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1994 Supreme(Del) 474
High Court Of Delhi
GARG BUILDERS AND ENGINIRS - Appellant
Versus
UTTAR PRADESH RAJKIYA NIRMAN NIGAM LIMITED - Respondent
Interim Application 12667 of 1992
Decided On : 07/25/1994
M.M.CHOPRA, R.G.SRIVASTAVA, S.S.Chauhan
A clause providing for the final and binding decision of the Unit In-charge is not an arbitration clause but a finality clause.
Headnote:
ARBITRATION ACT, 1940 - SECTION 34 - STAY OF SUIT - ARBITRATION CLAUSE - INTERPRETATION - CLAUSE PROVIDING FOR FINAL AND BINDING DECISION OF UNIT IN-CHARGE NOT AN ARBITRATION CLAUSE - SUIT NOT MAINTAINABLE.
Fact of the Case:
Plaintiff, a contractor, entered into a work order agreement with the defendant, a government agency, for the construction of a drain. The agreement contained a clause (Clause 15) providing that in case of any dispute, the decision of the then Unit In-charge would be final and binding on both parties. The plaintiff filed a suit against the defendant claiming damages and losses due to the withdrawal of certain work and termination of the contract. The defendant filed an application under Section 34 of the Arbitration Act, 1940, seeking a stay of the suit on the ground that there existed an arbitration agreement containing Clause 15.
Finding of the Court:
The court held that Clause 15 was not an arbitration clause but a finality clause, and therefore, the suit was not maintainable. The court observed that the clause did not refer to disputes arising out of, or concerning, or in connection with, or in consequence of, or relating to the contract, and therefore, it could not be said to be an arbitration clause. The court further held that the decision of the Unit In-charge regarding the interpretation of the condition of the contract being final and binding, by no stretch of imagination could be called an arbitration clause.
Issues: Whether Clause 15 of the work order agreement was an arbitration clause.
Ratio Decidendi: An arbitration clause must be comprehensive enough to cover all disputes arising out of the agreement covered by the clause. The clause must involve consideration of two matters: (1) What is the dispute in the suit; and (2) What dispute the arbitration clause covers. A clause providing for the final and binding decision of the Unit In-charge is not an arbitration clause but a finality clause.
Final Decision: The court dismissed the defendant's application under Section 34 of the Arbitration Act, 1940, and held that the suit was not maintainable.
( 2 ) IT is the case of plaintiff herein that since the Nigam withdrew certain work out of his work order arbitrarily and illegally, therefore, he suffered losses and damages. Not only the work was withdrawn, the Nigam illegally and arbitrarily terminated his contract vide order dated 25-3-1991. He was in fact performing his contractual obligation in accordance with the terms of the contract but the Nigam with an ulterior motive and in order to favour other agencies terminated his contract. On account of this illegal action of the Nigam, the plaintiff has suffered losses and damages. He has also not been paid his final bill. He suffered on account of the change and reduction in scope of his work. His security amount has also not been released.
( 3 ) HE had earlier filed a petition under Sections 5, 12 and 20 of the Arbitration Act (in short the act ). It was registered as O. M. P. No. 92/91. Subsequently, the same was withdrawn because the parties had not consented for any enlargement of the statutory period of time. The Arbitrator thus became functus officio, hence the question of revocation of his authority did not survive. He withdrew that petition with liberty to take such further remedies as he may be entitled to. Thereafter, the present suit claiming an amount of Rs. 8,57,267. 54 p. on account of damages, losses and for non-payment of his dues has been filed.
( 4 ) THE DDA filed the written statement. The Nigam, however, has filed an application under Section 34 of the Act seeking stay of the suit on the ground that there exists an agreement containing arbitration clause, hence suit is not maintainable. The fact of filing an earlier application under Ss. 5, 12 and 20 of the Act is admitted by the plaintiff, therefore, the suit for the same claims which are covered by the arbitration clause is not maintainable. This assertion of the Nigam has been controverted by the plaintiff on the ground, that there does not exists an agreement containing arbitration clause. Clause 15 of the work order is only a finality clause giving powers to the then Unit In-charge to give his decision. But it cannot be called an arbitration clause.
( 5 ) AT the outset, counsel for the respondent-Nigam submitted that the petitioner admitted the existence of the Arbitration agreement when he filed a petition under Ss. 5,12 and 20 of the Act listed as OMP. 92/91. He subsequently withdrew that petition on the ground that period of making and publishing the Award had expired and since petitioner had not given the consent hence Arbitrator became functus officio. Having submitted to the jurisdiction of the Arbitrator and admitting arbitration agreement, the suit is not maintainable. Even in this suit plaintiff , admits agreement and the said agreement contains arbitration clause No. 15. Therefore, also suit is not maintainable. Plaintiff at no stage challenged the arbitration agreement or the clause 15, therefore, he is estopped now challenging the same because in his earlier petition OMP. 92/91 his only prayer was to revoke the authority of the arbitrator and that this Court should appoint an impartial arbitrator in his place. The Arbitration Act provides that
