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1999 DIGILAW 58 (DEL)

BHARAT BHUSHAN v. UP SMALL IND. CORPORATION

1999-01-21

R.C.LAHOTI, SUJATA V.MANOHAR

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Sujata V. Manohar ( 1 ) IN the present case, reading Clauses 23 and 24 together, it is quite clear that in respect of questions arising from or relating to any claim or right, matter or thing in any way connected with the contract, while the decision of the Executive Engineer is made final and binding in respect of certain types of claims or questions, the decision of the Managing Director is made final and binding in respect of the remaining claims. Both the Executive Engineer as well as the Managing Director are expected to determine the question or claim on the basis of their own investigations and material. Neither of the clauses contemplates a full-fledged arbitration covered by the Arbitration Act. ( 2 ) A clause very similar to the present clause was also held to be not an aribitration clause by this Court in the case of State of Orissa Vs. Damodar Das ([1996] 2 SCC 216 ). The language of that clause was very similar to the present clause. Under the clause in question "except where otherwise specified in this contract, the decision of the Public Health Engineer, for the time being", was to be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of 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 contract. . . . . or otherwise concerning the works or the execution or failure to execute the same. . . . . . " This Court held that this clause did not spell out any intention to refer any disputes and differences between the parties to arbitration. ( 3 ) THE wording of the clause in the present case is very similar to the wording which was interpreted as not an arbitration clause in the above case. Both the above judgments of this Court have relied upon an earlier decision of this Court in the case of State ofu. P. Vs. Tipper Chand ([1980] 1 SCC 341 ). The clause which was interpreted in the above case was also materially similar to the clause before us. Both the above judgments of this Court have relied upon an earlier decision of this Court in the case of State ofu. P. Vs. Tipper Chand ([1980] 1 SCC 341 ). The clause which was interpreted in the above case was also materially similar to the clause before us. Clause 22 of the contract in that case provided; "except where otherwise specified in the contract the decision of the Superintending Engineer for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned. The decision of such engineer as to the quality of workmanship or materials used on the work or as to any other questions, claim right, matter or thing whatsever in any way arising out of relating to the contract, designs, drawings, specifications. . . . . or otherwise concerning the works, or the execution or failure to execute the same. . . . . . . shall also be final, concusive and binding on the contractor". This Court held that the clause did not contain an arbitration agreement either expressly or by implication. The intention was to vest the Superintending Engineer with supervision and administrative control over the work. ( 8 ) IN Hudson s Building and Engineering Contracts, Eleventh Edition, Volume 1, in Paragraph 6. 065, while making a distinction between a Certifier and Arbitrator in a building contract, it has been emphasised that essentially the Certifier in a construction contract will often be performing an administrative rather than a judicial function, and when doing so there may often be no formulated dispute before him at all. He has been described as a "preventer of disputes" in contradistinction to an arbitrator whose function can only arise once a dispute is in existence. He is not under the same obligation to afford the parties or their representatives a full hearing and receive evidence from them. Thus each contractual provision may need to be carefully scrutinised to see into which category the person named falls. ( 5 ) IN the present case the Managing Director is more in the category of an expert who will decide claims, right, or matters in any way pertaining to the contract. The intention appears to be more to avoid disputes than to decide formulated disputes in a quasi-judicial manner. In paragraph 18. ( 5 ) IN the present case the Managing Director is more in the category of an expert who will decide claims, right, or matters in any way pertaining to the contract. The intention appears to be more to avoid disputes than to decide formulated disputes in a quasi-judicial manner. In paragraph 18. 067 of Volume 2 of Hudson on Building and Engineering Contracts, Illustration (8) deals with the case where, by the terms of a contract it was provided that the engineer "shall be the ex- clusive judge upon all matters relating to the construction, incidents and the consequences of these present, and of the tender, specifications, schedule and drawings of the contract, and in regard to the execution of the works or otherwise arising out of or in connection with the contract, and also as regards all matters of account, including the final balance payable to the contractor, and the certificate of the engineer for the time being, given under his hand, shall be binding and conclusive on both parties. It was held that this clause was not an arbitration clause and that the duties of the engineer were administrative and not judicial. ( 6 ) SINCE Clause 24 does not contemplate any arbitration, the application of the appellant under S. 8 of the Arbitration Act, 1940 was misconceived. The appeal is therefore, dismissed though for reasons somewhat different from the reasons given by the High Court. There will, however, be no order as to costs.