2009 (5) TMI 956 - SC - Indian Laws

Court invalidates arbitration order, rules on improper arbitrator appointment. Parties allowed Civil Court adjudication and Limitation Act benefits.

Eastern Coalfields Ltd. Versus Sanjay Transport Agency & Anr.

Eastern Coalfields Ltd. Versus Sanjay Transport Agency & Anr. - 2009 AIR 2072, 2009 (9) SCR 690, 2009 (7) SCC 345, 2009 (14) JT 79, 2009 (8) SCALE 720 Issues involved:Interpretation of arbitration clause in excavation contract.Analysis:The appeal was against an order referring a dispute to arbitration under Section 11(6) of the Arbitration and Conciliation Act, 1996. The respondents sought appointment of an arbitrator based on clause No. 14 in the excavation contract. However, it was found that the original clause 14, which dealt with disputes between Public Sector Enterprises, had been replaced with a different clause 14 related to commercial disputes involving Public Sector Enterprises and Government Departments. This replacement clause was not applicable to the private parties involved in the current dispute, making the appointment of the arbitrator by the High Court improper.The judgment emphasized the importance of interpreting clauses based on their headings and context to understand the legislative intent fully. It was noted that the section heading or marginal note could help clarify any ambiguity in the interpretation of a provision. In the realm of commercial contracts like arbitration agreements, understanding the context was crucial for a comprehensive interpretation. The Court highlighted the significance of not solely relying on the text but considering the context to grasp the true meaning of a clause.As a result, the order referring the dispute to arbitration was set aside, granting the respondents the liberty to approach the Civil Court for adjudication of the disputes arising from the contract. The respondents were also entitled to the benefit of Section 14 of the Limitation Act. The appeal was disposed of accordingly.