PUNJAB AND HARYANA HIGH COURT AT CHANDIGARH. *** Arbitration Case No. 106 of 2007 Date of Decision: February 13, 2009. *** Astra Construction Private Limited Vs. CITCO. *** CORAM: Hon'ble Mr. Justice T.S.Thakur, CJ *** Present: Shri Sanjeev Sharma, Advocate, for the petitioner. Shri J.S.Ahluwalia, Advocate, for the respondents. *** T.S.Thakur, CJ (Oral) This petition has been filed under Section 11 read with Section 14 of the Arbitration and Conciliation Act, 1996 for appointment of sole Arbitrator to adjudicate upon a dispute that have arisen between the parties. The Controversy arises in the following circumstances. The petitioner and respondent No.1 entered into an agreement dated November 29, 1988 in connection with the construction of hotel building of Janta Hotel now known as Hotel Shivalik View Sector 17, Chandigarh on the terms and conditions stipulated in the said agreement. Certain disputes having arisen between the parties, a reference was made to the Chief Engineer, U.T., Chandigarh who was named as the sole arbitrator in terms of clause 4 sub clause (viii) of the agreement aforementioned. The Chief Engineer, however, adjudicated upon all the claims except those which related to non-scheduled items, compensation for delay and forfeiture of security deposit which appear to have been referred to the Managing Director CITCO for determination. Aggrieved by the award made by the Arbitrator, the petitioner company filed objections to the same before the Additional Civil Judge (Senior Division), Chandigarh who vide its order dated September 27, 2000 made the award the rule of the court and rejected the objections raised by the petitioner company. While dealing with the objections, the Arbitrator was not justified in excluding the claims that were pending before the Managing Director of the CITCO, the Civil Court observed:- “Learned counsel for the objector has contended with vehemence3 that the arbitrator committed gave illegality while pronouncing the award despite the fact that the matter was pending before the M.D., CITCO. This contention also lacks merit. It is the objector which has registered his claim with the M.D., CITCO with regard to non schedule items and compensation amounting to Rs.33,60,000/- and the arbitrator was not in any way bound by the decision of the M.D., CICTO. The claims of the non scheduled items and compensation were under the purview of the Managing Director and there was no occasion with the arbitrator to stay the proceedings or to pronounce the award only after the decision has been taken by the M.D., CITCO. The matter regarding the non scheduled items and compensation are still pending. The arbitrator was well within his rights to pronounce the award on the basis of material placed before him and with regard to the items which he was entitled to pronounce the award”. The petitioner then filed an appeal bearing No. 61 of 2001 before the District Judge, Chandigarh which was allowed by an order dated 16.12.2005. Dealing with the question of arbitrator excluding from consideration the claims of the petitioner for non-scheduled items and compensation etc. the appellate court observed:- “(i)........................... (ii) The findings of the Arbitrator leaving the claim of Rs. 52,71,217.65 on account of non-scheduled items and a sum of Rs.33,60,000/- in respect of compensation pending before the Managing Director CITCO is upheld and it is observed that the appellant will be at liberty to approach the Managing Director, CITCO within a period of one month for consideration and adjudication of the aforesaid claims and to avail the legal remedy available to it in accordance with the procedure of law in case dis- satisfied with the decision of the Managing Director, CITCO. (iii).....................”. The Managing Director eventually disposed of the claims made by the petitioner by an order dated March 20, 2007 and rejected the same not only on merits but even on the ground that there was inordinate delay in the making of the said claims. Thus, at this stage when the petitioner approached the Chief Engineer, the nominated Arbitrator, with a request to enter upon a reference and to adjudicate the petitioners' claim for a sum of Rs.55,71,217.65 on account of release of payment for non-scheduled items; a sum of Rs.33,60,000/- allegedly recovered by the CITCO on account of delay. The claim for refund of security deposit and interest is also sought to be adjudicated before the nominated Arbitrator. Having evoked no response from the named Arbitrator, a notice as noticed earlier is seeking appointment of an Arbitrator. The petition has been opposed by the respondents on several grounds. It is inter alia contended on behalf of the respondents that the order passed by the Managing Director on the claims made before me was final and hence beyond the purview of the arbitration clause found in the agreement executed between the parties. Reliance in support of that submission is placed upon clauses 2, 12 and 25-A of the agreement. It is contended by counsel appearing for the respondents that a conjoint reading of the said clauses left no option for the court except to hold that the order passed by the Managing Director on the claims made by the petitioner was beyond the purview of the arbitration clause and thereby rendering the present petition wholly untenable. On behalf of the petitioner, on the other hand, contended that clause 4 (viii) of the Arbitration Act did not make any such exclusion in favour of any decision rendered by the Managing Director. It was submitted that clause 4(viii) of the agreement was inconsistent with clause 25-A of the general conditions of the contract which stood specifically superseded by the provisions made to that effect in the agreement. It was submitted that clause 25-A contained in the notice inviting tenders must in the circumstances of the case be deemed to have been contravened and superseded by clause 4(viii) which does not provide for any limitation in so far as the claims before the Arbitrator are concerned. There is merit in the submission of the counsel Clauses 2, 12 and 25-A are found in the notice inviting tenders and are in the nature of general conditions of the contract. The agreement executed between the parties however specifically depicts about the terms stipulated in the agreement over those stipulated in the notice inviting tender. It is evident from the following words used at the end of clause 4(x) of the agreement. “However, the conditions No. 1 to x referred to above will supersede parallel terms and conditions in the details Notice Inviting Tender, if any mentioned therein” Even otherwise the provisions of clause 4(viii) of the agreement and 25-A in the Notice Inviting Tenders are exclusion and inconsistent with each other, while clause 25-A of the Notice Inviting Tenders provided for arbitration by the Superintending Engineer of concerned circle, Chandigarh. Clause 4(viii) of the agreement nominates the Chief Engineer of U.T.Chandigarh as the sole arbitrator. So also while clause 25-A makes an exception and saves from the purview of arbitration, the decisions otherwise made final in the agreement. Clause 4(viii) of the agreement does not make any such purview what so ever. Clause 4(viii) may be extracted for ready reference. “ In case of any dispute, the matter shall be referred to the Chief Engineer, Union Territory, Chandigarh who will act as Arbitrator. As an interim measure, the decisions arrived at by the Chairman of the Corporation will be binding on the contractors”. A plain reading of the above shows that any dispute between the parties in relation to the rates for the non-agreement items, is referable to the Chief Engineer, U.T.Chandigarh, as arbitrator. The above provisions does not exclude from such any arbitration proceedings, any matter or decision taken by the Managing Director of the Corporation. It is also evident that from a reading of the above provisions that a decision arrived at by the Chairman of the Corporation are binding on the contractor but only as an interim measure. The fact that the posts of Managing Director and the Chairman are often held by the same individual. This would suggest that the decision of the Chairman cum Managing Director passed by an interim measure and not under the provision of the agreement. Suffice it to say that in the absence of specific exclusion of any matter decided by the Managing Director from the purview of arbitration clause 4 (viii) of the agreement, shall have to be given its full effect. So interpreted any dispute the expression “any dispute” appearing in clause 4(viii) must be so construed so as to exclude any dispute regardless whether the same relates to correctness of any decision rendered by the Managing Director or any other Authority in relation to the agreement in question. Mr. Singh, counsel appearing for the respondents strenuously argued that since clauses 2 and 12 of the agreement makes the decision of the Managing Director finally it must necessarily mean that it is final even qua arbitration proceedings. I find it difficult to accept that submission. If the purpose underlying the said two provisions was to exclude the said decision from the purview of arbitration, there was no difficulty in making a provision to that effect in clause 4(viii) itself. Clause 4(viii) could in that situation have excluded from the arbitration. Decisions taken by the Managing Director to which finality has been attached in the agreement nothing of that sort has been done or is visible from clause 4(viii). The fact that clause 25-A of the Notice Inviting Tenders made such safe and exclude the decision taken in the agreement from the purview of arbitration clearly shows that the intention was to exclude the said decision from arbitration, the notice made it specifically so. In asmuch as clause 4(viii) did not say so and did not exclude any specific terms, the decision taken by the Managing Director from the scope of arbitration, the interference is that there was no intention to exclude such decisions from the purview of arbitration. In the circumstances, therefore, the contention urged on behalf of the respondents that the disputes in question are not arbitrable, mut be rejected and are hereby rejected. The next question whether the named arbitrator can be said to have failed to act in terms of the agreement having entered upon the reference. It is true that the petitioner had approached the nominated arbitrator with the request for entering upon the reference but it is equally true that the said request was unilaterally declined. I do not see any justification for removing the nominated arbitrator or appointing an independent person in his place. Accordingly, the petition is allowed only to the limited extent that the disputes referred shall stand referred to the sole arbitration of the nominated arbitrator for adjudication, keeping in view the provisions contained in the agreement executed between the parties and the law on the subject. The parties are directed to appear before the nominated Arbitrator for further proceedings on March 20, 2009. February 13, 2009 (T.S.Thakur) Malik Chief Justice