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1962 Supreme(Cal) 103
HIGH COURT OF CALCUTTA
P. C. Mallick
UNION OF INDIA - Appellant
Versus
BHARAT CHARCOAL CO. LTD. - Respondent
Award 11 Of 1962
Decided On : APRIL 19, 1962
R.N.Dutt, S.B.Mukherji
The court held that the existence of a dispute gives jurisdiction to the arbitrator and if no such dispute is raised before the suit is instituted, the Court cannot stay the suit. However, the court also held that a mere omission to raise disputes before action, short of an agreement, cannot re-invest in the court a jurisdiction which the statute has taken away from it and conferred on the arbitrator.
Headnote:
ARBITRATION - STAY OF SUIT - CONDITIONS - DISPUTE COVERED BY ARBITRATION CLAUSE - FAILURE TO RAISE DISPUTE BEFORE SUIT - DISCRETION OF COURT - INDIAN ARBITRATION ACT, 1940, SECTION 34.
Fact of the Case:
The respondent, a contractor, filed a suit against the Government for three separate sums allegedly due and payable under three contracts entered into between the parties for certain works to be done for the South Eastern Railway. The Government applied for a stay of the suit under Section 34 of the Indian Arbitration Act, contending that the dispute was covered by the arbitration clause in the contract and that the conditions laid down in Section 34 had been complied with.
Finding of the Court:
The court held that the dispute in the suit was covered by the arbitration clause in the contract and that the conditions laid down in Section 34 of the Indian Arbitration Act had been complied with. The court further held that the Government was entitled to claim in terms of the contract to appropriate the amounts due to the contractor on account of the other two contracts in satisfaction of its claim under the other contract, and that this claim was denied by the contractor, thus constituting a dispute covered by the arbitration clause.
Issues: 1. Whether the dispute in the suit was covered by the arbitration clause in the contract? 2. Whether the conditions laid down in Section 34 of the Indian Arbitration Act had been complied with? 3. Whether the Government was entitled to claim in terms of the contract to appropriate the amounts due to the contractor on account of the other two contracts in satisfaction of its claim under the other contract? 4. Whether this claim was denied by the contractor, thus constituting a dispute covered by the arbitration clause?
Ratio Decidendi: 1. The arbitration clause in the contract was in the widest possible terms and covered all disputes arising under or in connection with the contract or in any way attaching or relating to or concerning the construction, meaning or effect of the conditions of the contract. 2. The court held that the existence of a dispute gives jurisdiction to the arbitrator and if no such dispute is raised before the suit is instituted, the Court cannot stay the suit. However, the court also held that a mere omission to raise disputes before action, short of an agreement, cannot re-invest in the court a jurisdiction which the statute has taken away from it and conferred on the arbitrator. 3. The court held that the Government was entitled to claim in terms of the contract to appropriate the amounts due to the contractor on account of the other two contracts in satisfaction of its claim under the other contract, and that this claim was denied by the contractor, thus constituting a dispute covered by the arbitration clause.
Final Decision: The court granted a stay of the suit and ordered the parties to bear and pay their own costs of the application.
( 1 ) THIS is an application for stay of a suit under Section 34 of the Indian Arbitration Act. The respondent is a contractor. There are three contracts subsisting between the respondent and the Government. They are (1) Contract No. 22/ckp/56-57, (2) Contract No. 5/ckp/57-58 and (3) Contract No. 6/ckp/57-58. The Government entered into the contracts with the contractor for certain works to be done for the South Eastern Railway. The suit has been instituted by the contractor for three several sums alleged to be due and payable by the Government under the three said contracts.
( 2 ) IT is contended in the petition that the dispute in suit is covered by the arbitration clause in the contract and that the conditions laid down in Section 34 of the Indian Arbitration Act have been complied with in the instant case.
( 3 ) MR. Mukherjee appearing to oppose the application contended that the conditions laid down in Section 34 have not been complied with and even if they have been complied with, the Court in its discretion should not grant a stay, in the facts of the instant case.
( 4 ) THE first point urged by Mr. Mukherjee is that there is no dispute to be adjusted by arbitration. In respect to the two contracts, namely, Contracts Nos. 5 and 6/ckp/57-58, there is no dispute and it Is admitted that a substantial sum of money is due and payable to the contractor by the Government. There is no dispute also in respect to the remaining other contract as well. In respect to this contract a final bill has been tendered by the contractor and the Government has accepted it and made an 'on account payment'. The contractor has also submitted a no claim 'certificate'. Liability to pay has not been disputed. Apart from the Government's failure to pay, there is no dispute between the parties. Mere failure to pay is not however such a dispute that can be adjusted by arbitration under the arbitration clause in the contract.
( 5 ) THE Government's case is that there has been a wrong classification of works in all the running bills and because of this wrong classification, the contractor has been overpaid to the tune of more than Rs. 30,000/ -. No final bit! has been made up in the instant case. There is some discrepancy in the amount of the claim made by the Government in the petition and in the affidavit-in-reply and some explanation has been given as to how this mistake in the petition has crept in. Mr. Mukherjee is entitled to and did comment on this discrepancy. It is contended by Mr. Mukherjee that the question of classification cannot be the subject-matter of arbitration. It has been provided in other clauses of the contract that the classification by the District Engineer would be final. In the instant case, classification has been made by the District Engineer at the time when the running bills were prepared and it is not open to the Government now to effect a new classification. Whatever has been done previously is final. In any event, this is not subject to arbitration. Reference is made to Clause 21 of the contract which reads as follows:"running bills will be prepared at tender rates except in the case of earthwork where the rates shall be approximate only until a final classification is made as provided in Clause (3) of the special conditions for earthwork. * *** These interim payments are only made for the purpose of helping contractors financially and rates, and classification of the final bills may be either more or less than those shown in the interim bills. "it is contended by Mr. R. N. Dutt, learned Counsel appearing for the Government, that the payments on account of running bills are tentative payments and cannot be considered: to be conclusive and final and do not shut out a redetermination of the question of classification of the earhtworks. In the instant case, the final classification has been made by the appropriate officer named in Clause 21 and on the basis of the determination of this officer it has
