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Sunday, October 27, 2013

Whether there is an arbitration clause in contract agreement - No - aggrieved party remedy is only civil court = = M/s. P. Dasaratharama Reddy Complex … Appellant versus Government of Karnataka and another … Respondents - http://judis.nic.in/supremecourt/imgst.aspx?filename=40902

Whether there is an arbitration clause in contract agreement - No -
aggrieved party remedy is only civil court =

 Leave granted in SLP (C) Nos. 16117 of 2004, 17147 of 2004,  24655  of
 2004, 26073 of 2004, 5951 of 2006, 12552 of 2006,  12553 of 2006,  8597  of
2009, 28087-28088 of 2011, 28089 of 2011,  29227-29330  of  2011,  31975  of
2011 and 13528 of 2012.

2.    Of the above noted 23 appeals, 17 have been filed  by  those  who  had
been  awarded  contracts  by  the  Government  of   Karnataka   and/or   its
agencies/instrumentalities for execution of  the  particular  project/works.

They have challenged the orders  passed  by  the  Designated  Judge/Division
Benches of the Karnataka High Court rejecting their prayer  for  appointment
of Arbitrator in terms of the clauses relating to  settlement  of  disputes.

One appeal has been filed by the contractor  who  was  awarded  construction
contract by Nagarika Yogbakashema Mathu Gruha Nirmana Sahakara  Sangha.
The
remaining 5 appeals have been filed by  Karnataka  Neeravari  Nigam  Limited
and Kirshna Bhagya Jala Nigam Limited for setting aside  the  orders  passed
by the learned Designated Judge whereby  he  directed  the  concerned  Chief
Engineer to act as an Arbitrator. =

  “Clause-29: 
(a) If any dispute or difference of any kind whatsoever were  to
arise  between  the  Executive  Engineer/Superintending  Engineer  and   the
Contractor regarding the following matters namely,

(i)   The meaning of the specifications designs, drawings  and  instructions

herein before mentioned;

(ii)  The quality of workmanship or material used on the work and


(iii) Any other questions, claim right, matter, thing,  whatsoever,  in  any

way  arising  out  of  or  relating  to  the   contract  designs,  drawings,
specifications estimates, instructions, or orders, or  those  conditions  or
failure to execute the same whether arising  during  the  progress  of'  the
work, or after the  completion,  termination  or  abandonment  thereof,  
the
dispute shall, in the first place, be referred to  the  Chief  Engineer  who
has jurisdiction  over  the  work  specified  in  the  contract.  
The  Chief
Engineer shall within a period  of  ninety  days  from  the  date  of  being
requested by the Contractor to do so, given written notice of  his  decision
to the contractor.

Chief Engineer's decision final

(b)   Subject to other form of  settlement  hereafter  provided,  the  Chief
Engineer's decision in respect of every dispute or  difference  so  referred
shall be final and binding upon the  Contractor.  
The  said  decision  shall
forthwith  be  given  effect  to  and  contractor  shall  proceed  with  the
execution of the work with all due diligence.

Remedy when Chief Engineer's decision is not acceptable to Contract


(c)   In case the decision of the Chief Engineer is not  acceptable  to  the

contractor, he may approach the Law Courts  at  for  settlement  of  dispute
after giving due written notice in this regard to the Chief Engineer  within
a period of ninety days from the date of receipt of the  written  notice  of
the decision of the Chief Engineer.

Time limit for notice to approach law Court by Contractor


(d)   If the Chief Engineer has given written notice of his decision to  the

Contractor and no  written  notice  to  approach  the  law  court  has  been
communicated to him by the Contractor within a period of  ninety  days  from
receipt of such notice, the said decision shall be final  and  binding  upon
the Contractor.

Time limit for notice to approach law court by contractor when  decision  is

not given by CE as at (b)

(e)   If the Chief Engineer fails to give notice of his  decision  within  a

period of ninety days  from  the  receipt  of  the  Contractors  request  in
writing for settlement of  any  dispute  or  difference  as  aforesaid,  the
contractor may within ninety days  after  the  expiry  of  the  first  named
period of ninety days approach the Law Courts at giving due  notice  to  the
Chief Engineer.

Contractor to execute and complete work pending settlement of disputes;


(f)   Whether the claim is referred to the Chief  Engineer  or  to  the  Law

Courts, as the case may be, the contractor  shall  proceed  to  execute  and
complete the works with all due diligence pending  settlement  of  the  said
dispute or differences.

Obligations of the Executive Engineer and Contractor shall remain  unsettled

during consideration of dispute.

(g)   The reference of any dispute or difference to the  Chief  Engineer  or

the Law Court may proceed notwithstanding that the works shall  then  be  or
be alleged to be complete, provided  always  that  the  obligations  of  the
Executive Engineer and the Contractor shall not be altered by reason of  the
said dispute or difference being referred to the Chief Engineer or  the  Law
Court during the Progress of the works.”
                                                         (emphasis supplied)
 The above clause requires the contractor specifically to
approach the civil court, if he is not satisfied with the  decision  of  the Chief Engineer.
 It does  not  provide  for  reference  to  arbitration.  But
contrary to the specific term  of  clause  29,  the  petitioner  has  sought appointment of Arbitrator instead of approaching the Civil Court.

 In the result, Civil Appeal Nos. 1586, 1587, 1588, 4187,  5496,  6323,
6327 and 6328 of 2004; Civil Appeal Nos.  558-560  of  2006;  Civil  Appeals
arising out of SLP(C) Nos. 16117, 17147, 24655  and  26073  of  2004;  Civil
Appeals arising out of SLP(C) Nos. 5951, 12552  and  12553  of  2006,  Civil
Appeal arising out of SLP(C) No. 8597 of 2009 and Civil Appeal  arising  out
of SLP(C) No. 13528 of 2012 are dismissed.  
However,  liberty  is  given  to
the appellants to  avail  appropriate  legal  remedy  for  recovery  of  the
amount, if any, due from the respondents.

 Civil Appeals arising out of SLP(C) Nos.  28087-28088,  28089,  29227-

29230 and 31975 of 2011 and Civil Appeal No.1374 of 2013  are  allowed.  The
orders  passed  by  the  Designated  Judge,  which  are  subject  matter  of
challenge in the five appeals are set aside. 
 It  is,  however,  made  clear
that the respondents shall be free to avail appropriate legal  remedies  for
recovery of  the  amount,  if  any,  payable  to  them  in  terms  of  their
respective agreements.

                                                               REPORTABLE

                 IN THE SUPREME COURT OF INDIA

                 CIVIL APPELLATE JURISDICTION

                 CIVIL APPEAL NO. 1586 OF 2004


M/s. P. Dasaratharama Reddy Complex                  … Appellant

                                   versus

Government of Karnataka and another                        … Respondents

                             WITH

                        CIVIL APPEAL NO. 1587 OF 2004

                        CIVIL APPEAL NO. 1588 OF 2004

                        CIVIL APPEAL NO. 4187 OF 2004

                        CIVIL APPEAL NO. 5496 OF 2004

                        CIVIL APPEAL NO. 6323 OF 2004

                        CIVIL APPEAL NO. 6327 OF 2004

                        CIVIL APPEAL NO. 6328 OF 2004

                      CIVIL APPEAL NOS. 558-560 OF 2006

                        CIVIL APPEAL NO. 1374 OF 2013

                       CIVIL APPEAL NO. 9459  OF 2013
                  (arising out of SLP(C) No. 16117 OF 2004)

                        CIVIL APPEAL NO.9460  OF 2013
                  (arising out of SLP(C) No. 17147 OF 2004)

                       CIVIL APPEAL NO. 9461  OF 2013
                  (arising out of SLP(C) No. 24655 of 2004)

                       CIVIL APPEAL NO. 9462  OF 2013
                  (arising out of SLP(C) No. 26073 of 2004)

                       CIVIL APPEAL NO. 9463  OF 2013
                  (arising out of SLP(C) No. 5951 of 2006)

                        CIVIL APPEAL NO.9464  OF 2013
                  (arising out of SLP(C) No. 12552 of 2006)

                         CIVIL APPEAL NO.9465  OF 2013
                  (arising out of SLP(C) No. 12553 of 2006)

                        CIVIL APPEAL NO.9466  OF 2013
                  (arising out of SLP(C) No. 8597 of 2009)

                      CIVIL APPEAL NOS.9467-68  OF 2013
              (arising out of SLP(C) Nos. 28087-28088 of 2011)

                       CIVIL APPEAL NO. 9469  OF 2013
                  (arising out of SLP(C) No. 28089 of 2011)

                       CIVIL APPEAL NOS.9470-73  OF 2013
              (arising out of SLP(C) Nos. 29227-29230 of 2011)

                       CIVIL APPEAL NO. 9474  OF 2013
                  (arising out of SLP(C) No. 31975 of 2011)

                                     AND

                        CIVIL APPEAL NO.9475  OF 2013
                  (arising out of SLP(C) No. 13528 of 2012)



                               J U D G M E N T


G. S. Singhvi, J.

1.    Leave granted in SLP (C) Nos. 16117 of 2004, 17147 of 2004,  24655  of
 2004, 26073 of 2004, 5951 of 2006, 12552 of 2006,  12553 of 2006,  8597  of
2009, 28087-28088 of 2011, 28089 of 2011,  29227-29330  of  2011,  31975  of
2011 and 13528 of 2012.

2.    Of the above noted 23 appeals, 17 have been filed  by  those  who  had
been  awarded  contracts  by  the  Government  of   Karnataka   and/or   its
agencies/instrumentalities for execution of  the  particular  project/works.

They have challenged the orders  passed  by  the  Designated  Judge/Division
Benches of the Karnataka High Court rejecting their prayer  for  appointment
of Arbitrator in terms of the clauses relating to  settlement  of  disputes.

One appeal has been filed by the contractor  who  was  awarded  construction
contract by Nagarika Yogbakashema Mathu Gruha Nirmana Sahakara  Sangha.
The
remaining 5 appeals have been filed by  Karnataka  Neeravari  Nigam  Limited
and Kirshna Bhagya Jala Nigam Limited for setting aside  the  orders  passed
by the learned Designated Judge whereby  he  directed  the  concerned  Chief
Engineer to act as an Arbitrator.

3.    For the sake of convenience,  we  shall  notice  the  facts  from  the
record of Civil Appeal No.1586  of   2004  -  
M/s.  P.  Dasaratharama  Reddy Complex v. The Government of Karnataka and another
because  arguments  were
advanced with reference to that case.

4.    The appellant is a contractor  engaged  in  executing  work  contracts
awarded by the Government of Karnataka and its instrumentalities.
In  1996,
the appellant was  awarded  contract  for  construction  of  bridge  between
Yethabadi-Buyyanadoddi across Shimsha river  in  Malavalli.  
The  appellant
did not complete the work by alleging lack of cooperation  on  the  part  of
Chief Engineer, Communication and Building  (South),  Bangalore  (respondent
No.2) and then lodged claim for payment of the amount allegedly due to  him.

After some time, the appellant filed an  application  under  Section  11(6)
and (8) of the Arbitration and Conciliation Act, 1996 (for short, ‘the  1996
Act’) for appointment of an Arbitrator for adjudication of all the  disputes
pertaining to Contract No.5/96-97 dated 8.5.1996.
The Chief Justice of  the
High Court assigned the application to the Designated Judge,  who  dismissed
the same vide order dated 14.9.2001 by relying upon the judgment  in  Mysore
Construction Company v. Karnataka Power Corporation Ltd. ILR 2000 KAR  4953.
 Paragraphs 5 and 6 of that order read as under:

“5.   The above clause requires the contractor specifically to
approach the civil court, if he is not satisfied with the  decision  of  the Chief Engineer.
 It does  not  provide  for  reference  to  arbitration.  But
contrary to the specific term  of  clause  29,  the  petitioner  has  sought appointment of Arbitrator instead of approaching the Civil Court.

6.    I had occasion to consider the question 
whether such a  clause  is  an
arbitration agreement in Mysore Construction  Company  Vs.  Karnataka  Power
Corporation Ltd. [ILR 2000 KAR 4953] and held that the said  clause  is  not
an arbitration agreement. Following the said decision and  for  the  reasons
stated therein, it has to be held that clause 29 relied on by petitioner  is
not an arbitration agreement.”


5.        The writ petition filed by the appellant questioning the order  of
the Designated Judge was dismissed by the Division Bench of the  High  Court
by observing that
Clause 29 of  the  Contract  cannot  be  construed  as  an
Arbitration Agreement or an Arbitration Clause for settlement of disputes.

6.    In some of the other  appeals,  the  appellants  have  challenged  the
orders passed by the  Designated  Judge  rejecting  their  applications  for
appointment of Arbitrator under the  relevant  clause  of  their  respective
agreements.

7.    In the 5  appeals,  Karnataka  Neeravari  Nigam  Limited  and  Krishna
Bhagya  Jala  Nigam  Limited  have  challenged  the  orders  passed  by  the
Designated Judge for appointment of the Chief Engineer as an Arbitrator  and directed him to adjudicate the matter in dispute.

THE ARGUMENTS
8.    Mrs. Kiran Suri, Senior Advocate and other learned  counsel  appearing
for the contractors argued that the impugned orders are  liable  to  be  set
aside because the learned Designated Judge and the  Division  Bench  of  the
High Court  misconstrued  the  relevant  clauses  of  the  agreements.
She
further argued that in view of the judgment of the  Division  Bench  of  the
High Court in Karnataka State Road Transport Corporation and another  v.  M.
Keshava Raju 2004 (1) Arb. LR 507 and  of  this  Court  in  Smt.  Rukmanibai
Gupta v. Collector, Jabalpur and others (1980) 4  SCC  556,  Krishna  Bhagya
Jala Nigam Limited v. G. Harishchandra Reddy and another (2007) 2  SCC  720,
Punjab State and others v. Dina Nath  (2007) 5 SCC 28, State of  Orissa  and
others v. Bhagyadhar Dash (2011) 7 SCC 406,  Bharat Bhushan Bansal v. U.  P.
Small Industries Corporation Ltd., Kanpur (1999) 2 SCC 166 and  K.  K.  Modi
v. K.  N.  Modi  and  others   (1998)  3CC  573,   the  judgment  in  Mysore
Construction Company v. Karnataka Power Corporation Limited  (supra)  cannot
be treated as laying down correct law. Mrs. Suri also  relied  upon  Section
20 of the Arbitration Act, 1940 (for short, ‘the 1940 Act’) and argued  that
Clause 29 of the  agreement  executed  between  appellant  P.  Dasaratharama
Reddy Complex and the Government of Karnataka and similar clauses  contained
in other agreements provide for resolution of disputes  by  arbitration  and
the  High  Court  committed  serious  error  by  refusing  to   appoint   an
Arbitrator.

9.    Shri Naveen R. Nath,  learned  counsel,  who  appeared  on  behalf  of
Krishna Bhagya Jala Nigam Limited and  Karnataka  Neeravari  Nigam  Limited,
who are the appellants in the five appeals and respondents in  some  of  the
other cases argued that
Clause 29 of  the  agreement  executed  between  the
appellant and the Government of Karnataka in Civil Appeal  No.1586  of  2004
and similar clauses in other agreements are in the  nature  of  departmental
dispute  resolution  mechanism  and  the  same  cannot  be  treated  as   an
arbitration clause.
He pointed  out  that  Clause  29  and  similar  clauses
contained in other agreements neither postulate hearing of  the  parties  by
the Chief Engineer nor he can adjudicate the  dispute.   Shri  Nath  pointed
out that the relevant clauses in the agreements  entered  into  between  the
parties provide for settlement of disputes  through  Court  and,  therefore,
the decision, if any, taken by the Chief Engineer cannot be  treated  as  an
award of the Arbitrator.

10.   We have considered  the  respective  submissions.
 Clause  29  of  the
Agreement  entered  into  between  the  parties  (the  appellant   and   the
respondents in Civil Appeal No.1586/2004) and majority of other  cases  read
as under:

“Clause-29: 
(a) If any dispute or difference of any kind whatsoever were  to
arise  between  the  Executive  Engineer/Superintending  Engineer  and   the
Contractor regarding the following matters namely,

(i)   The meaning of the specifications designs, drawings  and  instructions
herein before mentioned;

(ii)  The quality of workmanship or material used on the work and

(iii) Any other questions, claim right, matter, thing,  whatsoever,  in  any
way  arising  out  of  or  relating  to  the   contract  designs,  drawings,
specifications estimates, instructions, or orders, or  those  conditions  or
failure to execute the same whether arising  during  the  progress  of'  the
work, or after the  completion,  termination  or  abandonment  thereof,  
the
dispute shall, in the first place, be referred to  the  Chief  Engineer  who
has jurisdiction  over  the  work  specified  in  the  contract.  
The  Chief
Engineer shall within a period  of  ninety  days  from  the  date  of  being
requested by the Contractor to do so, given written notice of  his  decision
to the contractor.

Chief Engineer's decision final
(b)   Subject to other form of  settlement  hereafter  provided,  the  Chief
Engineer's decision in respect of every dispute or  difference  so  referred
shall be final and binding upon the  Contractor.  
The  said  decision  shall
forthwith  be  given  effect  to  and  contractor  shall  proceed  with  the
execution of the work with all due diligence.

Remedy when Chief Engineer's decision is not acceptable to Contract

(c)   In case the decision of the Chief Engineer is not  acceptable  to  the
contractor, he may approach the Law Courts  at  for  settlement  of  dispute
after giving due written notice in this regard to the Chief Engineer  within
a period of ninety days from the date of receipt of the  written  notice  of
the decision of the Chief Engineer.

Time limit for notice to approach law Court by Contractor

(d)   If the Chief Engineer has given written notice of his decision to  the
Contractor and no  written  notice  to  approach  the  law  court  has  been
communicated to him by the Contractor within a period of  ninety  days  from
receipt of such notice, the said decision shall be final  and  binding  upon
the Contractor.

Time limit for notice to approach law court by contractor when  decision  is
not given by CE as at (b)

(e)   If the Chief Engineer fails to give notice of his  decision  within  a
period of ninety days  from  the  receipt  of  the  Contractors  request  in
writing for settlement of  any  dispute  or  difference  as  aforesaid,  the
contractor may within ninety days  after  the  expiry  of  the  first  named
period of ninety days approach the Law Courts at giving due  notice  to  the
Chief Engineer.

Contractor to execute and complete work pending settlement of disputes;

(f)   Whether the claim is referred to the Chief  Engineer  or  to  the  Law
Courts, as the case may be, the contractor  shall  proceed  to  execute  and
complete the works with all due diligence pending  settlement  of  the  said
dispute or differences.

Obligations of the Executive Engineer and Contractor shall remain  unsettled
during consideration of dispute.

(g)   The reference of any dispute or difference to the  Chief  Engineer  or
the Law Court may proceed notwithstanding that the works shall  then  be  or
be alleged to be complete, provided  always  that  the  obligations  of  the
Executive Engineer and the Contractor shall not be altered by reason of  the
said dispute or difference being referred to the Chief Engineer or  the  Law
Court during the Progress of the works.”
                                                         (emphasis supplied)


11.   Clause 7 of the Agreement,
which was subject matter  of  consideration
in Civil Appeal No.4187/2004 – C.C.  Kondaiah  v.  the  Secretary,  Nagarika
Yogbakashema Mathu Gruha Nirmana Sahakara Sangha, reads thus:

“7. In all matters  of  dispute  arising  out  of  this  contract  agreement
regarding the quality of materials, work, etc., the decision  of  the  Board
of Directors of the Sangha, shall be final and binding on the  part  of  the
Contractor.”


12.   Clause 66 of the contract, which is subject  matter  of  consideration
in the appeals arising out of SLP(C)Nos. 31975/2011  and  13528/2012,  reads
thus:

      “Clause 66 : SETTLMENT OF DISPUTES:

66. If any disputes or difference of any kind whatsoever and  contractor  in
connection with, or raising out of the contract or the execution  of  works,
whether during the progress of the  works  or  after  their  completion  and
whether before or  after  the  termination  abandonment  or  breach  of  the
contract, it shall, in the first place, be referred to and  settled  by  the
Engineer who shall, within a period of forty five  days  from  the  date  of
being requested by the contractor to do  so,  give  written  notice  of  his
decision to the contractor.

Subject to other form of settlement hereafter  provided,  such  decision  in
respect of every dispute or  difference  so  referred  shall  be  final  and
binding upon the contractor. The said  decision  shall  forthwith  be  given
effect to, and the contractor shall proceed with the execution of the  works
with all due diligence.  In  case  the  decision  of  the  Engineer  is  not
acceptable to the contractor, he may approach the law courts for  settlement
of dispute after giving due written notice in this regard  to  the  Engineer
within a period of forty five days form the date of receipt of  the  written
notice of the decision of the Engineer. If the Engineer  has  given  written
notice of his decision to the contractor and no written notice  to  approach
the law courts has been communicated to  him  by  the  contractor  within  a
period of forty five days from receipt of such  notice,  the  said  decision
shall be final and binding upon the contractor. If the Engineer  shall  fail
to give notice of his decision within a period of forty five days  form  the
receipt of the  contractor's  request  in  writing  for  settlement  of  any
dispute or difference as aforesaid, the contractor  may  within  forty  five
days after the expiration of the first  named  period  of  forty  five  days
approach the law courts, giving due notice  to  the  Engineer.  Whether  the
claim is referred to the Engineer or the law courts, as  the  case  may  be,
the contractor shall proceed to execute and complete the works with all  due
diligence pending  settlement  of  the  said  dispute  or  differences.  The
reference of any dispute or difference to the engineer  or  law  courts  may
proceed not withstanding that the works shall then be or be  alleged  to  be
complete, provided always that the  obligations  of  the  Engineer  and  the
contractor shall not be altered by reason of the said dispute or  difference
being referred to the engineer or law courts  during  the  progress  of  the
works.

Neither party is entitled to bring a claim to resolution of disputes if  the
dispute or differences are not notified in writing within thirty  (30)  days
after expiration of the maintenance period.”

                                                         (emphasis supplied)


13.   Clause 67 of the contract, which is subject  matter  of  consideration
in the appeal arising out of SLP(C) No.12553/2006, reads thus:

“SETTLEMENT OF DISPUTES

67) If any dispute or difference of any kind whatsoever shall arise  between
the Engineer and the Contractor in connection with, or arising  out  of  the
Contract, or the execution of works, whether  during  the  progress  of  the
works  or  after  their  completion  and  whether  before   or   after   the
termination, abandonment or breach of the Contract, it shall, in  the  first
place, be referred to and settled  by  the  Engineer  who  shall,  within  a
period of ninety days from the date of being requested by the Contractor  to
do so, give written notice of his decision of the Contractor.

Subject to other form of settlement hereafter  provided,  such  decision  in
respect of every dispute or  difference  so  referred  shall  be  final  and
binding upon the Contractor. The said  decision  shall  forthwith  be  given
effect to, and the Contractor shall proceed with the execution of the  works
with all due diligence.  In  case  the  decision  of  the  Engineer  is  not
acceptable to the Contractor, he may approach the law  Courts  at  Bangalore
for settlement of dispute after giving due written notice in this regard  to
the Engineer within a period of ninety days from the date of receipt of  the
written notice of the decision of the Engineer. If the  Engineer  has  given
written notice of his decision to the Contractor and no  written  notice  to
approach the law courts has been  communicated  to  him  by  the  Contractor
within a period of ninety  days  from  receipt  of  such  notice,  the  said
decision shall be final and binding upon the  contractor.  If  the  Engineer
shall fail to give notice of his decision within a  period  of  ninety  days
from the receipt of the Contractor's request in writing  for  settlement  of
any dispute of difference as aforesaid, the  Contractor  may  within  ninety
days after the expiration of the first named period of ninety days  approach
the law Courts at Bangalore, giving due notice to the Engineer. However  the
claim is referred to the Engineer or to the law Courts, as the case may  be,
the Contractor shall proceed to execute and complete the works with all  due
diligence pending  settlement  of  the  said  dispute  or  differences.  The
reference of any dispute or difference to the Engineer  or  law  Courts  may
proceed not withstanding that the works shall then be or be  alleged  to  be
complete, provided always that the  obligations  of  the  Engineer  and  the
Contractor shall not be altered by reason of the said dispute or  difference
being referred to the Engineer or law Courts  during  the  progress  of  the
works.”

                                                         (emphasis supplied)


14.   In Mysore Construction Company v. Karnataka Power Corporation  Limited
and others (supra), the learned Designated Judge  referred  to  the  passage
from Russell on Arbitration (19th Edition, page 59), the judgments  of  this
Court in K. K. Modi v. K. N. Modi and others (supra), Chief  Conservator  of
Forests, Rewa v. Ratan Singh Hans AIR 1967 SC 166; Smt. Rukmanibai Gupta  v.
the Collector, Jabalpur (supra); State of  Uttar  Pradesh  v.  Tipper  Chand
(1980) 2 SCC 341; State of Orissa v. Damodar Das (1996) 2  SCC  216;  Bharat
Bhushan Bansal  v.  Uttar  Pradesh  Small  Industries  Corporation  Limited,
Kanpur (1999) 2 SCC 166 and observed:

“The above decisions make it clear that an  agreement  or  a  clause  in  an
agreement can be construed as an arbitration agreement, 
only if,

(i)   it provides for or contemplates reference of  disputes  or  difference
by either party to a private forum (other  than  a  Court  or  Tribunal)  or
decision;

(ii)  it provides either expressly or  impliedly,  for  an  enquiry  by  the
private forum giving due opportunity to both  parties  to  put  forth  their
cases; and

(iii)       it provides that the decision of the forum is final and  binding
upon the parties, without recourse to any other remedy and both would  abide
by such decision.

Where there is no provision either for reference of disputes  to  a  private
forum, or for a fair and judicious enquiry,  or  for  a  decision  which  is
final and binding on  parties  to  the  dispute,  there  is  no  arbitration
agreement.”


The learned Designated Judge then analysed Clause 29  (old  Clause  67)  and
recorded his observations in the following words:

“(a)  The heading of the clause is 'settlement of  disputes'.  There  is  no
reference to either 'arbitration' or 'Arbitrator'.

(b)   Clause (a) provides that if any dispute  or  difference  of  any  kind
whatsoever to arise between the Executive  Engineer/Superintending  Engineer
and the Contractor, regarding the matters  mentioned  therein,  the  dispute
shall  in  the  first  place  be  referred  to  Chief  Engineer,   who   has
jurisdiction over the work specified in the contract. Thus the reference  to
the Chief Engineer is only the first phase of the process of  settlement  of
disputes and not the final phase of the  settlement  of  disputes.  This  is
evident from the provision that when a dispute  arises,  it  should  in  the
first place, be referred to the Chief Engineer for decision.

(c)   The reference is to a person, who has jurisdiction over  the  contract
work and  not  to  an  independent  Authority  nor  to  an  officer  of  the
Corporation, who has no connection  or  control  over  the  work.  In  other
words, the decision of Chief Engineer is a decision  by  a  person  who  has
overall supervision and charge of the execution of the work. This  gives  an
indication that the decision of the Chief Engineer is not intended to be  an
adjudication of the rights of the parties to the dispute,  but  intended  to
be a decision of one party in regard to the claim of  the  other  party,  to
enable the other party to seek relief in a  Court  of  law,  if  he  is  not
satisfied with the decision.

(d)   Sub-clause (b) provides that  subject  to  other  form  of  settlement
provided in  the  ensuing  sub-clause,  the  Chief  Engineer's  decision  in
respect of every dispute or difference  so  referred,  shall  be  final  and
binding upon the Contractor. This clause  makes  it  clear  that  the  final
remedy of the Contractor is to approach the law Court for  decision  on  the
dispute. It is also  significant  that  the  decision  given  by  the  Chief
Engineer is made final and binding upon the  Contractor  (subject  to  other
remedies specified) and not KPC. Any decision, which is  made  binding  only
on one party and  not  on  both  the  parties,  cannot  be  an  adjudicatory
decision. The very principle of adjudication of a  dispute  is  that  it  is
binding on both the parties.

(e)   Clause (c) provides that if the Contractor is not satisfied  with  the
decision of the Chief Engineer, he can approach the law Court at Karwar  for
settlement of the dispute The clause requires  the  Contractor  to  approach
the  law  Court  for  settlement  of  disputes.  If  as  contended  by   the
petitioner, the disputes are to be settled by  way  of  arbitration  by  the
Chief Engineer, acting as Arbitrator,  then  the  question  of  one  of  the
parties being permitted to approach the law Courts  for  settlement  of  the
disputes does not arise. If the Chief Engineer is  the  Arbitrator  and  his
decision is an award, then a party can approach the  Civil  Court  only  for
setting aside the award  and  not  for  settlement  of  the  disputes.  This
provision makes it clear that the decision of  the  Chief  Engineer  is  not
intended   to   be   a   decision   by   way   of   adjudication   of    the
disputes/differences between the  parties  by  way  of  arbitration  but  is
intended to be merely  a  decision  of  the  party  (employer)  which,  when
intimated to the other side, gives rise to a cause of action  to  the  other
party (Contractor) to approach the  Civil  Court  for  adjudication  of  its
dispute/claim.

(f)   Similarly, sub-clause (d) which provides that if  the  Chief  Engineer
does not give his decision within a particular period,  the  Contractor  can
approach the Civil Court for settlement of the dispute,  again  demonstrates
that no finality is intended to be attached to the  decision  of  the  Chief
Engineer and the final adjudication should be by the Civil Court and not  by
the Chief Engineer.

The scheme of Clause 29 (or  old  Clause  67)  therefore  is,  whenever  the
Contractor has a claim which is not settled by  the  Executive  Engineer  or
Superintending  Engineer,  he  has  to  make  the  claim  before  the  Chief
Engineer. If the Chief Engineer examines the matter and gives  his  decision
which is not acceptable to the Contractor, or if  the  Chief  Engineer  does
not give his decision within the  time  specified,  the  Contractor  has  to
approach  the  Civil  Court,  by  filing  a   civil   suit   and   get   his
disputes/claims adjudicated, on merits. 
Use of words 'to approach the  Civil
Court for settlement of disputes' makes it  clear  that  final  adjudicating
authority in the case of a dispute is the Civil  Court  and  not  the  Chief
Engineer. 
Thus, the Intention of the parties is not  to  refer  any  dispute
for adjudication by way of arbitration but to get  adjudicated  the  dispute
only through the normal  procedure  of  approaching  law  Courts.  
The  said
clause does not also contemplate or require the Chief Engineer to  hold  any
enquiry or hear the parties before deciding the matter. On the  other  hand,
the clause merely requires the Chief Engineer to consider the claim  of  the
Contractor and give his decision thereon. 
Such decision being on  behalf  of
KPC, the Contractor can either accept it or approach  the  Civil  Court  for
adjudication. Thus the petitioner has failed to make out two  of  the  three
ingredients  --  requirement  of  enquiry  by  the   named   Authority   and
requirement of finality by a binding decision.”


15.   The distinction between an expert determination  and  arbitration  has
been spelt out in Russell  on  Arbitration,  21st  Edn.,  in  the  following
words:

“Many cases have been fought  over  whether  a  contract’s  chosen  form  of
dispute resolution is expert determination or arbitration. This is a  matter
of construction of the contract, which involves an  objective  enquiry  into
the intentions of the parties. First, there are the  express  words  of  the
disputes  clause.  If  specific  words  such  as   ‘arbitrator’,   ‘arbitral
tribunal’, ‘arbitration’ or  the  formula  ‘as  an  expert  and  not  as  an
arbitrator’ are used to describe the manner in which  the  dispute  resolver
is  to  act,  they  are  likely  to  be  persuasive  although   not   always
conclusive…. Where there is no express wording,  the  court  will  refer  to
certain guidelines. Of these, the most important used to be,  whether  there
was an ‘issue’ between the parties such as the value of an  asset  on  which
they had not taken defined positions, in which case the procedure  was  held
to be expert determination; or a ‘formulated dispute’  between  the  parties
where defined positions had been taken, in  which  case  the  procedure  was
held to be an arbitration. This imprecise concept is still being relied  on.
It is unsatisfactory because some parties to  contract  deliberately  choose
expert determination for dispute  resolution.  The  next  guideline  is  the
judicial function of an arbitral tribunal as opposed  to  the  expertise  of
the expert; …. An arbitral tribunal arrives at its decision on the  evidence
and submissions of the parties and must apply the  law  or  if  the  parties
agree, on other consideration; an expert, unless  it  is  agreed  otherwise,
makes his own enquiries, applies his own expertise and decides  on  his  own
expert opinion....”



      A clause substantially similar to the clauses referred to  hereinabove
was interpreted by a three Judge Bench in  State  of  U.P  v.  Tipper  Chand
(supra) and it was held that the same cannot be construed as an  arbitration
clause.
 Paragraphs 2 and 3 of the judgment which contain  the  reasons  for
the aforesaid conclusion are reproduced below:

“2. The suit  out  of  which  this  appeal  has  arisen  was  filed  by  the
respondent  before  us  for  recovery  of  Rs.  2000  on  account  of   dues
recoverable from the Irrigation Department of the petitioner State for  work
done by the plaintiff in pursuance of an agreement, clause 22 of which  runs
thus:

“Except where otherwise specified  in  the  contract  the  decision  of  the
Superintending Engineer for the time being shall be  final,  conclusive  and
binding on all parties to the contract upon all questions  relating  to  the
meaning  of   the   specifications,   design,   drawing   and   instructions
hereinbefore mentioned. The decision of such Engineer as to the  quality  of
workmanship, or materials used on the work, or as  to  any  other  question,
claim, right, matter or things whatsoever, in any  way  arising  out  of  or
relating  to  the  contract,  designs,  drawing  specifications,  estimates,
instructions, orders, or  these  conditions,  or  otherwise  concerning  the
works, or the execution or failure to  execute  the  same,  whether  arising
during the progress of the work, or after the completion or  abandonment  of
the contract by the contractor, shall also be final, conclusive and  binding
on the contractor.”

3. After perusing the contents  of  the  said  clause  and  hearing  learned
Counsel for the parties we find ourselves in  complete  agreement  with  the
view taken by the High Court. 
Admittedly the clause  does  not  contain  any
express arbitration agreement. 
Nor can such  an  agreement  be  spelled  out from its terms by implication, there being no mention in it of any  dispute, much less of a reference thereof. 
On the other  hand,  the  purpose  of  the clause clearly appears to  be  to  vest  the  Superintending  Engineer  with supervision of the execution of the work and administrative control over  it from time to time.”


16.   In State of Maharashtra v. M/s.  Ranjeet  Construction  (Civil  Appeal
No.4700 of 1985), a two Judge Bench of this Court interpreted Clause  30  of
the agreement entered into between the parties, which  is  almost  identical
to the clauses under consideration, relied upon the  judgment  in  State  of
U.P. v. Tipper Chand (supra) and held that Clause 30 cannot be  relied  upon
for seeking a reference to an Arbitrator of any dispute  arising  under  the
contract.

17.   In State of Orissa  v.  Damodar  Das  (supra),
 a  three  Judge  Bench
interpreted Clause 21 of the contract entered  into  between  the  appellant
and the respondent for construction of sump and pump chamber etc. for  pipes
W/S to Village Kentile. The respondent abandoned the work before  completion
of  the  project  and  accepted  payment  of  the   fourth   running   bill.
Subsequently,  he  raised  dispute  and  sent  communication  to  the  Chief
Engineer, Public Health, Orissa for making a  reference  to  an  Arbitrator.
The Subordinate Judge, Bhubaneswar allowed  the  application  filed  by  the
respondent under Section 8 of the 1940 Act and the order passed by  him  was
upheld by  the  High  Court.  This  Court  referred  to  Clause  25  of  the
agreement, relied upon the  judgment  in  State  of  U.P.  v.  Tipper  Chand
(supra) and held that the said clause cannot  be  interpreted  as  providing
resolution of  dispute  by  an  Arbitrator.  Paragraphs  9  and  10  of  the
judgment, which contain discussion on the subject, are extracted below:

“9. The question, therefore, is 
whether there is any  arbitration  agreement for the resolution of the disputes. 
The agreement reads thus:

“25.  Decision  of  Public  Health  Engineer  to  be  final.—  Except  where
otherwise specified in this contract, the  decision  of  the  Public  Health
Engineer for the time being shall be final, conclusive and  binding  on  all
parties to the contract upon all questions relating to the  meaning  of  the
specifications; drawings and instructions herein before mentioned and  as  to
the quality of workmanship or materials used on  the  work,  or  as  to  any
other question, claim,  right,  matter  or  thing,  whatsoever  in  any  way
arising out of, or relating  to,  the  contract,  drawings,  specifications,
estimates,  instructions,  orders  or   these   conditions,   or   otherwise
concerning the works or the  execution  or  failure  to  execute  the  same,
whether arising during the progress of the work or after the  completion  or
the sooner determination thereof of the contract.”

10. Section 2(a) of the Act  defines  “arbitration  agreement”  to  mean  “a
written agreement to submit present or future  differences  to  arbitration,
whether an arbitrator is named therein or not”. Indisputably,  there  is  no
recital in the above  clause  of  the  contract  to  refer  any  dispute  or
difference present or future to arbitration. The  learned  counsel  for  the
respondent sought to contend from the marginal note, viz., “the decision  of
Public Health Engineer to be final” and any other the words  “claim,  right,
matter or thing,  whatsoever  in  any  way  arising  out  of  the  contract,
drawings,  specifications,  estimates,   instructions,   orders   or   these
conditions, or otherwise concerning the works or the  execution  or  failure
to execute the same, whether arising during the  progress  of  the  work  or
after the completion or the sooner determination thereof  of  the  contract”
and contended that this clause  is  wide  enough  to  encompass  within  its
ambit, any disputes or differences arising in  the  aforesaid  execution  of
the contract or any question or claim or right arising  under  the  contract
during  the  progress  of  the  work  or  after  the  completion  or  sooner
determination thereof for reference  to  an  arbitration.  The  High  Court,
therefore, was right in its  conclusion  that  the  aforesaid  clause  gives
right to arbitration to the respondent for resolution of the  dispute/claims
raised by the respondent. In support thereof he  relied  on  Ram  Lal  Jagan
Nath v. Punjab State through Collector AIR 1966  Punj  436.  It  is  further
contended that for the decision of the Public Health Engineer to  be  final,
the contractor must be given an opportunity to submit his case to  be  heard
either in person or through counsel and a decision thereon should be  given.
It envisages by implication existence of a dispute  between  the  contractor
and the Department. In other words, the parties construed  that  the  Public
Health Engineer should be the sole arbitrator. When the claim  was  made  in
referring the dispute to  him,  it  was  not  referred  to  the  court.  The
respondent is entitled to avail of the remedy under Sections  8  and  20  of
the Act. We find it difficult  to  give  acceptance  to  the  contention.  A
reading of the above clause in the contract as a conjoint whole, would  give
us an indication  that  during  the  progress  of  the  work  or  after  the
completion or the sooner determination thereof of the contract,  the  Public
Health Engineer has been empowered to decide all questions relating  to  the
meaning  of  the   specifications,   drawings,   instructions   hereinbefore
mentioned and as to the quality of workmanship or material used on the  work
or as to any other question, claim, right, matter  or  thing  whatsoever  in
any  way  arising  out  of,  or  relating   to,   the   contract   drawings,
specifications, estimates,  instructions,  orders  or  those  conditions  or
otherwise concerning the works or the execution or failure  to  execute  the
same has been entrusted to the  Public  Health  Engineer  and  his  decision
shall be final.  In  other  words,  he  is  nominated  only  to  decide  the
questions  arising  in  the  quality  of  the  work  or  any  other  matters
enumerated hereinbefore and  his  decision  shall  be  final  and  bind  the
contractor. A clause in the contract cannot be split into two  parts  so  as
to consider one part to give rise to difference or dispute and another  part
relating to execution of work, its workmanship etc. It is settled  now  that
a clause in the contract must be  read  as  a  whole.  If  the  construction
suggested by the respondent is given effect then the decision of the  Public
Health Engineer would become final and it is not even necessary to  have  it
made rule of the court under the Arbitration Act. It would be  hazardous  to
the claim of a contractor to give such instruction and  give  power  to  the
Public Health Engineer  to  make  any  dispute  final  and  binding  on  the
contractor. A careful reading of the clause in the contract  would  give  us
an indication that the Public Health Engineer is  empowered  to  decide  all
the questions enumerated therein other  than  any  disputes  or  differences
that have arisen between the contractor and the Government. But  for  clause
25, there is no other contract to refer any  dispute  or  difference  to  an
arbitrator named or otherwise.”

                                                         (emphasis supplied)


18.   In K.K. Modi v. K.N. Modi (supra), this Court interpreted Clause 9  of
the Memorandum of Understanding signed by two groups of Modi  family.  Group
‘A’ consisted of Kedar Nath Modi (younger brother of Seth  Gujjar  Mal  Modi
and his three sons) and Group ‘B’ consisted of five sons of Seth Gujjar  Mal
Modi. To resolve the  disputes  and  differences  between  two  groups,  the
financial institutions, which had lent money, got  involved.  Ultimately,  a
Memorandum of Understanding was signed by the parties on  24.1.1989,  Clause
9 of which reads as under:

“Implementation  will  be  done   in   consultation   with   the   financial
institutions.  For  all  disputes,  clarifications  etc.   in   respect   of
implementation of  this  agreement,  the  same  shall  be  referred  to  the
Chairman, IFCI or his nominees whose decisions will be final and binding  on
both the groups.”


The Chairman, Industrial  Finance  Corporation  of  India  (IFCI)  formed  a
committee of experts to  assist  him  in  deciding  various  questions.  The
committee of experts and the Chairman held discussion with both the  groups.
On 8.12.1995, the Chairman, IFCI gave his detailed  report  /  decision.  In
his  covering  letter,  the  Chairman  indicated  that  the  Memorandum   of
Understanding had been substantially implemented during  1989  to  1995  and
with his decisions on the disputes / clarifications given by  him,  it  will
be possible to implement the remaining part. The report of the Chairman  was
neither filed in the competent Court as an award  nor  any  application  was
submitted for making the report a rule or decree of the Court. However,  the
Chairman issued  series  of  directions  for  implementing  the  report.  On
18.5.1996, the appellants filed a petition under Section 33 of the 1940  Act
in the Delhi High Court challenging  report  dated  8.12.1995  by  asserting
that it was an award in arbitration proceedings. The opposite parties  filed
civil suit in the High Court to challenge the report of the Chairman.

      One of the questions formulated by this Court was whether Clause 9  of
the Memorandum of Understanding constituted  an  Arbitration  Agreement  and
whether the decision of the Chairman, IFCI constituted  an  award.
The  two
Judge Bench first culled out the  following  attributes  of  an  Arbitration
Agreement:

“(1) The arbitration agreement must contemplate that  the  decision  of  the
tribunal will be binding on the parties to the agreement,

(2) that the jurisdiction of the tribunal to decide the  rights  of  parties
must derive either from the consent of the parties or from an order  of  the
court or from a statute, the terms of which make it clear that  the  process
is to be an arbitration,

(3) the agreement must contemplate that substantive rights of  parties  will
be determined by the agreed tribunal,

(4) that the tribunal will  determine  the  rights  of  the  parties  in  an
impartial and judicial manner with the tribunal owing  an  equal  obligation
of fairness towards both sides,

(5) that the agreement of  the  parties  to  refer  their  disputes  to  the
decision of the tribunal must be intended  to  be  enforceable  in  law  and
lastly,

(6) the agreement must contemplate that the tribunal will  make  a  decision
upon a dispute which is already formulated at the time when a  reference  is
made to the tribunal.

The  other  factors  which  are  relevant  include,  whether  the  agreement
contemplates that the tribunal will receive evidence  from  both  sides  and
hear their contentions or at least give the parties an  opportunity  to  put
them forward;  whether  the  wording  of  the  agreement  is  consistent  or
inconsistent  with  the  view  that  the  process  was  intended  to  be  an
arbitration, and whether the agreement requires the tribunal to  decide  the
dispute according to law.”


The Court then referred to several precedents including  English  cases  and
held:

“In  the  present  case,  the  Memorandum  of  Understanding   records   the
settlement of various disputes as between Group A and Group B  in  terms  of
the  Memorandum  of  Understanding.  It  essentially  records  a  settlement
arrived at regarding disputes and differences between the two  groups  which
belong to the same family. In  terms  of  the  settlement,  the  shares  and
assets of various  companies  are  required  to  be  valued  in  the  manner
specified in the agreement.  The  valuation  is  to  be  done  by  M/s  S.B.
Billimoria & Co. Three companies which have to be divided  between  the  two
groups are to be divided in accordance with  a  scheme  to  be  prepared  by
Bansi  S.  Mehta  &  Co.  In  the  implementation  of  the   Memorandum   of
Understanding which is  to  be  done  in  consultation  with  the  financial
institutions, any disputes or clarifications relating to implementation  are
to be referred to the Chairman, IFCI or his nominees whose decision will  be
final and binding. The purport  of  clause  9  is  to  prevent  any  further
disputes between Groups A and B. Because the agreement requires division  of
assets in agreed proportions after their  valuation  by  a  named  body  and
under a scheme of division by another named body. Clause 9  is  intended  to
clear any other difficulties which may arise in the  implementation  of  the
agreement by leaving it to the decision of the Chairman, IFCI.  This  clause
does not contemplate any judicial  determination  by  the  Chairman  of  the
IFCI. He is entitled to nominate another person for deciding  any  question.
His decision has been  made  final  and  binding.  Thus,  clause  9  is  not
intended to be for any different decision than what is already  agreed  upon
between the parties to the dispute. It is meant for a proper  implementation
of the settlement already arrived at. A  judicial  determination,  recording
of evidence etc. are not contemplated. The decision of  the  Chairman,  IFCI
is to be binding on the parties.  Moreover,  difficulties  and  disputes  in
implementation  may  not  be  between  the  parties  to  the  Memorandum  of
Understanding. It is possible that the valuers nominated in  the  Memorandum
of Understanding or the firm entrusted with the responsibility of  splitting
some  of  the  companies  may  require  some  clarifications  or  may   find
difficulties in doing the work. They can also resort to  clause  9.  Looking
to the scheme of the Memorandum of  Understanding  and  the  purpose  behind
clause 9, the learned Single Judge, in our view, has  rightly  come  to  the
conclusion that this was not an agreement to refer disputes to  arbitration.
It was meant to be an expert’s decision. The Chairman, IFCI  has  designated
his decision as a decision. He has consulted experts in connection with  the
valuation and division of assets. He did not file his decision in court  nor
did any of the parties request him to do so.”

                                                         (emphasis supplied)


19.    In  Bharat  Bhushan  Bansal  v.  U.P.  Small  Industries  Corporation
Limited, Kanpur (supra), a two Judge Bench interpreted Clauses 23 and 24  of
the agreement entered into between the parties  for  execution  of  work  of
construction of a factory and allied buildings of the  respondent  at  India
Complex, Rai Bareli. Those clauses were as under:

“Decision of the Executive Engineer of the UPSIC  to  be  final  on  certain
matters

23. Except where otherwise specified in the contract, the  decision  of  the
Executive Engineer shall be  final,  conclusive  and  binding  on  both  the
parties to the contract on  all  questions  relating  to  the  meaning,  the
specification, design, drawings  and  instructions  hereinbefore  mentioned,
and as to the quality of workmanship or materials used on the work or as  to
any other question whatsoever in any way arising out of or relating  to  the
designs,  drawings,  specifications,  estimates,  instructions,  orders   or
otherwise concerning the works or the execution or failure  to  execute  the
same whether  arising  during  the  progress  of  the  work,  or  after  the
completion thereof or abandonment of the contract by  the  contractor  shall
be final and conclusive and binding on the contractor.

Decision of the MD of the UPSIC on all other matters shall be final

24. Except as provided in clause 23 hereof, the  decision  of  the  Managing
Director of the UPSIC shall be final, conclusive and  binding  on  both  the
parties to the contract upon all questions relating  to  any  claim,  right,
matter or thing in any way arising out of or relating  to  the  contract  or
these  conditions  or  concerning  abandonment  of  the  contract   by   the
contractor and in respect of all other matters arising out of this  contract
and not specifically mentioned herein.”


It was argued on behalf of the appellant that Clause 24 should be  construed
as an arbitration clause because the decision of the Managing  Director  was
binding on both the parties.  The two Judge Bench analysed  Clauses  23  and
24 of the agreement, referred to the judgment in  K.K.  Modi  v.  K.N.  Modi
(supra), State of U.P. v. Tipper Chand (supra), State of Orissa  v.  Damodar
Das (supra) and observed:

“In the present case, the Managing Director is more in the  category  of  an
expert who will decide claims, rights, or matters in any way  pertaining  to
the contract. The intention appears to be more to  avoid  disputes  than  to
decide formulated disputes in a quasi-judicial manner.  In  para  18.067  of
Vol. 2 of Hudson on Building and Engineering  Contracts.   Illustration  (8)
deals with the case where, by the terms of a contract, it was provided  that
the engineer

“shall  be  the  exclusive  judge  upon  all   matters   relating   to   the
construction, incidents, and the consequences of these presents, and of  the
tender, specifications, schedule  and  drawings  of  the  contract,  and  in
regard to the execution of the works or  otherwise  arising  out  of  or  in
connection with the contract, and also as regards all  matters  of  account,
including the final balance payable to the contractor, and  the  certificate
of the engineer for the time being, given under his hand, shall  be  binding
and conclusive on both parties.”

It was held that this clause was not an  arbitration  clause  and  that  the
duties of the Engineer were administrative and not judicial.

Since clause 24 does not contemplate any  arbitration,  the  application  of
the  appellant  under  Section  8  of  the   Arbitration   Act,   1940   was
misconceived.  The  appeal  is,  therefore,  dismissed  though  for  reasons
somewhat different from the reasons given by the  High  Court.  there  will,
however, be no order as to costs.”


20.   In Civil Appeal No.3680/2005 - Vishnu (dead)  by  L.Rs.  v.  State  of
Maharashtra and others decided  on  4.10.2013,  this  Court  considered  the
question whether Clause 30  of  B-1  Agreements  entered  into  between  the
Government of  Maharashtra  and  the  appellant  is  in  the  nature  of  an
arbitration clause. That clause was substantially  similar  to  the  clauses
being considered in these cases. After noticing precedents on  the  subject,
the Court observed:

“In terms of Clause 29 of B-1 Agreement, the Superintending Engineer of  the
Circle was invested with the authority to approve all works to  be  executed
under the contract. In other  words,  the  Superintending  Engineer  was  to
supervise execution of all works.  The power  conferred  upon  him  to  take
decision  on  the  matters  enumerated  in  Clause  30   did   not   involve
adjudication of any dispute or lis between  the  State  Government  and  the
contractor.  It would have  been  extremely  anomalous  to  appoint  him  as
Arbitrator to decide any dispute or difference between the parties and  pass
an award.  How could he pass an award on any of the issues  already  decided
by him under Clause  30?   Suppose,  he  was  to  decline  approval  to  the
designs, drawings etc. or was to object to the  quality  of  materials  etc.
and the contractor had  a  grievance  against  his  decision,  the  task  of
deciding the dispute could not have  been  assigned  to  the  Superintending
Engineer.  He could not be expected to make adjudication with  an  un-biased
mind. Even if he may not be actually  biased,  the  contractor  will  always
have a lurking apprehension that his decision will not be  free  from  bias.
Therefore, there is  an  inherent  danger  in  treating  the  Superintending
Engineer as an Arbitrator. This facet of the problem was highlighted in  the
judgment  of  the  two  Judge  Bench  in  Bihar  State  Mineral  Development
Corporation and another v. Encon Builders (I)(P) Limited (2003) 7  SCC  418.
In that case, the agreement entered into between  the  parties  contained  a
clause that any dispute arising out of the agreement shall  be  referred  to
the Managing Director of the Corporation and his  decision  shall  be  final
and binding on both the parties.
After noticing several precedents, the  two
Judge Bench observed:

“There cannot be any doubt whatsoever that  an  arbitration  agreement  must
contain the broad consensus  between  the  parties  that  the  disputes  and
differences should be referred to a domestic  tribunal.  The  said  domestic
tribunal must be an impartial one.  It is a well-settled  principle  of  law
that a person cannot be a judge  of  his  own  cause.  It  is  further  well
settled that justice should not only be  done  but  manifestly  seen  to  be
done.

Actual bias would lead to an automatic disqualification where the  decision-
maker is shown to have an interest in the outcome of the case.  Actual  bias
denotes an arbitrator who allows a decision to be influenced  by  partiality
or prejudice and thereby deprives the litigant of the fundamental  right  to
a fair trial by an impartial tribunal.

As the acts of bias on  the  part  of  the  second  appellant  arose  during
execution of the agreement,  the  question  as  to  whether  the  respondent
herein entered into the agreement with his eyes wide open  or  not  takes  a
back seat.  An order which lacks inherent jurisdiction would  be  a  nullity
and,  thus,  the  procedural  law  of  waiver  or  estoppel  would  have  no
application in such a situation.

It will bear repetition to state that the action  of  the  second  appellant
itself  was  in  question  and,  thus,  indisputably,  he  could  not   have
adjudicated thereupon in terms of the principle that nobody can be  a  judge
of his own cause.”  ”


21.   To the aforesaid proposition, we may  add  that  in  terms  of  Clause
29(a) and similar other clauses, any dispute or difference  irrespective  of
its nomenclature in matters relating to specifications,  designs,  drawings,
quality of workmanship or material used or any question relating  to  claim,
right in any way arising  out  of  or  relating  to  the  contract  designs,
drawings etc. or failure on the  contractor’s  part  to  execute  the  work,
whether arising during the progress of the work  or  after  its  completion,
termination or abandonment has to be first referred to the  Chief   Engineer
or the Designated Officer of the Department.
The  Chief  Engineer  or  the
Designated Officer is not an independent authority or  person,  who  has  no
connection or control over the work.  As a matter  of  fact,  he  is  having
over all supervision and charge of the execution of the work.    He  is  not
required to hear the parties or to take evidence, oral  or  documentary.  He
is not invested with the power to adjudicate upon the rights of the  parties
to the dispute or difference and his decision is subject  to  the  right  of
the aggrieved party to seek relief in a Court of Law.
The decision  of  the
Chief Engineer or the Designated  Officer  is  treated  as  binding  on  the
contractor subject to his  right  to  avail  remedy  before  an  appropriate
Court.  The use of the expression ‘in the first  place’  unmistakably  shows
that non-adjudicatory decision of the  Chief  Engineer  is  subject  to  the
right of the aggrieved party to seek remedy.
Therefore, Clause 29  which  is
subject matter of consideration in most of the appeals and  similar  clauses
cannot be treated as an Arbitration Clause.
22.   As a corollary to  the  above,  we  hold  that  the  judgment  of  the
Designated  Judge  in  Mysore  Construction  Company  v.   Karnataka   Power
Corporation Ltd. (supra) lays down the correct law.
23.   Before parting with the case, we may notice the judgments relied  upon
by the learned  counsel  for  the  contractors  and  find  out  whether  the
proposition laid down therein supports their argument  that  Clause  29  and
other similar clauses in the agreements entered  into  between  the  parties
should be treated as arbitration clause.

24.   The facts of Mallikarjun v. Gulbarga University case (2004) 1 SCC  372
were that the respondent-University had accepted  the  tender  submitted  by
the appellant for construction of an indoor stadium.  In  pursuance  of  the
work order issued by the competent authority, the  appellant  completed  the
construction.
Thereafter, he invoked the arbitration clause  for  resolution
of  the  disputes  which  arose  from  the   execution   of   the   project.
Superintending Engineer, PWD, Gulbarga Circle was entrusted  with  the  task
of deciding the disputes.
The parties filed their respective claims  before
the Superintending Engineer. He considered the same  and  passed  an  award.
The appellant filed execution petition  in  the  Court  of  Principal  Civil
Judge  (Senior  Division),  Gulbarga.  The  respondent  filed  an  objection
petition under Section 47 of the  CPC.  The  Executing  Court  rejected  the
objection. The University challenged the decision  of  the  Executing  Court
and pleaded that the agreement  on  the  basis  of  which  the  dispute  was
referred to the Superintending Engineer was  not  an  arbitration  agreement
and, as such, award made by him cannot be treated  as  one  made  under  the
1940 Act.
The High Court accepted the plea of the University and  set  aside
the order of the trial Court. Clause 30 of the agreement which came  up  for
interpretation by this Court was as under:

“The decision of the Superintending Engineer  of  Gulbarga  Circle  for  the
time being shall be final, conclusive and binding  on  all  parties  to  the
contract upon all questions relating to the meaning of  the  specifications,
designs, drawings and instructions hereinbefore  mentioned  and  as  to  the
quality of workmanship or material used on the work,  or  as  to  any  other
question, claim, right, matter, or thing whatsoever, in any way arising  out
of  or  relating  to  the  contract   designs,   drawings,   specifications,
estimates,  instructions,  orders  or   those   conditions,   or   otherwise
concerning the works or the  execution  or  failure  to  execute  the  same,
whether arising during the progress of the work, or after the completion  or
abandonment thereof in case of dispute arising between  the  contractor  and
Gulbarga University.”



After analyzing the aforesaid clause and making  a  reference  to  essential
elements  of  arbitration  agreement  enumerated  in  Bihar  State   Mineral
Development Corporation v. Encon Builders (I)(P) Limited  (supra),  a  three
Judge Bench held:

“Applying the aforesaid principle to the present case,  clause  30  requires
the  Superintending  Engineer,  Gulbarga  Circle,  Gulbarga,  to  give   his
decision on any dispute that may arise out  of  the  contract.  Further,  we
also find that the agreement postulates present  or  future  differences  in
connection with some contemplated affairs inasmuch  as  there  also  was  an
agreement between the  parties  to  settle  such  difference  by  a  private
tribunal, namely, the Superintending Engineer,  Gulbarga  Circle,  Gulbarga.
It was also agreed between the parties that  they  would  be  bound  by  the
decision of the Tribunal. The parties were also ad idem.

In the aforesaid view of the matter, it must be held that the agreement  did
contain an arbitration clause.”


The Bench distinguished the judgment in  Bharat  Bhushan  Bansal’s  case  by
making the following observations:

“A bare comparison of clause 30 of the contract agreement  involved  in  the
present matter and clauses 23 and 24 involved in Bharat Bhushan Bansal  case
would show that they are not identical. Whereas clause 30 of  the  agreement
in question provides for resolution  of  the  dispute  arising  out  of  the
contract by persons named therein; in terms  of  clause  24,  there  was  no
question of decision by a named person in the dispute raised by the  parties
to the agreement. The matters which are specified under clauses  23  and  24
in Bharat Bhushan Bansal case were necessarily not required to arise out  of
the contract, but merely claims arising during performance of the  contract.
Clause 30 of the agreement in the present case did  provide  for  resolution
of the dispute arising out of the contract by the  Superintending  Engineer,
Gulbarga Circle, Gulbarga. For that reason, the  case  relied  upon  by  the
learned counsel for the respondent is distinguishable.

Once clause 30 is constituted to be a valid arbitration agreement, it  would
necessarily follow that the decision of the arbitrator named  therein  would
be rendered only upon allowing the parties to adduce evidence in support  of
their respective claims and counter-claims as also upon hearing the  parties
to the dispute. For  the  purpose  of  constituting  the  valid  arbitration
agreement, it is not necessary that the conditions as regards  adduction  of
evidence by the parties or giving an opportunity of  hearing  to  them  must
specifically be  mentioned  therein.  Such  conditions,  it  is  trite,  are
implicit in the decision-making  process  in  the  arbitration  proceedings.
Compliance with the principles of natural justice inheres in an  arbitration
process. They, irrespective of the fact as to whether recorded  specifically
in the arbitration agreement or not are required to be  followed.  Once  the
principles of natural justice are not complied with, the award made  by  the
arbitrator would be rendered invalid. We,  therefore,  are  of  the  opinion
that the arbitration clause does not necessitate spelling out of a  duty  on
the part of  the  arbitrator  to  hear  both  parties  before  deciding  the
question before him. The expression “decision” subsumes adjudication of  the
dispute. Here in the instant case, it will bear repetition  to  state,  that
the disputes between the parties arose out of a contract and in relation  to
matters specified therein and, thus, were required to be  decided  and  such
decisions are not only final and  binding  on  the  parties,  but  they  are
conclusive which clearly spells out the finality of such decisions  as  also
their binding nature.

A clause which is inserted in  a  contract  agreement  for  the  purpose  of
prevention  of  dispute  will  not  be  an  arbitration  agreement.  Such  a
provision has been made in the agreement itself  by  conferring  power  upon
the Engineer-in-Charge to take a  decision  thereupon  in  relation  to  the
matters envisaged under clauses 31 and 32 of the said agreement. Clauses  31
and 32 of the said agreement provide for  a  decision  of  the  Engineer-in-
Charge in relation to the matters specified  therein.  The  jurisdiction  of
the Engineer-in-Charge in relation to such  matters  are  limited  and  they
cannot be equated with an arbitration agreement. Despite such clauses  meant
for prevention of dispute arising out of a contract,  significantly,  clause
30 has been inserted in the contract agreement by the parties.

The Superintending Engineer, Gulbarga Circle, Gulbarga,  is  an  officer  of
the Public Works Department in the Government of Karnataka.  He  is  not  an
officer of the University. He did not have  any  authority  or  jurisdiction
under the agreement or otherwise either to supervise the construction  works
or issue any direction(s) upon the contractor in relation  to  the  contract
job. He might be an  ex  officio  member  of  the  Building  Committee,  but
thereby or by reason thereof, he could not have been given nor in  fact  had
been given an authority to supervise the contract job  or  for  that  matter
issue any direction upon  the  contractor  as  regards  performance  of  the
contract.”

                                                         (emphasis supplied)


25.   In Punjab State v. Dina Nath (supra), a two  Judge  Bench  was  called
upon to consider whether clause 4  of  work  order  No.114  dated  16.5.1985
constituted an arbitration agreement. The clause in question was as under:

“Any dispute arising  between  the  department  and  the  contractor/society
shall be referred to the  Superintending  Engineer,  Anandpur  Sahib,  Hydel
Circle No.1, Chandigarh for orders  and  his  decision  will  be  final  and
acceptable/binding on both the parties.”

After noticing the judgment in K.K. Modi v. K.N. Modi, the Court observed:
“Keeping the ingredients as indicated by this Court in K.K.Modi in mind  for
holding a particular agreement as an arbitration agreement, we  now  proceed
to examine the aforesaid ingredients in the context of the present case:

              a) Clause 4 of the Work Order categorically  states  that  the
                 decision of the Superintending engineer shall be binding on
                 the parties.

              b) The jurisdiction of the Superintending Engineer  to  decide
                 the rights of the parties has also been  derived  from  the
                 consent of the parties to the Work Order.

              c) The agreement contemplates that the Superintending Engineer
                 shall determine substantive rights of parties as the clause
                 encompasses  all  varieties  of  disputes  that  may  arise
                 between the parties and does not restrict the  jurisdiction
                 of the Superintending Engineer to specific issues only.

              d) That the agreement of the parties to refer  their  disputes
                 to the decision of the Superintending Engineer is  intended
                 to be enforceable in law as it is binding in nature.

The words “any dispute” appears in clause 4 of the  Work  Order.  Therefore,
only on the basis of the materials produced by the  parties  in  support  of
their respective claims a decision  can  be  arrived  at  in  resolving  the
dispute between the parties. The use of the words “any dispute” in clause  4
of the Work order is wide enough to include all  disputes  relating  to  the
said Work Order. Therefore, when a party raises a  dispute  for  non-payment
of money after completion of the work, which is denied by the  other  party,
such a dispute would come within  the  meaning  of  “arbitration  agreement”
between the parties. Clause 4 of the Work Order also clearly  provides  that
any dispute between the department and the contractor shall be  referred  to
the Superintending Engineer, Hydel Circle No.1, Chandigarh for  orders.  The
word “orders” would indicate some expression of  opinion,  which  is  to  be
carried our, or enforced and which is a conclusion of a body (in  this  case
Superintending engineer, Hydel Circle  No.1,  Chandigarh).  Then  again  the
conclusion and decision of the Superintending Engineer  will  be  final  and
binding on both the parties. This being the position  in  the  present  case
and in view of the fact that clause  4  of  the  Work  Order  is  not  under
challenge  before  us,  the  decision  that   would   be   arrived   at   by
Superintending Engineer, Hydel Circle No.1, Chandigarh must also be  binding
on the parties as a result whereof clause 4 must be held  to  be  a  binding
arbitration agreement.”


The Bench distinguished the judgment in  State  of  Orissa  v.  Damodar  Das
(supra) by making the following observations:

“From a plain reading of this clause in Damodar Das it is evident  that  the
powers of the Public Health  Engineer  were  essentially  to  supervise  and
inspect.  His powers were limited to the questions relating to  the  meaning
of the specifications, drawings and instructions, quality of workmanship  or
materials used on the work or  as  to  any  other  question,  claim,  right,
matter, drawings, specifications, estimates, instructions, orders  or  these
conditions or otherwise concerning the works or the execution or failure  to
execute the same.  However,  in  the  case  before  us,  the  Superintending
Engineer was given full power to resolve any  dispute  arising  between  the
parties which power in our view is  wide  enough  to  cover  any  nature  of
dispute raised by the parties. The clause in the instant case  categorically
mentions the word “dispute” which would be referred to him and  states  “his
decision would be final and acceptable/binding on both the parties.”


26.   Krishna Bhagya Jala Nigam Ltd. v. G.Harishchandra  Reddy  (supra)  was
decided on the peculiar facts of that case.
The contract which  was  subject
matter of  interpretation  in  that  case  contained  Clause  29.  When  the
respondent raised disputes and called upon the Chief Engineer to act  as  an
Arbitrator, the latter refused to do so. The Designated  Judge  allowed  CMP
No.26/1999 filed under Section 11 of the 1996 Act  and  directed  the  Chief
Engineer to act as an Arbitrator. Thereafter, both the parties  filed  their
respective statements before  the  Arbitrator  and  produced  evidence.  The
Arbitrator passed award dated 25.6.2000.  The  appellant  –  Krishna  Bhagya
Jala Nigam Ltd. filed a petition under Section 34(2)(v)  of  the  1996  Act.
The Civil Court  confirmed  the  award  of  the  Arbitrator.   Appeal  filed
against the judgment of the Civil Court was dismissed  by  the  High  Court.
Before this Court, an argument was raised that Clause  29  of  the  contract
was not an arbitration clause. While rejecting the argument, the  two  Judge
Bench observed:

“We do not  find  any  merit  in  the  above  arguments.  The  plea  of  “no
arbitration clause” was not raised in the written statement  filed  by  Jala
Nigam before the arbitrator. The said  plea  was  not  advanced  before  the
civil court in Arbitration Case No. 1 of 2001. On  the  contrary,  both  the
courts below on facts have found  that  Jala  Nigam  had  consented  to  the
arbitration  of  the  disputes  by  the  Chief  Engineer.  Jala  Nigam   had
participated in the arbitration proceedings.  It  submitted  itself  to  the
authority of the arbitrator. It gave  consent  to  the  appointment  of  the
Chief Engineer as an arbitrator. It filed  its  written  statements  to  the
additional claims  made  by  the  contractor.  The  Executive  Engineer  who
appeared on  behalf  of  Jala  Nigam  did  not  invoke  Section  16  of  the
Arbitration Act. He  did  not  challenge  the  competence  of  the  Arbitral
Tribunal. He did not  call  upon  the  Arbitral  Tribunal  to  rule  on  its
jurisdiction. On the contrary, it  submitted  to  the  jurisdiction  of  the
Arbitral Tribunal. It also filed written arguments.  It  did  not  challenge
the order of the High Court dated 10-9-1999 passed in CMP No.  26  of  1999.
Suffice it to  say  that  both  the  parties  accepted  that  there  was  an
arbitration agreement, they proceeded on that  basis  and,  therefore,  Jala
Nigam cannot be now be allowed to contend that clause  29  of  the  contract
did not constitute an arbitration agreement.”


27.   One of the questions which arose for consideration in Karnataka  State
Road Transport Corporation and  another  v.  M.  Keshava  Raju  (supra)  was
whether the appointment of Arbitrator under Section 11 of the 1996  Act  was
proper. 
The facts of that case show that on  an  application  filed  by  the
respondent under Section 11 of the 1996 Act, the Designated Judge  appointed
an Arbitrator.
After hearing the parties, the Arbitrator passed award  dated
15.10.1998 whereby he allowed some claims of the respondent.
The  objections
filed by the appellant under Section 34 of the 1996 Act were rejected by  VI
Additional City Civil Judge, Bangalore.
 In  the  appeal  filed  against  the
judgment of the  trial  Court,  the  High  Court  formulated  the  following
points:

“(1)  Whether the appellant can be permitted to raise the  ground  regarding
the alleged want of jurisdiction in this Court to refer the dispute  between
the parties to an Arbitrator under Section 11 of  the  Act,  for  the  first
time, in this appeal.

(2)   Whether the ground regarding the legality  and  justification  on  the
part of the Arbitrator to Award a sum of Rs. 2,85,000 towards  reimbursement
of overhead charges and another sum of  Rs.  2,85,000  towards  compensating
the loss of profits was raised before the Court below, and  if  it  was  not
raised, whether such plea can be allowed to be raised  in  this  appeal  for
the first time and if the above plea was in fact  raised  before  the  Court
below, whether the  Arbitrator  is  justified  in  awarding  a  sum  of  Rs.
2,85,000 towards reimbursement of overhead charges and another  sum  of  Rs.
2,85,000 towards compensating loss of profits having regard to Clause  15(a)
of the agreement.”


The Division Bench referred to Section 16 and held:

“In our considered opinion, the above plea cannot be  entertained  for  more
than one reason. 
Firstly, one of the objects in enacting the Act is to  have
early completion of arbitration proceedings minimising the supervisory  role
of Courts in arbitral process. Sections 4, 5 and 16 of  the  Act  have  been
enacted to give  effect  to  that  object.  
Secondly,  even  the  method  of
arbitration as a dispute resolution mechanism and  the  procedure  envisaged
for that are intended to reach the finality to resolve the  dispute  between
the parties as quickly as possible. 
Therefore, it  is  imperative  that  the
party raising jurisdiction point, should raise such plea  at  the  earliest,
that is to say,  at  the  threshold  of  the  proceeding.  
If  that  is  not
insisted, it is trite, the very object in enacting the Act, on the basis  of
the 'UNCITRAL Modern Law', would be  defeated.  
The  jurisdiction  plea  now
raised for the first time in the Memorandum of Appeal was not raised  either
directly or by necessary implication before this Court in C.M.P. No.  4/1996
or before the Arbitrator or before the Court  below. 
 The  appellant  having
acquiesced in the jurisdiction of the Arbitral Tribunal  without  any  demur
and protest, having participated in the proceedings and having  suffered  an
award cannot now turn round and raise the  plea  that  the  orders  of  this
Court in C.M.P. No. 4 of 1996, the award of the Arbitrator and the  judgment
of the Civil Court dated 20-6-2000 in Arbitration Suit No.  6  of  1998  are
nullity.
Thirdly, the appellant should be deemed to have waived his right  to  object
to the jurisdiction of the Arbitrator to pass the impugned  award  in  terms
of the provisions of Section 4 of the Act. Section 4 reads as follows :-

"(4) Waiver of right to object

A party who knows that -

(a) any provision of this Part from which the parties may derogate, or

(b) any requirement under the arbitration agreement,

has not been complied with and yet proceeds  with  the  arbitration  without
stating his objection to such non-compliance without undue delay  or,  if  a
time limit is provided for stating that objection, without  that  period  of
time, shall be deemed to have waived his right to so object."

17. Section 4 narrates the circumstances in which the party,  who  knowingly
fails to object the non-compliance of any non-mandatory provisions of  Part-
I or any requirement under the arbitration agreement by the other party,  is
deemed to have waived his right to object.
This section is based on  general
principles such as "estoppel" or "venire  contra  factum  proprium".  
It  is
intended to help the arbitral  process  function  efficiently  and  in  good
faith. 
If there is non-compliance of any non-mandatory provision of  Part  I
or of any requirement  of  the  arbitration  agreement  by  a  party  to  an
arbitration agreement of which the other party to the agreement  though  has
the knowledge of such non-compliance  but  does  not  object  without  undue
delay, or if a time limit is provided for  stating  that  objection  and  no
objection is taken within that period of time, such a  party  later  on  can
neither raise objection about that non-compliance of any provision  of  Part
I nor any requirement of the arbitration agreement since  such  party  shall
be deemed to have waived its  objection.
Though,  in  order  to  apply  the
doctrine of waiver by invoking Section 4, the first condition  is  that  the
non-compliance must be of non-mandatory  provision  of  Part  I  or  of  any
requirement under the arbitration agreement,  certain  mandatory  provisions
of the Act also provide for a grant of waiver in the  event  of  failure  to
object. For example, sub-sections (2) and (3) of Section 16 are one of  such
mandatory provisions. Section 16 (2) of the Act provides that  a  plea  that
the Arbitral Tribunal does not have jurisdiction shall be raised  not  later
than the submission of the statement of defence. Section 16 (3) of  the  Act
provides that a plea that the Arbitral Tribunal is exceeding  the  scope  of
its authority shall be raised as soon as the matter  alleged  to  be  beyond
the scope of its authority is raised during the arbitral proceedings.”


28.   Thus, none of the judgments relied upon by  learned  counsel  for  the
contractors is of any help to their cause.

29.   In the result, Civil Appeal Nos. 1586, 1587, 1588, 4187,  5496,  6323,
6327 and 6328 of 2004; Civil Appeal Nos.  558-560  of  2006;  Civil  Appeals
arising out of SLP(C) Nos. 16117, 17147, 24655  and  26073  of  2004;  Civil
Appeals arising out of SLP(C) Nos. 5951, 12552  and  12553  of  2006,  Civil
Appeal arising out of SLP(C) No. 8597 of 2009 and Civil Appeal  arising  out
of SLP(C) No. 13528 of 2012 are dismissed.  
However,  liberty  is  given  to
the appellants to  avail  appropriate  legal  remedy  for  recovery  of  the
amount, if any, due from the respondents.

30.   Civil Appeals arising out of SLP(C) Nos.  28087-28088,  28089,  29227-
29230 and 31975 of 2011 and Civil Appeal No.1374 of 2013  are  allowed.  The
orders  passed  by  the  Designated  Judge,  which  are  subject  matter  of
challenge in the five appeals are set aside. 
 It  is,  however,  made  clear
that the respondents shall be free to avail appropriate legal  remedies  for
recovery of  the  amount,  if  any,  payable  to  them  in  terms  of  their
respective agreements.
                                                             ..….………………….…J.
                                                   (G.S. SINGHVI)


                                                             ..….………………….…J.
                                                   (V. GOPALA GOWDA)


                                                             ..….………………….…J.
                                                   (C. NAGAPPAN)

New Delhi,
October 25, 2013.


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