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Sushila Seth and ors. Vs. State of Madhya Pradesh - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberFirst Appeal No. 14 of 1972
Judge
Reported inAIR1980Delhi244; 17(1980)DLT418
ActsArbitration Act, 1940 - Sections 2
AppellantSushila Seth and ors.
RespondentState of Madhya Pradesh
Advocates: D.B. Gupta,; I.N. Shroff and; B.P. Kapur, Advs
Cases ReferredArbitration A.ct. In Union of India v. Raghunath Singh
Excerpt:
.....dispute to the arbitrator - the respondent resisted the said application on the ground that the chief engineer was the authorised person to decide the dispute and nothing could be referred to the arbitrator - it was contended that the dispute could not be decided by the chief engineer in the absence of the contractor - it was further argued that the clause should be construed reasonably as the decision of the dispute necessarily involved the hearing of the parties - thus, the said clause amounted to the arbitration agreement - - of the circle 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..........the arbitrator was vague and it could not be ascertained from it as to which particular chief engineer was to be the arbitrator to decide the dispute between the parties. the government had contended that clause 25 of the contract did not amount to arbitration agreement at all. but that contention was negatived by the learned single judge.(2) the undisputed facts out of which these questions for decision arose are briefly as below: the contract was entered into between the parties on 16.4.1957 by which the appellant was to do construction of cross drainage and cross-communication works or the right main canal groups i and ii in the chambal project in madhya pradesh. clause 25 of the contract was as below: 'except where otherwise specified in the contract the decision of the.....
Judgment:

V.S. Deshpande, C.J.

(1) This is an appeal by the contractor who by an application under Section 20 of the Arbitration Act had claimed that the dispute between the contractor and the respondent. Government of Madhya Pradesh, be referred to arbitration. The application was dismissed by a learned single Judge of this Court on the ground that Clause 25 of the contract designating the arbitrator was vague and it could not be ascertained from it as to which particular Chief Engineer was to be the arbitrator to decide the dispute between the parties. The Government had contended that Clause 25 of the contract did not amount to arbitration agreement at all. But that contention was negatived by the learned single Judge.

(2) The undisputed facts out of which these questions for decision arose are briefly as below: The contract was entered into between the parties on 16.4.1957 by which the appellant was to do construction of cross drainage and cross-communication works or the right main canal groups I and Ii in the Chambal Project in Madhya Pradesh. Clause 25 of the contract was as below:

'EXCEPT where otherwise specified in the contract the decision of the C.E. of the circle 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, order or their conditions or otherwise concerning the works, or the execution work or failure to execute the same, whether arising during the progress of the work, or after the completion or abandonment thereof.'

(3) Disputes arose between the parties and the appellants made an application on 25.5.1968 under Section 20 of the Arbitration Act to this Court for reference of the dispute to the arbitration of the designated arbitrator. The application was resisted by the Government on the ground that Clause 25 was not an arbitration clause at all, but it simply authorised the concerned Chief Engineer to decide the dispute between the parties and that such decision had already been taken and, thereforee, there was nothing which could be referred to arbitration. It was also stated for the Government that the post of the 'Chief Engineer of the Circle' was abolished on 17.7.1961 and thereafter the duties of that post were performed by the Deputy Chief Engineer, Chambal Project which post itself was in existence only till 6.9.1968. From 7.9.1968 the latter post was also abolished and instead a circle was formed headed by a Superintendent Engineer. It was stated for the Government that the last incumbent holding the post of Deputy Chief Engineer of the Chambal Project was Mr. S.P. Caprihan, who has retired from service from July, 1979 and his present address is G-227, defense Colony, New Delhi.

(4) The first question which arises for decision is whether Clause 25 of the contract amounts to an arbitration agreement. As pointed out by us in our order of 16.1.1980 this clause 25 ought to be reasonably construed as amounting to an arbitration clause because a decision of a dispute necessarily involves the hearing of the parties and this is the essence of arbitration. It cannot be that the dispute is decided by the Chief Engineer of the circle behind the back of the contractor or without hearing him and without any quasi-judicial procedure being followed. The principles relating to natural justice have advanced too far for such an argument being accepted by a Court of law which is also a Court of justice. We have, thereforee, no difficulty in agreeeing with the learned single Judge that a more persual of Clause 25 of the contract is sufficient to show that the disputes under the contract had to be decided and the very words 'dispute' and 'decision' imply a quasi-judicial procedure to be followed by the Chief Engineer and, thereforee, the clause cannot be distinguished from any ordinary arbitration agreement. We hold, thereforee, that Clause 25 amounted to an arbitration agreement.

(5) Mr. Shroff, learned counsel for the respondent then supported the decision under appeal on the ground that the learned Judge was right in holding that clause 25 was too vague' to be given effect to and, thereforee, reference to arbitration there under could not be made by the Court. The relevant words of the clause which appeared to the learned single Judge to be too vague are 'the Chief Engineer of the circle for the time being'. Theoretically it could be argued that it is not clear as to which Chief Engineer was intended by these words, whether it was the Chief Engineer who held that office at the time the parties entered into contract or whether it would be the Chief Engineer who held that office at the time the dispute arose or whether it was the Chief Engineer who held the office when the dispute were decided. In our view, the words 'for the time being' have a well established meaning by usage in law. They are used not only in contracts but also in statutes and the general meaning attached to the words 'for the time being' is 'at the relevant time'. The question, which is the relevant time depends on the context of the facts and the object of the arbitration. The arbitration clause in this case provides for decision of dispute between the parties to the contract by the designated authority. Since the cause of action arises when the disputes arise between the parties there can be no other meaning of the words 'for the time being' except that it refers to the Chief Engineer who holds the office of the Chief Engineer at the time the disputes arose and the necessity for arbitration arises. In that view, we are unable to accept Mr. Shroff's contention that Clause 25 of the contract was vague in such a manner that effect cannot be given to it.

(6) The next difficulty arises out of the passage of time and the question is whether the rights of the appellants should be allowed to suffer by the time taken by this Court in finally deciding on their application. The general principle is that no act of the Court and no delay on the part of the Court in deciding the case can be allowed to prejudice the rights of the appellants. This is why the appellants are entitled to have their case decided on the facts as they existed on the date of the application made by them. The tenability of the petition/application is to be decided on the facts as they existed on the date of the application or petition. It is only in exceptional cases that subsequent events may make it impossible for the Court to grant relief to the appellants on the facts as they existed on the date of the petition. But such exceptions apart, the general rule is that the decision mist rest on the facts as they existed on the date of the petition without any difference being made by subsequent changes over which the appellants had no control. The first change that took place after the contract was entered into is that the post of the Chief Engineer of the circle was abolished and the duties of the Chief Engineer were ordered to be performed by the Deputy Chief Engineer of the circle. On this admission of the Government it was not seriously argued either before us or before the learned single Judge that the Deputy Chief Engineer, Chambal Project was not the successor in office of the Chief Engineer of the circle mentioned in Clause 25. This is the crucial fact on which the application under Section 20 has to be decided. The application was made on 25.5.1968 when the Deputy Chief Engineer of the Ghambal Project performed the duties of the Chief Engineer of the circle. The general principles accepted by Section 18 of the General Clauses Act is that a designated authority includes the successor in office of such an authority. Since the very intention of the Government was to substitute the Deputy Chief Engineer to continue to perform the duties of the Chief Engineer the intention has to be given effect to and it has to be held that under Clause 25 the words 'Chief Engineer of the circle' necessarily included the successor in office of such a Chief Engineer provided that the powers and the duties of the successor were the same as they were in the present case. The abolition of the office of the Deputy Chief Engineer on 6.9.1968 during the pendency of the petition was urged by Mr. Shroff as a ground for making the petition under Section 20 infructuous. Mr. Shroff argued that Section 8(1)(b) of the Aribitration Act has to be taker*into account in considering the question whether the abolition of the office of the Deputy Chief Engineer on 6.9.1968 would mean that any reference to arbitration by the Court thereafter would be to supply a vacancy within the meaning of Section 8(1)(b) of the Arbitration Act. This, in our view, is a point of such importance that it has to be thoroughly dealt with.

(7) As pointed out by the Supreme Court in M/s Prabhat General Agenciesv. Union of India, : [1971]2SCR564 ,The wordsofSection 8(l)(b) are'the arbitration agreement does not show that it was intended that vacancy should not be supplied.' The burden is, thereforee, on that party who takes the stand that the vacancy was not to be supplied. Since this was the stand of Mr. Shroff on behalf of the Government it was for him to make good that contention. A reading of the Supreme Court decision referred to above and the decision in Union of India v. M/s Raghunath Singh and Co,, : [1980]1SCR128 , would show that the following are the relevant considerations for deciding whether the vacancy of an arbitrator or umpire was or was not intended to be supplied within the meaning of Section 8(1)(b). Firstly, the nature of the disputes which arise in the contract have to be taken into account. Secondly, the reason why a particular officer or authority was designated to be the arbitrator has to be understood. Thirdly, the necessity of the continuation of the office held by the designated person may also be one of the reasons why such an officer may be designated by office.

(8) In the present case the contract related to a specific and particular work to be done in the Chambal Project. The nature of dispute which would arise between the parties would relate to the particular work or the deficiencies in the work there. In deciding the dispute, it was necessary that the arbitrator should be familiar with the intricacies of the civil engineering work which was required to be done by the contractor or the Government. For, it is well known that construction work done by the contract for the Government has to be inspected and supervised by technically qualfied Government officials. The mere possession of technical qualification, however, is not sufficient because in addition to the technical qualifications, familiarity about the work done could be had only by inspection and supervision of the work. These appear to be the reasons why the Chief Engineer of the circle was particularly designated to be the authority to decide the dispute between the parties. These considerations would also hold good in respect of the Deputy Chief Engineer who was placed in charge of the work of the Chief Engineer. No appreciable distinction could be made between the two. There is a continuity of the knowledge of the work done by the contractor and the qualifications possessed by the Chief Engineer and the Deputy Chief Engineer and, thereforee, the latter was an appropriate officer, successor to the former and equally qualified to decide the disputes between the parties according to the intention underlying Clause 25 of the contract. As for the official designation by which the authority to decide the disputes was specified in Clause 25, the obvious intention was to ensure that the person holding the office at the relevant time should be able to act as such authority to decide the disputes. This is why the name of a particular person was not mentioned but only the official designation was mentioned.

(9) In M/s Prabhat General Agencies case, referred to above, though the contract related to supply of certain forest produce by the contractor to the Government, the authority to decide the disputes was not given to any forest officer. It was vested in the Judicial Commissioner, Himachal Pradesh. While a forest officer could have known the nature of the work done by the contractor particularly if he was supervising the work, the Judicial Commissioner was not expected to know it. He was designated as the arbitrator merely because he was competent in law to hold an arbitration proceeding. As pointed out by the Supreme Court he was appointed arbitrator by designation and not by name to ensure that whoever is the Judicial Commissioner at the relevant time may be able to act as the arbitrator. It was for that reason that in that case the Supreme Court was not persuaded to hold that the appointment of the Judicial Commissioner Himachal Pradesh was such that the vacancy in it was not intended to be supplied by the Court within the meaning of Section 8(l)(b) of the Arbitration A.ct. In Union of India v. Raghunath Singh, referred to above, the nature of the contract is not apparent from the facts stated in the report of the decision. The Chief Commissioner/ Director of Storage Ministry of Food, Government of India, who was designated as the arbitrator in that case seems to have been in the same position as the arbitrator designated in the previous case of Prabhat General Agencies case. In neither case was the arbitrator selected on account of his knowledge of the facts of a dispute or his special technical qualifications for deciding the dispute. The rationed decidendi of these two decisions are not, thereforee, applicable to the facts of the case before us. On the facts of our case it is obvious that the decision of the disputes could be entrusted only to the official who had known the work done by the contractor and who also had the technical competence to assess the work. We have already stated above that the nature of the work to be done under the contract was itself of a technical nature in which the knowledge of civil engineering as also the supervision over the work had to be possessed before the designated person could decide the dispute between the parties. We are of the view, thereforee, that the particular arbitrator appointed under Clause 25 was such that the vacancy created by his inability or unwillingness to function as such was not intended to be supplied by the Court within the meaning ofSection 8(l)(b) of the Arbitration Act.

(10) The incidental question raised by Mr. Shroff at the end of his argument was that Clause 25 apparently intended the arbitrator to function in his official capacity and without any remuneration because he would be deciding the dispute between the parties as a part of official duties. He further argued that the Court cannot rewrite the arbitration clause. He submitted that even if the Court were to hold that Mr. Caprihan remained the arbitrator under Clause 25 even after his retirement he would have to be paid remuneration since he is not expected to do the work gratis. To that extent the reference of the arbitration to Mr. Caprihan would be outside Clause 25 and hence should not be done by the Court on a proper interpretation of Clause 25 read with Section 8(l)(b) of the Arbitration Act. In our view, the real question for consideration is not whether Mr. Caprihan happened to retire after the cause of action for his appointment as arbitrator arose, but whether at the time of the cause of action Mr. Caprihan was competent to act as arbitrator entirely within the construction of Clause 25 without any variation having to be made therein by the Court. The principle on which the Court entertains an application under Section 20 as also other applications and suits is that in theory and in law the ideal Court would be able to decide the dispute on the facts as it stood on the date of the application. This is why any delay, short or long, on the part of the Court in deciding the application cannot be allowed to prejudice the rights of the applicant. Since the applicant cannot be blamed if sometime after the application was presented Mr. Caprihan happened to retire from service, we are driven to take the view that the cause of action which arose in favor of the applicant was fully satisfied by the fact that on the date of the application Mr. Caprihan was in office and was competent to act as arbitrator under Clause 25 without the Court having to make any change at all in the - conditions applicable to his acting as such under Clause 25. The payment of remuneration to Mr. Caprihan is an incidental effect of the passage of time which has taken place in the Court deciding the application. If the applicant is not to be prejudiced by such a subsequent event, it is only an incidental function of the Court in doing justice on the particular facts of a case that the Court would have to fix and pay at the cost of the appellants proper remuneration to Mr. Caprihan for the work he would have to do as the arbitrator in this case, provided that he is willing to act as such. In our view this incidental fact does not amount to rewriting Clause 25 and the reference of the dispute between the parties to Mr. Caprihan by the Court would be entirely in accordance with Clause 25. We find so.

(11) In para 25 of the application under Section 20 of the Arbitration Act, it is stated that list of disputes that have arisen between the parties is contained in the notice dated 30.5.1967 sent by the appellants to the respondent. A copy of the said notice is available in the documents file of Suit No. 272 of 1968. Mr. S.P. Caprihan, retired Deputy Chief Engineer, Chambal Project, is appointed as arbitrator as agreed to by the parties under Clause 25 of the contract. A copy of the list of disputes referred to above shall be sent to him and he may be requested to inform his willingness to act as such arbitrator. He may be informed that remuneration shall be paid to him by the appellants after an assessment of his work is made by the Court. Initially and provisionally, subject to the parties being later beared by the court in making the final assessment, the remuneration payable to Mr. Gaprihan is fixed at Rs. 3000.00 . A copy of the order be sent to him and on receipt of his willingness to act as such he will be entitled to call for statement of claim from the appellants and reply from the respondent and then proceed to decide the dispute between the parties accordingly. Only one set of fees will be payable to the arbitrator in respect of the work to be done by him in the two references made in this and the connected suit.

(12) The appeal is allowed in the above terms with no order as to costs.


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