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TMI Blog1977 (9) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... t (Exhibit D-l) was concluded between the Union of India and Mrs. Harbhajan Singh Roshan Singh for the execution of the construction of a runway. Clause 21 of the contract prohibited the contractor from assigning or splitting the contract to anyone else without the written approval of the officer authorised by the Union of India. As the work progressed, the contractor was to submit a bill each month under clause 8 of the contract. The Engineer- in-charge was then to measure the work done and then to prepare a bill in terms of the measurement so taken. Under clause 9 the contractor was to submit all bills on the prescribed printed forms. Clause 9-A is crucial and is reproduced below :- PAYMENTS due to the contractor may, if so desired by him, be made to his bank instead of direct to him, Provided that the contractor furnishes to the Engineer-in- charge (1) and authorisation in the form of a legally valid document such as a power of attorney conferring authority on the bank to receive payment, and (2) his own acceptance of the correctness of the account made out as being due to him by Government or his signature on the bill or other claim preferred against Government, befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions from the Government towards the current overdraft account of the contractors with the bank. (4) In terms of clause 9-A of the contract between the Union of India and the contractors, the irrevocable power of attorney executed by the contractors in favor of the bank was deposited with the Government. The bills in the prescribed forms were submitted by the contractors to the Government and on verification of the measurements oi the work done by the contractors payments were made by the Government to the bank. The power of attorney was deposited with the office of the Central Public Works Department, Delhi Aviation Division, New Delhi on 22nd July 1959. During the first week of February 1961 the Delhi Aviation Division No. 2 was converted into P T Division and all the aviation work which was being executed by the said Division were transferred to Delhi Aviation Division No. 1, Central Public Works Department, New Delhi. This included the work contracted by the Government with Messrs. Harbhajan Singh Roshan Singh. During the transfer of the records of the said work from Division No. 2 to the new division, the copy of the power of attorney deposited by the bank with Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments to the plaintiff bank to the exclusion of the contractors. The suit of the plaintiff bank was dismissed by the trial court mainly because the proviso to clause 9-A of the contract expressly stated that nothing herein contained shall operate to create in favor of the bank any rights or equities vis-a-vis the President of India . The learned trial Court observed that clause 9-A and the proviso to it could have been overridden only if a new contract could have been concluded between the plaintiff bank and the Union of India. There was no such contract between the two. No question of any implied contract or estoppel by representation making the Government liable to the plaintiff bank could arise so long as clause 9-A .and its proviso stand. (7) In this appeal by the bank against the Government against the dismissal of the suit, learned counsel for the appellant bank was allowed by us during his oral argument to raise a new plea of law based on the undisputed facts. Shri Ved Vyas for the appellant bank argued that the irrevocable power of attorney amounted to an equitable assignment by the contractors to the bank of the right to recover the debt due to the contractors from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gency is abrogated. The agent acts thereafter not for the benefit of the principal but for his own benefit. The reason is that he has an interest of his own in the property which is the subject-matter of the contract. The interest of the principal is abrogated in the satisfaction of the dues which the agent has to recover from the principal. In this respect the substance prevails over the form. What about the other element of agency, namely, that the agent acts on behalf of the principal ? If this element of the agency is also abrogated then the irrevocable power of attorney would amount to an assignment to the bank: of the debt due to the contractors from the Government. The distinction between the form and the substance of the irrevocable power of attorney becomes here material to know if the said power amounted to an assignment. An outright assignment or transfer would have obliterated the contractors and would have given the right to the assignee or the transferee to make a claim on the Government of India in its own right. This did not happen. The claim had to be made by the bank on the Government of India in the name of and on behalf of the contractors. The bank did not act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the bank to appropriate the money paid by the Government towards the discharge of the debt due to the bank from the contractors but does not authorise the bank to receive the money from the Government beyond the amount of contractors' indebtedness to the bank. The power of attorney is only an equitable and not an absolute assignment for the above reasons, namely, that the bank had to act as an agent of the contractors and it was to receive the money from the Government only to the extent of the contractors' indebtedness and not beyond. Neither the contract nor the power of attorney at all contemplates that the bank was ever to make an independent claim against the Government even though the Government had already paid the principal of the bank, namely, the contractors, the money due on the very claims which are made by the bank. Nor does the question of waiver or estoppel arise against the Government. The Government has acted strictly in accordance with the contract. It has not accepted the recital in the power of attorney that it is the bank and not the contractors who has the right to give a valid discharge of 'the payment made by the Government. There is neither a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nk any rights or equities as against the Government. It is this proposal of the Government which was accepted by the bank when the bank requested the Government to make the payment to it instead of to the contractors and deposited the power of attorney with the Government. The power of attorney could be construed as an assignment in favor of the bank in writing and the letter accompanying the copy of the power of attorney deposited with the Government of India read with the power of attorney could be construed as notice to the debtor Government of India. The terms of section 130 of the Transfer of Property Act may, Therefore, be said to have been satisfied. (11) The question may, Therefore, be looked at from two points of view, namely, (a) was there any privity of contract at all between the bank and the Government, or (b) assuming that there was some kind of privity between them, what was precisely agreed to between them. (12) A contract has no meaning for a party if the party is prohibited from legally enforcing, it against the other party. The proviso to clause 9-A of the contract says that the bank shall not have any rights or equities against the Government in terms of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m two different sides. Such an assignment may be enforceable as between the contractors and the bank. The assignment, however, does not entitle the bank to any enforceable rights against the Government. The Government has agreed to pay to the bank only as an agent of the contractors and not otherwise. The Government has also said that the willingness of the Government to make such payment is only under the terms of the contract, that is to say, as a facility given to the contractor who alone is a party to the contract with the Government. The Government expressly stipulates that the agent of the contractors will not have any right of his own against the Government. (14) An actionable claim has two elements, namely, (a) a sum due from the Government to the contractors and (b) the right of the contractors to claim the sum from the Government and to enforce the claim against the Government. What has been transferred by the contractors to the bank is the first element, namely, the sum due from the Government to the contractors. The second element has not been transferred by the contractors to the bank. The right given by the contractors to the bank to receive the dues from the Gover ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed only by the execution of an instrument in writing signed by the transfer or. This means that the only manner of transferring the claim to receive a debt has to be by execution of an instrument. This instrument is the power of attorney. There is no other instrument of assignment. (16) It is true that in law a debt can be assigned unless the contract from which the debt arises prohibits such assignment. There is a difference, however, between an assignment and an equitable assignment. The latter is not an assignment at all because it falls short of a complete transfer. The very argument of Shri Ved Vyas that the bank is an equitable assignee means that it is not an assignee in law. An assignment cannot co-exist with agency. For, a transferee has an independent right while an agent has no independent right. In the present case, so long as the bank continues to be an agent it cannot become an assignee. (17) If, Therefore, it is to be assumed that some kind of contractual relationship could be implied between the Government and the bank, then that relationship fell short of giving the right to the bank to enforce payment of the debt as against the Government. It is only if ..... X X X X Extracts X X X X X X X X Extracts X X X X
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