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TMI Blog2011 (7) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... refore the short question that arises for our consideration in these appeals is whether the said clause is an arbitration agreement. The essentials of an arbitration agreement 3. In K K Modi vs. K N Modi [1998 (3) SCC 573] this court enumerated the following attributes of a valid arbitration agreement : (1) The arbitration agreement must contemplate that the decision of the Tribunal will be binding on the parties to the agreement, (2) that the jurisdiction of the Tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration, (3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner, with the tribunal owing an equal obligation of fairness towards both sides, (5) that the agreement of the parties to refer their disputes to the decision of the Tribunal must be intended to be enforceable in law, and lastly, (6) the agreement must contemplate that the tribunal will m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the parties to put forth their case before it. (d) The parties should have agreed that the decision of the Private Tribunal in respect of the disputes will be binding on them. (iii) Where the clause provides that in the event of disputes arising between the parties, the disputes shall be referred to Arbitration, it is an arbitration agreement. Where there is a specific and direct expression of intent to have the disputes settled by arbitration, it is not necessary to set out the attributes of an arbitration agreement to make it an arbitration agreement. But where the clause relating to settlement of disputes, contains words which specifically excludes any of the attributes of an arbitration agreement or contains anything that detracts from an arbitration agreement, it will not be an arbitration agreement. For example, where an agreement requires or permits an authority to decide a claim or dispute without hearing, or requires the authority to act in the interests of only one of the parties, or provides that the decision of the Authority will not be final and binding on the parties, or that if either party is not satisfied with the decision of the Authority, he may file a civ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sideration was as under : "9. Implementation will be done in consultation with the financial institutions. For all disputes, clarification etc., in respect of implementation of this agreement, the same shall be referred to the Chairman, IFCI or his nominees whose decisions will be final and binding on both the groups". This Court held that the said clause was not an arbitration agreement on the following reasoning: Therefore our Courts have laid emphasis on (1) existence of disputes as against intention to avoid future dispute; (2) the tribunal or forum so chosen is intended to act judicially after taking into account relevant evidence before it and the submissions made by the parties before it; and (3) the decision is intended to bind the parties. Nomenclature used by the parties may not be conclusive. The purport of Clause 9 is to prevent any further disputes between Groups A and B. Because the agreement requires division of assets in agreed proportions after their valuation by a named body and under a scheme of division by another named body. Clause 9 is intended to clear any other difficulties which may arise in the implementation of the agreement by leaving it to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt as it did not mention any dispute or reference of such dispute for decision. 8. In State of Orissa vs. Damodar Das [1996 (2) SCC 216], a three Judge Bench of this court considered whether the following clause is an arbitration agreement: "25. Decision of Public Health Engineer to be final.--Except where otherwise specified in this contract, the decision of the public Health Engineer for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications; drawings and instructions hereinbefore mentioned and as to the quality of workmanship or material use on the work, or as to any other question, claim, right, matter or thing, whatsoever in any way arising out of, or relating to, the contract, drawings, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the works or the execution of 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". Following the decision in Tipper Chand, this Court held that the said clause did not amount to an arbitration agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in". This Court held that the said clauses did not amount to arbitration agreement on the following reasoning: "In the present case, reading Clauses 23 and 24 together, it is quite clear that in respect of questions arising from or relating to any claim or right, matter or thing in any way connected with the contract, while the decision of the Executive Engineer is made final and binding in respect of certain types of claims or questions, the decision of the Managing Director is made final and binding in respect of the remaining claims. Both the Executive Engineer as well as the Managing Director are expected to determine the question or claim on the basis of their own investigations and material. Neither of the clauses contemplates a full-fledged arbitration covered by the Arbitration Act". (emphasis supplied) This Court while noting the distinction between a 'Preventer of disputes' and an 'adjudicator of disputes', observed that the Managing Director under clause 24 of the agreement, was more in the category of an expert who will decide claims, rights, or matters in any way pertaining to the contract and the object of his decision is to avoid disputes and not decide dispu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the principle stated, we have our doubts as to whether the clause considered would be an arbitration agreement if the principles mentioned in the said decision and the tests mentioned in the subsequent decision of a larger bench in Damodar Das are applied. Be that as it may. In fact the larger bench in Damodar Das clearly held that the decision in Rukmanibai Gupta was decided on the special wording of the clause considered therein. The ratio in Rukmanibai Gupta vs. Collector does not assist the respondent. From the language therein this court inferred, by implication, existence of a dispute or difference for arbitration. 11. In Encon Builders (supra), this court proceeded on the assumption that the following clause was an arbitration agreement, as that issue was not disputed: In case of any dispute arising out of the agreement the matter shall be referred to the Managing Director, Bihar State Mineral Development Corporation Limited, Ranchi, whose decision shall be final and binding. The clause specifically provided for disputes being referred to the Managing Director and made the said authority s decision not only final, but also binding on the parties. Therefore it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey would be bound by the decision of the tribunal. The parties were also ad idem. The clause for consideration in this case 13. Clause 10 of the Conditions of Contract which is the subject of controversy reads thus: Clause 10 : The Engineer-in-Charge shall have power to make any alterations in or additions to the original specifications, drawings, designs and instructions that may appear to him necessary and advisable during the progress of work, and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-Charge and such alterations shall not invalidate the contract, and any additional work which the contractor may be directed to do in the manner above specified as part of the work shall be carried out by the contractor on the same conditions in all respects on which he agreed to do the main work, and at the same rates as are specified in the tender for the main work. The time for the completion of the work shall be extended in the proportion that the additional work bears to the original contract work and the certificate of the Engineer-in-Charge shall be conclusive as to such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing: a) that the Engineer-in-charge could make additions and alterations in the drawings/specifications; and that such alterations and additions will not invalidate the contract, but will entitle the contractor to extension of time for completion of work proportionately; b) that if the additional work be executed is an item for which the rate is not specified in the contract (or in the schedule of rates for the district), the contractor shall specify the rate and the Engineer-in-charge may either accept the rate or cancel the order to execute that particular work; c) that if the contractor commences the work with reference to an item for which there is no rate in the contract and there is no agreement in regard to the rate for execution of such work, he shall be paid at the rates fixed by the Engineer-in -Charge; and d) that if the contractor disputes the rate fixed by the Engineer-in-Charge, the decision of the Superintending Engineer in regard to rate for such non-scheduled item shall be final. 15. We may next examine whether the last sentence of the proviso to clause 10 could be considered to be an arbitration agreement. It does not refer to arbitration as the mode ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecution, or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of a Superintending Engineer of the State Public Works Department unconnected with the work at any stage nominated by the Chief Engineer concerned. If there be no such Superintending Engineer, it should be refereed to the sole arbitration of Chief Engineer concerned. It will be no objection to any such appointment that the arbitrator so appointed is a government servant. The award of the arbitrator so appointed shall be final, conclusive and binding on all parties to this Contract. The said clause was deleted by the State Government from the Standard Conditions of Contract by official Memorandum dated 24.12.1981. Contracts entered by the State Government thereafter did not have the said arbitration clause, though the other Conditions of Contract remained the same. The contracts in all these cases are of a period subsequent to 24.12.1981 and the Conditions of Contract forming part of these contracts do not contain the arbitration clause. When the State Government has consciously and intentionally deleted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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