D.R.KHANNA, J. - (1.) ORDER:-
(2.) THIS will dispose of two petitions moved under Ss. 20 and 33 of the Arbitration Act by M/s. Bindra Builders. The respondent is the Delhi Development Authority. By the former the petitioner is seeking reference of disputes numbering 14 as mentioned in Annexure 'A' attached with the petition to arbitration. The other is for determining the effect and validity of the arbitration agreement with regard to claim No. 5 of that Annexure. That claim is to the following effect: "Dispute over sanction of substituted item for Makrana white marble provided in the works; Rs. 3.75 lacs." The background is that the petitioner executed a contract for the construction of 201 houses on behalf of the respondent at Siri Fort, New Delhi for the "Asiad". The total amount thereof was about 2.2 crores. Specifications and rates of different items were also agreed upon. One of the terms of the contract was that the petitioner would use 'makrana superior marble'. The rate according to the petitioner for this was around Rs. 781.00 per sq. meter. However, during the course of the execution of the contract the petitioner found that the 'makrana marble' was not available and it appeared that mines there were not in operation for some time. As such the petitioner used 'Rajnagar marble' which though not of as high quality as 'makrana', was next possible available. Its user according to the petitioner was to the knowledge of the Engineers of the respondent who used to supervise the work at the spot and no objection was taken thereto. Subsequently after the completion of the contract when the petitioner submitted the bills, the Executive Engineer In-charge treated the use of 'Rajnagar Marble' as substituted item and allowed the rate of about Rs. 343.00 per sq. meter. The petitioner claimed that he should have been allowed the rate of Rs. 634.00 per sq. meter. However, the Chief Engineer declined to treat the matter as one of the substituted item but held that it fell in the category of reduction item as the marble actually used was of inferior quality than stipulated for. On its basis substantial amount is sought to be deducted from the bills of the petitioner. There is no dispute that the contract was governed by an arbitration clause under which the Engineer Member of the respondent was competent to appoint an arbitrator. This was earlier also invoked during the course of execution of contract when certain interim disputes had arisen. The petitioner has, therefore, sought in the petition under S. 20 of the Arbitration Act that the Engineer Member should be directed to appoint an arbitrator for deciding the dispute as referred to in Annexure 'A' attached with this petition. Clause 25-B of the agreement provided as under : "The decision of Chief Project Engineer regarding the quantum of reduction as well as justification thereof in respect of rates for sub-standard work which may be decided to be accepted will be final and would not he open, to arbitration." The respondent is purporting to act under this clause and holding the case as one of reduction for substandard work. The decision of the Chief Project Engineer in this regard is made final and not open to arbitration. To this extent, therefore, the arbitrator is held bound by the finality of the decision given by the Chief Project Engineer. A reduction @ Rs. 956.00 per sq. meter on this score is being sought from the bills of the petitioner. The petitioner on the other hand is asserting that the controversy does not fall under cl. 25-B and that this was a case of substituted item and Cl. 12 of the agreement was applicable under which the Engineer In-charge was empowered to substitute any item during the progress of the work. Although no specific request in writing for this was made to the Engineer In-charge by the petitioner during the progress of the work, it is contended that since the work was being executed under his supervision and instructions, he acquiesced and accepted this substitution. This substitution it is contended cannot be treated as reduction item and, therefore, no finality can be attached to the decision of the Chief Project Engineer. The controversy it is pleaded is referable to arbitrator for decision. 6A. The respondent has on the other hand entirely denied that any approval or instructions were given from its side to enable the contractor to use inferior quality of 'Rajnagar marble' instead 'makrana white marble of first quality'. At no stage he informed the department that he was using substituted item of 'Rajnagar marble' nor sought its permission. Rather it is pointed out that all through the contractor had been submitting bills and obtaining payments disclosing that he was using 'makrana marble' as stipulated. Advances in running payment of the works on the basis of 'makrana white marble of first quality' were throughout obtained by him concealing the fact of his using the 'Rajnagar marble'. The substituted item statement was for the first time submitted after the completion of the work and not during its course. The 'Rajnagar marble' used was further stated to be not even of first quality but of medium quality. It appears that the Executive Engineer planned to treat the case as one of substituted item and as such the matter was referred to a committee of six Executive Engineers by the Additional Chief Engineer for examination specially of the following aspects: "The circumstances under which Makrana was not used by the contractors in the works. Was it on account of non-availability of enough quantity of Makrana Marble in the market at the time of execution of the work? Identification of the type of marble used in the various works at Asian Games Village. The basis on which a payment should be made to the contractors under terms of contract for use of marble stone other than that obtained from Makrana quarries." The report was then inter alia submitted as under : "One major piece of information that emerged after discussions that 1st class or 2nd class makrana marble white plain stone was not available in sufficient quantities even at the source for the last few years. In fact there is no normal dealing in 1st class makrana marble in Delhi. The availability of 2nd class makrana marble white plain marble is in meagre quantities in Delhi. The normal quality of marble being marketed in Delhi and used in both Govt. and private constructions is Raj Nagar white medium variety." The Executive Engineer then submitted that due to the non-availability of makrana marble stone the contractor used marble stone from other quarries like Raj Nagar etc., which were just in the vicinity of makrana quarries. It was also added that on account of use of the marble stone from quarries other than makrana in the buildings, there had not been felt any perceptible difference as far as functioning, structural soundness and aesthetics were concerned. It was, therefore, mentioned that the substitution was inevitable. After considering the rates prevalent it was stated that the rate of Rs. 325.86 would be fair to both the department and contractor, and as such substituted item statement amounting to Rs. 2,77,846.00 was prepared and submitted for sanction. I have heard the parties and given my utmost consideration to the entirety of the circumstances. It is obvious from the above narration that the controversies are mostly factual In what circumstances the 'makrana superior marble' was not used and 'Rajnagar marble of medium quality' was utilised is a question of fact. It is also a question of fact whether the user of Rajnagar marble was under the instructions or approval of the Engineer Incharge or other Officers. No opinion, therefore, can be expressed on them. It is also apparent that the terms and conditions of the contract between the parties have to be minutely gone into and then in the context of the appraisement of the facts determined whether the case was one of substitution or of reduction. The arbitration clause in the present case is quite wide. All questions, claims, right, matter or thing whatsoever in any way arising out of or relating to the contract, business, drawings, specifications, estimate, instructions, orders of 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 of the work or abandonment thereof have to be referred to the sole arbitration of the person appointed by the Engineer Member of the Delhi Development Authority. There has been exception made with regard to finality of the decisions of Chief Project Engineer regarding the quantum of reduction as well as justification thereof in respect of the rates for sub-standard work and to this extent they are not opened to arbitration. (Vide cl. 25-B). The position of law in this regard is well settled that where the test for determining whether the dispute is one arising out of the contract or in connection with the contract is whether recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the party is justified or otherwise. If it is necessary to take recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrators have jurisdiction to decide that dispute. Seen in this regard the decision of the Supreme Court in Union of India v. Salween Timber and Construction Co. AIR 1969 SC 488. The controversy, therefore, in the present case with regard to the interpretation of different terms and conditions of the contract and further whether in the context of facts which the parties may bring forth, the case would be one of substitution or of reduction is primarily within the domain of the arbitrator. If he finds that the case is of substitution, he would naturally adjudicate upon the same. If however, he comes to the view that the case is one of reduction, then to that extent he will be bound by the decision of the Chief Project Engineer in terms cl. 25-B. Thus I had the occasion to observe in similar circumstances in the case Suit No. 160-A of 1983 M/s. Shiv Hari Tandon v. Union of India decided on 22-4-1985 as under: "Adverting to the other plea about the expected matters, it need hardly be impressed that the interpretation of the terms of contract is entirely within the domain of the arbitrator. He has to give effect to the same. In case any of the terms envisages that particular authority's decisions on certain matters have to be final, the arbitrator would certainly be bound by those decisions and would not question them. By doing so he would be only acting in terms of the contract and giving effect to those terms while determining the rights of the parties. This is made clear and it is directed that the arbitrator will act accordingly. Whether any particular work could be considered as extra items or not would also depend upon the interpretation of the contract and the arbitrator as such will consider them. His appointment as arbitrator arises from the clause existing in the contract, and naturally he acts within the limits of the contract." I am unable to accept the contention of Mr. Vohra that the determination of this dispute by the court is one of jurisdiction of the arbitrator and this essentially vests in court. He has placed reliance in this regard upon the decisions reported as Shiva Jute Baling Ltd. v. Hindley and Co. Ltd., (1960) 1 SCR 569: (AIR 1959 SC 1357), Gordhandas Pursottam v. Natvarlal Chandulal and Co., AIR 1952 Bom 349, Hindustan Steel Ltd. v. M/s. Kaushal Construction Co., AIR 1966 Madh Pra 249 and Reliable Water Supply Service of India (P) Ltd. v. Union of India, AIR 1971 SC 2083.1 am, however, unable to agree inasmuch as the present is not one of determining the jurisdiction of the arbitrator, but that of interpreting the terms and conditions of the contract in the context of the facts ascertained.
(3.) IT has also been sought to be urged by Mr. Vohra that once the Executive Engineer had prepared substituted item statement, the respondent should be bound by the same and should not be allowed to resile. In support reliance was placed upon AIR 1966 SC 405. In my view, however, this will be a matter for the learned arbitrator to consider. Mr. Vohra also sought to urge that the respondent is acting in a very high handed manner as to allow deduction of Rs. 956.14 per sq. meter which would be more than even the price of the makrana marble. Ex facie that would appear unreasonable. However, no opinion is expressed about that and the matter would receive due adjudication in arbitration in the light of what is observed in this order. The result, therefore, is that the arbitration agreement is directed to be filed and in terms thereof the Engineer Member of Ac Delhi Development Authority is directed to appoint arbitrator for going into the disputes and differences arising between the parties under the contract in dispute. Both the sides will be entitled to submit their claims before the arbitrator. To the decision of any particular authority is made final under the contract, the arbitrator will abide by the same and not question that (sic). The appointment of arbitrator will be made within a month of the communication of this order. The award be delivered within four months of the entering upon reference.;