State of Orissa &
Ors. Vs. Bhagyadhar Dash
J U D G M E N T
R.V.RAVEENDRAN, J.
1.
Leave
granted.
2.
These
appeals by special leave are by the State of Orissa aggrieved by the orders of the
Chief Justice of Orissa High Court allowing the 2applications filed under
Section 11 of the Arbitration and Conciliation Act 1996 (`Act' for short) filed
by contractors and appointing arbitrators to decide the disputes raised by them
against the State Government. The learned Chief Justice held that the last
sentence of the proviso to clause 10 of the conditions of contract (forming
part of the agreements between the state and the contractors) is an arbitration
agreement. The appellants challenge the said orders on the ground that there is
no arbitration agreement and therefore the applications under section 11 of the
Act filed by the contractors ought to have been dismissed. Therefore the short question
that arises for our consideration in these appeals is whether the said clause is
an arbitration agreement. The essentials of an arbitration agreement
3.
In
K K Modi vs. K N Modi [1998 (3) SCC 573] this court enumerated the following
attributes of a valid arbitration agreement : "
a. The arbitration
agreement must contemplate that the decision of the Tribunal will be binding on
the parties to the agreement,
b. 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,
c. the agreement must
contemplate that substantive rights of parties will be determined by the agreed
tribunal,
d. 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,
e. 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,
f. 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."Following K.K. Modi and other cases, Bihar State Mineral Development
Corporation v. Encon Builders (IP) Ltd. - 2003 (7) SCC 418, this court listed
the following as the essential elements of an arbitration agreement: "
i.
There
must be a present or a future difference in connection with some contemplated
affair;
ii.
There
must be the intention of the parties to settle such difference by a private
tribunal;
iii.
The
parties must agree in writing to be bound by the decision of such tribunal; and
iv.
The
parties must be ad idem."
4.
In
Jagdish Chander vs. Ram Chandra [2007 (5) SCC 719], this Court, after referring
to the cases on the issue, set out the following principles in regard to what
constitutes an arbitration agreement : "
(i) The intention of
the parties to enter into an arbitration agreement shall have to be gathered
from the terms of the agreement. If the terms of the agreement clearly indicate
an intention on the part of the parties to the agreement to refer their
disputes to a private tribunal for adjudication and an willingness to be bound by
the decision of such tribunal on such disputes, it is arbitration agreement.
While there is no specific form of an arbitration agreement, the words used
should disclose a determination and obligation to go to arbitration and not
merely contemplate the possibility of going for arbitration. Where there is
merely a possibility of the parties agreeing to arbitration in future, as
contrasted from an obligation to refer disputes to arbitration, there is no
valid and binding arbitration agreement.
(ii) Even if the
words 'arbitration' and 'arbitral tribunal (or arbitrator)' are not used with
reference to the process of settlement or with reference to the private
tribunal which has to adjudicate upon the disputes, in a clause relating to
settlement of disputes, it does not detract from the clause being an arbitration
agreement if it has the attributes or elements of an arbitration agreement. They
are :
(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.
(iii) Where the clause
provides that in the event of disputes arising between the parties, the
disputes shall be referred to Arbitration, it is an arbitration agreement.
Where there is a
specific and direct expression of intent to have the disputes settled by
arbitration, it is not necessary to set out the attributes of an arbitration agreement
to make it an arbitration agreement. But where the clause relating to settlement
of disputes, contains words which specifically excludes any of the attributes of
an arbitration agreement or contains anything that detracts from an arbitration
agreement, it will not be an arbitration agreement. 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.
(iv) But mere use of
the word 'arbitration' or 'arbitrator' in a clause will not make it an
arbitration agreement, if it requires or contemplates a further or fresh
consent of the parties for reference to arbitration. For example, use of words such
as "parties can, if they so desire, refer their disputes to
arbitration" or "in the event of any dispute, the parties may also
agree to refer the same to arbitration" or "if any disputes arise
between the parties, they should consider settlement by arbitration" in a clause
relating to settlement of disputes, indicate that the clause is not intended to
be an arbitration agreement. Similarly, a clause which states that "if the
parties so decide, the disputes shall be referred to arbitration" or "any
disputes between parties, if they so agree, shall be referred to
arbitration" is not an arbitration agreement.
Such clauses merely indicate
a desire or hope to have the disputes settled by arbitration, or a tentative arrangement
to explore arbitration as a mode of settlement if and when a dispute arises. Such
clauses require the parties to arrive at a further agreement to go to arbitration,
as and when the disputes arise. Any agreement or clause in an agreement requiring
or contemplating a further consent or consensus before a reference to arbitration,
is not an arbitration agreement, but an agreement to enter into an arbitration
agreement in future."
5.
The
following passage from Russell on Arbitration (19th Edn. Page 59) throws some
light on this issue: "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 enquiry in the nature of a judicial enquiry and hear
the respective cases of the parties and decide upon evidence laid before him, then
the case is one of an arbitration. The intention in such case is that there
shall be a judicial inquiry worked out in a judicial manner. On the other hand,
there are cases in which a person is appointed to ascertain some matter for the
purpose of preventing differences from arising, not of setting them when they
have arisen".Cases where the tests were applied to different clauses to find
out whether they could be termed as `arbitration agreement'
6.
In
K.K. Modi, the clause that arose for consideration was as under : "9. 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".This Court held that the said clause was
not an arbitration agreement on the following reasoning:
"Therefore our
Courts have laid emphasis on (1) existence of disputes as against intention to avoid
future dispute; (2) the tribunal or forum so chosen is intended to act judicially
after taking into account relevant evidence before it and the submissions made
by the parties before it; and 6 (3) the decision is intended to bind the
parties. Nomenclature used by the parties may not be conclusive. 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. .
. 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 proper implementation
of the settlement already arrived at. A judicial determination, recording of
evidence etc. are not contemplated..." (emphasis supplied)
7.
In
State of Uttar Pradesh vs. Tipper Chand - 1980 (2) SCC 341, the following
clause fell for consideration: "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".
The High Court held
that the clause was not an arbitration agreement, as it merely conferred power
on the Superintending Engineer to take a decision on his own and did not
authorise parties to refer any matter to his decision. This court clarified that
in the absence of a provision for reference of disputes between parties for settlement,
clause merely stating that the "decision of the Superintending Engineer shall
be final" was not an arbitration agreement. This Court clarified that an
arbitration agreement can either be in express terms or can be inferred or
spelt out from the terms of the clause; and that if the purpose of the clause
is only to vest in the named Authority, the power of supervision of the execution
of the work and administrative control over it from time to time, it is not an arbitration
agreement. It also held that the clause did not contain any express arbitration
agreement, nor spelt out by implication any arbitration agreement as it did not
mention any dispute or reference of such dispute for decision.
8.
In
State of Orissa vs. Damodar Das [1996 (2) SCC 216], a three Judge Bench of this
court considered whether the following clause is an arbitration agreement: "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 material use 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 of 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". 8 Following the decision in Tipper
Chand, this Court held that the said clause did not amount to an arbitration agreement,
on the following reasoning:
"It would, thereby,
be clear that this Court laid down as a rule that the arbitration agreement must
expressly or by implication be spelt out that there is an agreement to refer
any dispute or difference for an arbitration and the clause in the contract
must contain such an agreement. 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." (emphasis supplied)9. In Bharat
Bhushan Bansal vs. Uttar Pradesh Small Industries Corporation Ltd., Kanpur
[1999 (2) SCC 166], the following clauses fell for consideration of this Court:
"Decision of the
Executive Engineer of the UPSIC to be final on certain matters 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 for 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
9 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 matter arising out of this
contract and not specifically mentioned herein".This Court held that the said
clauses did not amount to arbitration agreement on the following reasoning:
"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". (emphasis supplied)
This Court while noting
the distinction between a 'Preventer of disputes' and an 'adjudicator of
disputes', observed that the Managing Director under clause 24 of the
agreement, was more in the category of an expert who will decide claims,
rights, or matters in any way pertaining to the contract and the object of his
decision is to avoid disputes and not decide disputes in a quasi-judicial manner.
This court also referred to an illustration given in Hudson on 'Building and
Engineering Contracts' (11th Edition, Volume II, para 18.067) stating that the
following clause was not an arbitration clause and that the duties of the
Engineer mentioned therein were administrative and not judicial:
"(E)ngineer 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
contract, and the certificate of the engineer for the time being, given under
his hand, shall be binding and conclusive on both parties".
9.
We
may next refer to the three decisions of this Court relied on by the
respondents, where on interpretation, clauses though not described as
`arbitration clauses', were held to be arbitration clauses, by applying the
tests as to what constitute an arbitration agreement. In Rukmanibai Gupta v. Collector,
Jabalpur - 1980 (4) SCC 566, this Court considered whether the following clause
amounted to an arbitration agreement : "15. 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 the matter in difference shall be decided by
the lessor whose decision shall be final".
This Court held that Arbitration
agreement is not required to be in any particular form. What is required to be ascertained
is whether the parties have agreed that if disputes arise between them in respect
of the subject-matter of contract such dispute shall be referred to arbitration;
and if the answer was in the affirmative, then such an arrangement would spell
out an arbitration agreement. Applying the said test, this court held that the
aforesaid clause is an arbitration agreement, as it (a) made a provision for referring
any doubt, difference or dispute to a specified authority for decision and (b) it
made the "decision" of such authority final.
While we respectfully
agree with the principle stated, we have our doubts as to whether the clause considered
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. "The ratio in Rukmanibai Gupta vs. Collector
does not assist the respondent. From the language therein this court inferred,
by implication, existence of a dispute or difference for arbitration."
10.
In
Encon Builders (supra), this court proceeded on the assumption that the following
clause was an arbitration agreement, as that issue was not disputed: "In
case of any dispute arising out of the agreement the matter shall be referred to
the Managing Director, Bihar State Mineral Development Corporation Limited,
Ranchi, whose decision shall be final and binding."The clause specifically
provided for `disputes being referred to the Managing Director' and made the said
authority's decision not only final, but also binding on the parties.
Therefore it can be
said that it answers the tests of an arbitration agreement. The issue
considered therein was whether the High Court committed an error in refusing to
refer the dispute to arbitration, even after finding the clause to be an
arbitration agreement, by presuming bias in view of the fact that the named arbitrator
was an employee of one of the parties to the dispute. This Court held that disputes
were arbitrable in terms of the said clause. Be that as it may. A similar
clause was also considered in Punjab State Vs. Dina Nath [2007 (5) SCC 28] and
held to be arbitration agreement.
11.
In
Mallikarjun v. Gulbarga University - 2004 (1) SCC 372, this court held the
following clause was a valid arbitration agreement : "The decision of the
Superintending Engineer of the 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 herein before 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 of 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."
This court after referring
to the essentials of an arbitration agreement laid down in Encon Builders held that
the above clause is an arbitration agreement as it answered the test of reference
of dispute for decision and made the decision of the authority final and
binding. This court held : "Applying the aforesaid principle to the
present case, Clause 30 requires that 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 also there 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."The clause for consideration in this case
12.
Clause
10 of the Conditions of Contract which is the subject of controversy reads
thus: "Clause 10: The Engineer-in-Charge shall have power to make any alterations
in or additions to the original specifications, drawings, designs and instructions
that may appear to him necessary and advisable during the progress of work, and
the contractor shall be bound to carry out the work in accordance with any
instructions which may be given to him in writing signed by the Engineer-in-Charge
and such alterations shall not invalidate the contract, and any additional work
which the contractor may be directed to do in the manner above specified as
part of the work shall be carried out by the contractor on the same conditions
in all respects on which he agreed to do the main work, and at the same rates as
are specified in the tender for the main work.
13.
The
time for the completion of the work shall be extended in the proportion that
the additional work bears to the original contract work and the certificate of
the Engineer-in-Charge shall be conclusive as to such proportion. And if the additional
work includes any class of work for which no rate is specified in this
contract, then such class of work shall be carried out at the rates entered in the
sanctioned schedule of rates of the locality during the period when the work is
being carried on and if such last mentioned class of work is not entered in the
schedule of rates of the district then the contractor shall within seven days
of the date of the rate which it is his intention to charge for such class of
work, and if the Engineer-in-Charge does not agree to this rate he shall be
noticed in writing be at liberty to cancel his order to carry out such class of
work and arrange to carry it out in such manner as he may consider advisable.
No deviations from the
specifications stipulated in the contract nor additional items of work shall
ordinarily be carried out by the contractor, 14 nor shall any altered,
additional or substituted work be carried out by him, unless the rates of the substituted,
altered or additional items have been approved and fixed in writing by the
Engineer-in-Charge, the contractor shall be bound to submit his claim for any
additional work done during any month on or before the 15th days of the
following month accompanied by a copy of the order in writing of the
Engineer-in-Charge for
the additional work and that the contractor shall not be entitled of any payment
in respect of such additional work if he fails to submit his claim within the
aforesaid period. Provided always that if the contractor shall commence work or
incur any expenditure in respect thereof before the rates shall have been
determined as lastly hereinbefore mentioned, in such case he shall only be
entitled to be paid in respect of the work carried out or expenditure incurred
by him prior to the date of the determination of the rates as aforesaid
according to such rate or rates as shall be fixed by the Engineer-in-Charge. In
the event of a dispute, the decision of the Superintending Engineer of the
Circle will be final." (emphasis supplied)
14.
A
reading of the said clause shows that it is a clause relating to power of the
Engineer-in-Chief to make additions and alterations in the drawings and
specifications and execution of non-tendered additional items of work (that is items
of work which are not found in the bill of quantities or schedule of work). It
provides for the following:
a. that the
Engineer-in-charge could make additions and alterations in the
drawings/specifications; and that such alterations and additions will not invalidate
the contract, but will entitle the contractor to extension of time for
completion of work proportionately;
b. that if the
additional work be executed is an item for which the rate is not specified in
the contract (or in the schedule of rates for the district), the contractor
shall specify the rate and the Engineer-in-charge may either accept the rate or
cancel the order to execute that particular work;
c. that if the contractor
commences the work with reference to an item for which there is no rate in the contract
and there is no agreement in regard to the rate for execution of such work, he
shall be paid at the rates fixed by the Engineer-in -Charge; and
d. that if the contractor
disputes the rate fixed by the Engineer-in- Charge, the decision of the
Superintending Engineer in regard to rate for such non-scheduled item shall be
final.
15.
We
may next examine whether the last sentence of the proviso to clause 10 could be
considered to be an arbitration agreement. It does not refer to arbitration as
the mode of settlement of disputes. It does not provide for reference of
disputes between the parties to arbitration. It does not make the decision of
the Superintending Engineer binding on either party. It does not provide or refer
to any procedure which would show that the Superintending Engineer is to act judicially
after considering the submissions of both parties. It does not disclose any
intention to make the Superintending Engineer an arbitrator in respect of
disputes that may arise between the Engineer-in-Charge and the contractor. It does
not make the decision of the Superintending Engineer final on any dispute,
other than the claim for increase in rates for non-tendered items.
It operates in a limited
sphere, that is, where in regard to a non-tendered additional work executed by the
contractor, if the contractor is not satisfied with the unilateral
determination of the rate therefor by the Engineer-in-Charge the rate for such
work will be finally determined by the Superintending Engineer. It is a
provision made with the intention to avoid future disputes regarding rates for
non-tendered item. It is not a provision for reference of future disputes or
settlement of future disputes. The decision of superintending Engineer is not a
judicial determination, but decision of one party which is open to challenge by
the other party in a court of law. The said clause can by no stretch of
imagination be considered to be an arbitration agreement. The said clause is
not, and was never intended to be, a provision relating to settlement of
disputes.
16.
That
clause 10 was never intended to be an arbitration agreement is evident from the
contract itself. It is relevant to note the Standard Conditions of Contract of the
state government, as originally formulated consisted a provision (Clause 23)
relating to settlement of disputes by arbitration, which is extracted below :
"Except where otherwise
provided in the contract, all questions and disputes relating to the meaning of
the specifications, designs, 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, designs, drawing, specifications, estimates, instructions,
orders or these conditions, or otherwise concerning the work, or the execution,
or failure to execute the same, whether arising during the progress of the work
or after the completion or abandonment thereof shall be referred to the sole arbitration
of a Superintending Engineer of the State Public Works Department unconnected with
the work at any stage nominated by the Chief Engineer concerned. If there be no
such Superintending Engineer, it should be refereed to the sole arbitration of Chief
Engineer concerned.
It will be no
objection to any such appointment that the arbitrator so appointed is a
government servant. The award of the arbitrator so appointed shall be final, conclusive
and binding on all parties to this Contract."The said clause was deleted by
the State Government from the Standard Conditions of Contract by official Memorandum
dated 24.12.1981. Contracts entered by the State Government thereafter did not
have the said arbitration clause, though the other Conditions of Contract remained
the same. The contracts in all these cases are of a period subsequent to
24.12.1981 and the Conditions of Contract forming part of these contracts do not
contain the arbitration clause. When the State Government has consciously and intentionally
deleted the provision for arbitration from its contracts, it will be a travesty
of justice to read another clause in the contract providing for execution of non-tendered
items and the method of determination of the rates therefor, as a provision for
arbitration.
17.
In
fact, in Executive Engineer RCO vs. Suresh Chandra Panda [1999 (9) SCC 92],
this Court considered the effect of the said clause relating to execution of non-tendered
items, vis-`-vis clause 23 in a pre-1981 contract. This court held that the
said clause (then numbered as clause 11, numbered as clause 10 in subsequent contracts)
was a provision which excluded the issue relating to finality of rates, from the
scope of arbitration agreement contained in clause 23 on the following reasoning:
"Under Clause 11 of the contract, there is an elaborate provision dealing with
the power of the Engineer-in Charge to make any alterations or additions to the
original specifications, drawings, designs and instructions. It, inter alia, provides
that if for such alterations or additions no rate is specified in the contract,
then the rates which are entered in the sanctioned schedule of rates of the
locality during the period when the work is being carried out, would be paid.
However, if this
class of work, not provided for in the sanctioned schedule of rates then the
contractor has the right, in the manner specified in that clause, to inform the
Engineer-in-Charge of the rate at which he intends to carry out that work. If the
Engineer-in-Charge does not agree to this rate he is given the liberty to
cancel his order and arrange to carry out such class of work in such manner as he
may consider advisable. The clause further provides that if the contractor commences
such additional work or incurs any expenditure in respect of it before the rate
are determined as specified in that clause, then the rate or rates shall be as
fixed by the Engineer-in-Charge.
In the event of a
dispute, the decision of the Superintendent Engineer of the circle will be final.
Under Clause 23, except as otherwise provided in the contract, all disputes are
arbitrable as set out in that clause. The finality of rates, therefore, under Clause
11 is a provision to the contrary in the contract which is excluded from Clause
23."Thus, even when the Standard Conditions of Contract contained a
provision for arbitration (vide clause 23), clause 10 was considered to be a
provision dealing with a matter excepted from arbitration. Be that as it may. The
proviso to clause 10, which provides that the decision of the Superintending Engineer
is `final', merely discloses an intention to exclude the rates for extra items decided
by the Superintending Engineer from the scope of arbitration, as an excepted
matter, when there was an arbitration agreement (clause 23) in the contract. When
the arbitration agreement was deleted, provision dealing with non-tendered items
can not be described as an arbitration agreement. Be that as it may.
18.
We
therefore allow these appeals, set aside the orders of the High Court
appointing the arbitrator and dismiss the applications for appointment of
arbitrator.
.................................J.
(R V Raveendran)
.................................J.
(A K Patnaik)
New
Delhi
July
4, 2011
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