Delhi High Court Union Of India vs Bharat Engineering Corporation on 20 April, 1977 Equivalent citations: ILR1977DELHI57, 1977RLR499 JUDGMENT T.P.S. Chawla, J. (1) A very fundamental question is raised in I his appeal. It has proved to be more difficult than I had originally imagined. The question is : Can there be an 'arbitration agreement' which reserves the right of reference to only one party ? Or, in other words, which only one party can involve ? The point has arisen in a somewhat curious way. (2) On 12th July 1972, a contract was signed between the President of India acting through the Northern Railway Administration (the 'Railway') and a firm known as M/s. Bharat Engineering Corporation (the 'contractor'). The contractor was to execute certain 'Earthwork' connected with the construction of bridges over a portion of the railway line between Pathankot and Joginder Nagar. Payment was to be made at the agreed rates. Disputes arose whilst the work was in progress. The Railway was not satisfied with the speed at which the work was being done. Ultimately, after issuing various notices, the Railway rescinded the contract on 11th September 1974. The remainder of the work was awarded to other firm at the 'risk and cost' of the contractor. (3) As there was an arbitration clause in the contract, a petition under section 20 of the Arbitration Act 1940 was moved by the contractor on 5th November 1974. The disputes, of which reference to arbitration was sought, were enumerated in an annexure to this petition. They comprised only the claims made by the contractor. Though, in its reply, the Railway mentioned that it. had 'suffered huge loss' due to the failure of the contractor to complete the work, there was no prayer that counterclaims of the Railway be also referred to arbitration. On 10th February 1975, the contractor's petition was allowed and the disputes mentioned in the annexure were referred to an arbitrator to be appointed by the General Manager, Northern Railway, within two months. (4) Therefore, on 8th April 1975, the Railway moved an application under section 151 of the Code of Civil procedure. It was prayed that the counterclaims of the Railway, amounting to Rs. 5,80,550 be also decided by the same arbitrator. This application was dismissed as withdrawn' on 15th May 1975 without prejudice to the right of the Railway to 'move an appropriate application under some other provisions of law'. (5) Promptly, on 27th May 1975, the Railway moved a petition under section 20 of the Arbitration Act seeking the same relief. Simultaneously, an application was moved under section 151 of the Code of Civil Procedure. In this it was stated that if the counterclaims of the Railway were also referred to arbitration, the number of arbitrators and the mode of their appointment would be altered under the terms of the arbitration clause, as the amount of the claims would then be more than Rs. 3,00,000. The court was requested to pass such orders 'as be deemed just and proper in this matter'. (6) Both the petition and the application were dismissed with costs on 31st July 1975 by a single judge of this court. The present appeal is against that order. The reasons for dismissal given in the order under appeal are not altogether clear. However, it is not necessary to dwell on them because no attempt was made to support the order on any of these reasons. In appeal the sole argument on behalf of the contractor was that the arbitration clause could not be 'involved' by the Railway. The entire debate has centered on this point. A like submission was made before the single judge, as is noticed in his order, but he did not deal with it, possibly because it was not developed as the matter, seems to have gone on other grounds. So we have to consider the question more or less at first instance. (7) The arbitration agreement is contained in clause 64 of the General Conditions of Contract. It comes under the section entitled 'Settlement of Disputes'. The arbitration clause itself is entitled 'Demand for arbitration'. It has many subclauses, but for the present purpose only subclause (1) is relevant, and it reads as follows : In the event of any dispute or difference between the parties hereto as to the construction of operation of this contract or the respective rights and liabilities of the parties, on any matter in question, dispute or difference on any account, or as to the withholding by the Railway of any certificate 'to which the contractor may claim to be entitled to, or if the Railway fails to make a decision within a reasonable time, then and in any such case, but except in any of the excepted matters referred to in clause 63 of these conditions, the Contractor, after 90 days of his presenting his final claim on disputed matters, may demand in writing that the dispute or difference be referred to arbitration, such demand for arbitration shall specify the matters wh