1 S.B.CIVIL MISC. APPEAL NO.149/1995 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR ORDER S.B.CIVIL MISC. APPEAL NO.149/1995. M/s.Ferro Concrete Const.(India) Pvt. Ltd. VERSUS Rajasthan State through Chief Engineer (Irrigation), Bisalpur Project, Jaipur & Others. 05.03.2009. HON'BLE MR.JUSTICE DALIP SINGH Mr.Abhay Jain, for the appellant. Mr.G.S.Bafna, Advocate General assisted by Mr.Vayankatesh Garg, for the respondents. ***** Heard learned counsel for the parties. This appeal has been preferred under Section 39 of the Arbitration Act, 1940 against the order passed by the learned District Judge, Tonk dated 13.01.1995 in Civil Misc. Petition No.6/1994 filed under Section 20 of the Arbitration Act, 1940. The facts, in brief, are that the appellant was awarded a contract in respect of the Upstream and Downstream Coffer Dams of the Bisalpur Project in 1988. Since there was a delay in the completion of the work, the respondents imposed a penalty by way of compensation of 10% of the tender amount against the appellant holding the appellant liable for the delay in completion of the project. The appellant challenged the imposition of the 2 S.B.CIVIL MISC. APPEAL NO.149/1995 aforesaid penalty by way of compensation and, therefore, against the decision of the respondents the appellant moved an application and wanted the matter to be referred to arbitration as provided under the terms of the agreement. The aforesaid application submitted for this purpose under section 20 of the Arbitration Act, 1940 for making of the reference by the appellant was contested by the respondents who interalia submitted that the dispute which is sought to be raised by the appellant for making of the reference under Section 20 for arbitration does not fall within the scope of the arbitration clause and, therefore, the matter cannot be referred for arbitration. The learned District Judge after having heard the parties and having examined the matter came to the conclusion that in view of the specific provisions contained in the agreement and the tender conditions, the dispute which the petitioner-appellant seeks to raise does not fall within the scope of the arbitration clause and, therefore, rejected the application vide the impugned judgment dated 13.01.1995, hence, this appeal. Learned counsel for the appellant has reiterated the same submissions which were raised before the learned District Judge and contended that the dispute which the appellant sought to raise fell within the scope of the arbitration clause and, therefore, the 3 S.B.CIVIL MISC. APPEAL NO.149/1995 learned District Judge committed an error in rejecting the application filed under Section 20 of the Arbitration Act. I have considered the rival submissions and also examined the relevant clauses of the contract. The condition No.2, upon which the reliance was placed by the learned District Judge in the tender agreement in the contract, reads as follows:- “The time allowed for carrying out the work as entered in the Tender shall be strictly observed by the contractor and shall be reckoned from the 15th day after the date of written order to commence the work is given to the contractor. The work shall throughout the stipulated period of the contract be proceeded with all due diligence, time being deemed to be the essence of the contract on the part of the contractor and the contractor shall pay as compensation an amount equal to one percent or such smaller amount as the Chief Engineer or his authorised Engineer (whose decision shall be final) may decide on the tendered amount for every week that the work remains uncommenced, or unfinished after the proper date. Ant further to ensure good progress during the execution of work, the contractor shall be bound in all cases in which the time allowed for any work exceeds one month (save for special jobs) to complete 1/8th of the whole of the work before 1/4th of the whole time allowed under the contract has elapsed, 3/8th of the work before 1/2 of such time has elapsed and 3/4 of the work before 3/4 of such time has elapsed. The contractor shall further be bound to carry out the work in accordance with the dates and quantities entered in the progress statement attached to this tender. However, if for any special job, a time 4 S.B.CIVIL MISC. APPEAL NO.149/1995 schedule has been submitted by the contractor and the same has been accepted by the Engineer in charge the contractor shall complete the work within the said time schedule. In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one percent, or such smaller amount as the Chief Engineer or his authorised Engineer (whose decision in writing shall be final) may decide on the said tendered amount of the whole work for every week the due quantity of work remains incomplete.” (Emphasis supplied.) Learned counsel for the appellant also relied upon the condition No.23 and 59 which read as follows:- “23. If any question, difference or objection whatsoever shall, arise in any way in connection with or arising out of this instrument or the meaning of operation of any part therefore or the rights, duties or liabilities of either party, then save in so far as the decision of any such matter as hereinbefore provided for and has been so decided, every such matter constituting a total claim of Rs.5,000/- or above, whether its decision has been otherwise provided for and whether it has been finally decided accordingly, or whether the contract should be terminated or has been rightly terminated and as regards the rights or obligations of the parties as the result of such termination shall be referred for adjudication to a sole arbitrator to be appointed as hereinafter. For the purpose of appointing the sole arbitrator referred to above, the Chief Engineer will on receipt of notice and prescribed from the contractors send a panel of 3 names not below the rank of Superintending Engineer of the Rajasthan Govt. and who shall all be presently 5 S.B.CIVIL MISC. APPEAL NO.149/1995 unconnected with the contract. The contractor shall on receipt of the name as aforesaid select any one of the persons named, to be appointed as a sole arbitrator and communicate his name to the Chief Engineer, the Chief Engineer shall thereupon appoint the said person as the sole arbitrator without delay. The arbitrator shall give reasons for award. Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause. 59. All the disputes or differences in respect of matters relating to the performance under the contract except interpretation of drawings and specifications and the quality of the work of which the decision of the Additional Chief engineer, Bisalpur Project, Jaipur shall be final and binding and not subject to arbitration, shall be referred for arbitration in accordance with Clause No.23 of condition of contract. All awards shall be in writing and in case of awards amounting to Rs.1.00 lacs above, such awards shall state the reasons for the amount awarded.” (Emphasis supplied.) On the basis of the above, learned counsel for the appellant contended that even assuming that Condition No.2 empowered the respondents to impose the penalty, the same was required to be imposed on the basis of the amount calculated every week for unfinished or the uncommenced work as provided under Condition No.2 and submitted that in case the penalty of more than Rs.5,000/- is to be imposed as per 6 S.B.CIVIL MISC. APPEAL NO.149/1995 the Condition No.23, referred to above, the same could be referred for adjudication to the sole Arbitrator. I have considered the aforesaid submissions of the learned counsel for the appellant and also perused the judgment passed by the learned District Judge. The learned District Judge relied upon the decision of the Hon'ble Supreme Court in the case of Vishwanath Sood Vs. Union of India and Another reported in AIR 1989 SC 952. A perusal of the aforesaid report goes to show that their Lordships of the Hon'ble Supreme Court in the said case were dealing with an identical clause in the agreement namely clause (2) thereof. The language of clause (2) of the agreement before their Lordships in Vishwanath Sood's case which has been incorporated in para 4 of the judgment is identical with the language of the clause (2) of the agreement which has been incorporated hereinabove. The aforesaid fact that the language of the clause (2) in Vishwanath Sood's case and clause (2) in the present case is identical is not in dispute. In Vishwanath Sood's case (supra) their Lordships of Hon'ble Surpeme disagreeing with the reasons given by the Division Bench of the Himachal Pradesh High Court in para 8 of the report held as follows:- 7 S.B.CIVIL MISC. APPEAL NO.149/1995 “...... As we see it, clause 2 contains a complete machinery for determination of the compensation which can be claimed by the Government on the ground of delay on the part of the contractor in completing the contract as per the time schedule agreed to between the parties. The decision of the Superintending Engineer, it seems to us, is in the nature of a considered decision which he has to arrive at after considering the various mitigating circumstances that may be pleaded by the contractor or his plea that he is not liable to pay compensation at all under this clause. In our opinion the question regarding the amount of compensation leviable under clause 2 has to be decided only by the Superintending Engineer and no one else.” (Emphasis supplied.) Their Lordships have further clarified and held that the construction given by the Division Bench of the High Court with regard to the expression regarding finality of the decision as referred to in clause (2) of the agreement for giving jurisdiction for reference to arbitration was not correct and their Lordships accordingly held in para 9 of the report as follows:- “The Division Bench has construed the expression in clause 2 in parenthesis that "the Superintending Engineer's decision shall be final" as referring only to a finality qua the department; in other words, that it only constitutes a declaration that no officer in the department can determine the quantification and that the quantum of compensation levied by the Superintending Engineer shall not be changed without the approval of the Government. After referring to certain judicial decisions regarding the 8 S.B.CIVIL MISC. APPEAL NO.149/1995 meaning of the word "final" in various statutes, the Division Bench concluded that the finality cannot be construed as excluding the jurisdiction of the arbitrator under clause 25. We are unable to accept this view. Clause 25 which is the arbitration clause starts with an opening phrase excluding certain matters and disputes from arbitration and these are matters or disputes in respect of which provision has been made elsewhere or otherwise in the contract. These words in our opinion can have reference only to provisions such as the one in parenthesis in clause 2 by which certain types of determinations are left to the administrative authorities concerned. If that be not so, the words "except where otherwise provided in the contract" would become meaningless. We are therefore inclined to hold that the opening part of clause 25 clearly excludes matters like those mentioned in clause 2 in respect of which any dispute is left to be decided by a higher official of the Department. Our conclusion, therefore, is that the question of awarding compensation under clause 2 is outside the purview of the arbitrator and that the compensation, determined under clause 2 either by the Engineer-in-charge or on further reference by the Superintending Engineer will not be capable of being called in question before the arbitrator.” Learned counsel sought to contend that in the instant case, there was no such clause as clause (25) of the agreement as is found in Vishwanath Sood's case and, therefore, the exclusion of the jurisdiction of the Arbitrator which was held by the Hon'ble Supreme Court in that case cannot be made applicable in the present case. So far as the above submission of the learned 9 S.B.CIVIL MISC. APPEAL NO.149/1995 counsel for the appellant is concerned I find from the judgment of the learned District Judge and rightly so that clause (59) of the contract excludes all disputes relating to the performance under the contract except interpretation of drawing and specification and quality of the work from the purview of arbitration. In the facts and circumstances, therefore, I find no good ground to interfere with the judgment of the learned District Judge. In the facts and circumstances, the appeal stands dismissed. No order as to costs. (DALIP SINGH),J. Solanki DS, Jr.P.A.