Tribunal Overruled: Subcontractor's Claim Against Electricity Board Reinstated

 


This case involves a dispute between M/s Star Electricals (the Petitioner), a proprietorship firm, and The State Of Electricity Board Now North Bihar Power Distribution Company and others (the Respondents). The case was heard in the High Court of Judicature at Patna.

Background:

  • The 6th Respondent, M/s Genus Power Infrastructure Ltd., was awarded a contract by Respondent Nos. 1 to 5 (the Electricity Board) for the installation of electric meters.
  • M/s Genus Power Infrastructure Ltd. then engaged the Petitioner, M/s Star Electricals, as a sub-contractor to carry out the installation work.
  • The Petitioner completed part of the work, but some payments for the meters installed in Raxaul and Bettiah Electric Supply Divisions were not received.
  • The Petitioner approached the Electricity Board for payment, but they were directed to contact Respondent No. 6.
  • Aggrieved, the Petitioner filed a case before the Bihar Public Work Contract Dispute Arbitration Tribunal (the Tribunal) seeking direction for payment.

Tribunal's Decision:

  • The Tribunal rejected the Petitioner's application, stating that the Petitioner was not a party to the contract and therefore not competent to raise a dispute under the Bihar Public Work Contract Dispute Arbitration Tribunal Act, 2008 (the Tribunal Act).

High Court Proceedings:

  • The Petitioner filed a writ petition in the Patna High Court seeking to quash the Tribunal's order and for a direction to the Tribunal to adjudicate the dispute.
  • The Petitioner argued that as a sub-contractor/executor, they fall within the definition of "party" under Section 2(g) of the Tribunal Act, 2008.
  • Respondent Nos. 1 to 5 contended that there was no privity of contract between the Electricity Board and the Petitioner, and that the Petitioner's grievances were against Respondent No. 6.

Petitioner's Arguments:

  • The Petitioner argued that the Tribunal Act, 2008 was constituted to arbitrate disputes arising from work contracts to which the State Government or a public undertaking is a party.
  • The Petitioner relied on the definition of "party" in Section 2(g) of the Tribunal Act, 2008, which includes "executors".
  • The Petitioner presented dictionary definitions of "executor" to argue that they, as the entity carrying out the work, fit this definition.
  • The Petitioner cited a Supreme Court judgment (Commercial Taxation Officer, Udaipur Versus M/s Rajasthan Taxchem Ltd.) to support their interpretation of the word "includes" in the definition.
  • The Petitioner also referred to Section 2(k)(iii) of the Tribunal Act, 2008, which states that undefined words should have the same meaning as in the Arbitration Act.
  • The Petitioner cited Sections 41 and 70 of the Indian Contract Act, 1872, arguing that the Electricity Board benefited from their work and should compensate them.
  • The Petitioner presented case law (Bharat Petroleum Corporation Ltd. Vs. Great Eastern Shipping Co. Ltd. and Hyderabad Municipal Corporation Vs M. Krishnaswami Mudaliar & Anr.) to argue that acceptance of work can be implied through conduct, even without a formal agreement.

Respondents' Arguments:

  • Respondent Nos. 1 to 5 argued that the Tribunal was correct in rejecting the Petitioner's claim because the Petitioner was not a party to the agreement.
  • They contended that the definition of "party" in the Arbitration and Conciliation Act, 1996, should be considered, not the definition in the Tribunal Act, 2008.
  • They cited Section 8 of the Tribunal Act, 2008, which states that the Arbitration & Conciliation Act, 1996, prevails in case of conflict.
  • They referred to a Supreme Court judgment (State of Bihar Vs M/s Brahmaputra Infrastructure Limited) regarding the applicability of the Arbitration and Conciliation Act, 1996.

High Court's Decision:

  • The High Court held that the definition of "Party" under the Tribunal Act, 2008, has a wider scope than under the Arbitration and Conciliation Act, 1996.
  • The Court stated that since the Tribunal Act, 2008 defines "Party," the definition from the Arbitration and Conciliation Act, 1996, does not apply.
  • The High Court concluded that the Petitioner, as an "executor" of the work, falls under the meaning of "Party" as defined in Section 2(g) of the Tribunal Act, 2008.
  • The Court found that the Tribunal's rejection of the Petitioner's claim was illegal and arbitrary.
  • The High Court set aside the Tribunal's order and remanded the matter back to the Tribunal for adjudication, directing them to settle the dispute within four months.
  • The High Court explicitly stated that a sub-contractor who executes work on behalf of the contractor can be termed a "Party" under Section 2(g) of the Tribunal Act, 2008.