Case: International Amusement Limited Vs. India Trade Promotion Organization

said judgment contain the reasons for holding that the clause in the agreement cannot be construed as an arbitration clause. 20. At para 18 in P. Dasaratharama Reddy (supra), the case of State of Maharashtra v. Ranjeet Construction [AIR 1986 Bom 76 ] has been discussed wherein a two Judge Bench of this Court interpreted clause 30 of the agreement entered into between the parties, which is almost identical to the clauses under consideration, relying upon the judgment in the Tipper Chand (supra), and held that clause 30 cannot be relied upon by the parties for seeking reference of any dispute to an Arbitrator arising out of the contract. 21. At para 17 in the P. Dasaratharama Reddy Complex case (supra), the case of State of Orissa v. Damodar Das (supra) has also been examined, wherein the three Judge Bench of this Court interpreted clause 21 of the contract entered into between the parties. In the said case, this Court referred to clause 25 of the agreement, relied upon the judgment in State of U.P. v. Tipper Chand (supra) and held that the said clause cannot be interpreted for resolution of the dispute by an Arbitrator, the case fell for consideration of this Court in the case of State of Uttar Pradesh v. Tipper Chand (supra) which was relied upon in the said case is extracted at para 20 of the P. Dasaratharama Reddy case (supra) as under:- "20......(10)...... A reading of the above clause in the contract as a conjoint whole, would give us an indication that during the progress of the work or after the completion or the sooner determination thereof of the contract, the Public Health Engineer has been empowered to decide all questions relating to the meaning of the specifications, drawings, instructions hereinbefore mentioned and as to the quality of workmanship or material used 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 those conditions or otherwise concerning the works or the execution or failure to execute the same has been entrusted to the Public Health Engineer and his decision shall be final. In other words, he is nominated only to decide the questions arising in the quality of the work or any other matters enumerated hereinbefore and his decision shall be final and bind the contractor. A clause in the contract cannot be split into two parts so as to consider one part to give rise to difference or dispute and another part relating to execution of work, its workmanship, etc. It is settled now that a clause in the contract must be read as a whole. If the construction suggested by the respondent is given effect then the decision of the Public Health Engineer would become final and it is not even necessary to have it made rule of the court under the Arbitration Act. It [pic]would be hazardous to the claim of a contractor to give such instruction and give power to the Public Health Engineer to make any dispute final and binding on the contractor. A careful reading of the clause in the contract would give us an indication that the Public Health Engineer is empowered to decide all the questions enumerated therein other than any disputes or differences that have arisen between the contractor and the Government. But for Clause 25, there is no other contract to refer any dispute or difference to an arbitrator named or otherwise." 22. Further, at paragraph 21 of the case of P. Dasaratharama Reddy (supra) the case of K.K. Modi v. K.N. Modi (supra) fell for consideration, wherein this Court interpreted clause 9 of the Memorandum of Understanding that was signed by the two groups of Modi family. The relevant portion from the said judgment with regard to interpretation of Clause 9 of the Memorandum of Understanding between the parties is extracted below:- "9. Implementation will be done in consultation with the financial institutions. For all disputes, clarifications, 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." 23. Further, in the decision of P. Dasaratharama Reddy at para 30 referred to the case of Mallikarjun v. Gulbarga University [2004) 1 SCC 372 ] wherein it was held that the decision of the Superintending Engineer of Gulbarga Circle was final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications, designs etc. whether arising during the progress of the work or after the completion or abandonment thereof in case of dispute arising between the contractor and the Gulbarga University. The case of Punjab State v. Dina Nath [(2007) 5 SCC 28] was also referred supporting the same view in the case of P. Dasaratharama Reddy (supra). In view of the aforesaid decisions and the law laid down by this Court in catena of cases referred to supra which are reiterated in the case of P. Dasaratharama Reddy (supra) we are of the view that the clause 28 in the agreement which is referred to in the case on hand is not an arbitration clause. Therefore, the appointment of an Arbitrator by the nominee of the Chief Justice has been rightly set aside in the impugned judgment by the Division Bench of the Delhi High Court. The law laid down by this Court in the above referred judgments, after interpretation of relevant arbitration clauses in the agreement in those cases, are aptly applicable to the fact situation on hand and we answer the questions of law framed by this Court against the appellant and in favour of the ITPO and Union of India. 24. The other proceedings involved in this case, if any, pending under the provisions of the P.P. Act before the Estate Officer, the same shall be continued by him. 25.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This Court must accept the contention of the learned senior counsel on behalf of the ITPO that the said clause in the licence agreement is not an arbitration agreement between the parties for the reasons discussed below. The three Judge Bench decision of this Court (of which two of us were members) in P. Dasaratharama Reddy Complex v. Government of Karnataka & Anr. [2014) 2 SCC 201 ], while examining a similar clause of an arbitration agreement, after careful consideration and interpretation of the clause, has held that in all the matters of dispute arising out of the agreement regarding quality of materials and work, etc., the decision of the Board of Directors of the Nagarika Yogbakashema Mathu Gruha Nirmana Sahakara Sangha, shall be final and binding on the part of the Contractor. Further, the case of Mysore Construction Company v. Karnataka Power Corporation Ltd. & Ors. [ILR 2000 KAR 4953] was discussed in P. Dasaratharama Reddy (supra) by this Court, at para 14, wherein, the Designated Judge has referred to the passage from Russell, on Arbitration (19th Edition, page 59) and the other judgments of this Court in K.K. Modi v. K.N. Modi and Ors., Chief Conservator of Forests, Rewa v. Ratan Singh Hans [AIR 1967 SC 166 ], Rukmanibai Gupta v. The Collector, Jabalpur [(1980) 4 SCC 556] , State of Uttar Pradesh v. Tipper Chand [(1980) 2 SCC 341] , State of Orissa v. Damodar Das [(1996) 2 SCC 216] , Bharat Bhushan Bansal v. Uttar Pradesh Small Industries Corporation Ltd., Kanpur [1992) 2 SCC 166] and observed that the decisions in the abovementioned cases make it clear by laying down the conditions, when an agreement or a clause in the agreement can be construed as an arbitration agreement between theat paragraph 16 of P. Dasaratharama Reddy (supra), the distinction between an expert determination and arbitration between the parties has been spelt out as per Russell, on Arbitration (21st Edn.) in the followingcases have been fought over whether a contracts chosen form of dispute resolution is expert determination or arbitration. This is a matter of construction of the contract, which involves an objective enquiry into the intentions of the parties. First, there are the express words of the disputes clause. If specific words such as arbitrator, Arbitral Tribunal, arbitration or the formula as an expert and not as an arbitrator are used to describe the manner in which the dispute resolver is to act, they are likely to be persuasive although not always conclusive.... Where there is no express wording, the court will refer to certain guidelines. Of these, the most important used to be, whether there was an issue between the parties such as the value of an asset on which they had not taken defined positions, in which case the procedure was [pic]held to be expert determination; or a formulated dispute between the parties where defined positions had been taken, in which case the procedure was held to be an arbitration. This imprecise concept is still being relied on. It is unsatisfactory because some parties to contract deliberately choose expert determination for dispute resolution. The next guideline is the judicial function of an Arbitral Tribunal as opposed to the expertise of the expert.... An Arbitral Tribunal arrives at its decision on the evidence and submissions of the parties and must apply the law or if the parties agree, on other consideration; an expert, unless it is agreed otherwise, makes his own enquiries, applies his own expertise and decides on his own expertwas further held that a clause substantially similar to the clauses referred to in P. Dasaratharama Reddy (supra) was interpreted by the three Judge Bench of this Court in the State of Uttar Pradesh v. Tipper Chand (supra) wherein paras 2 and 3 of the said judgment contain the reasons for holding that the clause in the agreement cannot be construed as an arbitrationpara 18 in P. Dasaratharama Reddy (supra), the case of State of Maharashtra v. Ranjeet Construction [AIR 1986 Bom 76 ] has been discussed wherein a two Judge Bench of this Court interpreted clause 30 of the agreement entered into between the parties, which is almost identical to the clauses under consideration, relying upon the judgment in the Tipper Chand (supra), and held that clause 30 cannot be relied upon by the parties for seeking reference of any dispute to an Arbitrator arising out of theA reading of the above clause in the contract as a conjoint whole, would give us an indication that during the progress of the work or after the completion or the sooner determination thereof of the contract, the Public Health Engineer has been empowered to decide all questions relating to the meaning of the specifications, drawings, instructions hereinbefore mentioned and as to the quality of workmanship or material used 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 those conditions or otherwise concerning the works or the execution or failure to execute the same has been entrusted to the Public Health Engineer and his decision shall be final. In other words, he is nominated only to decide the questions arising in the quality of the work or any other matters enumerated hereinbefore and his decision shall be final and bind the contractor. A clause in the contract cannot be split into two parts so as to consider one part to give rise to difference or dispute and another part relating to execution of work, its workmanship, etc. It is settled now that a clause in the contract must be read as a whole. If the construction suggested by the respondent is given effect then the decision of the Public Health Engineer would become final and it is not even necessary to have it made rule of the court under the Arbitration Act. It [pic]would be hazardous to the claim of a contractor to give such instruction and give power to the Public Health Engineer to make any dispute final and binding on the contractor. A careful reading of the clause in the contract would give us an indication that the Public Health Engineer is empowered to decide all the questions enumerated therein other than any disputes or differences that have arisen between the contractor and the Government. But for Clause 25, there is no other contract to refer any dispute or difference to an arbitrator named orat paragraph 21 of the case of P. Dasaratharama Reddy (supra) the case of K.K. Modi v. K.N. Modi (supra) fell for consideration, wherein this Court interpreted clause 9 of the Memorandum of Understanding that was signed by the two groups of Modi family. The relevant portion from the said judgment with regard to interpretation of Clause 9 of the Memorandum of Understanding between the parties is extractedImplementation will be done in consultation with the financial institutions. For all disputes, clarifications, 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 thein the decision of P. Dasaratharama Reddy at para 30 referred to the case of Mallikarjun v. Gulbarga University [2004) 1 SCC 372 ] wherein it was held that the decision of the Superintending Engineer of Gulbarga Circle was final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specifications, designs etc. whether arising during the progress of the work or after the completion or abandonment thereof in case of dispute arising between the contractor and the Gulbarga University. The case of Punjab State v. Dina Nath [(2007) 5 SCC 28] was also referred supporting the same view in the case of P. Dasaratharama Reddy (supra). In view of the aforesaid decisions and the law laid down by this Court in catena of cases referred to supra which are reiterated in the case of P. Dasaratharama Reddy (supra) we are of the view that the clause 28 in the agreement which is referred to in the case on hand is not an arbitration clause. Therefore, the appointment of an Arbitrator by the nominee of the Chief Justice has been rightly set aside in the impugned judgment by the Division Bench of the Delhi High Court. The law laid down by this Court in the above referred judgments, after interpretation of relevant arbitration clauses in the agreement in those cases, are aptly applicable to the fact situation on hand and we answer the questions of law framed by this Court against the appellant and in favour of the ITPO and Union ofother proceedings involved in this case, if any, pending under the provisions of the P.P. Act before the Estate Officer, the same shall be continued by