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The Union of India (Uoi), Represented by the Executive Engineer, Coimbatore Central Division, C.P.W.D. Vs. S. Nataraja Pillai - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtChennai High Court
Decided On
Reported in(1979)2MLJ129
AppellantThe Union of India (Uoi), Represented by the Executive Engineer, Coimbatore Central Division, C.P.W.
RespondentS. Nataraja Pillai
Cases ReferredPunjab State v. Motiram. A.I.R.
Excerpt:
- .....contract for reference of disputes 'relating to the contract'. in the course of execution of the contract work, the contractor was asked to do certain works which were not strictly covered by the work orders issued by the authorities. when the final bills were presented disputes arose in regard to payment for those extra items of work. these were referred to the arbitrator in terms of the arbitration clause in the contract. the question which the court was subsequently invited to consider was whether items of work which did not, in terms, form the subject-matter of the original contract could properly be referred to arbitration. on this question, the learned judge observed:even if it be held the contractor has done some work which is not covered by the items mentioned in the work.....
Judgment:
ORDER

V. Balasubrahmanyan, J.

1. This civil miscellaneous appeal raises a point about the construction of an arbitration Clause in a building construction contract between the Union Government and a C.P.W.D. contractor. The contract was for construction of an Annexe to the Comptroller's Office building at Trivandrum at an estimated cost of about Rs. 5,47,000. The work was to be completed within 18 months. But, as the work progressed, the Government extended the time by two years. Apparently because of the time lag, the contractor incurred additional costs and expenses in the construction work. He accordingly applied to the Government for an upward revision of rates. During the execution of the contract, the contractor was also asked to do some substituted work. For this also he asked for extra payment. The Government, however, refused to pay him a pie more than what thecontract had originally specified. In consequence, the contractor referred the matter for arbitration.

2. The arbitrator entertained the reference. There were as many as four claims in dispute. The arbitrator dismissed one of them and allowed the rest in pa In money terms, the arbitrator passed an award directing the Government to pay the contractor a sum of Rs. 10,021 over and above the amount payable to him under the contract.

3. The Government thereupon moved the Sub-Court, Coimbatore, under Section 30 of the Arbitration Act, to set aside the award as invalid. Their contention was that the reference which the arbitrator had entertained was beyond the ambit of the arbitration Clause in the contract between the C.P.W.D. and the contractor. The learned Subordinate Judge rejected this contention. He said that the arbitration agreement was wide enough to cover the claims made by the contractor in this case. He accordingly upheld the validity of the award, observing that Section 30 of the Arbitration Act cannot be invoked in this case. In this appeal, Mr. Chengalvarayan, learned Senior Central Government Standing Counsel, submits that the disputes entertained by the arbitrator were beyond the scope of the arbitration agreement.

4. Initially, at the hearing of this appeal, I felt a good deal of difficulty in considering this point. For, neither the construction contract, as a whole, nor the text of the relevant Clause therein, which contained the arbitration agreement, was placed before me. But, the order of the learned Subordinate Judge indicated what the scope of the arbitration Clause was. In the absence of the original text, I reckoned I might well act on the learned Judge's version of it. According to the learned Judge, the arbitration Clause mentioned 'all disputes between the contractor and the Executive Engineer of the Union of India' as referable to arbitration.

5. The words 'all disputes' seem to me to be wide as wide can be for determining the scope of the arbitration. They comprehend any and every dispute between the contracting parties as respects the construction work.

6. Mr. Chengalvarayan's argument, however, was that even though Clause 25 had employed an unqualifiedly wide language, it was yet necessary, as a matter of construction to limit the scope of the arbitration and confine it within the bounds of the construction contract. He said that what the contractor claimed in this case was different from, and in excess of, what the contract had laid down. He said that the disputes before the arbitrator were wholly de hors the contract between the parties.

7. I do not agree with the learned Counsel's understanding either of the scope of the arbitration Clause or of the nature of the disputes which arose between the parties. It is true that the contractor, like Oliver Twist, asked for more. But on that account the claim cannot be held to fall outside the scope of the arbitration Clause. The argument of Mr. Ghengalvarayan, to my mind, involves the mixing up of two things which have got to be kept separate. One is whether the contractor's claim is or is not covered by the terms of the contract. The other is whether the dispute is covered by the arbitration Clause. The answer to the latter question does not depend on the answer to the former question, but has to be found on a construction of the terms of the arbitration Clause alone.

8. There are many cases in the books which deal with the construction of arbitration Clauses in agreements. The trend of recent decisions would seem to disclose a tendency on the part of Courts both here and elsewhere to construe these Clauses in a liberal spirit. Herman v. Darwins Ltd. (1942) A.C. 356, decided by the English House of Lords is a fair sample of this approach. Citing the House of Lords, our own Supreme Court in Gaya Electric Supply Co. Ltd. v. State of Bihar : [1953]4SCR572 . has laid down that an arbitration Clause is a written submission agreed to by the parties to a contract, and like every written submission to arbitration such a Clause must also be considered according to its language and in the light of the circumstances in which it is made.

9. Following the liberal tradition, I am unable to see how I can possibly cut down the effect of the words 'all disputes' occurring in Clause 25 of the contract in the instant case, so as to exclude from arbitration disputes over rates and disputes over payment for (extra work. Building contractors asking for more is no uncommon thing even in C.P.W.D. construction jobs. Buildings are not built in a day, and part of the hazards of the building trade, especially in modern economics, is the escalation in the cost of men and material even while work is in progress. I do not mean to suggest that this variable element of cost does not enter into the reckoning even while the contractor submits his tender in fee first place. But, the question in this appeal is not whether the contract itself allows any claim for higher rates, but whether such a claim is comprehended by the expression 'all disputes' employed in the arbitration Clause. The position, I grant, might possibly have been different had the parties employed some such variant as 'all disputes touching the interpretation of this agreement', 'all disputes relating to this contract', 'all disputes arising from this contract', 'all disputes arising out of this contract' and the like. Indeed, in the case before the Supreme Court, which I cited earlier, the arbitration Clause, in terms, referred only to the contract-oriented disputes, unlike Clause 25 in the present case which uses the expression 'all disputes' without frills. In a strict sense, therefore, the particular construction which the Supreme Court placed on the arbitration agreement which they had to consider in that case cannot serve as a model for the present case.

10. I am also impressed by yet another consideration. It will have been observed that the Government in this case had enlarged the time for completion of the contract by nearly two years, and had also directed the contractor to construct certain 'substituted' works. This being so, the claim for extra payment which the contractor put forward in his final bills could not be said to be entirely unrelated to the performance of the contract, even if it might not have strictly accorded with the framework of the rates as originally inscribed in the contract. In this contract it seems to me an eminently reasonable construction of the arbitration Clause to hold that 'all disputes' must mean and include not only disputes which arise out of the interpretation of the contract, but also disputes which arise out of its actual implementation. In this case, even disputes which are strictly de hors the contract would be entertainable by the arbitration as being within the scope of the reference.

11. Mr. Ghengalvarayan cited before me, M. Union v. Ganesh Sugar Mills : AIR1956All601 , where a Bench of the Allahabad High Court held that disputes between a sugar mill : AIR1956All601 and cane growers relating to deductions made in the contracted purchase price for sugarcane cannot be brought before an arbitrator. A perusal of this judgment shows that the real basis for the Court's decision was that the dispute between the parties arose not as respects a contract providing for arbitration, but as respects a different contract which did not provide for it. This decision is, therefore, of no use to the present discussion.

12. Mr. Chengalvarayan cited in the course of his arguments a decision of a learned single Judge of the Punjab High Court reported in Punjab State v. Motiram. A.I.R. 1957 P.&H; 252. I must refer to this case in some detail because it appears to support the kind of approach which I have adopted as the right one in the present case. In the case before the Punjab High Court, a building contractor entered into a contract with the Government, to build staff quarters. There was an arbitration Clause in the contract for reference of disputes 'relating to the contract'. In the course of execution of the contract work, the contractor was asked to do certain works which were not strictly covered by the work orders issued by the authorities. When the final bills were presented disputes arose in regard to payment for those extra items of work. These were referred to the arbitrator in terms of the arbitration Clause in the contract. The question which the Court was subsequently invited to consider was whether items of work which did not, in terms, form the subject-matter of the original contract could properly be referred to arbitration. On this question, the learned Judge observed:

Even if it be held the contractor has done some work which is not covered by the items mentioned in the work orders, a claim for payment of this extra work would be covered by the arbitration agreement. It is after all a dispute which relates to the contract.

The learned Judge proceeded to observe that every deviation from the original terms of a contract would not render the dispute relating to that deviation fall outside the scope of the arbitration.

13. It seems to me that the above reasoning must apply with greater force to the present case, in the view I have expressed that when the parties had unqualifiedly agreed to refer 'all disputes' to arbitration they must be held to have agreed to refer even disputes which are de hors the contract.

14. In the event, I must uphold the validity of the award as being within the bounds of the arbitration Clause in the contract. The result is that I dismiss this civil miscellaneous appeal and confirm the judgment and decree of the learned Subordinate Judge. I however, make no order as to costs.


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