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2001 DIGILAW 862 (KAR)

GULBARGA UNIVERSITY, GULBARGA v. MALLIKARJUN

2001-11-30

M.P.CHINNAPPA

body2001
M. P. CHINNAPPA, J. ( 1 ) HEARD Sri Udaya holla, the learned counsel for the petitioner and Sri Jayakumar S. Patil for the respondent. ( 2 ) THE brief facts which are not in dispute are that the petitioner and the respondent entered into an agreement of construction of indoor stadium for the petitioner-University. The respondent did construct the indoor sta- dium after the persuasive efforts but the dispute aro. se between the parties that the petitioner had not settled the payments of the respondent and however, the petitioner contended that the workmanship was defective and required rectification as a result of which the petitioner had sustained heavy loss towards effecting repairs and claimed that the respondent would have to pay a sum of Rs. 50 lakhs. In view of this, the respondent wrote a letter to the petitioner to refer the questions to the superintending Engineer-for his report. Therefore, the Registrar of the petitioner-University by his letter No. GUG/engg/dm/98-99/ 9182, dated 25/28-11-1998 requested the superintending Engineer to furnish his report in connection with the construction of the in -. door stadium and also the payment to be made by either of the parties along with the copy of the letter as per Clause 30 of the agreement. The Superintending Engineer held meetings "of both the parties and by letter dated 30th july, 1999, informed that the petitioner is liable to pay a sum of Rs. 27,69,900/- and the counter-claim of the University was rejected. The respondent herein filed Ex. P. No. 254 of 2000 on the file of the Principal Civil Judge (Senior Division) at Gulbarga for recovering the amount in a sum of Rs. 27,69,900/- together with interest at 18% per annum from 31. 7. 1999. The executing Court issued warrant and in execution of that warrant, the car of the Vice-Chancellor of Gulbarga University was attached. Therefore, the petitioner filed an application under Section 47 of the Civil procedure Code. The respondent filed his objection and the said application was rejected after hearing both parties. As against that order dated 19. 10. 2000 the petitioner preferred this revision petitfon under Section 115 of the civil Procedure Code. Therefore, the petitioner filed an application under Section 47 of the Civil procedure Code. The respondent filed his objection and the said application was rejected after hearing both parties. As against that order dated 19. 10. 2000 the petitioner preferred this revision petitfon under Section 115 of the civil Procedure Code. ( 3 ) THE learned counsel for the petitioner has vehemently argued that the Clause 30 of the agreement is not an arbitration clause and the order passed by the Superintending Engineer, PWD, Gulbarga is not an award and therefore, the executing Court has committed an error in holding that the said report is arbitration award and executing the award as against the petitioner. Clause 30 is incorpo rated to secure expert opinion which cannot be construed as a clause to appoint an arbitrator. Therefore, he submitted that the order passed by the Court below calls for interference. ( 4 ) REPELLING this argument, Sri Jayakumar s. Patil, the learned counsel for the respondent strenuously argued that the order passed by the Superintending Engineer in question is the award and a dispute was referred to him for passing an arbitration award and as it is an arbitration award, the petitioner ought to have questioned the same under Section 16 and it is open to the executing court to decide as to whether it is arbitration proceedings or not. Therefore, he submitted that the Court below has rightly rejected the application which does not call for interference. ( 5 ) BOTH Counsels very fairly and rightly submitted that Arbitration Act 26 of 1996 which came into force with effect from 25. 1. 1996 is applicable to the facts of the case. ( 6 ) IT is also not in dispute that under Section 47 of the Civil Procedure Code the question of nullity of decree can be set up at any stage including the execution case as held by their Lordships of the Supreme Court in Urban improvement Trust, Jodhpur v. Gokul Narain and Anr. In view of this, the petitioner herein filed the application under Section 47 of the civil Procedure Code. The question is whether the report of the Superintending Engineer is an award as contemplated under the Arbitration Act, 1966 (for short 'the Act'), and whether the Court has jurisdiction to execute the same. In view of this, the petitioner herein filed the application under Section 47 of the civil Procedure Code. The question is whether the report of the Superintending Engineer is an award as contemplated under the Arbitration Act, 1966 (for short 'the Act'), and whether the Court has jurisdiction to execute the same. ( 7 ) BEFORE considering the question involved in this petition, it is now necessary to refer to certain decisions cited at the Bar. ( 8 ) IN K. K. Modi v. K. N. Modi and Ors. their Lordships have considered the requirements to be satisfied to attribute an agreement to be considered as an arbitration agreement which reads thus : (1) Among the attributes which must be present for an. agrement to be considered as an arbitration agreement are : (1) the arbitration agreement must contemplate,that the decision of the Tribunal will be binding on the parties to the agreement, (2) that the jurisdiction of the Tribunal to decide the rights of parties must be derived either from the consent of the parties or from an order of the Court or from a statute, the terms of which made it clear that the process is to be an arbitration, (3) the agreement must' contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) that the Tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, (5) that the agreement of the parties to refer their disputes to the decision of the Tribunal must be intended to be enforceable in law and lastly, (6) the agreement must contemplate that the Tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the Tribunal. The other factors which are relevant include whether the agreement contemplates that the Tribunal will receive evidence from both sides and hear their contentions or at least give the parties an opportunity to put them forward; whether the wording of the agreement is consistent or inconsistent with the view that the process was intended to be an arbitration, and whether the agreement requires the Tribunal to decide the dispute according to law. ( 9 ) IN State of Uttar Pradesh v. Tipper chand, the Supreme Court has held that on interpretation of relevant clause therein that it did not amount to arbitration clause as it did not contain any express arbitration agreement nor could it be implied. The clause vested the superintending Engineer only with supervision and administsrative control over the work. ( 10 ) IN Smt. Rukmanibai Gupta v. The collector, Jabalpur and Ors. , their Lordships have held :"arbitration agreement is not required to be in any particular form. What is required to be ascertained is whether the parties have agreed that if disputes arise between them in respect of the subject- matter of contract such dispute shall be referred to arbitration, then such an arrangement would spell out an arbitration agreement. " ( 11 ) IN State b/orissa and Anr. v. Damodar das, their Lordships have held that the arbitration clause in the agreement to refer disputes or differences to arbitration must be expressly or impliedly spelt out from the clause. The clause in the contract empowers Public health Engineer to decide questions relating to meaning of specifications, drawings, quality of work etc. , and providing that his decision shall be final and binding on the contractor. It does not constitute an arbitration clause and the clause in the agreement must be read as a whole. ( 12 ) IN Bharat Bhushan Bansal v. attar pradesh Small Industries Corporation Limited, kanpur, their Lordhips have considered the Clause 23 in the agreement which is incorporated in the agreement referred to in that judgment which reads thus :"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 hereinbefore 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. "their Lordships after considering the decisions referred to above viz. "their Lordships after considering the decisions referred to above viz. , K. K. Modi's case, (supra); State of Orissa's case, (supra) and state, of Uttar Pradesh's case, (supra), have held unless the wording of a clause unambiguously indicates the intention and agreement of both parties enforceable in law to refer disputes to the adjudication of an Arbitration and casts a duty on the Arbitrator to record evidence and to hear both parties before coming to a decision the clause cannot be taken to be an arbitration agreement. Two clauses in a construction agreement setting out that : (1) the decision of the Executive Engineer was to be final, conclusive and binding on both parties to the contract on all questions relating to meaning, specifications, designs, etc. , and quality of workmanship or material used or any other question arising out of such matters; and (2) the decision of the Managing Director to be final in relation to any claim, right, matter or thing arising out of the contract and all other matters. Contractor making application under section 8 of the Arbitration Act, 1940 for appointment of an independent Arbitrator The application was allowed by the Civil Judge in appeal. High Court while upholding the finding that there was an arbitration clause holding that the Court had no jurisdiction under section 8 to appoint an Arbitrator because in the circumstances of the case none of the clauses of Section 8 were attracted and thus setting aside the order of the Civil Judge The supreme Court held that the High Court decision was correct though for different reasons. As the disputed agreement did not contemplate any arbitration the application under Section 8 was misconceived. It is also further held that there is a difference between an agreement and an arbitration agreement ( 13 ) WITH this background, it is now necessary to find out whether Clause 30 of the agreement produced in the case on hand is an arbitration clause or only whether an expert determination of an arbitration agreement. section 30 of the agreement which is called in question reads thus :"the decision of the Superintending Engineer of the Gulbarga Circle for the time being shall be final, conclusive and binding on all the parties to the contract upon all questions relating to the meaning of the specifications, design. section 30 of the agreement which is called in question reads thus :"the decision of the Superintending Engineer of the Gulbarga Circle for the time being shall be final, conclusive and binding on all the parties to the contract upon all questions relating to the meaning of the specifications, design. drawings and instructions hereinbefore mentioned, and as to the quality of work manship or materials used on the wrok 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 ex ecute the same whether arising during the progress of the work, or after the completion or abandonment thereof in case of dispute arising between the contractor and Gulbarga Univeristy. By reading this clause one may feel it is an arbitration clause. Similar clauses are found in all the decisions referred to above decided by the Supreme Court and their Lordships have held that the same are not arbitration clauses. It also appears from the conduct of the parties that they have not treated it as an arbitration clause. The petitioner also by its letter requested the Superintending Engineer to send his report. It does not spell out that he was requested to send his award. " ( 14 ) FROM the perusal of the document in question, it is clear that the Superintending Engineer has not conducted an enquiry. At this juncture it is appropriate to recall the commentary of mustill and Boyd : Commmercial Arbitration, 2nd Edition at page 30; Russel on arbitration, 21st Edition at page 37, para 2- 014, relied on : while there are no conclusive tests, by and large, one can follow a set of guidelines in deciding whether the agreement is to refer an issue to an expert or whether the parties have agreed to resolve through arbitration. Therefore, Indian Courts have laid emphasis on (1) existence of disputes as against intention to avoid future disputes; (2) the Tribunal or forum so chosen is intended to act judicially after taking into account relevant evidence before it and the submissions made by the parties before it; and (3) the decision is intended to bind the parties. Nomenclature used by the parties may not be conclusive. Nomenclature used by the parties may not be conclusive. One must examine the true intent and purport of the agreement. There are, of course, the statutory requirements of a written agreement, existing or future disputes and an intention to refer them to arbitration (vide section 2, Arbitration Act, 1940 and section 7, Arbitration and Conciliation act, 1996.)". It is clear that the Superintending Engineer has not conducted any enquiry. On the other hand, he held a meeting in his chamber and then passed the order in question. ( 15 ) THE learned counsel for the respondent vehemently argued that it is not open to the petitioner now to say that enquiry was not held and therefore, this order is not binding. As the petitioner was represented, so also the respondent before the Superintending Engineer and the matter was discussed, that itself is an enquiry as contemplated under the Act. Therefore, it has to be construed as an award. As indicated above, to decide whether the agreement is to refer an, issue, of expert or whether the parties have agreed to resolve the dispute through arbitration the existence of dispute as against the intention to avoid future disputes, the Tribunal or a forum so chosen is intended to act judicially after taking into account the relevant evidence before it and the submissions made by the parties before it and the decision is intended to bind the parties. These three requirement are conspicuous in their absence in the order passed by the Superintending Engineer. ( 16 ) IN this case, the enquiry is so required as the petitioner has put forth a counter-claim alleging that his workmanship was so poor that the indoor stadium was leaking and to rectify the same the petitioner had spent a huge sum estimated at Rs. 50 lakhs. So no finding is given on that aspect. On the other hand, by a single sentence, the Superintending Engineer held that the counter-claim is rejected. There is nothing to indicate that the petitioner has given up his counter-claim in the said meeting. On the other hand, it was rejected by the Superintending engineer unilaterally. Therefore, it is clear that when the enquiry has not been conducted it is not an award and the intention. of the parties also was not to invoke Clause 30 as an arbitration clause. On the other hand, it was rejected by the Superintending engineer unilaterally. Therefore, it is clear that when the enquiry has not been conducted it is not an award and the intention. of the parties also was not to invoke Clause 30 as an arbitration clause. That being the situation, the argument of Sri Jayakumar S. Patil that since the petitioner made counter-claim and the same came to be rejected in the meeting hence it has to be construed as an enquiry is a far-fetched argument. ( 17 ) THE reading of Clause 30 coupled with the letter of request sent to the Superintending Engineer with the copy of the letter clearly postulates that the parties have not treated this clause as arbitration clause. There is no consensus ad idem amongst the parties to treat it as an arbitration clause. This can best be treated as expert's opinion and not an award. The language of Clause 30 in the case on hand and the clause in the agreement referred to in the decision in Bharat Bhushan Bansal, noted supra, are similar and their Lordships have held that it is not an arbitration award. ( 18 ) IT is further argued that the award passed by the Superintending Engineer was not questioned in accordance with Section 16 or 34 of the Act. Section 16 deals with competence of Arbitral Tribunal to rule on its jurisdiction and Section 34 deals with application for setting aside arbitral award. The question of challenging the award would arise only if it was referred to the Arbitrator and that order passed was treated as an award by both the parties. In this case as stated above, Clause 30 was not an arbitration clause and the order passed by the Superintending Engineer was only an expert's opinion and not an arbitration award. Therefore, invoking. Sections 16 and 34 does not arise. Only if it was treated as an arbitration award, then the argument of the learned counsel for the respondent would hold water and not otherwise. Therefore, this argument also is not well-founded and unacceptable. ( 19 ) THE learned counsel for the respondent has sought to. argue by interpreting each and every word and he wants the Courts to read the Clause 30 in-between the lines to hold that it is an arbitration clause. Therefore, this argument also is not well-founded and unacceptable. ( 19 ) THE learned counsel for the respondent has sought to. argue by interpreting each and every word and he wants the Courts to read the Clause 30 in-between the lines to hold that it is an arbitration clause. I am afraid that it is not permissible for the court to read the clause as suggested by the learned Counsel. The agreement has to be read as a whole and the clause will have to be interpreted on the basis of the intention of the parties that could be derived from this contract and as to how the parties treated it. Under the circumstances, the argument of the learned Counsel referring to certain words used in the clause 30 would indicate that it is an arbitration clause, is also liable to be rejected. For the foregoing reasons, i have no hesitation to hold that the order passed by the Court below which is impugned in this petition is liable, to be set aside. In the result therefore, I proceed to pass the following :"the petition is allowed. The impugned order dated 19. 10. 2000 is set aside. Consequently, the application filed by the petitioner under Section 47 of the civil Procedure Code is also allowed and the Execution Petition No. 254 of 2000 stands dismissed. No order as to costs. "revision allowed. --- *** --- .