2003 Supreme(SC) 1106

2003(8) Supreme 255
SUPREME COURT OF INDIA
(From Karnataka High Court)
V.N. Khare, CJI., S.B. Sinha & AR. Lakshmanan, JJ.
Mallikarjun -Appellant
versus
Gulbarga University -Respondent
Civil Appeal No. 2758 of 2002
Decided on 5-11-2003
Counsel for the Parties :
For the Appellant : Bhaskar P. Gupta, Sr. Advocate, G V Chandrashekhar, Advocate for P.P. Singh, Advocate.
For the Respondent : Basava Prabhu S. Patil, Shivaprabhu S. Hiremath, R. Subrahmanya Prasad, Mohd. Rishal, Sr. Advocate for A.S. Bhasme, Advocate.

IMPORTANT POINT
Clause in agreement stipulating that in case of dispute between parties decision of Superintending Engineer will be final and binding would constitute arbitration clause.

Headnote:Arbitration and Conciliation Act, 1986-Arbitration award-Execution-Objection in execution that purported agreement was not an arbitration agreement-High Court accepted the plea in revision-Appeal-Essential elements of arbitration agreement-Agreement clause stipulated that in case of dispute between parties, decision of Superintending Engineer shall be final and binding-Agreement thus did contain arbitration clause-It is not necessary that conditions as regards adduction of evidence by parties or giving an opportunity of hearing must specifically be mentioned therein-Impugned order was liable to be set aside.

       Held : A plain reading of the aforementioned clause would show that in case of dispute between the contractor and Gulbarga University, the decision of the Superintending Engineer of the Gulbarga Circle, Gulbarga, shall be final and binding to all parties to the contract, such dispute may embrace within its fold all questions relating to the matters specified therein as also any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract. Such dispute may also relate to designs, drawings, specifications, estimates, instructions, orders or those conditions or otherwise concerning the works or the execution or failure to execute the same. Such disputes may be referred to for decision of the Superintending Engineer; whether arising during the progress of the work after the completion thereof. There cannot thus, be any doubt whatsoever that Clause 30 aforementioned fulfills all the criteria of a valid arbitration agreement. It is further not in dispute that the Superintending Engineer, Gulbarga Circle, Gulbarga is an independent person. In Bihar State Mineral Development Corporation and Anr. vs. Encon Builders (I) (P) Ltd., reported in 2003 (7) SCC 418, laid down the essential elements of the arbitration agreement, which are as follows:

        (i) There must be a present or a future difference in connection with some contemplated affair;

        (ii) There must be the intention of the parties to settle such difference by a private tribunal;

        (iii) The parties must agree in writing to be bound by the decision of such tribunal; and

        (iv) The parties must be ad idem.

       The principles laid down in the aforementioned decision are not in question. We, therefore, are required to construe Clause 30 of the said agreement. Applying the aforesaid principle to the present case, Clause 30 requires that the Superintending Engineer, Gulbarga Circle, Gulbarga, to give his decision on any dispute that may arise out of the contract. Further we also find that the agreement postulates present or future differences in connection with some contemplated affairs inasmuch as also there was an agreement between the parties to settle such difference by a private tribunal, namely, the Superintending Engineer, Gulbarga Circle, Gulbarga. It was also agreed between the parties that they would be bound by the decision of the tribunal. The parties were also ad idem. In the aforesaid view of the matter, it must be held that the agreement did contain an arbitration clause. (Paras 6 to 11)

       Once Clause 30 is constituted to be a valid arbitration agreement it would necessarily follow that the decision of the Arbitrator named therein would be rendered only upon allowing the parties to adduce evidence in support of their respective claims and counter claims as also upon hearing the parties to the dispute. For the purpose of constituting the valid arbitration agreement, it is not necessary that the conditions as regards adduction of evidence by the parties or giving an opportunity of hearing to them must specifically be mentioned therein. Such conditions, it is trite are implicit in the decision making process in the arbitration proceedings. Compliance of the principles of natural justice inheres in an arbitration process. They, irrespective of the fact as to whether recorded specifically in the arbitration agreement or not are required to be followed. Once the principles of natural justice are not complied with, the Award made by the Arbitrator would be rendered invalid. We, therefore, are of the opinion that the arbitration clause does not necessitate spelling out of a duty on the part of the arbitrator to hear both parties before deciding the question before him. The expression decision subsumes adjudication of the dispute. Here in the instant case, it will bear repetition to state, that the disputes between the parties arise out of a contract and in relation to matters specified therein and, thus, were required to be decided and such decisions are not only final and binding on the parties, but they are conclusive which clearly spells out the finality of such decisions as also its binding nature. (Para 16)