REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. 7408-7409 OF 2008

(Arising out of SLP (C) Nos. 4968-4969 of 2005)

M/S P. MANOHAR REDDY & BROS. … APPELLANT

Versus

MAHARASHTRA KRISHNA VALLEY DEV.

CORP. & ORS. … RESPONDENTS

J U D G M E N T

S.B. Sinha, J.

1.Leave granted.

2.Respondent herein invited tenders for the work of excavation in canal

K.M. No. 126, Kukadi Left Bank Canal, Shrigonda in the District of

Ahmednagar at an estimated costs of Rs.23,26,424/- pursuant whereto

appellant herein submitted its offer for a sum of Rs.21,10,233/-. The said

offer being the lowest was accepted.

3.The parties hereto thereafter entered into a contact on 9.2.1988;

clauses 37, 54 and 55 whereof read as under:

“37.After completion of work and prior to that

payment, the contractor shall furnish to the

Executive Engineer, a release of claims against the

Government arising out of the contract, other than

claims specifically identified, evaluated and

expected from the operation of the release by the

contractor.”

54.Settlement of Dispute (For works costing

less than Rs. 50 lakhs).

If the contractor considers any work demanded of

him to be outside the requirements of the contract,

or considers any drawings, record or ruling of the

Executive Engineer, KIP Dn. No. VII, Shrigonda

on any matter in connection with or arising out of

the contract or the carrying out of work to be

outside the terms of contract and hence

unacceptable he shall promptly ask the Executive

Engineer, in writing, for written instructions or

decision. Thereupon the Executive Engineer, shall

give his written instructions or decision within a

period of 30 days of such request.

Upon receipt of the written instructions or

decision the contractor shall promptly proceed

without delay to comply with such instructions or

decision.

If the Executive Engineer fails to give his decision

in writing within a period of 30 days after being

requested, or if the contractor is dissatisfied with

the instructions or decision of the Executive

Engineer, the contractor may within 30 days after

receiving the instructions or decision appeal to

upward authority who shall afford an opportunity

to the contractor to be heard and to offer evidence

in support of his appeal.

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If the contractor is dissatisfied with this decision,

the contractor within a period of thirty days from

receipt of the decision shall indicate his intention

to refer the dispute to Arbitration as per clause 55

failing which the said decision shall be final and

conclusive.

55.Arbitration (For works costing less than Rs.

50 lakhs)

All the disputes or differences in respect of which

the decision has not been final and conclusive as

per clause 54 above shall be referred for

arbitration to a sole arbitrator appointed as

follows.

Within 30 days of receipt of notice from the

contractor or his intention to refer the dispute to

arbitration the Chief Engineer (SP Irrigation

Department), Pune shall send to the contractor a

list of three officers of the rank of Superintending

Engineers or higher, who have not been connected

with the work under this contract. The contractor

shall within 15 days of receipt of this list select

and communicate to the Chief Engineer, the name

of one officer from the list who shall then be

appointed as the Sole Arbitrator. In case

contractor fails to communicate this selection of

name within the stipulated period, the Chief

Engineer shall without delay select one officer

from the list and appoint him as the sole arbitrator.

If the Chief Engineer fails to send such a list

within 30 days as stipulated the contract shall send

a similar list to the Chief Engineer within 15 days.

The Chief Engineer shall then select one officer

from the list and appoint him as the Sole

Arbitrator within 15 days. If the Chief Engineers

fails to do so, the contractor shall communicate to

the Chief Engineer the name of one officer from

the list who shall then be the sole Arbitrator.

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The Arbitrator shall be conducted in accordance

with the provision of the Indian Arbitration Act,

1940 or any statutory modification thereof. The

Arbitration shall determine the amount of costs to

be awarded to either parties.

Performance under the contract shall continue

during the arbitration proceedings and payments

due to the contractor shall not be withheld unless

they are subject matter of the arbitration

proceedings.

All awards shall be in writing and in case of award

amounting to Rs. One lakh and above, such

awards shall state the reasons for the amount

awarded. Neither party is entitled to bring a claim

to arbitrator if the arbitrator has not been

appointed before the expiration of 30 days after

defects liability period.”

4.A work order was issued on the same day. The said contract was to be

completed by 8.1.1989, i.e. within a period of about 11 months.

Appellant failed to complete the work within the stipulated time. He

applied for extension which was granted first upto 09.07.1989 and thereafter

upto 30.09.1990. Within the said period the work was completed. The

measurements of the work undertaken by the appellant were recorded on

26.11.1990. Final bill prepared and paid by the respondent was accepted by

the appellant without any demur.

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5.Inter alia, on the premise that appellant was asked to do extra items of

work, it raised its claims by a letter dated 27.2.1991, which was rejected.

Details of the purported extra work done by appellant, however, were

not mentioned in the said letter dated 27.2.1991. It submitted another claim

giving details thereof by a letter dated 10.6.1991.

6.Appellant by a letter dated 26.9.1991 purporting to invoke clause 54

of the General Conditions of Contract,issued notice to the Executive

Engineer of respondent, stating:

“Whereas a number of claims were referred to you

from time to time and in respect of many of them

you have failed to give the decision. And whereas

the work under contract was kept in progress by us

in good faith and with a belief that on completion

of the work you will reconsider our total case and

settle our accounts with all the claims.

And whereas the work has been duly

completed by us, we are now in a petition (sic) of

finally work out in full the sum of money due and

payable to us by the department including all the

claims.

Now therefore, we hereby call upon you and

give you notice finally under clause 54 of the

General conditions of contract with a request to

settle our accounts and give your decisions in

respect of our following claims and disputes

within a period of thirty days from the date of

receipt of this notice by reconsidering your earlier

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decision in respect of claim on which you had

indicated your decision earlier.”

He specified 16 claims thereunder.

7.Respondent rejected the said claim by its letter dated 5.10.1991

alleging that the stipulated period therefor expired in May, 1991. The

Executive Engineer of the respondent by his letter dated 29.10.1991 opined

that the matter cannot be considered for arbitration, stating:

“Please refer your letter under reference which

was received by this office in the 1

st

week of

October 1991. The claims raised were already

denied by this Office vide letter No. 448 dtd.

29.4.91. As you have referred the matter under the

provisions of clause 54 of the L.C.B. No. 18 for

87, 88, The decisions of this office are again sent

herewith. It is further clarified that the matter is

brought for arbitration process after expiry of 30

days from end of defect liability period. The work

was completed in November-90 and the defect

liability period of six months is over in May 1991,

hence the matter cannot be considered for

arbitration.”

However, its earlier decision of rejecting the claim was repeated.

8.Treating the same to be an order rejecting his claim, appellant herein

preferred an appeal thereagainst before the Superintending Engineer in

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terms of its letter dated 26.11.1991; pursuant whereto a meeting was held

between the representatives of the parties; the minutes whereof read as

under:

“Since the contractors have not submitted their

claims under clause 54 of the General conditions

of the contract along with documentary evidences

within the stipulated period i.e. before the expiry

of 30 days after defect liability period and as per

clause 55 which states ‘Neither party is entitled to

bring a claim to arbitrator if the arbitrator has not

been appointed before the expiration of 30 days

after defect liability period.’

Defect liability period of this contract

expired on 31

st

May 1991 and the stipulated period

of 30 days expired on 30

th

June 1991.

Hence the contractor’s appeal for arbitration

is hereby rejected”

9.A copy of the said minutes of the meeting was sent by the

Superintending Engineer along with his letter dated 30.12.1991.

A notice, on the premise that disputes and differences arose between

the parties within the meaning of clause 55 of the General Conditions of

Contract, was served upon the Chief Engineer asking him to furnish the

names of its three officers for appointment of sole arbitrator within 30 days

from the receipt thereof. The said request was rejected by the Chief

Engineer in terms of his letter dated 26.2.1992, stating:

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“ You have given notice under clause 54 on

26/11/91 to refer the dispute to arbitration. Thus

the notice under clause 54 is given after the expiry

of 30 days of defect liability period.

Thus you have not submitted the claims

within the stipulated time and followed the

procedure as per the clause 54 of general condition

for settlement of dispute. This has already been

informed to you by the Superintending Engineer

Kukadi canal circle, Pune-6 under his letter no.

KCC/PB-1/KM 126/Claims/4129 dt. 30/12/91.

Hence the question of appointing arbitrator

by this office does not arise.”

10.Appellant thereafter sent a list of arbitrators on 9.3.1992 followed by

a notice through a lawyer.

Indisputably, the said request for referring the disputes to an

arbitrator was rejected by respondent.

11.Appellant filed an application under Section 8 of the Arbitration Act,

1940 (for short, “the Act”) in the Court of Civil Judge (Senior Division),

Ahmednagar at Ahmednagar for appointment of Arbitrator.

By reason of a judgment and order dated 9.12.1997, the Civil Judge

Senior Division, Ahmednagar opining that the said application having been

filed within the period as specified in Article 137 of the Limitation Act,

1963 and the cause of action therefor having arisen on 29.10.1991 on which

8

date the appellant’s claim was rejected, appointed one Shri V.M. Bedse, a

retired Chief Engineer as Arbitrator with regard to the additional and extra

works allegedly carried out by appellant.

The learned judge held:

“The petitioner along with Exh. 19 has produced

various documents and correspondence ensued

with the respondents. It is crystal clear from this

correspondence that the petitioner had demanded

release of claim on 27/2/91 under clause No. 37 of

the contract agreement. This claim letter was

received by the respondents and further query in

respect of proof of claim was called for by the

respondents by their letter dated 29/4/91.

Accordingly, the proof was submitted by letter

dated 10/6/91 and details of claim were given on

26/9/91. The petitioner also apprised about

‘settlement of dispute’ as contemplated in clause

No. 54 of the contract agreement. Therefore

practically there is compliance by the petitioner as

contemplated under clause No. 54 of the contract

agreement. The record also reveals that the

respondents on 5/10/91 i.e. after lapse of three

months replied the notice of petitioner dated

10/6/91 and first time it was agitated that the

petitioner has not taken steps under clause No. 55

under defect liability and before expiration of 30

days. The clause No. 19(a) of the contract

agreement is in respect of material and

workmanship and it defines the defect liability in

respect of workmanship and materials and so also

the defect liability period is to be counted from the

certified date of completion certificate. Under

clause No. 26 of the contract agreement, it is the

respondents who are required to issue such

certificate to the petitioner. The notices were

issued by the petitioner under clause Nos. 54 and

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55 of the contract but it appears from the record

that the respondents did not take any steps to

choose their arbitrator. On the contrary, on 9/3/92

the list of three officers was demanded and out of

them sole arbitrator was chosen but the

respondents have not replied the same. In this

manner, the petitioner and respondents could not

concur for appointment of arbitrator and the

petitioner had therefore no alternative but to resort

to provisions of Section 8 of the Arbitration Act.

The correspondence produced on record in support

of claim under Section 8 of the Arbitration Act by

the petitioner is sufficient to come to the

conclusion that there was dispute between

petitioner and the respondents in respect of

additional work and no such steps have been taken

by the respondents as provided under the

Contract.”

12.A Civil Revision Application No. 201 of 1998 was preferred

thereagainst by the respondent before the High Court, which by reason of

the impugned judgment and order dated 13.4.2004 has been allowed. A

Review Petition filed by appellant thereagainst has been dismissed.

13.Mr. Sundaravaradan, learned Senior Counsel appearing on behalf of

appellant raised the following contentions in support of the appeal.

i.The High Court committed a serious error of law in passing the

impugned judgment insofar as it failed to take into

10

consideration that limitation for raising a claim as envisaged

under clause 54 is not applicable in the instant case.

ii.In view of the fact that the claim was rejected only on

26.2.1992 by the appellate authority, the period of 30 days

should be counted therefrom.

iii.While exercising its jurisdiction under Section 8 of the Act, the

court was concerned only with the question as to whether there

was a triable issue.

iv.Once a triable issue is found to have been raised, which was

required to be referred to the arbitration, the merit of the claim

cannot be gone into.

14.Ms. Aprajita Singh, learned counsel appearing on behalf of the

respondent, on the other hand, would urge:

i.Clause 54 of the General Conditions of the Contract must be

invoked by the contractor during the tenure thereof and not

after completion of the contract and acceptance of the final bill.

ii.The final bill having been accepted without any demur, the

contract came to an end, wherewith the arbitration agreement

which was a part thereof also perished.

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iii.Appellant having not sought for extension of time in terms of

sub-Section (4) of Section 37 of the Act and in any event no

sufficient cause having been made out therefor, even no

extension of time could be granted.

15.Indisputably, the parties are governed by the Act.

‘Arbitration Agreement’ has been defined in Section 2(a) of the Act

to mean a written agreement to submit present or future differences to

arbitration, whether an arbitrator is named therein or not.

An arbitration is a private dispute resolution mechanism agreed upon

by the parties. The arbitration agreement is contained in a commercial

document; it must be interpreted having regard to the language used in it. A

bare perusal of clauses 37, 54 and 55 of the General Conditions of Contract

clearly shows that the arbitration agreement entered into by and between the

parties is not of wide amplitude. In a case where arbitration clause is of

wide amplitude, the same may cover also the claims arising during the

tenure of contract or thereafter, provided the arbitration clause subsists.

16.Clause 37 imposes an obligation upon the contractor to furnish to the

Executive Engineer a release of claims against the Government arising out

of the contract other than the claims specifically identified, evaluated and

12

expected from the operation of the release by the Contractor only after

completion of the work and prior to payment thereof.

There is nothing on record to show that any claim in relation to extra

or additional work had been raised by the contractor prior to 27.2.1991

although final measurement had been recorded on 26.11.1990 and the bill

has been paid in full and final satisfaction on 4.12.1990. Clauses 54 and 55

of the arbitration agreement must be read together.

17.Indisputably, the contract has been entered into for works costing less

than Rs. 50 lakhs and, thus, clause 54 would be attracted in the instant case.

In terms of the said provision, the contractor has to raise a demand with the

Executive Engineer if any work is demanded from him, which he considers

to be outside the requirements of the contract. The word ‘consider’ is of

some significance, it means “to think over; to regard as or deem to be.” (See

Advanced Law Lexicon,3

rd

Edition, 2005).

18.If a work has to be carried out outside the terms of the contract and is

unacceptable, he is required to promptly approach the Executive Engineer in

writing for obtaining his written instruction or decision in that behalf. The

Executive Engineer is obligated to give his written instructions or decision

within a period of 30 days of making such request. Once such instruction or

decision is received, the contractor is required to comply therewith. Only in

13

a case where the Executive Engineer fails and/or neglects to give a decision

or issue instruction, the contractor may within a period of 30 days thereafter

prefer an appeal to the appellate authority. The appellate authority is

required to provide an opportunity of hearing to the contractor. It is only

when the contractor is dissatisfied with the decision of the appellate

authority, he may indicate his intention to refer the dispute to Arbitration in

terms of clause 55 within a period of 30 days from the date of receipt of the

said decision, failing which, the same would be final.

19.The arbitration clause, thus, could be invoked only in a case where

the decision has not become final and conclusive as per clause 54.

20.A plain reading of the aforementioned provisions clearly shows that

clause 54 does not envisage raising of a claim in respect of extra or

additional work after the completion of contract.

21.The jurisdiction of the civil court under Section 8 of the Act or under

Section 20 thereof can be invoked if the disputes and differences arising

between the parties was the one to which the arbitration agreement applied.

22.The contractual clause provides for a limitation for the purpose of

raising a claim having regard to the provisions of Section 28 of the Indian

Contract Act. It is no doubt true that the period of limitation as prescribed

14

under Article 137 of the Limitation Act would be applicable, but it is well

settled that a clause providing for limitation so as to enable a party to lodge

his claim with the other side is not invalid.

In The Vulcan Insurance Co. Ltd. vs. Maharaj Singh and anr. reported

in AIR 1976 SC 287, the arbitration clause read as under:

“18. If any difference arises as to the amount of

any loss or damage such difference shall

independently of all other questions be referred to

the decision of an Arbitrator, to be appointed in

writing by the parties in difference, or, if they

cannot agree upon a single Arbitrator to the

decision of two disinterested persons as

Arbitrators.... … ….. ……. ….. ……. …… ….

And it is hereby expressly stipulated and declared

that it shall be a condition precedent to any right

of action or suit upon this policy that the award by

such arbitrator, arbitrators or Umpire of the

amount of the loss or damage if disputed shall be

first obtained.

19. In no case whatever shall the company be

liable for any loss or damage after the expiration

of twelve months from the happening of the loss

or damage unless the claim is the subject of

pending action or arbitration.”

Referring to the well known decision of Scott vs. Avery, (1856) 25 LJ

Ex 308 = 5 HLC 811, and noticing different views expressed by different

courts, it was held:

15

“22. The two lines of cases clearly bear out the

two distinct situations in law. A clause like the one

in Scott v. Avery bars any action or suit if

commenced for determination of a dispute covered

by the arbitration clause. But if on the other hand a

dispute cropped up at the very outset which cannot

be referred to arbitration as being not covered by

the clause, then the Scott v. Avery clause is

rendered inoperative and cannot be pleaded as a

bar to the maintainability of the legal action or suit

for determination of the dispute which was outside

the arbitration clause.”

Whether such a clause comes within the purview of the arbitration

clause, vis-à-vis Article 137 of the Limitation Act, it was held:

“…It has been repeatedly held that such a clause is

not hit by Section 28 of the Contract Act and is

valid; vide-The Baroda Spinning and Weaving Co.

Ltd. v. The Satyar narayan Marine and Fire

Insurance Co. Ltd. ILR 38 Bom 344 : AIR 1914

Bom 225 (2); Dawood Tar Mahomed Bros. v.

Queensland Insurance Co. Ltd. AIR 1949 Cal 390

and The Ruby General Insurance Co. Ltd. v. The

Bharat Bank Ltd. AIR 1950 (East) Punj 352.

Clause 19 has not prescribed a period of 12

months for the filing of an application under

Section 20 of the Act. There was no limitation

prescribed for the filing of such an application

under the Indian limitation Act, 1908 or the

limitation Act, 1963. Article 181 of the former did

not govern such an application. The period of

three years prescribed in Article 137 of the Act of

1963 may be applicable to an application under

Section 20.”

16

Whether the difference which arose between the parties was the one

to which the arbitration clause applied and whether the application under

Section 20 of the Act could be dismissed, this Court opined:

“24. But in this case on a careful consideration of

the matter we have come to the definite conclusion

that the difference which arose between the parties

on the company's repudiation of the claim made by

respondent No. 1 was not one to which the

arbitration clause applied and hence the arbitration

agreement could not be filed and no arbitrator

could be appointed under Section 20 of the Act.

Respondent No. 1 was ill-advised to commence an

action under Section 20 instead of instituting a suit

within three months of the date of repudiation to

establish the company's liability.”

(See also A.B.C. Laminart Pvt. Ltd. vs. A.P. Agencies, Salem [AIR

1989 SC 1239)

23.It is not a case where an application under Section 8 could not be

filed within a period of 3 years. It is a case where a determination was

necessary as regards invocation of the disputes settlement processes. For

resolution of the dispute, a claim must be made in terms of the provisions of

the contract for the purpose of giving effect to the arbitration clause; the

application thereof being limited in nature.

17

24.Mr. Sundaravaradan has taken us through a large number of decisions

to contend that the purported ‘accord and satisfaction’ on the part of the

contractor might not itself be a sufficient ground to reject a prayer for

making a reference under the Arbitration Act.

Such a question came up for consideration before this Court in

Damodar Valley Corporation vs. K.K. Kar [(1974) 1 SCC 141], wherein this

Court noticing the decision of Heyman v. Darwins Ltd. (1942) 1 All ER

337, stated the law thus:

“Again, an admittedly binding contract containing

a general arbitration clause may stipulate that in

certain events the contract shall come to an end. If

a question arises whether the contract has for any

such reason come to an end I can see no reason

why the arbitrator should not decide that question.

It is clear, too, that the parties to a contract may

agree to bring it to an end to all intents and

purposes and to treat it as if it had never existed.

In such a case, if there be an arbitration clause in

the contract, it perishes with the contract. If the

parties substitute a new contract for the contract

which they have abrogated the arbitration clause in

the abrogated contract cannot be invoked for the

determination of questions under the new

agreement. All this is more or less elementary.”

It was furthermore held:

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“Similarly the question whether there has been a

settlement of all the claims arising in connection

with the contract also postulates the existence of

the contract. The principle laid down by Sarkar. J.,

in Kishorilal Gupta Bros's case [1960] 1 S.C.R.

493 that accord and satisfaction does not put an

end to the arbitration clause was not dissented to

by the majority. On the other hand proposition (6)

seems to lend weight to the views of Sarkar, J. In

these circumstances, the question whether the

termination was valid or not and whether damages

are recoverable for such wrongful termination

does not affect the arbitration clause, or the right

of the respondent to invoke it for appointment of

an arbitrator.”

{See also S.C. Konda Reddy vs. Union of India & anr. [AIR 1982

KARNATAKA 50)}

25.We are, however, in this case faced with a different situation. The

contention of respondent is not that there has been a breach of contract and

the contract still subsists. Its contention is that in terms of the contract the

claim for extra work or additional work should have been raised during the

tenure of the contract itself and not after it came to an end and payment

received in full and final satisfaction.

26.An arbitration clause, as is well known, is a part of the contract. It

being a collateral term need not, in all situations, perish with coming to an

19

end of the contract. It may survive. This concept of separability of the

arbitration clause is now widely accepted. In line with this thinking, the

UNCITRAL Model Law on International Commercial Arbitration

incorporates the doctrine of separability in Article 16(1). The Indian law -

The Arbitration and Conciliation Act, 1996, which is based on the

UNCITRAL Model Law, also explicitly adopts this approach in Article 16

(1)(b), which reads as under:-

“16. Competence of arbitral tribunal to rule on its

jurisdictional. - (1) The arbitral tribunal may rule

on its own jurisdiction, including ruling on any

objections with respect to the existence or validity

of the arbitration agreement, and for that purpose,

-

(a) An arbitration clause which forms part of a

contract shall be treated as an agreement

independent of the other terms of the contract;

and

(b) A decision by the arbitral tribunal that the

contract is null and void shall not entail ipso jure

the invalidity of the arbitration clause.”

(Emphasis supplied).

Modern laws on arbitration confirm the concept. The United States

Supreme Court in the recent judgment in Buckeye Check Cashing, Inc. v.

Cardegna (546 US 460) acknowledged that the separability rule permits a

court “to enforce an arbitration agreement in a contract that the arbitrator

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later finds to be void.” The Court, referring to its earlier judgments in Prima

Paint Corp. v. Flood & Conklin Mfg. Co., (388 U. S. 395), and Southland

Corp. v. Keating, (465 U. S. 1), inter alia, held :-

“Prima Paint and Southland answer the question

presented here by establishing three propositions.

First, as a matter of substantive federal arbitration

law, an arbitration provision is severable from the

remainder of the contract.”

But this must be distinguished from the situation where the claim

itself was to be raised during the subsistence of a contract so as to invoke

the arbitration agreement would not apply.

M/s Bharat Heavy Electricals Limited, Ranipur vs. M/s Amar Nath

Bhan Prakash (1982) 1 SCC 625, whereupon reliance has been placed by

Mr. Sundaravaradan is not applicable as it was held therein that the

question whether there was discharge of the contract by accord and

satisfaction or not, is itself arbitrable.

The said question need not detain us having been considered by this

Court in Bharat Coking Coal Ltd. vs. Annapurna Construction [(2003) 8

SCC 154] holding:

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“14. The question is as to whether the claim of the

contractor is de hors the rules or not was a matter

which fell for consideration before the arbitrator.

He was bound to consider the same. The

jurisdiction of the arbitrator in such a matter must

be held to be confined to the four-corners of the

contract. He could not have ignored an important

clause in the agreement; although it may be open

to the arbitrator to arrive at a finding on the

materials on records that the claimant’s claim for

additional work was otherwise justified.”

27.In Chairman and MD, NTPC Ltd. vs. Reshmi Constructions, Builders

& Contractors [(2004) 2 SCC 663], this Court held:

“18. Normally, an accord and satisfaction by itself

would not affect the arbitration clause but if the

dispute is that the contract itself does not subsist,

the question of invoking the arbitration clause may

not arise. But in the event it be held that the

contract survives, recourse to the arbitration clause

may be taken. [See Union of India v. Kishorilal

Gupta (AIR 1959 SC 1362) and Naihati Jute Mills

Ltd. v. Khyaliram Jagannath (AIR 1968 SC 522).”

It was furthermore opined

“28.Further, necessitas non habet legem is an

age-old maxim which means necessity knows no

law. A person may sometimes have to succumb to

the pressure of the other party to the bargain who

is in a stronger position.

29. We may, however, hasten to add that such a

case has to be made out and proved before the

Arbitrator for obtaining an award.

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30. At this stage, the Court, however, will only

be concerned with the question whether trial

issues have been raised which are required to be

determined by the Arbitrators.”

28.We, however, as noticed hereinbefore, are concerned with a different

fact situation. As arbitration clause could not be invoked having regard to

the limited application of clauses 37, 54 and 55 of the General Conditions of

the Contract, we are of the opinion that the trial court was not correct in

directing appointment of an arbitrator.

29.We may notice that in Wild Life Institute of India, Dehradun vs.

Vijay Kumar Garg [(1997) 10 SCC 528], a Division Bench of this Court

held as under:

“It is also necessary to refer to the arbitration

clause under the contract which clearly provides

that if the contractor does not make any demand

for arbitration in respect of any claim in writing

within 90 days of receiving the intimation from the

appellants that the bill is ready for payment, the

claim of the contractor will be deemed to have

been waived and absolutely barred and the

appellants shall be discharged and released of all

liabilities under the contract in respect of these

claims. The liability, therefore, of the appellants

cease if no claim of the contractor is received

within 90 days of receipt by the contractor of an

intimation that the bill is ready for payment. This

clause operates to discharge the liability of the

appellants on expiry of 90 days as set out therein

and is not merely a clause providing a period of

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limitation. In the present case, the contractor has

not made any claim within 90 days of even receipt

of the amount under the final bill. The dispute has

been raised for the first time by the contractor 10

months after the receipt of the amount under the

final bill.”

30.The High Court has relied upon a decision of this Court in M/s K.

Ramaiah and Company Vs. Chairman & Managing Director, National

Thermal Power Corpn. [1994 Supp. (3) SCC 126]. We need not deal

therewith in details as the effect thereof has been considered by us in Bharat

Coking Coal Ltd. vs. Annapurna Construction (supra).

31.It is also not a case where sub-section (4) of Section 37 of the Act

could be invoked. Appellant did not invoke Section 37(4) of the Act. No

reason has been assigned as to why the said discretion of the court should be

invoked particularly when the claim has been raised only after completion

of the work.

32.For the reasons aforementioned, we, albeit for different reasons,

affirm the judgment of the High Court. The appeals are, accordingly,

dismissed. In the facts and circumstances of the case there shall be no order

as to costs.

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We may clarify that nothing stated herein shall affect the merit of the

appellant’s claim to invoke the jurisdiction before any other forum for

enforcing the same.

……………….…..………….J.

[S.B. Sinha]

..………………..……………J.

[Cyriac Joseph]

New Delhi;

December 18, 2008

25