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SUPREME COURT OF INDIA
G.S. SINGHVI, V. GOPALA GOWDA & C. NAGAPPAN, JJ.
Vishnu (dead) by L.Rs. – Appellants
Versus
State of Maharashtra & Others – Respondents
Civil Appeal No. 3680 of 2005 with Civil Appeal No. 3681 of 2005
Decided On : 04-10-2013
(1980) 2 SCC 341; C. A. No. 4700/1985; (1996) 2 SCC 216; (1998) 3 SCC 573; (1999) 2 SCC 166 - Relied upon
(2004) 1 SCC, 372; (2007) 5 SCC 28 - Distinguished
(b) Administration of justice - Judicial Propriety - Superintending Engineer exercising power of overall supervision - Passing orders - Cannot adjudicate his orders as arbitrator. (Para 26)
(2003) 7 SCC 418 - Relied upon
(c) Administration of Justice - Interpretation - Government circulars - Interpretation by authorities are not conclusive - Not binding on Courts. (Para 32)
Facts of the case:
This appeal relates to interpretation of agreement to ascertain whether it contains an arbitration clause in terms of the Arbitration Act, 1940.
Finding of the Court:
Clause 30 of B-1 agreement is not an arbitral clause.
Result : Appeal dismissed.
Key Points: - The main question is whether Clause 30 of B-1 Agreements entered into between the Government of Maharashtra and the appellant constitutes an arbitration clause under the Arbitration Act, 1940 [1000533050001] (!) - Clause 30 makes the Superintending Engineer's decision final, conclusive, and binding on matters relating to specifications, designs, quality of workmanship, materials, claims, etc., arising from the contract (!) (!) [1000533050014] - Clauses 29 and 30 confer supervisory control on the Superintending Engineer as a departmental dispute resolution mechanism, not arbitration [1000533050016] - Distinction between expert determination (uses own expertise, makes enquiries) and arbitration (judicial function, evidence, law application) per Russell on Arbitration [1000533050017] (!) - Relied on State of U.P. v. Tipper Chand (1980) 2 SCC 341, holding similar clause not an arbitration agreement as no reference to dispute or arbitrator [1000533050018] (!) (!) - Distinguished Mallikarjun v. Gulbarga University (2004) 1 SCC 372 due to differences: SE not supervisory authority there, explicit dispute reference [1000533050027] (!) (!) [1000533050029] - Superintending Engineer cannot act as arbitrator due to supervisory role, risking bias; cannot judge own decisions [1000533050025] (!) - Trial court wrongly appointed Chief Engineer as arbitrator; High Court correctly held Clause 30 not arbitral [1000533050009][1000533050030] - Government circulars interpreting Clause 30 as arbitration not binding on courts [1000533050015] (!) [1000533050031] - Appeals dismissed, confirming Clause 30 is not an arbitration clause [1000533050032]
Judgment :-
G.S. Singhvi, J.
1. Whether Clause 30 of B-1 Agreements entered into between the Government of Maharashtra and the appellant is in the nature of an arbitration clause is the question which arises for consideration in this appeal filed against judgment dated 6.5.2004 of the learned Single Judge of the Bombay High Court, Aurangabad Bench.
2. The tenders submitted by the appellant, who is now represented by his legal representatives, for Tondapur Medium Project, Jalgaon Medium Project Division, Jalgaon and Hatnoor Canal Division No.3, Chopda, District Jalgaon were accepted by the Competent Authority and five agreements were executed between the parties on 19.5.1983 and 5.10.1983 (hereinafter referred to as ‘B-1 Agreements’).
3. In January 1985, the appellant abandoned the works and submitted bills for the works already done. He also claimed damages in lieu of the alleged loss suffered by him.
4. After four years, the appellant served notice under Section 80 CPC and then filed Civil Suit No.995/1989 before the trial Court for declaring the recovery proceedings initiated by the defendants as illegal, null and void.
5. During the pendency of the suit, the appellant filed an application under Section 21 of the Arbitration Act, 1940 (for short, ‘the 1940 Act’) and prayed that the matter may be referred to an Arbitrator by appointing the Superintending Engineer or any other Arbitrator as the sole Arbitrator in terms of Clause 30 of B-1 Agreement. The same was dismissed by the trial Court vide order dated 29.7.1994 on the ground that both the parties had not given consent for making a reference to an Arbitrator.
6. Soon thereafter, the appellant filed an application under Order VI Rule 17 CPC for leave to amend the plaint and incorporate an additional prayer for reference of the dispute to an Arbitrator. The same was allowed by the trial Court vide order dated 27.9.1994.
7. The respondents challenged the aforesaid order in Civil Revision Application No.153/1995, which was partly allowed by the learned Single Judge of the High Court and the order of the trial Court granting leave to the appellant to amend the prayer clause was set aside.
8. In the meanwhile, the appellant filed application dated 3.2.1995 under Section 20 of the 1940 Act for settlement of accounts and prayed that respondent Nos.3 and 4 may be directed to file Arbitration Agreement in terms of Clause 30 of B-1 Agreement executed between the parties and an Arbitrator may be appointed to decide all the disputes. On 17.6.1995, the trial Court directed the parties to adduce evidence on the nature of Clause 30 of B-1 Agreement.
9. After considering the evidence adduced by the parties and by placing reliance on some judgments of the High Courts, the trial Court allowed the application and declared that Clause 30 of B-1 Agreement is an arbitration clause. The trial Court also appointed Shri D.G. Marathe, Chief Engineer (PWD) as an Arbitrator and referred all the disputes to him.
10. Civil Revision Application No.447 of 1997 filed by the respondents against the order of the trial Court was allowed by the learned Single Judge of the Bombay High Court and it was held that Clause 30 of B-1 Agreement cannot be treated as an arbitration clause. In support of this conclusion, the High Court relied upon the judgment of this Court in Civil Appeal No. 4700/1985 – State of Maharashtra v. M/s. Ranjeet Construction.
11. While issuing notice of the special leave petition on 4.1.2005, this Court passed the following order:
“The learned counsel for the petitioner places reliances on a three Judge Bench decision of this Court in Mallikarjun Vs. Gulbarga University 2004 (1) SCC, 372 wherein a similar clause, as arises for consideration in the present case, was held to be an arbitration clause.
The abovesaid decision seems to be at divergence from the view taken by a two Judge Bench decision in Bharat Bhushan Bansal Vs.U.P. Small Industries Corporation Ltd., Kanpur 1999 (2) SCC, 166 wherein reliance
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