Union of India vs Nalini Ranjan Guha

S.R. Das Gupta, J.—This is an application u/s 34 of Indian Arbitration Act for stay of the suit No. 4307 of 1950 (Nalini Ranjan Guha v. Union of India). The matter arises in this way : On the 1st of May, 1945, the respondent to this application had entered into a contract for the construction of hutments for 1,500 labourers at Ganoodih with the Governor-General of India in Council, being contract No. 18/SEB. In the said contract particulars of the constructions which had to be done by the contractor were set out and they contained 10 items. There was an arbitration clause in the said contract which runs as follows :

Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of work man ship 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, designs, drawing specifications, estimates, instructions. Orders or these conditions, or otherwise concerning the works, or the execution on failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the arbitration of the Superintending Engineer of the Circle for the time being in the manner provided by law for the time being in force who after such investigations as he may think proper shall deliver his award which shall be final, conclusive and binding on all parties to this contract.

Under clause 29 of the said agreement it was provided that the expression "works" or "work" was used in these conditions shall unless there be something either in the subject or context repugnant to such construction be construed and taken to mean the works by or by virtue of the contract contracted to be executed whether temporary or permanent and whether original, altered, substituted or added. Under clause 12 of the said contract it was provided that the Engineer-in-charge shall have power to make any alterations in or omissions from, additions to or substitution for the original specifications, drawings, designs and instruction that may appear to him to be necessary or advisable during the progress of the work and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-charge and such alterations, omissions, additions or substitutions shall not invalidate the contract.

The plaintiff in suit No. 4307 of 1950 which is sought to be stayed on this application has placed his claim on the following basis : In paragraphs 1 and 2 of the plaint he has referred to the contract and has pleaded that in terms of the said contract the plaintiff commenced the construction of the works and duly completed the same in October, 1944. In para 3 of the plaint he has alleged that during the progress of the main work the plaintiff was instructed by the Governor General in Council and/or his servants and agents to execute divers extra works within the main contract as also works beyond and distinct from the work and/or items mentioned in the said contract. Particulars of all such works have been set out in Annexure A to the plaint. In the said annexure the plaintiff has placed all extra works which he had to do in two groups, namely, (1) Additional works within the main contract works and (2) Additional works beyond and distinct from the main works. The substantial claim of the plaintiff in the suit relate to the second ground, namely, the additional works beyond and distinct from the main works and Rs. 42,855 has been claimed on that basis. In para. 11 of the plaint the plaintiff has also based his claim on the ground of fraud on the part of the defendant and/or its agents in including the plaintiff to commence to execute such works. The plaintiff has set out the particulars of such fraud in the sub-paragraphs of the said paragraph 11 and in para. 12 the plaintiff has alleged that in the premises the defendant has been guilty of fraud and is liable to pay damages for such fraudulent representation and inducement.

Mr. Roy appearing on behalf of the petitioner, Union of India, contended before me that the dispute which is the subject-matter of the suit is a dispute relating to the contract and is covered by the contract. Mr. Chaudhuri appearing on behalf of the respondents on the other hand contended before me that on the case as made out in the plaint the dispute cannot be said to relate to the contract because his client has alleged in the plaint that the extra work for which the claim of Rs. 42,856 has been made in the plaint had nothing to do with the contract and is beyond and outside the scope of the contract. In the circumstances, the principal question which I shall have to decide on this application is whether the claim, as made in the plant, relates to the contract and whether the dispute between the parties is a dispute relating to the contract, In order to decide this question I shall have to decide as to whether the extra works for which a claim for Rs. 42,856 has been made In the plaintiff in his plaint were the works which had been contracted to be executed by the respondent under the said contract. If my answer to the said question is in the negative and if those works are held not to be the works which had been contracted to be executed under the said contract then clearly the arbitration clause in the said contract cannot be applicable.

Mr. Roy in support of contention, namely, that the additional works for which the claim of Rs. 42,854 has been made in the said plaint are the works which were contracted to be executed under the said contract, drew my attention to the provisions of clause 12 of the said contract. I have already set out the substance of the said clause. Mr. Roy contended that on a true interpretation of the said clause the Engineer-in-charge can at any time ask the respondent to do any altered, additional or substituted work and the contractor would be bound to carry out the same and such works therefore would be works under the said contract. Rut on a proper interpretation of clause 12 of the contract it seems to me that the additional, altered or substituted works which are contemplated under the said clause are the works which are in addition to or in alteration of or in substitution for the original specifications, drawings, designs and instructions and not any and every additional works which the Engineer-in-charge may direct the respondent to carry out. In other words it seems to me that the Engineer-in-charge under the said contract has the right to direct the contractor to carry out the said works in different specifications, drawings designs and instructions and in order to do that and for that purpose if the contractor has to do extra works provision has been made in clause 12 of the contract for the same and provision has also been made as to how those extra works which have been occasioned by the change of specifications, drawings, designs and instructions are to be paid for and to be carried out. But it does not seem to me on consideration of the provisions of clause 12 of the said contract, that any and every additional work which the Engineer-in-charge may ask the contractor to do would be an additional work within the meaning of clause 12 or clause 29 of the said con tract. Judging this matter from this point of view I have come to the conclusion that the additional works for which the claim of Rs. 42,854 has been made by the plaintiff in the plaint are not the additional works which arc contemplated under clause 12 of the contract and are not the works which were contracted to be executed under the said agreement. As I said before, in the contract itself items of works which had to be carried out, with particulars thereof, have been set out, but the works which have done by the respondent and for which he has made a claim of Rs 42,854 are works far in excess of the works which have been specified in the said contract and it cannot be said that those works are nothing more than the works in addition to or substitution for the original specifications, drawings, designs and instructions. They are extra works and are in my opinion beyond and distinct from the works and/or items mentioned in the said contract. That being so, it cannot be said that the dispute which arises in relation to the said works is a dispute which relates to the original contact and is covered by the arbitration agreement. In my opinion such a dispute does not come within the arbitration clause as set out in the contract. In the premises the petition of the Union of India on this ground alone must fail.

But Mr. Chaudhuri relied on several others grounds in support of his contention and I shall shortly indicate my views thereon. For instance, he has contended before me that the arbitration clause is uncertain and cannot be given effect to. His contention on this point is that under the arbitration agreement the dispute has to be referred to the arbitration of the Superintending Engineer of the Circle for the time being but according to the allegation made by his client in his affidavit in opposition, the Circle, the Superintending Engineer of which is to arbitrate, has been abolished and therefore arbitration clause has failed. Apart from the fact that it has been held in a number of decisions of this Court including a decision of the Court of Appeal, presided over by the present Chief Justice Harries, that a clause, namely, that the matters are to be referred to the arbitration of the Superintending Engineer of the Circle for the time being, is not void for uncertainty and the point of time when it is to be determined as to who is the Superintending Engineer of Circle is the point of time when the dispute arose, there is another ground on which this contention of Mr. Chaudhuri cannot in my opinion prevail. There is nothing in the arbitration agreement to suggest that the vacancy which has been caused by the absence of any Superintending Engineer of the Circle for the time being due to the abolition of the Circle itself cannot be filled in. It does not appear from the arbitration agreement that the parties intended that such a vacancy would not be filled in. This pan of Mr. Chaudhuri''s contention in my opinion cannot succeed.

Mr. Chaudhuri then contended that the petitioner was not ready and willing to go to arbitration and he drew my attention to a letter dated the 6th September, 1949, in which the Executive Engineer, Bihar Central P. W. Division, Dhanbad, had written to the respondent asking for his consent to appear before the Negotiation Committee for final settlement of the case early. Mr. Chaudhuri also contended before me that the petitioned had never intimated to the respondent that the petitioner was willing to refer the matter to the arbitration. I am unable to accept Mr. Chaudhuri''s contention on this point as well. The point of time to be taken into consideration in order to decide whether the petitioner was ready and willing to go to arbitration is the point of time when the suit is instituted. It cannot be said that at that point of time, although there may have been laches on the part of the petitioner before, the petitioner was not ready and willing to go to the arbitration. No material has been placed before me to show that at the time when the suit was instituted the petitioner was not ready and willing to go to arbitration.

The last contention of Mr. Chaudhuri is that there is a probability of bias and a probability of not get ting real justice in the hands of the Arbitrator who in fact is to be appointed by the petitioner. In support of that contention Mr. Chaudhuri drew my attention to certain facts alleged in para. 11 of client''s affidavit. It is stated in the said paragraph that his client had filed three suits and although applications for stay under sec. 34 of the Indian Arbitration Act had been made in those suits none of those applications succeeded and it is also stated therein that although a claim for Rs. 16,008 made in one of such suits, had been dismissed by Mr. Justice Bose, Mr. Justice Bose in his judgment expressed strong disapproval of the conduct of the Officers of the Government and their advisers. The respondent has also alleged that after the filing of these suits the Union of India demoted the respondent from the category of first class contractors to third class contractors.

I cannot merely on these grounds hold that there is a probability of the arbitrator who may be appointed in case the matter goes to arbitration would be biased. Although the Court might thave expressed its strong disapproval of the conduct of the officers of the Government in particular suit but it does not follow there from that the arbitrator who may be appointed in the future would be an arbitrator biased in favour of the Union. In short, the allegations on which Mr. Chaudhuri wants to support his contention that there is a probability of bias cannot, in my opinion, be sustained. This contention of Mr. Chaudhuri must also fail. But in view of my finding that the dispute between the parties relating to the extra works mentioned in Group II of Schedule "A" to the Plaint do not come within the ambit of the arbitration clause the application for stay should be refused. As I have already pointed out there are two portions of the plaintiff''s claim, one relating to works done under the contract (set out in Group I of the Schedule) and the other and the more substantial part relating to the extra work which are beyond and distinct from the works and/ or items mentioned in the contract (set out in Group II of the Schedule). The first part of the plaintiff''s claim is covered by the arbitration agreement between the parties because even on the allegations made in the plaint that claim relates to the works done under the contract itself to which the arbitration clause applies. That being the position, the question arises whether the suit can be stayed. Kania, C. J., in a recent decision has laid down that there can be stay of a part of claim if the said part can be conveniently separated from the other parts of the claim. Keeping that test in mind, it seems to me that the portion of the claim which relates to the contract can be conveniently separated from the portion of the claim which is outside the contract. In my opinion therefore there would be a stay of that part of the plaintiff''s claim which relates to the contract (set out in Group I) and the application for stay with regard to the rest of the plaintiff''s claim in the suit would be refused. The applicant is to pay the costs of this application to the respondent. Lest there be any difficulty, I make it clear that the plaintiff will be entitled to proceed with his claim in the suit so far as relates to Group II of Annexure ''A'' to the plaint.