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Shri Girdhari Lal Bansal v. The Chairman, Bhakra Beas Management Board, Chandigarh And Others
Factual and Procedural Background
The Bhakra Beas Management Board (the "Board"), through its Sub Divisional Officer, Construction Sub Division, allotted work for the construction of 12 quarters to Girdhari Lal by work order dated 22nd September 1980. The contractor filed an application under sections 5, 8, 11 and 12 of the Indian Arbitration Act, 1940 before the lower court on 26th October 1982 seeking revocation of the authority of the appointed Arbitrator and the appointment of a new impartial Arbitrator. The contractor contended that under the arbitration agreement disputes were to be referred to the Superintending Engineer of the Circle and submitted a claim of Rs. 1,05,984/- to the said Arbitrator. However, the Arbitrator did not proceed with the matter and allowed four months to lapse, which the contractor alleged amounted to misconduct, prompting the application for removal of the Arbitrator.
The Board contested the application, leading to the framing of three issues: whether the petition was barred under Order 23, Rule 1(4) of the Civil Procedure Code (C.P.C.), whether the Civil Courts at Chandigarh had jurisdiction, and whether there were sufficient grounds for removal of the Arbitrator.
After evidence, the lower court dismissed the application on 17th February 1984, holding that the petition was barred, that the court had jurisdiction, but that the reference made by the contractor was unilateral and invalid, and the Arbitrator's inaction did not justify removal. The contractor appealed against this decision.
Legal Issues Presented
- Whether the contractor’s petition was barred under Order 23, Rule 1(4) of the C.P.C. given the prior application was withdrawn.
- Whether the Civil Courts at Chandigarh had jurisdiction to try the petition.
- Whether there were sufficient grounds for removal of the Arbitrator, specifically if the arbitration agreement was valid and the reference lawful.
Arguments of the Parties
Appellant's Arguments
- The second petition was not barred under Order 23, Rule 1(4) C.P.C. because it was filed before the first application was withdrawn, relying on precedents from Lahore decisions (Ram Mal v. Upendra Dutt and Mangi Lal v. Radha Mohan).
- There existed a valid arbitration agreement as clause 5 of the work order conditions referred disputes to the Superintending Engineer of the Circle for final decision.
- The reference to the Superintending Engineer was not unilateral or illegal; the contractor submitted a detailed claim, but the Arbitrator failed to proceed, which justified removal.
- Relied on cases such as State of Orissa v. Laxminarayan Samantrary, P.C Aggarwal v. K.N Khosla, Bhusawal Borough Municipality v. Amalgamated Electricity Co. Ltd., and Seth Thawardas Pherumal v. Union of India to support the duty of an arbitrator to proceed once a reference is made.
Respondent's Arguments (Board)
- Argued that the conditions of the work order, including clause 5, did not constitute an arbitration clause but administrative control and supervision by the officer in charge or Superintending Engineer.
- Relied on The State of U.P v. Tipper Chand to argue that the decision of the Superintending Engineer was not an arbitration award but a supervisory direction.
- Contended that the reference was unilateral and invalid, thus the Arbitrator’s inaction did not warrant removal.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Teja Singh v. The Union Territory of Chandigarh, 1981 1 S.L.R. 275 | Application of Order 23, Rule 1(4) C.P.C. barring second petition after withdrawal of first | Lower court relied on this to hold petition barred; appellate court distinguished facts and reversed. |
| Ram Mal v. Upendra Dutt, AIR 1928 Lah 710 | Second suit filed before first is withdrawn is not barred under Order 23 C.P.C. | Appellate court accepted this principle to hold petition not barred. |
| Mangi Lal v. Radha Mohan, AIR 1930 Lah 599 | Similar principle regarding second suit and Order 23 C.P.C. | Supported the appellate court’s reversal of lower court’s bar on petition. |
| The State of U.P v. Tipper Chand, 1980 2 SCC 341 | Interpretation of supervisory clause versus arbitration clause | Distinguished by appellate court as facts and clause wording differed. |
| Union of India, Bombay v. Hari Krishan Joshi, AIR 1972 P&H 207 | Validity of unilateral arbitration reference | Lower court relied on it to hold reference invalid; appellate court disagreed. |
| State of Orissa v. Laxminarayan Samantrary, AIR 1982 Orissa 93 | Duty of arbitrator to proceed once reference is made | Appellate court relied on it to hold that arbitrator’s failure to proceed justified removal. |
| P.C Aggarwal v. K.N Khosla, AIR 1975 Delhi 54 | Arbitrator’s obligation to arbitrate once reference accepted | Supported appellate court’s reasoning on arbitrator’s duty. |
| Bhusawal Borough Municipality v. Amalgamated Electricity Co. Ltd., AIR 1966 SC 1652 | Supreme Court authority on arbitration proceedings | Used to reinforce the principle that arbitrator must proceed once reference is accepted. |
| Seth Thawardas Pherumal v. Union of India, AIR 1955 SC 468 | Observations on arbitration and jurisdiction | Referenced in support of arbitrator’s duty to proceed. |
| Guru Nanak Trunk House, Amritsar v. Chanan Finance and Chit Fund (P) Limited, 1976-78 PLR 534 | Recent ruling aligning with obligation of arbitrator to proceed | Appellate court relied on this for its decision on arbitrator’s duty and reference validity. |
Court's Reasoning and Analysis
The court first examined whether the petition was barred under Order 23, Rule 1(4) C.P.C. The lower court had held it barred relying on a precedent, but the appellate court found that since the second petition was filed before the first was withdrawn, the provisions of Order 23 C.P.C. did not apply. The court reversed the lower court’s decision on this issue.
On jurisdiction, no arguments were advanced before the appellate court, so the lower court’s finding that the Civil Courts at Chandigarh had jurisdiction was upheld.
Regarding the arbitration agreement and removal of the Arbitrator, the court carefully analyzed the terms of the work order. It noted that while the conditions granted supervisory authority to the officer in charge and the Superintending Engineer, clause 5 specifically referred to disputes being referred to the Superintending Engineer whose order would be final. The court distinguished this from mere administrative direction, concluding that clause 5 constituted an arbitration agreement despite the absence of explicit terms like "arbitrator" or "award."
The court further considered whether the reference made by the contractor was unilateral and invalid. It found that the contractor had submitted a detailed claim to the named Arbitrator (Superintending Engineer), who failed to proceed and allowed four months to lapse. Relying on relevant precedents, the court held that the failure of the Arbitrator to act amounted to misconduct and justified removal. The reference was therefore valid and not illegal.
The court also noted the practical possibility that the original Superintending Engineer might have changed by the time of the decision, allowing for flexible relief.
Holding and Implications
The court allowed the appeal and set aside the order of the lower court dated 17th February 1984.
The Superintending Engineer, Bhakra Dam Circle, Nangal, was directed to enter into arbitration based on the contractor’s claim. The parties were ordered to appear before the Superintending Engineer on 20th February 1985, with the contractor filing a copy of the claim and the Board given six weeks to file a counterclaim. Upon filing the counterclaim, the Arbitrator would be deemed to have entered into reference and was to decide the matter within four months.
If the parties agreed, the four-month period could be extended; otherwise, failure to decide within four months would result in removal of the Superintending Engineer as Arbitrator, allowing the parties to approach the court for appointment of a new Arbitrator.
No order as to costs was made. The decision directly affects the parties by mandating arbitration proceedings and establishing a clear timeline and consequences for non-compliance, but it does not set any new binding precedent beyond the application of established principles.
Gokal Chand Mital, J.:— Bhakra Beas Management Board, (hereinafter referred to as the ‘Board) through Sub Divisional Officer Construction Sub Division, allotted work for the construction of 12 quarters to Girdhari Lal vide work order No. 437 dated 22nd September 1980. The contractor filed an application under sections 5, 8, 11 and 12 of the Indian Arbitration Act, 1940 (hereinafter called the ‘Act’), before the Court below on 26th October, 1982 for revoking the authority of the Arbitrator and for appointment of some other impartial Arbitrator for decision of the dispute between the parties on the pleas that under the arbitration agreement the disputes had to be referred to the Arbitration of Superintending Engineer of the Circle and the applicant submitted the claim before the said Arbitrator in which all details were mentioned and a total claim of Rs. 1,05,984/- was made against the Board. The Arbitrator did not proceed with the matter and allowed the four months' time to expire, which amounted to misconduct and hence order of the Court was sought for appointment of another Arbitrator
2. The application was contested by the Board and the following issues were framed:—
1. Whether the petition is barred under Order 23, Rule 1(4) of C.P.C.?
2. Whether the Civil Courts at Chandigarh lack jurisdiction to try the present petition?
3. Whether there are sufficient grounds for the removal of the arbitrator?
3. After the evidence was led, the Court below by order dated 17th February, 1984 dismissed the application after recording findings on issue No. 1 in favour of the Board and against the applicant; issue No. 2 was decided in favour of the applicant and under issue No. 3 it was hold that although there was an arbitration agreement but the reference, which the contractor had made, was unilateral, and as such, was invalid and the inaction of the Arbitrator not to enter into the reference, was not a sufficient ground for removal of the Arbitrator. This is contractor's appeal.
4. After hearing the learned counsel for the parties, I give the following findings issuewine.
Issue No. I—This issue relates to the matter whether the second petition filed by the contractor on the same allegations and fertile same relief is barred under O. 23 Rules 1(4) C.P.C or not in view of the fact the earlier petition was got dismissed as withdrawn. The Court below relied on Teja Singh v. The Union Territory of Chandigarh . 1981 1 S.L.R. 275. and decided the issue against the contractor and held that the present petition was barred. The learned counsel for the appellant has not challenged the dictum laid down in the aforesaid decision but has argued that on the facts of this case that decision is not applicable because here the second application was filed before first application was withdrawn and to these facts the provisions of Order 23 C.P.C. are not attracted in view of Ram Mal v. Upendra Dutt . AIR 1928 Lah 710. and Mangi Lal v. Radha Mohan . AIR 1930 Lah 599.. The earlier application was filed on 6th October, 1982 and the present application was fixed on 26th October, 1982 and the first application was withdrawn vide order dated 18th November, 1982. The learned counsel for the Board could not show if aforesaid two decisions were ever dissented from or over-ruled. The aforesaid two Lahore decisions clearly say that if second suit is tiled before the first suit is withdrawn then Order 23 C.P.C. is not attracted and the second suit cannot be dismissed under Order 23 Rule 1(4) of the Civil Procedure Code. Accordingly, I reverse the decision of the trial Court and hold that the present petition was not barred under Order 23 C.P.C.
Issue No. 2—No argument has been raised before me on this issue and hence the findings of the Court below on this issue are upheld.
Issue No. 3.—On issue No. 3 while the contractor wants to challenge the findings of the Court below for coming to the conclusion that the reference was invalid because it was unilateral and for refusing to remove the named arbitrator the Board bat filed cross-objections for reversal of the findings of the trial Court on issue No. 3 to the effect that there was an arbitration agreement between the parties. I first proceed to decide the matter whether there was an arbitration agreement or not. At the back of the work order, certain conditions have been laid down and these conditions have also been signed by the parties. Those conditions are as follows:—
1. The Officer in charge of the work will accept or reject the work executed, according to his judgment.
2. The work will be measured up and paid for from time to time as the officer in charge may deem necessary, usually once a month when the progress is satisfactory.
3. This order can be cancelled and the work stopped at any time by the officer incharge of the work or by any officer superior to him. In authority. Similarly, the contractor is at liberty to cease work at any time.
4. The work shall be executed strictly according to the specifications attached.
5. In matter of dispute the case shall be referred to the Superintending Engineer of the Circle, whose order shall be final.
6. All work executed shall be paid for according to measurements taken by or under the orders of the officer in charge of the work, and not according to the quantity given in any estimate.”
5. Shri Munishwar Puri appearing, for the Board has strongly argued that these are the conditions for the carrying out of the work order and power has been bestowed either on the officer-in-charge or on the Superintending Engineer of the Circle for deciding certain matters but none of the conditions shows any arbitration clause. The Court below had referred to condition No. 5 in order to come to the conclusion that it was an arbitration clause. The learned counsel states that it is not an arbitration clause and confers authority on the Superintending Engineer of the Circle to decide the dispute under the work order and for this argument reliance is placed on The State of U.P v. Tipper Chand . 1980 2 SCC 341. I have gone through the decision relied upon and find that the relevant clause was wholly different. The clause which the Supreme Court considered in that case was as follows:
“Except where otherwise specified in the contract the decision of the Superintending Engineer for the time being shall be final, conclusive and binding on all parties to the contract upon all questions relating to the meaning of the specification, design, drawing and instructions hereinbefore mentioned. The decision of such Engineer as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right, matter or things whatsoever, in any way arising out of or relating to the contract, designs, drawing specifications, estimates, instructions, orders, or these conditions, or otherwise concerning the works, or the execution or failure to execute the same, whether arising during the progress of the work, or after the completion or abandonment of the contract by the contractor, shall also be final conclusive and binding on the contractor.”
6. A bare perusal of the aforesaid conditions shows that it was not even remotely agreed between the parties if the officer concerned was to settle any dispute between the parties on being referred to him. He was given authority to supervise and to have administrative control over the work. It was also taken notice of that the clause reproduced above was under the marginal note of ‘direction of work’. So, while the work was to go on and any question was to arise about the interpretation of meaning of the specifications, decision and instructions, the matter had to be decided by the Superintending Engineer, for the time being and if during the contract any difficulty to find out the meaning arose, at different times, during the posting of the different Superintending Engineers the Superintending Engineer for the time being had to decide these matters, which means that the matters at different times could be decided by different Superintending Engineers. This may not be so in the case of arbitration proceedings. Therefore, the words ‘decision of the Superintending Engineer for the time being shall be final’ clearly go to show that the decision was not to be an award but with regards to directions to be issued in regard to the work to be completed.
7. In the present case clause 5 is quite clear. It talks of dispute between the parties and for reference of the same to the Superintending Engineer of the Circle. The term ‘dispute and reference’ were conspicously absent in the clause which fell for consideration in Tipper Chand's case (supra).
8. The learned counsel for the Board then argued that it is no where mentioned in clause 5 that the Superintending Engineer was to be the arbitrator or that he had to give an award, and, therefore, it is not a case where there was an agreement of arbitration. It is true that the words ‘arbitrator and award’ are not mentioned but the clause is clear enough to show that the dispute which was to arise between the parties had to be referred to the Superintending Engineer of the Circle and this gives sufficient indication of the Superintending Engineer being an arbitrator and his decision to be an award. Therefore, I am in agreement with the Court below and hold that there was an arbitration agreement between the parties.
9. Adverting to the remaining points arising in this issue, it is categoric stand of the contractor that he submitted his claim Exhibit. All to the Superintending Engineer, Bhakra Dam Circle, Nangal, requesting him to adjudicate the dispute between the parties on the basis of arbitration agreement and after giving detailed facts in 14 paragraphs, 10 items of claim were mentioned and sought an award of Rs. 1,05,984.00 along with 18 per cent interest per annum, from the date of reference till realization. This was not controverted. The Arbitrator did not enter into reference and kept quiet till the application was moved in the Court. It has to be seen whether this amounts to unilateral reference and as such illegal, clothing no jurisdiction on the Arbitrator to adjudicate the dispute. In this behalf the Court below relied on Union of India, Bombay v. Hari Krishan Joshi . AIR 1972 P&H 207., to decide the issue against the contractor. Before me the learned counsel for the contractor has relied on State of Orissa v. Laxminarayan Samantrary . AIR 1982 Orissa 93., which has followed the judgment reported as P.C Aggarwal v. K.N Khosla . AIR 1975 Delhi 54. and Bhusawal Borough Municipality v. Amalgamated Electricity Co. Ltd., Bhusawal . AIR 1966 SC 1652., and also referred to Seth Thawardas Pherumal v. Union Of India . AIR 1955 SC 468.. The decisions of other High Courts, which have been referred in the aforesaid Laxminarayan Samantaray's case, had not referred to Bhusawal Borough Municipality's case (supra) and had merely taken notice of certain observations in Thawardas Pheruman's case (supra) and on that basis they were also commented upon. Reliance was also placed on the latest decision of this Court in Guru Nanak Trunk House, Amritsar v. Chanan Finance and Chit Fund (P) Limited, Amritsar . 1976 78 PLR 534., which is in line with Laxminarayan Samantaray's case (supra). For the detailed reasons given in Laxminarayan Samantaray's case (supra), which is based on latest decision of the Supreme Court in Bhusawal Borough Municipality's case (supra) I am of the view that it mould be wrong to say that if there is a named arbitrator one of the aggrieved parties to the agreement cannot ask the Arbitrator to arbitrate or that it would be an illegal reference. If the Arbitrator is satisfied that he is the Arbitrator under the agreement he will be duty bound to call upon the opposite party to file their counter claim and then to proceed to arbitrate the matter in accordance with law. If he fails to proceed with the arbitration and allows 4 month's time to pass it may be a fit case for his removal and for appointment of another Arbitrator.
10. In view of Laxminarayan Samantaray's case and Guru Nanak Trunk House's case (supra) the decision of the Court below on issue No. 3 is hereby reversed and it is held that reference of dispute by the contractor to the Superintending Engineer, Bhakra Dam Circle, Nangal, was not illegal.
11. Since sufficient time has elapsed between the reference and the dispute by the contractor till this date, it is quite possible that there may be a different Superintending Engineer who may be holding the post of the Circle and in that view the relief can be moulded.
12. For the reasons recorded above, this appeal is allowed, the order of the Court below dated 17th February, 1984 is set aside and direction is issued to the Superintending Engineer, Bhakra Dam Circle, Nangal, to eater into the arbitration on the basis of claim Exhibit. All made by the contractor. It is possible that the original claim made by the contractor to the then Superintending Engineer may not be available, the parties through their counsel are directed to appear before the Superintending Engineer Bhakra Dam Circle, Nangal, on 20th February, 1985 when the contractor will file copy of claim Exhibit All before the said officer and the Board would be given six weeks' date to file its counter claim on the filing of the counter claim it will be deemed that the Arbitrator has entered into reference and he would decide the matter between the parties within four months' thereafter i e. within 4 months of filing of the counter claim by the Board. If parties agree to extend the time of 4 months before the Arbitrator he may take the matter beyond 4 months and in case the parties do not agree for the extension of time and the Arbitrator does not decide the matter within 4 months' in accordance with law, the Superintending Engineer of the Circle shall stand removed as arbitrator and the parties would be at liberty to move the Court for the appointment of a new Arbitrator in accordance with law. There will be no order as to costs.
R.M.S
Appeal allowed.
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