1961 (5) TMI 70 - HC - Indian Laws

Enforcement of Arbitration Agreement: Construction Contract Disputes

The court confirmed the validity of the arbitration agreement under Clause 30 of the contract, appointing an arbitrator when the named arbitrator was ... - Issues Involved:1. Validity of the arbitration agreement.2. Scope of disputes covered by the arbitration clause.3. Requirement of notice for arbitration.4. Appointment of an arbitrator when the named arbitrator is unable or unwilling to act.5. Discretion of the court in filing the arbitration agreement and making a reference.Detailed Analysis:1. Validity of the Arbitration Agreement:The court acknowledged that there was a valid arbitration agreement under Clause 30 of the contract. This clause provided for arbitration by the Chief Engineer, Central Public Works Department, or a nominee, and stated that the award would be final and binding on the parties. The court confirmed that this clause constituted a valid arbitration agreement under the Indian Arbitration Act.2. Scope of Disputes Covered by the Arbitration Clause:The court analyzed the arbitration clause, noting it covered disputes related to the construction of the contract or matters arising thereunder, except those left to the sole discretion of the architect. The court held that the disputes raised in paragraph 15 of the petition, specifically the wrongful withholding of the certificate by the architect and the claim for works done amounting to Rs. 59,941.52 nP, were covered by the arbitration clause. The court referenced Halsbury's Laws of England to support the view that disputes regarding the improper refusal of a certificate, which is a condition precedent to payment, fall within the scope of arbitration.3. Requirement of Notice for Arbitration:The court addressed the contention that a written notice specifying the matters in dispute was a precondition for arbitration. It was argued that the notice contained in the letter dated May 23, 1960, differed from the dispute sought to be referred. The court concluded that the notice of dispute contained in the petition itself satisfied the requirement, allowing the court to proceed with the reference.4. Appointment of an Arbitrator When the Named Arbitrator is Unable or Unwilling to Act:The court examined whether it could appoint an arbitrator when the named arbitrator (Chief Engineer) was unwilling to act. The court reviewed various legal precedents and concluded that under Section 20(4) of the Arbitration Act, the court has the power to appoint an arbitrator if the parties cannot agree on one. The court held that this includes cases where the previously agreed arbitrator is unable or unwilling to act. The court appointed Sri Section N. Majumdar, Retired Chief Engineer, as the arbitrator.5. Discretion of the Court in Filing the Arbitration Agreement and Making a Reference:The court discussed its discretion under Section 20 of the Arbitration Act, noting that it must consider whether there is sufficient cause not to file the agreement and make a reference. The court held that no sufficient cause was shown to refuse the application. The court emphasized that the arbitrator must accept the architect's final decisions on matters within the architect's sole discretion and focus on the disputes raised in the petition.Conclusion:The court ordered the arbitration agreement to be filed and made a reference to the appointed arbitrator, Sri Section N. Majumdar. The arbitrator was directed to decide whether the architect wrongfully withheld the certificate and the amount, if any, due to the plaintiff. The court emphasized the limited scope of the arbitration, ensuring the arbitrator respects the finality of the architect's decisions on specified matters. The costs of the application were to be determined in the arbitration proceedings.