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HIGH COURT OF MADHYA PRADESH
R.J. BHAVE, J.
Union of India
Versus
S.V. Krishnarao
C. Revision No. 314 of 1967
Decided on: 3.9.1967
The Court has first to decide whether the necessary conditions for making a reference to an arbitrator are available or not, that is to say, whether any dispute between the parties has really arisen or not. When the Court comes to the conclusion that a dispute has arisen between the parties, then the Court is required to make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise. The reference is to be made to the arbitrator appointed by the par. ties in the agreement, that alone is the meaning of or otherwise. It is only when no arbitrators have been appointed in the agreement or no procedure has been prescribed in the agreement for appointment of such arbitrators and when there is no agreement between the parties before the Court about the choice of arbitrators that the Court gets an authority of nominating the arbitrators itself. AIR 1961 SC 1285, AIR 1964 All. 477 & AIR 1965 Cal. 404 relied on. AIR 1961 Pat. 228 dissented from.
(Para 10)
(2) Arbitration Act, 1940-Ss. 8 & 20-application under section 20-section 8 not attracted- scope of the two provisions.
The provisions of sub-section (5) of section 20 makes it clear that the stage of application of the other provision of the Arbitration Act is reached when the reference for arbitration is made. Before a reference is made the Court is not entitled to rely on the provision of section 8 of Act.
(Para 7)
The purposes of section 8 and section 20 are altogether different. In those cases where the parties have agreed at the time of entering into a contract that any dispute arising out of it shall be settled by arbitration and where no arbitrators have been named and where the parties do not agree an the choice of the arbitrator, section 8 comes into operation. It gives power to the Court to appoint an arbitrator, in other words, to make a choice for the contesting parties. Once the arbitrator is so appointed, the function of the Court comes to an end. The reference is not made by the Court but it is left to the parties to make the reference to the arbitrator nominated by the Court. On the other hand, under section 20 what the Court has to decide is as to whether the arbitration agreement should be filed before it or not. In other words, it has first to decide whether the necessary conditions for making a reference to an arbitrator are available or not, that is to say, whether any dispute between the parties has really arisen or not. When the Court comes to the conclusion that a dispute has arisen between the parties, then the Court is required to make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise.
(Para 10)
1. This revision is by the Union of India through the General Manager, South-Eastern Railway, Calcutta (hereinafter referred to as the 'Railway Administration') against the order of the lower Court, dated 20.1.1967, passed under section 20 of the Arbitration Act appointing Shri N.S. Tayabji, Chief Engineer (Construction), Eastern Railway, Calcutta, as the arbitrator.
2. The fact of the case are that the non-applicant S.V. Krishna Rao (hereinafter referred to as 'the contractor') had entered into a contract dated 2.12.1963 with the Railway Administration for carrying out certain work at Manendragarh Station. The contractor was also required to undertake certain additional work, the details of which are given in the application filed by the contractor under section 20 of the Arbitration Act. It is the case of both the parties that the General Conditions of contract framed by the Railway Administration formed part of the contract dated 2.12.1963. Condition No. 62 of the General Conditions provides that all disputes or differences of any kind arising out of or in connection with the contract, whether during the progress of the works or after their completion and whether before or after the determination of the contract, shall be referred by the Contractor to the Railway and the Railway shall within a reasonable time after their presentation make and notify decision thereon in writing. This condition further provides that the decisions and the directions issued by the Railway Administration shall be final. Condition No. 63 then provides for arbitration. That condition is in the following terms:–
"63. (1) If the Contractor be dissatisfied with the decision of the Railway, an any matter in question, dispute or difference, on any account or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to or if the Railway fails to make a decision within a reasonable time, then and in any such case but except in any of the Excepted Matters referred to in Clause 63 of these conditions the Contractor may within 10 days of the receipt of the communication of such decision or after the expiry of the reasonable time as the case may be, demand in writing that such matter in question, dispute or difference be referred to arbitration. Such demand for arbitration shall be delivered to the Railway by the Contractor and shall specify the matters which are in question, dispute or difference and only such dispute or difference of which the demand has been made and no other shall be referred to arbitration.
(2) Work under the contract shall, unless otherwise directed by the Engineer, continue during the arbitration proceedings and no payment due or payable by the Railway shall be withheld on account of such proceedings provided however it shall be open for the arbitrator or arbitrators to consider and decide whether or not such work should continue during arbitration proceedings.
(3) (a) Matters in question, dispute or difference to be arbitrated upon shall be referred for decision to:–
(i) A sole Arbitrator who shall be the General Manager or a person nominated by him in that behalf in cases where the claim in question is below Rs. 50,000 and in cases where the issues involved are not of a complicated nature. The General Manager shall be the sole judge to decide whether or not the issues involved are of a complicated nature.
(ii) Two Arbitrators, who shall be Gazetted Railway Officers of equal status to be appointed in the manner laid down in Clause 3 (b) for all claims of Rs. 50,000 and above, and for all claims irrespective of the amount or value of such claims if the issues involved are of a complicated nature. The General Manager shall be the sole judge to decide whether the issues are of a complicated nature or not. In the event of the two Arbitrators being devided in their opinions the matter under dispute will be referred to an Umpire to be appointed in the manner laid down in Clause 3 (b) for his d
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