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TMI Blog2020 (6) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... y respondent no.2 could have been proceeded further by respondent no.1 when it is an admitted position that there is no privity of contract between the petitioner and respondent nos. 2 and 3. If there is dispute between respondent no.2, 3 and 4, the petitioner is not liable in any manner whatsoever more particularly, when respondent no.4 has admitted that there is a final settlement between the petitioner and respondent no.4 with regard to the outstanding dues. The findings given by respondent no.1 Council in paragraph no. 3 and 4 as referred to herein above are self-contradictory. Respondent no.1 Council on one hand has observed that this is the only civil remedy for involving all the three respondents, except M/s. Indian Oil Corporation Limited but in the next paragraph it has observed that it is very shocking and painful argument by learned advocate of M/s. Indian Oil Corporation Limited before the Council that it has no knowledge of the work by M/s. Hariom Builders and M/s. H.P. Associate. The respondent no.1 council appears to have taken into consideration the work done by respondent no.2 and 3 only without referring to the respective clauses of the agreement between the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion Limited has prayed for the quashing and setting aside the order dated 17th April, 2018 passed by respondent no.1- the State Level Industry Facilitation Council constituted under section 21 of the Micro, Small and Medium Enterprises Development Act, 2006 ( Act-2006 for short). 2. Brief facts giving rise to this petition are as under : 2.1 The petitioner Indian Oil Corporation Limited is a company incorporated under the provisions of the Companies Act, 1956 and is a public sector undertaking. 2.2 The petitioner had awarded the contract for Combined Station 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 ₹ 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f IOC. Be that as it may, under no condition the petitioner can claim any relief against IOC, particularly in facts of the present case. Firstly, the entire issue is in realm of contractual relations. Secondly, large number of disputed questions of facts are involved. Thirdly, there is no privity of contract between the petitioner and the IOC. It is difficult to understand how the petitioner can prevent the IOC from readvertising the contract or claiming direct payment for the work which may have been completed. Mere completion of the work even by the principal agency 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under section 18(2) of Act-2006 has failed and therefore, it was decided that the matter be referred to the Gujarat Chamber of Commerce and Industries for arbitration proceedings under section 18(3) of the Act- 2006. 3. This Court passed the following order on 11th July, 2018 : Notice be issued to the respondents returnable on 25.07.2018. Mr. Jaimin R. Dave, learned advocate appearing on caveat, waives service of notice on behalf of the respondent No.2. The reply filed on behalf of the respondent No. 2 is taken on record. Having 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion of section 2(n) of the Act-2006 to submit that neither respondent no.2 nor respondent no.3 can be stated to be supplier to the petitioner and therefore, no proceedings could have been initiated under section 18 of the Act-2006 by respondent no.1- Council. It was therefore, submitted that the proceedings initiated by the Council and the impugned order passed therein is without jurisdiction. 5.4 Learned Senior Advocate Mr. M.R. Bhatt referred to the provisions of section 18 of the Act-2006 to point out that application could be preferred 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 Advoc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuted between the petitioner and respondent no. As the agreement itself demonstrates, it was an agreement for franchise and was entered into between the petitioner and respondent no. 1. The agreement also clearly provided that respondent no. 1 was a group company of respondent no. 2 and was a facilitator of various products of respondent no. 1 and would provide franchise in its own name and terms and conditions mentioned in the agreement. It was further recorded that respondent no. 2 will not be liable or responsible 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant directly. 25. Simply because some payments had been made by the ONGC to the appellant, it would not be established that there was a privity of contract between the ONGC and the appellant and only for that reason the ONGC cannot be saddled with a liability to pay the amount payable to the appellant by the respondent. 26. It is also pertinent to note that the Arbitration Agreement was only between the appellant and the respondent. 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 Arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons, we do not agree with the view expressed by the High Court and the impugned judgment delivered by the High Court is set aside. The ONGC shall not be liable to make payment, as rightly decided by the Arbitral Tribunal, to the appellant but the payment shall have to be made by the respondent, who had given a sub- contract to the appellant. Majority view of the Arbitral Tribunal on the above issue is confirmed 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been established under the provisions of the Indian Companies Act and having its registered office in India, the applicant can pursue its remedy against respondent No.1 for appointment of a sole arbitrator to conduct arbitration proceedings, as a domestic commercial arbitration. 14. Indeed, the applicant had vehemently relied upon the circumstances and correspondence postcontract 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oil Corporation Limited. So of course in this matter so far involvement concern he has no privity in this matter. But council is not satisfy by argument in SCA No. 3419/2016 M/s. Indian Oil Corporation. Limited was respondent No. 1 M /s. Hariom Builders was respondent No. 3 who was remain Ex-partee in aforesaid matter. This SCA No. 3419/2016 was only 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. Furthe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e final view that the purpose of the forum MSME-D Act 2006 is interest of small supplier. As per the objective of MSME-D Act, 2006, it provides that authority should work in the benefit of Micro, Small Medium Enterprises. Therefore council is of the View that any injustice to any supplier under this act would not be tolerated. 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract as defined in the agreement is Guwahati Metropolitan Development Authority, Guwahati. The sub-contractors is to mean M/s.Aquafil- Wintech JV. JWIL, which is the petitioner and JWIL- Ranhill JV is consortium of JWIL and Ranhill Utilities, Malaysia. The principal agreement is between the principal employer and JWIL-Ranhill 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 issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under any law and engaged in selling goods produced by micro or small enterprises and rendering services which are provided by such enterprises. Without any manner of doubt, respondent No.2, an MSME and the nature of work under the agreement will attract requirements of definition of supplier . 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elves inasmuch as they not only contain comprehensive procedure for recovery of the dues but also envisage constitution of quasi-judicial bodies for redressal of the grievance of any aggrieved person. Therefore, in all such cases, the High Court must insist that before availing 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 retains its character of public money ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 deducting penalty amount by revoking bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 available to the OWNER, the Engineer-in- Charge may, by written no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 definition, the petitioner cannot be said to be a buyer only because responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Conciliation Act, 1996 (26 of 1996) shall then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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