SuJata V. Manohar - (1.) THE appellant had entered into a contract with the respondent under which the appellant had undertaken the work of construction of factory and allied buildings of the respondent at India complex, Rae Bareilly. THE agreement is dated 19.10.1973. Clauses 23 and 24 of the agreement are as follows: "Decision of the Executive Engineer of the UPSIC to be final on certain matters: Clause 23: Except where otherwise specified in the contract, the decision of the Executive Engineer shall be final, conclusive and binding on both the parties to the contract on all questions relating to the meaning, the specification, design, drawings and instructions herein before mentioned, and as to the quality of workmanship or materials used on the work or as to any other question whatsoever in any way arising out of or relating to the designs, drawings, specifications, estimates, instructions, orders 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 there of or abandonment of the contract by the contractor shall be final and conclusive and binding on the contractor. Decision of the M.D. of the U.P.S.I.C. on all other matters shall be final: clause-24: Except as provided in Clause 23 hereof the decision of the Managing Director of the U.P.S.I.C. shall be final, conclusive and binding on both the parties to the contract upon all questions relating to any claim, right, matter or thing in any way arising out of or relating to the contract or these conditions or concerning abandonment of the contract by the contractor and in respect of all other matter arising out of this contract and not specifically mentioned herein."
(2.) THERE were disputes between the appellant and the respondent in connection with the payments to be made under the terms of the said contract and in* connection with the work of the said contract. The appellant made an application under S. 8 of the Indian arbitration Act, 1940 before the Civil Judge, Kanpur. He applied for the appointment of an independent arbitrator in the place of the Managing Director. The respondent denied that there was any arbitration clause in the said contract. The court, however, allowed the. petition of the appellant under S. 8 of the arbitration Act and appointed one D.D.Sharma, Executive Engineer, as arbitrator. In appeal, the High court, while upholding the finding that there was an arbitration clause, held that the court below had no jurisdiction under S. 8 to appoint another arbitrator in the place of Managing Director since none of the clauses of S. 8 was attracted in the present case. The High court, therefore, set aside the order of the court below and dismissed the application of the appellant under S. 8. From this judgment the appellant has filed the present appeal. The first question that requires consideration is whether there is any clause in the contract which provides for arbitration between the parties. The relevant clauses are Clauses 23 and 24. Under Clause 23, the decision of the Executive Engineer is final, conclusive and binding on both the parties to the contract on all questions relating to the meaning, specifications, designs etc. and as to the quality of workmanship or material used or relating to any other question whatsoever in any way arising out of or relating to the designs, drawings, specifications etc. or otherwise concerning the execution or failure to execute the same. Under Clause 24, except as provided in Clause 23, the decision of the Managing Director of the respondent shall be final, conclusive and binding on both the parties to the contract upon all questions relating to any claim, right, matter or thing in any way arising out of or relating to the contract and in respect of all other matters arising out of the contract and not specifically mentioned, in the said clause. Therefore, in respect of certain claims the decision of the Executive Engineer is final and binding on both the parties to the contract. While in respect of the reaming matters, the decision of the Managing Director of the respondent is final, conclusive and binding on both the parties to the contract. Clause 24 does not mention that any dispute can be referred to the arbitration of the Managing Director. Clause 24 also does not spell out any duty on the part of the Managing Director to record evidence or to hear both parties before deciding the questions before him. From the wording of Clause 24 it is difficult to spell out any intention of the parties to leave any disputes to the adjudication of the Managing Director of the respondent as an arbitrator. 4. In the case of K.K.Modi v. K.N. Modi and Ors. (JT 1998(1) SC 40) a bench of this court (of which one of us was a member) had the occasion to consider the essential ingredients of an arbitration clause. Among the ingredients which are described in the said judgment, two important ingredients are: that the agreement between the parties must contemplate that substantive rights of parties will be determined by the agreed tribunal and that the tribunal wilt determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides and also that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law. There is a difference between an expert determination and arbitration. S.K. Chawla in the Law of Arbitration and Conciliation at page 164 states as follows:
(3.) ARBITRATION agreement to be distinguished from agreement for decision by an engineer or expert, Contracts may contain a clause that on certain questions the decision of an engineer, architect or another expert shall be final. The decision given in such cases by the engineer etc., is not an award. As pointed out by Bernstein, such a person is under no obligation, unless the contract otherwise provides, to receive evidence or submissions and is entitled to arrive at his decision solely upon the results of his own expertise and investigations. The procedure involved is not arbitration, and the ARBITRATION Act does not apply to it. The primary material on which such person acts is his own knowledge and experience, supplemented if he thinks fit by (i) his own investigations: and/or (ii) material (which need not conform to rules of 'evidence') put up before him by either party. An arbitrator on the other hand, acts primarily on material put before him by the parties. The determination by an engineer or an expert would involve a less through investigation. Only one mind will be brought to bear on the problem. There will be no discovery of documents, there will not normally be any oral 'evidence' or oral submissions.;