Departmental decision clauses are not arbitration agreements where disputes remain open to civil court recourse.

Clauses requiring disputes to be first referred to a Chief Engineer or designated departmental officer, with that officer's decision stated to be final but followed by recourse to court, are not arbitration agreements. The Court held that such clauses provide only expert or administrative determination by an officer lacking the attributes of an independent arbitral tribunal, including a judicial enquiry and impartial adjudication. On that construction, orders refusing to appoint arbitrators were upheld, while orders treating the Chief Engineer as an arbitrator were set aside.

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Issues: (i) Whether clauses requiring the dispute to be first referred to the Chief Engineer or a designated officer, with the officer's decision being final and subject to recourse to court, constitute an arbitration agreement. (ii) Whether the High Court's refusal to appoint an arbitrator in some matters and appointment of the Chief Engineer in others was sustainable.

Issue (i): Whether clauses requiring the dispute to be first referred to the Chief Engineer or a designated officer, with the officer's decision being final and subject to recourse to court, constitute an arbitration agreement.

Analysis: The clauses under consideration were drafted as dispute-settlement or decision clauses and not as arbitration clauses. Their scheme required the contractor's grievance to be placed first before an engineer or departmental officer who had overall supervision over the work, not before an independent private tribunal. The officer was not required to hold a judicial enquiry, receive evidence, or decide the dispute in an impartial adjudicatory manner. The decision was binding only to a limited extent and was expressly followed by a right to approach the civil court for settlement of the dispute. That structure showed expert or administrative determination and not reference of disputes to arbitration. Clauses of this kind, intended to prevent disputes or to facilitate departmental resolution, cannot be converted into arbitration agreements merely because the officer's decision is described as final or binding.

Conclusion: Such clauses do not constitute arbitration agreements and do not justify appointment of an arbitrator.

Issue (ii): Whether the High Court's refusal to appoint an arbitrator in some matters and appointment of the Chief Engineer in others was sustainable.

Analysis: The Court applied the above construction uniformly to the contracts in issue. Where the clauses only required departmental consideration followed by recourse to court, the orders refusing appointment of arbitrators were correct. Where the Designated Judge had treated the Chief Engineer as an arbitrator despite the absence of an arbitration clause, those orders could not stand. The authorities relied upon by the contractors were distinguished because they involved clauses that either expressly contemplated arbitration, or were decided on special facts, or proceeded on consent/waiver in completed arbitral proceedings. The objection based on earlier participation could not transform a non-arbitral clause into an arbitration agreement.

Conclusion: The appeals challenging refusal to appoint arbitrators were dismissed, while the appeals challenging appointment of the Chief Engineer as arbitrator were allowed and the impugned orders were set aside.

Final Conclusion: Clauses reserving the first decision to a departmental engineer and leaving the parties to seek civil court remedy are not arbitration clauses. The decision produces a mixed outcome: the refusals to appoint arbitrators were upheld, and the orders appointing the Chief Engineer as arbitrator were annulled.

Ratio Decidendi: A contractual clause is an arbitration agreement only if it contemplates reference of a formulated dispute to an independent adjudicatory forum that decides judicially and binds both parties; a departmental decision clause that merely provides expert or administrative determination followed by recourse to court is not arbitration.

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