1961 Supreme(Cal) 92

HIGH COURT OF CALCUTTA
P. C. Mallick
GANNON DUNKERLEY AND CO. - Appellant
Versus
UNION CARBIDE (INDIA) LTD. - Respondent
Special Suit 4  Of  1960
Decided On : MAY 25, 1961

The Court has the discretion to refuse an application for filing an agreement and directing a reference under Section 20 of the Indian Arbitration Act, even in cases where there is an effective arbitration agreement and the dispute stated in the petition as covered by the arbitration agreement.

Headnote:

ARBITRATION - Filing of agreement and reference - Application under Section 20 of the Indian Arbitration Act - Conditions to be satisfied - Notice to be served on the other parties to the agreement - Sufficient cause - Court's discretion to refuse an application - Scope of arbitration - Appointment of arbitrator - Construction of arbitration clause - Finality of architect's decision - Matters excluded from arbitration.

Fact of the Case:

The plaintiff, a contractor, entered into a building contract with the defendant, a company. The contract provided for the certification of workmanship by a firm of architects and that the works shall be carried out to the reasonable satisfaction of the Architect whose decision as to sufficiency and quality of the work and material shall Be final and binding upon all parties. The plaintiff completed the work in 1957. During the progress of the work, eight running bills were submitted and paid in terms of the contract. However, the payment of the ninth bill was withheld on the ground that the roof of the factory building constructed was leaking at several places. The plaintiff attempted to effect repair, but the repairs were not found to be satisfactory. The Architect was of the opinion that the workmanship was bad, which was disputed by the contractor. The plaintiff then purported to refer the dispute to the arbitration of the Chief Engineer Central Public Works Department, in terms of the arbitration clause. The Chief Engineer protested that he never agreed to arbitrate or to nominate an arbitrator. The plaintiff filed an application under Section 20 of the Indian Arbitration Act for an order that the arbitration agreement be filed in Court and reference made.

Finding of the Court:

The Court held that there was an arbitration agreement between the parties and that the dispute raised in the petition was covered by the arbitration agreement. The Court further held that the Court had the discretion to refuse an application for filing an agreement and directing a reference under Section 20, even in cases where there was an effective arbitration agreement and the dispute stated in the petition as covered by the arbitration agreement. However, the Court found that no cause had been shown as to why the Court should not make an order filing the agreement and directing a reference.

Issues: 1. Whether there was an arbitration agreement between the parties and whether the dispute raised in the petition was covered by the arbitration agreement? 2. Whether the Court had the discretion to refuse an application for filing an agreement and directing a reference under Section 20, even in cases where there was an effective arbitration agreement and the dispute stated in the petition as covered by the arbitration agreement? 3. Whether the Court should exercise its discretion against making an order in the facts of the instant case?

Ratio Decidendi: 1. The Court held that there was an arbitration agreement between the parties and that the dispute raised in the petition was covered by the arbitration agreement. The Court relied on the fact that the arbitration clause in the contract provided for arbitration of disputes as to the construction of the contract or as to matters and things arising thereunder, and that the dispute raised in the petition was a dispute as to whether the architect had wrongfully withheld the certificate and whether the plaintiff was entitled to Rs. 59,941.52 np. for works done. 2. The Court held that the Court had the discretion to refuse an application for filing an agreement and directing a reference under Section 20, even in cases where there was an effective arbitration agreement and the dispute stated in the petition as covered by the arbitration agreement. The Court relied on the fact that Section 20(4) of the Arbitration Act empowers the Court to make an order of reference to the arbitrator appointed by the parties whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. The Court also relied on the fact that Section 34 of the Arbitration Act empowers the Court to refuse to stay a suit if it is satisfied that there is no sufficient reason why the matter should not be referred in accordance with the arbitration agreement. 3. The Court held that it should not exercise its discretion against making an order in the facts of the instant case. The Court relied on the fact that no difficult question of law or investigation of a charge of fraud was involved in the dispute, and that the arbitrator would be directed to accept all decisions of the Architect in matters in which the Architect's decisions had become final and binding on the parties under the contract.

Final Decision: The Court ordered that the arbitration agreement be filed and that the dispute be referred to arbitration. The Court appointed Sri Section N. Majumdar, B. E. M. I. E. , Retired Chief Engineer (Works and Buildings) West Bengal, as arbitrator and directed him to make his award within four months from the date of the service of the order on him.