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TMI Blog2007 (5) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... 000, Civil Appeal No. 5198 of 2000 - - - Dated:- 14-5-2007 - Tarun Chatterjee And Altamas Kabir,JJ. JUDGMENT Tarun Chatterjee, J. 1. The crucial question that needs to be decided in these appeals is whether Clause 4 of Work Order No.114 dated 16th of May, 1985 (in short Work Order ) which says that: "Any dispute arising between the department and the contractor/society shall be referred to the Superintending Engineer, Anandpur Sahib, Hydel Circle No. 1 Chandigarh for orders and his decision will be final and acceptable/binding on both the parties" constituted an arbitration agreement. 2. Before proceeding further, we may bring it on record that though the facts in both the appeals are identical, but for purposes of disposal of these appeals, the facts in CA No. 5197 are being considered which are as follows: 3. The parties entered into a contract for the work of dowel drain and wire crate at RD No. 9400 to 10400 kms. in the State of Punjab. The appellants made running payments to the respondent during the period of execution of the works in terms of the Work Order. However, after completion of the work, the final measurements were not made, nor the final bills we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d order was allowed and the order of the Additional Subordinate Judge, Ropar was restored. Dissatisfied with this order of the High Court, a special leave petition was filed by the appellants, which on grant of leave was heard in the presence of the learned counsel for the parties. 5. Having heard the learned counsel for the parties and after going through the impugned order of the High Court as well as the orders of the appellate court and the trial court and the materials on record and considering the clauses in the Work Order, we are of the view that the High Court was fully justified in setting aside the order of the appellate court and restoring the order of the Additional Subordinate Judge by which the dispute was referred to arbitration for decision. Before proceeding further, we may, however, take note of some of the relevant clauses in the Work Order which read as under: - "Clause 13 of the Work Order: - "If the contractor does not carry out the work as per the registered specifications, the department will have the option to employ its own labour or any other agency to being the work to the departmental specification and recover the cost therefrom." Clause 4: "Any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises between them in respect of the subject matter of the contract, such dispute shall be referred to arbitration. In that case such agreement would certainly spell out an arbitration agreement. [See Rupmani Bai Gupta v. Collector of Jabalpur AIR 1981 SC 479] However, from the definition of the arbitration agreement, it is also clear that the agreement must be in writing and to interpret the agreement as an arbitration agreement one has to ascertain the intention of the parties and also treatment of the decision as final. If the parties had desired and intended that a dispute must be referred to arbitration for decision and they would undertake to abide by that decision, there cannot be any difficulty to hold that the intention of the parties to have an arbitration agreement; that is to say, an arbitration agreement immediately comes into existence. 9. In the case of Bihar State Mineral Development Corporation v. Encon Building, [(2003) 7 SCC 418], this Court held that "there is no dispute with regard to the proposition that for the purpose of construing an arbitration agreement, the term "arbitration" is not required to be specifically mentioned therein." Looking to the opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cated above was also recorded in which it was stated that "this court said that there was no mention in this clause in any dispute much less any reference thereof." 12. Keeping the ingredients as indicated by this Court in the case of K. K. Modi (supra) in mind for holding a particular agreement as an arbitration agreement, we now proceed to examine the aforesaid ingredients in the context of the present case. a. Clause 4 of the Work Order categorically states that the decision of the Superintending Engineer shall be binding on the parties. b. The jurisdiction of the Superintending Engineer to decide the rights of the parties has also been derived from the consent of the parties to the Work Order. c. The agreement contemplates that the Superintending Engineer shall determine substantive rights of parties as the clause encompasses all varieties of disputes that may arise between the parties and does not restrict the jurisdiction of the Superintending Engineer to specific issues only. d. That the agreement of the parties to refer their disputes to the decision of the Superintending Engineer is intended to be enforceable in law as it is binding in nature. 13. In view of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andigarh). Then again the conclusion and decision of the Superintending Engineer will be final and binding on both the parties. This being the position in the present case and in view of the fact that Clause 4 of the Work Order is not under challenge before us, the decision that would be arrived at by Superintending Engineer, Hydel Circle No. 1, Chandigarh must also be binding on the parties as a result whereof Clause 4 must be held to be a binding arbitration agreement. 15. In the decision of this Court in the case of State of UP v. Tippar Chand (supra), this Court however held that the clause in dispute in that decision between the parties did not amount to an arbitration agreement. In that decision, this Court further held that clause under consideration before them which provided that except where otherwise specified in the contract the decision of the Superintending Engineer for the time being shall be final, conclusive and binding on all the parties to the contract upon all questions relating to the meaning of the specifications etc and the decision of the Superintending Engineer as to the quality, workmanship etc. shall be final, conclusive and binding between the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in any way arising our of, or relating to, the contract, drawings specifications estimates, instructions, orders or these conditions, or otherwise concerning the works or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or the sooner determination thereof of the contract." 17. A plain reading of this clause in the case of Damodar Das, it is evident that the powers of the Public Health Engineer were essentially to supervise and inspect. His powers were limited to the questions relating to the meaning of the specifications; drawings and instructions, quality of workmanship or materials used on the work, or any other question, claim, right, matter, drawings specifications estimates, instructions, orders or these conditions, or otherwise concerning the works or the execution or failure to execute the same. However, in the case before us, the Superintending Engineer was given full power to resolve any dispute arising between the parties which power in our view is wide enough to cover any nature of dispute raised by the parties. The Clause in the instant case categorically mentions the word "dispute" which would be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. At the risk of repetition, we may keep it on record that the Additional Senior Subordinate Judge, Ropar, held that the application was filed in time whereas the appellate court held that the application was barred by limitation. However, the High Court in revision restored the order of the Additional Senior Subordinate Judge, Ropar, by holding that application was filed within the period of limitation. 22. For the purpose of deciding the question of limitation, it may be stated that the application under Section 20 of the Act was filed within 3 years from the date the demand notice was made by the respondent as contemplated under Article 137 of the Limitation Act. 23. In order to determine when the cause of action arose, it is essential for us to refer to a case decided by this court. In the case of S. Rajan v. State of Kerala [(1992) 3 SCC 608] it was held by this Court that the right to apply for arbitration proceeding under Section 20 of the Arbitration Act, 1940 runs from the date when the dispute arises. It observed: "Reading Article 137 and Sub-section (1) of Section 20 together, it must be said that the right to apply accrues when the difference arises or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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