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Vrinda Engineers Pvt. Ltd. v/s Hindustan Steelworks Construction Limited & Another

    General Application No. 1156 of 2019 & Civil Suit No. 226 of 2018

    Decided On, 03 December 2019

    At, High Court of Judicature at Calcutta

    By, THE HONOURABLE MR. JUSTICE DEBANGSU BASAK

    For the Appearing Parties: Sukrit Mukherjee, Avirup Mitra, S.R. Kakrania, Tanuj Kakrania, Sanjeeb Seni, Ankita Upadhyay, Chayan Gupta, Prasun Mukherjee, Deepak Agarwal, Advocates.



Judgment Text


1. The application is at the behest of the defendant No. 2 claiming that it is neither a necessary nor a proper party in the suit.

2. Learned Advocate appearing for the defendant No. 2 submitted that, the defendant No. 2 engaged the defendant No. 1 as the principal contractor to render comprehensive project management services for construction of a building. The plaintiff was engaged by the defendant No. 1. There was no privity of contract between the defendant No. 2 and the plaintiff. The claim of the plaintiff was at best against the defendant No. 1. The plaint did not disclose any cause of action against the defendant No. 2. The back to back payment clause which the plaintiff relied upon formed part of the agreement between the plaintiff and the defendant No. 1. The defendant No. 2 was not a party to such agreement. Consequently, the name of the defendant No. 2 should be deleted from the plaint. In support of his contentions, learned Advocate appearing for the defendant No. 2 relied upon (Har Narain Singh v. Kharag Singh and Anr.,1887 9 ILR(All) 448) and (Utkarsh Tubes and Pipes Limited v. Simplex Infrastructure Limited, (2015) 1 CalLJ 27)

3. Learned Advocate appearing for the plaintiff submitted that, the plaintiff was issued a letter of intent by the defendant No. 1 for fabrication, erection, grouting etc. of steel structures for construction of a building on behalf of the defendant No. 2. The plaintiff and the defendant No. 1 entered into a formal agreement dated July 4, 2012. The agreement contained a back to back payment clause. He referred to such clause and submitted that, the plaintiff is entitled to receive payment from the defendant No. 1. He referred to the various correspondence exchanged between the parties as also the minutes of the meeting between the parties and submitted that, the defendant No. 2 claimed that, entire payment was made to the defendant No. 1 and that, the defendant No. 1 was unreasonably withholding the payment to the plaintiff. The plaintiff executed the work not intending to do so gratuitously and therefore by virtue of Section 70 of the Indian Contract Act, 1872, the defendant No. 2 was liable to pay the plaintiff. The defendant No. 2 was the beneficiary of the work done by the plaintiff. He relied upon (State of West Bengal v. B.K. Mondal and Sons, (1962) AIR SC 779) in support of the contention that, the defendant No. 2 was also liable to pay the plaintiff.

4. The suit is for recovery of price of goods sold and delivered and services rendered. There are two defendants in the suit. The case of the plaintiff in the plaint is that, in November 2011, the defendant No. 2 floated a project for construction of a building at Kolkata. The defendant No. 2 engaged the defendant No. 1 as the principal contractor to render comprehensive project management services. The defendant No. 1 invited offers from prospective bidders engaged in construction business. The plaintiff participated in the tender process. The plaintiff became successful in such tender and a letter of intent dated April 20, 2012 was issued by the defendant No. 1 to the plaintiff. The plaintiff and the defendant No. 1 entered into a formal agreement on July 4, 2012. The plaintiff discharged all its obligations under the agreement. The plaintiff raised running account bills upon the defendant No. 1. The plaintiff raised tax invoices on the defendant No. 1. The construction was completed in November 2014. After completion, the plaintiff raised the final bill on the defendant No. 1. The defendant No. 1 accepted the bills of the plaintiff without any demur or protest. The defendant No. 1 from time to time made part payments to the plaintiff. The defendant No. 1 withheld sums receivable by the plaintiff including on account of sales tax and excise duty. A meeting was held between the plaintiff, the defendant No. 1 and 2 where a minutes of the meeting was prepared on May 14, 2013. In such meeting, the defendant No. 2 did not agree to make payment of the excise duty directly to the plaintiff on the ground that, the defendant No. 2 did not have any privity of contract to the plaintiff. A spate of correspondence ensued between the plaintiff and the defendant No. 1. The plaintiff thereafter filed the instant suit, on the defendant No. 1 failing and neglecting to pay the claims of the plaintiff.

5. There is nothing on record to establish existence of privity of contract between the plaintiff and the defendant No. 2. The plaintiff and the defendant No. 1 entered into a formal agreement dated July 4, 2012. The defendant No. 2 is not a party to such formal agreement. By such formal agreement dated July 4, 2012, the defendant No. 1 agreed to pay the running account bills of the plaintiff within reasonable time of receipt of corresponding payment from the defendant No. 2. The plaintiff claims that the defendant No. 2 paid the defendant No. 1.

6. There being no privity of contract between the plaintiff and the defendant No. 2, the plaintiff cannot call upon the defendant No. 2 to pay the plaintiff for the work done. The plaintiff was engaged by the defendant No. 1. It is the liability of the defendant No. 1 to pay the plaintiff. The plaintiff cannot shift the liability of the defendant No. 1 to the defendant No. 2, in absence of any contract.

7. Har Narain Singh (supra) held that, a person can be added as a plaintiff or defendant to a suit when adding such person to the suit will enable the Court to effectually and completely adjudicate upon and settle all questions involved in the suit. It held that, questions involved in the suit means questions between the plaintiff and the defendant and not questions which may arise between co-defendants or between co-plaintiffs inter se. In the present case, the plaintiff sued the defendant No. 2 on the basis of a clause in the formal agreement dated July 4, 2012. The defendant No. 2 is not a party to such formal agreement dated July 4, 2012. The so-called clause of back to back payment appearing in the formal agreement dated July 4, 2012 is not binding upon the defendant No. 2. The plaintiff is seeking to raise a question as to whether the defendant No. 2 paid the defendant No. 1 and whether the defendant No. 1 is liable to pay on the basis of the back to back payment clause in the formal agreement dated July 4, 2012. The question sought to be raised by the plaintiff in relation to the defendant No. 2 is a question between the co-defendants and not between the plaintiff and the defendant No. 2. There is no question between the plaintiff and the defendant No. 2 since, there is no privity of contract between the plaintiff and the defendant No. 2.

8. While considering an application under Section 8 of the Arbitration and Conciliation Act, 1996 Utkarsh Tubes and Pipes Limited (supra) held that, where the real cause of action in the suit is for recovery of price of goods sold and delivered, making the bank as a co-defendant in such suit will not make the arbitration agreement between the plaintiff and the defendant of such suit, not enforceable. It held that, the bank was joined as the defendant No. 2 in such a suit to avoid the arbitration. In the facts of that case, the Court allowed the application under Section 8 of the Arbitration and Conciliation Act, 1996.

9. B.K. Mondal and Sons (supra) considered Section 70 of the Contract Act, 1872. It held as follows :-

"14. It is plain that three conditions must be satisfied before this section can be invoked. The first condition is that a person should lawfully do something for another person or deliver something to him. The second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously; and the third is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof. When these conditions are satisfied Section 70 imposes upon the latter person, the liability to make compensation to the former in respect of, or to restore, the thing so done or delivered. In appreciating the scope and effect of the provisions of this section it would be useful to illustrate how this section would operate. If a person delivers something to another it would be open to the latter person to refuse to accept the thing or to return it; in that case Section 70 would not come into operation. Similarly, if a person does something for another it would be open to the latter person not to accept what has been done by the former; in that case again Section 70 would not apply. In other words, the person said to be made liable under Section 70 always has the option not to accept the thing or to return it. It is only where he voluntarily accepts the thing or enjoys the work done that the liability under Section 70 arises."

10. Section 70 of the Contract Act, 1872 is as follows:-

"70. Obligation of person enjoying benefit of nongratuitous act.-Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered."

11. In the facts of the present case, as noted above, there was no privity of contract between the plaintiff and the defendant No. 2. The plaintiff claimed that the defendant No. 2 enjoyed the benefits of the work done by the plaintiff. The plaintiff engaged the defendant No. 1. The defendant No. 1 in turn engaged the defendant No. 2 for a portion of the work. The defendant No. 2 paid the defendant No. 1 for the work done. There may be claims made by the plaintiff against the defendant No. 1, as in the present

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case, the plaintiff claims that, the defendant No. 1 is yet to repay the bills and other claims of the plaintiff. The defendant No. 2 cannot be said to have taken anything from plaintiff voluntarily as the defendant No. 2 never asked the plaintiff to do so. The defendant No. 2 paid the defendant No. 1 to provide the goods, services and facilities. It was the obligation of the defendant No. 1 to pay the plaintiffs, if any amount is due and payable. The defendant No. 2 paid the value of the goods and services to person from whom the defendant No. 2 received the same. It did not receive anything from the plaintiff to pay for. Provisions of Section 70 of the Act of 1872 are not attracted between the plaintiff and the defendant No. 2. The defendant No. 2 cannot be said to be liable to the plaintiff. The plaintiff cannot have a cause of action against the defendant No. 2. 12. In such circumstances, the defendant No. 2 is deleted as a defendant in the suit. Old GA No. 1156 of 2019 New GA No. 3 of 2019 in CS No. 226 of 2018 is allowed accordingly without any order as to costs.
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