Skip to content


Madhya Pradesh Housing Board, Bhopal and ors. Vs. Karodi Shah Kohli - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. (First) Appeal No. 199 of 1976
Judge
Reported inAIR1978MP197; 1978MPLJ288
ActsArbitration Act, 1940 - Sections 34
AppellantMadhya Pradesh Housing Board, Bhopal and ors.
RespondentKarodi Shah Kohli
Appellant AdvocateV.S. Pandit, Adv.
Respondent AdvocateY.S. Dharmadhikari, Adv.
DispositionAppeal allowed
Cases ReferredIn Daulat Ram v. State of Punjab
Excerpt:
- - he complained that the authorities had wrongfully withheld his security deposit and had wrongfully imposed penalty for the delay in execution of the work, for which, in fact, the housing board was responsible, and for the below-standard quality work. another division bench authority taking similar view while interpreting a like clause, is reported in vishni bai v. secondly, it should be expected that the housing commissioner possessing technical qualifications and holding a high office should keep in mind that he has to act as an impartial and disinterested tribunal, absolutely uninfluenced by the fact that the administrator had poor opinion about the quality of work, which he had no technical knowledge to judge......on two counts : (i) that clause 29 of the contract was not an arbitration agreement and (ii) the housing commissioner and secretary of the board who is nominated as an arbitrator, it is apprehended, will not give a fair and honest decision.4. as regards the first point, whether or not clause 29 of the contract was an arbitration agreement, the point is concluded by a division bench decision of this court reported in gaurishankar v. m. p. housing board, bhopal, 1976 mp lj 513. clause 29 has been held to be an arbitration agreement within the meaning of section 2(a) of the arbitration act. it is conceded that in view of this decision, it would be futile to canvass that this court sitting singly should take a different view. another division bench authority taking similar view while.....
Judgment:

M.L. Malik, J.

1. This Miscellaneous Appeal is directed against the order of the District Judge, Jabalpur, dated the 19th July, 1976, refusing to stay the legal proceedings under Section 34 of the Arbitration Act, 1940.

2. The plaintiff, a building contractor, sued the defendants for price of the work done. He complained that the authorities had wrongfully withheld his security deposit and had wrongfully imposed penalty for the delay in execution of the work, for which, in fact, the Housing Board was responsible, and for the below-standard quality work. The plaintiff also said that the imposition of penalty was unauthorized because it was imposed by persons who were incompetent to impose it.

3. The defendants referred to Clause 29 of the contract and prayed that the legal proceedings be stayed and the dispute be referred to arbitration. The learned District Judge has rejected the application on two counts : (i) That Clause 29 of the Contract was not an arbitration agreement and (ii) The Housing Commissioner and Secretary of the Board who is nominated as an arbitrator, it is apprehended, will not give a fair and honest decision.

4. As regards the first point, whether or not Clause 29 of the Contract was an arbitration agreement, the point is concluded by a Division Bench decision of this Court reported in Gaurishankar v. M. P. Housing Board, Bhopal, 1976 MP LJ 513. Clause 29 has been held to be an arbitration agreement within the meaning of Section 2(a) of the Arbitration Act. It is conceded that in view of this decision, it would be futile to canvass that this Court sitting singly should take a different view. Another Division Bench authority taking similar view while interpreting a like clause, is reported in Vishni Bai v. Executive Engineer, Raipur Division, 1976 MPLJ Notes 62.

5. The attack, therefore, must be confined to the second ground, whether or not the Housing Commissioner-cum-Secretary was a proper person to arbitrate dispute, he being an employee of the Board or whether for reasons of bias, reference to him should not be made. It is usual to see that in agreements with the Government or Corporations, there is often an arbitration clause providing for arbitration, not by a stranger as a wholly disinterested person, but by an engineer or an architect in their employment. Employers find it in their interest to impose such terms and the contractors accept these terms so that their tenders may be accepted, and it has been held that it is no part of the duty of Judges to approach such curiously coloured contracts with a desire to upset them or to emancipate the contractor from the burden of such a stipulation. In all such cases, the arbitrator would be, if not directly, indirectly, interested in the same that it might affect other similar transactions, but it cannot be helped. The parties agree that they might have to go to such an arbitral tribunal and they must stick to it. It cannot even be said in such a case that the arbitrator has a secret interest in the subject-matter, which may vitiate the award.

In Daulat Ram v. State of Punjab, AIR 1958 Punj 19 their Lordships made the following observations in para 20 :

'Normally, the parties to an arbitration are entitled to have their disputes settled by an unbiased arbitrator with no interest in the result of the proceedings. The fact that the Superintending Engineer is interested to the extent that he is employed and paid by the Government would, by itself, be not sufficient to disqualify him from acting as arbitrator in a contract relating to Government work. Where it has not been shown that the Superintending Engineer is biased or that there is a probability that he would be biased the presumption is that the gentleman holding such a high office, would keep in mind the duties and responsibilities of an arbitrator and would act as an honest, disinterested and impartial tribunal, absolutely un-influenced by the fact that the is the head of the department to which the dispute relates.'

6. There could be no objection to an employee-engineer being nominated as an arbitrator. What is to be seen is whether the arbitrator was directly or indirectly prejudiced against the contractor or had exhibited conduct which indicated bias.

7. I have perused the plaint allegations carefully. Nothing has been said against the Housing Commissioner-cum-Secretary. The allegations are against the Deputy Housing Commissioner, the Assistant Engineer and the arbitrary way in which the Administrator-Chairman of the Housing Board behaved in imposing 10 per cent. penalty. The argument is that the Administrator being an officer of a superior rank, the Housing Commissioner, judged by the common course of human conduct, would be slow to discredit his assessment of the quality of the work and would support the imposition of penalty however unwarranted and unauthorized it was. It could be reasonably suspected, the counsel said, that the arbitrator would not act fairly.

8. The learned counsel for the appellants submitted that this apprehension was most ill-founded. Firstly, the Administrator at whose instance the amount of 10 per cent. had been withheld was not an engineer and his assessment of the quality of work ought, in the ordinary course, be ignored by the Housing Commissioner who is a highly qualified engineer. Secondly, it should be expected that the Housing Commissioner possessing technical qualifications and holding a high office should keep in mind that he has to act as an impartial and disinterested tribunal, absolutely uninfluenced by the fact that the Administrator had poor opinion about the quality of work, which he had no technical knowledge to judge.

9. I agree with the contentions of the learned counsel for the appellants. Prejudice or bias cannot be inferred in the Housing Commissioner simply because the Administrator happened to be the principal officer of the Board and had imposed a penalty of 10% when he had no jurisdiction to evaluate the quality. The Arbitrator who is a high ranking engineer, is expected to judge the quality of the work by himself irrespective of what the Administrator said.

10. The learned counsel for the respondent further argued that the imposition of penalty was outside the terms of the contract and, therefore, not covered by the arbitration clause. The Court's jurisdiction could, therefore, be invoked.

11. The suit is for price of the work done. If payment is withheld for any reason, the arbitrator has jurisdiction to say whether withholding of payment was justified. The arbitration clause is all comprehensive.

12. In the result, therefore, the legal proceedings must stay under Section 34 of the Arbitration Act and the dispute be referred to the named arbitrator. I accept the appeal and order accordingly.

13. Costs on respondent. Counsel's fee as per schedule or certificate, whichever is less.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //