advocatemmmohan

My photo

ADVOCATEMMMOHAN -  Practicing both IN CIVIL, CRIMINAL AND FAMILY LAWS,Etc.,

WELCOME TO LEGAL WORLD

WELCOME TO MY LEGAL WORLD - FOR KNOWLEDGE IN LAW & FOR LEGAL OPINIONS - SHARE THIS

Tuesday, April 8, 2014

Arbitration and conciliation Act - contract disputes - absence of arbitration clause - High court held that there is an arbitration clause as per clause 48 and read with clause 4.1 of agreement and as such appointed an arbitrator - Apex court held that In fact, clause 48, even if it is stretched, cannot be regarded as an arbitration clause. The elements and attributes to constitute an arbitration clause, as has been stated in Jagdish Chander (supra), are absent.Therefore, the irresistible conclusion is that the High Court has fallen into grave error by considering the said clause as providing for arbitration. Consequently, the appeals are allowed and the judgments and orders passed by the High Court are set aside. = Karnataka Power Transmission Corporation Limited and another ... Appellants Versus M/s. Deepak Cables (India) Ltd. ...Respondent=2014 ( April. Part ) http://judis.nic.in/supremecourt/filename=41394

    Arbitration and conciliation Act - contract disputes - absence of arbitration clause - High court held that there is an arbitration clause as per clause 48 and read with clause 4.1 of agreement and as such appointed an arbitrator -  Apex court held that In fact, clause 48, even if it is stretched, cannot  be  regarded  as  an  arbitration clause. The elements  and  attributes  to  constitute  an  arbitration clause, as has been stated in Jagdish  Chander  (supra),  are  absent.Therefore, the irresistible conclusion is  that  the  High  Court  has  fallen into grave error by considering the said  clause  as  providing for arbitration. Consequently, the appeals are allowed and  the  judgments  and  orders passed by the High Court are set aside.    =  

 During the performance of  the  contract,
      the respondent raised a claim before the engineer as per clause 48  of
      the general conditions of the contract and called upon the engineer to
      settle certain disputes arising in connection with the  contract.   As
      the concerned engineer did  not  do  anything  within  the  prescribed
      period of thirty days as provided under clause  48.2,  the  respondent
      filed CMP  No.  62  of  2011  under  Section  11(5)  and  (6)  of  the
      Arbitration and Conciliation Act, 1996 (for brevity “the Act”)  before
      the High Court  of  Karnataka  at  Bangalore  for  appointment  of  an
      arbitrator.

   4. The said application was resisted by the  present  appellants  on  the
      singular ground that clause 48 does not provide  for  arbitration  and
      the same, under no circumstances, could be construed as an arbitration
      clause.  To substantiate the said submission, reliance was  placed  on
      clause 4.1 of the agreement.  It was put forth that  as  there  is  no
      arbitration clause, no arbitrator could be appointed. =
The  designated
      Judge of the Chief Justice placed reliance on the proceedings in  W.P.
      No. 28710/09 (M/s. Subhash Projects & Marketing Limited  v.  Karnataka
      Power Transmission  Corporation  Limited)  disposed  of  on  10.6.2010
      wherein the appellant-company, being a State  owned  Corporation,  had
      not disputed clause  48.2  as  an  arbitration  clause  and,  on  that
      foundation, opined that it was precluded from denying the same in  the
      case under consideration.  The learned  designated  Judge  interpreted
      clauses 48 and 4.1 of the agreement and came  to  hold  that  a  plain
      reading of clause 48 would indicate that it partakes the character  of
      an arbitration clause and, accordingly, appointed a sole arbitrator to
      adjudicate the matters in dispute.=
It  really  means
      that the disputes and differences are left to be  adjudicated  by  the
      competent civil court.  
Thus, clause 48, as we have analysed, read  in
      conjunction with clause 4.1, clearly  establishes  that  there  is  no
      arbitration  clause  in  the  agreement.   
The  clauses   which   were
      interpreted to be arbitration clauses, as has been  held  in  Ram  Lal
      (supra) and Dewan Chand (supra) which have  been  approved  in  Tipper
      Chand (supra), are differently couched.  
As far  as  Rukmanibai  Gupta
      (supra) is concerned, as has been opined in Damodar  Das  (supra)  and
      also in Bhagyadhar Dash (supra), it has to  rest  on  its  own  facts.
      
Clause in Dina Nath (supra) is differently  couched,  and  clause  48,
      which we are dealing with, has no similarity with it.  
In fact, clause
      48, even if it is stretched, cannot  be  regarded  as  an  arbitration
      clause. 
The elements  and  attributes  to  constitute  an  arbitration
      clause, as has been stated in Jagdish  Chander  (supra),  are  absent.
      
Therefore, the irresistible conclusion is  that  the  High  Court  has
      fallen into grave error by considering the said  clause  as  providing
      for arbitration.

  25. Consequently, the appeals are allowed and  the  judgments  and  orders
      passed by the High Court are set aside.                  
2014 ( April. Part ) http://judis.nic.in/supremecourt/filename=41394
ANIL R. DAVE, DIPAK MISRA
 
IN THE SUPREME COURT OF INDIA

                        CIVIL APPELLATE JURISDICTION

                        CIVIL APPEAL NO. 4424 OF 2014
                (Arising out of S.L.P. (C) No. 20558 of 2013

Karnataka Power Transmission
Corporation Limited and another              ... Appellants

                                   Versus

M/s. Deepak Cables (India) Ltd.                ...Respondent

                                    With

                        CIVIL APPEAL NO. 4425 OF 2014
                (Arising out of S.L.P. (C) No. 29008 of 2013)

                                    With

                        CIVIL APPEAL NO. 4426 OF 2014
                (Arising out of S.L.P. (C) No. 29009 of 2013)

                                    With

                        CIVIL APPEAL NO. 4427 OF 2014
                (Arising out of S.L.P. (C) No. 29010 of 2013)

                                    With

                        CIVIL APPEAL NO. 4428 OF 2014
                (Arising out of S.L.P. (C) No. 29011 of 2013)

                                    With

                        CIVIL APPEAL NO. 4429 OF 2014
                (Arising out of S.L.P. (C) No. 29012 of 2013)

                                    With

                        CIVIL APPEAL NO. 4430 OF 2014
                (Arising out of S.L.P. (C) No. 29013 of 2013)

                                    With

                        CIVIL APPEAL NO. 4431 OF 2014
                (Arising out of S.L.P. (C) No. 29014 of 2013)







                               J U D G M E N T


Dipak Misra, J.



      Leave granted in all the special leave petitions.

   2. The controversy involved in these appeals, preferred by special leave,
      being similar, they were heard together  and  are  disposed  of  by  a
      common judgment.  For the sake of  convenience,  we  shall  state  the
      facts from Civil Appeal arising out of Special Leave Petition 29011 of
      2013.

   3. The appellant No. 1 is a company wholly owned  by  the  Government  of
      Karnataka and,  being  a  State  transmission  utility,  is  a  deemed
      licencee in the State.  It invited tenders for establishing  2x8  MVA,
      66/11 Sub-stations  at  Tavarekere  in  Channagiri  Taluk,  Davanagere
      District, which included the  supply  materials,  erection  and  civil
      works on partial turnkey basis.  The  respondent-company  participated
      in the bid and it was successful in the  tender  and,  accordingly,  a
      letter of intent was sent to it.  After  taking  recourse  to  certain
      procedural aspects, a contract was entered into between the appellant-
      company and the respondent.  During the performance of  the  contract,
      the respondent raised a claim before the engineer as per clause 48  of
      the general conditions of the contract and called upon the engineer to
      settle certain disputes arising in connection with the  contract.   As
      the concerned engineer did  not  do  anything  within  the  prescribed
      period of thirty days as provided under clause  48.2,  the  respondent
      filed CMP  No.  62  of  2011  under  Section  11(5)  and  (6)  of  the
      Arbitration and Conciliation Act, 1996 (for brevity “the Act”)  before
      the High Court  of  Karnataka  at  Bangalore  for  appointment  of  an
      arbitrator.

   4. The said application was resisted by the  present  appellants  on  the
      singular ground that clause 48 does not provide  for  arbitration  and
      the same, under no circumstances, could be construed as an arbitration
      clause.  To substantiate the said submission, reliance was  placed  on
      clause 4.1 of the agreement.  It was put forth that  as  there  is  no
      arbitration clause, no arbitrator could be appointed.  The  designated
      Judge of the Chief Justice placed reliance on the proceedings in  W.P.
      No. 28710/09 (M/s. Subhash Projects & Marketing Limited  v.  Karnataka
      Power Transmission  Corporation  Limited)  disposed  of  on  10.6.2010
      wherein the appellant-company, being a State  owned  Corporation,  had
      not disputed clause  48.2  as  an  arbitration  clause  and,  on  that
      foundation, opined that it was precluded from denying the same in  the
      case under consideration.  The learned  designated  Judge  interpreted
      clauses 48 and 4.1 of the agreement and came  to  hold  that  a  plain
      reading of clause 48 would indicate that it partakes the character  of
      an arbitration clause and, accordingly, appointed a sole arbitrator to
      adjudicate the matters in dispute.

   5. We have heard Mr. K.V. Vishvanathan, learned senior counsel  appearing
      for the appellants, and Mr. Dushyant Dave and Mr. Shyam Divan, learned
      senior counsel appearing for the respondents.

   6. Mr. Vishvanathan, learned senior counsel appearing for the appellants,
      assailing the impugned order, has submitted  that  clause  48  of  the
      agreement cannot be remotely construed as an  arbitration  clause  and
      hence, the designated Judge could not have  invoked  the  power  under
      Section 11(5) & (6) of the Act for appointment of an  arbitrator.   It
      is urged by him that an order passed in a  writ  petition,  which  was
      instituted in a different context, could not have been placed reliance
      upon for construing the said clause as an arbitration clause.   It  is
      submitted by him that in the  absence  of  an  express  intention  for
      referring the matter to an arbitrator, it cannot be so  inferred  from
      such a clause and, more so, when there is  a  specific  clause,  i.e.,
      clause 4 in the agreement which provides for  settlement  of  disputes
      that stipulates that all the references and disputes  arising  out  of
      the agreement or touching the subject-matter of the agreement shall be
      decided  by  a  competent  court  at  Bangalore.    To   bolster   his
      contentions, he has commended us to the  decisions  rendered  in  M.K.
      Shah  Engineers  &  Contractors  v.  State  of   M.P.[1],   Wellington
      Associates Ltd. v.  Kirit  Mehta[2]  and  Jagdish  Chander  v.  Ramesh
      Chander and others[3].

   7. Mr.  Dushyant  Dave  and  Mr.  Shyam  Divan,  learned  senior  counsel
      appearing for the respondents in all the appeals, in oppugnation, have
      submitted that when clause 48 is read as  a  whole,  it  is  clear  as
      crystal that the intention  of  the  parties  is  to  get  the  matter
      referred to an arbitrator and clause 4.1 only determines the place  of
      territorial jurisdiction and has nothing to do  with  any  stipulation
      for arbitration.  It has been strenuously urged that clause 48 has  to
      be interpreted on the touchstone of the language employed in Section 7
      of the Act and when it is scrutinized on that anvil, there remains  no
      trace  of  doubt  that  clause  48  has   all   the   attributes   and
      characteristics of an arbitration agreement.  Learned  senior  counsel
      have placed reliance on Smt. Rukmanibai Gupta v.  Collector,  Jabalpur
      and others[4] and Punjab State and others v. Dina Nath[5].

   8. Before we advert to the rival submissions  advanced  at  the  Bar,  we
      think it appropriate to refer to Section 7 of  the  Act  and  what  it
      conveys and, thereafter, refer to few authorities to  understand  what
      constitutes an arbitration clause in an agreement entered into between
      two parties.  Section 7 of the Act reads as follows:
      “7.    Arbitration  agreement.  –  (1)  In  this  Part,   “arbitration
      agreement” means an agreement by the parties to submit to  arbitration
      all or certain disputes which have arisen or which may  arise  between
      them in respect of a defined legal relationship,  whether  contractual
      or not.

        2) An arbitration agreement may be in the form  of  an  arbitration
           clause in a contract or in the form of a separate agreement.

        3) An arbitration agreement shall be in writing.

        4) An arbitration agreement is in writing if it is contained in –

        a) a document signed by the parties;

        b) an exchange of letters,  telex,  telegrams  or  other  means  of
           telecommunication which provide a record of the agreement; or

        c) an exchange of statement of  claim  and  defence  in  which  the
           existence of the agreement is  alleged  by  one  party  and  not
           denied by the other.

      (5)   The  reference  in  a  contract  to  a  document  containing  an
      arbitration  clause  constitutes  an  arbitration  agreement  if   the
      contract is in writing and the reference  is  such  as  to  make  that
      arbitration clause part of the contract.”

   9. From the aforesaid provision, it is graphically clear that  unless  an
      arbitration agreement stipulates that the parties agree to submit  all
      or certain disputes which have arisen or which may arise in respect of
      defined legal relationship, whether contractual or not,  there  cannot
      be a reference to an arbitrator.  To elaborate, it conveys that  there
      has to be intention, expressing the consensual acceptance to refer the
      disputes to an arbitrator.  In the absence of an arbitration clause in
      an agreement,  as  defined  in  sub-section  (4)  of  Section  7,  the
      dispute/disputes arising between the parties cannot be referred to the
      arbitral tribunal for adjudication of the dispute.

  10. In Smt. Rukmanibai Gupta (supra), while considering Clause 15  of  the
      agreement therein, a two-Judge Bench opined that the clause spelt  out
      an arbitration agreement between the parties.  The said clause was  as
      follows:-
      “Whenever any doubt,  difference  or  dispute  shall  hereafter  arise
      touching  the  construction  of  these  presents  or  anything  herein
      contained or any matter or things connected with the said lands or the
      working or non-working thereof or the amount or payment of any rent or
      royalty reserved or made payable hereunder in the matter in difference
      shall be decided by the lessor whose decision shall be final.”

      The learned Judges, to appreciate the tenor and purport  of  the  said
clause, referred to Section 2(a) of the 1940 Act and  reproduced  a  passage
from Russell on Arbitration, 19th Edn., P. 59 which reads as follows: -
      “If it appears from the terms of the agreement by which  a  matter  is
      submitted to a person’s decision that the intention of the parties was
      that he should hold an inquiry in the nature of a judicial inquiry and
      hear the respective cases of the parties and decide upon evidence laid
      before him, then the case is one of an arbitration”


  11. The Court also referred to  Chief  Conservator  of  Forest  v.  Rattan
      Singh[6] and ruled that:
      “In the clause under discussion there is a provision for referring the
      disputes to the lessor and the decision of the lessor is  made  final.
      On its true construction it spells out an arbitration agreement.”

  12. At this juncture, it is apposite  to  refer  to  a  three-Judge  Bench
      decision in State of U.P. v.  Tipper  Chand[7]  where  the  Court  was
      interpreting Clause 22 in the agreement which was under  consideration
      so as to find out  whether  the  stipulations  therein  spelt  out  an
      arbitration clause.  The clause involved in  the  said  case  read  as
      follows:-
      “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.”

      Interpreting the said clause, the Court opined thus:-
      “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 if from time to time.”

  13. In that context, the three-Judge Bench approved the decisions  of  the
      High Courts  in  Governor-General  v.  Simla  Banking  and  Industrial
      Company Ltd.[8], Dewan Chand v. State of Jammu and Kashmir[9] and  Ram
      Lal v. Punjab State[10] wherein the clauses were different.   In  that
      context, it was opined that the High Courts  had  rightly  interpreted
      the clause providing for arbitration.  We think it  apt  to  reproduce
      the delineation by the learned Judges:-
      “In the Jammu and Kashmir case the  relevant  clause  was  couched  in
      these terms:

           “For any dispute between the contractor and the  Department  the
           decision of the Chief Engineer PWD Jammu and  Kashmir,  will  be
           final and binding upon the contractor.”

      The language of this clause is materially different from the clause in
      the present case and in  our  opinion  was  correctly  interpreted  as
      amounting to an arbitration agreement. In this connection the  use  of
      the words “any dispute between the contractor and the Department”  are
      significant. The same is true of the clause in Ram Lal case which  ran
      thus:

           “In matter  of  dispute  the  case  shall  be  referred  to  the
           Superintending Engineer of the  Circle,  whose  order  shall  be
           final.”

      We need hardly say that this clause  refers  not  only  to  a  dispute
      between the parties to the contract but also specifically  mentions  a
      reference to the Superintending Engineer and must therefore be held to
      have been rightly interpreted as an arbitration agreement.”

  14. At this stage, it is useful to refer to a three-Judge  Bench  decision
      in State of Orissa and another etc. v. Sri Damodar Das[11] wherein the
      Court posed the question  whether  there  was  an  agreement  for  the
      resolution of disputes as enshrined under Clause 25 of the  agreement.
      The said clause read as follows:-
      “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
      hereinbefore 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.”

      The three-Judge Bench referred to  the  principles  stated  in  Tipper
Chand (supra) and observed as follows:-
      “We are in respectful agreement with the above ratio.  It  is  obvious
      that for resolution of any dispute or difference arising  between  two
      parties to a contract, the agreement  must  provide  expressly  or  by
      necessary implication, a reference to an arbitrator named  therein  or
      otherwise of any dispute or  difference  and  in  its  absence  it  is
      difficult to spell out existence of such an agreement for reference to
      an arbitration to resolve the dispute or difference contracted between
      the parties.  The ratio in Smt. Rukmanibai Gupta v. Collector does not
      assist the respondent.”
  15. In K.K. Modi v. K.N.  Modi  and  others[12],  a  two-Judge  Bench  was
      interpreting Clause 9 of the agreement which read as follows:-
      “Implementation will  be  done  in  consultation  with  the  financial
      institutions.  For all disputes,  clarification  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 court referred to a passage  from  Russell  on  Arbitration,  21st
Edn., at p. 37, para 2-014 and the decisions  in  Rukmanibai  Gupta  (supra)
and M. Dayanand Reddy v. A.P. Industrial Infrastructure Corporation  Limited
And Others[13] and came to hold that the said clause was not an  arbitration
clause and hence, the proceedings before the Chairman, IFCI could  not  have
been treated as arbitration proceedings.  It was so held  on  the  following
ground:-
      “Undoubtedly, in the course of  correspondence  exchanged  by  various
      members of Groups A and B with the Chairman, IFCI, some of the members
      have used the words “arbitration” in connection with clause 9. That by
      itself, however, is not conclusive. The intention of the  parties  was
      not to have any judicial determination on the basis  of  evidence  led
      before the Chairman, IFCI. Nor was the Chairman, IFCI required to base
      his decision only on the material placed before him by the parties and
      their submissions. He was free to make his own inquiries.  He  had  to
      apply his own mind and use his own expertise for the purpose.  He  was
      free to take the help of other experts. He was required to decide  the
      question of valuation and the division of assets as an expert and  not
      as an arbitrator. He has been authorised to nominate  another  in  his
      place. But the contract indicates that he has to nominate  an  expert.
      The fact that submissions were made before the Chairman,  IFCI,  would
      not turn the decision-making process into an arbitration.”

  16. In Bharat Bhushan Bansal v. U.P. Small  Industries  Corporation  Ltd.,
      Kanpur[14], clauses 23 and 24 of the agreement were projected to  make
      the foundation of an arbitration clause.  That read as follows:-
      “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.”

Interpreting the said clauses, the Court opined thus:-

      “In the present case, reading clauses 23 and 24 together, it is  quite
      clear that in respect of questions arising from  or  relating  to  any
      claim or right,  matter  or  thing  in  any  way  connected  with  the
      contract, while the decision of the Executive Engineer is  made  final
      and binding in respect of certain types of claims  or  questions,  the
      decision of the Managing Director is made final and binding in respect
      of the remaining claims. Both the Executive Engineer as  well  as  the
      Managing Director are expected to determine the question or  claim  on
      the basis of their own investigations and  material.  Neither  of  the
      clauses  contemplates  a  full-fledged  arbitration  covered  by   the
      Arbitration Act.”

  17. In Bihar State Mineral Development Corporation and  another  v.  Encon
      Builders (I) (P) Ltd.[15],while dealing with the arbitration clause of
      an arbitration agreement under the Act the Court stated thus:

      “(1) There must be a present or a future difference in connection with
      some contemplated affair.

      (2) There must  be  the  intention  of  the  parties  to  settle  such
      difference by a private tribunal.

      (3) The parties must agree in writing to be bound by the  decision  of
      such tribunal.

      (4) The parties must be ad idem”.

      In the said case, it has also  been  opined  that  the  Act  does  not
prescribe any form of an arbitration agreement. The  term  ‘arbitration’  is
not required to be specifically mentioned  in  the  agreement  but  what  is
required is to gather the intention of the parties as to whether  they  have
agreed for resolution of the disputes through arbitration.

  18. In Dina Nath (supra), the clause in the agreement read as follows: -
      “4.   Any   dispute   arising   between   the   department   and   the
      contractor/society shall be referred to the  Superintending  Engineer,
      Anandpur Sahib, Hydel (Construction)  Circle  No.  1,  Chandigarh  for
      orders and his decision will be final and acceptable/binding  on  both
      parties.”

      The two-Judge Bench, basically relying on Tipper Chand  (supra)  which
has approved the view of  Jammu  and  Kashmir  High  Court  in  Dewan  Chand
(supra), treated the aforesaid clause as providing for  arbitration  because
it categorically mentioned the word “dispute” which  would  be  referred  to
the Superintending Engineer and further that his  decision  would  be  final
and acceptable to/binding on both the parties.

  19. In Jagdish Chander (supra), the Court, after referring to the  earlier
      decisions, culled out certain  principles  with  regard  to  the  term
      “arbitration agreement”.  The said principles basically  emphasize  on
      certain core aspects, namely, (i) that though  there  is  no  specific
      form of an arbitration agreement, yet the  intention  of  the  parties
      which can be gathered from the terms of the agreement should  disclose
      a determination and obligation to go to arbitration; (ii)  non-use  of
      the words “arbitration” and “arbitral tribunal” or “arbitrator”  would
      not  detract  from  a  clause  being  interpreted  as  an  arbitration
      agreement if the attributes or elements of arbitration  agreement  are
      established, i.e., (a) The agreement should be  in  writing.  (b)  The
      parties should have agreed to refer any disputes (present  or  future)
      between them to the decision of a private tribunal.  (c)  The  private
      tribunal should be empowered to adjudicate upon  the  disputes  in  an
      impartial manner, giving due opportunity to the parties to  put  forth
      their case before it. (d) The parties  should  have  agreed  that  the
      decision of the private tribunal in respect of the  disputes  will  be
      binding on them; and (iii) where there is specific exclusion of any of
      the attributes of an arbitration agreement or contains  anything  that
      detracts from an arbitration agreement, it would not be an arbitration
      agreement.  In this  context,  the  two-Judge  Bench  has  given  some
      examples and we think it apt to reproduce the same: -
      “For example, where an agreement requires or permits an  authority  to
      decide a claim or dispute without hearing, or requires  the  authority
      to act in the interests of only one of the parties, or  provides  that
      the decision of the authority will not be final  and  binding  on  the
      parties, or that if either party is not satisfied with the decision of
      the authority, he may file a civil suit seeking relief, it  cannot  be
      termed as an arbitration agreement.”

  20. In State of Orissa and others v. Bhagyadhar Dash[16], the Court, while
      discussing  about  the  non-requirement  of  a  particular  form   for
      constituting  an  arbitration  agreement  and  ascertainment  of   the
      intention  for  reference  to  arbitration,  as  has  been  stated  in
      Rukmanibai Gupta (supra), observed thus: -
      “16. While we respectfully agree with the principle stated  above,  we
      have our doubts as to whether  the  clause  considered  in  Rukmanibai
      Gupta case  would  be  an  arbitration  agreement  if  the  principles
      mentioned in  the  said  decision  and  the  tests  mentioned  in  the
      subsequent decision of a larger Bench in Damodar Das are  applied.  Be
      that as it may. In fact, the larger Bench in Damodar Das clearly  held
      that the decision in Rukmanibai  Gupta  was  decided  on  the  special
      wording of the clause considered therein: (Damodar Das  case,  SCC  p.
      224, para 11)

           “11. … The ratio in  Rukmanibai  Gupta  v.  Collector  does  not
           assist the respondent. From  the  language  therein  this  Court
           inferred, by implication, existence of a dispute  or  difference
           for arbitration.”

  21. Keeping in mind  the  principles  laid  down  by  this  Court  in  the
      aforesaid authorities relating to under what circumstances a clause in
      an agreement can be construed  as  an  arbitration  agreement,  it  is
      presently apposite to refer to clause 48 of the agreement.   The  said
      clause reads as follows: -
      “48.0 Settlement of disputes:

        1. Any dispute(s) or difference(s) arising out of or in  connection
           with the Contract shall, to  the  extent  possible,  be  settled
           amicable between the parties.

        2. If any dispute or difference of any kind whatsoever shall  arise
           between the  owner  and  the  Contractor,  arising  out  of  the
           Contract for the Performance of the  Works  whether  during  the
           progress of the Works or after its completion or 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, within a period of thirty (30) days  after  being
           requested by either party to do so, shall give written notice of
           his decision to the owner and the contractor.

        3. Save as hereinafter provided, such decision in respect of  every
           matter so referred shall be final and binding upon  the  parties
           until the completion of the works and shall forthwith  be  given
           effect to by the contractor who shall  proceed  with  the  works
           with all the due diligence.

        4. During  settlement  of  disputes  and  Court  proceedings,  both
           parties  shall  be  obliged  to  carry  out   their   respective
           obligations under the contract.”

  22. On a careful reading of the said clause, it is  demonstrable  that  it
      provides  for  the  parties  to  amicably  settle  any   disputes   or
      differences arising in connection with  the  contract.   This  is  the
      first part.  The second part, as is perceptible, is that when disputes
      or differences of any kind arise between the parties to  the  contract
      relating to the performance of the works during progress of the  works
      or  after  its  completion  or  before  or  after   the   termination,
      abandonment or breach of the contract, it is to  be  referred  to  and
      settled by the engineer, who, on  being  requested  by  either  party,
      shall give notice of his decision within thirty days to the owner  and
      the contractor.  There is also a  stipulation  that  his  decision  in
      respect of every matter so referred to shall be final and binding upon
      the parties until the completion of works and is required to be  given
      effect to by the contractor who shall proceed with the works with  due
      diligence.  To understand the intention of the parties, this  part  of
      the clause is important.  On a studied scrutiny of this postulate,  it
      is graphically clear that it does  not  provide  any  procedure  which
      would remotely indicate that the concerned engineer is required to act
      judicially as an adjudicator by following the  principles  of  natural
      justice or to consider the submissions  of  both  the  parties.   That
      apart, the  decision  of  the  engineer  is  only  binding  until  the
      completion of the works.  It only casts a burden on the contractor who
      is required to proceed with the works with due diligence.  Besides the
      aforesaid,  during  the  settlement  of   disputes   and   the   court
      proceedings, both the parties are obliged to carry out  the  necessary
      obligation under the contract.  The said clause, as we understand, has
      been engrafted to avoid delay and stoppage of work and for the purpose
      of smooth carrying on of the works.  It is interesting  to  note  that
      the burden is on the contractor  to  carry  out  the  works  with  due
      diligence after getting the  decision  from  the  engineer  until  the
      completion of the works.  Thus, the emphasis is on the performance  of
      the contract.  The language employed in the clause does not spell  out
      the intention of the parties to get the disputes  adjudicated  through
      arbitration.  It does not really provide for resolution of disputes.

  23. Quite apart from the above, clause 4.1 of the agreement is  worthy  to
      be noted.  It is as follows: -
      “4.1  It is specifically agreed by and between the  parties  that  all
      the differences or disputes arising out of the Agreement  or  touching
      the subject matter of the Agreement, shall be decided by  a  competent
      Court at Bangalore.”

  24. Mr. Vishwanathan, learned senior counsel for  the  appellants,  laying
      immense emphasis on the same, has submitted that the said  clause  not
      only provides the territorial  jurisdiction  by  stating  a  competent
      court at Bangalore but, in essence and in effect, it  stipulates  that
      all the differences or disputes arising out of the agreement  touching
      the subject-matter of the agreement shall be decided  by  a  competent
      court  at  Bangalore.   Mr.  Dave,  learned  senior  counsel  for  the
      respondents, would submit that it only clothes the competent court  at
      Bangalore the  territorial  jurisdiction  and  cannot  be  interpreted
      beyond the same.  The submission of Mr. Dave, if properly appreciated,
      would convey that in case an award is passed by  the  arbitrator,  all
      other proceedings under any of the provisions of the  Act  has  to  be
      instituted at the competent court at Bangalore.  This construction, in
      our opinion, cannot be placed on the said  clause.   It  really  means
      that the disputes and differences are left to be  adjudicated  by  the
      competent civil court.  Thus, clause 48, as we have analysed, read  in
      conjunction with clause 4.1, clearly  establishes  that  there  is  no
      arbitration  clause  in  the  agreement.   The  clauses   which   were
      interpreted to be arbitration clauses, as has been  held  in  Ram  Lal
      (supra) and Dewan Chand (supra) which have  been  approved  in  Tipper
      Chand (supra), are differently couched.  As far  as  Rukmanibai  Gupta
      (supra) is concerned, as has been opined in Damodar  Das  (supra)  and
      also in Bhagyadhar Dash (supra), it has to  rest  on  its  own  facts.
      Clause in Dina Nath (supra) is differently  couched,  and  clause  48,
      which we are dealing with, has no similarity with it.  In fact, clause
      48, even if it is stretched, cannot  be  regarded  as  an  arbitration
      clause. The elements  and  attributes  to  constitute  an  arbitration
      clause, as has been stated in Jagdish  Chander  (supra),  are  absent.
      Therefore, the irresistible conclusion is  that  the  High  Court  has
      fallen into grave error by considering the said  clause  as  providing
      for arbitration.

  25. Consequently, the appeals are allowed and  the  judgments  and  orders
      passed by the High Court are set aside.  However, regard being had  to
      the facts and circumstances of the case, there shall be no order as to
      costs.


                                                           …..…………………………….J.
                                                                  [Anil   R.
    Dave]





                                                           ……………..………………….J.
                                                               [Dipak Misra]
New Delhi;
April 07, 2014.
-----------------------
[1]    (1999) 2 SCC 594
[2]    (2000) 4 SCC 272
[3]    (2007) 5 SCC 719
[4]    (1980) 4 SCC 556
[5]    (2007) 5 SCC 28
[6]    AIR 1967 SC 166 : 1966 Supp SCR 158
[7]     (1980) 2 SCC 341
[8]    AIR 1947 Lah 215 : 226 IC 444
[9]    AIR 1961 J & K 58
[10]   AIR 1966 Punj 436 : 68 Punj LR 522  : ILR (1966) 2 Punj 428
[11]   AIR 1996 SC 942
[12]   (1998) 3 SCC 573
[13]   (1993) 3 SCCC 137
[14]   AIR 1999 SC 899
[15]   (2003) 7 SCC 418
[16]   (2011) 7 SCC 406

-----------------------
23


No comments:

Post a Comment

Note: Only a member of this blog may post a comment.