1. The dispute has arisen between the appellant, which is the Union Government, and the respondent whether there was failure to carry out the work with a view to avoiding incurring of demurrage on the part of the former. The parties differed on the question whether the dispute is covered by the arbitration clause in the agreement which was for providing transport for goods of the Union from the Madras Port to Avadi. While on the one hand the Union relied on Clause 5(h) of the agreement to contend that it intended to prevent any difference arising under that clause from being referred to arbitration, the respondent maintained that even a difference within the ambit of Clause 5(h) would be within the purview of Clause 17, which provides for arbitration. Kunhamed Kutti, J. held that the arbitration clause applied and directed the Union Government to make a reference of the dispute for arbitration. The appeal arises from that order.
2. We are of opinion that the order of the learned Judge is correct Clause 17, in so far as at is relevant for the present purpose reads:
'17. Arbitrations All disputes and differences arising out of or in any way touching or concerning this agreement whatsoever shall be referred to the sole arbitration of any person appointed by the......
Clause 5(h) taking only the relevant words, reads;--
'Liability of contractors for losses etc, suffered by Government: The contractors shall be liable for all costs, charges and expenses suffered or incurred by the Government due to ..... their failure to carry out the work with a view to avoiding incurrence of demurrage.......Thedecision of the Regional Director (Food) regarding such failure of 'the contractors had their liability for the losses, etc., sufferred by. Government will be final and binding on the contractors.'
For the Union it is said that the effect of Clause 5(h) is to make the decision of the Regional Director (food) final and binding as between the parties and that this meant that there could be no question of further arbitration of the dispute. Otherwise, according to the Union, the word 'final' in Clause 5(h) will have no meaning attached to it whatsoever. We are told that the two Clauses 5(h) and 17 should be read together and each given effect to in the light of each other, and, if that were done, finality to the decision of the Regional Director (Food) being the intention of the parties, it should be kept in view in delimiting the scope of arbitration under Clause 17.
3. We are unable to accept this interpretation of the arbitration clause. But for Clause 5(h) there can be no doubt whatever that the arbitration clause is so comprehensive that it could include the dispute relating, to the alleged failure on the part of the respondent leading to the Union incurring demurrage. The words 'arising out of or in any way touching or concerning this agreement' are wide enough to comprehend such a dispute. Equally, it is clear that the dispute is squarely within the ambit of Clause 5(h), which means, it is open to the Regional Director (Food) to decide the difference between the two parties. But the point is whether such a decision should prevail as final and prevent the operation of the arbitration clause over the dispute. It seems to us that this very question will in itself be within the ambit of the arbitration clause. For, it arises out of touches and is concerned with the agreement. Apart from that, Clause 17 is so comprehensive, and any dispute arising out of, touching or concerning the agreement would be referable to arbitration and does not except within its scope any dispute which would be comprehended by Clause 5(h).
Notwithstanding the finality attaching to the decision of the Regional Director (Food), as between the parties, under Clause 5(h), that finality, when the two clauses are read together, would be subject to the clause of arbitration. This is because Clause 17 mentions the whole agreement and Clause 5(h) has not been excluded from it. It would, therefore, come to this, that, the two clauses read together, the finality in Clause 5(h) would have effect only in the absence of an arbitration and will not have the force of preventing the operation of the arbitration clause over the dispute. If it is intended that any dispute, which is within the purview of Clause 5(h), is to be excluded from the operation o Clause 17 of the agreement, specific exclusion of such dispute should have been made in Clause 17.
4. For the Union Government our attention has been invited to the following observations from Russell on Arbitration, 17th Edn:--
'It might seem, therefore, that if the agreement between the parties is in effect an agreement to prevent disputes from arising and not an agreement as to how they are to be settled, then it is neither an agreement to refer to arbitration nor a submission to arbitration, and it is not within the Act.'
We fail to see how this observation is of any assistance to the Union. If Clause 5(h) has remained alone without Clause 17, phrased as it is, the observation from Russell would be apposite. But here Clause 17 does not save or except the 'dispute within Clause 5(h) and the result is the arbitration clause will have full force in respect of the dispute.
5. The appeal is dismissed with costs. The appellant will have two months' time from to date to appoint an arbitrator and make the reference of the dispute in question.