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TMI Blog2019 (10) TMI 1572X X X X Extracts X X X X X X X X Extracts X X X X ..... 19 (2) TMI 2091 - SUPREME COURT] , Section 70 falls in that Chapter of the Indian Contract Act, 1872 which deals with relationships which resemble contracts. In that sense, the provision belongs to the category of quasi contracts and restitution. Such a remedy is unusual and cannot be permitted to be invoked in the present case as the conditions for such a claim to be made, as laid down by the Hon'ble Supreme Court in State of West Bengal v. B.K. Mondal Sons, [ 1961 (12) TMI 82 - SUPREME COURT ], have not been satisfied. It is not disputed that the above order continues to operate and apply even qua ITNL. The primary dispute and claim for recovery being against ITNL/SSTL, in view of the order dated 15th October, 2018 of the NCLAT, the present suit would not be maintainable. The claims of the Plaintiff would lie only against the parties with whom it has privity i.e., ITNL/SSTL. No direct claims would be maintainable against NHIDC. In view of the above, the Defendant's application under Order VII Rule 11 CPC is liable to be allowed. - Prathiba M. Singh, J. For the Appellant : A.K. Ganguli, Senior Advocate, Dharmendra Rautray, Tara Shahani and Shivansh Jolly, Adv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9% share in SSTL, as the Engineering, Procurement and Construction Contractor (hereinafter, EPC ), under an agreement dated 9th November, 2015. 7. On 5th July, 2014, i.e. prior to the EPC agreement dated 9th November, 2015, ITNL had floated a RFP for appointment of a Construction Contractor. The Plaintiff i.e., APCO-Titan (JV), submitted its offer letter on 13th December, 2014. On 9th June, 2015, i.e., even prior to the Construction Contract between the Plaintiff and ITNL dated 11th November, 2015, a letter of intent cum notice to proceed had been issued by ITNL to the Plaintiff to commence work on the Project. 8. ITNL is a group company of Infrastructure Leasing and Financial Services Limited (hereinafter, IL FS ), against whom liquidation proceedings are pending in the National Company Law Appellate Tribunal (hereinafter, NCLAT ). Plaintiff's Case 9. The Plaintiff, who was undertaking the construction, claims to have been submitting regular Running Account Bills (hereinafter, RA Bill ) to ITNL. It states that it had imported specialised machinery for undertaking the tunnelling works, exclusively for the Project and the same was done with the knowledge and as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iff. He thus submits that under Section 70 of the Indian Contract Act, 1872, the Plaintiff is entitled to receive compensation for the work it has executed, from the Defendant, if not from ITNL. He further submits that since these are infrastructure projects in which the circulation of funds is absolutely essential, the Plaintiff cannot wait indefinitely to receive the amounts due as this would result in the Plaintiff being unable to invest in future projects. The Plaintiff has, in fact, been awarded the balance work on this very project when tenders were invited in June, 2019. Ld. Sr. Counsel submits that the amounts which are due are not under dispute ought to be paid as the Defendant does not dispute that the Plaintiff is the Construction Contractor for this Project, even on NHIDC's own website. A print out dated 17th May, 2019 from NHIDC's website relating to this project is relied upon. The said print out also shows the exact status of the project. 13. Reliance is also placed on the memorandum dated 9th March, 2019 wherein a detailed scheme has been evolved for payment in case of stuck projects . Ld. Sr. Counsel submits that the Plaintiff having executed the Projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um. Impleadment Application by SSTL and ITNL 16. During the pendency of the present suit, an application under Order I Rule 10 CPC was filed by SSTL and ITNL seeking impleadment in the present suit as Defendant Nos. 2 and 3. The applicants submit that a moratorium is operating, staying the initiation of any proceedings against IL FS and its subsidiaries, including ITNL. While the Union of India's request for a moratorium was initially rejected by the National Company Law Tribunal (hereinafter, NCLT ), on appeal, the NCLAT, vide order dated 15th October, 2018, granted a stay on the institution or continuation of any suit or other proceeding by any party against IL FS and its subsidiaries. The stand of the applicants is that a Group Level Resolution Process is currently being undertaken by the new Board of Directors of IL FS, which has been constituted as per the order of the NCLT dated 1st October, 2018. IL FS and all its group companies are now under the management of the new board, which is managing the day to day affairs of all the group companies. 17. It is further pleaded that a demand notice dated 6th February, 2019 was served by the Plaintiff on ITNL und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the Plaintiff's work had to be ultimately accepted by ITNL. The principle of Section 70, it is submitted, would not apply contrary to the express terms of a contract. 21. Reliance is also placed on Food Corporation of India Ors. v. Vikas Majdoor Kamdar Sahkari Mandli Ltd., (2007) 13 SCC 544 to argue that the principle of quantum meruit, on which Section 70 is based, does not apply when there is a specific agreement in operation. In the present case, since there is a valid agreement between the Plaintiff and ITNL, Section 70 does not come into operation. 22. Further, the amount claimed by the Plaintiff is also disputed. According to the applicants, the amount payable is not Rs. 89 crores, as has been claimed, but far lesser i.e., to the tune of approximately Rs. 56 crores. Analysis and Findings 23. The present suit is purely based on Section 70 of the Indian Contract Act, 1872. A claim for compensation has been raised against NHIDC on the ground that work has been executed by the Plaintiff, as part of the Project, which has been acknowledged by NHIDC, and since ITNL/SSTL are under liquidation, the Plaintiff ought to be compensated directly by NHIDC. 24. The un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Taking the facts in the case before us, after the respondent constructed the warehouse, for instance, it was open to the appellant to refuse to accept the said warehouse and to have the benefit of it. It could have called upon the respondent to demolish the said warehouse and take away the materials used by it in constructing it; but, if the appellant accepted the said warehouse and used it and enjoyed its benefit then different considerations come into play and Section 70 can be invoked. Section 70 occurs in Chapter V which deals with certain relations resembling those created by contract. In other words, this c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITNL, in order to create an obligation on NHIDC to pay. If the main contract between the Plaintiff and the ITNL was not alive and valid or was terminate, then the Plaintiff may have had an arguable case, if it had directly delivered the works to NHIDC. That is clearly not the position. 27. In this factual background, there is no doubt that ITNL and SSTL would be proper and necessary parties to the present suit inasmuch as the entire Project has been executed by the Plaintiff under a contract with ITNL/SSTL. Hence, I.A. No. 6834/2019 is liable to be allowed and is accordingly allowed. 28. As per the affidavit of Mr. Mohan Kumar Kolli, the authorized representative of the Plaintiff, the admitted position is that ITNL - a subsidiary of IL FS, with whom the Plaintiff has an agreement, is under insolvency proceedings. This is clear from a reading of paragraph 2 of the Affidavit, which is extracted herein below: - I state that the proceedings against Infrastructure Leasing and Financial Services Limited ('IL FS') group companies were pending prior to filing of the present suit. Union of India in a petition preferred before the National Company Law Tribunal, Mumbai ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been classified as a 'Red Entity' which cannot secure its financial creditors. The said impleadment application was withdrawn vide order dated 12th July, 2019. 31. The NCLAT's order dated 15th October, 2018 is clear in its terms. The relevant portion of the same reads as under:- ... Taking into consideration the nature of the case, larger public interest and economy of the nation and interest of the Company and 348 group companies, there shall be stay of (i) The institution or continuation of suits or any other proceedings by any party or person or Bank or Company, etc. against IL FS' and its 348 group companies in any Court of Law/Tribunal/Arbitration Panel or Arbitration Authority; and (ii) Any action by any party or person or Bank or Company, etc. to foreclose, recover or enforce any security interest created over the assets of 'IL FS' and its 348 group companies including any action under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002; (iii) The acceleration, premature withdrawal or other withdrawal, invocation of any term loan, corporate loan, bridge loan, commercial paper, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt before making any payments to either SSTL and ITNL in respect of this project. The interim order dated 10th May, 2019 shall continue. The same shall be subject to such order(s) as may be passed by the NCLAT. Accordingly, IA 5576/19, praying for the direction that the Defendant not disburse any amounts in favour of SSTL or ITNL until the disposal of the present application and the suit filed by the Plaintiff, is disposed of. 'Stuck Projects' 33. The response of the Government in respect of the interpretation of stuck projects , as per the memorandum dated 9th March, 2019, is that a sub-contractor is not entitled to payment. Only the Concessionaire/Contractor can be paid. The scheme for resolution of stuck projects, attached to the memorandum dated 9th March, 2019, reads as under:- . (i) Stuck Projects awarded under EPC Mode: The projects awarded under the EPC mode, which qualify as Stuck Projects, recourse may be taken to fore-closure of the EPC Agreement vide a Supplementary Agreement mutually agreed and executed between the Parties. The Authority would pay for the executed/completed work in terms of milestone payment criteria set forth in Schedule- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarded Project. 36. This dispute highlights the quagmire in which construction contracts are embroiled. While the office memorandum dated 9th March, 2019 does partially intend to solve this problem, considering that there are a large number of sub-contractors who may be awaiting payments, the Government ought to evolve a mechanism for making payments on a case to case basis, especially in those cases where the contractor is in financial difficulty or is undergoing insolvency proceedings etc. A re-think is required to address such situations in order to resolve disputes between contractors and sub- contractors, if the intention is to ensure that infrastructure projects are not impeded and are smoothly implemented. Accordingly, it is directed that a meeting be held between the Secretary, MORTH, representatives of the Plaintiff and the newly impleaded Defendants, to attempt a resolution of the payments to the sub-contractor. The meeting shall be held on or before 15th November 2019 and the decision taken shall be communicated to the Plaintiff. The time of four weeks given to the Plaintiff to approach NCLAT, shall run from 25th November 2019, by which time the proposal for resolut ..... X X X X Extracts X X X X X X X X Extracts X X X X
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