.

Conclusion: The plea of back-to-back liability was rejected and the contractor was held primarily liable to the subcontractor.

Issue (ii): Whether the contractor was bound by its earlier admission and inconsistent stand taken in the connected arbitrations.

Analysis: The contractor had earlier accepted liability to the subcontractor, albeit while seeking adjustment against any amount awarded in its own arbitration against the employer. That concession was held to be an admission of contractual liability, and the later attempt to repudiate liability altogether on the basis of back-to-back liability was treated as inconsistent with its earlier stand. The earlier admission reinforced the correctness of the award in favour of the subcontractor.

Conclusion: The contractor was bound by its earlier admission and inconsistent stand, which supported the award against it.

Final Conclusion: The award and the concurrent findings of the courts below were sustained, and the challenge to the subcontractor's claim failed.

Ratio Decidendi: A subcontractor's claim cannot be displaced merely by describing the arrangement as back-to-back unless the main contract itself transfers liability to the employer, and an admitted contractual liability cannot later be denied by taking an inconsistent stand.

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