Allahabad High Court
Ganga Plumbering Works A Proprietor ... vs The Kanpur Development Authority ... on 11 January, 2008
Equivalent citations: 2008(2)AWC1560, AIR 2008 ALLAHABAD 107, 2008 (3) ALL LJ 296, 2008 A I H C 2322, (2008) 71 ALL LR 24, (2008) 2 ALL WC 1560
Author: H.L. Gokhale
Bench: H.L. Gokhale
JUDGMENT H.L. Gokhale, C.J.
1. Heard Mr. Shubham Agrawal in support of this application.
2. The applicant herein claims to have constructed some 125 houses for the respondent-Kanpur Development Authority. The agreement amount for the construction of the houses has been paid over to the applicant but the security deposit has been forfeited. It is to claim this security amount that the applicant wants the dispute to be referred for arbitration. The applicant is relying upon Clause-24 of the agreement between the parties, which Clause reads as follows:
Clause 24. Except where otherwise specified in the contract the decision of the Chief Engineer for the time being shall be final, conclusive and binding on all parties to the contract upon all question relating to the meaning of the specifications, designs, 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, designs, 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 abandonment thereof the contract by the contractor, shall be final, conclusive and binding on the contractor.
3. It is material to note that an identical Clause having this matter first came up for consideration before the Apex Court in The State of U.P. v. Tipper Chand where the Clause provided as follows:
2. The suit out of which this appeal has arisen was filed by the respondent before us for recovery of Rs. 2,000 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.
The Apex Court (a Bench of three Judges) in the case of The State of U.P. (supra) observed on this Clause as follows:
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 implications, 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.
The Court therefore held that it was not an arbitration clause.
4. A similar question came up before the Apex Com in State of Orissa v. Damodar Das . An identical Clause was there where also the wording was with respect to the meaning of the specifications designs, drawings, etc. and the question with respect to quality of workmanship or any other question or rights were to be decided by the concerned Engineer. The Apex Court held that the same not to be an arbitration clause.
5. This was followed in Executive Engineer, REO v. Suresh Chandra Panda (Dead) Through Lrs. reported at where also the supervising authority was given to the Superintending Engineer concerned under the relevant Clause of the agreement and a view was taken that it did not come to Arbitration clause.
6. This was followed again in State of Rajasthan v. Nav Bharat Construction Co. by a Bench of three Judges on the consideration of a similar Clause and the Apex Court has again held that the concerned Clause-23 in that agreement will not be an arbitration clause.
7. As far as the judgment in Damodar Das (Supra) is concerned, it came to be commented by the Apex Court recently in Punjab State and Ors. v. Dina Nath . In para 17, the Apex Court observed as follows:
17. 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."
8. Mr. Agrawal, learned Counsel for the applicant submits that in the present case, same kind of finality has been given to the decision of the Chief Engineer, therefore, it should be treated as a Clause of Arbitration. He has relied upon the judgment of the Apex Court in the case of Jagdish Chander v. Ramesh Chander . In para 8 of this judgment, the Court has laid down the principles in which the agreement will constitute an arbitration agreement. They are principally four, (i) The intention of the parties to enter into an arbitration agreement is to be gathered. No specific form of an arbitration agreement is required, (ii) The use of words 'arbitration' and 'arbitral tribunal' are not required. The agreement has to be in writing and there should be a provision and that the decision on the dispute will be binding on that, (iii) However, the Court has added where the Clause relating to settlement of disputes, contains words which specifically excluded any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement, and (iv) Again the use of the words used is not very material. In para 8 of this judgment the Court referred to the judgment in the case of State of Orissa v. Damodar Das (Supra) which stated only if an agreement to refer disputes or differences to arbitration is expressly or impliedly spelt out from the clause, there should be an arbitration clause.
9. The situation as obtaining in the case of Damodar Das (Supra) has thus been clearly excluded from the category of cases which were covered in Jagdish Chander (Supra). The Clause in the present case does not state that the decision of the Superintending Engineer on the dispute will be final and binding. His (sic) is principally with respect to designs, specifications and execution of the work. This being so, the present agreement Clause cannot be held to be an arbitration clause. The application is dismissed.