H.
Lathakumari Vs. Vamanapuram Block Panchayat & Ors. [2009] INSC 1158 (7 July
2009)
Judgment
Reportable
IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.
4152 OF 2009 (Arising out of SLP [C] No.7656 of 2006) H.Lathakumari ...
Appellant Vamanapuram Block Panchayat & Ors. ... Respondents
R.V.
RAVEENDRAN, J.
1.
Leave granted. Heard both parties.
2.
The Vamanapuram Block Panchayat, first respondent herein, entered
into a "contract agreement" dated 15.3.1999 with the appellant under
which the work of "RIDF-III, Pangode Sivakshetram - Thannichal Road
improvements" was entrusted to her as per the articles of agreement,
plans, specifications and conditions of contract approved by the Superintending
Engineer, Commissionerate of Rural Development, State of Kerala. The 2 Articles
of agreement confirmed that the contractor had also signed the copy of the
Madras Detailed Standard Specifications (for short `MDSS') and addenda volume
thereto in acknowledgement of being bound by all the conditions of the clauses.
The MDSS which thus became a part of the contract between the parties, provided
for settlement of disputes by arbitration vide clause 73 which is extracted
below :
"73.
Arbitration.--In case of any dispute or difference between the parties to the
contract either during the progress or after the completion of the works or
after the determination, abandonment, or breach of the contract as to the
interpretation of the contract, or as to any matter or thing arising thereunder
except as to the matters left to the sole discretion of the Executive Engineer
under clauses 20, 22, 27(c), 29, 36, 37 and 40 of the Preliminary
Specification, or as to the withholding by the Executive Engineer of payment of
any bill to which the contractor may claim to be entitled, then either party
shall forthwith give to the other notice of such dispute or difference, and
such dispute or difference shall be and is hereby referred to the arbitration
of the Superintending Engineer of the nominated circle mentioned in the
`Articles of Agreement" (hereinafter called the "arbitrator")
and the award of such arbitrator shall be final and binding on the
parties."
3.
Certain disputes having arisen in respect of the said contract,
the appellant, by letter dated 28.12.2000, sought reference to arbitration of
its claims aggregating to Rs.13,06,936/- in terms of the aforesaid arbitration
clause contained in the MDSS forming part of the agreement. The Block
Development Officer, Vamanapuram Panchayat, sent a reply dated 4.1.2001 denying
the claims and informing the contractor that if she did not resume the work,
the contract would be terminated at her risk and cost. The 3 respondents,
however, did not deny the existence of the arbitration agreement in the said
reply.
4.
Thereafter, the appellant filed an application under section 11 of
the Arbitration & Conciliation Act, 1996 (`Act' for short) seeking
appointment of an Arbitrator. The first respondent filed a counter denying the
claims and also contending that there was no arbitration agreement. The said
application was dismissed by the designate of the Chief Justice of the High Court
by order dated 13.1.2003. He considered the contention of the appellant that
there was an arbitration agreement in terms of clause 73 of MDSS for resolving
the disputes. He also referred to the contention of the respondents that the
government had decided to scrap arbitration by Government Order dated
19.11.1988, relevant portions of which read as under :
"On
a detailed examination of the matter, Government finds that the system of
arbitration has generally gone against the interests of the government and
therefore, government has decided to stop altogether the system of referring
the disputes for arbitration under any circumstances.
Accordingly,
Government orders the following :
(1)
xxxxxxxx (2) Disputes and differences arising between the department and the
contractors in the PWD contracts shall not be referred to arbitration hereafter
and all provisions relating to arbitration in the tender documents shall be
deleted or scored off under the signature of the executing parties. However, if
any work is financed by an agency and that agency insists to have provision for
arbitration, 4 provision for arbitration may be provided in the agreement in
respect of such work.
(3) xxxxx
(4) The question of adopting the above procedure in other departments and organizations
like Kerala State Electricity Board will be examined by the concerned
department."
[emphasis
supplied] The learned Designate of the Chief Justice accepted the said
contention of the respondents and held as follows :
"In
view of the above notification (Government Order?) the arbitration clause in
the tender documents and in the agreement shall stand deleted or scored off.
When the above arbitration clause from the tender documents had been
specifically deleted by the above notification, the applicant cannot again rely
on the above arbitration clause and seek an order for appointing an arbitrator.
As the above arbitration clause has been deleted by the above notification, the
prayer for appointing an arbitrator for resolving the disputes and differences
between the parties cannot be allowed."
5.
The said order is challenged in this appeal by special leave. The
question therefore is whether there is an arbitration agreement between the
parties? The first respondent did not deny the existence of an arbitration
clause in terms of clause 73 of MDSS, which was admittedly a part of the
agreement. The contention was that the said arbitration clause stood deleted
from contracts in view of the G.O. dated 19.11.1988. The question is whether
the arbitration clause has, in fact, stood deleted. A reading of the said order
dated 19.11.1988 clearly shows that the deletion of the arbitration 5 clause
was directed only in regard to the Public Work Department contracts.
In fact,
it specifically provided that the question of adopting such deletion by other
departments of the Government or by statutory bodies would be examined by the
concerned department/statutory body. It is thus clear that the deletion of
clause 73 of MDSS from the contract was made applicable only in regard to the
contracts entered into by the Public Works Department of the State of Kerala
and the question whether other governmental or quasi- governmental agencies
should delete such a provision, was left to the individual decision/discretion
of the respective authorities.
6.
Admittedly, neither the first respondent nor the Panchayat Raj
Department, decided to delete the arbitration clause. On the other hand, the
first respondent entered into an agreement with the appellant long after the
said Government Order dated 19.11.1988, that is, on 15.3.1999 and did not
choose to delete clause 73 from the MDSS made part of the agreement. If the
first respondent wanted to delete the arbitration agreement, it ought to have
scored out clause 73 from the MDSS which was signed and made a part of the
agreement or included a clause in the agreement that clause 73 of MDSS would
not apply or that there shall be no arbitration. That was not done. In fact, in
PWD contracts, to which the bar on arbitration was applied, the printed form of
Articles of Agreement was amended to include a clause 6 which confirmed that
the "contractor has also signed the copy of the Madras Detailed Standard
Specifications excluding clause 73 and other clauses relating to
arbitration......" Significantly such an exclusion is not made in the
articles of Agreement entered by the first respondent Panchayat. It is thus
clear that the arbitration clause was intended to form a part of the contract
between the parties. Therefore, the disputes between the parties are preferable
to arbitration in terms of the said arbitration agreement. No other objection
to the arbitration is raised.
7.
In view of the above, the appeal is allowed and the first
respondent is directed to refer the disputes to the Superintending Engineer in
terms of the arbitration agreement contained in clause 73 of MDSS within six
weeks from today. Nothing stated above shall be construed as an expression of
any opinion on the merits of the claim.
..............................J. (R V Raveendran)
.............................J.
New Delhi;
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