Kerala High Court
Cherian And Kurian vs State Of Kerala on 16 June, 2006
Equivalent citations: AIR2006KER330, 2007(1)ARBLR21(KERALA), 2006(3)KLT344, AIR 2006 KERALA 330, 2006 (6) AKAR (NOC) 830 (KER), 2007 A I H C (NOC) 148 (KER), 2007 (1) ARBI LR 21, (2006) ILR(KER) 3 KER 220, (2006) 3 KER LT 344, (2007) 1 ARBILR 21
Author: Thottathil B. Radhakrishnan
Bench: Thottathil B. Radhakrishnan
ORDER Thottathil B. Radhakrishnan, J.
1. These arbitration requests filed under Section 11(6) of the Arbitration and Conciliation Act, 1996, hereinafter referred to as "the Act", are being disposed of by this common order since the parties to these matters are the same, the contentions as regards the requests for arbitration are similar and the requests are made on the strength of identical agreements.
2. Agreement No. 5/PD-NH/2000-01 forming the foundation for A.R.28/2003 and Agreement No. 6/PD-NH/2000-01 forming the foundation for A.R.29/2003 were entered into between the applicant and the State of Kerala acting through the Project Director (S.E.), National Highway (ADB) Project Circle, Edappally, Kochi-24, on behalf of the Governor of the State of Kerala, for certain works in relation to N.H.49 - Madura Kochi Road - Special repairs crash programme - Improving riding quality -strengthening the existing surface by providing 50mm BM and 25mm BC. Agreement No. 6 relates to the work between ch. km.261/000 to 274/000 and Agreement No. 5 relates to ch. km. 274/000 to 286/610.
3. The contention of the applicant is that though the said agreements were entered into and the work was completed and completion certificate issued, there are disputes between the parties regarding certain outstanding claims of the applicant, the contractor. It is his assertion that the parties have agreed that the arbitration clause as per Ministry of Surface Transport's Letter No. R.W/NH-34041/3/94-DO-III dated 28-9-1994 is applicable to the contracts in terms of the agreements in that regard and that in terms of the said arbitration clause, the matter requires to be referred for arbitration and further that, in view of the failure of the respondents to do so, measure has to be taken in terms of Section 11(6) of the Act.
4. In opposition, the second respondent, on behalf of the State Government, contends that there are express provisions in the contract documents excluding arbitration and to the effect that the claims, if any, can be adjudicated only by the competent civil court and not by arbitration.
5. The letter dated 28-9-1994, referred to above, is produced as Annexure-A9 by the applicant. Accordingly, an order was issued on 14-10-2005 to the third respondent, representing the Central Government, as to whether Annexure-A9 circular was. withdrawn prior to the date of the agreements between the parties. A statement has been placed on record on behalf of the third respondent stating that the said circular has not been withdrawn, however that the same is not applicable and that the arbitration clause would apply only to cases where the tender amount exceeds Rs. 5 crores.
6. Having regard to the nature of the contentions, the original agreements were produced. Agreement No. 5/PD-NH/2000-01 dated 3-10-2000 and Agreement No. 6/ PD-NH/2000-01 dated 3-10-2000 produced on behalf of the State Government through the learned Government Pleader, have been perused. They are identical and have the following common relevant features, on the basis of which arguments have been advanced by counsel for either side:
(a) The date of both the agreements is 3-10-2000. The agreements contain different printed forms, different cyclostyled forms and different typed forms. Various blank spaces in the said forms which required to be filled are filled up in writing with pen. The Articles of Agreement between the parties is made by filling up the blanks in a printed form which is in the form of a booklet printed by the Government of Kerala in 1987, going by the endorsement of the Government Press/Store on the facing sheet of the said document. It is signed by the parties after filling the necessary blank spaces. Among the terms agreed, Clause 3 among the printed conditions in the Articles of Agreement reads as follows:
The parties to this contract agreed to undertake the condition that arbitration shall not be a means of settlement of disputes or claim or anything on account of this contract.
As part of the agreements, are the mutually agreed conditions in the notices inviting tenders for the work, which again, are in printed forms, printed in 1992 wherein, among other things, Clause 24 reads as follows:
Arbitration shall not be a means of settlement of dispute or claim arising out of the contract relating to the work.
This clause came to be so read after its introduction into the Tender Conditions of the Government as per G.O.(Ms.) No. 10/86/PW & T, dated 27-1-1986. Clause 24(a) of the said document introduced as per G.O.(Ms.) No. 53/88/PW & T dated 30-9-1988 reads as follows:
All disputes and differences arising out of the contract that may be executed in pursuance of this notification shall be settled only by the Civil Court in whose jurisdiction the work covered by the contract is situated or in whose jurisdiction the contract was entered into in case the work extends to the jurisdiction of more than one Court.
(b) However, as part of the agreements, on the facing sheet of the notice inviting tenders, a cyclostyled paper is attached by affixing the same using adhesive. The said piece of paper, which is about 2 1/2 inches in width and signed by both the parties, contained the following clause:
Arbitration clause as per Ministry of Surface Transport sletter No. R.W/NH-34041/3/94-DO-III dated 28/9/1994 will be applicable. (emphasis supplied),
(c) The arbitration clause referred to above and as evidenced by the Annexure to Circular No. RW/NH-34041/3/94-DO III dated 28-9-1994, reads as follows:
Annexure to Circular No. RW/NH-34041/3/94-DO III dated 28.9.1994.
CONTRACT CLAUSE FOR INCLUSION IN BIDDING CONDITIONS FOR WHOLL Y DOMESTIC FUNDED NH WORKS Settlement of Disputes
1. If any dispute or difference of any kind whatsoever (the decision whereof is not herein otherwise provided for) shall arise between the Employer and the Contractor in connection with the, or arising out of the contract or the execution of the works, whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the contract it shall, in the first place, within six months of occurrence of the said event(s), be referred to and be settled by the Engineer who shall, within a period of sixty days after being requested in writing by the Contract or Employer to do so give written notice of his decision to the Contractor/Employer. Subject to arbitration, as hereinafter provided, such decision in respect of every matter so referred shall be final and binding upon the Employer and the Contractor and shall forthwith be given effect to by the Contractor, who shall proceed with the execution of the work with all due diligence whether he or the Employer requires arbitration, as hereinafter provided, or not. If the Engineer has given written notice of his decision to the party(ies) and no claim to arbitration has been communicated to him by the concerned party within a period of 90 days from receipt of such notice, the said decision shall remain final and binding upon the party concerned. If the Engineer shall fail to give notice of his decision, as aforesaid, within a period of 60 days after being requested as aforesaid, or if either the Employer or the Contractor be dissatisfied with any such decision, then and in any such case either the Employer or the Contractor may within 180 days after the expiration of the first-named period of 60 days on receiving notice of such decision, as the case may be, require that the matter or matters in dispute be referred to arbitration as hereinafter provided.
2. Arbitration All disputes or differences in respect of which the decision, if any, of the Engineer has not become binding as aforesaid and amicable settlement has not been reached, shall, on the initiative of either party, be referred to the adjudication. The sole Arbitrator for claims up to Rs. 5.00 lakhs shall be appointed by the State Chief Engineer. Such appointed Arbitrator shall be a person not below the rank of Executive Engineer and not connected with the contract. The claims above Rs. 5.00 lakhs and up to Rs. 25.00 lakhs shall be settled by a sole arbitrator to be nominated by the Director General (Road Development), Ministry of Surface Transport, Government of India, New Delhi. A copy of the order shall be supplied to both the parties. The claims of more than Rs. 25.00 lakhs shall be referred to the adjudication of a Committee of three arbitrators. The Committee shall be composed of one arbitrator to be nominated by the employer, one to be nominated by the Contractor and the third, who will also act as the Chairman of the Committee, to be nominated by the Director General (Road Development), Ministry of Surface Transport (Roads Wing), Government of India, New Delhi. If either of the parties abstain or fail to appoint his arbitrator, within 60 days after receipt of notice for the appointment of such arbitrator, then the Director General (Road Development), Ministry of Surface Transport (Roads Wing), Government of India shall also appoint such arbitrators). A certified copy of the appointment made by the Director General (Road Development), Ministry of Surface Transport (Roads Wing), Government of India shall be furnished to both parties. The decision about the appointment of the arbitrators by the Ministry of Surface Transport shall be final and binding on both the parties. Any person appointed as Arbitrator shall not be connected with the work.
3. Save as otherwise provided in the Contract, the Arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act 1940 or any statutory modifications or enactment thereof and shall be held at such place and time in India as the arbitrator or the Committee of Arbitrators may determine. The decision of the Arbitrator(s) shall be final and binding as may be determined by the Arbitrator(s).
4. Performance under the contract shall continue during the arbitration proceedings and payments due to the Contractor by the Employer shall not be withheld, unless they are the subject matter of the arbitration proceedings.
5. All awards shall be in writing and such awards shall state reasons for the amounts awarded, No decision given by the Engineer in accordance with the foregoing provisions shall disqualify him from being called as a witness and giving evidence before the arbitrators as aforesaid and neither party will be limited in the proceedings before such arbitrators to the evidence of arguments put before the Engineer for the purpose of obtaining his said decisions.
On 28-9-1994 as per the said circular, All Secretaries, State Public Works Department (All States and Union Territories dealing with National Highways) and Engineers-in-Chief/Chief Engineers (National Highways) (All States and Union Territories dealing with National Highways) were notified regarding the procedure for appointment of arbitrators for domestic funded National Highway works. The said circular, inter alia, provides as follows:
A standard contract clause prescribing therein procedure to be followed for appointment of Arbitrators has been finalised by this Ministry and a copy thereof is enclosed for incorporation in the bidding conditions for the National Highway works. It may be ensured that the clause is compulsorily made a part of the bidding conditions for the National Highway works in your State for which invitation of Tender Notices are to be Finalised by the State henceforth after receipt of this letter.
(emphasis supplied)
(d) It has to be remembered at once that it could have been only following the aforesaid circular of the Central Government issued on 28-9-1994, that the clause incorporating the arbitration clause in the said circular was included by affixing the cyclostyled term that such clause applies, on the agreement documents entered into between the parties in this case. This is so because the works in question relate to National Highway and the circular required that the said clause is compulsorily made a part of the bidding conditions for the National Highway works.
7. On the aforesaid facts, the question that falls for decision is as to whether the inclusion of the arbitration clause, required for by the circular dated 28-9-1994 issued by the Central Government has an overriding effect on the printed conditions in the Articles of Agreement and the tender document that there shall not be any arbitration.
8. Arguments have been advanced on the question as to whether the printed conditions which are referred to above or the cyclostyled condition, included by adhesion on the agreement document, applies.
9. There is no dispute between the parties that the printed form documents and the cyclostyled piece of paper that is stuck on the tender document are specifically signed by both the parties under lawful authority. The existence of the circular as aforesaid on the date of the agreement is admitted.
10. The contents or part of the contents of another document may be incorporated by reference, and in such cases', the other document so far as it is incorporated, is to be read with the document under consideration. In so far as the proposition that a reference by incorporation will have the effect of having to read both documents together as a whole, the principles, available in the realm of interpretation of statutes regarding the distinction between a mere reference to an earlier statute or a provision therein and an incorporation thereof can be safely imported into the realm of interpretation of documents. An incorporation, in effect means, the bodily lifting of provisions of one and making them part of another. In contradistinction to that a mere reference to an earlier statutory provision, statement or document has to be viewed as only a reference without incorporation. Profitable reference in this regard can be made to the decision of the Apex Court in Western Coalfields Ltd. v. Spl. Area Development Authority .
11. Odgers' Construction of Deeds and Statutes, Fifth Edition refers to certain aspects regarding documents, partly printed. Encapsulating the discussions in the said treatise, Sri. M.A. Sujan on his work -Interpretation of Contract, Second Edition, succinctly states as follows:
The first rule is that where there is any reasonable doubt as to the meaning of the document, greater weight is placed on the written words then (sic) the printed words. This is because the written words are the immediate language and terms selected by the parties themselves for the expression of their meaning whereas the printed words are a general formula adopted equally to their case and to that of all other contracting parties upon similar occasions and subjects. In addition to striking out printed clauses, courts have modified such clauses in order to implement the true intention of the contracting parties as ascertained from the document as a whole.
12. In C.C. Exporters v. B.B.C. Mills , their Lordships were concerned with the conflict between the printed portion of a document and the portion in manuscript. It was held that the intention expressed in the manuscript should prevail.
13. In Noorbhai v. M. Allabux & Co. AIR 1917 Bombay 246, it was held that in a contract which contains written and printed clauses, or terms, and when the written terms are inconsistent with the printed terms, the written terms would prevail over the printed terms. In doing so, the decision in Western Assurance Company of Toronto v. Poole (1903) 1 KB 376 among others, was followed.
14. In Ratilal v. Dalmia Cement & Paper Marketing Co. AIR 1943 Bombay 229, it was held that the written or typed-in terms which are inconsistent with the printed terms will prevail.
15. In Mohanlal v. Krishna Premji & Co. AIR 1928 Bom. 170, the Division Bench of the Bombay High Court held that when a contract is partly printed and partly written, special importance should be given to that part of the contract which is written, but the printed portion is not to be neglected and the whole of the document, both printed and written must be construed and if possible, one intelligible whole made of it.
16. It was laid down in Amritlal v. Bhagwandas (AIR 1939 Bom. 435) that when there are printed and written conditions in one document, the Court's duty, as far as possible, is to reconcile all the terms, but, when that is not found possible, the written conditions are to be given greater weight than the printed ones.
17. In Bharat Construction Co. Ltd. v. Union of India , the Division Bench of the Calcutta High Court was called upon to consider a set of facts referred to in paragraph 2 of the said judgment. The parties had agreed to have their disputes under a contract to be referred to the sole arbitration of Major General. The standard form did not have the name of the deciding authority and the words "Major General I/C, Administration, Eastern Command" were introduced in writing. The Bench held that the term "Major General" was not a mere surplusage and that such intention has to be given effect to.
18. Construing a letter of credit, a Division Bench of the Calcutta High Court in United Bank of India Ltd. v. N.S. Bank held that each case must be examined and determined on the exact terms and conditions of the letter of credit in a particular case and further that, if there is a conflict between the text of a letter and a printed clause, then certainly the text of the letter must prevail over the ordinary printed clause, as being the special variation where the printed clause would be inapplicable. In doing so, their Lordships noticed that mis principle is well recognised in the judgment delivered by Lord Wright of the Privy Council in Canada and Dominion Sugar Co. Ltd. v. Canadian National Steamships Ltd. (1947 AC 46), wherein it was observed that if there is any discrepancy between the printed clause and the stamped clause in the margin, the latter, on ordinary principles of construction, will prevail.
19. In Firm Ganeshi Lal v. Firm Debi Sahia (AIR 1927 Lahore 481) a Division Bench of the Lahore High Court held that when a contract is both in writing and in print that part which is in writing will be operative as against the part which is in print, if there is an inconsistency between the two.
20. The Division Bench of the Madras High Court in Moolchand Kesarimull v. Associated Agencies (AIR 1942 Madras 139) was called upon to resolve the conflict between the printed terms in a document and a clause which was typed into the said printed document. It was held that under a contract which is partly typewritten and partly printed in a form commonly used by one of the parties and since there was a conflict between the typed portion and the printed portion, the typed portion prevails. Following the decisions in Gumm v. Tyril (1864) 33 LJ QB 97, Glynn v. Margeston & Co. ((1893) 1893 AC 351) and Robertson v. French ((1803) 4 East 130), it was noticed that if the typewritten and printed portions of a contract can be read together, effect must be given to all the provisions, but if the printed portion cannot be reconciled with the typewritten portion, the typewritten portion must prevail.
21. In Mukhilal v. Kesho Prasad (AIR 1919 Patna 252), it was held that where there is a conflict between printed portion and the manuscript portion, the manuscript portion must prevail over the printed portion. Under consideration in the said case, was a lease document.
22. In The Athinoula ((1980) 2 Lloyd's Law Reports 481 [Queen's Bench Division)), it was noticed that a particular clause as to demurrage is a clause that was added by typing the same into a printed document which contained a conflicting clause as Clause 8. It was held that where there is conflict between two such clauses, it is well established that the typed clause should prevail.
23. In Phoenix Cotton Tape Factory and Anr. v. Union of India ((1974) ILR II Delhi 479), it was noticed that it is a well known principle of construction of documents that hand-written or type-written matter is to be given preference aver what is printed and that, presumably, this is so, for the reason that what is inserted in hand or type-written in a printed form may be taken to show a particular application of mind, whereas it is not always sure that the printed matter was fully read and understood by the parties, more especially where the document is unwieldy and complicated.
24. Pollock & Mulla on Indian Contract & Specific Relief Acts, Twelfth Edition states as follows:
In the event of any inconsistency between the printed and the written provisions, the printed words cannot be discarded; attempt to derive the real meaning must be made from the printed as well as the written words, and between them, greater weight must be given to written clauses or type-written clauses than the printed clauses, because as Lord Ellenborough said in a judgment repeatedly approved,'.... where a contract is partly printed in a common form and partly written, the words added in writing are entitled, if there should be any reasonable doubt upon the sense and meaning of the whole, to have a greater effect attributed to them than to the printed words; inasmuch as the written words are the immediate language and words selected by the parties themselves for the expression of their meaning, and the printed words are a general formula adapted equally to their case and that of all other contracting parties upon similar occasions and subjects. So also a special agreement or clause between parties added to the printed form must be given greater weight than the clauses of the printed form. Where a typed 'paramount clause' was included in a charter party without words of limitation, all the rules referred to in the paramount clause would form part of the terms of the charter party and would take precedence over the printed terms of the charter party. But where a document consists otherwise of print, type and ink writing, the most natural inference to draw of an addition to that in pencil is that it is not, and is not intended to be operative and final alteration.
25. The aforesaid discussion shows that the primary duty of the Court in the matter of interpretation of documents is to give effect to the intention of the parties to the said document as is discernible from the document itself. In doing so. the Court will endeavour to give effect to all the terms of the document by harmoniously construing the document as a whole. However, in cases where certain clauses are irreconcilably contradictory, the real intention of the parties has to be gathered by appropriately weighing and considering the matters that would have gone into the decision-making process of the parties, leading to the making of the document. The issues on which the parties would have applied the mind specifically, would require to be identified. This is so because, consensus ad idem is of the essence of a contract and a mistake of fact, as understood in law, is a vitiating element nullifying the enforceability of a contract.
26. Added to the aforesaid principles, when printed forms maintained by one of the parties in the course of its activities are applied in the making of a contract document the printed clauses will have to be construed, having regard to any clause typed into, added by manuscript or otherwise added on to the contract document. Such addition by writing, typewriting or addition by any other mode expresses the intention of the contracting parties to give such added conditions an authoritative effect on the printed conditions in the case of an irreconcilable conflict between the printed conditions and the conditions so added or superimposed.
27. Reverting to the facts of this case, the printed form Articles of Agreement was printed in the year 1987. That contains a term, as Clause 3, that the parties agreed that arbitration shall not be a means of settlement of disputes. Clause 24 of the Conditions in the Notice inviting tenders to the effect that arbitration shall not be a means of settlement of disputes and Clause 24(a) in the said document that all disputes shall be settled only by the civil court, were introduced as per Government Orders dated 27-1-1986 and 30-9-1988, into the standard form printed notice inviting tenders. The works in relation to which these matters arise for consideration are indisputably works relating to the maintenance of National Highways and the regulating authority is essentially the Central Government. On 28-9-1994, the Central Government issued the circular referred to above prescribing a standard contract clause, to be included in bidding conditions for wholly domestic funded National Highway works and required that it shall be ensured that the clause is compulsorily made a part of the bidding conditions for the National Highway works for which invitation of tender notices is to be finalised by the States henceforth after the receipt of the said letter. This means, the State Governments stood obliged to include the clauses relating to settlement of disputes and arbitration in all such works. The works in question are such works. It is, obviously, therefore that the State Government and the applicant contractor have consciously introduced the clause that the arbitration clause as per the aforesaid fetter (circular) will be applicable. As already noticed, the said clause is intended to be applied, per force the instructions of the Central Government. The State Government would have, obviously, therefore kept such a clause available in a cyclostyled form and it is that cyclostyled piece that has been affixed on the tender document. The inclusion of the said clause is vouchsafed by both the parties signing immediately beneath the said clause and on the said piece of paper which has been affixed. Under such circumstances, the predominant intention of the parties in so far as it related to the method of resolution of disputes, at the point of time when the agreements in question were executed on 3-10-2000, is that the arbitration clause contained in the circular dated 28-9-1994 issued by the Ministry of Surface Transport in the Central Government will apply. The said arbitration clause has already been extracted in paragraph No. 6(c) above. So much so, I have no hesitation to hold that the provisions extracted in paragraph No. 6(c) above apply in terms of the agreements between the parties.
28. Now, what requires to be dealt with is a submission made on behalf of the Central Government and the State Government that the arbitration clause in the circular dated 28-9-1994 applies only to contracts where the tender amount exceeds Rs. 5 crores. A plain reading of the arbitration clause, which is Clause 2 in the contract clauses extracted in paragraph No. 6(c) above, would show that all disputes which remained unresolved even after the procedure prescribed for settlement of disputes as per Clause 1 thereof, have to be referred for arbitration and for claims up to Rs. 5 lakhs, a sole arbitrator has to be appointed by the State Chief Engineer and for claims above Rs. 5 lakhs and up to Rs. 25 lakhs, the sole arbitrator is to be nominated by the Director General (Road Development), Ministry of Surface Transport, Government of India and for claims more than Rs. 25 lakhs, the arbitration shall be by an Arbitral Tribunal of three arbitrators, the composition of which is already stated in the aforesaid arbitration clause. The arbitration clause, framed while the Arbitration Act of 1940 was in force, required the award to be passed stating reasons. There is absolutely no material in the arbitration clause to hold that the said clause applies only to matters above any particular claim amount or tender amount.
29. It is not in dispute that no appointment was made by the competent authority and no reference was made before the applicant contractor moved this Court by filing these arbitration requests. In the circumstances, the arbitration requests are only to be allowed.
30. Having regard to the fact that the tender amount in relation to each of the contracts is below Rs. 25 lakhs, a sole arbitrator is to be appointed.
In the result, these arbitration requests are allowed and appointments made as per separate orders. No costs.