Ltd. Vs. Sanjay Transport Agnecy & ANR.  INSC 1108 (22 May 2009)
IN THE SUPREME COURT
OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 753 OF 2007 Eastern
Coalfields Ltd. ....Appellant Versus Sanjay Transport Agency & Anr.
appeal is directed against the order dated 9 th January, 2006 whereby the
Calcutta High Court referred the dispute arising between the parties herein to
the sole arbitration of Hon'ble Mr. Justice D.K. Basu a retired Judge of
Calcutta High Court, with a request to him to adjudicate upon and decide the
dispute between the parties. The aforesaid order came to be passed on an
application filed by the respondents herein under Section 11 (6) of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as `the Act').
By filing the said application, the respondents prayed for appointment of an
Page 1 of 5 arbitrator relying on the alleged arbitration agreement being
clause No. 14.
parties entered into an excavation contract whereby the respondents undertook
to carry out certain works on behalf of the appellant herein. In the contract
signed by the parties there is a clause being clause No. 14 with the caption
"Settlement of Disputes/Arbitration". Part of the said clause which
is relevant to the context of this case is reproduced hereunder :
incumbent upon the contractor to avoid litigations and disputes during the
course of execution.
However, if such
disputes take place between the contractor and the department, effort shall be
made first to settle the disputes through committees at different levels made
for this purpose by the company."
aforesaid clause 14 in the Agreement, however, was scored out and the same was
replaced by another clause being clause No. 14.
When the parties
entered into the agreement and signed the agreement what remains in the
agreement was clause No. 14 with the caption "Arbitration with regard to
the commercial disputes between the Public Sector Enterprises inter se and
Public Sector Enterprises and Government Departments." It reads as follows
WITH REGARD TO THE COMMERCIAL DISPUTES BETWEEN THE PUBLIC SECTOR ENTERPRISES
INTER SE AND BETWEEN THE PUBLIC SECTOR ENTERPRISES AND GOVERNMENT
"In the event of
any dispute of difference relating to the interpretation and application of the
provisions of the commercial terms of the contract such dispute or difference
shall be referred by either party to the arbitration, to one of the arbitrators
in the Department of Public Enterprises, to be nominated by the Secretary to
the Government of India incharge of the BUREAU OF PUBLIC ENTERPRISES.
The Arbitration Act,
1940 shall not be applicable to the arbitration under this clause. The award of
the arbitrator shall be binding upon the parties to the dispute, provided
however, any party aggrieved by such award, may make further reference for
setting aside or revision of the award to the Law Secretary, Department of
Legal Affairs, Ministry of Law & Justice, Government of India. Upon such
reference, the dispute shall be decided by the Law Secretary or the Special
Secretary/Additional Secretary when so authorised by the Law Secretary, whose
decision shall bind the parties finally and conclusively. The parties to the
dispute will share equally the cost of arbitration, as intimated by the
aforesaid clause No. 14 relates to disputes of commercial nature arising
between the Public Sector Enterprises inter se and between the Public Sector
Enterprises and Government Departments. The text that follows also makes the
said position clear which provides that after the award is given by the
arbitrator in the department of public sector enterprises, reference for
setting aside or revision of the award is to be made to the Law Secretary,
Department of Legal Affairs, Ministry of Law & Justice, Government of
India. The said clause, therefore, concerns the commercial disputes arising
between the Public Sector Enterprises inter se and between such enterprises and
Government Departments. The said clause will have no application to an
agreement which is entered into between the appellant and the respondents, one
of whom is a private party. Since that arbitration clause is not applicable to the
case in hand, therefore, the appointment of the arbitrator by the Calcutta High
Court exercising jurisdiction under Section 11 (6) of the Act was improper.
is well settled rule of interpretation that the section heading or marginal
note can be relied upon to clear any doubt or ambiguity in the interpretation
of any provision and to discern the legislative intent.
The section heading
constitutes an important part of the Act itself, and may be read not only as
explaining the provisions of the section, but it also affords a better key to
the constructions of the provisions of the section which follows than might be
afforded by a mere preamble.
interpretation can well be applied to understand and construct the various
clauses of an arbitration agreement also, which is in the realm of commercial
contract. While interpreting so, the Court may not depend only on the text but
context as well in order to fully comprehend the context and the meaning of the
accordingly, set aside the said order and give liberty to the respondents to
approach the Civil Court for adjudication and resolving the disputes and lis
between the parties arising out of the said contract.
Needless to say that
the respondents herein will be entitled to get the benefit of Section 14 of the
the appeal stands disposed of to the aforesaid extent.
[Dr. Mukundakam Sharma]