(1) The appellant firm entered into a contract with the respondent Union of India (Northern Railway) for execution of 'earth work in left guide bond and approach bank of 2nd Yamuna Bridge. Certain disputes arose between the parties and the petitioner/appellant called upon the respondent No. 2 to appoint an arbitrator in terms of the General Conditions vide letter dated 27-4-66. Since the respondent took up the stand that most of the matters in dispute fell within the ambit of term 'excepted matters' as described in clause 63, the same could not be referred to the arbitration. Under the circumstances the appellant/petitioner moved an application u/s 8 and 20 of the Arbitration Act (called the Act) with the prayer that the arbitration agreement be directed to file in the court and the disputes between the parties be referred to the arbitrator. The learned Single Judge who heard the petition u/s 20 of the Act held that only a couple of disputes between the parties were referable to arbitration under clause 64 of the General Conditions of Contract Regulations and Instructions (for short General Conditions) while the rest of the disputes fell within 'excepted matters' and as such beyond the scope of the arbitration. He, thereforee, referred only two disputes out of many for adjudication to an arbitrator to be appointed by the respondent. Against this order the appellant filed the present appeal.
(2) It was contended by the appellant that notwithstanding the use of expression 'excepted matters' in clause 63, the arbitrationF clause 64 is couched in very wide and comprehensive language so as to cover all kinds of disputes arising between the parties in relation to or concerning the contract in question especially when the said term has nowhere been defid and that the learned Judge had erred in assuming the jurisdiction to decide as to whether various disputes raised by the appellant fell within the excepted matters and that in view of the phraseology of clause 64 of the General Conditions the arbitrator alone is vested with the powers to decide any controversy between the parties with regard to the construction or operation of the contract and the jurisdiction of the court is excluded.
(3) After noticing clauses 64(1) and 63 of the General Conditions of the contract it was held that no doubt that the words of clause 64 are wide enough to encompass the disputes which have arisen between the parties but for clear exclusion of what has been termed as 'excepted matters' from the purview of arbitration. The words 'but except in any of the excepted matters referred to in clause 63 of these conditions the contractor, after 90 days of his presenting his final claim on disputed matters......' used in clause 64(1) clearly underscore the importance excepted matters as referred to in clause 63.
(4) On a plain reading of this clause 63 it is manifest that it is composed of two parts. Under its first part, all disputes and differences of any kind whatsoever have to be referred by the contractor to the Railway and the latter is supposed to decide and notify his decisions thereon in writing within a reasonable time. However, having regard to the phraseology of its second part, all such decisions are not binding and they can be challenged before the arbitrator on demand for arbitration being made in terms of clause 64(1). As the language of second part of this clause does, only those decisions, directions, classifications, measurements, drawings and certificates with respect to any matter the decision of which is specially provided for either in the General Conditions or in the Special Conditions of contract etc. have been called 'excepted matters' and have been excluded from the jurisdiction of the arbitrator. Further, the second part of this clause clearly confers finality to such decisions and the same cannot be called in question or set aside on any ground whatsoever, even no appeal is provided for against the same. Hence, the arbitration clause despite its being very widely worded and comprehensive enough to embrace all kinds of disputes which may arise between the parties out of or in relation to the contract in question does exclude 'excepted matters' and by no stretch of reasoning, the same can be said to be covered by the arbitration clause. As a necessary corollary it would follow that the disputes falling within the ambit of 'excepted matters' and not referable to arbitration and even if the same are referred for any reason, say oversight or inadvertence on the part of the parties etc., the arbitrator will not be vested with any jurisdiction to adjudicate upon the same.
(5) Agreering with the view expressed in Meadows & Kenworthy (1960) N.Z.L.R. 503, Fao (OS) No. 106/80 decided on 31st Oct. 1980 by a division bench of 7this court, and : AIR1975MP152 , it was held that indeed the rationale, behind the exclusion of certain decision and measurements etc. made by the Engineer or the Railway from the Arbitration clause and conferring finallity and conclusiveness on the same is clearly discernible. It is that in matters like these special skill and knowledge of technical nature is involved. Moreover, these measurements and classifications etc. must be carried out while the work is still in progress or has been just completed so as to ensure authenticity and accuracy about the same. Surely, the primary evidence of the same may well be destroyed and may not survive raveges of time after the forces of nature have their unbridled play over a long period. That certainly explains why the decisions of the Railway on certain matters have been kept out of the scrutiny by the arbitrator who may come into picture much after the disputes have arisen.
(6) In view of this it was held that on a conjoint reading of clauses 63 & 64 of the General Conditions, 'expected matters' as defined in clause 63 fall outside the domain of the arbitrator's jurisdiction because in respect of such matters there does not exist any arbitration agreement.
(7) Held that the arbitrator by his own finding cannot clothe himself with jurisdiction and in an application under section 20 of the Arbitration Act, the court has to see whether there is an arbitration agreement between the parties and whether the disputes disclosed by the parties are covered by such agreement. It is trite that the arbitrator derives his power from the reference which furnishes the source and prescribes the limit of his authority. He cannot enlarge the scope of the reference by construing the agreement in a particular manner. It was thereforee held that the learned Single Judge was perfectly right in holding that the final decision on the question of jurisdiction rests with the law court and not with the arbitrator. The contention of the appellant on this point was rejected.
(8) The Division Bench after considering on merits the various claims lodged by the appellant came to the conclusion that out of the 9 claims disputes pertaining to claims 3 to 9 be also referred to the arbitrator for adjudication in addition to the disputes already referred by the learned Single Judge.