IMPORTANT POINT
The Apex Court has declined to subscribe to the view that interpretation of arbitration clause itself can be or should be left to be determined by arbitrator and such determination cannot be done by Court at any stage.

Headnote:Arbitration Act, 1940-Section 20 -Arbitration through Court-Six claims set out in petition being referred for settlement-Singh Judge allowed two claims to be referred-In appeal, D.B. referred the remaining four matters on interpreting the clause 63 of the General Conditions of Contract-Whether correct? (No) (They are covered by "escaped matter" and cannot be referred to arbitrator)-Case law discussed-Appeal allowed-(Contract Act, 1872-Sections 55 and 56).
Held : To sum up, our conclusion are: (i) while deciding a petition under Section 20 of the Arbitration Act, 1940, the Court is obliged to examine whether a difference which is sought to be referred to arbitration is one to which the arbitration agreement applies. If it is a matter excepted from the arbitration agreement, the Court shall be justified in withholding the reference, (ii) to be an excepted matter it is not necessary that a departmental or in-house remedy for settlement of claim must be provided by the contract. Merely for the absence of provision for in-house settlement of the claim, the claim does not cease to be an excepted matter, (iii) an issue as to arbitrability of claim is available for determination at all the three stages - while making reference to arbitration, in the course of arbitral proceedings and while making the award a rule of the Court. In the case before us, the claims in question as preferred are clearly covered by "excepted matters". The statement of claims, as set out in the petition under Section 20 of the Arbitration Act, does not even prima facie suggest why such claims are to be taken out of the category of "excepted matters" and referred to arbitration. It would be an exercise in futility to refer for adjudication by the arbitrator a claim though not arbitrable, and thereafter, set aside the award if the arbitrator chooses to allow such claim. The High Court was, in our opinion, not right in directing the said four claims to be referred to arbitration. After the hearing was concluded the learned counsel for the respondent cited a few decisions by making a mention, wherein the view taken is that interpretation of contract is a matter for arbitrator to decide and the Court cannot substitute its own decision in place of the decision of the arbitrator. We do not think that the cited cases have any relevance for deciding the question arising for consideration in this appeal. None of the cases is an authority for the proposition that the question whether a claim is an excepted matter or not must be left to be decided by the arbitrator only and not adjudicated upon by the Court while disposing of a petition under Section 20 of the Arbitration Act, 1940. We cannot subscribe to the view that interpretation of arbitration clause itself can be or should be left to be determined by arbitrator and such determination cannot be done by Court at any stage. For the foregoing reasons we are of the opinion that the view of the excepted matters taken by the Division Bench of the High Court cannot be sustained. The appeal is allowed, the impugned decision of the Division Bench of the High Court is set aside and that of the learned Single Judge is restored. No order as to the costs. (Paras 17 to 20)

JUDGMENT

R.C. Lahoti, J.-The respondent was granted by the appellants work of construction on bored piles 500 mm dia by cast in Situ method for widening and raising of Pul Mithai (S). A contract was entered into between the parties on 27.4.1985. The contract is subject to the General conditions of the contract of Railways read with Special Conditions. Disputes arose between the parties and the respondent moved a petition under Section 20 of the Arbitration Act, 1940 praying for the arbitration agreement being filed in the Court and six claims set out in the petition being referred to the Arbitrator for settlement. The learned Single Judge of the High Court of Delhi (Original Side) directed two claims to be referred but as to claims numbers 3 to 6 formed an opinion that the claims being excepted matters within the meaning of Clause 63 of General Conditions of Contract were not liable to be referred to arbitration. An intra-Court Appeal preferred by respondent has been allowed and the four claims have also been directed to be referred by the Division Bench to arbitrator on forming an opinion that they were not covered by excepted matters . The appellants have filed this petition seeking special leave to appeal against the decision of Division Bench.

2. Leave granted.

3. Clause 63 of the General Conditions of the Contract provides as under:

"Matters finally determined by the Railway - All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the Railway and the Railway shall within a reasonable time after receipt of the Contractor s representation make and notify decisions on all matters referred to by the contractor in writing provided that matters for which provision has been made in clauses 18, 22(5), 39, 45(a), 55, 55-A(5), 61(2) and 62(1) (XII)(B)(e)(b) of the General conditions of Contract or in any clauses of the special conditions of the contract shall be deemed as excepted matters and decisions thereon shall be final and binding on the contractor provided further that excepted matters shall stand specifically excluded from the purview of the arbitration clause and not be referred to arbitration."

4. Clauses 9.2, 11.3 and 21.5 of Special Conditions of contract are as under:-

"9.2. No material price variation or wages escalation on any account whatsoever and compensation for "Force Majaure" etc. shall be payable under this contract.

11.3. No claim whatsoever will be entertained by the Railway on a/c of any delay or hold up of the works arising out of delay in supply of drawings, changes, modifications, alterations, additions, omissions, omissions in the site layout plans or detailed drawings or designs and or late supply of such materials as are required to be arranged by the Railway or due to any other factor on Railway Accounts.

21.5. No claim for idle labour and/or idle machinery etc. on any account will be entertained. Similarly no claim shall be entertained for business loss or any such loss."

5. Claims numbers 3 to 6 whereon reference is sought for by the respondent to the Arbitrator are as under:-

3. There occurred tremendous increase in cost of building materials. 52 Nos. of piles were bored after the expiry of stipulated completion period and particularly when the prices were too high. Additional cost incurred @ Rs. 250/- for these 42 Nos. of piles may please be paid. This has also been verified by your staff at site, Rs. 250 x 42 = Rs. 10500/-.

4. Piling rig with diesel driven wench, mixture, machine, driving pipe, wheel barrows, hoppers and other tools and plants remained idle at site for 24 months, i.e. for 75 days. The entire machinery was procured from the market on hire charges. Rent was paid @ Rs.1070/- per day for this machinery. Hire charges amounting to Rs

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2002 Supreme(SC) 294

IMPORTANT POINTThe Apex Court has declined to subscribe to the view that interpretation of arbitration clause itself can be or should be left to be determined by arbitrator and such determination cannot be done by Court at any stage.

Cases Referred (8)

IMPORTANT POINT
The Apex Court has declined to subscribe to the view that interpretation of arbitration clause itself can be or should be left to be determined by arbitrator and such determination cannot be done by Court at any stage.