Sub-Contractor Stranger to Contract with Employer – Cannot Compel Arbitration against Employer – Ruling of the Supreme Court
Judgment dated 9.12.2025 of the Supreme Court in Civil Appeal No.14647 of 2025 of Hindustan Petroleum Corporation Ltd Vs. BCL Secure Premises Pvt Ltd.
There was no privity of contract between HPCL and BCL – sub-contractor. The respondent was the sub-contractor of main contractor AGC. HPCL & sub-contractor were operating on separate orbits and there was no intention to bind BCL sub-contractor to the main contract between HPCL & AGC.
In that context, the question was whether the appellant HPCL was veritable party i.e. truly, genuinely and for all intended purposes necessary to the arbitral proceedings of the respondent sub-contractor with the AGL main contractor and the employer.
The appellant Corporation had given contract for supply, installation, integration, testing and commissioning of Tank Truck Locking System to M/s. AGC Networks.
Clauses 3.17 and 5 of the General Terms and Conditions of Works Contract to contend that there was express prohibition to sub-let, sub-contract or assign the work or any share of interest thereof without the prior consent of the owner obtained in writing.
The respondent – subcontractor BCL informed the Corporation that it was working as sub-vendor and entitled to receive 94% of the payment. This was denied on the ground that the Corporation had no contract with BCL.
BCL invoked arbitration that the main contract AGL had agreement on 15.1.2014 on back-to-back basis with it for the entire performance of the contract. The said agreement provided for arbitration.
On 31.10.2023, there was assignment agreement between AGL contractor and BCL to assign receivables of AGC from HPCL to the sub-contractor BCL.
It was HELD that the Referral Court cannot be relegated to the status of a monotonous automation. It would lead to disastrous consequences, where absolutely stranger could walk into the Referral Cout and contend that the matter has to perforce go to the Arbitral Tribunal for decision on the veritable nature of the party.
