Allahabad High Court
Ganga Pollution Control Unit And ... vs Civil Judge, Allahabad And Others on 12 July, 2000
Equivalent citations: 2000(3)AWC2515, AIR 2001 ALLAHABAD 149, 2001 ALL. L. J. 1208, 2001 (2) ARBI LR 525, 2001 (2) CIVILCOURTC 526, 2001 (1) ALL CJ 11, 2000 (3) ALL WC 2515, 2001 ALL CJ 1 11
Author: Onkareshwar Bhatt
Bench: Onkareshwar Bhatt
JUDGMENT Sudhir Narain, J.
1. This is an appeal against the order of the Court below dated 18.9.1996 appointing Arbitrator under Section 20 of the Arbitration Act, 1940.
2. The respondent. M/s. M. K. Traders, filed application under Section 20 of the Arbitration Act for appointment of an Arbitrator with the allegations that it entered into contract with the defendant-appellant on 5.1.1993 "to construct R.C.C. retaining wall". It started construction work after the execution of the contract which was to be completed by 4.7.1993. The construction work continued for about four months but according to him due to wrong designing of Piles and departmental carelessness, the construction work could not be completed. The Manager of the appellant wrote a letter dated 21.5.1993 to the plaintiff directing him to stop further construction. After six months, It received letter dated 5.10.1993 from the Project Manager, asking the plaintiff to start construction again. The plaintiff-respondent asked the appellant to enhance the rate due to increase in market rate of materials. The appellant determined the contract by letter dated 22.2.1994. The plaintiff requested to appoint an Arbitrator. The appellant did not appoint any Arbitrator as suggested by the respondent.
3. The appellant contested the claim of the respondent and denied that there was any cause of action for referring the matter to the Arbitrator. The plaintiff did not itself comply with the terms of the agreement and failed to raise construction within time. The Court below after considering the contention raised by the parties held that in accordance with clause 24 of the agreement, the Arbitrator was to be appointed as the difference and dispute had arisen between the parties. The Court appointed Lalta Singh (retired Chief Engineer, U. P. Jal Nigam. Allahabad) as an Arbitrator and the dispute as detailed in schedule A of the plaint has been referred to him.
4. The only contention raised on behalf of the appellant in this appeal is that clause 24 of the agreement itself does not amount to an arbitration clause which reads as under:
"24. Decision of Chief Engineer to be final.-- Except where otherwise specified in this contract, the decision of the Chief Engineer for the time being shall be final, conclusive and binding on parties to the contract upon all questions relating to the quality of the specifications, drawings and instructions hereinbefore mentioned and 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 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 the sooner determination thereof of the contract."
5. It is submitted that clause 24 only provides that the decision of the Chief Engineer shall be final and binding on the parties to contract upon all questions relating to the specification, drawings and instructions etc. It does not provide that he shall act as an Arbitrator and the matter shall be referred to him by the parties on any dispute or difference arising between the parties.
6. Learned counsel for the appellant has placed reliance upon the decision State of Orissa and. another v. Sri Damodar Das, AIR 1996 SC 942, the Supreme Court referring to clause 25 of the agreement In the said case, held that clause 25 of the agreement does not provide for arbitration agreement. The agreement was as under :
"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 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 contracts, 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 the sooner determination thereof of the contract."
7. The Apex Court held that the mere fact that the authority mentioned in the agreement is to decide the questions in respect of the quality of work or any other matters enumerated therein and his decision shall be final and binding between the parties does not amount to arbitration agreement. The agreement must provide that the difference and dispute shall be referred to the Arbitrator.
8. The contention of learned counsel for the respondent is that the word 'decision' involves hearing both the parties on difference or dispute between them in relation to the matter enumerated in the said clause and the Chief Engineer is to take decision as Arbitrator. He has referred to the decision Smt. Rukmanibai Gupta v. Collector, Jabalpur and others, AIR 1981 SC 479, referring to the arbitration clause it was held that the Arbitrator can be appointed on the basis of arbitration clause as contained in the agreement which reads as under :
"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."
9. In the arbitration agreement referred to in the said decision clearly contemplated that whenever any doubt, difference or dispute shall arise touching the construction or anything contained in the agreement. the matter in difference or dispute shall be decided by the lessor whose decision shall be final. This agreement clearly contemplated a reference or dispute to the Arbitrator. Clause 24 of the agreement in question does not amount to arbitration clause as it does not indicate that Chief Engineer shall decide any matter arising out of difference or dispute being referred to him by both the parties. The element of reference to the arbitration is missing in the agreement. The parties may agree that on certain question arising out of the contract may be finally decided by an authority but such decision is not on a reference of dispute to him by the parties to the agreement. An Arbitrator gets Jurisdiction to decide when a dispute is referred to him by the parties. The reference to the Arbitrator has to be made by both the parties under an agreement. Clause 24 of the agreement referred to in the contract in question does not contemplate a reference to the Arbitrator on a dispute arising between the parties on any matter relating to the contract entered into between the parties.
10. The further question arises as to whether there was agreement between the parties to refer any matter to the Arbitrator apart from clause 24 of the agreement referred to above. In J. K. Jain and others v. Delhi Development Authority and others. AIR 1996 SC 318, it was held that the arbitration clause may not be included in the agreement itself but if the terms and conditions contained in the tender form is accepted which provides for reference to the arbitration, such term will form part of the main agreement and will be binding between the parties and a dispute can be referred to the Arbitrator treating it to be as an arbitration agreement. Section 2(a) of the Arbitration Act. 1940, defines arbitration agreement as "arbitration agreement" means to submit present or future differences to arbitration, whether an Arbitrator is named therein or not."
11. The requirement is that it should be a written agreement. It does not provide that such an agreement be signed by both the parties and secondly, the acceptance of the written agreement may be inferred from the correspondence or even it may be oral. In Union of India v. A. L. Radio Ram, AIR 1963 SC 1685. it was held that it is not a condition of effective arbitration agreement that it must be incorporated in a formal agreement executed by both the parties thereto nor it is required to be signed by the parties. In Banarsi Das v. Cane Commissioner Uttar Pradesh and another, AIR 1963 SC 1417, similar view was expressed. In Jupitar Chit Fund Pvt. Ltd. v. Dwarka Diesh Dayal and others, AIR 1981 All 251, it was held that the agreement may be in the form of a signed document by one party consisting the terms and plain acceptance either signed or orally accepted by other party or an unsigned document consisting the terms of submissions to arbitration agreed orally by both the parties. In Ram Chandra Ram Nag Ram Rice and Oil Mills Ltd. v. Howrah Oil Mills Ltd. and another, AIR 1958 Cal 620, the Court emphasised that the conduct of the parties is also relevant to determine as to whether both the parties agreed to refer the dispute to the Arbitrator.
12. It has to be examined in the present case as to whether there was arbitration agreement between the parties keeping in view the correspondence between them and their conduct. The respondent after submission of tender form on 15.10.1992 wrote a letter on 2.11.1992 to the appellant mentioning that in case of dispute of any kind whatsoever in the contract, if it is awarded to it, then it will be settled through arbitration and no other manner. This letter was received by the appellant. The department accepted the tender vide its letter dated 18.11.1992. The letter dated 2.11.1992 shall be treated as arbitration agreement and after the tender is accepted keeping in view this letter by the appellant it shall be treated that the appellant has accepted the term in relation to the arbitration agreement. This agreement was accepted would be further clear from the conduct of the appellant explicit In its various letters sent on its behalf to the respondent.
13. The dispute arose between the parties in the year 1994. The respondent wrote a letter on 25.11.1994 to the Chief Engineer (Ganga) Lucknow to appoint an Arbitrator and a copy of it was also sent to the Managing Director of the appellant at Allahabad. The Chief Engineer. Allahabad, wrote a letter dated 10.1.1995 to the Project Manager (Ganga Pollution) Allahabad, to take necessary action with regard to appointment of the Arbitrator in accordance with Rules. The Chief Engineer, (Ganga Pollution) Lucknow, authorised the Chief Engineer. Allahabad vide his letter dated 16.1.1995 to appoint Arbitrator. The General Manager, (Ganga Pollution). Allahabad, vide his letter dated 16.1.1995 Intimated that the Arbitrator Is appointed by the Head Office and Informed that it has no objection in the appointment of Arbitrator in respect of the dispute raised by the respondent. The Managing Director, U. P. Jal Nigam. Lucknow. vide his letter dated 18.1.1995 Issued directives to the General Manager, (Ganga Pollution), Allahabad, to send his report in regard to appointment of Arbitrator. The General Manager. Allahabad, wrote a letter dated 18.1.1995 stating that he has no objection in appointment of Arbitrator in the matter of respondent. On 22.4.1995 the Managing Director, U. P. Jal Nigam, Lucknow, wrote a letter to the General Manager. (Ganga Pollution), Allahabad, to ask the respondent to furnish the names of three Superintending Engineers for the appointment of Arbitrator. The respondents sent letter dated 19.7.1995 intimating that it will not be just approach to appoint an Arbitrator who is working with the appellant and some retired person be appointed as Arbitrator.
14. As there was a dispute as to who should be appointed an Arbitrator, the respondents filed application under Section 20 of the Arbitration Act. From the facts referred to above it is clear that the appellants and their officers never raised any question that there was no arbitration agreement between the parties and the Arbitrator should not be appointed. It is not denied that the respondents had written a letter dated 2.11.1992 that in case there is a difference or dispute between the parties, such dispute or difference should be decided by an Arbitrator. The tender was accepted only after the receipt of this letter. The Court below has considered some of the letters and found that there was an arbitration agreement between the parties. The submission made in the present appeal was not raised before the Court below. On the facts and circumstances of the present case, the Court was justified in appointing the Arbitrator.
15. There is no merit in the appeal. It is accordingly dismissed.