The interpretation of G.O.M. No. 430 and 160 and their effect on the arbitration of claims above Rs. 50,000.

ORDER

1. These four appeals raise a common question on the interpretation of a certain G.O.M. issued by the State of Andhra Pradesh terms of which supposedly constitute an arbitration agreement. There is, however, apparent conflict on two decisions of this Court on the interpretation of the said G.O.M.

2. We take the facts in Civil Appeal No. 7246 of 1993 to understand the issue involved in these appeals.

3. Appellant, the State of Andhra Pradesh, awarded a contract on March 14, 1984 to the respondent for execution of certain work of construction or a canal across Sarada River. The value of the contract was over Rs. 83 lacs. G.O.M. NO. 430 dated October 4, 1983 which contained arbitration clause was part of the contract document. This G.O.M. 430, in relevant part is as under:--

Value of Amount Panel of Arbitration

1. Claims upto Rs. 10,000 & above

1.Superintending Engineer of another Circle in the same Department.

2. Claims above Rs. 10.000/- upto Rs. 50.000/-

1. Another CE of the same Department.

2. Where there is only one CE in the Deptt., the CE, will submit proposals to Govt, in the Administrative Deptt., for nomination of another CE as Arbitrator by Government.

3. Claims above Rs. 50.000/- Court of competent jurisdiction.

4. Disputes and differences having arisen of the value above Rs. 50,000/-, the respondent sent a letter to the Principal Subordinate Judge, Visakhapatnam to enter into the reference as arbitrator. The Principal Subordinate Judge, however, declined to enter into any reference. Respondent then filed a petition under Section 8 of the Arbitration Act. 1940 which was allowed by the Subordinate Judge on April 13, 1992 and the disputes were referred to a sole arbitrator. State of Andhra Pradesh felt aggrieved and challenged the appointment of the arbitrator by filing a Civil Revision in the Andhra Pradesh High court. It was the contention of the State Government that under G.O.M.No. 430 claims above Rs. 50,000/- could only be decided in a regular suit and it could not be the subject matter of arbitration and that Section 8 of the Arbitration Act was inapplicable. High Court, however, dismissed the revision filed by the State Government by its judgment and order dated November 23, 1992. State Government has then taken the matter to this Court in appeal after obtaining leave. In the meanwhile, it appears, another GO No, 160 date June 1, 1987 was issued by the State Government clarifying if claim over Rs. 50,000/- is to be decided by the arbitrator or by a Civil Court. This GO we set down as under:

"ORDER

Govt., after careful consideration of various aspects, issued orders in para (2) of the G.O. read above prescribing the revised procedure for arbitration.

2. It has come to the notice of the Govt., that some of the contractors are approaching Courts to decide the claims above Rs. 50,000/- under the provisions of the Arbitration Act taking advantage of para 2(3) of the G.O. read above. The intention of the Govt. incorporating the above provision is to dispense with the Arbitration proceedings in respect of claims above Rs. 50,000/and leave the parties to have their remedy in Civil Court. As some of the contractors have misconstrued that the claims above Rs. 50,000/- have to be decided under the Arbitration Act and not under ordinary Law in a regular civil Court, the Govt., direct that the following amendments to G.O.Ms. No. 430, Para(V) Deptt., dated 24-10-1983 be issued by way of clarification.

(i) Item (3) of para (2) may be deleted.

(ii) Substitute para (3) by the following.

"All claims above Rs. 50,000/- shall be decided by the Civil Court of competent jurisdiction by way of a regular suit."

(iii) Para 3 to 7 are renumbered as para 4 to 8."

5. As to how the conflict has arisen, we refer to the two decisions of this Court in State of Andhra Pradesh vs. I Devender Reddy (1993 (2) SCALE 732) and in Vishakapatnam Urban Development Authority vs. V. Narayana Raju (1995 (2) SCALE 234). In both the decisions reference