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High Court Of Madhya Pradesh
C. P. Sen and B. C. Varma, JJ.
ASSOCIATED COMMERCIAL ENGINEERS - Appellant
Versus
STATE OF MADHYA PRADESH - Respondents
Misc. First Appeal 64 Of 1974
Decided On : 10/25/1978
ARBITRATION ACT, 1940 - SECTION 20 - JURISDICTION - CAUSE OF ACTION - CONSTRUCTION OF DAM - BUSINESS ACTIVITY - CONTRACT - PLACE OF EXECUTION - BREACH - ARBITRATOR'S JURISDICTION.
Fact of the Case:
Plaintiff, an engineering contractor, submitted a tender for construction of a dam project. The tender was accepted by the State Government and a contract was executed. The plaintiff commenced work but was later stopped by the Superintending Engineer under a clause of the contract. The plaintiff served a notice to the Superintending Engineer to refer the dispute to arbitration, which was forwarded to the State Government. The plaintiff filed an application under Section 20 of the Arbitration Act, 1940, in the Bhopal Court, seeking appointment of an arbitrator.
Finding of the Court:
The Bhopal Court dismissed the plaintiff's application, holding that it had no jurisdiction to entertain the matter as no part of the cause of action arose within its jurisdiction. The court also found that the plaintiff had waived its right to arbitration by filing a suit prior to the application, and that the order of the Superintending Engineer withdrawing the work from the plaintiff had become final.
Issues: 1. Whether the Bhopal Court had jurisdiction to entertain the plaintiff's application under Section 20 of the Arbitration Act, 1940? 2. Whether the plaintiff had waived its right to arbitration by filing a suit prior to the application? 3. Whether the order of the Superintending Engineer withdrawing the work from the plaintiff had become final and could not be annulled by the arbitrator?
Ratio Decidendi: 1. The court held that the Bhopal Court did not have jurisdiction to entertain the plaintiff's application because no part of the cause of action arose within its jurisdiction. The contract was executed at Tawa, the work was to be executed at Tawa, and the withdrawal of the work from the plaintiff was also at Tawa. The mere acceptance of the tender by the State Government at Bhopal did not give rise to a cause of action at Bhopal. 2. The court held that the plaintiff had not waived its right to arbitration by filing a suit prior to the application. Filing a suit does not amount to waiver of the arbitration clause. 3. The court held that the order of the Superintending Engineer withdrawing the work from the plaintiff had not become final and could be annulled by the arbitrator. The arbitrator had jurisdiction to examine the question of whether the withdrawal of work was justified or not.
Final Decision: The appeal was dismissed with costs.
( 1 ) THE plaintiff has preferred this appeal under Section 39 (1) of the Arbitration act, 1940, against the dismissal of its application under Section 20 of the Act.
( 2 ) THE plaintiff-firm is a registered Engineering Contractor at Tawa in Hoshangabad district. It submitted tender on 4-11-70 for Group VI-B of Tawa project at Tawa. The tender was accepted by the State Government on 22-1270 to the extent of the works amounting to Rs. 40 lacs. The acceptance of tender was communicated to the plaintiff on 29-12-70 by the Chief Engineer. The contract was signed on behalf of Governor of the State of M. P. by the Chief engineer at Tawa on that date. The work was commenced by the plaintiff in january 1971 and continued up to February 1972. Under Clause 3-3-29 of the contract, the Superintending Engineer, Tawa, was the person in charge of the project and his decision was final on all questions. However, if the contractor was dissatisfied with his order, he could give a notice in writing to the superintending Engineer for referring the dispute to Arbitration. The government was the competent authority to appoint an arbitrator. On 16-101971 the Executive Engineer asked the plaintiff to get concurrence of the reserve Bank of India regarding bank guarantee furnished by it and pending such furnishing of concur-rence, the running payments were stopped. In his letter dated 25-3-72 the Superintending Engineer stopped the work of the plaintiff under Clause 3-3-3 (c) of the contract. The plaintiff on 12-4-72 served anotice under Section 80 of C. P. C. on the defendants. The plaintiff then filed an application for temporary injunction before Civil Judge, Class II, Indore, on 174-72. On 22-4-72 the plaintiff served a notice on the Superintending Engineer to refer the dispute to Arbitrator which was forwarded by the Superintending engineer to the State Government. It appears that the plaintiff failed in its attempt to get injunction from Civil Court at Indore restraining the defendants from allotting the work to a third party. In the meanwhile, the incomplete work was entrusted to M/s. Southern Engineering Works, Tawa. The plaintiff then filed a writ petition in the High Court challenging withdrawal of the work but the same was dismissed in limine on 18-10-72. The plaintiff thereafter filed Civil suit No. 122-A/72 for declaration and perpetual injunction against the defendants in the Court of Civil Judge, Class I. Bhopal. The plaint was returned on 20-11-72 to the plaintiff for presentation to the proper court as that Court had no jurisdiction to proceed with the suit. The plaintiff then filed the present peti-tion under Section 20 of the Arbitration Act on 20-12-72 in the Court of third Additional District Judge, Bhopal pray-ing that the arbitration agreement be filed in Court and an independent person be appointed an Arbitrator to decide the dispute between the parties. The petition has been dismissed by the trial Judge on 31-10-73. On the same day he also dismissed the plaintiffs appeal against return of its plaint in civil suit No. 122-A/72. Aggrieved by both the orders, the plaintiff filed this appeal and Civil Revision No. 227 of 1974. During arguments the plaintiff only pressed this appeal and it did not press the revision.
( 3 ) THE plaintiff has assailed the findings of the trial Judge that (i) the Court at bhopal had no jurisdiction to proceed with the matter as no part of cause of action arose at Bhopal, (ii) the plaintiff having filed suit prior to the filing of this application on the same cause of action, the conduct of the plaintiff amounts to waiver of its right under the arbitration Clause regarding compensation due to it because of the breach of contract, (iii) no specific dispute has been raised by the plaintiff in its notice dated 22-4-72 to the Superintending Engineer and (iv)the order of the Superintending Engineer withdrawing work from the plaintiff has become final and the same cannot be annulled by the Arbit
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