TaxTMI 
TaxTMI 
2020 (6) TMI 17
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....tion Work (CSW) for augmentation of fire water system at Mundra Crude Oil Tank Farm location (Group B) by issuance of Letter of Acceptance dated 17-1-2013 for an order value of Rs. 39,35,26,803/- to respondent no.4 - M/s. Das Offshore Private Limited. 2.3 According to the petitioner, in view of general conditions of contract more, particularly, clauses 4-8-1.0 to 4.8.5.0, the respondent no.4 was not allowed to enter into sub-contracts without the prior written consent of the petitioner. 2.4 According to the petitioners respondent no.4 and without the approval of the petitioner awarded subcontract to respondent no.2 who in turn awarded subcontract to respondent no3. According to the petitioner, the petitioner had lis-contract with respondent no.4 only and not with respondent nos. 2 and 3. 2.5 It is the case of the petitioner that respondent no.4 committed delay and breaches against the contractual delivery date of 12 months i.e. by 17th January, 2014 the respondent no.4 was not in a position to complete the said works. The petitioner therefore, sent a pre-termination notice dated 11th November, 2014 to respondent no.4 followed by another pre-termination notice dated 2nd Dec....
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....ency need not always be the sole criteria for payment when complex contractual obligations are to be performed. 4. Neither of the decisions cited by the counsel of the petitioner would change this situation. In case of Union of India v. M/s. J. K. Gas Plant, reported in [1980] 3 SCC 469, the Supreme Court was considering a situation where the Government had supplied unused steel to a company for manufacturing purpose which was delivered to another company under Government's direction. It was held that such delivery being lawful and the Government having full and direct benefit thereof; in terms of section 70 of the Contract Act, delivering company would be entitled to payment for the delivered steel from the Government. In case of State of Kerala and others v. M.K. Jose reported in [2015] 9 SCC 433, even while taking note of the decision of the Supreme Court in case of ABL International Limited v. Export Credit Guarantee Corpn. of India Ltd., reported in [2004] 3 SCC 553 holding that even in contractual matters, writ petition may in a given exceptional case still be available, deprecate the practice of appointing Court commission for fact finding in writ petition invol....
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.... regard to the submissions made by learned Senior Advocate Mr. Manish R. Bhatt for the petitioner and Mr. Jaimin R. Dave, learned advocate for the respondent No. 2, and having regard to the provisions contained in the Micro, Small and Medium Enterprises Development Act, 2006, it prima facie appears that the provisions of the said Act are not applicable to the facts of the present case, and hence, the operation of the impugned order is stayed qua the petitioner, till further orders." 4. Heard learned Senior Advocate Mr. M.R. Bhatt assisted by learned advocate Mr. Vineet Sheth and learned advocate Mr. Munjaal Bhatt for the petitioner and learned Assistant Government Pleader Mr. Soaham Joshi for respondent no.1, learned advocate Mr. Jaimin R. Dave for respondent no.2 and learned advocate Mr. Ravi Karnavat for respondent no.3 and learned advocate Mr. Gaurav K. Mehta for respondent no.4. 5. Learned Senior Advocate Mr. M.R. Bhatt for the petitioner submitted that the impugned order passed by respondent no.1 Council is contrary to the order passed by this Court dated 12th April, 2016 in Special Civil Application No.3419/2016 filed by respondent no.2. 5.1 It was submitted by Learn....
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....red to respondent no.1- Council by any "party to a dispute", however, in the facts of the case, contract was only between the petitioner and respondent no.4 and in absence of any contract either with respondents no.2 or 3, it cannot be said that there was a dispute between the petitioner and respondents no. 2 and 3. It was submitted by Learned Senior Advocate Mr. M.R. Bhatt that even as per provision of section 16 of the Arbitration and Conciliation Act, 1996 respondent no.1 was required to adjudicate the aspect of jurisdiction and therefore, the impugned order is liable to be quashed and set aside. 5.5 It was submitted by Learned Senior Advocate Mr. M.R. Bhatt that the Council did not consider the application filed by the petitioner to delete its name from the proceedings and arrived at a conclusion that it is not possible to believe that the petitioner had no knowledge about the work carried out by respondents no. 2 and 3. It was submitted by Learned Senior Advocate Mr. M.R. Bhatt that the Council discarded the submission of the petitioner only on the ground that the petitioner had permitted entry of the goods of respondents no. 2 and 3 on the site, which is contrary to the te....
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....for any type of legal or other matters and franchise would directly contact respondent no. 1 for all issues. With these preliminary remarks, the agreement records the terms and conditions. 15. All these terms and conditions involve petitioner and respondent no. 1 for their bilateral obligations under the agreement. Even the arbitration agreement, as noted, provides that all disputes and differences shall be referred to sole arbitrator to respondent no. 1 company whose decision will be final on every matter arising there under. Thus there was a clear understanding even under the agreement that the same was executed between the petitioner and respondent no. 1 alone and respondent no. 2 was specifically kept out of the purview of such agreement. When the petitioner signed such documents with full consciousness and out of free will, could it later on turn around and contend that it was respondent no. 2 who had entered into an agreement and that therefore, must be made answerable to arbitration proceedings. The contention that the petitioner was compelled to sign the agreement cannot be accepted since the petitioner was acting out of free will and was under no compulsion ....
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....ent. The ONGC was not a party to the Arbitration Agreement. When a dispute had arisen between the appellant and the respondent in relation to payment of money, the appellant had initiated the arbitration proceedings. As the ONGC was not a party to the Arbitration Agreement, it could not have been represented before the Arbitral Tribunal. If the ONGC was not a party before the Arbitral Tribunal, the Tribunal could not have made any Award making the ONGC liable to make payment to the appellant. In the afore stated factual and legal position, the Arbitral Tribunal could not have made the ONGC liable in any respect and rightly, the majority view of the Arbitral Tribunal was to the effect that the ONGC, not being a party to any contract or Arbitration Agreement with the appellant, could not have been made liable to make any payment to the appellant. 27. We are in agreement with the view expressed by the majority of the Arbitral Tribunal. In our opinion, the High Court had committed an error by not considering the above facts and by observing that the appellant will have to take legal action against the ONGC for recovery of the amount payable to it. If one looks at the rel....
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....and the view of the High Court is not accepted. The respondent shall accordingly make payment to the appellant." (iii) Reliance was also made to the decision in case of Reckitt Benckiser (India) Private Limited v. Reyenders Label Printing India Private Limited and another reported in [2019] 7 Supreme Court Cases 62, wherein the Apex Court held that if there is no arbitration agreement between the parties, then the matter cannot be referred to arbitration and has held as under : "9. In the backdrop of the averments in the application and the correspondence exchanged between the parties adverted to by the applicant, it is obvious that the thrust of the claim of the applicant is that Mr. Frederik Reynders was acting for and on behalf of respondent No.2, as a result of which the respondent No.2 has assented to the arbitration agreement. This basis has been completely demolished by respondent No.2 by stating, on affidavit, that Mr. Frederik Reynders was in no way associated with respondent No.2 and was only an employee of respondent No.1, who acted in that capacity during the negotiations preceding the execution of agreement. Thus, respondent No.2 was neither the....
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....ontract but that cannot be the basis to answer the matter in issue. The respondent No.2 has justly relied upon the exposition in Godhra Electricity Co. Ltd. and Anr. v. State of Gujarat and Anr., to buttress the argument that postnegotiations in law would not bind the respondent No.2 qua the arbitration agreement limited between applicant and respondent No.1. In any case, even this plea is based on the assumption that Mr. Frederik Reynders was associated with and had authority to transact on behalf of respondent No.2, which assertion has been refuted and rebutted by respondent No.2. It is clearly stated that Mr. Frederik Reynders was neither connected to nor had any authority of respondent No.2, but was only an employee of respondent No.1 and acted only in that capacity. 15. For the view that we have taken, it is unnecessary to dilate on other contentions. Suffice it to observe that the application must fail against respondent No.2 and on that conclusion, no relief can be granted to the applicant who has invoked the jurisdiction of this Court on the assumption that it is a case of international commercial arbitration. Despite that, respondent No.1 through counsel has....
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....belongs to direction to the IOCL & the next direction by the petitioner is to realize the payment in favour of M/s. H. P. Associate in respect of work done by him to IOCL. 2. Council's attention has been drawn by the order of the Honorable High Court that in this citation the Honorable High Court has excluded M/s. Indian Oil Corporation Limited. Council is in view that at this junction the M / s. Indian Oil Corporation Limited is the main rolling action party. The whole painting should not be completed without the colour of the M/s. Indian Oil Corporation Limited because M/s. Indian Oil Corporation Limited has been contracted to M/s. Dasoffshore Engineering Pvt. Ltd., & M/s. Dasoffshore Engineering Pvt. Ltd. has been contracted to M/s. Hariom Builders & M/s. Hariom Builders has been contracted to. M/s. H. P. Associate. Further M/s. H. P. Associate is asking his payment to M/s. Hariom Builders & M /s. Hariom Builders is asking payment to M/s. Dasoffshore Engineering Pvt. Ltd. As per previous petition pending before the council DP-397 should not be completed without involving M/s. Indian Oil Corporation Limited & M/s. Dasoffshore Engineering Pvt. Ltd. Further in Order SC....
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.... 5. Hence order of council dated 05/12/2017 is here by treated as cancel & this whole matter is ordered out to club the matter & referred to GCCI-ADRC." 6.2 Referring to the aforesaid findings, it was submitted by Mr. Dave that the petitioner participated in the proceedings before the Council and therefore, when the Council has found as a matter of fact that the petitioner was in knowledge of work carried out by respondents no. 2 and 3, then the petitioner is a necessary party in the arbitration proceedings between respondents no.2 to 4 and also because the accounts are settled between the petitioner and respondent no.4, petitioner cannot absolve itself from the liability of payment to be made to respondents no. 2 and 3 for the work carried out by respondents no. 2 and 3 pursuant to the contract awarded by the petitioner. Learned advocate Mr. Dave for the respondent no.2 further relied upon the Memorandum of Understanding between respondent nos. 2 and 4 to point out that the petitioner was aware about such Memorandum of Understanding and therefore it was liable to be joined as a necessary party in the arbitration proceedings. 6.3 It was submitted by Mr. Dave that the petit....
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.... JV. Clause-20.1 provides for 'Amicable Settlement'. Clause-20.2 provides for 'Assistance of Export' for the purpose and Clause- 20.3 provides for 'Arbitration'. From the facts, it appears that in terms of the agreement, both the constituents of JV, viz. Aquafil Polymers Co. Pvt. Ltd. and Wintech Engineering Pvt. Ltd. have given their individual performance guarantees which, accepted by the petitioner. It is the case of respondent No.1 and not controverted by the petitioner that such performance bank guarantees were invoked by the petitioner. Therefore, apparently, the petitioner has also recognized individual existence of separate entities, i.e. Aquafil Polymers Co. Pvt. Ltd. and Wintech Engineering Pvt. Ltd. and by entering into the contract with JV, has accepted both the constituents as a JV. On account of disputes, the JV had issued notice to the petitioner. However, there was no reconciliation as provided under the agreement and therefore, JV invoked arbitration clause of the contract proposing a sole Arbitrator, to which the petitioner refuted the allegations and under Clause-20.3 concluded that the authority to appoint sole Arbitrator lies with the pe....
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....er". Hence, MSME Act was correctly invoked by respondent No.1. Section 18 provides for "Reference to Micro and Small Enterprises Facilitation Council". Respondent No.1, being one such constituted council under Section 18, was within its power to receive reference under Section 18(2), which provides that the council shall itself either conduct conciliation or seek assistance of any institution or centre providing for alternate dispute resolution services. In the instant case, in exercise of powers under Section 18(2), the council came to conclusion that the council itself is not in a position to reconcile the dispute and therefore, was left with option to refer the conciliation involved under Section 18(3). In this case, such reference is made to respondent No.3. The impugned order therefore appears to be in consonance with the requirements of relevant provisions of the MSME Act. 10. In view of the aforesaid, no interference is called for. The petition deserves to be and is hereby dismissed. Notice is discharged. No order as to costs." 6.5 Referring to aforesaid decision, it was submitted by Mr. Dave that respondent no.2 would fall in definition of "supplier" as per sub-....
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....ng remedy under Article 226 of the Constitution, a person must exhaust the remedies available under the relevant statute. ** ** ** 16. It is the solemn duty of the Court to apply the correct law without waiting for an objection to be raised by a party, especially when the law stands well settled. Any departure, if permissible, has to be for reasons discussed, of the case falling under a defined exception, duly discussed after noticing the relevant law. In financial matters grant of ex-parte interim orders can have a deleterious effect and it is not sufficient to say that the aggrieved has the remedy to move for vacating the interim order. Loans by financial institutions are granted from public money generated at the tax payers expense. Such loan does not become the property of the person taking the loan, but re....
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....3 submitted that respondent no.3 is also beneficiary of the work executed by it inasmuch as it is not in dispute that respondent no.3 has carried out the work at the premises of the petitioner. It was further submitted that though the agreement is formally executed between the petitioner and respondent no.4 but by conduct, the petitioner has allowed respondent no.3 to execute the work and therefore, the Council has rightly referred the matter for arbitration. 7.1 Reliance was also placed on the averments made in the affidavit in reply filed on behalf of respondent no.3 and the application filed by respondent no.3 before the Council to refer the matter to arbitration. 8. Learned advocate for respondent no.4 referred to the averments made in the affidavit in reply filed on behalf of respondent no.4 to contend that the contract executed between the petitioner and respondent no.4 was required to be completed within a prescribed time but the same was not completed due to the negligence on behalf of respondents no. 2 and 3 and with cooperation of the petitioner, the contract was successfully completed for which final financial settlement was also done by the petitioner after deduct....
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....ing approval of the sub-contract as aforesaid and notwithstanding that the OWNER/Engineer-in-charge shall have received a copy of the contract between the CONTRACTOR and sub-contractor, the CONTRACTOR shall be and shall remain exclusively responsible to the Owner for the due and proper performance of the contract and the sub-contractor shall for all purposes vis-a-vis the OWNER deemed to be the servant/agent of CONTRACTOR employed for the performance of the particular work with full responsibility on CONTRACTOR for all acts, omissions and defaults of the sub-contractor. 4.8.3.0 Subjects as hereinabove in this behalf specifically permitted and provided, the CONTRACTOR shall not sub-contract any work under the Contract and any sub-contract in breach hereof shall be deemed to be an unauthorized subcontracting of the contract or part or portion thereof sub-contracted as the case may be. 4.8.4.0 If any sub-contractor engaged upon the work at the site executes any work which in the opinion of the Engineer-in-Charge is not of the requisite standard (the opinion of the Engineer-in-charge being final in this behalf) then without prejudice to any other right or remedy avail....
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...., in absence of any contract between petitioner and respondent nos. 2 and 3, the petitioner could not have been dragged to arbitration proceedings only because respondents no.2 and 3 have carried out work pursuant to the contract awarded to respondent no.4 by the petitioner. 11. Findings given by respondent no.1 Council in the impugned order is therefore contrary to the facts materials on record. Respondent no.1 Council has not taken into consideration the relevant materials on record but has been swayed away by the factor of work being carried out by respondent nos. 2 and 3. Only because the petitioner permitted respondent nos. 2 and 3 to execute the work, the petitioner cannot be held responsible or liable in any manner in absence of any contract. Respondent nos. 2 and 3 at the best can be the agents of respondent no.4. The petitioner cannot be said to have any liability for the work carried out by respondent nos. 2 and 3 for respondent no.4 in absence of any contract. 12. Section 2(d) of the Act-2006 defines "buyer" as under : "2(d) buyer means whoever buys and goods or receives any services from a supplier for consideration." 13. In view of the aforesaid defin....
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..... Reference to Micro and Small Enterprises Facilitation Council.- (1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council. (2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act. (3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer to it any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliatio....