Question
The Plaintiff Enoch Infra build LLP, carries on the business of construction and infrastructure development. Archon, Archon Power infra India Pvt. Ltd. is a company
The Plaintiff Enoch Infra build LLP, carries on the business of construction and infrastructure development. Archon, Archon Power infra India Pvt. Ltd. is a company registered under the Companies Act, 1956
Sometime in or around July 2016, Archon was awarded a tender by BPCL to
construct anew plant shed and also complete allied civil, structural and enabling works at BPCL's bottling plant situated at Budge Budge, West Bengal. Mr. Kapil Sharma represented that the total value of the contract was approximately Rs. 17.73 crores.
Mr. Sharma of Archon represented that it needed a sub-contractor for executing the various works which the Plaintiff expressed its willingness to do. Subsequently, parties entered in a Sub-Contract Agreement dated 07th March, 2017.
A few relevant clauses of the Sub-contract Agreement dated 7th March, 2017 are
as follows:
Clause 1 stipulated that Archon shall be the main contractor and the Plaintiff shall be the sub-contractor.
Clause 4 stipulated that all payments from BPCL shall be received in the Dena Bank
account of Archon. Archon undertook to release 50% of the payments immediately
upon receipt from BPCL.
Clause 6 inter alia stated that all charges, materials, labour and overheads shall be borne by both the Plaintiff and Archon equally.
On 24thAugust, 2017 the Plaintiff and Archon entered into a Supplementary Agreement to modify the earlier Sub-contract Agreement. The Supplementary Agreement modified the profit-sharing ratio from the earlier 50:50 ratio to 32:68. Another relevant clause of the Supplementary Agreement stated that all remaining
financial arrangements shall be arranged by the Plaintiff from its own funds and
the future revenue receipts generated from the said project. Clause 4 of the
Agreement inter alia stated that the new HDFC Bank current account of Archon
shall be operated by an authorized person from Enoch.
During the subsistence of the agreements a few disputes pertaining to the
management of receipts from BPCL cropped up. It was the Plaintiff's case that
Archon was diverting funds from the accounts instead of paying the Plaintiff and
or utilizing the amounts to ward the said project.
During the subsistence of the Agreement, Enoch made numerous payments to the various vendors, workers etc. for both projects. A majority of these payments were form Enoch's own bank account. However, none of the moneys received by BPCL were being credited to Enoch. These shall be elaborated subsequently. Sometime in or around May2018 Enoch discovered that it no longer was authorized to operate the HDFC Bank account of Archon contrary to Clause 4 of the Supplementary Agreement of 24th August 2017.
On 16th July, 2018 Enoch addressed a letter to BPCL stating that Archon had been diverting funds from its account without paying Enoch sub-contractor its share as
determined by the three agreements entered into between the parties. The Letter
called upon BPCL to make all the payments pertaining to the project into Enoch's
account. The letter inter alia also stated that despite a payment of Rs. 2.41 crores
to Archon, Archon had not paid any amounts to Enoch but had diverted the said
funds. Similarly, amounts vide RA Bills No. 8 to 13 totaling Rs, 2.22 crores were
utilized by Enoch in the project itself. The letter called upon BPCL to withhold any
further payments to Archon and called upon it to make payments to the new
account wherein Enoch was the sole signatory.
Archon became aware of the aforementioned communication and addressed a
letter to Enoch requesting it to not make any communications with BPCL. It is pertinent to note that by the letter dated 24th July, 2018 Archon did not deny any
of the contents of the aforementioned letter.
By a letter dated 3rd August, 2018 the Archon blatantly denied the contents of the
letter and to the shock and surprise of Enoch, stated that the Agreement mentioned in Enoch's letter were never termed as sub-contract agreement but
merely as profit sharing work jointly agreed by both parties to carry out
construction work for the said project.
Ultimately it was discovered that Archon did not inform BPCL of Enoch's role as a sub-contractor. This is because the agreement with BPCL stipulated that Archon cannot appoint any sub-contractor without its permission. BPCL initiated proceedings against Archon for failing to disclose BPCL as a sub-contractor and has sought to blacklist Archon for breach of its agreement with BPCL by appointing a subcontractor. Archon denied that Enoch was a sub-contractor but has stated that Enoch was merely a financial partner.
1.What remedy does Enoch have? On what ground do you suggest it file a case against Archon? What can it claim?
2.Can Enoch recover anything from BPCL directly?
3.Is Archon in breach of Contract by appointing a sub-contractor? Can Archon be blacklisted for this?
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