M/S. Garg Builders And Engineers vs U.P. Rajkiya Nirman Nigam Ltd., ...
1994 Latest Caselaw 474 Del

ORDER

1. Delhi Development Authority (hereinafter called the 'DDA") entrusted the work of C/o Outfall RCC box drain measuring 2258 mts. in Lawrence Road area including remodelling of part of Kanahaya Nagar Drain for Pitampura Residential Scheme to discharge into Najafgarh drain, to U.P. Rajkiya Nirman Nigam Limited (in short 'Nigam') defendant No. 1. The Nigam in turn invited tenders for the contraction of Kanhaiya Nagar RCC Box Culvert type drain. The plaintiff herein submitted his tender and the same was accepted by the Nigam subject to the terms and conditions agreed upon between the parties vide work order agreement dated 2-5-1990. The said work order contains various clauses and one of the clause No. 15 provided that in case of dispute the decision of the then Unit in charge would be binding.

2. It is the case of plaintiff herein that since the Nigam withdrew certain work oat of his work order arbitrarily and illegally, therefore, he suffered losses and damages. Not only the work was withdrawn, the Nigam illegally and arbitrarily terminated his contract vide order dated 25-3-1991. He was in fact performing his contractual obligation in accordance with the terms of the contract but the Nigam with an ulterior motive and in order to favor other agencies terminated his contract. On account of this illegal action of the Nigam, the plaintiff has suffered losses and damages. He has also not been paid his final bill. He suffered on account of the change and reduction in scope of his work. His security amount has also not been released.

3. He had earlier filed a petition under Sections 5, 12 and 20 of the Arbitration Act (in short the 'Act'). It was registered as O.M.P.

No. 92/91. Subsequently, the same was withdrawn because the parties had not consented for any enlargement of the statutory period of time. The Arbitrator thus became functus officio, hence the question of revocation of his authority did not survive. He withdrew that petition with liberty to take such further remedies as he may be entitled to. Thereafter, the present suit claiming an amount of Rs. 8,57,267.54 p. on account of damages, losses and for non-payment of his dues has been filed.

4. The DDA filed the written statement. The Nigam, however, has filed an application under Section 34 of the Act seeking stay of the suit on the ground that there exists an agreement containing arbitration clause, hence suit is not maintainable. The fact of filing an earlier application under Ss. 5, 12 and 20 of the Act is admitted by the plaintiff, therefore, the suit for the same claims which are covered by the arbitration clause is not maintainable. This assertion of the Nigam has been controverted by the plaintiff on the ground, that there does not exists an agreement containing arbitration clause. Clause 15 of the work order is only a finality clause giving powers to the then Unit In-charge to give his decision. But it cannot be called an arbitration clause.

5. At the outset, counsel for the respondent Nigam submitted that the petitioner admitted the existence of the Arbitration agreement when he filed a petition under Ss. 5, 12 and 20 of the Act listed as OMP. 92/91. He subsequently withdrew that petition on the ground that period of making and publishing the Award had expired and since petitioner had not given the consent hence Arbitrator became functus officio. Having submitted to the jurisdiction of the Arbitrator and admitting arbitration agreement, the suit is not maintainable. Even in this suit plaintiff admits agreement and the said agreement contains arbitration clause No. 15. Therefore, also suit is not maintainable. Plaintiff at no stage challenged the arbitration agreement or the clause 15, therefore, he is estopped now challenging the same because in his earlier petition OMP. 92/91 his only prayer was to revoke the authority of the arbitrator and that this Court should appoint an impartial arbitrator in his place. The Arbitration Act provides that when there is an arbitration clause in an agreement, the suit for the same cause of action is not maintainable. The disputes which have been referred to the arbitrator by the respondent are the same which arc the subject matter of this suit. Therefore, claims made in the suit are covered by arbitration clause. The present suit is not maintainable and liable to be stayed.

6. This objection is taken up first because it deals with the legal aspect as to whether by filing a petition under Ss. 5, 12 and 20 of the Act plaintiff admitted the existence of arbitration agreement. Dealing with this objection, it can be said that there is no estoppel against law. It is the duty of the Court to find out whether there exists an arbitration clause in an agreement or not. It is also true that with the consent of the parties the dispute between the parties can be referred to arbitration, irrespective of the fact as to whether there exists an arbitration agreement or not? But that has to be with the consent of the parties. In this case, the reading of para 11 of the OMP.92/91 shows that the plaintiff never consented for the arbitration by the Unit In-charge. Rather he has been assailing clause 15 of the agreement to be an arbitration clause. Similarly, in this suit also, the plaintiff has assailed clause 15 to be an arbitration clause, therefore, merely because the plaintiff earlier filed an application under Ss. 5, 12 and 20 of the Act, would not amount to be a consent on the part of the plaintiff for the appointment of an arbitrator under Cl. 15 of the agreement. The fact whether Cl. 15 can be construed and considered as arbitration clause, one has to refer to the intention of the parties by reading the language of the clause. Merely filing the OMP. No. 92/91 will not operate as an estoppel against the plaintiff nor on that ground the suit can be stayed. The respondent has to succeed on its own merits, by establishing that there exists an arbitration clause and, therefore, the suit, be stayed.

Moreover, while allowing application under O. 23, R. 1, C.P.C., this Court gave liberty to the plaintiff to take recourse to any proceedings in accordance with law.

7. In order to appreciate the relevant contentions on merits as raised by the counsel at the Bar, we have to have reference to Cl. 15, which is reproduced hereunder :--

Clause 15

"In the event of any dispute arising out of any of the conditions of this agreement, the matter shall be referred to the then Unit in charge, whose decision shall be final and binding on both the parties."

8. In order to hold that an agreement contains an arbitration clause, we have to keep in mind that the clause has to be comprehensive enough to cover all the disputes arising out of the agreement coveted by the clause. The question whether the dispute in the suit falls within the arbitration clause, we have to be sure that the clause must involve consideration of two matters :--

(1) What is the dispute in the suit; and (2) What dispute the arbitration clause covers? Before an order under S.34 of the Act can be passed, it must be established that the suit has been instituted in respect of the matter agreed to be referred and not independent of it. What has to be determined irrespective of the validity of the claim and counter-claim of the parties, be it untenable, frivolous or vexatious, is whether the dispute is one which involves the interpretation of the contract or which arises thereunder. It will be deemed to arise under the contract for the purposes of the arbitration clause if recourse is had to the terms of the contract itself as negativing the claim of one party or as establishing the claim of the other.

9. To arrive at the conclusion that a clause in the agreement is an arbitration clause, it is necessary that the parties should intend that Arbitrator should determine the dispute in a quasi judicial manner. Mere agreement between two persons to be bound by the decision of a person does not constitute him an Arbitrator. Clause 15 is not comprehensive enough to constitute an arbitration clause, at best, the decision of Unit In-charge can be called an "Excepted Matter". The reading of the same does not indicate that disputes arising between the parties with regard to the conditions of the agreement have to be referred for adjudication to an Arbitrator. Clause 15 deals with the decision of the Unit In-charge, which will be final and binding on both the parties, meaning thereby it is only a finality clause i.e. the decision on a particular point rendered by the Unit In-charge would be binding on the parties. Such a decision falling in the category of "Excepted Matter" cannot be challenged. But this by no stretch of imagination can be called an arbitration clause. An arbitration clause has to be broad and comprehensive enough to embrace all or any dispute between the parties in respect of the agreement or any provisions therein or anything arising out of it, and one of the parties seeks to avoid the contract, the dispute is referable to arbitration, if the avoidance of the contract arises out of the contract itself. The Lahore High Court in Governor General v. Simla Banking and Industrial Company reported, as AIR 1947 Lahore 215 and of Calcutta High Court in Calcutta Met. Dev. Authority v. K. C. Anand & Co. (1976) 80 Cal WN 328, were dealing with the cases where the clause mentioned that "Except where otherwise specified in the contract the decision of the Supdt. Engineer shall be final, conclusive and binding on all the parties to the contract on all questions, claims, rights or matters in any way arising out or relating to the contract", it was held by those Courts that even though the words "Arbitrator" or "Arbitration" were not used, the result was the same and the agreement amounted to an Arbitration agreement. This decision was overruled by the Supreme Court in State of U. P. v. Tipper Chand where it was held that the Supdt. Engineer was vested only with supervision and administrative control over the work and he was not an Arbitrator. In fact it is necessary to keep in mind the distinction between the functions of the Arbitrator and the binding nature of Unit In-charge's decision or certification. Essentially, the Unit In-charge, in this case, was to perform an administrative rather than a quasi judicial function. He at best can be described as a prevent or of disputes, while the Arbitrator would come on the scene after the disputes have arisen.

10. Clause 15 does not refer to dispute arising out of, or concerning, or in connection with, or in consequence of, or relating to the contract and, therefore, it cannot be said to be an arbitration clause. In Gaya Electric Supply Co. Ltd. v. State of Bihar, , the Supreme Court observed that the arbitration clause is a written submission to arbitration and it must be considered according to its language and in the light of the circumstances in which it is made. If the arbitration clause refers to disputes arising out of, or concerning, or in connection with, or in consequence of, or relying to, as already mentioned above, then of course, it will constitute an arbitration clause. However, the reading of the clause 15 nowhere indicates that there had been a written submission between the parties to refer their future disputes to arbitration relating to the contract itself or arising out of, or concerning, or in connection with, or in consequence of the contract. Clause 15 is somewhat similar to Government of India's finality clause, i.e. of CPWD and DDA which also provide that the decision of the Supdt. Engineer shall be final. While interpreting those clauses in the contract of CPWD and DDA this Court has held such a clause to be a finality clause and not arbitration clause. Similarly the decision of the Unit In-charge regarding the interpretation of the condition of contract being final and binding, by no stretch of imagination can be called an arbitration clause. When there is no prior consent for submission to arbitration which is a pre-requirement for invoking the provisions of S. 34 of the Arbitration Act, the suit cannot be stayed. In view of the above discussion, I find no merit in this application. The suit cannot be stayed. The application is dismissed.

11. Application dismissed.