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Bharat Lal and Co. Vs. Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 12 of 1980
Judge
Reported inAIR1982Delhi444; ILR1982Delhi751; 1982RLR193
ActsArbitration Act, 1940 - Sections 8
AppellantBharat Lal and Co.
RespondentUnion of India and anr.
Advocates: Daljit Singh,; Ashok Kashyap and; D.K. Sayal, Advs
Cases ReferredSmt. Rukmanibai v. The Collector
Excerpt:
.....superintendent, northern railway will be final. the railway rescinded the contract and also did not make payments to the appellant for the work done. the appellant moved the court and filed an application for filling the arbitration agreement before the court. the application was refused. the appellant filled an appeal against the order refusing his application for filling the arbitration agreement. allowing the appeal,; 1. if the language of the clause in agreement leaves no room for doubt that the parties intended to enter into an arbitration agreement and to have their disputes resolved by arbitration, it must be held that the agreement is an arbitration agreement, whether the words 'arbitration' or 'arbitrator' have been used in the clause or not. in this case, the two..........judge dismissed the application. he held that these two clauses do not constitute an arbitration agreement. bharat lal appeals to this court. (7) mr. sayal on behalf of the railway raised a preliminary objection that this order is not appealable under section 39 of the act. we do not agree. this is an order refusing to file an arbitration agreement. under section 39(1)(iv) an order filing or refusing to file an arbitration agreement has expressly been made appealable. the learned judge refused to file the arbitration agreement holding that there was no arbitration agreement between the parties. we are of opinion that the order is appealable. 8 hcd/82 1 (8) the real question in this appeal is whether clause 4 of the agreement and clause 16 of the special conditions constitute an.....
Judgment:

Avadh Behari Rohtgi, J.

(1) This is an appeal from the order of a learned single judge dated 29th November, 1978.

(2) These are the facts. The appellant, Bharat Lal, sole proprietor of M/s. Bharat Lal & Co., entered into a contract with the respondent Northern Railway, for doing conservancy wort at Ghaziabad. This contract was for a period of 2 years, that i-', from 1-7-1968 to 30-6-1970. A formal agreement was executed on 24-10-1968. Bharat Lal did the work assigned to him for 20 months. But the Railway did not pay him as per terms of the agreement. He was to be paid Rs. 830 per month. The Railway rescinded the contract on 20th November, 1969 with effect from 20th February, 1970.

(3) Bharat Lal made an application under sections 8 and 20 of the Arbitration Act (the Act) for filing the arbitration agreement and fop referring the matter to the arbitrator. In this application he detailed as many as 7 disputes which be raised.

(4) Bharat Lal referred to the following two clauses in the agreement and submitted that these constitute an arbitration agreement in law. The first is clause 4 of the agreement. This reads:

'THEcontractor agrees that in the event of any question or dispute arising under the conditions or in connection with this contract the decision of the Divisional Superintendent, Northern Railway, New Delhi will be final.'

(5) Then there is clause 16 of the Special Conditions annexed to the agreement. That clause is in these terms :

'INthe event of any request or, dispute arising under these conditions or in connection with this contract the decision of the Divisional Superintendent, Northern Railway, will be final.'

(6) The learned Judge dismissed the application. He held that these two clauses do not constitute an arbitration agreement. Bharat Lal appeals to this Court.

(7) Mr. Sayal on behalf of the Railway raised a preliminary objection that this order is not appealable under section 39 of the Act. We do not agree. This is an order refusing to file an arbitration agreement. Under section 39(1)(iv) an order filing or refusing to file an arbitration agreement has expressly been made appealable. The learned Judge refused to file the arbitration agreement holding that there was no arbitration agreement between the parties. We are of opinion that the order is appealable. 8 HCD/82 1

(8) The real question in this appeal is whether clause 4 of the agreement and clause 16 of the Special Conditions constitute an arbitration agreement. This matter, in our opinion, is now fully covered by a recent decision of the Supreme Court in Smt. Rukmanibai v. The Collector, Jabalpur, : AIR1981SC479 . The intention of the parties has to be seen in every case. If the language of the clause leaves no room for doubt that the parties intended to enter into an arbitration agreement and to have their disputes resolved by arbitration, it must be held that the agreement is an arbitration agreement, whether the words 'arbitration' or 'arbitrator' have been used in the clause or not. In Russel on Arbitration 19th ed. page 59 the learned author says:.

'IFit 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.'

(9) Bharat Lal entered into a commercial contract with the Railway. He was to be paid for the work. There was a provision in the agreement to terminate .the contract. 'The Railway gave three months' notice to the contractor. They terminated the contract. Now disputes have arisen between the parties. These disputes are set out in the notice of Bharat Lal's Advocate dated 28-4-1975 given to the Railway. The clauses in question are of the widest character. All disputes under the contract and 'in connection with this contract' can be referred to the Divisional Superintendent. The clauses make his decision final. It appears to us that the intention of the parties was that the Divisional Superinendent shall hold an inquiry into the disputes raised by Bharat Lal and hear him. He shall decide upon the evidence such as he lays before him. Bharat Lal has made several claims against the Railway arising out of the termination of the contract. In our opinion, the two clauses in the contract are an arbitration agreement.

(10) The learned judge said 'the work assigned to the petitioner was of conservancy and it seems the railway authorities thought that it would not be proper to appoint an arbitrator to resolve the disputes concerned with a work of this nature'. We cannot endorse this view. The test is not the nature of the work. What has to beascertained is whether the parties contemplated that if disputes arise between them in connection with the contract such disputes shall be settled by arbitration instead of regular courts of law. It appear to us that there was a clear intention to go to arbitration in the event of disputes and differences arising between the parties. The Railway have pleaded that 'after imposition of fines and penalties' nothing was' found due to Bharat Lal. If such serious action can be taken by a party under the contract it would stand to reason that some forum would be provided in the agreement where these disputes can be resolved. In this case it was done by providing for arbitration by the Divisional Superintendent of the Railway. '

(11) Mr. Sayal then said that claim No. 3 is a claim for damages for defamation and should not go to arbitration. It is. true that Bharat Lal has styled it as a claim on account of defamation. He claims Rs. 25,000 from the Railway. But from the substance of the claim it appears to us that it is essentially a claim for damages on account of 'illegal rescission without any rhyme and reason' of his contract with the Railway, as his advocate put it. This claim can also go to the arbitrator. It will be for him to adjudicate upon it.

(12) For these reasons the appeal is allowed. We hold that the two clauses constitute an arbitration agreement. The Divisional Superintendent, Northern Railway, New Delhi will decide the disputes formulated by Bharat. Lal in Annexure A to his notice dated 28th April, 1975 which he sent to the Railway through his advocate.

(13) The parties are however left to bear their own costs.


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