2013 (10) TMI 800 - SC - Companies Law

Interpretation of Clause 30 in B-1 Agreements: Not an Arbitration Clause

The court held that Clause 30 of the B-1 Agreements did not constitute an arbitration clause. The High Court's interpretation was upheld, and the trial ... Arbitration agreement - Whether Clause 30 of B-1 Agreements entered into between the Government of Maharashtra and the appellant is in the nature of an arbitration clause - Held that:- neither of the judgments relied upon by appellant help the case. In Mallikarjun Vs. Gulbarga University [2008 (8) TMI 798 - SUPREME COURT] case, this Court noted that Superintending Engineer, Gulbarga Circle, Gulbarga was not an officer of the University and he did not have any authority or jurisdiction either to supervise the construction work or issue any direction to the contractor in relation to the project. The Court also emphasized that the parties had agreed that any dispute arising from the contract would be referred to the decision of the Superintending Engineer. These factors are missing in the instant case. Likewise, Clause 4 of the work order which came up for interpretation in Punjab State v. Dina Nath (2007 (5) TMI 564 - SUPREME COURT) contemplated resolution by the Superintending Engineer of any dispute arising between the department and the contractor. Therefore, the relevant clause of the work order was rightly treated as an Arbitration Agreement - High Court had rightly held that Clause 30 of B-I Agreement is not an Arbitration Agreement and the trial Court was not right in appointing the Chief Engineer as an Arbitrator - Appeal dismissed. Issues Involved:1. Whether Clause 30 of B-1 Agreements constitutes an arbitration clause.Detailed Analysis:1. Nature of Clause 30 of B-1 Agreements:The primary issue in this case was whether Clause 30 of the B-1 Agreements between the Government of Maharashtra and the appellant constituted an arbitration clause. The appellant argued that Clause 30 should be treated as an arbitration clause based on its language and the binding nature of the Superintending Engineer's decisions. The respondents, however, contended that Clause 30 was not an arbitration clause and relied on previous judgments to support their argument.Interpretation of Clauses 29 and 30:Clauses 29 and 30 of the B-1 Agreements were analyzed to determine their nature. Clause 29 provided that all works under the contract were to be executed under the direction and approval of the Superintending Engineer. Clause 30 stated that the decision of the Superintending Engineer would be final, conclusive, and binding on all parties concerning various aspects of the contract, including specifications, designs, and quality of workmanship.Judicial Precedents:Several judicial precedents were considered to interpret Clause 30. The judgments in State of U.P. v. Tipper Chand, State of Maharashtra v. M/s. Ranjeet Construction, and State of Orissa v. Damodar Das were particularly relevant. These cases established that similar clauses did not constitute arbitration agreements because they did not explicitly mention arbitration or the referral of disputes to an arbitrator.Expert Determination vs. Arbitration:The court referred to 'Russell on Arbitration' to distinguish between expert determination and arbitration. The key difference lies in whether the decision-maker acts as an expert or as an arbitrator. An arbitrator's decision is based on evidence and submissions from both parties, while an expert's decision is based on their own expertise and inquiries.Analysis of Clause 30:The court concluded that Clause 30 did not constitute an arbitration clause. The clause was intended to ensure smooth execution of the work and to provide a mechanism for resolving issues related to specifications, designs, and quality of workmanship. The Superintending Engineer's role was supervisory and administrative, not judicial. There was no indication that the parties intended to confer the role of an arbitrator on the Superintending Engineer.Contrasting Judgments:The court also considered judgments that the appellant relied upon, such as Mallikarjun v. Gulbarga University and Punjab State v. Dina Nath. These cases involved clauses that explicitly mentioned the resolution of disputes by a designated authority, which was not the case with Clause 30 of the B-1 Agreements.Conclusion:The court held that Clause 30 of the B-1 Agreements was not an arbitration clause. The High Court's interpretation was upheld, and the trial court's appointment of the Chief Engineer as an arbitrator was deemed incorrect. Circulars issued by the State Government, while providing guidance, were not conclusive or binding on the court's interpretation of the agreement clauses.Final Judgment:The appeals were dismissed, affirming that Clause 30 of the B-1 Agreements did not constitute an arbitration clause.