1990 JTR(SC) 804
1991 AIR(SC) 957 ; 1991 AIR(SCW) 239 ; 1991 1 AllCJ 346 ; 1991 17 AllLR 242 ; 1991 1 APLJ 48 ; 1991 1 ArbLR 282 ; 1991 2 CurCC(SC) 219 ; 1991 JLJ 376 ; 1991 5 JT 105 ; 1990 2 Scale 1260 ; 1991 1 SCC 498 ; 1991 1 UJ 309 ; 1991 KHC 899
SUPREME COURT OF INDIA
T.K. THOMMEN AND R.M. SAHAI, JJ.
M/s. Prabartak Commercial Corporation Ltd., Appellant
Versus
The Chief Administrator Dandakaranya Project and another, Respondents.
Civil Appeal No. 1023 of 1975
Decided on 14-12-1990.
Act Referred :ARBITRATION ACT : S.20, S.30, S.2(a), S.39(1)(vi)
(A) The Arbitration Act, 1940, sections 20, 30, 2(a), and 39(1)(vi) govern the referral, procedure, scope, and appeals in arbitration matters. Section 20 empowers the court to refer matters to arbitration, section 2(a) defines the scope of the arbitration agreement, section 30 addresses the powers of the arbitrator, and section 39(1)(vi) provides for appeals against awards. These provisions are directly invoked to assess the validity of the arbitration reference, the jurisdiction of the arbitrator over the dispute concerning rates, and the admissibility of challenging the award in the High Court. The interplay between the arbitration clause and the broader contract provisions determines the adjudicatory authority.
(B) Key legal principles include: (i) the scope and interpretation of arbitration agreements must be strictly construed; (ii) disputes falling outside the arbitration clause are not arbitrable; (iii) the court has limited supervisory jurisdiction under sections 20 and 39; (iv) an award made without jurisdiction is void; (v) the exclusion clause operates to bar arbitration for specific disputes; and (vi) the finality of engineering decisions under contract clauses may override arbitration.
Facts of the case:
The appellant contracted to supply hard granite chips for a highway project but supplied hard stone chips instead. A dispute arose regarding the applicable rates of paymentwhether under the contracts rate for hard granite chips or the schedule of rates for hard stone chips. The matter was referred to arbitration despite objections that the dispute was excluded from the arbitration agreement. The arbitrator issued awards, but the respondent challenged the jurisdiction, arguing the dispute fell under an exclusive engineer-determination clause.
Findings of Court:
The High Court held that the dispute regarding rates was excluded from arbitration under clause 14, which specifically excluded disputes covered by clause 13A. Clause 13A provided that the decision of the Superintending Engineer shall be final. The arbitrator therefore lacked jurisdiction, rendering the awards void. The lower courts conclusion that the reference was invalid and the proceedings null and void was upheld.
Issues:
(i) Whether the dispute concerning the rate of payment falls within the scope of the arbitration clause. (ii) Whether clause 13A, providing for final determination by the Superintending Engineer, ousts the arbitrators jurisdiction. (iii) Whether the award made by the arbitrator was void for lack of jurisdiction.
Ratio Decidendi:
The dispute regarding rates was expressly excluded from arbitration by clause 14 read with clause 13A of the agreement. Since the matter fell within the ambit of the engineers final determination clause, the arbitrator had no jurisdiction, and the awards were void. The exclusion clause prevailed over the general arbitration clause.
Result:
The appeal is dismissed with costs throughout, upholding the High Courts judgment that the arbitration reference was invalid and the awards were void.
(A) The Arbitration Act, 1940, sections 20, 30, 2(a), and 39(1)(vi) govern the referral, procedure, scope, and appeals in arbitration matters. Section 20 empowers the court to refer matters to arbitration, section 2(a) defines the scope of the arbitration agreement, section 30 addresses the powers of the arbitrator, and section 39(1)(vi) provides for appeals against awards. These provisions are directly invoked to assess the validity of the arbitration reference, the jurisdiction of the arbitrator over the dispute concerning rates, and the admissibility of challenging the award in the High Court. The interplay between the arbitration clause and the broader contract provisions determines the adjudicatory authority.
(B) Key legal principles include: (i) the scope and interpretation of arbitration agreements must be strictly construed; (ii) disputes falling outside the arbitration clause are not arbitrable; (iii) the court has limited supervisory jurisdiction under sections 20 and 39; (iv) an award made without jurisdiction is void; (v) the exclusion clause operates to bar arbitration for specific disputes; and (vi) the finality of engineering decisions under contract clauses may override arbitration.
Facts of the case:
The appellant contracted to supply hard granite chips for a highway project but supplied hard stone chips instead. A dispute arose regarding the applicable rates of paymentwhether under the contracts rate for hard granite chips or the schedule of rates for hard stone chips. The matter was referred to arbitration despite objections that the dispute was excluded from the arbitration agreement. The arbitrator issued awards, but the respondent challenged the jurisdiction, arguing the dispute fell under an exclusive engineer-determination clause.
Findings of Court:
The High Court held that the dispute regarding rates was excluded from arbitration under clause 14, which specifically excluded disputes covered by clause 13A. Clause 13A provided that the decision of the Superintending Engineer shall be final. The arbitrator therefore lacked jurisdiction, rendering the awards void. The lower courts conclusion that the reference was invalid and the proceedings null and void was upheld.
Issues:
(i) Whether the dispute concerning the rate of payment falls within the scope of the arbitration clause. (ii) Whether clause 13A, providing for final determination by the Superintending Engineer, ousts the arbitrators jurisdiction. (iii) Whether the award made by the arbitrator was void for lack of jurisdiction.
Ratio Decidendi:
The dispute regarding rates was expressly excluded from arbitration by clause 14 read with clause 13A of the agreement. Since the matter fell within the ambit of the engineers final determination clause, the arbitrator had no jurisdiction, and the awards were void. The exclusion clause prevailed over the general arbitration clause.
Result:
The appeal is dismissed with costs throughout, upholding the High Courts judgment that the arbitration reference was invalid and the awards were void.
JUDGMENT
THOMMEN, J.:— This appeal arises from the judgment of the High Court of Madhya Pradesh at Jabalpur dated 6-8-1974 in First Appeal No. 146 of 1969. The appellant entered into a contract with the respondents for the supply of hard granite chips for the construction of NH/43 at four reaches. Since hard granite chips were not available, it was agreed between the appellant and the respondents that the appellant would supply hard stone chips instead of hard granite chips. The payment was agreed to be paid in terms of the Schedule of Rates of the Dandakaranya Project., Dispute arose between the parties in respect of the rate of Payment. The appellant contended that it was entitled to be paid the rates prescribed under the contract for hard granite chips and not the rates under the Schedule for hard stone chips.
2. The dispute between the parties was referred by the Court in terms of S. 20 of the Arbitration Act, 1940. The reference was made, notwithstanding the objections on the part of the respondents. The respondents contended that the matter in dispute was outside the scope of the arbitration clause. That objection was rejected by the learned Additional District Judge. An advocate was appointed as an arbitrator.The arbitrator entered upon the reference and submitted awards on 16-12-1968 and on 30-9-1969.A preliminary decree was directed to be drawn up despite the objections filed by the respondents under S. 33 of the Act.
3. In an appeal filed in the High Court under S. 39(J)(vi), the respondents contended that the dispute regarding rates came within the ambit of Cl. 13A of the agreement and that clause provided "in the event of a dispute the decision of the Superintending Engineer of the circle shall be final". The respondents pointed out that the arbitration agreement was contained in Cl. 14 and that clause specifically excluded any dispute arising under Cl. 13A. Disputed rates were matters which came within the ambit of clause 13A. Such disputes were not covered by the arbitration agreement. The awards were, therefore, made without jurisdiction and were void.
4. The learned judge of the High Court held that clause 14 containing the arbitration agreement had no application to the dispute in question which fell under clause 13A and, therefore, the arbitrator had no jurisdiction in the matter. He held that the reference of the dispute to the arbitrator was invalid and the entire proceedings before the arbitrator including the awards made by him were null and void.
5. We are in complete agreement with the reasoning of the learned judge. The appeal is accordingly dismissed with costs throughout.
Appeal dismissed.
For Citation: AIR 1991 SC 957 = 1991 I SCC 498.