1. This appeal is under Section 39(1)(iv) of the Arbitration Act from an order refusing to file an arbitration agreement. The appellant, a firm of building contractors, submitted tender for the construction of an Auto Exchange at Durgapur which was accepted by the respondent, Durgapur Projects Ltd., and a formal contract was executed on the 11th March, 1964. The contract contained an arbitration clause namely Clause 25, the relevant part of which is as follows:
'Except where otherwise provided in the contract all questions and disputes. . . . .................. shall be referred to the sole arbitration of the Chief Engineer of the Department. Should the Chief Engineer be for any reason unwilling or unable to act as such arbitrator, such question and dispute shall be referred to an arbitrator to be appointed by the Chief Engineer. The award of the arbitrator shall be final, conclusive and binding on all parties to this contract.'
2. The appellant alleges that the respondent subsequently revised the design and the drawings for the building introducing radical changes. Admittedly in terms of Clause 12 of the contract the appellant was entitled to payment at revised rates for the changes. Under Clause 12 the Engineer-incharge has the 'power to make any alterations in, omissions from, additions to and substitutions for the original specification, drawings, designs and instructions that may appear to him to be necessary or advisable.' Clause 12 states inter alia that in such a case the Engineer-incharge shall revise the rates at which payment was to be made by 'determining the rates on analysis worked out from (a) the basic rates of materials and labour provided in the current schedule of rates or (b) the current market rates of materials and labour when even basic rates for the work are not available in the schedule.' Clause 12 further provides that
'in the event of any dispute regarding rates determined on analysis for any altered, additional or substituted work under this clause, the decision of Superintending Engineer of the Circle shall be final and binding'.
According to the appellant the respondent failed and neglected to refix the rates as required under Clause 12 while the work was in progress. On 28th May, 1965, the appellant addressed a letter to the Chief Engineer of the respondent Company complaining that they had 'come to understand that your office had drastically reduced the costing to an unworkable level' and requesting the favour of his intervention and 'restoration of the cuts'. This letter is Ext. A (11) in the case. On 12th July, 1965 the Chief Engineer wrote back to the appellant offering certain revised rates which were not found acceptable by the appellant. Then on 11th March 1966 the appellant again wrote to the Chief Engineer of the respondent Company requesting him to 'refer the matter in dispute to the sole arbitration of the Chief Engineer of the Department as per contract' in view of the 'differences of opinion' that had arisen between the contracting parties. It does not appear that this letter, Ext. 1/X, was answered by the Chief Engineer. Ultimately on 28th September, 1966 the appellant made an application under Section 20 of the Arbitration Act in the Court of the Subordinate Judge at Asansol wherein they contended that the Chief Engineer having already 'meddled' in the dispute had 'committed himself to a certain position in the matter' and had thereby disabled himself from acting as the sole arbitrator as also from nominating any one else as arbitrator. On these statements the appellant prayed that the arbitration agreement contained in the contract between the appellant and the respondent for the construction of the Auto Exchange Building at Durgapur be filed, a sole arbitrator be appointed by the Court and an order of reference to arbitration be made. The respondent filed a written-statement contending that as the Chief Engineer on reference to him by the appellant had fixed and revised the rates in his letter dated 12th July, 1965 there was no further scope for reference to arbitration.
3. The learned Subordinate Judge held that the case came within the purview of Clause 12 of the contract which itself provided for reference of disputes as to rates etc. to the Superintending Engineer and that as such there was no scope for application of Clause 25. On this finding the Court below dismissed the application made under Section 20 of the Arbitration Act.
4. Before us it was also contended on behalf of the respondent that in view of the revised rates fixed by the Chief Engineer in his letter dated 12th of July, 1965, there was no further scope for reference to arbitration. We do not find this contention acceptable. The letter dated 12th July, 1965 was addressed by the Chief Engineer to the appellant in reply to their letter dated 28th May, 1965, Ext. A (11). We have reproduced above the substance of the letter, Ext. A (11); it cannot be maintained that this letter, Ext. A (11), was a reference to the Chief Engineer for arbitration as provided in Clause 25. We also find it difficult to agree with the learned Judge that on the facts of this case Clause 12 would apply. Clause 12 applies when rates are determined on analysis by the Engineer-in-charge for any altered, additional or substituted work and a dispute arises regarding rates so determined; it is only in such a case that the decision of the Superintending Engineer of the Circle becomes final under this clause. Admittedly in this case no rates had been determined as contemplated in Clause 12. In our opinion, therefore, Clause 12 has no application. In our view the dispute that has arisen between the parties in this case is covered by the terms of Clause 25, the relevant portion of which I have already set out. We are also inclined to accept the appellant's contention that the Chief Engineer having suggested certain rates in his letter dated 12th July, 1965 which were found unacceptable by the appellant, had rendered himself incapable of acting as an arbitrator in this matter. Further, it was submitted on behalf of the appellant that there was no officer now functioning as Chief Engineer. Seeking clarification on the point, we asked the respondent to file an affidavit stating the correct position. The affidavit filed by the respondent pursuant to our direction, though somewhat vague, states that the post of Chief Engineer is now lying vacant, though it is not clear from the affidavit whether the post has been abolished or not. The question now is, what should be done in such circumstances. The arbitration agreement does not indicate that the parties intended that in such circumstance the agreement would come to an end; it was also not argued before us that the agreement would stand cancelled in such a case. On the contrary, it seems clear from the contract between them that the parties wanted their disputes and differences to be settled through arbitration. It seems established on the authorities that there is no bar to the Court appointing an arbitrator in such a case (see 52 Cal WN 288 = (AIR 1948 Cal 230); Governor General in Council v. Associated Livestock Firm (India) Ltd., : AIR1964Pat468 Hindustan Steel Ltd. v. Ingeniurs and Contractors).
5. This being the position, the Court below was wrong in refusing to file the arbitration agreement as prayed for by the appellant. We, therefore, allow this appeal, set aside the judgment of the learned Subordinate Judge and remit the case to the Court below. The learned Subordinate Judge shall order the agreement to be filed and shall make an order of reference to an arbitrator to be appointed by him. We are making this order upon the footing that the post of Chief Engineer is now lying vacant; if, however, in the meantime a fresh appointment is made to the post of Chief Engineer, the learned Judge will make an order of reference to him in terms of Clause 25 of the Contract. Considering the circumstances of the case, we direct the parties to bear their own costs in this Court and in the Court below.
Amiya Kumar Mookerji, J.
6. I agree.