1. Dispute regarding the existence of an arbitration clause in a contract following a remand to determine the nature of the dispute resolution provision. (Para 3 )
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2017 Supreme(SC) 1344
SUPREME COURT OF INDIA
Rohinton Fali Nariman, Sanjay Kishan Kaul, JJ.
M/s Pile Engineering India (P) Ltd. Thr. Its M.D. Manoranjan Kumar Sinha – Appellants
Versus
Bihar Rajya Pul Nirman Nigam Ltd & Ors. – Respondents
Civil Appeal No. 14991 of 2017 (Arising out of S.L.P. (C) No. 34474 of 2014)
Decided On : 18-09-2017
Important Points
The central legal point established in the judgment is the interpretation of an arbitration clause and the application of precedent in determining the validity of the clause.
Subject
Arbitration Law - Interpretation of Arbitration Clauses
Headnote
Arbitration Clause - Interpretation of Clause 23 - The court held that Clause 23 of the Agreement between the parties constituted an arbitration clause, overturning the decision of the High Court.
Fact of the Case:
The case involved a dispute over the interpretation of an arbitration clause in an agreement between the parties. The High Court had held that Clause 23 of the Agreement did not amount to an arbitration clause.
Finding of the Court:
The court found that Clause 23 of the Agreement constituted an arbitration clause between the parties, overturning the decision of the High Court and upholding the Arbitral Award dated 25.07.2004.
Issues: Interpretation of arbitration clause, validity of the Arbitral Award
Ratio Decidendi: The court relied on a direct judgment of the Supreme Court and compared Clause 23 with a similar clause in a previous case, ultimately concluding that Clause 23 constituted an arbitration clause.
Final Decision: The impugned judgment of the High Court was set aside, and the Arbitral Award dated 25.07.2004 was upheld. The appeal was allowed.
Legal Category Hierarchy
Advocates Appeared:
For the Appellant :Devashish Bharuka, Gaurav Parthap Singh, Ms. Anu Tyagi, Ms. Himanjali Gautam, Advocates.
For the Respondent:Nagendra Rai, Sr. Adv., Smarhar Singh, Shantanu Sagar, Advocates.
For the Appellant :Devashish Bharuka, Gaurav Parthap Singh, Ms. Anu Tyagi, Ms. Himanjali Gautam, Advocates.
For the Respondent:Nagendra Rai, Sr. Adv., Smarhar Singh, Shantanu Sagar, Advocates.
Table of Contents
2. Whether a clause referring disputes to a Managing Director for a final and binding decision constitutes a valid arbitration agreement. (Para 3 )
3. The court found the disputed clause almost identical to one previously upheld as an arbitration clause, with the present clause being broader in scope. (Para 4 )
4. A clause referring disputes to a designated authority whose decision is final and binding constitutes an arbitration clause. (Para 4 , 5 )
5. Appeal allowed; High Court judgment set aside and the original arbitral award upheld. (Para 6 , 7 )
6. Does a clause referring disputes to a Managing Director for a final and binding decision constitute an arbitration clause?
Yes. A clause that refers disputes or differences to a specific authority whose decision is final, conclusive, and binding on all parties is considered an arbitration clause. (Para 4 , 5 )
7. Does the inclusion of the phrase breach of contract in a dispute resolution clause affect its characterization as an arbitration agreement?
Yes. The court observed that including the expression or as to the breach of this contract makes the clause broader than similar clauses previously upheld as arbitration agreements. (Para 4 )
ORDER :
Leave granted.
2. Heard the learned counsel appearing for the parties.
3. This matter has a somewhat chequered history. In that an award that was passed on 25.07.2004 for a sum of Rs.12,09,000/- was upheld by a learned Single Judge of the Patna High Court on 16.02.2012. However, in an appeal to this Court, this Court by an order dated 12.09.2013, remanded the matter to decide whether there was an arbitration clause in point of fact between the parties. On remand, the impugned judgment dated 16.04.2014 has held that Clause 23 of the Agreement between the parties dated 12.10.1999 did not amount to an arbitration clause.
Clause 23 reads as follows:-
"Clause 23: In case any dispute or difference shall arise between the parties or either of them upon any question relating to the meaning of the specifications, designs, drawings and instruction, herein before mentioned or to the quality of workmanship of materials used on the work, or as to the construction of any of the conditions or any clause or thing therein contained, or as to any question, claim, rights or liabilities of the parties, or any matter, or thing whatsoever, in any way arising out of, or relating to the contract, designs, drawings, specifications, estimates, instructions, order or these conditions, or otherwise concerning the work, or the execution, or failure to execute the same whether arising the progress of the work, or after the completion or abandonment thereof or as to the breach of this contract, then either party shall forthwith give to the other notice of such dispute or difference and such dispute or difference shall be referred to the Managing Director of the Corporation and his decision thereon shall be final conclusive and binding on all the parties."
4. We are of the opinion that the High Court was in error. The matter is covered by a direct judgment of this Court which is referred to in Vishnu (Dead) by LRs. v. State of Maharashtra and Others, (2014) 1 SCC 516. In a lengthy judgment referring to most of the judgments on point, this Court referred to the judgment in Mallikarjun v. Gulbarga University, (2004) 1 SCC 372. Clause 30, on the facts of that case, was set out in this paragraph. It will be noticed that Clause 30 of the aforesaid paragraph and the present Clause 23 are almost identical, with one important difference - namely, the expression "or as to the breach of this contract" occurs in Clause 23 which did not occur in Clause 30 of Mallikarjun's case. Despite that, the judgment in Mallikarjun's case held that the aforesaid Clause 30 was an arbitration clause.
5. Following the aforesaid judgment, we state that Clause 23 of the Agreement was an arbitration clause between the parties.
6. As a result, the impugned judgment of the High Court is set aside and the Arbitral Award dated 25.07.2004 is upheld.
7. Accordingly, the appeal is allowed.
