TaxTMI 
TaxTMI 
TaxTMI 
2014 (4) TMI 512
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....civil works on partial turnkey basis. The respondent-company participated in the bid and it was successful in the tender and, accordingly, a letter of intent was sent to it. After taking recourse to certain procedural aspects, a contract was entered into between the appellant- company and the respondent. During the performance of the contract, the respondent raised a claim before the engineer as per clause 48 of the general conditions of the contract and called upon the engineer to settle certain disputes arising in connection with the contract. As the concerned engineer did not do anything within the prescribed period of thirty days as provided under clause 48.2, the respondent filed CMP No. 62 of 2011 under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 (for brevity "the Act") before the High Court of Karnataka at Bangalore for appointment of an arbitrator. 4. The said application was resisted by the present appellants on the singular ground that clause 48 does not provide for arbitration and the same, under no circumstances, could be construed as an arbitration clause. To substantiate the said submission, reliance was placed on clause 4.1 of the agreement. ....
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....ls, in oppugnation, have submitted that when clause 48 is read as a whole, it is clear as crystal that the intention of the parties is to get the matter referred to an arbitrator and clause 4.1 only determines the place of territorial jurisdiction and has nothing to do with any stipulation for arbitration. It has been strenuously urged that clause 48 has to be interpreted on the touchstone of the language employed in Section 7 of the Act and when it is scrutinized on that anvil, there remains no trace of doubt that clause 48 has all the attributes and characteristics of an arbitration agreement. Learned senior counsel have placed reliance on Smt. Rukmanibai Gupta v. Collector, Jabalpur and others[(1980) 4 SCC 556] and Punjab State and others v. Dina Nath[(2007) 5 SCC 28]. 8. Before we advert to the rival submissions advanced at the Bar, we think it appropriate to refer to Section 7 of the Act and what it conveys and, thereafter, refer to few authorities to understand what constitutes an arbitration clause in an agreement entered into between two parties. Section 7 of the Act reads as follows: "7. Arbitration agreement. - (1) In this Part, "arbitration agreement" means an agreemen....
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....oduced a passage from Russell on Arbitration, 19th Edn., P. 59 which reads as follows: - "If it appears from the terms of the agreement by which a matter is submitted to a person's decision that the intention of the parties was that he should hold an inquiry in the nature of a judicial inquiry and hear the respective cases of the parties and decide upon evidence laid before him, then the case is one of an arbitration" 11. The Court also referred to Chief Conservator of Forest v. Rattan Singh[AIR 1967 SC 166 : 1966 Supp SCR 158] and ruled that: "In the clause under discussion there is a provision for referring the disputes to the lessor and the decision of the lessor is made final. On its true construction it spells out an arbitration agreement." 12. At this juncture, it is apposite to refer to a three-Judge Bench decision in State of U.P. v. Tipper Chand[(1980) 2 SCC 341] where the Court was interpreting Clause 22 in the agreement which was under consideration so as to find out whether the stipulations therein spelt out an arbitration clause. The clause involved in the said case read as follows:- "Except where otherwise specified in the contract the decision of the Superintend....
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....of the clause in Ram Lal case which ran thus: "In matter of dispute the case shall be referred to the Superintending Engineer of the Circle, whose order shall be final." We need hardly say that this clause refers not only to a dispute between the parties to the contract but also specifically mentions a reference to the Superintending Engineer and must therefore be held to have been rightly interpreted as an arbitration agreement." 14. At this stage, it is useful to refer to a three-Judge Bench decision in State of Orissa and another etc. v. Sri Damodar Das[AIR 1996 SC 942] wherein the Court posed the question whether there was an agreement for the resolution of disputes as enshrined under Clause 25 of the agreement. The said clause read as follows:- "25. Decision of Public Health Engineer to be final. - Except where otherwise specified in this contract, the decision of the Public Health Engineer for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications; drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work, or as to any ot....
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.... his decision only on the material placed before him by the parties and their submissions. He was free to make his own inquiries. He had to apply his own mind and use his own expertise for the purpose. He was free to take the help of other experts. He was required to decide the question of valuation and the division of assets as an expert and not as an arbitrator. He has been authorised to nominate another in his place. But the contract indicates that he has to nominate an expert. The fact that submissions were made before the Chairman, IFCI, would not turn the decision-making process into an arbitration." 16. In Bharat Bhushan Bansal v. U.P. Small Industries Corporation Ltd., Kanpur[AIR 1999 SC 899], clauses 23 and 24 of the agreement were projected to make the foundation of an arbitration clause. That read as follows:- "Decision of the Executive Engineer of the UPSIC to be final on certain matters. 23. Except where otherwise specified in the contract, the decision of the Executive Engineer shall be final, conclusive and binding on both the parties to the contract on all questions relating to the meaning, the specification, design, drawings and instructions hereinbefore mention....
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....ny form of an arbitration agreement. The term 'arbitration' is not required to be specifically mentioned in the agreement but what is required is to gather the intention of the parties as to whether they have agreed for resolution of the disputes through arbitration. 18. In Dina Nath (supra), the clause in the agreement read as follows: - "4. Any dispute arising between the department and the contractor/society shall be referred to the Superintending Engineer, Anandpur Sahib, Hydel (Construction) Circle No. 1, Chandigarh for orders and his decision will be final and acceptable/binding on both parties." The two-Judge Bench, basically relying on Tipper Chand (supra) which has approved the view of Jammu and Kashmir High Court in Dewan Chand (supra), treated the aforesaid clause as providing for arbitration because it categorically mentioned the word "dispute" which would be referred to the Superintending Engineer and further that his decision would be final and acceptable to/binding on both the parties. 19. In Jagdish Chander (supra), the Court, after referring to the earlier decisions, culled out certain principles with regard to the term "arbitration agreement". The said princip....
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..... Be that as it may. In fact, the larger Bench in Damodar Das clearly held that the decision in Rukmanibai Gupta was decided on the special wording of the clause considered therein: (Damodar Das case, SCC p. 224, para 11) "11. ... The ratio in Rukmanibai Gupta v. Collector does not assist the respondent. From the language therein this Court inferred, by implication, existence of a dispute or difference for arbitration." 21. Keeping in mind the principles laid down by this Court in the aforesaid authorities relating to under what circumstances a clause in an agreement can be construed as an arbitration agreement, it is presently apposite to refer to clause 48 of the agreement. The said clause reads as follows: - "48.0 Settlement of disputes: 1. Any dispute(s) or difference(s) arising out of or in connection with the Contract shall, to the extent possible, be settled amicable between the parties. 2. If any dispute or difference of any kind whatsoever shall arise between the owner and the Contractor, arising out of the Contract for the Performance of the Works whether during the progress of the Works or after its completion or whether before or after the termination, abandonment or....
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....contract. The said clause, as we understand, has been engrafted to avoid delay and stoppage of work and for the purpose of smooth carrying on of the works. It is interesting to note that the burden is on the contractor to carry out the works with due diligence after getting the decision from the engineer until the completion of the works. Thus, the emphasis is on the performance of the contract. The language employed in the clause does not spell out the intention of the parties to get the disputes adjudicated through arbitration. It does not really provide for resolution of disputes. 23. Quite apart from the above, clause 4.1 of the agreement is worthy to be noted. It is as follows: - "4.1 It is specifically agreed by and between the parties that all the differences or disputes arising out of the Agreement or touching the subject matter of the Agreement, shall be decided by a competent Court at Bangalore." 24. Mr. Vishwanathan, learned senior counsel for the appellants, laying immense emphasis on the same, has submitted that the said clause not only provides the territorial jurisdiction by stating a competent court at Bangalore but, in essence and in effect, it stipulates that al....