R.C.LAHOTI - (1.) THESE two civil appeals have been preferred by two contractors feeling aggrieved by the orders of trial court upholding the objections preferred by the respondent-State under Sections 16 and 30 of the ARBITRATION AND CONCILIATION ACT, 1940 and setting aside the awards given by the Arbitrator which orders have been maintained in revision by the High Court of Madhya Pradesh. The facts of the two cases are similar and the questions of law arising for decision are common. The two appeals have been heard analogously and are being disposed of by this common order.
(2.) THE disputes relating to the two contracts are referable to construction of Barna Main Dam across River Barna, a tributary of Narmada near Bhopal. THE entire work was divided into five groups namely 1 to 5. THE main dam came under groups 1 and 2 consisting of blocks 1 to 23. Contract for construction of group No. 1 consisting of block numbers 1 to 10 was given to M/s. M. K. Shah, Engineers and Contractors, the appellant in Civil Appeal No. 5961 of 1983. Contract for construction of group No. 2 consisting of block numbers 11 to 23 was entered into with M/s. Chabaldas and Sons, Contractors. It appears that both the contractors could not complete the work assigned to them and disputes arose between them and the respondent-State. THE contracts were terminated in between and the remaining parts of the work were got executed through other agencies. The contracts entered into with the two contractors by the respondent-State of M.P. have an arbitration clause around which centres the controversy arising for decision in the two appeals. The same is extracted and reproduced hereunder. 3.3.29 : Decision of Superintending Engineer to be Final Except where otherwise Specified in the Contract." "The decision of the Superintending Engineer of the Circle for the time being in respect of all questions and disputes relating to the meaning of the specifications designs drawing and, instructions here-in-before mentioned and as to the quality of workman- ship or material used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications estimates, instructions orders or those conditions or otherwise concerning the work of execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof, shall be final. Provided that if any party to the contract is dissatisfied with the final decision of the Superintending Engineer, in respect of any matter, he may within 28 days after receiving the notice of such decision give notice in writing to the Superintending Engineer, requiring that the matter may be referred to arbitrator and furnishing detailed particulars of the dispute or difference and specifying clearly the point at issue. If any party fails to give such notice within 28 days as stipulated above, the decision of the Superintending Engineer, already given shall be conclusive, final and binding on the parties. In case an arbitration is to be held it shall be effected by an arbitrator to be appointed by the State Government out of panel of three names suggested by the State Government to the contractor, who shall give concurrence within a period of one month from the date of the communication. In case the contractor does not communicate the concurrence, the State Government shall appoint an arbitrator whose decision shall be conclusive final and binding on the parties. If the work under the contract has not been completed when a dispute is referred to arbitrator work shall continue during the arbitration proceedings if it is reasonably possible and no payment due to contractor should be withheld on account of arbitration proceedings unless it is required by the arbitrator." Hereafter the facts of the two cases have a little different narration and hence are stated separately.
(3.) C.A. No. 5961/83 : M/s. M. K. Shah stated the disputes and referred them to the Superintending Engineer, Barna Project Circle, Bari from time to time for his final decision. The Superintending Engineer kept the disputes pending for a long time and observed silence for over a year without having intimated his decision to the contractor. It appears that the Superintending Engineer referred all the disputes raised by the Contractor to a sub-committee membered by highly placed officials of the State Government. Making a note of all such facts the contractor on 27-10-1972 addressed a communication to the Chief Secretary, the Secretary to Government (Irrigation Department), the Engineer-in-Chief, the Superintending Engineer, and the Secretary Central Board Major Project lodging a strong protest to the action of the Superintending Engineer having delegated his function of taking decision in terms of the contract to the sub-committee. He submitted that the Superintending Engineer had thereby rendered himself incapable of taking the decision under the contract and therefore it was necessary to appoint an arbitrator and refer the disputes raised by the contractor for his decision. A list of disputes raised by the contractor was annexed with the letter with a request to take steps in the direction of appointment of an arbitrator. 5.1 On 11-1-74 the Deputy Secretary to Government of MP (Irrigation Department) acting 'by order and in the name of Governor of Madhya Pradesh' appointed Shri W. V. Oak, Chairman M.P. Electricity Board Jabalpur as the sole arbitrator for deciding the disputes between M/s. M. K. Shah. Engineers and Contractors and the Government of Madhya Pradesh. The opening sentence of the letter states that the State Government in consultation with M/s. M. K. Shah Engineers and Contractors were pleased to appoint Shri W. V. Oak as the sole arbitrator as per clause 3.3.29 of the contract document for the arbitration of the disputes between the contractors and the Government in respect of the work awarded to M/s. M. K. Shah vide the contract in question. The language of the letter clearly suggests that the Government of Madhya Pradesh having deliberated over the issue, was agreeable to arbitration and that was with the consent of the contractor. 5.2 Shri W. V. Oak, the arbitrator entered upon the reference. The Government of Madhya Pradesh appeared before the arbitrator but raised a preliminary objection to the legality of the arbitration by submitting that it was not in accordance with the arbitration clause and the claims put forth by the contractor were not arbitrable inasmuch as they were not preceded by a decision by the Superintending Engineer in accordance with clause 3.3.29. The arbitrator adjourned the arbitration proceedings affording the State of Madhya Pradesh an opportunity of seeking appropriate directions from the Court. 5.3 The State of Madhya Pradesh filed an application under Section 33 of the Arbitration Act before the Addl. District Judge, Bhopal seeking an adjudication that the items of claim put forth by the contractor before the arbitrator were beyond the scope of the arbitration clause and a declaration to that effect was sought for and prayed. 5.4 During the pendency of the application, Shri W. V. Oak expired on 26-6-75. The State of M.P. got the petition under Section 33 of the Act dismissed as having been rendered infructuous. The contractor then served a notice on the State of Madhya Pradesh on 13-8-75 for filling up the vacancy in the office of arbitrator. As the State of Madhya Pradesh failed to comply, a petition under Section 8(2) of the Act was filed by the petitioner before the Addl. District Judge, Bhopal. On being noticed, the State of Madhya Pradesh proposed a panel of three names. The court allowed the petition and appointed Shri G. H. Sanghvi retired Chief Engineer (Irrigation Department) as an arbitrator for deciding the disputes previously referred to late Shri W. V. Oak. The order of the Court dated 25-11-75 was acted upon by the respondent-State of Madhya Pradesh which by letter dated 5-5-77/19-5-77, issued by Deputy Secretary to Government (Irrigation Department) 'by order and in the name of Governor of Madhya Pradesh' appointed Shri C. M. Sanghvi as sole arbitrator to decide the disputes. The letter opens with a statement that the State Government were pleased to accord sanction in the case in which Shri C. H. Sanghvi had been appointed as an arbitrator to decide the disputes between M/s. M. K. Shah and the Government of Madhya Pradesh. 5.5 The arbitrator Shri Sanghvi concluded the arbitration proceedings and made an award on 26-9-78. The award is a non-speaking one. The contractor had put forth claims aggregating to over Rs. 62 lacs while the respondent-State of MP had raised a debit against the contractor of over Rs. 28 lacs. There were also counter claims made by the respondent-State of M.P. on account of loss of revenue and interest on capital which was locked-up in incomplete works. 5.6 The operative part of the award reads as under :- "I make and state the award as below :- The respondents, the State of Madhya Pradesh, will pay the claimants, M/s. M. K. Shah, the following :- JUDGEMENT_315_JT1_1999Html1.htm The parties will bear their own costs." C.A. 5962/83 : M/s. Chabaldas and Sons had also raised disputes on 23/06/1971 before the Superintending Engineer. The claims were rejected by the Executive Engineer, Barna project on 26-7-71. The communication made by him to the contractor clearly states that the communication was under the directions of the Superintending Engineer, Barna project. On 7-8-71 the contractor raised several disputes annexing a statement thereof with his letter and seeking reference of the disputes for adjudication by arbitration as per clause 3-3-29 of the agreement. There were certain talks for amicable settlement which turned out to be fruitless. The respondent-State of Madhya Pradesh having failed to appoint an arbitrator, the petitioner moved an application under Section 20 of the Act before the Additional District Judge, Bhopal. On 28-11-1973, the Deputy Secretary of Government of Madhya Pradesh (Irrigation Department) sent a communication to the petitioner informing that the State Government in consultation with the contractor were pleased to appoint Shri K. L. Pandey, a retired judge of Madhya Pradesh as the sole arbitrator for the arbitration of the disputes between the contractor and the Government of Madhya Pradesh in respect of the works covered by the contract entered into between the two. The communication is 'by order and in the name of the Governor of Madhya Pradesh'. 6.1 Shri K. L. Pandey entered upon the reference. Before him also a preliminary objection to the maintainability of the arbitration proceeding was taken up submitting that the same was not preceded by Superintending Engineer's decision under clause 3.3.29 whereafter only and within 28 days the arbitration could have been demanded. A petition under Section 33 of the Arbitration Act was filed before the Court seeking determination of the effect of arbitration clause and inviting adjudication by the court on the plea of the State of Madhya Pradesh that the disputes raised by the contractor were not arbitrable in view of the arbitration clause. 6.2 During the pendency of the abovesaid petition, Shri K. L. Pandey expired. The contractor M/s. Chabaldas and Sons made a demand for filling up the vacancy. The Government of Madhya Pradesh acceded with the request and on 26-11-77 appointed Shri C. H. Sanghvi, a sole arbitrator in place of Shri K. L. Pandey. This letter is also signed by Deputy Secretary of Government of Madhya Pradesh, (Irrigation Department) 'by order and in the name of the Governor of Madhya Pradesh'. 6.3 The contractor had put forth claims exceeding Rs. 70 lacs while the respondent-State had raised a debit of over Rs. 50 lacs against the contractor and had also preferred counter-claims. The award dated 26-9-1978 is a non-speaking award, operative part whereof reads as under : "I make and state the award as below :- The respondents, the State of Madhya Pradesh, will pay the claimants. M/s. Chabaldas and Sons, the following :- JUDGEMENT_315_JT1_1999Html2.htm ;