Raj Mohan Singh, J.

Vide this common order, CR No.1419 of 2017 titled Chandigarh Industrial & Tourism Development Corporation Ltd. and another v. M/s K.B. Hotels Pvt. Ltd. and CR No.1423 of 2017 titled M/s K.B. Hotels Pvt. Ltd. are being decided. Since common questions of law and facts are involved in the aforesaid petitions, therefore, facts are being taken from CR No.1419 of 2017.

2. With the concurrence of learned counsel for the parties, the case is being taken up for final disposal.

3. Petitioners have challenged the order dated 18.01.2017 passed by Civil Judge (Junior Division), Chandigarh, vide which 1 of 9 application filed by the petitioner-Corporation under Section 8 of the Arbitration and Conciliation Act, 1996 for referring the matter to Arbitration was dismissed.

4. Petitioner-Corporation is a company incorporated under the Companies Act, 1956 and the same is owned by Chandigarh Administration. Petitioner-Corporation is engaged in the hospitality sector and is running various hotels in Chandigarh. Petitioner-Corporation invited tenders for supply of fresh vegetables in its hotels viz. Mount-view, Shivalik-view, Park-view and other units of CITCO. Respondent applied for the said tender and being a highest bidder, respondent was allotted the contract on 12.12.2014 for a period from 12.12.2014 to 31.03.2015. According to the terms and conditions of the contract, the respondent was required to supply the vegetables to the petitioner-Corporation at its various hotels and units as per approved rates. Necessary security deposit was made by the respondent. As per Clause No.9 of the terms and conditions of Contract, in the event of non-supply, short supply, inferior quality supply of the goods/items, the same shall be purchased by the petitioner-Corporation from open market at the risk and cost of the respondent. The amount spent in excess of the approved rates shall be recovered from the pending bills/security deposit of the respondent. As per Clause No.15 of the Agreement, in case of dispute arising out of the agreement, the same shall be referred to the Arbitration of the Managing Director, CITCO and any other 2 of 9 person appointed by him/her in his/her behalf. Arbitration Clause No. 15 of the Contract reads as under:-

"15. In the event of dispute, subject to the jurisdiction of Chandigarh only, the same shall be referred to arbitration to the Managing Director, CITCO, or any other person appointed by him/her. The decision of the arbitrator shall be final & binding on both the parties."

5. The contract was duly accepted by the respondent. The contract was in operation for the period in question. After completion of the contract, the respondent filed a suit for recovery of Rs. 2,12,460/- (amount of Rs. 1,72,460/- was on account of illegal deduction and amount of Rs. 40,000/- towards security amount) calculated with interest from the date of deduction till decree and if the amount becomes due over and above, the same shall be computed till the date of actual payment. During scrutiny, it was observed that the respondent charged for desi potatoes @ Rs. 28/- per kg, instead of Rs. 18/- per kg as per the orders placed by the petitioner-Corporation. Since the respondent had charged @ 28/- per kg as against the approved rate of Rs. 18/- per kg for desi potatoes, therefore, the bills were approved @ 18/- per kg only. Respondent was issued with a show cause notice on 09.10.2015 to which reply was filed by the respondent.

6. Petitioner-Corporation filed an application under Section 8 read with Section 5 of the Arbitration and Conciliation Act, 1996. The agreement is an admitted document between the parties. The 3 of 9 plaintiff has admitted in the plaint that there was an award of contract dated 12.12.2014 for supply of fresh vegetables to various hotels and units of the petitioner-Corporation. Clause No.15 of the Contract was duly stipulated therein.

7. The application was opposed by the respondent, wherein it was stated that