1981 Supreme(MP) 561

High Court Of Madhya Pradesh
G. P. Singh, C. J. and Faizanuddin, J.
UTTAM SINGH DUGAL AND CO.PVT.LTD., NEW DELHI - Appellant
Versus
HINDUSTAN STEEL LTD., BHILAI STEEL PROJECT, BHILAI - Respondents
Civil Revn 84 Of 1978
Decided On : 09/30/1981

A contract is valid and binding if the parties have agreed on all essential terms, and any remaining uncertainties can be resolved by implication or by reference to industry standards.

Headnote:

ARBITRATION - JURISDICTION - CONTRACT - VALIDITY - UNCERTAINTY - CONSTRUCTION OF CONTRACT - SECTION 29 OF THE CONTRACT ACT, 1872 - SECTION 33 OF THE ARBITRATION ACT, 1940 - SECTION 39 OF THE ARBITRATION ACT, 1940 - SECTION 115 OF THE CODE OF CIVIL PROCEDURE, 1908.

Fact of the Case:

The contractors entered into two contracts with the employers for construction of civil engineering works in the Coke Oven Zone part and Open Hearth Zone part of the Bhilai Steel Project. The contracts were executed on 7/8th November, 1962. The contractors started work in one zone on 12th Aug., 1962 and in the other zone on 13th September, 1962. The works were completed by 31st December, 1967. The contract agreements contain identical terms and conditions. By letter dated 18th August, 1971 the contractors, claimed additional payment for both the works on account of escalation in wages under the Minimum Wages Act, 1948 during the currency of the contracts. These claims were based on Clause 32 of the General Conditions of Contracts as modified by the parties. The employers did not accept these claims. The contractors then by their letter dated 17th April, 1972 named their arbitrator under Clause 76 of the General Conditions of Contracts for deciding the claims in respect of both the contracts. The employers in their reply by letter dated 3rd May, 1972 did not accept that the claims made by the contractors were justified or could go to arbitration. The employers, however, named their arbitrator. The arbitrators decided two preliminary issues by their order dated 6th September, 1973. These related to the questions (1) whether there were valid and binding contracts between the parties, and (2) whether the dispute raised by the contractors fell within the arbitration clause of the said contracts. Both these issues were decided in favour of the contractors. The arbitrators, however, left it open to the parties to obtain a final decision on these questions from a competent Court. Faced with an objection as to their jurisdiction the arbitrators had two courses open. They could refuse to deal with the matter at all and leave the parties to go to the Court or they could go into the question of jurisdiction and proceed with the reference if they found that there existed arbitration agreements between the parties covering the disputes raised before them leaving the parties to have the point finally settled by the Court (see Russel on Arbitration, 19th Edition, p. 99 ). It is the latter course which the arbitrators adopted in the instant case. The employers then filed two applications under Section 33 of the Arbitration Act, 1940 in the Court of the Additional District Judge, Durg. These Misc. Judicial Cases were finally registered as M. J. C No. 1/77 and M. J. C. No. 2/77. It was contended by the employers in these applications that there were no binding contracts between the parties and so the arbitrators had no jurisdiction to proceed with the reference made to them. These applications were allowed by a common order passed by the Additional District Judge on 27th September, 1977. It was held by the Additional District Judge that there were no binding contracts between the parties and so the arbitration clause in the contracts was not attracted. The contractors have filed Misc. (First) Appeal No. 7 of 1978 and Civil Revision No. 84 of 1978 against the order passed in M. J. C. No. 1/77, and Misc. (First) Appeal No. 9 of 1978 and Civil Revision No. 83 of 1978 against the order passed in M. J. C. No. 2/77. The appeals have been filed under Section 39 of the Arbitration Act but as a matter of prudence revisions have also been filed to meet the situation in case it is held that the orders passed by the Additional District Judge are not appealable under Section 39 of the Act

Finding of the Court:

The Court held that the contracts were valid and binding, and that the arbitration clause was applicable to the dispute. The Court also held that the Additional District Judge had erred in law in holding that there were no binding contracts between the parties.

Issues: 1. Whether there were valid and binding contracts between the parties? 2. Whether the dispute raised by the contractors fell within the arbitration clause of the said contracts? 3. Whether the Additional District Judge had erred in law in holding that there were no binding contracts between the parties?

Ratio Decidendi: 1. The Court held that the contracts were valid and binding, as the parties had agreed on all essential terms, and any remaining uncertainties could be resolved by implication or by reference to industry standards. 2. The Court held that the dispute raised by the contractors fell within the arbitration clause of the contracts, as it related to the interpretation of the contracts and the parties' respective rights and obligations thereunder. 3. The Court held that the Additional District Judge had erred in law in holding that there were no binding contracts between the parties, as the contracts were valid and enforceable, and the arbitration clause was applicable to the dispute.

Final Decision: The Court allowed the revisions and set aside the orders passed by the Additional District Judge. The Court also held that the contractors were entitled to costs from the employers.