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Anand Kumar JaIn Vs. Union of India - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberSuit No. 186A of 1983
Judge
Reported in1984RLR438
ActsArbitration Act, 1940 - Sections 20
AppellantAnand Kumar Jain
RespondentUnion of India
Advocates: D.P. Sharma and; B.D. Sharma, Advs
Cases ReferredUnion of India v. Bharat Eng. Corp.
Excerpt:
.....contractor may claim to be entitled to ;(e) dispute or difference if the railways fail to make a decision within a reasonable time. though the said tetter was addressed to senior civil engineer, but a copy of the same was endorsed to the chief engineer, n, riy. even if the dispute must arise before a petition u/s 20 is filed, in the present case i am satisfied that such a dispute had arisen before the filing of the present petition......to the railway as required vide clause 63 of the general conditions. it is also alleged that the disputes referred to therein either fall under the category of 'excepted matters', referred to in clause 63, or do not arise out of the contract. [in para 5, 6 issues and clause 63 are reproduced.] (5) the opening portion of clause 63 requires the contractor to refer the disputes to the railway for its adjudication but the later part of the said clause states that disputes regarding which decisions are to be taken in terms of clauses i8, 22 (5), 39, 45 (a), 55, 55-a(5), 61 (2) and 62 (1) (xiii) (b) (e) (b) of the general conditions of contract and the decisions taken under any of the clauses of the special conditions of the contract are not to be referred to arbitration. it is these.....
Judgment:

B.N. Kirpal, J.

(1) This is a petition u/s 20 of the Arbitration Act for directing the respondents to file the arbitration agreement and to refer the disputes mentioned in this application to arbitration.

(2) It is not in dispute that an agreement was entered into between the parties in respect of some civil works which the petitioner was to carry out. According to the petitioner he completed the work, but there were some breaches which was committed by the respondents. It is further alleged that the respondents illegally and arbitrarily cancelled the contract on 9.8.82. The respondents state that the contract was cancelled on 22.7.82. Nothing will turn on this. It is further alleged by the petitioner that he had approached the respondents for the release of his lawful and legal dues, that it was made clear that in case the Deptt. did not accede to the request then the matter should be referred to arbitration.

(3) In the petition which has been filed, the petitioner has enumerated 29 disputes. According to the petitioner the said disputes are to be referred in accordance with Cl 64 of the General Conditions of Contract. The said clause contains the arbitration clause. This fact is not denied.

(4) In the reply to the present petition, it has been contended that the disputes which the petitioner seeks to raise had never been referred to the Railway as required vide clause 63 of the General Conditions. It is also alleged that the disputes referred to therein either fall under the category of 'Excepted Matters', referred to in clause 63, or do not arise out of the contract. [In para 5, 6 issues and clause 63 are reproduced.]

(5) The opening portion of clause 63 requires the contractor to refer the disputes to the Railway for its adjudication but the later part of the said clause states that disputes regarding which decisions are to be taken in terms of clauses i8, 22 (5), 39, 45 (a), 55, 55-A(5), 61 (2) and 62 (1) (xiii) (B) (e) (b) of the General conditions of Contract and the decisions taken under any of the clauses of the special conditions of the contract are not to be referred to arbitration. It is these decisions which are deemed to be 'excepted matters'.

(6) It is clear from the reading of the aforesaid 63 clause that the petitioner cannot demand any of the disputes to be referred which fall within the category of 'excepted matters'. One of the 'excepted matters' admittedly is regarding the quantum of work which is done by the petitioner, and which is mentioned in the measurement books maintained by the respondents. In other words, the petitioner cannot challenge, by way of arbitration, the correctness of the entries in the measurement book. Apart from this, it is open to the petitioner to challenge and contend that he has not been paid his dues even according to the entries made in the measurement books.

(7) In the W/s there is no objection taken with regard to dispute 1 to 24 as being not referable to arbitration on the ground that they fall within the category of 'excepted matters'. This is subject to the petitioner not being entitled to challenge the correctness of the measurement books.

(8) With regard to disputes 25 to 29, it is contended by Shri B.D. Sharma that they do not arise out of the contract [After citing these, clause 64 is reproduced in para 11].

(9) The aforesaid arbitration clause is very widely worded. As I read it, the said clause provides that the following types of disputes can be referred to arbitration : (a) disputes are differences between the parties as to the construction or operation of the contract, (b) dispute or difference between the parties regarding the respective rights and liabilities on any matter in question ; (c) dispute or difference on any account; (d) dispute or difference as to the with holding by the Railways of any certificate to which the con- contractor may claim to be entitled to ; (e) dispute or difference if the Railways fail to make a decision within a reasonable time.

(10) The aforesaid types of disputes arid differences are to be referred unless, of, course, they fall within the .category of 'excepted matters'. The provisions of clause 64 are not subject to clause 63. Clause 64 does, however, state that disputes which come within, the category of 'excepted matters' will not be referred and, furthermore, the contractor is to demand in writing that the disputes be referred and this demand is to be made after 90 days but within 180 days of his presenting the final claim on disputed matters.

(11) The dispute Nos. 25 to 29 cannot be said to be of such a type which do not arise out of the contract. Any dispute which refers, to the contract or is of a type with regard to which re-course has to be made to the contract by either of the party, would be a dispute arising out of the contract. Dispute No. 25 is with regard to refund of earnest money and security deposit. This amount was deposited in terms of the contract. Dispute 26 refers to the guarantee bonds which the petitioner had to give in terms of the contract. Dispute 27 is with regard to termination of contract. The contract had been terminated by the Department supposedly in exercise of the rights under the contract. thereforee, this will also be a dispute arising out of the contract as to whether the termination was valid or not and if invalid, what is its effect. Dispute 28, of course, cannot be referred to arbitration, for as to whether the costs are to be awarded or not, would be in the discretion of the Arbitrator. With regard to dispute 29, according to the respondents the contract does not permit such interest being payable. thereforee, this will also be a dispute which arises out of the contract, because reference has to be made to the contract for deciding this dispute.

(12) It was then contended by the counsel for the respondents that the petition was pre-mature as no demand had been made for referring the dispute to arbitration in the proper manner or to the proper authority in terms of clause 64.

(13) In my opinion it cannot be held on the facts of this case that the petition is to be dismissel on the ground that it is premature or that no demand was made for referring the disputes to arbitration in the proper manner. The petitioner had written a latter dated 13.9.82 to the Senior Civil Engineer, Railways, with reference to the letters received by the petitioner from the said Officer. Along with this letter a list containing the demands of the petitioner had been enclosed. The number of items mentionel in this list are 24, It has been stated that the payment in respect of the outstanding items should be made and with regard to those items for which no payment is made, the same should be referred to arbitration. Copy of this. letter was sent to the Chief Engineer, for information and necessary action. This letter was replied to vide letter lated 15.10.82. It was stated therein that the items submitted by the petitioner were vague and were not based on the actual work done as per the approved drawing, and that in case there was any doubt he should make specific objections. Copy of this letter was also sent to the Chief Engineer, N. Rly. It was also stated that as far as the reference to arbitration was concerned, the petitioner should approach the competent authority. The present petition has been filed after the receipt of the aforsaid reply.

(14) In my opinion, there was sufficient compliance with clause 64. Vide letter dated 13.9.82 a demand at least in respect of :A items had been raised. Though the said tetter was addressed to Senior Civil Engineer, but a copy of the same was endorsed to the Chief Engineer, N, RIy. Clause 64, in so far as it was required that a demand shall be made in writing that the dispute be referred to arbitration, has to be construed in a practical manner. It is not disputed that the person to whom the aforesaid letter was addressed was directly concerned with the execution of the work. The over-all supervision and control was that of the Chief Engineer. It is contended by Shri B.D. Sharma that the demand for arbitration had to be made to the Deputy Chief Engineer who had executed the contract on behalf of the President of India. In the present case, by endorsing the letter dated 13.9.82 to the Chief Engineer, it could be said that a demand had been made to the Chief Engineer, who obviously was an officer superior to or higher in rank than the Deputy Chief Engineer who had signed the contract. Moreover, this court in a number of decisions has held that filing of a petition u/s 20, demanding that disputes arising therein be referred to arbitration, was by itself sufficient to constitute a demand as contemplated by such a clause. These decisions are those given in M/s Inderjit Singh Avtar Singh & Co. v. U.O.I. & Others, S. No. 403-A/75 D/17.5.77, M/s Hindustan Iron & Steel Co. v. U.O.I. S. No. 660-A/79 D./26.10.79, H.R. Kalra vs. Uoi S. No. 1157-A/82, D./25.10.83 & Greenland Foods Pvt. Ltd, v. Uoi : AIR1973Delhi157 . No decision of this Court taking a contrary view has been brought to my notice. I see no reason to differ and I, thereforee, come to the conclusion that demand for arbitration has been properly made in the present case.

(15) Counsel for the respondents had referred to Mangal Prasad v. Lachhman Prasad, : AIR1964All108 , and Jhelum Forest Co. v. Conservator of Forest, and sought to contend that a dispute must arise between the parties before a petition u/s 20 can be filed. What can be referred is only a dispute which arises between the parties. Even if the dispute must arise before a petition u/s 20 is filed, in the present case I am satisfied that such a dispute had arisen before the filing of the present petition. The dispute arose when on 13.9.82 demand was made in respect of 24 items, but the same was not accepted by the respondents. It may be that the demand made by the petitioner was not justified, but it cannot be said that there was no dispute which had arisen as a result of this demand.

(16) It was then contented by the learned counsel for the respondents that even if dispute Nos. 25, 26, 27 and 29 can be said to arise out of the contract, nevertheless, the same cannot be referred to arbitration unless specific demand in respect thereof has been male. In this context reference been made to the case of Union of India v. Bharat Eng. Corp., 2nd (1977) 11 Delhi 57. In that case the main question which arose was whether there could be an arbitration agreement reserving right of reference to one party alone. The arbitration clause which came up for consideration in that context was clause 64 of the General Conditions of Contract, which was, in all material terms, similar to the arbitration clause in the present case. It was observed by the Court in that case as follows :-

'CLAUSE64 of the General Conditions of Contract is so formulated as to constitute a contract of option. It says, the contractor may demand a refer to arbitration. Nothing is said about a demand by the Railway. Furthermore the demand by the contractor must specify the matters which are in question, dispute or difference. A reference is permisible in respect of them alone and no other.'

(17) Furthermore, in para 69 it has been stated that 'But the arbitration agreement is restricted to the disputes regarding which the contractor made the demand.' It is not disputed that in the present case there was no demand to the Railways in respect of disputes Nos. 25 to 29. Neverthless, this Court has held, as already observed herein above, that if a demand is made in an application u/s 20, then that would be sufficient compliance of the requirement of clause 64. The observations of the D.B. understood in this context would mean and imply that before disputes can be referred to arbitration, a demand in respect thereof must be made. The D.B. was not concerned with the question as to the manner in which the demand had to be made. The demand could be made to the Railway Authorities in writing or, as has been held by this Court, demand may be made by filing a petition u/s 20 of the arbitration Act. If any dispute is not referred to in such an application u/s 20 and, nor is a demand in respect thereof for being referred to arbitration, made to the Railway Authorities, then, by virtue of the ratio of the decision of this Court in Bharat Eng. Corp. case, such disputes which are not raised, cannot be referred to arbitration. In the present case disputes Nos. 25 to 29 were not raised before the Railway Authorities, but they have been set out in the present application u/s 20 and, thereforee, the same can be referred. But as I have already held that Dispute No. 28 does not arise out of the contract, thereforee, that dispute alone would not be referable to arbitration. Petition allowed.


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