Case: State of Madhya Pradesh and Another Vs. K. K. Shukla and Company

Disputes having arisen between the appellants and the respondent, a reference was made to arbitration under Section 7 of the M.P. Madhyastham Adhikaran Adhiniyam, 1983 (hereinafter referred to as "the Act"). Before the Tribunal, it was contended that having availed of arbitration under clause 29 of the contract it was not open to invoke Section 7 of the Act. This contention was rejected. A revision petition was filed under Section 19 of the Act in the Madhya Pradesh High Court. The High Court upheld the view of the Arbitral Tribunal. Hence this appeal by special leave.

Court's reasoning:
The Superintending Engineer under clause 29(2) is empowered to decide all questions relating to the meaning of the specifications, designs, drawings and constructions mentioned in the contract and as to the quality of workmanship or materials used in 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, designs, drawings, specification estimates, instructions, orders or these conditions, or otherwise concerning the work, or the execution, or failure to execute the same, whether arising during the progress of the work or after the completion of abandonment and the Superintending Engineer will have to give his decision after giving an opportunity to the partycontract. If any party is not satisfied with the decision of the Superintending Engineer, it may make a reference to the Chief Engineer within 30 days from the date of communication of the decision of the Superintending Engineer and the Chief Engineer will give his decision after hearing the parties which shall be final, conclusive and binding on the parties.These clauses are sought to be interpreted as clauses for arbitration. We fail to understand as to how these clauses can be understood to be one referring the matter to arbitration at all. So far as the Superintending Engineer is concerned, he has to decide certain questions which we have adverted to and upon his decision the matter is referred to the Chief Engineer for further decision. These two provisions made in the contract are only to make a fair provision in the contract to settle any of the claims that may arise in the course of execution of contracts and the matter cannot be stretched so as to elevate to the level of an arbitration clause. Neither the Superintending Engineer nor the Chief Engineer can be characterised as discharging the functions of an arbitrator. In that view of the matter, we do not think the contention put forth on behalf of the appellant that the respondent having availed of the arbitration as provided under clause 29 is trying to seek another remedy as provided under Section 7 of the Act is tenable. In the circumstances, the effect of Section 7 upon clause 29 does not arise for consideration at all.