Arbitration agreement by reference to named authority upheld; Section 20 application found within limitation

A clause requiring disputes under a work order to be referred to the Superintending Engineer for a final and binding decision was held to constitute an arbitration agreement, even though the words "arbitration" or "arbitrator" were absent, because the parties' intention to submit disputes for adjudication was clear. The Court also held that an application under Section 20 of the Arbitration Act, 1940 was within limitation, since the right to apply accrues when the dispute arises and the application was filed within the statutory period. The High Court's order was sustained and the reference to arbitration restored.

---

---

Issues: (i) Whether Clause 4 of the Work Order constituted an arbitration agreement. (ii) Whether the application under Section 20 of the Arbitration Act, 1940 was barred by limitation.

Issue (i): Whether Clause 4 of the Work Order constituted an arbitration agreement.

Analysis: The clause provided that any dispute arising between the department and the contractor would be referred to the Superintending Engineer for orders and that his decision would be final and binding on both parties. The absence of the words "arbitration" or "arbitrator" was held not to be decisive. What mattered was the parties' intention to submit disputes to a named authority for a binding decision. The clause covered any dispute arising under the work order and contemplated adjudication of the dispute on reference, which satisfied the essentials of an arbitration agreement under Section 2(a) of the Arbitration Act, 1940.

Conclusion: Clause 4 was held to be an arbitration agreement and the dispute was required to be referred accordingly.

Issue (ii): Whether the application under Section 20 of the Arbitration Act, 1940 was barred by limitation.

Analysis: The right to apply under Section 20 accrues when the dispute or difference arises between the parties, and the period under Article 137 of the Limitation Act, 1963 runs from that date. The demand notice was issued on 16 April 1990 and the application was filed on 13 November 1990, well within three years from the accrual of the right to apply. The contrary view of the appellate court was rejected.

Conclusion: The application under Section 20 was held to be within limitation.

Final Conclusion: The appeals failed on both issues, the High Court's order was sustained, and the reference to arbitration stood restored.

Ratio Decidendi: A clause requiring disputes to be referred to a named authority for a final and binding decision can constitute an arbitration agreement even without the express use of the words "arbitration" or "arbitrator", and the limitation for seeking a reference under Section 20 begins when the dispute between the parties arises.

---