1998 Supreme(Bom) 613

IN THE HIGH COURT OF BOMBAY
F.I. Rebello, J.
Hotel Corporation of India ..... Petitioners.
Versus
M/s. Motwani (P) Limited .... Respondents.
Arbitration Petition No. 7 of 1997, decided on 13-10-1998.
Advocates appeared :
S.U. Kamdar, with R.C. Dhru i/b. Bhasin Co., for the petitioners.
Hiralal Thakkar, with B.S. Chandnani, for the respondents.

Headnote:-Section 9-Dispute arising out of contract Respondents and there after, petitioners appointed their arbitrators-Before making reference to arbitrator, respondents had not moved consultant as provided in agreement-Appointment of an arbitrator by petitioners and their participation in the proceedings cannot be said to amount to acquiescence on their part so as to bar them from raising a ground that arbitrators were not competent to decide issue in view of failure by respondents to obtain decision of consultant. AIR 1998 SC 717, AIR 1998 Bom 335, JT 1996 (2) SC 322, Ref.

       Section 23-Reference of dispute-Where the dispute was referred to an arbitrator and the dispute was arose out of contract it was held that appointment of arbitrator is not amount to acquiescence of jurisdiction.

       Section 30-Dispute arising out of contract-Reference to arbitrator-Non-speaking award Challenge as to-Specific clauses in agreement providing for settlement of dispute by the consultant first-Letter calling upon Project Manager to make payments cannot be construed as a reference for settlement of dispute by consultant-Award of arbitrator in respect of dispute without the said dispute having first been decided by consultant, is not sustainable. M/s. M.S. Chavan Construction v. Municipal Corporation of Greater Bombay, 1997 (4) SC 319, Ref.

       Work contract-Appointment Of Arbitrator by consent of both parties-Jurisdiction of Arbitrator - Clauses 40 and 41 of Agreement - Providing for reference of disputes to consultant-Not complied with-Instead both parties appointing an Arbitrator-Whether such Arbitrator has jurisdiction to decide dispute Held, Arbitrator has no jurisdiction without said disputes having first been decided by consultant._ The contract between the parties, therefore, provides that before going to arbitration any of the parties must refer the matter for decision in the first instance to the Consultant then only after the decision of the Consultant or failure to decide that the parties may call upon the Consultant within 28 days of such decision to refer the matter for arbitration of the Arbitrator. It is true that the period of 28 days may not be a mandatory provision but directory notwithstanding the procedure as provided therein. A question did arise as to what happens if the Consultant refuses to decide the matter. In such an event if in spite of reminder no decision is given within a reasonable time or notice to the Consultant to decide the matter, the matter could be referred for decision to the Arbitrator within 28 days or within the period of limitation considering the subject-matter of the dispute, if the period of 28 days is held to be directory and not mandatory.

       In the present case admittedly, there has been no decision by the Consultant. It is, however, contended on behalf of the respondents that their letter, dated 28th October, 1987 should itself be construed as a reference for decision of the Consultant. It was addressed to the Project Manager with only a copy forwarded to the Consultant. By the said letter the Project. Manager was called upon to make payments. This would be in terms of clause 35, it would not mean that this was a letter to the Consultant to decide any dispute. Even otherwise by a letter of October 27, 1987, the respondents were informed by the petitioners that MI s. Kudianwala and Co. had been terminated as Consultant with effect from 14th October, 1987 and that M/s. P.M.C. Architects, had been appointed. Copy of the letter of October 27, 1987 was addressed to the previous Consultant whose services had already been terminated on 14th October, 1987. That letter, therefore, cannot be construed as a reference for settlement of the dispute by the Consultant. That such clauses are strictly construed has been so held in the judgment in the case of M/s. M.S. Chavan Construction v. The Municipal Corporation of Greater Bombay (Arbitration Suit No. 3540 of 1992, dated 30th November, 1993). Before the learned single Judge of this Court what was in issue was clauses 96 and 97 of a Contract of the Municipal Corporation of Greater Bombay to the same effect. Reference to arbitration was sought by filing a suit under Section 20 of the Arbitration Act, 1940. The learned single Judge declined to refer the matter to arbitration without the plaintiff first getting the disputes settled by the Commissioner therein, who was the authority to decide the dispute. The said judgment came up in Appeal, in appeal No. 50 of 1994. The Division Bench of this Court presided over by the learned Chief Justice by order, dated 10th July, 1996 upheld the judgment of the learned single Judge considering clauses 96 and 97 of the contract therein. I am in respectful agreement with the views expressed therein. In matters like the present one where the parties have entered into an agreement and agreed to follow the procedure, it is that procedure which has to be followed. The respondents having not invoked the said procedure, held that the Arbitrators could not have invoked jurisdiction to pass an award in respect of the disputes referred to them without the said disputes having first been decided by the Consultant.