M/s. Singla Construction Company and Another vs Union of India and Another

K. Kannan, J.—The Civil Revision is against the order rejecting the petition filed u/s 20 of the Arbitration Act, 1940, seeking for a reference to the Arbitrator. That there had been an arbitral agreement between the parties is not in dispute. The dispute is whether the petitioners are entitled to claim the amount of what, according to them, was due to them after completion of the contract. The contention in defence in the application filed u/s 20 of the Act was to the effect that there existed no dispute and the claim had not been made in the manner contemplated under the contract. If the petitioners before the court say that in the manner of completion of contract or in relation to any matter for which a contract had been entered, that there exists a dispute for resolution, that would conclude the issues so far the civil court is concerned. A respondent in the application u/s 20 of the Act cannot contend that there existed no dispute when the contractor had complained that his own settlement under the contract had not been effected. The court at the first instance allowed the objection of the respondents to prevail and dismissed the petitioner. Against the order passed u/s 20 of the Act, an appeal had been filed which I am not too sure whether it was competent but it was also dismissed. The legality of the order of dismissal of the petition u/s 20 is brought before me. I have no doubt in my mind that the order passed by the court was erroneous. The court exercising jurisdiction u/s 20 of the Act does not traverse beyond an inquiry of whether there existed an arbitral agreement or not and when an application is made, notice shall contain in terms of Section 20(3) to show cause within the time why the agreement should not be filed. The very language of the section would only show that the objections which could be called for from the defendant was only why the agreement shall not be filed. If no sufficient cause is shown then sub clause 4 of Section 20 operates. That clause reads as under:--

Application to file in Court arbitration agreement.

(1) to (3) xxxx

(4) Where no sufficient cause is shown, the Court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.

The court''s power then is only to make an order of reference to the arbitrator appointed by the parties. In the only situation where the parties themselves cannot agree upon an arbitrator, there is scope for the court to appoint an arbitrator. Learned counsel appearing on behalf of the respondents refers to me to the decision of this Court in Commander Works Engineers (Air Force). Chandigarh v. Sh. Kesho Ram Sharma and another, Civil Revision No. 3599 of 2004 decided on 28.9.2010, which, according to him, gives an answer that the acceptance of final bill without prejudice would close the matter further and would not entitle him to raise any further claim only on the ground that he had received the final bill. This, according to him, would show that there existed no dispute for adjudication. I must respectfully submit my inability to accept such a reasoning for the court exercising jurisdiction u/s 20 of the Act will not decide an objection by the respondent that there existed no dispute. The dispute as conceived by a contractor and the tenability thereof will be an issue for adjudication only by the arbitrator and the court has no right to pre-judge the same. The order impugned is set aside and the Civil Revision is allowed. There shall be reference of the dispute to the Arbitrator named under the terms of the reference, namely, Chief Engineer, Chandigarh Zone, ''N'' Area, Airport Road, Chandigarh, who shall enter the reference and communicate the same to the parties and proceed with the case in accordance with law.