Executive Engineer, Construction Division, U.P. Jal Nigam and Others vs Coronation Construction Co.

A.K. Banerji, J.—This revision by the Defendants is directed against the order dated 16-8-1991, passed by the V Additional Civil Judge, Meerut holding that Clause 25 of the Agreement between the parties amounts to arbitration clause in proceedings u/s 20 of the Arbitration Act in Suit No. 989 of 1989. �

Brief facts are that the Plaintiff-opposite party M/s. Coronation Construction Company, filed an application u/s 20 of the Arbitration Act before the Court below which was registered as Suit No. 989 of 1989. The case of the Plaintiff was that a contract was given to the said Plaintiff by the Defendants for construction of R.C.C. over head tank for which an agreement was entered on 16-7-1986 between the parties. It will be relevant to reproduce paragraph No. 5 of the plaint which ruas as follows:

There is an Arbitration clause being condition 25 of the condition of the contract in the aforesaid agreement and that according to this clause dispute of the parties were to adjudicated or decided by the Zonal Chief Engineer (West Zone), Agra in the capacity of an Arbitrator.

According to the Plaintiff some dispute arose regarding bills and t|e claim of the Plaintiff hence invoking the arbitration clause No. 25 of the Agreement, the present proceedings were initiated u/s 20 of the Arbitration Act. The Defendants have filed a written statement contesting the said proceedings. It appears that in paragraph No. 5 of the written statement, the Defendants had stated "that paragraph No. 5 of the plaint is admitted". However, in the additional pleas, paragraph No. 33 of, the written statement, it was stated that "there was no clause of Arbitration in the said contract agreement and as such, no reference for Arbitration can be made, had there been any clause of Arbitration, then the applicant contractor should have informed the O.Ps. by making out the dispute and should have requesled/asked for the O.Ps. for referring the matter for adjudication to the arbitrator so nominated/mentioned in the contract agreement." , The Court below framed issue No. 2 to the effect" whether the disputed agreement No. 1 /SI/86-87 dated 16-7-1986 an arbitration clause,." After bearing the arguments of the learned counsel for- the parties, the Court below has held that Clause 25 of the Agreement dated ,16-7-1986 does contain

(sic)

According to the learned counsel it is not the form but the substance of the clause which has to be considered while interpreting the clause in question.

Before proceeding further it would be worthwhile to quote Clause 25 of the Agreement dated 16-7-1986 entered into between the parties as the dispute relates to interpretation of the said clause. Clause 25 of the aforesaid agreement is reproduced below:

Decision of Additional Chief/Superintending Engineer to be final. Except where otherwise specified in this contract, the decision of the Zonal Chief Engineer/Superintending Engineer for the time being shall be final, conclusive and binding between the parties to the contract upon all questions relating to the meaning of the specifications, design and instructions hereinbefore mentioned and as to the quality of workmanship material used on the work, or as to any other question, claim, right matter or things whatsoever in any way, arising out of, or relating to, concerning of the execution or failure to execute the same, whether arising during the progress of the work or after completion or the sooner determination thereof of the contract.

According to the learned counsel for the applicants, this clause does not contain any express arbitration agreement nor can such an agreement be spelt out from its terms by implication and the purpose appears to be to vest the Chief Zonal Engineer or the Superintending Engineer with supervision of the execution of the work and administrative control over it. Learned counsel has further contended that a similar and almost identical clause had. come up for interpretation before the Supreme Court in the case of State of U.P. v. Tipper Chand AIR 1986 SC 1522, and the apex Court agreeing with the view taken by the Allahabad High Court had held that the clause in question does not contain any express arbitration agreement. I have carefully considered the decision of the Supreme Court in the aforesaid case and find substance in the submissions made by the learned counsel for the applicants. In the said case, Clause 22 of the Agreement was similar and almost identical to the Clause 25 of the Agreement in the present case before me. The High Court had interpreted the said clause and held that the same did not amount to an Arbitration Clause and it merely conferred power on the Superintending Engineer to take decision on his own and did not authorise the parties to refer any matter to his arbitration The Supreme Court had concurred with the view taken by the High Court and observed as follows:

Admittedly, the clause does not contain any express arbitration agreement, nor can such an agreement be spelt out from its term by implication. There being no mention in it of any dispute much less of a reference thereof On the other hand, the purpose of the clause clearly appears to be to the Superintending Engineer with supervision of the execution of the work administrative control over it from time to time.

(sic)

and In the case of Uttam Wires and Machines (P) Ltd. Vs. State of Rajasthan and Another, . Where a similar view has been taken. I, have carefully perused the said decisions. There can be no dispute with regards to the proposition of law laid down in the aforesaid cases. However, I have carefully considered the facts of the aforesaid cases and I find that. the arbitration clause which had come up for interpretation in the. aforesaid cases were different and not identical or similar to the''clause which has come for interpretation in the present case. The clause in question in the case reported in State of Uttar Pradesh and Another Vs. Sardul Singh Kulwant Singh and Another, had stated that all disputes in respect of the contract arising "between the contractor and the department will be put up before the Chief Engineer whose decision shall be final and legally binding on both the parties. In the clause which had come up for interpretation before the Calcutta High Court in the case reported in AIR 1990 page 83, the material words were "in the event of a dispute the decision of the Superintending Engineer of the circle shall be final. In the case before Delhi High Court reported in Uttam Wires and Machines (P) Ltd. Vs. State of Rajasthan and Another, , the relevant clause stated that all disputes arising of the agreement and questions relating to the interpretation of the agreement shall be decided by the Government and the decision shall be final. It will be noticed that in all the aforementioned cases, the clause mentions regarding the determination of a dispute by the authority concerned whereas in the clause which we are concerned, no mention has been made about any dispute or about a reference of the dispute to any authority. The apex Court had, therefore, held an identical clause like in the present case not to be an arbitration clause. It is noteworthy that this Supreme Court case. State of U.P. Vs. Tipper Chand, , was considered by the Calcutta High Court in AIR 1990 Gal. 83 (supra) and the same was distinguished on the ground that the Supreme Court in the said case was interpreting a clause which had not made mention regarding "any dispute" whereas before the Calcutta High Court, the clause specified that in the event of a dispute the decision of the Superintending Engineer will be final.

The learned counsel for the Plaintiff-opposite party has also referred to a decision of the Supreme Court in the case of M/s. Prabartak Commercial Corporation Ltd. Vs. The Chief Administrator Dandakaranya Project and another, . I have carefully considered the said decision in the said case also the clause 13-A provided that "in the event of a dispute the decision of the Superintending Engineer of the circle shall be final, "which are not the terms of the clause in the present case.

I am, therefore, of the view that the aforesaid case are of no help to the learned counsel for the Plaintiff-opposite party as the clause which fell for interpretation in those cases were somewhat different than clause 25 (sic) the Agreement in the present case. Here no mention has been made about havtriy dispute between the parties or regarding reference of the said dispute the plore the authority concerned. I am of the view that the Supreme. Court finally? reported in State of U.P. Vs. Tipper Chand, fully applies to the facts of the present

As a result of the aforesaid discussions, the revision succeeds and (sic) The ''order dated 16-8-1991. passed by Additional Civil Judge, contain a(sic) eld that Clause 25 of the Agreement dated mauifestlydoes not contain an Arbitration Clause. In the facts and circuin-learned (sic) shall bear their own costs of this revision.