t 58 0 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH J 1 A I8 Date ofDecision 11010 CNo1161of2001 Mls AllRl3uilders Petitioner Versus Union TerritoryChandigarh and others 2espondents CORAM1 HONBLE MR JUSTICE HEMANT GUPTA 0 Present Mr PSRana Advocate for thepetitioner O HEMANT GUPTA J I CD Challengein the presetltreVlSlon petitionis to the orders dated I 2109 1992 and 18 02000 passedby the leamed trial Court and leamed Z first AppellateCourt wherebyan application flled by the l petitionerunder Section 20 of the lndian Arbitration Act 1940 or short I the Act was dismissed 08 Cn The brief facts leadingto the presentrevlSlOll petitlOllare that e on 02091 986 the petitioner submittedtenderfor the work of constructlon Z of 66KVA Grid Sub Station 111Sector 12 On 2609 1986 the Llm tender of the petitlonerwas acceptedand was asked to completethe work within a periodofsix monthsic on or before25031987 On the requestof the petitionerthC tlme 10r coinpletionof the contract was extended to 0507 1987 The pctiticnercoinpletedtheprojectwithin the extendedpeiiod and submitted Onal bill for paynlenr The llnal bill submitted by the petitioner was paidon 12021988 Duriilgthe COUrSC 0 l eXeCUllOll of the work the petilionerhas serveda notice on 08041 987 calling the Eogineer to . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 1 59 2 CReNoe1161of2001 0 decide the two claims raised by the petitioncr It was on 22071988the e4 etitionersent a notl ce to the Executive EngineerCP Division NoA raising disputesarising out of the contract Such communlcation was by the Executive Engineeron 0408988 rejectingthe clailns raised by the petitionerlt was thereafterthepetitioner invoked thejurisdictionof the Civil Court under Section 20 of the Act on 10081988 The applicationof the petitioner has been declined by the Courts below inter alia for the reasoll that the disputehas not been raised 1 r by the petitionerwithin 180 daysfroin the date of receiptof nal payment 0 0 andthat thepetitionerhas failed to produceon record evidenceto show that I the Engineerhasiniseconductedtheproceedings C5 I Arbitration Clause ie Clause 2A of the Agreementreadsas Z under Clause 25A 1f any questiondifference of objection whatsoevershall arisein any wav connectedwith or arisingout I of this instruinentsor the meaning or operationof any part 08 thereof or the rlghtsduties or Iiabilities of either party then 0 save in so far as the decision of any such matteris hereinbefore Ivno Z providedfor and has been So decided every such matter includingwhether its decision has been otherwiseprovidedfor tl andlor whether it has been finallydecided accordinglyor whether the contract should be terininatedor has been rightly terminated and as regardsthe rightsand obligations of the partiesas the result of such termination shall be referred for arbitration to the S Engineerof the Circle Chandigarh or actingas such at the time of referencewithin 180 daysVlZ SlX monthsfrom the dateof inakingfinal paymentto the contractor or when the contractor is not willing to recelve the paymentfrom the datea registered notice is sent to him that his final bill is readyfor paymentand his decision shall be final and bindingand wherethe matter involves a claims or the be . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 60 3 OeReNo1161of2001 0 paymentof rccovery or deducton of money only the amount ti if any awarded in such arbitration shall be recoverable in respectofthe matter so referred If the matter is not referred to arbitration within the specifiedperiod all the rightsand claims under the Contract shall be deemedto havebeenforfeitedand absolutely barred Relyingupon the said Clause Iearnedcounsel for thepetitioner has arguedthatthough Engineeris namedas an Arbitrator by designationbut such Engineerhas failed to 1 r the claim of the petitionersubmittedon 08041987 vide ExAVe21A and 0 0 thus the nondecision of such clailn rendersthe Engineer as I unflt to be an Arbitrator Therefore the petitioner had rightlyinvoked the C I jurisdictionto refer the disputeto an Arbitrator under Section20 ofthe Act Z Therefore the orderspassedby the Courts below decliningthe application m underSection20 ofthe Act are not sustainable lt is also contendedthat the L petitionerhas raised claiin within 180 daysof the dateof final paymentand 08 has also invoked thejurisdictionof the Court under Section 20 of the Act m within a periodof six months therefore thedisputesraisedbythe petitioner e Z arerequired to be referredto an independent Arbitrator Learned counsel for thepetitioner hasrelied upon a judgment of this Court reportedas Jugdish Chander Gupta Vse Lachhman Dass and othersAIR 1968 1UH 413 to contendthat the Court has jurlsdiction under Section 20 ofthe Act for ofan Arbitrator and cannotbe takenaway merelybecausethepetitionerhasnot servednotice for appointinentof an Arbitrator under Section 8 of the Act It is thus contended that the disloutesraised by the petitionerare requiredto be adjudicated upon by an independent Arbitrator . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 61 4 0 CRNo1161 of2001 l 0 Section 20 of the Act empowers any partyto an agreementto 1 ihvokethejurisdiction of the Court insteadof under ChapterII for filingof an agreementin Court Sulsection 641of Section 20 of the Act that the Court shall order the agreementto be 61ed and shall makean order ofreference to thcarbitratorappointed by thepartiesor where theparties cannot agreeupon an arbiirator to an arbitratorappointed by the Cou A Division Bench of Allahabad High Court ln a judgment 1 0 reported as Union of India Vs Gorakh Mohan and another AIR 1964 0 0 Allahabad 4 77 has considered the scope of Sections 8 and 20 of the I ArbitrationAct 1940 lt has been held that Section 80f the Act confers C5 I powerupon the Court to appointan arbitratoron an appiicationwhere the Z parties concur in the ofan arbitrator whereasSection 20 ofthe Act entitlespartyto applyfor fllingofthe arbitrationagreementin Coun and Ci the Court to inake an order ofreference to the arbitratorappointed 08 bythepartiesIt was held to thefollowingeffect oo 9 The provinceof the two provisionsis quitedistinct one 7 Z conferspower upon the Court to appolntan arbitratorwherethe partiesdo not concur in the of an arbitrator the other entitles a partyto applyfor the filing of the arbitration agreement in Court andeinpowersthe Court to make an order if referenceto the arbitratorappointedby the partiesand in the absenceof such appointlnent to the arbitratorappointed by it In the foriner case afterthe Court hasappointed an arbitrator it is thepartieswho refer thedispute to him ln the lattercaseit 1S the Court which refers the dispute In Thawar Das Pherumal Vs Union of IndiaS1 AIR 1955 SC 468 lt was observed A refclrencerecluires the assentofboth sides If one side is not preparedto submit a given matter to . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 62 5 Il CeReNo1161of2001 0 arbitrationwhen thereis an agreeinentbetwcenthemthat L should be referred then recourse must be had to the 1 Court under Section 20 of the Act and the recalcitrant partycan then be compelled to submit the matterunder subsection 49 In the absenceof either agreementby both sides about the terms of reference or an order of the Court under Section 20 649compelling a reference the arbitrator is not vested with the necessary exclusive jurisdiction 252 In Union of India Vs SVKrishna Rao AIR 1970 Madhva 1 iZ Prudesh 49 itwas held that the purpose of Sections8 and 20 are altogether 0 different In those cases where the partieshave agreedat the time of C3 I enteringinto a contract that any disputearisingout of it shall be settledby C5 arbitrationand where no arbitratorshave been namedand wherethe panies I do not agree on the choice of the arbitrator Section 8 comes lnto operatiOn Z It givespower to the Court to appointan arbitrator On the other hand C under Section 20 what the Court has to decide is as to whether the I 08 arbitration agreelnentshould be fi Ied before it or not When the Court OO comesto the conclusion ihat a disputehas ansen between the partiesthen 7 Z the Court is requiredto make an order of reference to the arbitrator tl appointedby the partieswhether in the agreementor otherwise The provisionsof sulsection 41of Section 20 must be in this manner Not only the agreeinentto refer tbe disputeto arbitrator but also the agreementregardingarbitrationby the nained arbitrator is also to be enforced A Division Bench of PatnaHighCourt in a judgmentreported as Panna Lal Khomani Vs Stote ofBihur und unother AIR 1984 Patnu 09 was seized ofsomewhat siinilar issue as in the presentcase The Court . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 63 6 CeKeNoell6l of2001 0 hasheld to thefollowingeffect 1 6 1earned counsel for therespondents placedrelianceof 3 decisions namelyThe Union of India Vs Om Prakash 6AIR 1976 SC 17459Stateof RajasthanVs Sharma 8 Co 6AIR 1981Raj l9 and Excalcer Vs StateofWest BengalAIR 1980 Cal 869 The raliO of all these cases is that if nothingis done pursuantto a notice bcing sent by a party aggrieved to the arbitrator under the arbitration agreement to enter upon arbitration or to appointhis nominee and then if the party comes to the court for a direction to the other side to Sle the m arbitrationagreelnentand to appoint an arbitratorand refer the 0 inatters in disputeto arbitration the matterwilI fall within the C0 four corners ofSection 20 041ofthe Act But ifa nominationis I madepursuantto the noticesent by thepartyaggrieved or ifthe C5 I COUrt on such an asks the sole arbitrator either to arbitrate or to nonlinate his nominee under the terms of the Z agreement and the arbitratorreadilydoes so such cases may a2 well be said to fall within theprovisions ofSection 8 3 The Honble SupremeCourt in a judgInentreportedas The 08 Union ofIndiu Vs Shri Om Prakash AIR 1976 SC 45 has explained oo that the Act threekinds of arbitratioli1 arbitration without W2 Z lntervention of a court dealt with in chapterll of the Act which includes r Section 3 to Section 19 1i0 arbitrationwith interventionof a court where thereis no suit pendingdealt with in ChapterIIl which consistsofonlyone section viz Section 20 and iiil arbitration in suits which covered by chapter IV Thus ltwas held that in terlns of the provisionsof Chapter4I aller the appointment of arbitrator the are to be outside court and up to the stage of filing the award intervention of court is not unless any occasion arises requiringthe court to remove the arbitrator under Section ll An agreement to submit differences to . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 64 7 4 CRNoell6l of2001 0 arbitrationimplies an agrecinenl to refer the di ffercnces to the arbitrator Section8 only the court to appointan arbitratorwherethepanies do not concur in the Section 20 occurringin ChapterIlI containsprovisions for arbitration wlth the intervention of a court where thereis no suit pending A perusalof arbitrationclause between the partiesshows that the Engineer was nained as an Arbitratorby In SRaian Vs State ofKeralu and anotherAIR 1992 SC 1918theCouMwas 0 considering a disputearisingout of an agreementcontaining similar clause 0 C ofarbitrator by and held to thefollowingeffec I 12 Thus this 1S a case where the agreementitself C5 I species and names the arbitrator It is the EngineerBuildingsand Roads Circle Trivandrum In such a Z situation it was obligatory upon the IearnedSubordinateJudge in case he was satisfied that the disputeoughtto be referredto 0 the arbitrator to refer the disputeto the arbitratorspeciSed 111 I the agreementIt was not open to hlm to ignorethe said clause cr5 of the agreementand to appointanotherperson as an arbitrator Oo Only if the arbitratorspecifledand named in the agreement n7 Z refuses or fails to act the Court does get the jurisdictionto appointanotherpersonor persons asthe arbitrator Thisisthe Ll clear purportof subsection 41 It says that the referenceshall be to the arbitrator appointedby the parties Such agreed appointlnent may be containedin the agreenlentitselfor may be expressedseparately To repeat only in cases where the agreement does not specifythe arbitratorand the partiescannot also agree upon an arbitrator does the court getthejurisdiction to appointan arbitrator 79 In anotlierjudgmentreported as Dhurmu Prathishthanam Vs Madhok Construction U1 Ltd 10519 SCC 686 the Honble Supreme Court held that an arbitratorundcr Arbitration Act 1940 1S not statutory It . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 65 8 CeReNoe1161of2001 0 1S a Forum chosen bythe consent of thepartiesas an altemateto resolution J bythe ordinaryforLilnof Iaw courts It was held to the following effect 7 Further this was not a case wherethe arbitrationclause authorizedone ofthe partiesto appointan arbitratorwithout the consent of the other Two thingsare therefore of essence lIl cases like the presentonel flrstly the choice of the tribunal or the arbitrator and secondlythe referenceof the dispute to the arbitrator Both should be based on consent giveneither atthe 10 time of choosingthe arbitratorand makingreferenceor else at the time of enteringinto the contract between the parties ln 0 0 anticipationof an occasion for settlelnentof disputesarising lll future 95 C5 I In view of the referredto above the partieshave Z consentedfor resolvingtheirdisputesby an arbitratorby The partiesare bound to resolve disputes111tenns of subsection of Section 20 of the Act by such arbitrator alone The petitionercannot seek 08 appointment of an arbitralor de hors the terlns of the agreementfor the m reason that the Engineerhas failed to decide the claims 7 Z earlier tl Learned counscllorthe petitionerhas arguedthat Since the agreementdoes not specificalJyexclude raisingof disputepriorto the paymentof final bill therefore the Engineerwas bound to decide the disputeraised by the petitionervide communication dated 08041987 6ExAH21A1 Since the said communication has not been adjudicatedupon therefore the Engineerhas failed to discharge the dutiesof an arbitrator I do not f1ndanv merit lll the said arguments Clause 2A of the agreementallows any party to the agreementl0 raise disputeafter . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 66 9 CeKeNo11610f2001 0 t bill and that too within a periodofsix months Such clause b implication excludesraisingof disputes in any other manner Once the parties have agreed to ralse disputeafter the flnal bill is tnade then it was not open to one of the parly to ralse the disputeduringthe course of the executlOIl of the work Clause 254 of the agreelnentexcludesraisingof disputeduringthe course of execution of the contract Since there was no obligationwith the Engineer to decide the claim raised by the petitioner before sublnlssion of the final bill it cannot be said that the 1 r agreedarbitrator has refused or failed to act which may warrant his 0 removal CO I The petitionerhaspleadedthatthereis reasonable C5 I that full rates for extra iteillSas claimed by petitionerwould not be allowed Z bythe Engineeras he will try to absolve himself from the a responsibility which he failed to dischargeThe petitioner apprehends that the Engineerof the respondentwill not do justicebeing 08 employeeof respondentand is also biased againstthe petitionerAW3 00 DGill partnerof the petitionerdeposed on oath thatduringexecution of 7 Z the work a disputeregarding recovery of stealand water charges arose and tl theyrequested the EngineerunosoleArbitrator vide letter dated8A 1987for the settlenlentof disputebut the Arbitrator did not enter upon the reference He has furtherdeposed that he does not expectjustice from the Engineerbecausehe is not taken any action when the arbitrationclause was invoked beingthe official of the and new arbitrator inay kindlybe appointedto settlc the disputebetween the parties In terlns of subscction 641Section 20 of the Act an Arbitrator chosenbythepaitiesalone can be appointed as an arbltrator Mere fact that . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 1 67 10 CeReNo1161of2001 0 the Engineerls an offlcial of the Administration is not a 1 on the basis of which the agreedarbitratorcan be changed It 1S mere ipsidixit of the petitioner that he does not expectjusticefrom the Engineeronlyfor the reason that his earlier misconceived anduntenableclaim was not entertainedby the Engineer Therefore I do not 6nd that the petitionercan seek of an arbitrator de hors the agreeinentin proceedings under Section 20 ofthe Act 1O The fact remains that paylnent of Snal bill was made on 0 0 1202 1988 The petitioner raised the disputeon 22071 988 vide ExAV I 311 The said letter was not addressedto the arbitrator but to the Executive 9 I EngineerThe Executive Engineercould have referredthe said leuer to the Z arbitrator but instead of referring to the arbitrator the Executive Engineer communicated on 040 819 88 vide Ex rejectingthe claim of the r petitioner Soon therealter Oll 100 1988 the petitioner has invoked the I 08 jurisdiction ofthe Court underSection20 ofthe Act Such petitionwas filed oo within 6 months of the paymentof final bill on 12021988 Sincethe Z Executive Engineerhas refused to appointan Arbitrator and the petitioner tl has flled a petitionbefore this Court for fillng of the arbitrationagreement and for referring the disputeto the arbitrator it satistlesthepreconditions of seekingresolution of disputesby an arbitrator in Clause 2544 of the agreementTherefore the disputebetween the partiesare required to be resolvedby theagreedarbitratorie Engineer The Courts below have erredin decliningtheapplication under Section 20 of the Act for the reason that the demandwas not inade to the arbitratorbut to the Executive Engineer The Courts overooked the fact . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document 4 1 68 11 CR1Vo1161of2001 1 1 Cl thatthepetitioner under Section20 ofthe Act was also Sled within 6 months ofthe flnal bill In view ofthe said facts the orderspassedbythe Courts beiow are set aside The tnatter is orderedto be remittedback to the leamed trial Court for decidingthe applicationunder Section 20 of the Act for 6lingof the arbitrationagreementand referring the disputes to the namedarbitrator 1e Engineer The petitionerthrough his counsel is directed to appearbefore W r the learned trial Courl Oll toIlIo foi further ltl 0 0 accordancewith law7 I C 1 I 11010 Z JUDGE C 08 OO Wmo Z Llm 6 41 Il 197 7 V IA . Rashmi 2012.08.09 14: 44 True Scanned Copy Of the Original PHHC,Chandigarh JOYTI RANI 2016.03.28 16:22 I attest to the accuracy and integrity of this document