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State of Orissa Vs. G.C. Kanungo - Court Judgment

LegalCrystal Citation
SubjectArbitration;Contract
CourtOrissa High Court
Decided On
Case NumberCivil Revn. Nos. 8 and 10 to 16 of 1979
Judge
Reported inAIR1980Ori157; 48(1979)CLT505
ActsArbitration Act, 1940 - Sections 13, 31 and 33
AppellantState of Orissa
RespondentG.C. Kanungo
Appellant AdvocateD.P. Mohapatra, Addl. Govt. Adv.
Respondent AdvocateR. Mohanty and ;R.K. Rath, Advs.
DispositionRevision dismissed
Cases ReferredIn Willesford v. Watson
Excerpt:
.....thereof' as the parties have agreed and intended to refer all such disputes, covering evidently a very wide range, to arbitration it would be wrong to say, without anything specific in the agreement that because of the non obstante clause in clause 23 and the last sentence in clause 11 the arbitrator cannot have any jurisdiction to decide any question whatsoever relating to or arising out of such additional work......agreed to do the main work and at the same rates as was specified in the tender for the said main work.' clause 11 also provides for different rates for certain other items of additional work done by the contractor. in the last sentence of the said clause, it is, of course, mentioned that 'in the event of a dispute a decision of the s. e. (superintending engineer) of the circle will be final'. merely because of that sentence it would be against all canons of law to hold that the contractor has to remain contented with and calmly accept whatever decision is given by the s. e. in purported exercise of his authority under this clause, even though his decision is in complete disregard of the rates, principles and modes of assessment provided in that clause, and/or his decision is in respect.....
Judgment:
ORDER

S. Acharya, J.

1. The above 8 cases were taken up together as parties are the same and the points for consideration and decision in all these cases are similar in nature.

2. The contractor Gokul Chandra Kanungo, the opposite party in all these cases, was entrusted with different items of work by the Executive Engineer, National Highway, Cuttack in the year 1963-64 by the Orissa Public Works Department under F-2 Agreements for the said purpose. On the motion of the contractor the Chief Engineer in the year 1965 appointed an arbitrator as per Clause 23 of the agreements to settle some disputes relating to claims in respect of these 8 and six other items of work. The arbitration continued in the hands of different arbitrators, and at the instance of the contractor the arbitrator appointed by the Chief Engineer was removed by the court in 1977 and Sri B.R. Rao, retired District Judge, was appointed as arbitrator to decide those disputes between the parties in all these cases, and the arbitration proceedings are now pending before him. Just before the filing of the Section 33 petition by the State of Orissa, both the parties took part in the arbitration proceedings before the several arbitrators in all thecases, and in fact in the six other cases awards were filed by the arbitrator and those cases have already been closed. Before the arbitrator took up hearing of these 8 cases, an application under Section 33 of the Arbitration Act was filed in these cases by the Executive Engineer, National Highway, Cuttack, on behalf of the State of Orissa, for declaration that the F-2 Agreements executed between the parties are illegal, invalid, and inoperative; the arbitrator has no jurisdiction to decide the disputes referred to him; Clause 23 of the agreement is not applicable to the claims preferred by the claimant before the arbitrator.

3. During the hearing of the miscellaneous cases arising out of the said Section 33 petitions before the Subordinate Judge, Bhubaneswar, it was urged on behalf of the State, the petitioner in these cases, that (i) the contractor had never made any claim before the relevant Executive Engineer nor the latter ever refused to investigate into the claim and hence there was no dispute for reference under the agreement; (ii) that the contractor had admitted in his claim statement filed before the arbitrator that the claims are extra contractual items, and the arbitration clause of the contract excluded from its purview such disputes, the mode of settlement of which was otherwise provided for in Clause 11 of the contract, and so the alleged disputes did not come within the scope of Clause 23, and hence the arbitrator had no jurisdiction to entertain such disputes; (iii) there was no reference of any disputes to arbitration by the parties as the parties did not jointly list their difference and referred the same in the agreement of reference, and so there was no valid reference; (iv) the reference to arbitration was made after the period of limitation and so the claims were clearly barred by time and could not be considered in the arbitration proceedings.

4. The court below has arrived at the finding that disputes have arisen between the parties relating to the conditions of the contract, and the same come within the jurisdiction of the arbitration proceeding; the dispute arising between the parties as to whether the claims of the contractor were covered by Clause 11 or not can be decided by the arbitrator by interpretation and closer scrutiny of the agreement and the arbitration clause contained therein disputes regarding the interpretation of the arbitration clausein the contract are within the purview of the arbitrator, and the question as to whether the stand taken by the petitioner in this respect was justified or not should be left for the ultimate decision of the arbitrator; reference for arbitration of disputes can be made by either of the parties jointly or separately after giving notice to the other; the Chief Engineer as per Clause 23 in the agreement had previously appointed arbitrators to settle these disputes, and now the court has appointed the arbitrator for the selfsame purpose under Section 12 of the Arbitration Act after revoking the authority of the previous arbitrator; the opposite party has filed statements of claim before the said arbitrator and the petitioner had notice of the same. On the above finding, the court below holds that there has been a valid reference of the disputes to the arbitrator. With regard to the question of limitation the court holds that this question is a mixed question of law and fact, and so it should not be gone into at this stage and better it should be left to the arbitrator for adjudication. On the above findings the Section 33 petitions have been dismissed.

5. The learned counsel appearing for the State in all these cases has urged that the claims relating to the extra contractual items come under Clause 11 of the F-2 agreement, and so the decision of the Superintending Engineer of the Circle in these matters is final as mentioned in that clause, and hence the arbitrator has no jurisdiction to decide the said claims under Clause 23 of the agreement in view of the non obstante clause 'Except where otherwise provided' in that clause.

6. Clauses 11 & 23 are extracted below:--

'Clause 11 : The Engineer-in-charge shall have power to make any alterations in or additions to the original specifications, drawings, designs, and instructions that may appear to him to be necessary or advisable during the progress of the work, and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-charge, and such alterations shall not invalidate the contract; and any additional work which the contractor may be directed to do in the manner above specified as part of the work shall be carried out by thecontractor on the same conditions in allrespects on which he agreed to do the main work, and at the same rates as are specified in the tender for the main work The time for the completion of the work shall be extended in the proportion that the additional work bears to the original contract work and the certificate of the Engineer-in-charge shall be conclusive as to such proportion. And if the additional work includes any class of work, for which no rate is specified in this contract, then such class of work shall be carried out at the rates entered in the sanctioned schedule of rates of the locality during the period when the work is being carried on and if such last mentioned class of work is not entered in the schedule of rates of the district then the contractor shall within seven days of the date of his receipt of the order to carry out the work inform the Engineer-in-charge of the rate which it is his intention to charge for such class of work, and if the Engineer-in-charge does not agree to this rate he shall by notice in writing be at liberty to cancel his order to carry out such class of work and arrange to carry it out in such manner as he may consider advisable, provided always that if the contractor shall commence work order of any expenditure in regard thereof before the rates shall have been determined as lastly hereinbefore mentioned, then and in such case he shall only be entitled to be paid in respect of the work carried out or expenditure incurred by him prior to the date of the determination of the rate as aforesaid according to such rate or rates as shall be fixed by the Engineer-in-charge. In the, event of a dispute, the decision of the Superintending Engineer of the Circle will be final:' x x x '

Clause 23:--

Except where otherwise provided in the contract all questions and disputes 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 work or the execution, or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of a Superintending Engineer of the State Public Works Department unconnected with the work at any stage nominated by the concerned Chief Engineer. If there be no such Superintending Engineer it should be referred to the sole arbitration of the Chief Engineer, concerned. It will be no objection to any such appointment that the arbitrator so appointed is a Government servant. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to these contracts.'

7. Clause 11 is a clause in the F-2 agreement between the parties and it is in respect of extra contractual items, which are additional works, the contractor had done or was required or directed to do in connection with or as part of or for the purpose of performing the main work. In Clause 11, it is specifically provided that the additional work as described therein 'shall be carried out by the contractor on the same conditions in all respects on which he agreed to do the main work and at the same rates as was specified in the tender for the said main work.' Clause 11 also provides for different rates for certain other items of additional work done by the contractor. In the last sentence of the said clause, it is, of course, mentioned that 'in the event of a dispute a decision of the S. E. (Superintending Engineer) of the circle will be final'. Merely because of that sentence it would be against all canons of law to hold that the contractor has to remain contented with and calmly accept whatever decision is given by the S. E. in purported exercise of his authority under this clause, even though his decision is in complete disregard of the rates, principles and modes of assessment provided in that clause, and/or his decision is in respect of matters which do not come within the purview of this clause. To suggest that there can be no arbitration on such matters will be an unrealistic, and incongruous proposition, especially in view of the wide provision for arbitration in Clause 23.

8. In the present cases there is a dispute on the question as to whether the claim of the contractor is covered by Clause 11 or not. The determination of that question would depend upon the determination of various facts and would require the interpretation and examination of the agreement itself. The question as to whether the Superintending Engineer's decision is final or not will involve interpretation, construction and assessment of the scope and ambit of Clauses 11 and 23 and examination of the factual basis on which the said decision is given. In Heymen's case (1942 AC 356) it has been stated that on reference of disputes arising out of the contract the arbitrator may decide the disputes regarding the construction of the contract itself. In Willesford v. Watson ((1872) 8 Ch App 473) it has been held that a dispute as to the interpretation of the arbitration clause is one within the purview of the arbitrator. The Division Bench of this Court in A. C. Parija's case ((1970) 36 Cut LT 1089) accepted the above views. In view of the above well settled position of law and the facts of the case it is wrong to say that the arbitrator has no jurisdiction to decide any dispute arising between the parties in respect of the additional work done by the contractor in connection with and as part of the main work.

9. Moreover, the arbitration clause in the agreement (Clause 23) is in very wide terms. It, inter alia, includes 'all questions and disputes relating to the meaning of the specifications......or as to anyother question, claim, right, matter, or thing whatsoever, in any way arising out of or relating to the contract......instructions, orders or these conditions or otherwise concerning the work or the execution, or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof' .........As the parties have agreed and intended to refer all such disputes, covering evidently a very wide range, to arbitration it would be wrong to say, without anything specific in the agreement that because of the non obstante clause in Clause 23 and the last sentence in Clause 11 the arbitrator cannot have any jurisdiction to decide any question whatsoever relating to or arising out of such additional work. To give such a construction would be fundamentally unjust, unrealistic and against the intention of the parties expressed and professed in so wide and broad terms as in Clause 23.

10. The State in opposing the arbitration in these cases taken recourse to Clauses 11 and 23 of the contract. In the decision reported in AIR 1971 SC 1495, the phrase 'arising out of a contract', asin Clause 23, has been given the widest connotation, and it has been decided that it covers any matter arising out of the contract. In this connection the observation of the Supreme Court in AIR 1969 SC 488 (491) may be noted:--

' xxx The test for determining the question is whether recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the respondent firm is justified or otherwise. If it is necessary to take recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrators have jurisdiction to decide this case.xxxx'

The Superintending Engineer in deciding matters coming under Clause 11 of the Agreement cannot cover all matters, questions and disputes which arise out of the contract, as such matters have to be referred to arbitration as proved under Clause 23 of the Agreement. In this view of the matter also the arbitrator has jurisdiction to decide matters regarding the additional work, as in deciding those matters, disputes and questions arising out of the contract may have to be considered and decided by the arbitrator.

11. There is nothing specific in Clause 11 or elsewhere in the agreement barring the jurisdiction of the arbitrator in respect of such extra contractual items. The finality provision in Clause 11 is too narrow to engulf within its scope all that is understood by the words 'arising out of the contract' and other such clauses mentioned in Clause 23 of the agreement. Clause 11 is not an arbitration clause nor does it provide any mode for the assessment of the S. E.'s decision referred to therein. A final decision is yet to be taken on the question whether the last sentence in Clause 11 refers and applies to the entire clause or only to the items of work covered by the last portion of the penultimate sentence beginning with the words 'provided always'. Provision for payment of additional work is made in the contract itself. The additional work done by the contractor is part and parcel of the original work. The rates for assessment and payment of such additional work are mentioned in the different clauses of the contract. During the execution, of thework the contractor must have been paid amounts on his running bills in respect of the original and/or additional work, and the arbitrator may be required to decide matters relating to that as that would be a matter arising out of the contract. The above features and factors impel one to reject the above contention of the State, more so when considered in the context of the professed intention expressed in so unequivocal and wide terms in Clause 23. So without probing deep into the matter and without knowing all details about the scope and ambit of the claims, it cannot be said by one sweep of pen that the matters referred to the arbitrator are not within his jurisdiction.

12. The Division Bench of this Court in A. C. Parija's case ((1970) 36 Cut LT 1089) repelled the similar contention raised on behalf of the State. The same view has also been taken by another Division Bench of this Court deciding the case reported in ILR (1973) Cut 1218. The single Judge decision in C. R. No. 159/76, disposed of on the 15th Feb. 1977, is also to the same effect.

13. On the above considerations I do not find any merit in the above mentioned contention raised on behalf of the petitioner in these cases.

The question of limitation is also a question which can be decided by the arbitrator. In Wazir Chand's case (AIR 1967 SC 990), it has been held that after the agreement is filed in court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act whether the claim is barred. The Division Bench of this Court deciding the case of A.C. Parija ((1970) 36 Cut LT 1089) is also of the same view. The learned counsel appearing for the petitioner did not seriously agitate this question at the hearing of these Civil Revisions.

14. No other point was urged on behalf of the State.

15. On the above considerations I do not find any merit in these civil revisions and they are all dismissed with costs. Hearing fee of Rs. 50/- shall be paid by the petitioner in each of these Civil Revisions.

16. As the arbitration proceedings are pending since long time, the arbitrator now appointed in these cases shall proceed expeditiously to dispose of the saidproceedings in accordance with law within a very short time.


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