TMI Blog2000 (3) TMI 1117X X X X Extracts X X X X X X X X Extracts X X X X ..... irst place, be referred to and settled by the Engineer who shall, within a period of ninety days from the date of being requested by the Contractor to do so, give written notice of his decision of the Contractor. Subject to other form of settlement hereafter provided, such decision in respect of every dispute or difference so referred shall be final and binding upon the Contractor. The said decision shall forthwith be given effect to, and the Contractor shall proceed with the execution of the works with all due diligence. In case the decision of the Engineer is not acceptable to the Contractor, he may approach the law Courts at Bangalore for settlement of dispute after giving due written notice in this regard to the Engineer within a period of ninety days from the date of receipt of the written notice of the decision of the Engineer. If the Engineer has given written notice of his decision to the Contractor and no written notice to approach the law Courts has been communicated to him by the Contractor within a period of ninety days from receipt of such notice, the said decision shall be final and binding upon the Contractor. If the Engineer shall fail to give notice of his decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin a period of ninety days from the date of being requested by the Contractor to do so, given written notice of his decision to the Contractor. Chief Engineer's decision final (b) Subject to other form of settlement hereafter provided, the Chief Engineer's decision in respect of every dispute or difference so referred shall be final and binding upon the Contractor. The said decision shall forthwith be given effect to and Contractor shall proceed with the execution of the work with all due diligence. Remedy when Chief Engineer's decision is not acceptable to contract (c) In case the decision of the Chief Engineer is not acceptable to the Contractor, he may approach the Law Courts at Karwar for settlement of dispute after giving due written notice in this regard to the Chief Engineer within a period of ninety days from the date of receipt of the written notice of the decision of the Chief Engineer. Time-limit for notice to approach law Court by Contractor (d) If the Chief Engineer has given written notice of his decision to the Contractor and no written notice to approach the law Court has been communicated to him by the Contractor within a period of ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted against such action, by letter dated 2-9-1999. 6. The petitioner made certain claims in regard to the said work. They were not admitted by KPC. The petitioner alleges that as a consequence disputes and differences have arisen between the parties in regard to the said claims and that it referred those disputes to the second respondent [Chief Engineer (Civil) (Kali), KPC] for his decision under Clause 29 of the Conditions of Contract, as per letter No. MCC 2183 of 1999, dated 3-9-1999 (Annexure-A1). The Chief Engineer, who is required to give his decision on the disputes raised, within ninety days failed to do so. Therefore, the petitioner has filed this petition on 7-3-2000 under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short, 'the Act') for appointment of any one from the panel of Arbitrators suggested by the petitioner (Annexure-P) to be the sole Arbitrator for adjudication of the claims of the petitioner. 7. Respondents have resisted the petition by contending that there is no agreement to refer the disputes to arbitration and consequently the question of referring any dispute raised by the petitioner to arbitration does not arise. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itrator' are not used, the agreement or clause will not be construed as an arbitration agreement. 11. It is well-settled that what is necessary to decide whether there is an arbitration agreement, is an intention of parties to a contract or disputes, to refer the disputes to arbitration and be bound by the decision of the Arbitrator. But, if the agreement is only intended to prevent litigation or disputes, by requiring a decision by a named authority, before the matter is taken to Court, and is not intended to finally settle the disputes, then it is not an arbitration agreement. A mere agreement to accept a valuation is also not an arbitration agreement. Nor is a certification by a named Authority is an arbitration. The following passage from Russell on Arbitration (19th Edition, page 59), is relevant: If it appears from the terms of the agreement by which a matter is submitted to a person's decision, that the intention of the parties was that he should hold an enquiry in the nature of a judicial enquiry and hear the respective cases of the parties and decide upon evidence laid before him, then the case is one of an arbitration. The intention in such case is that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lachmanna B. Horamani v State of Karnataka, to contend that the clause is an arbitration agreement. 13.2 The learned Counsel for the respondent relied on the decisions of the Supreme Court in State of Uttar Pradesh v Tipper Chand, State of Orissa v Damodar Das, K.K, Modi, supra and Bharat Bhushan Bansal v Uttar Pradesh Small Industries Corporation Limited, Kanpur. 14. In Ratan Singh's case, supra, the Supreme Court considered whether the following clause in a forest contract entered into between a forest Contractor and a State Government was an arbitration clause: 9. In the event of any doubt or dispute arising between the parties as to the interpretation of any of the conditions of this contract or as to the performance or breach thereof, the matter shall be referred to the Chief Conservator of Forests, Madhya Pradesh, Nagpur, whose decision shall be final and binding on the parties hereto . The Supreme Court held that the said clause confers authority on the Chief Conservator of Forests to adjudication upon disputes referred to him and the decision shall be final and binding on both the parties, and therefore it was an arbitration agreement. 15. In Rukmanibai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to execute the same whether arising during the progress of the work or after the completion, termination or abandonment thereof, the dispute shall, in the first place, be referred to the VC and MD who has jurisdiction over the work specified in the contract. The VC and MD shall, within a period of 90 days from the date of being requested by the Contractor to do so, give written notice of his decision to the Contractor. Managing Director's Decision Final: (b) Subject to the form of settlement hereafter provided, the VC and MD's decision in respect of every dispute or difference so referred shall be final and binding upon the Contractor. The said decision shall forthwith be given effect to and Contractor shall proceed with the execution of the work with all due diligence. A perusal of the clause shows that the parties had agreed to refer their disputes to the Vice-Chairman and Managing Director having jurisdiction over the work specified in the contract. The reference to the words 'dispute' and 'reference' clearly indicate the intention of the parties of getting their disputes settled through an arbitrator under the Act. If the intention was to get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by implication any arbitration agreement as it did not refer to any dispute or reference of such dispute for decision. 18. In the case of State of Orissa, supra, the Supreme Court considered whether the following clause constitute an arbitration agreement: 25. Decision of Public Health Engineer to be final.--Except where otherwise specified in this contract, the decision of the public Health Engineer for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications; drawings and instructions hereinbefore mentioned and as to the quality of workmanship or material use on the work, or as to any other question, claim, right, matter or thing, whatsoever in any way arising out of, or relating to, the contract, drawings, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the works or the execution of failure to execute the same, whether arising during the progress of the work or after the completion or the sooner determination thereof of the contract . The Supreme Court referred to the decision in Tipper Chand's case, supra and held that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emphasis supplied) 20. In Bharat Bhushan Bansal's case, supra, the question that arose for consideration was whether the following clauses amounted to an arbitration agreement: Decision of the Executive Engineer of the UPSIC to be final on certain matters 23. Except where otherwise specified in the contract, the decision of the Executive Engineer shall be final, conclusive and binding on both the parties to the contract on all questions relating to the meaning, the specification, design, drawings and instructions hereinbefore mentioned, and as to the quality of workmanship or materials used on the work or as to any other question whatsoever in any way arising out of for relating to the designs, drawings, specifications, estimates, instructions, orders or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work, or after the completion thereof or abandonment of the contract by the Contractor shall be final and conclusive and binding on the Contractor. Decision of the MD of the UPSIC on all other matters shall be final 24. Except as provided in Clause 23 hereof, the decision of the Managing D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate forum (other than a Court or Tribunal) or decision; (ii) it provides either expressly or impliedly, for an enquiry by the private forum giving due opportunity to both parties to put forth their cases; and (iii) it provides that the decision of the forum is final and binding upon the parties, without recourse to any other remedy and both would abide by such decision. Where there is no provision either for reference of disputes to a private forum, or for a fair and judicious enquiry, or for a decision which is final and binding on parties to the dispute, there is no arbitration agreement. 22. Let me examine Clause 29 (and old Clause 67) of the Conditions of Contract in the light of the said principles, An analysis of the clause discloses the following: (a) The heading of the clause is 'settlement of disputes'. There is no reference to either 'arbitration' or 'Arbitrator'. (b) Clause (a) provides that if any dispute or difference of any kind whatsoever to arise between the Executive Engineer/Superintending Engineer and the Contractor, regarding the matters mentioned therein, the dispute shall in the first place be referred to Chief Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , then a party can approach the Civil Court only for setting aside the award and not for settlement of the disputes. This provision makes it clear that the decision of the Chief Engineer is not intended to be a decision by way of adjudication of the disputes/differences between the parties by way of arbitration but is intended to be merely a decision of the party (employer) which, when intimated to the other side, gives rise to a cause of action to the other party (Contractor) to approach the Civil Court for adjudication of its dispute/claim. (f) Similarly, sub-clause (d) which provides that if the Chief Engineer does not give his decision within a particular period, the Contractor can approach the Civil Court for settlement of the dispute, again demonstrates that no finality is intended to be attached to the decision of the Chief Engineer and the final adjudication should be by the Civil Court and not by the Chief Engineer. The position is the same in regard to old Clause 67. 23. The scheme of Clause 29 (or old Clause 67) therefore is, whenever the Contractor has a claim which is not settled by the Executive Engineer or Superintending Engineer, he has to make the claim b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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