Important POINTS
In order that an agreement is construed as arbitration agreement what is required to be ascertained is whether parties had agreed that if any dispute arises between them in respect of subject matter of contract, such dispute shall be refused to arbitration.
Right to apply for arbitration proceeding under Section 20 of the Arbitration Act, 1940 runs from the date when the dispute arises.

JUDGMENT

TARUN CHATTERJEE, J. —

1.The crucial question that needs to be decided in these appeals is whether Clause 4 of Work Order No.114 dated 16th of May, 1985 (in short ‘Work Order’) which says that: “Any dispute arising between the department and the contractor/society shall be referred to the Superintending Engineer, Anandpur Sahib, Hydel Circle No.1 Chandigarh for orders and his decision will be final and acceptable/binding on both the parties” constituted an arbitration agreement.

2.Before proceeding further, we may bring it on record that though the facts in both the appeals are identical, but for purposes of disposal of these appeals, the facts in CA No. 5197 are being considered which are as follows :

3.The parties entered into a contract for the work of dowel drain and wire crate at RD No. 9400 to 10400 kms. in the State of Punjab. The appellants made running payments to the respondent during the period of execution of the works in terms of the Work Order. However, after completion of the work, the final measurements were not made, nor the final bills were prepared. The dispute remained pending with the department for which the respondent called upon the appellants to finalise the dispute and prepare the final bill as per the rates quoted by the respondent and accepted by the appellants. A final notice was issued on 16th April, 1990, calling upon the appellants to refer the dispute to an arbitrator as per Clause 4 of the Work Order. Since the appellants had failed to appoint an Arbitrator, the respondent filed an application before the Additional Senior Subordinate Judge, Ropar, Punjab under Section 20 of the Arbitration Act, 1940 (in short ‘the Act’) seeking appointment of an Arbitrator.

4.By an order dated 20th October, 1993 the learned Additional Senior Subordinate Judge, Ropar, Punjab after hearing both the parties, allowed the application filed by the respondent and referred the dispute for decision to the Superintending Engineer, Anandpur Sahib, Hydel Circle No. 1 Chandigarh. The Additional Senior Subordinate Judge, Ropar, while allowing the application, held that Clause 4 of the Work Order must be construed to be an arbitration agreement within the meaning of Section 2(a) of the Act and that the application filed under Section 20 of the Act was filed within the period of limitation. According to the learned Additional Senior Subordinate Judge, Ropar, the cause of action arose from the date the final notice of demand was sent, i.e., 16th April 1990, which was well within the period of 3 years from the date of filing the application as contemplated under Article 137 of the Limitation Act 1963. Feeling aggrieved by the aforesaid order, the appellants preferred an appeal in the Court of the District Judge, Roopnagar, Punjab, which by an order dated 24th April, 1997 was allowed, inter alia, on a finding that Clause 4 of the Work Order could not be held to be an ‘arbitration agreement’ nor the dispute was covered within the ambit of the Act. On the question of limitation in filing the application under Section 20 of the Act, the appellate court held that the application under Section 20 of the Act was barred by limitation. Feeling aggrieved by the order of the learned Additional District Judge, Roopnagar, Punjab, reversing the order of the Additional Senior Subordinate Judge, Ropar, the respondent filed a Civil Revision Case before the High Court of Punjab and Haryana at Chandigarh, which by the impugned order was allowed and the order of the Additional Subordinate Judge, Ropar was restored. Dissatisfied with this order of the High Court, a special leave petition was filed by the appellants, which on grant of leave was heard in the presence of the learned counsel for the parties.

5.Having heard the learned counsel for the parties and after going through the impugned order of the High Court as well as the orders of the appellate court and the trial court and the materials on record and considering the clauses in the Wor