08 March 2021 | Laxmi Civil Engineering Services Ltd. and others v. Gail (India) Limited | Vibhu Bakhru J | 2021 SCC OnLine Del 2867

The first petitioner was the Contractor, and this term was defined by the contract to include the Contractor’s “permitted assigns.” The other petitioners were the sub-contractors appointed by the Contractor with GAIL’s approval. The work order the Contractor had placed with the sub-contractors read, “the Company hereby assigns work of civil work …”

Arguing that the sub-contractors fell within the definition of “Contractor’ and became parties to the contract, the Contractor and the sub-contractors requested the Delhi High Court to appoint an arbitrator to arbitrate their dispute with GAIL.

Rejecting the argument, the court held, the work order assigned some work and not the contract, both were materially different. An assignment entails assigning all rights and obligations and the assignee steps into the assignor's shoes.

Also, it held that a clause in the contract requiring that the Contractor obtains from the sub-contractors an undertaking did not constitute a contract between GAIL and the sub-contractor. Lastly, payments made by the sub-contractors to GAIL did not constitute a contract either; it was made at the instance and on behalf of the Contractor.

An appointment was made to arbitrate the dispute leaving out the sub-contractors.

See the judgment here.