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1982 Supreme(Del) 27

High Court Of Delhi
BHARAT LAL AND COMPANY - Appellant
Versus
UNION OF INDIA - Respondent
First Appeal (OS) 12 of 1980
Decided On : 02/03/1982

Advocates Appeared:
ASHOK KASHYAP, D.K.Sayal, DALJIT SINGH

Clauses in an agreement providing for the final decision of a designated person may constitute an arbitration agreement, even if the words "arbitration" or "arbitrator" are not used.

Headnote:

ARBITRATION ACT, 1940 - SECTIONS 8, 20, 39 - ARBITRATION AGREEMENT - INTERPRETATION - CLAUSES PROVIDING FOR FINAL DECISION BY DIVISIONAL SUPERINTENDENT - HELD TO CONSTITUTE AN ARBITRATION AGREEMENT - ORDER REFUSING TO FILE ARBITRATION AGREEMENT IS APPEALABLE.

Fact of the Case:

Bharat Lal entered into a contract with the Northern Railway for conservancy work at Ghaziabad for a period of 2 years. The Railway rescinded the contract before its completion and did not pay Bharat Lal as per the terms of the agreement. Bharat Lal applied under sections 8 and 20 of the Arbitration Act to file the arbitration agreement and refer the matter to arbitration. The trial court dismissed the application, holding that the clauses in the agreement did not constitute an arbitration agreement. Bharat Lal appealed.

Finding of the Court:

The court held that the clauses in the agreement providing for the final decision of the Divisional Superintendent constituted an arbitration agreement. The court relied on the Supreme Court decision in Smt. Rukmanibai v. The Collector, Jabalpur, which held that the intention of the parties is paramount in determining whether a clause constitutes an arbitration agreement.

Issues: Whether the clauses in the agreement providing for the final decision of the Divisional Superintendent constituted an arbitration agreement.

Ratio Decidendi: The court held that the clauses in the agreement were of the widest character and covered all disputes under the contract and "in connection with this contract". The court found that the intention of the parties was that the Divisional Superintendent would hold an inquiry into the disputes and decide upon the evidence laid before him. The court also held that the nature of the work was not relevant in determining whether there was an arbitration agreement.

Final Decision: The court allowed the appeal and held that the two clauses constituted an arbitration agreement. The Divisional Superintendent, Northern Railway, New Delhi was directed to decide the disputes formulated by Bharat Lal.

AVADH BEHARI ROHTGI, J. (ORAL)

( 1 ) THIS is an appeal from the order of a learned single judge dated 29th November, 1978.

( 2 ) THESE are the facts. The appellant, Bharat Lal, sole proprietor of M/s. Bharat Lal and Co. , entered into a contract with the respondent, Northern Railway, for doing conservancy wort at Ghaziabad. This contract was for a period of 2 years, that i- , from 1-7-1968 to 30-6-1970. A formal agreement was executed on 24-10-1968. Bharat Lal did the work assigned to him for 20 months. But the Railway did not pay him as per terms of the agreement. He was to be paid Rs. 830 per month. The Railway rescinded the contract on 20th November, 1969 with effect from 20th February, 1970.

( 3 ) BHARAT Lal made an application under sections 8 and 20 of the Arbitration Act (the Act) for filing the arbitration agreement and fop referring the matter to the arbitrator. In this application he detailed as many as 7 disputes which be raised.

( 4 ) BHARAT Lal referred to the following two clauses in the agreement and submitted that these constitute an arbitration agreement in law. The first is clause 4 of the agreement. This reads:

"the contractor agrees that in the event of any question or dispute arising under the conditions or in connection with this contract the decision of the Divisional Superintendent, Northern Railway, New Delhi will be final. "

( 5 ) THEN there is clause 16 of the Special Conditions annexed to the agreement. That clause is in these terms :

"in the event of any request or, dispute arising under these conditions or in connection with this contract the decision of the Divisional Superintendent, Northern Railway, will be final. "

( 6 ) THE learned Judge dismissed the application. He held that these two clauses do not constitute an arbitration agreement. Bharat Lal appeals to this Court.

( 7 ) MR. Sayal on behalf of the Railway raised a preliminary objection that this order is not appealable under section 39 of the Act. We do not agree. This is an order refusing to file an arbitration agreement. Under section 39 (1) (iv) an order filing or refusing to file an arbitration agreement has expressly been made appealable. The learned Judge refused to file the arbitration agreement holding that there was no arbitration agreement between the parties. We are of opinion that the order is appealable. 8 HCD/82 1

( 8 ) THE real question in this appeal is whether clause 4 of the agreement and clause 16 of the Special Conditions constitute an arbitration agreement. This matter, in our opinion, is now fully covered by a recent decision of the Supreme Court in Smt. Rukmanibai v. The Collector, Jabalpur, AIR 1981 SC 479. The intention of the parties has to be seen in every case. If the language of the clause leaves no room for doubt that the parties intended to enter into an arbitration agreement and to have their disputes resolved by arbitration, it must be held that the agreement is an arbitration agreement, whether the words arbitration or arbitrator have been used in the clause or not. In Russel on Arbitration 19th ed. page 59 the learned author says:.

"if it appears from the terms of the agreement by which a matter is submitted to a person s decision that the intention of the parties was that he should hold an inquiry in the nature of a judicial inquiry and hear the respective cases of the parties and decide upon evidence laid before him, then the case is one of an arbitration. "

( 9 ) BHARAT Lal entered into a commercial contract with the Railway. He was to be paid for the work. There was a provision in the agreement to terminate. the contract. "the Railway gave three months notice to the contractor. They terminated the contract. Now disputes have arisen between the parties. These disputes are set out in the notice of Bharat Lal s Advocate dated 28-4-1975 given to the Railway. The clauses in question are of the widest character. All disputes under the contract and "in connection with this contract" can be referred to the





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