1989 (9) TMI 400 - HC - Indian Laws

Interpreting Arbitration Agreements: Intent Over Terminology

State Of West Bengal And Others Versus Haripada Santra

The High Court of Calcutta held that clause 13 of the agreement constituted an arbitration agreement. Despite the absence of explicit arbitration ... - Issues:Interpretation of clause 13 of the agreement to determine if it constitutes an arbitration agreement.Analysis:The revisional application before the High Court of Calcutta involved the interpretation of clause 13 of an agreement for the supply of materials to ascertain if it constituted an arbitration agreement. The dispute arose when the opposite parties, after supplying materials worth Rs. 2,50,000, invoked clause 13 to seek arbitration by the Superintending Engineer, which was denied by the State. The Trial Judge considered clause 13 as an arbitration agreement, leading to the current challenge.Interpretation by Petitioner:The petitioner argued that clause 13 did not amount to an arbitration agreement. They contended that the clause primarily dealt with alterations, additions, and specifications related to the supply of materials, with the final decision of the Superintending Engineer being binding. The petitioner emphasized that the clause did not provide for arbitration of claims and suggested that any disputes could be resolved through a lawsuit, as there was no explicit arbitration agreement.Interpretation by Opposite Party:On the contrary, the opposite party asserted that clause 13 clearly indicated arbitration, as it mandated the Superintending Engineer's final decision in case of a dispute. They highlighted the importance of the finality of the Engineer's decision as a characteristic of an arbitration agreement.Legal Interpretation:The Court delved into the legal definition of an arbitration agreement under the Arbitration Act, 1940, emphasizing that the intention of the parties to submit disputes to arbitration was crucial. Citing precedents, the Court noted that formal words like 'arbitration' were not necessary, and the parties' mutual intent to refer disputes for arbitration sufficed. The Court referenced various legal authorities to support the view that a clause like the one in question, involving a decision by an appointed party on disputes, could be construed as an arbitration agreement.Judgment:After considering the arguments and legal principles, the Court concluded that clause 13 indeed constituted an arbitration agreement. The clause's language regarding disputes, decisions by the Superintending Engineer, and the finality of such decisions indicated an intention to arbitrate disputes between the parties. The Court emphasized that even without explicit mention of 'arbitration' or 'award,' the clause's essence embodied an arbitration agreement enforceable between the parties. Consequently, the Court dismissed the application, upholding the Trial Judge's decision on the matter.Conclusion:The High Court's judgment clarified that clause 13 of the agreement qualified as an arbitration agreement based on the parties' intent to resolve disputes through the decision of the Superintending Engineer. The detailed legal analysis and precedent references provided a comprehensive understanding of the interpretation of arbitration agreements, leading to the dismissal of the revisional application.