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Chabbel Dass and Co., Sultanpur Vs. the State of U.P. and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtAllahabad High Court
Decided On
Case NumberF.A.F.O. No. 4 of 1973
Judge
Reported inAIR1977All143
ActsArbitration Act, 1940 - Sections 20
AppellantChabbel Dass and Co., Sultanpur
RespondentThe State of U.P. and ors.
Appellant AdvocateP.N. Bhatt, Adv.
Respondent AdvocateStanding Counsel
DispositionAppeal dismissed
Excerpt:
arbitration - arbitration agreement - section 20 of arbitration act, 1940 - award purported to be made under an arbitration agreement must be enforceable on both parties - requirement of valid arbitration agreement. - - except where otherwise specified in the contract, the decision of the superintending 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, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders, or these..........to the finding, the dispute fell not in the first part but the second part of this clause. learned counsel for the appellant has not argued otherwise.3. this clause came up for consideration before a bench of this court instate of u p. v. padam singh rana, : air1971all270 andit was held that clause 23, quoted above,was in two parts. the first part contained an arbitration clause whereas thesecond part did not constitute an arbitration agreement. the reason given inthat judgment was that the second partmade the decision of the superintendingengineer binding only on the contractorand not on the other party, viz., the government, learned counsel for the appellanthas contended that this decision in stateof u. p. v. padam singh rana (supra)needs reconsideration. he has.....
Judgment:

Hari Swarup, J.

1. This appeal arises out of the order of the trial court dismissing the appellant's application under Section 20 of the Arbitration Act. The trial court has held that there was no arbitration clause in the agreement between the parties in respect of the matter regarding which the arbitration was sought.

2. The relevant clause in the agreement was in the following terms:

'Except where otherwise specified in the contract, the decision of the Superintending 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, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders, or these conditions, or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work, or after the completion thereof or abandonment of the contract by the contractor, shall be final, conclusive and binding on the contractor.'

According to the finding, the dispute fell not in the first part but the second part of this clause. Learned counsel for the appellant has not argued otherwise.

3. This clause came up for consideration before a Bench of this Court inState of U P. v. Padam Singh Rana, : AIR1971All270 andit was held that Clause 23, quoted above,was in two parts. The first part contained an arbitration Clause whereas thesecond part did not constitute an arbitration agreement. The reason given inthat judgment was that the second partmade the decision of the SuperintendingEngineer binding only on the contractorand not on the other party, viz., the Government, learned counsel for the appellanthas contended that this decision in Stateof U. P. v. Padam Singh Rana (supra)needs reconsideration. He has arguedfirstly that the two parts of Clause 23 shouldbe read in a manner that the second partshould also be deemed to be an arbitration clause making the decision of theSuperintending Engineer binding on boththe parties. We have read Clause 23 andfind that the two parts are independentand the first part does not conduct thesecond part. The first part makes thedecision of the Superintending Engineerbinding on both the parties while the second part makes it binding only on thecontractor. In view of the clear languageof the agreement it is not possible to accept the contention that in respect of matters dealt with in the second part, theState Government had agreed to be boundby the decision of the SuperintendingEngineer. It is not for the court to determine the wisdom of the agreement. Thecourt under Section 20 of the ArbitrationAct has only to see whether there is anarbitration agreement or not, whether itshould be so or not is beyond the scope ofenquiry.

4. The second limb at the argument of the learned counsel is that even though the decision of a person named in the agreement may not be binding on both the parties, it will still be an arbitration agreement. We are unable to see any merit in this contention. An agreement of arbitration implies on agreement to get a dispute adjudicated by a named forum rather than in the ordinary civil court. The Arbitrator gets substituted in place of the court. If an application under Section 20 of the Arbitration Act is allowed, the Arbitrator is required to give the award. The award can under the Act be made a rule of the court. If it becomes a rule of the court, it naturally becomes binding on both the parties. The binding character of the award on all the parties, to the arbitration agreement is thus, in our opinion, an essential ingredient to an arbitration agreement. Unless the arbitration agreement makes the award or decision of the Adjudicator binding on the parties, the Adjudicator cannot be deemed to be an Arbitrator and the agreement cannot be deemed to be an arbitration agreement.

5. Learned counsel for the appellant relied on a decision in Aghore Nauth Banerjee v. The Calcutta Tramways Co., Ltd., ( (1885) ILR 11 Cal 232), but in that case the agreement provided:

'............ and his certificate in writing in respect of the amount to be retained and the cause of such retention shall be binding and conclusive evidence between the parties in all courts of Justice.'

(Emphasis ours).

The decision was thus to be binding on both the parties. This case cannot, therefore, be of any assistance to the learned counsel for the appellant. The other case relied upon by the learned counsel is Detaram v. Forbes, (AIR 1930 Sind 17). There the principle accepted by the Court was that if one party undertakes to accept the decision of the other side, it is a binding agreement. There was no question about the decision not being binding on both the sides.

6. Under the Arbitration Act 'arbitration agreement' is defined in Section 2(a) as meaning 'a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not'. The very word 'agreement' signifies that the parties agree to the reference of the dispute for adjudication so that the differences between the parties may be settled by an award. The necessary implication is that it must bind the parties. If the decision does not bind the parties, it cannot be made a rule of the court and cannot be an award within the meaning of the Arbitration Act. Hence, we are clear that unless an arbitration agreement makes adjudication of the person named binding on both the parties, it will not amount to an arbitration agreement within the meaning of Section 20 of the Arbitration Act.

7. The result is that there is no merit in the appeal and it is dismissed with costs.


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