IMPORTANT POINT
Ingredients of arbitration clause stated and discussed.

Headnote:Arbitration Law - Arbitration clause - In case of dispute Chief Engineer's decision to be final - If not acceptable, contractor may approach the law courts for settlement of dispute - Intention of the parties - Dispute not to be adjudicated by way of arbitration - Intention is to get the dispute adjudicated only through the normal procedure of approaching law Courts - This is not arbitration agreement. (Paras 14, 15 29 and 30)
        ILR 2000 KAR 4953; (1980) 4 SCC 556; (2007) 2 SCC 720; (2007) 5 SCC 28; (2011) 7 SCC 406; (1999) 2 SCC 166; (1998) 3 SCC 573; AIR 1967 SC 166; (1980) 2 SCC 341; (1996) 2 SCC 216; Civil Appeal No.4700 of 1985; Civil Appeal No.3680/2005; (2004) 1 SCC 372 - Distinguished
       Facts of the case:
        The appellants were granted contracts by the govt. of Karnataka o its instrumentalities.
        When disputes arose the appellants invoked the arbitration clause in the agreements.
        High Court rejected their prayers for appointment of arbitrators.
       Finding of the Court:
        The clause relied upon by the appellants is not an arbitration clause.
       Result : Civil Appeal Nos. 1586, 1587, 1588, 4187, 5496, 6323, 6327 and 6328 of 2004; Civil Appeal Nos. 558-560 of 2006; Civil Appeals arising out of SLP(C) Nos. 16117, 17147, 24655 and 26073 of 2004; Civil Appeals arising out of SLP(C) Nos. 5951, 12552 and 12553 of 2006, Civil Appeal arising out of SLP(C) No. 8597 of 2009 and Civil Appeal arising out of SLP(C) No. 13528 of 2012 are dismissed.
        Civil Appeals arising out of SLP(C) Nos. 28087-28088, 28089, 29227-29230 and 31975 of 2011 and Civil Appeal No.1374 of 2013 are allowed.

JUDGMENT

G. S. Singhvi, J.

1. Leave granted in SLP (C) Nos. 16117 of 2004, 17147 of 2004, 24655 of 2004, 26073 of 2004, 5951 of 2006, 12552 of 2006, 12553 of 2006, 8597 of 2009, 28087-28088 of 2011, 28089 of 2011, 29227-29330 of 2011, 31975 of 2011 and 13528 of 2012.

2. Of the above noted 23 appeals, 17 have been filed by those who had been awarded contracts by the Government of Karnataka and/or its agencies/instrumentalities for execution of the particular project/works. They have challenged the orders passed by the Designated Judge/Division Benches of the Karnataka High Court rejecting their prayer for appointment of Arbitrator in terms of the clauses relating to settlement of disputes. One appeal has been filed by the contractor who was awarded construction contract by Nagarika Yogbakashema Mathu Gruha Nirmana Sahakara Sangha. The remaining 5 appeals have been filed by Karnataka Neeravari Nigam Limited and Kirshna Bhagya Jala Nigam Limited for setting aside the orders passed by the learned Designated Judge whereby he directed the concerned Chief Engineer to act as an Arbitrator.

3. For the sake of convenience, we shall notice the facts from the record of Civil Appeal No.1586 of 2004 - M/s. P. Dasaratharama Reddy Complex v. The Government of Karnataka and another because arguments were advanced with reference to that case.

4. The appellant is a contractor engaged in executing work contracts awarded by the Government of Karnataka and its instrumentalities. In 1996, the appellant was awarded contract for construction of bridge between Yethabadi-Buyyanadoddi across Shimsha river in Malavalli. The appellant did not complete the work by alleging lack of cooperation on the part of Chief Engineer, Communication and Building (South), Bangalore (respondent No.2) and then lodged claim for payment of the amount allegedly due to him. After some time, the appellant filed an application under Section 11(6) and (8) of the Arbitration and Conciliation Act, 1996 (for short, ‘the 1996 Act’) for appointment of an Arbitrator for adjudication of all the disputes pertaining to Contract No.5/96-97 dated 8.5.1996. The Chief Justice of the High Court assigned the application to the Designated Judge, who dismissed the same vide order dated 14.9.2001 by relying upon the judgment in Mysore Construction Company v. Karnataka Power Corporation Ltd. ILR 2000 KAR 4953.

Paragraphs 5 and 6 of that order read as under:

“5. The above clause requires the contractor specifically to approach the civil court, if he is not satisfied with the decision of the Chief Engineer. It does not provide for reference to arbitration. But contrary to the specific term of clause 29, the petitioner has sought appointment of Arbitrator instead of approaching the Civil Court.

6. I had occasion to consider the question whether such a clause is an arbitration agreement in Mysore Construction Company Vs. Karnataka Power Corporation Ltd. [ILR 2000 KAR 4953] and held that the said clause is not an arbitration agreement. Following the said decision and for the reasons stated therein, it has to be held that clause 29 relied on by petitioner is not an arbitration agreement.”

5. The writ petition filed by the appellant questioning the order of the Designated Judge was dismissed by the Division Bench of the High Court by observing that Clause 29 of the Contract cannot be construed as an Arbitration Agreement or an Arbitration Clause for settlement of disputes.

6. In some of the other appeals, the appellants have challenged the orders passed by the Designated Judge rejecting their applications for appointment of Arbitrator under the relevant clause of their respective agreements.

7. In the 5 appeals, Karnataka Neeravari Nigam Limited and Krishna Bhagya Jala Nigam Limited have challenged the orders passed by the Designated Judge for appointment of the Chief Engineer as an Arbitrator and directed him to adjudicate the matter in dispute.

THE ARGUMENTS

8. Mrs. Kiran Suri, Senior Advocate and other learned coun

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2013 Supreme(SC) 991

IMPORTANT POINT Ingredients of arbitration clause stated and discussed.

Cases Referred (10)

IMPORTANT POINT
Ingredients of arbitration clause stated and discussed.