The appointment of an arbitrator under Section 11 of the Arbitration Act and the interpretation of a contractual clause providing for settlement of disputes by arbitration were upheld.

ORDER :

Jagdish Singh Khehar, CJI.

1. The question, that arises for consideration, truly emerges from two orders passed by the High Court at Calcutta (hereinafter referred to as the “High Court”), dated 24.5.2002, and 26.9.2002. The order dated 24.5.2002 is reproduced below :

“THE COURT : The Learned Counsel appearing for the respondent submitted that the State of West Bengal may be granted liberty to prefer counterclaim, if any, before the Learned Arbitrator. Mr. Dutta, the Learned Counsel appearing for the petitioner very fairly submitted that it will always be open to the respondent to prefer its counterclaim, if any, before the Learned Arbitrator and there cannot be any possible objection to this from his client. Accordingly, there is no reason why the matter should not be placed before the Hon'ble the Chief Justice for appointment of an Arbitrator.

Let the matter be placed before His Lordship for nominating a fit and proper person to act as the Arbitrator as prayed for.”

2. Likewise, the order dated 26.9.2002, is extracted below :

“The Court : In exercise of power under Section 11 of the Arbitration & Conciliation Act, 1996 I appoint Justice S.S. Ganguly (Retd.) as Arbitrator to decide the disputes arising in the matter and I fix the remuneration a sum of Rs.5000/- per sitting. The Arbitrator shall give the award within four months from the date of filing of the claims and counter claims. The remuneration of the Clerk and Stenographer shall be decided by the Arbitrator in the meeting with the parties.

Let a copy of the order be communicated to the Arbitrator concerned by the Registrar, O.S.

All parties including the Arbitrator and Registrar, O.S. are to act on a Xeroxed Signed Copy of this dictated order on the usual undertaking.”

3. A collective perusal of the aforesaid orders, leads to the clear and unambiguous conclusion, that Justice (Retired) S.S. Ganguly, came to be appointed as an arbitrator, by the High Court, in exercise of its powers under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Arbitration Act”). Additionally, it emerges, from the above orders, that learned counsel appearing for the State of West Bengal sought liberty from the High Court, to raise a counter-claim, before the arbitrator. In furtherance of the said prayer, learned counsel for the respondent-Sarkar & Sarkar accepted before the High Court, that it would be open to the State of West Bengal to prefer a counter-claim.

4. Consequent upon the appointment of the above arbitrator, the State of West Bengal raised a challenge (against the appointment of an arbitrator by the High Court under Section 11 of the Arbitration Act) during the course of the arbitral proceedings, under Section 16 of the Arbitration Act, that the dispute raised by the respondent was not arbitrable. The arbitrator accepted the aforesaid prayer and held by an order dated 15.1.2004, that the arbitrator had no jurisdiction to entertain the dispute raised by the respondent-Sarkar & Sarkar, for arbitration.

5. It is essential for us to extract herein clause 12 of the contractual agreement between the parties. The same is reproduced hereinbelow :

“Clause 12 – the Engineer-in-charge shall have power to make any alteration in, omissions from, additions to or substitutions for, the original specifications : drawings, designs and instructions, that may appear to him to be necessary or advisable during the progress of the work and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-charge and such alterations, omissions additions or substitutions shall not invalidate the contract but shall be deemed to have formed as work included in the original tender & any altered, additional or substituted work which the contractors may be directed to do in the manner above specified as part of the work shall be carried but by the contractor on the same conditions in all re