Bombay High Court
S. Kumar Construction Co. & Anr vs Muncipal Corporation Of Gr. Bombay & Ors on 8 February, 2017
Author: R.M.Savant
Bench: Anoop V Mohta, R. M. Savant
APP-914.03
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.914 OF 2003
IN
ARBITRATION PETITION NO.286 OF 1996
IN
AWARD (L) NO.104 OF 1996
1] S. Kumar Construction Co. a ]
partnership firm having its ]
Registered office at B-1, Raj ]
Mahal Sir M. V. Road, Andheri ]
(E), Mumbai - 400 069 ]
]
2] Smt. Asha Girjashankar Singh
ig ]
Indian Inhabitant of Mumbai, ]
Partner of Appellant No.1, ]
residing at 106, Talati ]
Apartments, S. V. Road, Irla ]... Appellants.
Bridge, Andheri (W), Mumbai - ] (Original Respondent
400 058 ] Nos.1 and 3)
versus
1] The Municipal Corporation of ]
Greater Bombay, established ]
under the Bombay Municipal ]
Corporation Act, 1888, having ]
its office at Mahapalika Marg, ]
Fort, Mumbai - 400 001 ]
]
2] Shri Mayashankar Ramnihor ]
Singh Indian Inhabitant of ]
Bombay, Partner of Respondents ]
No.1, residing at 105, Talati ]
Apartments S. V. Road, Irla ]
Bridge, Andheri (West), Mumbai ]... Respondents.
- 400 058 ] (Respondent No.1 is
] Original Petitioner
3] Shri M. D. Tambekar, Indian ] and Respondent Nos.
Inhabitant of Bombay, residing ] 2 & 3 are Original
at Pradeep Villa, 92, Kotnis ] Respondent Nos.
Peth, Mahim, Mumbai - 400 016 ] 2 & 4).
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Mr. Mayank Bagla a/w Mr. Alok Bagla and Mr. Durgesh Kulkarni i/by M/s.
Bagla Dandekar & Co. for the Appellants.
Mr. Kevic Setalvad, Senior Advocate a/w Mr. Yashodeep Deshmukh, Mr.
Ameya Kulkarni, Mr. Sandeep Patil and Mr. R Y Sirsikar for the MCGM -
Respondent No.1.
Mr. U S Samudrala for the Respondent No.2
CORAM : ANOOP V MOHTA,
R. M. SAVANT, AND
G. S. KULKARNI, JJJ.
Reserved on : 16th December 2016
Pronounced on: 08th February 2017
JUDGMENT :- (Per R.M.Savant, J.) 1 This Full Bench is constituted by the Hon'ble the Chief Justice pursuant to the Reference made by a Division Bench of this Court D. K. Deshmukh and V. R. Kingaonkar, JJ, (as their Lordships then were), by the order dated 18/03/2010 passed in the above Appeal.
2 The said Division Bench made the Reference in view of the divergence of views between two Division Benches of this Court in the case of Municipal Corporation of Greater Bombay & others v/s. Atlanta Infrastructure Ltd. & others reported in 2006(2) Bom. C.R. 596 and the unreported decision of the Division Bench in M/s. M.S.Chavan Construction Company v/s. The Municipal Corporation of Greater Bombay in Arbitration Suit No.3540 of 1992. The divergence of views between the two Division Benches of this Court was as regards interpretation of Clauses 96 and 97 of the General Conditions of Contract which govern the relations between the parties lgc 2 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 i.e. the Municipal Corporation of Greater Mumbai ("MCGM" for short) and the contractors.
3 Pursuant to the Reference made, this Court has framed two issues for consideration which are as follows :-
(i) Whether it is necessary to comply with Clause 96 (pre arbitration condition) of the General Conditions of the contract to invoke arbitration under Clause 97 in the context of the jurisdiction of the Arbitral Tribunal ?
(ii) Whether the decision of the Division Bench in the case of "Municipal Corporation of Gr. Bombay & ors.
v/s. Atlanta Infrastructure Ltd. & ors. 2006(2) Bom.
C.R. 596)" or in the case "M/s. M.S. Chavan Construction Company v/s. The Municipal Corporation of Greater Bombay" lays down the correct position in law?
4 Before proceeding to answer the aforesaid two issues it would be apposite to refer to the two judgments of the Division Benches of this Court in Atlanta Infrastructure Ltd's case (supra) and M/s. M.S.Chavan Construction Company's case (supra).
In Atlanta Infrastructure Ltd.'s case (supra) the contractor i.e. Atlanta Infrastructure Ltd. had raised a dispute regarding the payments made to it before the Municipal Commissioner of the Municipal Corporation of Greater Mumbai. The dispute as regards the payments had arisen in view of the fact that the MCGM had discontinued the payments as per the contractual lgc 3 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 terms on the ground that it had over paid the contractor in respect of the earlier running bills. The said dispute did not get resolved before the Municipal Commissioner resulting in the said Atlanta Infrastructure Ltd invoking Clause 97 and proceeding to arbitration. It seems that before the learned Arbitrator the claim was made under 5 heads by the said Atlanta Infrastructure Ltd. The MCGM had filed its reply to the said claim made by the said Atlanta Infrastructure Ltd. and had also filed a Counter Claim. The learned Arbitrator had allowed the claims of the Atlanta Infrastructure Ltd whereas had rejected the Counter Claim of the MCGM. This resulted in the MCGM filing an Arbitration Petition in this Court being No.184 of 1992 challenging the Award. A learned Single Judge of this Court did not find any reason to interfere with the Award dated 30/09/1992 passed by the learned Arbitrator and accordingly dismissed the said Arbitration Petition. The MCGM carried the matter in Appeal by way of Appeal No.662 of 1995 and companion Appeals. The said Appeals came up before a Division Bench of this Court.
Before the Division Bench a contention was raised on behalf of the MCGM that having not raised the dispute before the Municipal Commissioner by invoking Clause 96 the contractor could not have raised the claims by invoking the Arbitration Clause. It was the contention of the MCGM that since no communication was received from the Municipal Commissioner, the same would mean that the claims have been rejected and therefore the disputes are not arbitrable. It was alternatively contended on behalf of the MCGM that lgc 4 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 since certain claims were not raised before the Municipal Commissioner, the same could not have been raised for the first time before the Arbitrator under Clause 97. The said contentions were rejected by the Division Bench of this Court by holding that there is nothing in the said Clauses by which one could conclude that the reference to the arbitration is in any way dependent upon the outcome of the proceedings before the Municipal Commissioner. The Division Bench further held that the Municipal Commissioner is also not a final authority and in terms of Clause 96 itself his decision can be the subject matter of arbitration if the party is not satisfied by it. The Division Bench therefore concluded that it is not as if the contractor must first approach the Commissioner or that he can seek reference of only such disputes and differences to arbitration, which have earlier been subject matter of decision by the Municipal Commissioner. Paragraphs 43 and 44 of the said Judgment are material and for the sake of ready reference are reproduced herein under :-
43. A bare perusal of clause-96 of the contract contemplates reference of the disputes or differences to the Commissioner. Such dispute or difference should be between the Engineer or any other officer on the one hand and the contractor on the other. It should touch or concern the said work or any of them or relating to the quantities, qualities, description or manner of work done and executed by the contractor or to the quantity or quality of the materials to be employed therein or in respect of any additions, deductions, alterations or deviations made into or from the said works etc.. The clause contemplates, therefore, reference of disputes or differences during the course of execution of contract, to the Municipal Commissioner, who is to give his decision thereon. If the contractor is not satisfied with the decision of the Commissioner or he fails to give lgc 5 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 decision within the period stipulated, then such dispute may be referred to Arbitration as per clause-97. Clause- 97 dealing with arbitration is worded in widest terms. It includes reference of all disputes and differences whatsoever and does not restrict to any party. In other words, all disputes or differences whether during or after completion of the contract or whether before or after determination, are capable of being referred to Arbitration.
44. The argument of Mr.Dhanuka that the claims have to be made firstly before the Commissioner and only such claims are capable of being referred to arbitration, is not well founded considering the aforesaid clauses.
There is nothing by which one can conclude that the reference to arbitration is in any way dependent upon the out come of proceedings before Municipal Commissioner. On the other hand, what the Municipal Commissioner does is also not final and his decision can be referred to arbitration. Hence, it is not as if the contractor must first approach the Commissioner or that he can seek reference of only such disputes and differences to arbitration, which have earlier been subject matter of decision by Municipal Commissioner. "
Hence in so far as the judgment in Atlanta Infrastructure Ltd is concerned, the Division Bench held that invoking Clause 96 cannot be a pre-
cursor to invocation of Clause 97 which provides for arbitration In M/s. M.S. Chavan Construction Company's case (supra) the Arbitration Suit being No.3540 of 1992 was filed by the contractor M/s. M S Chavan Construction Company seeking the relief that the arbitration agreement between the Plaintiffs and the Defendants contained in the general terms of contract for civil works be filed in this Court and all the disputes between the Plaintiffs and the Defendants including those specified in lgc 6 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 paragraph 17 of the plaint be referred to arbitration in accordance with the said agreement. In the said case the Plaintiffs i.e. M/s. M S Chavan Construction Company was the road contractor who had been awarded the contract of improving certain roads/junctions in the City of Mumbai. The contractor by letter dated 11/09/1990 had called upon the Chief Engineer of the MCGM to pay an amount of Rs.50,84,877.57. It seems that the Chief Engineer did not reply to the said letter of the Plaintiff and in spite of the reminders to the Chief Engineer, no cognizance was taken which resulted in neither the amount being paid nor any extension being granted to the contractor for completion of the work. The contractor therefore by letter dated 14/11/1991 requested the Municipal Commissioner to adjudicate upon the claim as per Clause 96 of the General Conditions of Contract. By letter dated 27/01/1992, the MCGM informed the contractor that the Plaintiffs' demand for compensation has already been rejected earlier as it did not fit in the conditions. It is in the said circumstances that the Plaintiffs had filed the said Arbitration Suit. Before the learned Single Judge of this Court the said Clauses 96 and 97 of the General Conditions of Contract were in contention. It seems that an objection was raised on behalf of the MCGM that a notice to proceed to arbitration under Clause 97 has not been addressed to the MCGM by the contractor. It was contended on behalf of the contractor that having regard to Clauses 96 and 97, notice was not required to be issued for invocation of Clause 97. The learned Single Judge did not find merit in the contentions lgc 7 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 urged on behalf of the contractor that no notice was required to be issued.
The learned Single Judge found merit in the submissions advanced on behalf of the MCGM that the very condition precedent for referring the dispute to arbitration viz. giving a written notice specifying the disputes is absent. The learned Single Judge further observed that not only that but the Plaintiffs' notice to the Commissioner under Condition 96 does not give any details as to which disputes or difference have arisen between the parties. The learned Single Judge found that non-issuance of notice to the MCGM was fatal and accordingly dismissed the suit by order dated 30/11/1993.
5 Aggrieved by the dismissal of the Suit, the contractor M/s. M S Chavan Construction Company carried the matter in Appeal. The Division Bench of this Court referred to the findings recorded by the learned Single Judge that there was non-compliance of the agreement i.e. Clauses 96 and 97 which provides that if the contractor is not satisfied with the decision of the Commissioner or the Commissioner fails to give decision within the period of 90 days such disputes may be referred to arbitration as per Condition No.97.
Since in the said case admittedly no notice was given to the Commissioner with regard to the dispute and the suit was filed for referring the parties to arbitration under the Arbitration Act, 1940, the Division Bench did not find any reason to interfere with the dismissal of the Arbitration Suit by the learned Single Judge by his order dated 30/11/1993. A reading of the judgment of the lgc 8 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 Division Bench in M/s. M S Chavan Construction Company's case (supra) therefore discloses that stricto senso the issue whether the invocation of Clause 96 is a pre-condition for invocation of Clause 97 to proceed to arbitration was not in contention, but the issue was as regards whether prior to invocation of Clause 97 a notice was required to be issued to the MCGM. However, Clauses 96 and 97 were in contention as the arbitration was sought in terms of Clause
97. 6 SUBMISSIONS ON BEHALF OF THE APPELLANTS -
CONTRACTOR BY THE LEARNED COUNSEL SHRI MAYANK BAGLA :-
A] That having regard to the manner in which the Clauses 96 and 97 have been worded, their scope and ambit is different and therefore they operate in independent fields.
B] That under Clause 96 the resolution of the doubts, disputes and differences between the Engineer and the Contractor are not by any adjudicatory process but in a summary manner so that the work on site is not affected. Reliance is placed on the judgment of the Division Bench of this Court reported in 1999 (1) Mh.LJ 209 in the matter of Ved Prakash Gupta v/s. MCGM.
C] That Clauses 96 and 97 being differently worded they are not inter dependent on each other and can be said to be exclusive to each lgc 9 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 other.
D] That though in Clause 96, reference is made to Clause 97, which is undoubtedly the arbitration clause, there is no reference in Clause 97 to Clause 96, so as to restrict the arbitration to only the matters which have arisen under Clause 96.
F] That the interpretation as sought to be propounded on behalf of the MCGM if accepted, would render Clause 97 redundant or otiose which could never have been the intention of the parties.
F] That the object behind Clause 97 being the resolution of the disputes between the parties by arbitration, a restricted meaning to Clause 97 is to be avoided, and an interpretation which results in the object being achieved is required to be given.
G] That the view taken by the Division Bench in Atlanta Infrastructure Ltd.'s case (supra) is the correct view.
7 SUBMISSIONS ON BEHALF OF THE RESPONDENT - MGCM BY LEARNED SENIOR COUNSEL SHRI KEVIC SETALVAD :-
i] That the interpretation of Clauses 96 and 97 by the Division Bench lgc 10 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 in M/s. M.S. Chavan Construction's case (supra) is well founded having regard to the manner in which Clauses 96 and 97 have been worded.
ii] That Clause 96 being widely worded would include every conceivable dispute either during the execution of the contract or after its completion and therefore invocation of Clause 96 is the pre-requisite before Clause 97 can be invoked.
iii] That having regard to the well settled principles applicable to the interpretation of instruments/deeds, every word is required to be given a meaning, and if that be so, Clause 96 being couched in the widest possible manner, there are no other disputes which remain for being referred to arbitration under Clause 97. Reliance is sought to be placed on the following judgments :-
[1] (2000) 3 SCC 723 in M. Arul Jothi and another v/s. Lajja Bal (Deceased) and another [2] AIR 1936 PC 281 in Purnananthachi v/s. T.s.
Gopalaswami Odayar and ors.
[3] 2008(2)Kerala12 in Thomas and Anr v/s. Dr.A.A .Henry and ors..
[4] (2007) 5 SCC 703 in Iron & Steel Co. Ltd. v/s. Tiwari
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Road Lines;
iv] That Clause 96 can be said to lay down the pre-requisites or the
procedure that is required to be followed before Clause 97 can be invoked. Hence without complying with Clause 96, the contractor is precluded from invoking Clause 97. Reliance is sought to be placed on the following judgments of the Apex Court and the different High Courts ;-
[1] (1999) 2 SCC 594 in M.K.Shah Engineers & Contractors v/s. State of M.P. [2] (1999) 2 SCC 166 in Bharat Bhushan Nansal v/s. U.P. Small Industries Corporation Ltd, Kanpur.;
[3] (2007) 5 SCC 344 in Municipal Corpn. Jabalpur and others v/s. Rajesh Construction Co.;
[4] Judgment of the Delhi High Court in Sushil Kumar Bhardwaj v/s. Union of India;
[5] 2010 (6) Mh. L.J. 483 in Rajiv Vyas v/s. Johnwin s/o George Manavalan;
[6] 1999 (1) Mh. L.J. 88 in Hotel Corporation of India,
Mumbai v/s. M/s. Motwani (P) Limited
[7] AIR 1999 Kerala 440 in Nirman Sindia v/s. Indal
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Electromelts Ltd, Coimbator and others
[8] ILR 2000 KAR 4953 in Mysore Construction Company
v/s. Karnataka Power Corporation Limited and others, and [9] Judgement of the Delhi High Court in M/s. Halidram Manufacturing Company Pvt. Ltd. v/s. M/s. DLF Commercial Complexes Limited.
[10] 2016 IIIAD (Delhi) 132 in Concept Infracon Pvt. Ltd. v/s Himalaya Crest Power Ltd.
[11] (114 CWN 700) in M/s. Ferro Crafts v/s Eastern Railway & ors.
v] That the judgments (supra) lay down and contain the perspective from which similar clauses as Clause 96 is viewed by different High Courts and the Apex Court.
vi] That the judgments in Sushil Kumar Bhardwaj's case (supra) and Mysore Construction Company Ltd's case (supra) can be said to be in close proximity to the case in hand having regard to the manner in which the clauses are worded in the said cases and Clauses 96 and 97 in the instant case.
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8 Having heard the learned counsel for the parties we now proceed
to answer the questions framed by us.
The answers to the said questions would undoubtedly be contingent upon the interpretation of Clauses 96 and 97 of the General Conditions of Contract which form part of the agreement entered into between the parties. Hence the position in law in so far as interpretation of agreements/deeds assumes some importance. In the said context the judgments cited on behalf of the MCGM by the learned Senior Counsel Shri Setalvad would have to be dealt with.
In M. Arul Jothi's case (supra) the rent agreement between the parties regarding use of the shop premises contained a clause that shop should be used by the tenant for carrying on his own business and the tenant shall not carry out any other business than the one specified (dealing in radios, cycles, fans, clocks and steel furniture). The tenant started using the shop to carry out business of provisions such as spices and dals etc along with original specified business. The Respondent - landlord filed a eviction suit under the Tamil Nadu Buildings (Lease and Rent Control) Act 1960 on the ground that the tenant was using the premises for different purpose than one specified). The Trial Court decreed the suit and the Appellate Authority dismissed the Appeal filed by the tenant. On the matter coming to the High Court, the High Court dismissed the Revision Petition filed by the tenant. On the matter coming to lgc 14 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 the Apex Court, the decree passed against the tenant was upheld. It was held by the Apex Court that since in the case before it there is specific prohibition clause in the rent deed which stated that the premises shall be used by the tenant only for carrying on his own business and the tenant shall not carry on any other business than the above said business. The said clause restricted user of the tenanted premises only for the business which is stated therein and no other. The word in the rent deed "not to use it for any other purpose"
would have to be given effect to. The Apex Court held that once parties enter into a contract then every word stated therein has to be given its due meaning and no part of the agreement or words used therein could be said to be redundant unless it is contrary to statute.
In Purnananthachi's case (supra) the Privy Council held that the cardinal rule of interpretation for deeds as well as for other instruments is to gather the intention from the words of the document, and for that purpose the language of the entire deed should be taken into consideration. The interpretation to be adopted should be one which gives effect, if possible, to all the parts, and does not reject any of them. The said observation made by the Privy Council in the context of the contract entered into between the parties in respect of what was to be done in future in respect of the property which was a joint family property.
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In Thomas's case (supra) the Division Bench of the Kerala High Court held that in construing a contract the Court must look at the words used in the contract unless they are such that one may suspect that they do not convey the intention correctly. If the words are clear, there is very little the Court can do about it. The Division Bench held that the whole context must be considered to ascertain the intention of the parties. The interpretation to be adopted should be one which gives effect if possible, to all the parts and does not reject any of them. The deed must be read as a whole in order to ascertain the true meaning of its several clauses, and the words of each clause should be so interpreted as to bring them into harmony with the other provisions of the deed if that interpretation does no violence to the meaning to which they are naturally susceptible. This according to the Division Bench was the settled principle of interpretation as stated in the decision of the Privy Council in Purnananthachi up to the Promoters and Builders Association, Pune v/s. Pune Municipal Corporation.
In Iron and Steel Co. Ltd.'s case (supra) the contract in question contained an agreed procedure for resolution of disputes by arbitration which was contained in clause 13.1 of the General Conditions of contract. The Respondent in the said case had invoked Section 11 of the Arbitration Act of 1996 without following the procedure prescribed in the contract. The Apex Court held that in the matter of settlement of disputes by arbitration the lgc 16 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 agreement executed by the parties has to be given great importance and an agreed procedure for appointing the arbitrator has to be given preference to any other mode for seeking appointment of an arbitrator.
9 At this stage it would be apposite to refer to relevant clauses of the Conditions of Contract. They are Clauses 7, 96 and 97 which are for the sake of ready reference reproduced herein under :-
Clause 7 :- Engineer's decisions :-
The whole of the work shall be under the direction of the Engineer, whose decision shall be final, conclusive and binding on all parties to the contract on all questions relating to the construction and meaning of plans, working drawings, section and specifications connected with the work.
Clause 96 :- Any dispute or difference to be referred to Commissioner :-
If any doubt, dispute or difference arises or happens between the Engineer or any other officer on the one hand and the Contractor on the other hand, couching or concerning the said works or any of them, or relating to the quantities, qualities description or manner of work done and executed by the Contractor, or to the quantity or quality of the materials to be employed therein, or in respect of any additions, deductions, alterations, or deviations made into or from the said works or any part of them, or touching or concerning the meaning or intention of this contract or of any part thereof or of any plans, drawings, instructions or directions referred to therein or which may be furnished, or given during the progress of the works, or touching or concerning any certificate, order, or reward which have been made or in any way whatsoever relating to the interests of the Municipal Corporation or of the Contractor in the premises, every lgc 17 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 such doubt, dispute and difference shall from time to time be referred to the Commissioner who shall give his decision within a period of 90 days and if the contractor is not satisfied with the decision of the Commissioner or the Commissioner fails to give the decision within the period of 90 days, such dispute may be referred to arbitration as per condition no.97."
Clause 97 :-Arbitration :-
All disputes or differences whatsoever which shall at any time arise between the parties hereto touching or concerning the works or the execution or maintenance thereof or this contract or the construction, execution, or maintenance thereof or this contract thereof or, to the rights or liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before or after determination, foreclosure or breach of the contract (other than those in respect of which, the decision of any person is by the contract expressed to be final and binding) shall after written notice by either party to the contract to the other of them specify the nature of such dispute or difference and call for the point or points at issue to be referred to the arbitration.
Arbitration shall be effected -
i] by an Arbitrator agreed upon by the parties or failing agreement upon such an Arbitrator, ii] by an Arbitrator appointed by the President for the time being of the Institute of Engineers (India) or by the President of the Bombay Centre of the Institute of Engineers (India), or failing such appointment.
iii] By an Arbitrator appointed by the Chief Engineer, Buildings and Communication Department, Government of Maharashtra, or failing such appointment iv] By an Arbitrator appointed in accordance with the provisions of the Indian Arbitration Act lgc 18 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 which law governs the contract.
The Arbitrator so appointed shall be a person presently unconnected with the organisation for which and by which the work is executed.
Submission to arbitration shall be deemed to be a submission to arbitration which the meaning of the Indian Arbitration Act, which law governs the contract.
If the Arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole Arbitrator shall be appointed as aforesaid.
The work under the Contract shall, if reasonably be possible, continue during the Arbitration proceeding and no payment due or payable to the contractor shall be withheld on account of such proceedings.
The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties fixing the date of the first heraring.
The Arbitrator may, from time to time with the consent of the parties, enlarge the time for making and publishing the award.
The Arbitrator shall give a separate award in respect of each dispute or difference referred to him The venue of Arbitration shall be within the limits of Greater Bombay.
the fees, if any, of the Arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the Arbitrator) shall be in the discretion of the Arbitrator who may direct to and by whom and in what manner, such costs or any part thereof be paid and may fix or settle the amount of cost to be so paid.
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Hence clause 96 postulates that any doubt, dispute or difference arises or happens between the Engineer or any other officer on the one hand and the Contractor on the other hand, touching or concerning the said works or any of them, or relating to the various matters mentioned therein i.e. in Clause 96 or touching or concerning any certificate, order, or reward which have been made or in any way whatsoever relating to the interests of the Municipal Corporation or of the Contractor in the premises, every such doubt, dispute and difference shall from time to time be referred to the Municipal Commissioner who shall give his decision within a period of 90 days and if the contractor is not satisfied with the decision of the Municipal Commissioner or the Municipal Commissioner fails to give the decision within the period of 90 days, such dispute may be referred to arbitration as per Condition No.97.
A reading of Clause 97 discloses that all disputes or differences whatsoever which shall at any time arise between the parties i.e. the Contractor and the Municipal Corporation and not merely between the Engineer and the Contractor as in Clause 96, regarding the matters mentioned in Clause 97 or to the rights or liabilities of the parties or arising out of or in relation thereto whether during or after completion of the contract or whether before or after determination, foreclosure or breach of the contract, excluding the matters mentioned in the said Clause 97, shall after written notice by either party to the contract to the other of them specify the nature of such dispute or lgc 20 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 difference and call for the point or points at issue.
The said Clause 97 thereafter provides the mechanism for appointment of the arbitrator, the law under which the arbitration is to be conducted, the person who can be appointed as arbitrator, the replacement of the arbitrator, the manner in which the arbitrator would proceed and how the costs of the arbitrator were to be fixed.
A reading of Clause 97 therefore discloses that the said Clause is worded in a different manner than Clause 96. The said clause encompasses all the disputes or differences touching the works under the contract awarded.
The defining aspect of Clause 97 is that the rights and liabilities of the parties arising out and in relation to the contract before or after determination, foreclosure or breach of the contract can be referred to arbitration. Hence Clause 97 is the arbitration clause in so far as the contract is concerned.
In so far as Clause 96 is concerned, as indicated herein above, it provides that any doubt, dispute or difference arises or happens between the Engineer or any other officer and the Contractor to be referred to the Municipal Commissioner from time to time. The said Clause therefore from its wording can be said to apply when the work under the contract is in progress and can be said to comprise the in house mechanism provided for clearing the lgc 21 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 doubts and resolving the disputes or differences between the parties so that the work under the contract is not impeded and can proceed on site The said clause ultimately provides that if the contractor is not satisfied with the decision of the Municipal Commissioner or the Municipal Commissioner fails to give the decision within the period of 90 days, such dispute may be referred to arbitration as per Condition No.97.
As indicated herein above Clause 97 is the arbitration clause covering every facet of the arbitration that would be undertaken under the said clause. Significantly however there is no mention of Clause 96 in the said Clause 97 to the effect that the arbitration under Clause 97 would only be in respect of the matters which have arisen under Clause 96. As indicated herein above, Clause 97 being the arbitration clause is worded differently than Clause 96 and can therefore be said to encompass all the disputes and differences which have arisen before or after completion of the work. The rights and liabilities of the parties before or after determination, foreclosure or breach of the contract. Hence the aforesaid are the broad parameters within which Clauses 96 and 97 operate in so far as the work under the contract is concerned.
Now coming to the issue of whether the procedure under Clause 96 is a pre-condition for invoking Clause 97, the said issue would be dealt with lgc 22 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 in the latter part of this judgment.
However the judgments cited by the learned counsel Shri Bagla in support of his proposition that invocation of Clause 96 is not necessary for invocation of Clause 97 would have to be considered in the first instance.
In Ved Prakash Gupta's case (supra) a Division Bench of this Court was dealing with an Appeal filed against the judgment and order dated 23rd April 1998 passed by a learned Single Judge of this Court who had dismissed the Arbitration Suit filed by the Appellant (original Plaintiff) on the ground that there was no arbitration agreement between the parties.
The Division Bench noted that prior to 1995 the general terms and conditions of the contract contained Clause 97 (which was akin to Clause 97 in the instant case). However the said Clause 97 was deleted and Clause 96 was substituted which read as under :-
"96. If any dispute, difference or claim is raised by the contractor relating to any matter arising under the contract, the Engineer may refer such matter to the superior not below the rank of Chief Engineer and other than Municipal Commissioner or Additional Municipal Commissioner who, on examining the dispute, difference or claim, shall give decision in writing. Such decision will be final and binding upon all parties. This decision will not be arbitrable at all."
The Division Bench held that the Engineer is not required to act as lgc 23 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 an arbitrator, and the said clause only empowers the higher officer to examine the contentions raised by the contractor and give an administrative decision.
The Division Bench held that it is not like a judicial interpretation by recording evidence. The Division Bench held that the procedure prescribed was like a pre-suit statutory notice to be given to statutory bodies. The superior officer has to decide in his absolute discretion and not by holding any enquiry worked out in a judicial manner.
Hence the judgment of the Division Bench spells out the perspective from which Clause 96 in the said case was looked at, though Clause 96 in the said case was differently worded than Clause 96 in the instant case to the extent of the later part, nevertheless it provided for any dispute or difference to be resolved by the officers of the MCGM who were mentioned therein.
In VISA International Ltd's case (supra) the controversy revolved around the interpretation of Article VI which according to the applicant contains the Arbitration Clause. The issue was whether the parties could be referred to arbitration. The Clause in the said case read thus :-
"Any dispute arising out this agreement and which cannot be settled amicably shall be finally settled in accordance with the Arbitration and Conciliation Act, 1996."
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A contention was raised whilst opposing the application that no attempt whatsoever was made to amicably settle the matter which was a pre-
condition to invoke the latter limb of Article VI and therefore the application under Section 11 is liable to be rejected. The Apex Court having regard to the said Clause observed that a plain reading of the arbitration clause reveals that parties intended to settle disputes finally in accordance with the provisions of the Act in case of failure to arrive at an amicable settlement. The Apex Court observed that from the correspondence exchanged between the parties it was clear that there was no scope for an amicable settlement as both the parties had taken a rigid stand. That attempts were made for an amicable settlement but without any result leaving no option but to invoke the arbitration clause.
The Apex Court accordingly referred the dispute to arbitration by rejecting the contention that the pre-requisites have not been satisfied in the said case.
Hence the Apex Court in the said case whilst dealing with an application under Section 11 of the Arbitration and Conciliation Act 1996 has given primacy to the resolution of the disputes between the parties by rejecting the contention based on a technical plea.
10 It would now be necessary to refer to the judgments relied upon on behalf of the Respondent MCGM by learned Senior Counsel Shri Kevic Setalvad in support of his contentions that unless there is a compliance of lgc 25 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 Clause 96, Clause 97 cannot be invoked.
In M.K. Shah Engineers and Contractors's case (Supra) controversy centered around the interpretation of Clause 3.3.29 which read thus :-
3. The contracts entered into with the two contractors by the respondent- State of MP have an arbitration clause around which centers the controversy arising for decision in the two appeals. The same is extracted and reproduced hereunder.
"3.3.29 Decision of Superintending Engineer to be final except where otherwise specified in the contract --- The decision of the Superintending Engineer of the Circle for the time being in respect of all questions and disputes relating to the meaning of the specifications designs drawing and, instructions here-in-before mentioned and as to the quality of workman ship 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 work of execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof, shall be final.
Provided that if any party to the contract is dissatisfied with the final decision of the Superintending Engineer, in respect of any matter, he may, within 28 days after receiving the notice of such decision give notice in writing to the Superintending Engineer, requiring that the matter may be referred to arbitrator and furnishing detailed particulars of the dispute or difference and specifying clearly the point at issue, if any party fails to give such notice within 28 days as stipulated above, the decision of the Superintending Engineer, already given shall be conclusive, final and binding on the parties.
In case an arbitration is to be held it shall be effected lgc 26 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 by an arbitrator to be appointed by the State Government out of panel of three names suggested by the State Government to the contractor, who shall give concurrence within a period of one month from the date of the communication. In case the contractor does not communicate the concurrence, the State Government shall appoint an arbitrator whose decision shall be conclusive final and binding on the parties.
If the work under the contract has not been completed when a dispute is referred to an arbitrator work shall continue during the arbitration proceedings if it is reasonably possible and no payment due to the contractor should be withheld on account of arbitration proceedings unless it is required by the arbitrator."
The Apex Court held that the steps preceding the coming into operation of the arbitration clause though essential are capable of being waived and if one party has by its own conduct or the conduct of its officials disabled such preceding steps being taken, it will be deemed that the procedural pre-requisites were waived. In the said case an objection was raised on behalf of the State of Madhya Pradesh that the pre-requisites have not been complied with. The Apex Court rejected the said objection by holding that the subsequent conduct of the respondent in voluntarily agreeing to the appointment of the arbitrators in both the cases and not pursuing their objections under Section 33 of the Arbitration Act amounts to waiver on their part of the plea of non-compliance with the earlier part of the clause.
In Bharat Bhushan Bansal's case (supra) the relevant clauses of the contract were Clauses 23 and 24 which read thus :-
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Clause 23 : 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 herein before 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 or 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 M.D. of the U.P.S.I.C. on all other matters shall be final :
Clause-24 : Except as provided in Clause 23 hereof the decision of the Managing Director of the U.P.S.I.C. 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."
On an interpretation of the said clauses the Apex Court held that both the Executive Engineer and the Managing Director are expected to determine the question on the basis of their own investigation and material. The Apex Court held that neither of the clauses contemplates a full-fledged arbitration covered by the Arbitration Act. The Apex Court held that no clause spells out any intention of the parties to refer any disputes between the parties to arbitration.
In Municipal Corporation Jabalpur's case (supra) the clauses in lgc 28 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 contention also provided for compliance of the preconditions before the parties could be referred to arbitration. The relevant clause in the said case is Clause 29 which read thus :-
"29 Except as otherwise provided in this contract all questions and disputes relating to the meaning of the specifications, drawing and instructions herein before mentioned and as to thing whatsoever, in any way arising out or relating to the contract, designs, drawings, specifications, estimates 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 there of shall be referred to the City Engineer in writing for his decision, within a period of 30 days of such occurrence. Thereupon the City Engineer shall give his written instructions and/or decisions within a period of 60 days of such request. This period can be extended by mutual consent of the parties.
Upon receipt of written instructions of decisions, the parties shall promptly proceed without delay to comply such instructions or decisions. If the City Engineer fails to give his instructions or decisions in writing within a period of 60 days or mutually agreed time after being requested if the parties are aggrieved against the decision of the C. E., the parties may within 30 days prefer an appeal of the M.P.L., Com. who shall afford an opportunity to the parties of being heard and to offer evidence in support of his appeal. The M.P.L. Com will, give his decision within 90 days. If any party is not satisfied with the decision of the M.P.L. Com, he can refer such disputes for arbitration by an Arbitration Board to be constituted by the Corporation which, shall consist of three members of whom one shall be chosen from among the officers belonging to be Urban Administration and Development Department not below the rank of B.E. one Retired Chief Engineer of any Technical Department and City Engineer Nagar Nigam Jabalpur, The following are also the terms of this contract, lgc 29 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 namely, :
a) No person other than the aforesaid Arbitration Board constituted by the Corporation (to handle cases of all Technical Departments) shall act as Arbitrator and if for any reason that is not possible the matter shall not be referred to Arbitration at all.
b) The Corporation may at any time effect any change in the personnel of the Board and the new members or members appointed to the Arbitration Board shall be entitled to proceed with the reference from the stage it was left by his or their predecessors.
c) The party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute(s).
d) Where the party invoking arbitration is the contractor no reference for arbitration shall be maintainable, unless the contractor furnishes a security deposit of a sum determined according to the table given below, and the sum so deposited shall on the determination of arbitration proceeding, be adjusted against the cost, if any awarded by the Board against the party and the balance remaining after such adjustment or in the absence of the such cost being awarded the whole of the sum shall be refunded to him within one month from the date of the award.
Amount of Claim Rate of Security Deposits
For claim below Rs.10,000 5% of amount claimed
For claim of Rs.10,000 and 3% of amount claimed subject above but below Rs.1,00,000 to minimum of Rs.500 For claims of Rs.1,00,000 2% of the amount claimed and above subject to a minimum of Rs.300
(e)-(h) * * (Underlining* is ours) In view of the non-fulfillment of the said Clause 29 in the matter of making the security deposit with the appointing authority, before the lgc 30 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 arbitration board would be constituted by it. The said security having not been deposited, the appointment procedure provided for in the agreement not having been complied with the Apex Court held that Section 11(6) of the Arbitration Act could not be invoked for the appointment of arbitrator.
In Sushil Kumar Bhardwaj's case (supra) the clause in contention was Clause 25 which read thus :-
"Clause 25.
Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in- 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, 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 cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:
i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-in-Charge on any matter in connection with or arising out of the contract of carrying out of the work, to be unacceptable, he shall promptly within 15 days request the Superintending Engineer in writing for written instruction or decision. Thereupon, the Superintending Engineer shall give his written instructions or decision within a period of one month from the receipt of the contractor's letter.
If the Superintending Engineer fails to give his lgc 31 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Superintending Engineer, the contractor may, within 15 days of the receipt of Superintending Engineer's decision, appeal to the Chief Engineer who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal. The Chief Engineer shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Chief Engineer for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.
ii) Except where the decision has become final, binding and conclusive in terms of sub para (i) above disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Engineer, CPWD, in charge of the work of if there be no Chief Engineer, the administrative head of the said CPWD. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.
The issues which were before the learned Single Judge of the Delhi High Court were as follows :-
A. Whether the procedure prescribed in sub clause (i) of clause 25 is applicable to all disputes or to only the matters of the contractor being required to do any work considered by him to be outside the contract or where the contractor disputes any drawing, record or decision given in writing only.
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B. Whether the procedure prescribed in sub clause (i) is mandatory or directory.
The said judgment discloses that there was divergence of opinion amongst two learned Single Judges of the Delhi High Court as regards the answer to the said Question A whilst one learned Single Judge in Concrete India v/s. MCD held that Clause 25(i) is so widely worded as to include all claims of the contractor in relation to any matter in connection or arisen out of a contract of carrying out the work. Another learned Single Judge in Gursaran v/s. MCD, whose attention was not invited to Concrete India's case, held that the disputes pertaining to actual working of the contract did not fall within the scope of Clause 25(i) and thus the procedure prescribed therein was not required to be followed and the Clause applicable was Clause 25(ii), which dealt with any other issues not covered by Clause 25(i). It was further held that in the case of disputes falling under Clause 25(ii), only a demand for appointment of an arbitrator to the Commissioner of MCD was required to be made and upon the failure of the Commissioner to appoint the arbitrator Section 11(6) of the Arbitration Act, 1966 could be invoked. The issue was therefore referred to a third learned Judge.
The learned Judge to whom the reference was made on an interpretation of the said Clause 25(i) held that the language of Section 25(i) was wide enough to cover all disputes. He also did not find any rationale in lgc 33 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 providing the aforesaid procedure for only some and not all disputes. It was held that the parties in the making of contract, while interpreting the same, are expected to have been guided by reason, rather than having acted irrationally.
It was further held that if Sub-clause (i) is held to apply to some only and not all disputes, it will add another tier of conflict between the parties, leading to further delays. The learned Judge observed that the aforesaid procedure has been prescribed so that before the parties resort to length/costly arbitration, there is ample opportunity to the MCD to, if finds any merit in the claims of the contractor, to settle the same and that the parties are perfectly within their right to provide for such a procedure. The learned Single Judge therefore answered Issue No.A by holding that the procedure under Clause 25(i) would have to be exhausted before the Chief Engineer can be approached for appointment of the arbitrator. The Question B was answered by holding that the procedure provided is mandatory and not directory.
In Rajiv Vyas's case (supra), the Clause in contention was Clause
14. The same read thus :-
"ARBITRATION CLAUSE
14. DISPUTE RESOLUTION 14.1 Settlement of Disputes through Good Faith Negotiations
a) The parties shall endeavour, in the first instance, to resolve any dispute, disagreement or difference arising out of or in connection with this Agreement, including lgc 34 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 any question regarding its performance, existence, validity, termination and the rights and liabilities of the parties to this Agreement (a "Dispute") through good faith negotiations;
If a settlement is not reached within thirty (30) days after the date of receipt of the Dispute Notice by the non-initiating Party, such Dispute shall be referred for conciliation to one Conciliator in accordance with the provisions of Arbitration & Conciliation Act 1996.
14.2 Arbitration
a) If good faith negotiations and conciliation have not been able to resolve a Dispute, such Dispute shall be referred to and be finally resolved by Arbitration in accordance with the Arbitration & Conciliation Act 1996 and the rules made thereunder. Each party to the Dispute shall appoint one Arbitrator and the two Arbitrators shall mutually agree to and appoint the third Arbitrator. The Arbitral Agency so constituted, shall be the "Arbitral Tribunal". The provisions of the Arbitration & Conciliation Act, 1996 as may be amended from time to time and the Rules, if any, made thereunder, shall apply to such Arbitration proceedings. The place of Arbitration shall be Mumbai, India. The language of the Arbitration shall be English.
(b) Any decision or award of the Arbitral Tribunal, subject to corrections/ recourse provided for under the Arbitration & Conciliation Act, 1996 be binding upon the parties. The Arbitral Tribunal shall give a speaking award."
A learned Single Judge of this Court, S.J.Vazifdar, J (as His Lordship then was) held that it is well settled that when the parties agree for a specific procedure and mode for settlement of their dispute by way of arbitration and also prescribe certain preconditions to be complied with for lgc 35 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 referring the matter to arbitration, the parties are required to comply with those pre-conditions and only then the matter can be referred to arbitration.
In Hotel Corporation of India, Mumbai's case (supra). The relevant Clauses were 40 and 41 which read thus :-
"40 Matters to be finally determined by Consultant:--- The Consultant's decision, opinion, direction, Certificates (except for payments) with respect to all or any of the matters under Clauses 2, 7, 9, 17, 23, 31 (a), (b), (c),
(d), (f) hereof and as to the exercise by him under Clause 12 of the rights to have any work opened up, (which matters are herein referred to as the excepted matters) shall be final and conclusive and binding on the parties hereto and shall be without appeal. Any other decision, opinion, direction, Certificate of Valuation of the Consultant or any refusal of the Consultant to give any of the same shall be subject to the rights of Arbitration and review in the same way in all respects including the provision as to opening the reference) as if it were a decision of the Consultant under the following clause:
41 Settlement of disputes - Arbitration:-- All disputes and differences of any kind whatever arising out of or in connection with the Contract or the carrying out of the works, (whether during the progress of the works or after their completion and whether before or after the determination, abandonment or breach of the Contract) shall be referred to and settled by the Consultant who shall state his decision in writing. Such decision may be in the form of a Final Certificate or otherwise. The decision of the Consultant with respect of any of the excepted matter shall be final and without appeal as stated in the preceding clause. But if either the Employer or the Contractor be dissatisfied with the decision of the Consultant on any matter, question or dispute of any kind (except any of the excepted matters) or as to the withholding by the Consultant of any certificate to which the Contractor may claim to be entitled, then and in any such case either party (the lgc 36 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 Employer or the Contractor) may within twenty-eight days after receiving notice of such decision give a written notice to the other party through the Consultant requiring that such matter in dispute be arbitrated upon."
A learned Single Judge of this Court F I Rebello, J (As His Lordship then was), by referring to the Clauses as aforesaid held that where the parties have entered into an agreement and agreed to follow the procedure, it is that procedure which has to be followed. The respondents having not invoked the said procedure could not have invoked jurisdiction to pass an award in respect of the disputes having first been decided by the Consultant. The Arbitrators would have had before them the decision of the Consultant. In the said case, the arbitration clause contained specific reference to the decision of the consultant and it is in the event that the contractor is dissatisfied with the decision of the Consultant by giving written notice to the Consultant calling upon that such matter in dispute be arbitrated upon.
In Nirman Sindia's case (supra) the issue was also as regards the compliance of pre-requisites before proceeding to arbitration. In the said case the clause in contention was Clause 24 which read thus :-
"24. Disputes.
24.1 If the Contractor believes that a decision taken by the Engineer was either outside the authority given to lgc 37 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 the Engineer by the contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer's decision."
In the facts of the said case where the Applicant had not referred the dispute for the decision of the Engineer and therefore dissatisfied with the decision of the Engineer, should have been referred to the adjudicator, but have prevented the adjudicator from proceeding with the adjudication, questioning the very authority of the adjudicator. The learned Single Judge of the Kerala High Court held that the petition filed for enforcing the arbitration clause was premature having been filed without resorting to or complying with or exhausting the pre-requisites for the enforcement of the arbitration clause.
In Mysore Construction Company's case (supra) the issue once again was, whether there was an arbitration clause and whether the parties could be referred to arbitration. The clauses in contention in the said case were Clause 67 of the Condition of Contract forming part of the Agreement dated 21/11/1988 and Clause 29 of the Supplementary Agreement dated 13/06/1995. The said clauses read thus :-
"SETTLEMENT OF DISPUTES
67. If any dispute or difference of any kind whatsoever shall arise between the Engineer and the Contractor in connection with, or arising out of the contract, or the execution of works, whether during the progress of the works or after their completion and whether before or after the termination, abandonment or breach of the lgc 38 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 Contract, it shall, in the first place, be referred to and settled by the Engineer who shall, within a period of ninety days from the date of being requested by the Contractor to do so, give written notice of his decision of the Contractor.
Subject to other form of settlement hereafter provided, such decision in respect of every dispute or difference so referred shall be final and binding upon the Contractor. The said decision shall forthwith be given effect to, and the Contractor shall proceed with the execution of the works with all due diligence. In case the decision of the Engineer is not acceptable to the Contractor, he may approach the law Courts at Bangalore for settlement of dispute after giving due written notice in this regard to the Engineer within a period of ninety days from the date of receipt of the written notice of the decision of the Engineer. If the Engineer has given written notice of his decision to the Contractor and no written notice to approach the law Courts has been communicated to him by the Contractor within a period of ninety days from receipt of such notice, the said decision shall be final and binding upon the Contractor. If the Engineer shall fail to give notice of his decision within a period of ninety days from the receipt of the Contractor's request in writing for settlement of any dispute or difference as aforesaid, the Contractor may within ninety days after the expiration of the first named period of ninety days approach the law Courts at Bangalore, giving due notice to the Engineer. Whether the claim is referred to the Engineer or to the law Courts, as the case may be, the Contractor shall proceed to execute and complete the works with all due diligence pending settlement of the said dispute or differences. The reference of any dispute or difference to the Engineer or law Courts may proceed notwithstanding that the works shall then be or be alleged to be complete, provided always that the obligations of the Engineer and the Contractor shall not be altered by reason of the said dispute or difference being referred to the Engineer or law Courts during the progress of the works".
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"SETTLEMENT OF DISPUTES -- TIME-LIMIT FOR
DECISION
Clause 29. (a) If any dispute or difference of any kind whatsoever were to arise between the Executive Engineer/Superintending Engineer and the Contractor regarding the following matter namely,
(i) the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned;
(ii) the quality of workmanship or material used on the work and
(iii) any other questions, claim, right, matter, thing whatsoever, in any way arising out of or relating to the contract designs, drawings, specifications, estimates, instructions, or orders, or those conditions or failure to execute the same whether arising during the progress of the work, or after the completion, termination or abandonment thereof, the dispute shall, in the first place, be referred to the Chief Engineer who has jurisdiction over the work specified in the contract. The Chief Engineer shall within a period of ninety days from the date of being requested by the Contractor to do so, given written notice of his decision to the Contractor.
Chief Engineer's decision final
(b) Subject to other form of settlement hereafter provided, the Chief Engineer's decision in respect of every dispute or difference so referred shall be final and binding upon the Contractor. The said decision shall forthwith be given effect to and Contractor shall proceed with the execution of the work with all due diligence.
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(c) In case the decision of the Chief Engineer is not acceptable to the Contractor, he may approach the Law Courts at Karwar for settlement of dispute after giving due written notice in this regard to the Chief Engineer within a period of ninety days from the date of receipt of the written notice of the decision of the Chief Engineer.
Time-limit for notice to approach law Court by Contractor
(d) If the Chief Engineer has given written notice of his decision to the Contractor and no written notice to approach the law Court has been communicated to him by the Contractor within a period of ninety days from receipt of such notice, the said decision shall be final and binding upon the Contractor.
Time-limit for notice to approach law Court by Contractor when decision is not given by CE as at (b)
(e) If the Chief Engineer fails to given notice of his decision within a period of ninety days from the receipt of the Contractors request in writing for settlement of any dispute or difference as aforesaid, the Contractor may within ninety days after the expiry of the first named period of ninety days approach the law Courts at Karwar, giving due notice to the Chief Engineer. Contractor to execute and complete work pending settlement of disputes.
(f) Whether the claim is referred to the Chief Engineer or to the law Courts. As the case may be, the Contractor shall proceed to execute and complete the works with all due diligence pending settlement of the said dispute or differences. Obligations of the Executive Engineer and Contractor shall remain unsettled during consideration of dispute.
(g) The reference of any dispute or difference to the Chief Engineer or the law Court may proceed notwithstanding that the works shall then be or be lgc 41 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 alleged to be complete, provided always that the obligations of the Executive Engineer and the Contractor shall not be altered by reason of the said dispute or difference being referred to the Chief Engineer or the law Court during the progress of the works".
Clause 29 :- The scheme of Clause 29 (or old Clause
67) therefore is, whenever the Contractor has a claim which is not settled by the Executive Engineer or Superintending Engineer, he has to make the claim before the Chief Engineer. If the Chief Engineer examines the matter and gives his decision which is not acceptable to the Contractor, or if the Chief Engineer does not give his decision within the time specified, the Contractor has to approach the Civil Court, by filing a civil suit and get his disputes/claims adjudicated, on merits. Use of words 'to approach the Civil Court for settlement of disputes' makes it clear that final adjudicating authority in the case of a disputes makes it clear that final adjudicating authority in the case of a dispute is the Civil Court and not the Chief Engineer. Thus, the intention of the parties is not to refer any dispute for adjudication by way of arbitration but to get adjudicated the dispute only through the normal procedure of approaching law Courts. The said clause does not also contemplate or require the Chief Engineer to hold any enquiry or hear the parties before deciding the matter. On the other hand, the clause merely requires the Chief Engineer to consider the claim of the Contractor and give his decision thereon. Such decision being on behalf of KPC, the Contractor can either accept it or approach the Civil Court for adjudication. Thus the petitioner has failed to make out two of the three ingredients -- requirement of enquiry by the named Authority and requirement of finality by a binding decision.
The learned Judge of the Karnataka High Court, His Lordship Justice R V Raveendran, J (as His Lordship then was) after referring to the lgc 42 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 requisites which have to be satisfied for an agreement to be construed as an arbitration agreement held that an agreement can be construed as an arbitration agreement, only if it provides for reference of dispute to a private forum and the decision given by such forum was binding on both parties. The learned Judge held that the scheme of Clause 29 (or old Clause 67) therefore is, whenever the Contractor has a claim which is not settled by the Executive Engineer or Superintending Engineer, he has to make the claim before the Chief Engineer. If the Chief Engineer examines the matter and gives his decision which is not acceptable to the Contractor, or if the Chief Engineer does not give his decision within the time specified, the Contractor has to approach the Civil Court, by filing a civil suit and get his disputes/claims adjudicated, on merits. Use of words 'to approach the Civil Court for settlement of disputes' makes it clear that final adjudicating authority in the case of a dispute is the Civil Court and not the Chief Engineer. Thus, the intention of the parties is not to refer any dispute for adjudication by way of arbitration but to get adjudicated the dispute only through the normal procedure of approaching law Courts. The said clause does not also contemplate or require the Chief Engineer to hold any enquiry or hear the parties before deciding the matter. Hence in the said case the enquiry undertaken by the Chief Engineer was not by way of any adjudicating process but was summary in nature and therefore the disputes were ultimately to be got adjudicated by approaching the Civil Court.
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11 The said Clause 29 had come up for consideration before the Apex
Court in M/s.P Dasaratharama Reddy Complex V/s. Government of Karnataka and anr. In fact in a number of Appeals which were before the Apex Court along with the aforesaid case, the said Clause 29 was in contention. The Apex Court whilst considering the said clause held that the use of the expression "in the first place" in the said clause shows that the non-
adjudicatory decision of the Chief Engineer is subject to the right of the aggrieved party to seek remedy. The Apex Court prior to recording the said finding observed that the Chief Engineer or Designated officer was not required to hear the parties or to take evidence, oral or documentary. He is not invested with the power to adjudicate upon the rights of the parties to the dispute or difference and his decision is subject to the rights to avail remedy before an appropriate of law.
In M/s Halidram Manufacturing Company Pvt. Ltd.'s case (supra) the Clause in contention was Clause 34 of the application form. The first step stipulated in Clause 34 was settlement of disputes through mutual discussion and the second step was settlement through arbitration. The forum of arbitration was therefore made dependent on the outcome of the first step that was of mutual settlement. In the said case the Defendant had not called upon the Plaintiff for any mutual discussion and therefore the Defendant itself had ignored Clause 34 of the application form and having ignored the said lgc 44 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:12 ::: APP-914.03 clause itself, the learned Single Judge did not find that the Defendant had any right to move the application to seek rejection of the plaint based on the alleged agreement. The learned Judge held that the steps to invoke arbitration proceedings before exhausting the first step of mutual discussion did not arise.
In Concept Infracon Pvt. Ltd.'s case (supra) the relevant clauses were Clauses 24, 25 and 25.3(f) which read thus :-
Clause 24: If the Contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the Contract or that the decision was wrongly taken, the decision shall be referred to the Adjudicator within 14 days of the notification of the Engineer's decision.
Clause 25.1: The Adjudicator shall give a decision in writing within 28 days of receipt of a notification of a dispute.
Clause 25.2: The Adjudicator shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the Contract Data and the cost shall be divided equally between the Employer and Arb.P. No. 373/2015 Page 2 of 10 the Contractor, whatever decision is reached by the Adjudicator. Either party may refer a decision of the Adjudicator to an Arbitrator within 28 days of the Adjudicator's written decision. If neither party refers the dispute to arbitration within the above 28 days, the Adjudicator's decision will be final and binding.
Clause 25.3: The arbitration shall be conducted in accordance with the arbitration procedure stated in the Special Conditions of Contract.
Clause 25.3(f) (Special Conditions of Contract): Where the value of the contract is Rs. 50 millions and below, the disputes or differences arising shall be referred to lgc 45 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 the Sole Arbitrator. The Sole Arbitrator should be appointed by agreement between the parties; failing such agreement, by the appointing authority, namely the Indian Council for Arbitration/ President of the Institution of Engineers (India)/The International Center for Alternative Dispute Resolution (India).
In the said case the Respondent opposed the Petition filed under Section 11 for appointment of arbitrator by primarily contending that the reference would be pre-mature since the matter has not been dealt with by an adjudicator. The learned Single Judge of the Delhi High Court held that in view of the clause 25.2 of the contract, a written decision of the Adjudicator is a mandatory condition precedent for reference of the dispute to a sole Arbitrator designated by the Appointing Authorities. In the said case it was observed by the learned Single Judge that the petitioner and the respondent did not jointly designate any person to act as adjudicator for resolution of disputes and since the parties had provided that in case of disagreement between the parties, the the nominated institutions can be approached for designating a person as adjudicator who would give his written decision in 28 days. Since the procedure for resolution of disputes between the parties through adjudicator had not yet been exhausted, the arbitration clause could not be enforced on account of non-compliance of the pre-requisites.
In M/s. Ferro Crafts' case (supra) the clause in contention was Clause 64(1)(i) of the general conditions governing railway contracts. The lgc 46 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 said Clause 64(1)(i) read thus :-
"In the event of any dispute or difference between the parties here to as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within 120 days, then and in any such case, but except in any of the excepted matters referred to in clause 63 of these conditions, the contractor, after 120 days but within 180 days of his presenting his final claim on disputed matters....."
Having regard to the manner in which the said clause was framed, a learned Single Judge of the Calcutta High Court held that a request to the Chief Justice or his designate cannot be made unless the agreed procedure fails. Since the petitioner in the said case did not adhere to the agreed procedure of making a demand for a reference after the expiry of 120 days from the date of presentation of the final claim, the petitioner has not met the mandatory precondition for invoking the jurisdiction under Section 11.
12 As indicated above the aforesaid judgments have been pressed into service by the learned Senior Counsel for the MCGM Shri Kevic Setalvad to contend that unless a recourse in the first instance is taken to Clause 96, Clause 97, invocation of which is contingent upon the decision in Clause 96 is ruled out. The learned Senior Counsel by citing the analogy of a tunnel submitted that tunnel of Clause 96 would have to be taken to reach the road lgc 47 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 of Clause 97. The answer to the said question as indicated herein-above lies in the interpretation of Clauses 96 and 97, and whether the conspectus of judgments (supra) cited on behalf of the Respondent - MCGM support such an interpretation.
13 In so far as Clause 96 is concerned, as observed in the earlier part of this Judgment, the said Clause can be said to provide a mechanism to resolve the doubts, disputes or differences in respect of the matters mentioned in the said Clauses which may arise between the contractor or the engineer or any other officer of the Corporation. The same would result in the removal of the difficulties faced by a contractor on the site so that the work can be proceeded with. Merely because certain expressions like "touching or concerning any certificate, order or reward" "every such doubt, dispute and difference" are used in the said Clause 96, the same would not expand its expanse so as to cover every conceivable dispute either before or after the work is completed. The said Clause cannot be construed differently than the clauses which are worded similarly and in which cases it has been held that determination is not by any adjudicatory process i.e. by giving an opportunity to the parties to lead evidence etc., but is summary in nature. Hence Clause 96 cannot be construed any more than a clause which provides for an in house mechanism for redressal of the disputes or differences relating to the work on site. It is only if the contractor is not satisfied with the decision of the lgc 48 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 Municipal Commissioner, or that the Municipal Commissioner does not give his decision within the stipulated period, the parties can then be referred to arbitration under Clause 97. The Municipal Commissioner is therefore not the final authority whose decision becomes final and binding, but it is open for the contractor if he is not satisfied to opt for arbitration. Hence a window has been kept open for the contractor in the event if he is not satisfied with the decision of the Municipal Commissioner, to opt for arbitration under Clause 97.
14In so far as Clause 97 is concerned, it has been worded in the widest possible manner, as it begins with the expression "all disputes and differences whatsoever" covers the stages when they may arise "concerning the works or the execution or the maintenance thereof or the construction meaning operation thereof" and also covers the determination of the rights and liabilities of the parties or arising out of or in relation thereto also covers the point of time when they can arise "whether during or after completion of the contract, or whether before or after determination, foreclosure or breach of the contract."
Hence the manner in which Clause 97 is structured, it can be said to be an all encompassing clause covering all disputes and differences arising at whatsoever stage and providing for arbitration. The said Clause as indicated above inter-alia covers, the aspect as to the manner of appointment of lgc 49 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 arbitrator, the qualifications of the arbitrator, fees that are payable to the arbitrator and the manner of their fixation etc. Hence a conjoint reading of Clause 96 and Clause 97 indicates that the parties have provided themselves a dual mechanism i.e. Clause 96 providing for doubts, disputes and differences arising at the time of the execution of the works, being resolved in a particular manner, and then Clause 97 which is an arbitration clause which can be said to be all encompassing.
Significantly in Clause 97 there is no reference to Clause 96 which can be said to be a defining feature of the agreement, in so far as the present works contract is concerned. Hence Clause 97 can be said to be a stand alone arbitration clause whose invocation is not contingent upon invocation of Clause 96. The said Clause 96 cannot eclipse Clause 97 which as indicated above is a stand alone arbitration clause and is all encompassing. It is therefore not possible to subscribe to the proposition as enunciated by the learned Senior Counsel Shri Setalvad that having regard to the law applicable to the interpretation of deeds, if every word is to be given meaning to in Clause 96 then all the disputes would be covered by Clause 96 and therefore invocation of Clause 96 is a pre-cursor to invocation of Clause 97. The acceptance of such a proposition would in fact render Clause 97 otiose. The acceptance of such a proposition would also militate against the object behind Clause 97 which is to provide a remedy by way of arbitration to the parties.
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Such an interpretation also cannot be accepted in view of the fact that it was also the submission of Shri Setalvad that in so far as the MCGM is concerned, it can directly invoke Clause 97. The same would give rise to an anomalous situation namely that the MCGM can invoke Clause 97 directly whereas the Contractor has to go through the route of Clause 96. The parties obviously cannot be meted out a different treatment under the same contract. The interpretation therefore would have to be one which results in a uniform treatment to the parties and furthers the object behind which the parties agreed to Clause 97. It would be one thing to say that Clause 96 is worded in the widest possible terms, but another thing to deny the efficacy of Clause 97 in so far as reference to arbitration de-hors Clause 96 is concerned.
15 Now coming to the judgments relied upon (supra) by the learned Senior Counsel for the Respondent - MCGM and whether the same would change the perspective from which Clause 96 and Clause 97 can be looked at.
Almost all the judgments (supra) including in Sushil Kumar Bhardwaj's case and Mysore Construction Company's case involved applications under Section 11 of the Arbitration and Conciliation Act, 1996 for appointment of an arbitrator. It is in the said context that the applications were adjudicated upon by primarily considering whether the clause/clauses in contention in the respective agreements can be said to contain an arbitration clause in terms of which the parties can be referred to arbitration. In almost all the cases, there is lgc 51 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 one single clause which contains or prescribes the pre-requisites or the procedure that was required to be followed before the parties could be referred to arbitration. (See judgments in M.K.Shah Engineers & Contractors' case (supra), Municipal Corporation, Jabalpur's case (supra) amongst other judgments.) 16 Even in cases where there were two or more clauses, the said clauses can be said to contain a composite scheme namely the disputes to be referred to an authority or adjudicator mentioned in the initial clause and thereafter the parties being entitled to invoke the arbitration clause. However, the defining feature of such a scheme contained in the multiple clauses is that in the arbitration clause a specific reference is made to the authority or adjudicator before whom the party has to go initially and on failure of the dispute or difference being resolved, that the arbitration clause can be invoked.
17 It is having regard to the manner in which the clauses have been worded in the said cases that the Courts have refused to refer the parties to arbitration on account of non-fulfillment of the procedure or non-compliance of the pre-requisites for the parties to be referred to arbitration.
18 In our view, in the instant case since Clause 96 and Clause 97 are
worded differently and though it is mentioned in Clause 96 that if the
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contractor is not satisfied with the decision of the Commissioner or the Commissioner fails to give his decision within the period of 90 days, then the dispute may be referred to arbitration as per Clause 97, in the instant case, there is nothing in Clause 97 to suggest that it is only in respect of the disputes or differences raised under Clause 96, that the arbitration can be invoked under Clause 97. In our view, Clause 97 being widely worded, the disputes which have arisen under Clause 96 and their reference to arbitration can only be one of the facets of Clause 97, but not the only facet. In our view, therefore invocation of Clause 96 is not a must for invoking Clause 97 and that a claim for the first time can be made before the arbitrator by following the procedure laid down in Clause 97.
19 The question which also arises is whether in terms of Clause 7 the decision of the Engineer on all questions relating to the construction and meaning of plans, working drawings, section and specifications connected with the work can be said to be final, conclusive and binding on all the parties to the contract and therefore is excluded from Clause 97 as posited in the said Clause No.7 20 As indicated herein above, Clause 96 provides for any doubt, dispute or difference in respect of the matters mentioned in the said Clause between the Engineer or any other officer and the contractor being referred to lgc 53 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 the Municipal Commissioner. The said matters include the items covered by Clause 7, namely, plans, workings, drawings section and specifications. If that be so, then applying the rule of interpretation which is applicable in respect of deeds, the said Clause 7 and Clause 96 would have to be construed in a manner which would make the scheme envisaged in Clause 96 workable. If the Municipal Commissioner is the referrable authority provided by Clause 96, he would also have to be so in respect of the items or matters mentioned in Clause 7 as otherwise the mechanism provided by Clause 96 would become meaningless. In fact the said proposition was advanced by the learned Senior Counsel for the Municipal Corporation of Greater Mumbai in support of his submission as regards the wide ambit of Clause 96. Hence to the extent that the items mentioned in Clause 7 are covered by Clause 96, to the said extent the decision of the Engineer would have to be held to be not final, conclusive and binding and would therefore be at large before the Municipal Commissioner and thereafter before the arbitrator if the occasion so arises.
21 In the light of the discussion as above, the view that we have taken can be crystallized by concluding that it is not necessary to invoke Clause 96 and await the completion of the procedure contemplated therein to invoke Clause 97. The corollary to the same would be that the arbitration under Clause 97 can also be in respect of claims which were not raised under Clause 96 and which are raised for the first time under Clause 97. For the view that lgc 54 of 55 ::: Uploaded on - 08/02/2017 ::: Downloaded on - 09/02/2017 01:15:13 ::: APP-914.03 we have taken we affirm the view taken by the Division Bench in Atlanta Infrastructure Ltd.'s case (supra) as laying the correct proposition of law. We accordingly answer both the questions framed by us.
22 By answering the reference as above we deem it appropriate to remit the above Appeal back to the Division Bench for being adjudicated on merits.
[ANOOP V MOHTA, J]
[R.M.SAVANT, J]
[G.S.KULKARNI,J]
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