1

IN THE HIGH COURT OF JHARKHAND AT RANCHI

Arbitration Appeal No. 12 of 2016

1. The State of Jharkhand, Minor Irrigation Division at present through

Secretary, Water Resources Department, having its office at Nepal

House, P.O. and P.S. Doranda, District Ranchi

2. The Chief Engineer, Jamshedpur, Swarnrekha Multipurpose Project

Icha Galudih Complex, P.O. and P.S. Adityapur, Jamshedpur at

present Chief Engineer, Swarnrekha Multipurpose Project, Chandil

Complex, Chandil, P.O. and P.S. Adityapur, Jamshedpur

3. The Executive Engineer, Minor Distribution Division No. 9, Ghatshila

Camp, Galudih, District East Singhbhum at present Executive

Engineer, Minor Distribution Division No. 12, Mango, Jamshedpur

4. The Superintending Engineer, Kharkhai Dam Circle Icha Chaliyama,

District East Singhbhum at present Superintending Engineer, Chandil

Dam Circle, Chandil, District Saraikela-Kharsawan

… … … Plaintiff/Applicants/Appellants

Versus

M/s. Shahi Construction, having its local office at Devi Mandap Road,

Hesal, P.O. and P.S. Sukhdeonagar, District Ranchi and site office at

Kumharpara, New Baradwari, Jamshedpur at present C/o Shri Sheo

Narayan Prasad (Kabijee) Vir Kunwar Singh Colony, Airport Road,

Hinoo, Ranchi-834002 … … Defendant/Respondent

---

CORAM: HON'BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY

---

For the Appellants : Ms. Shristi Sinha, Advocate

Mr. Vikash Kumar, Advocate

For the Respondents : Mr. Deepak Sinha, Advocate

---

14/18.01.2019

1. Heard Ms. Shristi Sinha, Advocate and Mr. Vikash Kumar,

Advocate appearing on behalf of the appellants.

2. Heard Mr. Deepak Sinha, Advocate appearing on behalf of the

respondent assisted by Mr. Tarun Kumar, Advocate.

3. Instant Arbitration Appeal has been filed for setting aside the

judgment dated 15.06.2016, passed in Misc. Case No. 2/2012 by

learned Civil Judge, Sr. Division-I, Ghatshila, East Singhbhum,

whereby award dated 24.12.2011, passed by the learned Arbitrator

has been affirmed and the petition under Section 34 of the

Arbitration and Conciliation Act, 1996 filed by the appellants has

been dismissed.

Arguments of the appellants

4. The brief facts and submissions by the counsel appearing on behalf

2

of the appellants are as under:-

a. In the year 2004, the appellants had come up with two Notice

Inviting Tenders bearing No. 2/2003-04 and No. 3/2003-04

for total value of Rs. 30,48,228.85 and Rs. 78,06,649.80

respectively. The period of completion of work was 12

months and 6 months respectively from the date of

agreement. Counsel submits that the work related to earth

work, lining and construction of structure in Minor

Distribution Division No. 2, Ghatsila Camp, Galudih under

Irrigation Department, State of Jharkhand. The respondent

herein issued work order dated 29.01.2004 and 25.03.2004

respectively against which the respondent deposited security

amount and entered into agreement dated 10.02.2004 and

04.08.2004. The specific case of the appellants is that both the

agreements were executed at the office of Minor Distribution

Division No. 2, Ghatsila Camp, Galudih , within the

jurisdiction of the learned court and the agreement was

executed on behalf of the State by the then Executive

Engineer, Minor Distribution Division No. 9, Ghatsila Camp,

Galudih, who was authorize to Act on behalf of the State of

Jharkhand.

b. He submits that in the notice inviting tender it was indicated

that clause-23 of the F 2 agreement was excluded and all

other terms contained therein would remain as it is. He

further submits that in view of such clear cut exclusion of

clause-23 of the F 2 agreement in the notice inviting tender

itself, there was no arbitration clause in the agreement and

accordingly the matter could not have been referred to the

Arbitrator.

c. He further submits that the respondent herein had filed an

application being Arbitration Application No. 6/2010

annexing the copy of the F 2 agreement, where clause-23 was

not struck off and the matter was referred to the Arbitrator

vide order dated 10.12.2010 passed in Arbitration Case No.

6/2010. He submits that specific condition/terms of the

notice inviting tender was not brought to the notice of this

3

Hon’ble Court at the time of hearing of Arbitration

Application No. 6/2010 and the lawyer who represented the

appellant, without instruction of the concerned department,

consented for appointment of the Arbitrator and the matter

was referred to Arbitrator vide order dated 10.12.2010 passed

in Arbitration Application No. 6/2010.

d. He further submits that on receipt of notice from the learned

sole Arbitrator, Sri Sanat Kumar Chattopadhyay, former

Judge, Jharkhand High Court, the appellants along with

officers of the Division appeared before the learned

Arbitrator and prayed for time for want of approval.

e. He further submits that since the respondent without

disclosing the terms of notice inviting tender obtained order

dated 10.12.2010 passed in Arbitration Application No.

6/2010, the appellants herein filed Special Leave Petition

against the aforesaid order dated 10.12.2010 which was S.L.P.

No. 16942/2011 and later on the said S.L.P. was withdrawn

with a view to move before the Hon’ble High Court for

review of the order dated 10.12.2010.

f. He also submits that aforesaid order of the Special Leave

Petition was communicated to the learned Arbitrator vide

letter dated 23.12.2011 with a prayer to defer and adjourn the

pronouncement of award for at least two months, but in spite

of service of said letter, the learned Arbitrator passed the

award on 24.12.2011.

g. In such circumstances, the appellants challenged the award

dated 24.12.2011 under Section 34 of the Arbitration and

Conciliation Act, 1996, as after passing of the award, there

was no question of filing any review application in

Arbitration Application Case No. 6/2010.

h. He submits that award was challenged before the learned

court below on the following grounds:-

(i) For that the appointment of sole learned Arbitrator by the

Hon’ble Chief Justice is beyond the purview of the

Agreement, as after detection of exclusion of Clause 23 of the

Agreement, the Opp. Party had no occasion to move before

the Hon’ble Court for appointment of Arbitrator and thus on

4

the basis of order dated 10.02.2010 all the arbitration

proceeding adopted by the learned Arbitrator is vitiated and

not sustainable.

(ii) For that the learned Arbitrator at least should have given

opportunity to the applicants to move before the Hon’ble

High Court for reviewing the order dated 10.02.2010.

(iii) For that the findings of the learned Arbitrator to the

effect that applicant/authorities have committed breach of

contract is highly erroneous and contrary to materials

available.

(iv) For that the findings of the learned Arbitrator below to

the effect that concerned opp. party committed gross error

and illegality in signing the agreements before acquisition of

the land for which claimant is entitled for compensation and

order of termination is also illegal and arbitrary are contrary

to fact.

(v) For that the findings of the learned Arbitrator that Suptd.

Engineer ought to have appointed arbitrator for redressal of

the grievances is beyond the purview of terms of Agreement

as NIT is the part of Agreement, which clearly speaks of

exclusion of arbitration Clause 23 of the agreement.

(vi) For that while the learned Arbitrator opined and

observed that claim of the Claimant with regard to claim No.

1 was not genuine and is doubtful even though a sum of Rs.

2,00,000/- awarded being advanced made by the claimant to

works using of J.C.B. Machine, Dumper etc.

(vii) For that the award of claim No. 2 allowed by the learned

sole Arbitrator amounting to Rs. 3,00,000/- based on mere

possibility and presumption of the learned Arbitrator which

would be evident from the observations and findings of the

learned Arbitrator that the Opp. party is unable to give

reasonable explanation for this claim.

(viii) For that the award of Rs. 1,40,000/- of claim No. 3

allowed by the learned Arbitrator is baseless and unfounded

which is based on mere opinion which would be crystal clear

from the opinion of the learned Arbitrator that claim in this

regard is also vague to be considered it seems to be

deliberately and intentionally manufactured.

5

(ix) For that the award of Rs. 5,00,000/- of claim No. 4 on

account of loss or profit is beyond the terms of agreement.

(x) For that since there was no arbitration clause in the

Agreements and thus the applicants should not have been

saddled with the legal expenses and remuneration and

Secretarial Charges as allowed in Claim No. 7 by the learned

Arbitrator.

(xi) For that all the amounts awarded by the learned

Arbitrator beyond the terms of agreement and based on mere

conjecture and surmises and also against a wrong person.

(xii) For that the award is in conflict with the public interest.

(xiii) For that the Award is otherwise invalid and bas been

improperly procured by the Opp. Party.

(xiv) For that the applicants reserve their right to file

additional ground in support of this objection if so require in

course of time.

i. Counsel submits that notices were issued pursuant to the

petition filed under Section 34 of Arbitration and Conciliation

Act, 1996. The case was instituted before the learned court

below as Misc. Case No. 2/2012.

j. Learned court below while rejecting the application for

setting aside the award under Section 34 of the Arbitration

and Conciliation Act, 1996 held that clause-23 of the F 2

agreement is an arbitration clause and was not deleted at the

time of signing of the agreement. Moreover, at the time of

referring the matter to the learned Arbitrator, in the High

Court, said fact was not raised and also before the Arbitral

Tribunal it was not raised by the appellants and the

appellants intentionally and deliberately remained absent

from arbitration proceeding. The learned court held that no

ground of challenge was sustainable and accordingly vide

order dated 15.06.2016 rejected the petition filed by the

appellant for setting aside the award under Section 34 of the

Arbitration and Conciliation Act, 1996.

k. Counsel for the appellants while advancing the argument

submits that there was no arbitration clause in existence

pursuant to the agreement between the parties and

6

accordingly the learned Arbitrator wrongly assumed

jurisdiction. He submits that the various clauses of the notice

inviting tender were required to be read into the agreement

and therefore clause 23 of the agreement was not applicable

and accordingly there was no arbitration clause between the

parties.

l. He further submits that even if clause 23 of the agreement is

assumed to be there, the same cannot be termed as arbitration

agreement.

m. Counsel has referred to the judgment passed by the Hon’ble

Supreme Court reported in 2018 SCC On line SC 327 (Lion

Engineering Consultants vs. State of M.P.) paragraph no. 5

and 6 to submit that the plea of jurisdiction by way of

objection under Section 34 of the Act can be raised, even if it

was not raised under Section 16 of the Act. Accordingly, he

submits that it has been held by the Hon’ble Supreme Court

that as per the scheme of the Act, all objections to jurisdiction

of whatever nature must be taken at the stage of the

submission of the statement of defence and must be dealt

with under Section 16 of the Arbitration Act, 1996 and further

once the parties seeks to contend that the subject matter of the

dispute is such as cannot be dealt with by arbitration, it may

be dealt under Section 34 of the Act by the Court.

n. He further refers to the judgment passed by the Hon’ble

Supreme Court reported in (2018) 4 SCC 793 and refers to

paragraph no. 35 and 36 to submit that it has been held by the

Hon’ble Supreme Court that in the absence of arbitration

agreement the court can refer the matter to the Arbitrator

only with written consent of the parties by way of joint

application, more so, when Government or statutory body

like the appellants are involved. He submits that the matter

could not have been referred to Arbitrator on oral consent

between the parties as has been done in the instant case in

Arbitration Application No. 6 of 2010.

o. He has also referred to the judgment passed by the Hon’ble

Supreme Court reported in (2014) 1 SCC 516 (Vishnu

7

(DEAD) By LRS. Versus State of Maharashtra and Others)

at paragraph no. 11 to submit that similar clause as that of

clause 23 of F-2 Agreement was subject matter of

interpretation by the Hon’ble Supreme Court and it was held

that such clause is not an arbitration agreement. Accordingly,

he submits that even if it is assumed that parties would be

governed by clause 23 of the agreement the same cannot be

termed as arbitration agreement. He further submits that the

issues involved in this case are pure question of law which

could have been agitated before the learned court below

which has a bearing upon the very jurisdiction of the learned

Arbitrator who passed the award.

Arguments of the respondent

5. Counsel appearing on behalf of the respondent, on the other hand,

submits as under:-

A. The dispute was referred to learned Arbitrator by

virtue of order dated 10.12.2010 by this Court in

Arbitration Application No. 6 of 2010. He further refers

to the order of this Court to submit that the matter was

referred to the Arbitrator with the consent of the

parties.

B. He submits that admittedly learned Arbitrator served

notice upon the appellants and they had appeared

before the learned Arbitrator, but in spite of that

appellants did not object to the arbitration proceeding

conducted by the learned Arbitrator, rather they

prayed for time for seeking certain approval from their

department.

C. He submits that from perusal of the award passed by

the learned Arbitrator, it is apparent that the learned

Arbitrator had taken all pain to ensure appearance of

the appellants and has recorded such steps in

paragraph no. 9 of the award and had no option but to

proceed in the matter of arbitration in absence of the

appellants. He further submits that the appellant herein

had taken a chance by not appearing before the learned

8

arbitrator and after having lost before the learned

Arbitrator have challenged the award by taking a plea

that the Arbitrator had no jurisdiction.

D. Counsel further submits that in the notice inviting

tender, clause 23 of the F 2 agreement was indicated to

be excluded, but the fact remains that at the time of

signing of the agreement, clause 23 of the agreement

was existing and the agreement was duly signed by the

parties. Clause 27 of the agreement clearly indicates

that parties had read contents of the agreement. He

submits that there is no indication in the petition filed

for setting aside the arbitration award by the appellants

as to why and under what circumstances clause 23 of

the agreement was retained in the agreement.

Accordingly, the parties had agreed to be governed by

clause 23 of the agreement. He also submits that every

page of the agreement were signed by both the parties.

He further submits that even if there was exclusion of

clause 23 of F 2 Agreement in notice inviting tender,

there was no legal bar in entering into the agreement

containing clause 23. He further submits that objection

in regard to existence of clause 23 is not a pure question

of law and it requires evidence as the appellants were

required to explain as to why and how clause 23 of the

agreement was retained. He submits that there is no

doubt that the point regarding the jurisdiction could

also have been raised before the learned Arbitrator, but

the same was required to be raised by the appellants

before the learned Arbitrator. Having not done so,

there was no occasion for the learned Arbitrator to go

into the issue as to whether clause 23 of the agreement

was existing or not particularly when the same was not

challenged and the matter was referred to arbitrator by

the order passed by this Court in Arbitration

Application No. 6/2010. He further submits that at the

stage of referring matter to arbitrator under Section 11

9

of the Arbitration & Conciliation Act, 1996, the Court is

under obligation to at least prima facie examine the

existence of arbitration agreement. He submits that the

appellants having chosen not to file any objection

before the learned arbitrator it was not open to the

appellant to raise such question before the learned

court below under Section 34 of the Arbitration &

Conciliation Act, 1996.

E. He further submits that no element of public policy is

involved in this case and such argument of the

appellants has been rejected by the learned court

below. Counsel also submits that the learned arbitrator

was careful enough even to look into the said

communication issued by the appellants as contained

in letter dated 10.02.2010 and contained in Annexure-7

to the claim petition wherein the Superintending

Engineer had rejected the application of the respondent

to refer the matter to the arbitrator on two grounds:-

(i) prayer for payment of compensation

was rejected by the court below the same

could not be allowed.

(ii) with effect from 18.11.1992 clause 23 i.e

arbitration clause has been deleted in

relation to F-2 Agreement.

6. He further submits that specific issue of point no. 4 was framed by

the learned arbitrator and the contention of the appellants as

contained in letter dated 10.02.2010 was also rejected, although the

appellants never filed any written statement before the learned

Arbitrator. He submits that the order of the learned Arbitrator on

this aspect is a well reasoned order and rightly not called for any

interference by the court below.

7. So far as interpretation of clause 23 is concerned, he submits that

judgment which has been relied upon by the appellants reported in

(2014) 1 SCC 516, in the said judgment, term dispute was totally

missing in the so-called arbitration clause. He further submits that

clause 29 and 30 of the agreement involved in the said case has been

10

quoted in the said judgment at paragraph no. 11 and there is no

clear indication for referring the dispute to the Arbitrator.

Accordingly, the said judgement relied upon by the appellants is

clearly distinguishable and does not apply to the facts and

circumstances of this case.

8. He further submits that clause 23 of the F-2 Agreement has been

duly interpreted by this Hon’ble Court in judgement reported in

Sharda Construction vs. State of Jharkhand reported in (2004)

Online Jhar 587 . He submits that in the said judgment the issue

involved was consequence of deleting clause 23 of the F-2

Agreement by way of gazette notification dated 18.11.1992 and it

was held that in spite of deleting the said clause by way of gazette

notification, the clause was not deleted from the agreement.

Accordingly, it was held that various questions regarding existence

of validity of agreement was required to be adjudicated only by the

Arbitration Tribunal and the matter was referred to the then

Arbitrator. It was also held that clause 23 of the agreement, which

was existing in the contract between the parties and the said

contract was not a statutory contract and was signed by both the

parties , the same cannot be said to have been deleted merely on

account of an executive order issued by the government by

notification. Similar view was taken by this Court in the judgment

passed in the case of Madan Prasad vs. State of Jharkhand reported

in (2016) 3 JLJR 169. He further refers to another judgment passed

by this Court decided on 22.11.2018 in Arbitration Application No.

32 of 2017 wherein by relying upon clause 23 of the agreement, the

matter was referred for arbitration.

Arguments of the appellants by way of rejoinder

9. In response, counsel for the appellants submits that clause 23,

which has been quoted in the judgment relied upon by the

respondents, had specific indication that the arbitration can be

invoked under the Arbitration & Conciliation Act, 1996. In the

instant case, clause 23 of the agreement did not indicate about

Arbitration & Conciliation Act, 1996 and therefore it cannot be said

that clause 23 of the instant agreement was the arbitration

agreement. It is submitted that on this ground the judgments which

11

has been relied upon by the respondents are clearly distinguishable.

Findings of this court

10. After hearing counsel for the parties and after considering the

materials on record this Court finds that admittedly two notice

inviting tenders were floated bearing no. 2 and 3 of 2003-04 for

earth working lining and construction of structures by the Irrigation

Department of the state and the time for completion of work was 12

months and 6 months respectively from the date of agreement.

Further, the value of the work was Rs. 30,48,228.85 and Rs.

78,06,649.80 respectively. Accordingly, the work order dated

29.01.2004 and 25.03.2004 were issued in connection with aforesaid

two notice inviting tenders. After the respondent herein was

declared as successful, the respondent deposited the security

money against both the work orders and entered into an agreement

with the appellant for the purposes of execution of work vide

agreement dated 10.02.2004 and 04.08.2004 respectively. However,

in the notice inviting tender it was clearly indicated that the

agreement will be entered into in Form F 2 as per its terms and

conditions except clause 23. This Court also finds that as per the

notice inviting tender, the N.I.T. was an integral part of the

agreement. This Court further finds that in spite of aforesaid

stipulation in the N.I.T., the authorized representative of the

appellants and the respondent herein had executed the agreement

containing clause 23 which reads as follows:-

Clause-23 : “In case any dispute or difference shall

arise between the parties or either of there upon any

question relating to the meaning of the specifications,

designs, drawings and instructions hereinbefore

mentioned or as to the quality of workmanship or

materials used on the work, or as to the quality of

workmanship or materials used on the work, or as be

the construction of any of the conditions or any clause

or thins there is contained, or as to any question,

claim, rights on liabilities of the parties, or any clause

or thing whatsoever, in my way arising out of, or

relating to the contract, designs drawing,

specification, estimates, instructions order, or these

12

conditions, or otherwise concerning the work, or the

execution, or failure to execute the same whether

arising during the progress of the work, or as to the

breach or this contract, then either party shall

forthwith give to the other notice of such dispute or

difference and such dispute or difference shall be

referred to the Superintending Engineer of the circle

and his decision thereon shall be final conclusive and

binding on all the parties.”

11. This Court finds that the some dispute arose between the parties

and accordingly the respondent herein filed application for

appointment of arbitrator under Section 11 of the Arbitration &

Conciliation Act, 1996 which was numbered as A.A Case No. 6/

2010. The said arbitration was disposed of vide order dated

10.12.2010 and with the consent of the parties and Hon’ble retired

judge of this Court was appointed as Arbitrator in the matter. The

order dated 10.12.2010 passed in Arbitration Application No. 6 of

2010 is quoted hereinbelow for ready reference:-

“This case comes up before this Court for appointment of

an arbitrator as provided in the arbitration agreement.

Both the parties agreed that Justice S.K. Chattopadhaya, a

retired High Court Judge be appointed as an arbitrator,

Since the appointment of arbitrator is on the agreed

submission of the parties, this Court feels inclined to

appoint Justice S.K. Chattopadhaya, a retired High Court

Judge. On being noticed, the parties will appear before him.

The arbitration application, accordingly, stands disposed

of.”

12. S.L.P. was filed against aforesaid order dated 10.12.2010 on the

ground that the dispute has been wrongly referred to the learned

Arbitrator and that there was no arbitration clause in existence in

view of the stipulation in the N.I.T. regarding non-applicability of

the clause 23 of Form F-2 and that it was only the counsel for the

appellants appearing in Arbitration Application No. 6 of 2010 who

had consented for reference to Arbitration by retired judge of this

Hon’ble Court without any instruction in the matter. Admittedly,

the S.L.P. No. 16942 of 2011 was withdrawn by the appellants vide

order dated 21.10.2011. It has been recorded in the order of

withdrawal passed by Hon’ble Supreme Court that the appellants

intended to move the High Court seeking “view” of the impugned

13

order. At this stage of dictation of the judgement in the court, the

counsel for the appellants submits that the word ‘view’ has been

wrongly mentioned in the order passed by the Hon’ble Supreme

court although the same ought to have been “review” and there

appears to be a typographical error in the order passed by the

Hon’ble Supreme Court to this effect. This court is not inclined to

read the order passed by the Hon’ble Supreme Court by

substitution the word “review” for the word “view”. If there was

any typographical mistake, it was for the appellants to move

appropriate petition before the Hon’ble Supreme Court which

admittedly has not been done. The order dated 21.10.2011 passed

by the Hon’ble Supreme Court in the aforesaid S.L.P. is quoted as

under :-

“ Learned counsel for the petitioners seeks withdrawal of

the special leave petition as the petitioners intend to move

the High Court seeking view of the impugned order.

Special leave petition is dismissed as withdrawn.”

13. Admittedly, in the meantime, the learned Arbitrator had

commenced the arbitration proceeding pursuant to the order dated

10.12.2010 passed in Arbitration Application No. 6/2010 and the

learned Arbitrator had issued notice to the appellants and the

appellants had appeared before the learned Arbitrator and had

prayed for time on the ground that certain approvals were required.

Thereafter, the appellants did not participate in the proceeding

before the learned Arbitrator which ultimately led to passing of the

award on 24.12.2011. It is the specific case of the appellants that the

order dated 21.10.2011 passed in aforesaid S.L.P. was duly

communicated to the office of learned Arbitrator on 23.12.2011,

with a prayer to adjourn the matter for two months so as to enable

them to take appropriate steps in the High Court, but in spite of

this, the learned Arbitrator had pronounced the award on

24.12.2011. The fact about filing of letter before the learned

Arbitrator on 23.12.2011 is not reflected from the award and

admittedly the appellants did not take any steps for more than two

months after order of withdrawal of the S.L.P. filed before the

Hon’ble Supreme Court. This court is of the considered view that

otherwise also, order of withdrawal of the S.L.P could not have

14

prevented the learned arbitrator from pronouncing the award

particularly when the appellants had refused to participate in the

arbitral proceedings.

14. From perusal of the award passed by the learned Arbitrator, this

court finds that the learned Arbitrator had mentioned about non

appearance of the appellants in paragraph no. 9 of the award which

clearly indicates that the learned Arbitrator had taken pain to

ensure that the appellants should appear in the proceeding.

However, in spite of best of efforts, the appellants did not

participate in the arbitration proceeding in spite of service of notice

and accordingly did not raise any objection in connection with the

existence of arbitration clause and/or on the interpretation of

clause-23 of the agreement which was never struck off by the

parties to the agreement. For ready reference, paragraph no. 9 of the

award passed by the learned Arbitrator is quoted below:-

“On being noticed, the claimant appeared but surprisingly

except one Mr. P.C. Jha, Executive Engineer, Minor

Distribution Division No. 9 (respondent no. 3) along with Mr.

M.K. Jha, S.D.O. Minor Distribution Division No. 9 appeared

on the date fixed i.e. on 27.01.2011 but no other respondents

appeared. However, the Chief Engineer (respondent no. 2) and

the Superintending Engineer (respondent no. 4) informed Mr.

Jha of their inability to appear on the date fixed as they could

only receive the notices on the said date. They assured Mr.

Jha that they would be present on 28.01.2011 and as such the

case was adjourned for 28.01.2011 though Mr. Tarun Kumar,

Advocate, appeared on behalf of the claimant and Mr. P.C.

Jha (respondent no. 3) along with Mr. M.K. Jha, appeared but

respondent no. 2 and 4 did not appear. When enquired by me,

Mr. Jha submitted that unless and until approval is given by

the concerned Department it was not possible for either

respondent no. 2 or 4 to appear before the Tribunal in spite of

receiving the notices. He prayed for three months time for

taking necessary approval from the Department so that on

the next date other two respondents could appear before me.

Prayer was allowed and the case was adjourned for three

months.

15

On 29.04.2011, that is after three months, when the matter

was again placed before me, none of the respondents

including Mr. Jha appeared before the Tribunal. On the same

date Tribunal observed that it will have no option but to

hear the claimant exparte on the next date and to pass an

exparte Award without hearing any of the respondents above

named. In order to facilitate the respondents to appear before

me on the next date positively and in order to avoid passing

of an exparte Award, I adjourned the matter to 12.05.2011.

Mr. Tarun Kumar on behalf of the claimant even could not

serve the copy of the claim petition to the respective

respondents due to non-appearance of the respondents. The

case was ordered to be listed on 12.05.2011 and the copies of

this order along with order dated 28.01.2011 were sent to

respondent nos. 1 to 4 by Speed-Post. It was expected that at

least respondent no. 1, the Secretary, Minor Irrigation

Division, would take steps in proper adjudication of the

disputes but all my efforts went in vain as even on 12.05.2011

nobody appeared on behalf of the respondents and having

found no other alternative the case was listed for hearing

exparte. On the prayer made by Mr. Deepak Sinha, learned

counsel on behalf of the claimant next date of hearing was

fixed on 03.06.2011 and the argument was advanced in part.”

15. This court further finds that Arbitrator had framed following issues

(I) Whether the respondents committed a breach of contract by

failing to allot lands free from all encumbrances to the

claimant for executing the allotted work?

(II) Whether respondent department was obliged to provide

encumbrances free land to the contractor for executing the

work allotted to him?

(III) Whether termination of contract for no fault of the claimant

and forfeiting security amount was an arbitrary and

malafide action on part of the Respondents?

(IV) Whether deletion of Clause 23 of the Agreement regarding

arbitration with effect from 18.11.1992 will have any

bearing on the arbitration clause incorporated in the

Agreements entered into in this case?

(V) Whether the Respondent No. 4 deliberately misinterpreted

16

the findings of the Hon’ble High Court while refusing to

appoint an Arbitrator for resolving the disputes?

(VI) Whether due to failure of the respondents, in allotting lands

free from all encumbrances to the claimant, the claimant

had to suffer a financial loss for sitting idle along with its

men and machineries, equipments and materials for almost

one year?

(VII) Whether the claimant is entitled to get the amount of

compensation as claimed by him?

16. Clause-23 of the agreement was subject matter of consideration

under issue no. 4. In spite of non appearance of the appellants

before the learned Arbitrator and their non participation, the

learned Arbitrator took note of the letter dated 10.02.2010 as

contained in Annexure-17 to the claim petition and which was

issued by the appellants wherein request for appointment of

Arbitrator was turned down by the appellant by specifying

following two grounds.

(i) As the prayer for payment of compensation was rejected by

the High court the same could not be allowed.

(ii) With effect from 18.11.1992, clause-23 (i.e. Arbitration Clause)

has been deleted in relation to F 2 agreement.

17. The learned Arbitrator while discussing issue no. 4 recorded his

findings as under:-

“It appears from letter dated 10.02.2010, as contained in

Annexure-17 to the claim petition, that when after the High

Court’s order the claimant filed an application before the

Superintending Engineer requesting him to appoint as

Arbitrator so that loss and damages suffered by him could

be ascertained and he may be compensated accordingly, the

Superintending Engineer by his aforesaid letter rejected the

said application on two grounds, namely (i) as the prayer

for payment of compensation was rejected by the High

Court, the same could not be allowed and (ii) with effect

from 18.11.1992. Clause-23 (i.e. Arbitration Clause) has been

deleted in relation to Agreement F-2.

The second reason assigned by the Superintending

Engineer, in my view, cannot be sustained in law as much

17

as in the present case, deletion of the said clause cannot be

hold good. The reason for my conclusion is that so far the

present case is concerned, the first Agreement was executed

on 10.02.2004 and period expires on 09.02.2005. The

Agreement Nos. 2F -2/2003-04 and 4F-2/2004-05 are

Annexures-3 & 4 to the claim petition. A bare perusal of

conditions of contract of both the Agreements will show

that Arbitration Clause, namely Clause 23, is very much in

existence n both the Agreements. Therefore, in my view if

the Arbitration Clause 23 would have been deleted from the

Conditions of Contract w.e.f. 18.01.1992, this Clause would

not have been mentioned in the Agreements executed much

after the deletion of the said clause, Moreover, the

Superintending Engineer has not annexed any notification

of the State Government by and under which Clause-23 was

deleted with effect from 18.11.1992 as claimed by him. This

shows that the Superintending Engineer in order to

frustrate the claim of the claimant has refused to refer the

matter to Arbitration by taking a non-existent ground of

deletion of Clause 23 from the Agreement. Another

important aspect of the matter is that when the claimant

filed Arbitration Application No. 6 of 2010 before the

Jharkahnd High Court, J.C. to G.P. –I appeared for

respondents and he also did not take this plea by indicating

to the High Court that Arbitration Clause has been deleted

with effect from 18.11.1992. On the other hand he also

agreed along with the claimant’s counsel that an Arbitrator

may be appointed. The order of the High court dated

10.12.2010 appointing me as the Arbitrator is Annexure-18 to

the claim petition.

Thus in my view, it is too late for the Superintending

Engineer to suggest that Clause 23 has been deleted and

therefore the matter could not be referred for Arbitration. I

am of the view that this fact also indicates that the

Superintending Engineer also trying to avoid illegalities

committed by concerned authority/authorities in signing

the Agreements before acquisition of land. In my opinion,

in all fairness the Superintending Engineer ought to have

18

appointed as arbitrator for redressal of the grievances of the

claimant.”

18. This court finds that the award of the learned Arbitrator was

challenged before the learned Civil Judge, Sr. Division at Ghatshila

under Section 34 of the Arbitration and Conciliation Act, 1996

which was numbered as Misc. Case No. 2/2012 and the ground of

challenge have been quoted above.

19. This court finds from perusal of the petition filed under Section 34

of the Arbitration and Conciliation Act, 1996, there is no

explanation on behalf of the appellants as to why and under what

circumstance, clause-23 of the agreement was not struck off at the

time of signing of the agreement by their authorised officer and also

their contention that the parties are governed by the conditions of

notice inviting tender read with the agreement and accordingly

clause-23 stood excluded by virtue of terms of the notice inviting

tender. Counsel for the appellants has referred to the judgment

passed by the Hon’ble Supreme Court reported in (2018) 16 SCC

758 and in also (2018) SCC Online 327 (Lion Engineering

Consultants v. State of M.P.) has referred to paragraph no. 5 and 6

of the said judgment. However , it would be useful to refer to para

4 to 6 of the said judgement which reads as follows:-

“4. Learned Advocate General for the State of M.P. submitted that

the amendment sought is formal. Legal plea arising on undisputed

facts is not precluded by Section 34 (2) (b) of the Act. Even if an

objection to jurisdiction is not raised under Section 16 of the Act, the

same can be raised under Section 34 of the Act. It is not even

necessary to consider the application for amendment as it is a legal

plea, on admitted facts, which can be raised in any case. He thus

submits the amendment being unnecessary is not pressed. Learned

Advocate General also submitted that observations in MSP

Infrastructure Ltd. (supra), particularly in Paragraphs 16 and 17 do

not laid down correct law.

5. We find merit in the contentions raised on behalf of the State. We

proceed on the footing that the amendment being beyond limitation is

not to be allowed as the amendment is not pressed.

6. We do not see any bar to plea of jurisdiction being raised by way of

an objection under Section 34 of the Act even if no such objection was

19

raised under Section 16.”

20. This court is of the considered view that the aforesaid judgement

does not apply to the facts and circumstances of this case

particularly in view of the fact that the point regarding jurisdiction

in the instant case is not a pure question of law but is a mixed

question of fact and law. Here admittedly the clause 23 of the

agreement was existing in the agreement which was ultimately

signed, although as per the case of the appellants, the said clause

was to be excluded. It was certainly for the respondents to lead

evidence on this point and satisfy the learned arbitrator as to under

what circumstances the clause 23 of the agreement was not struck

off from the agreement while signing the same. There is no bar for

the parties to enter into arbitration agreement at a subsequent stage

of signing the agreement even if it was mentioned in the tender that

the clause regarding agreement is to be excluded. This court further

finds that in the instant case, at the initial stage when the appellants

refused to refer the matter for arbitration vide letter dated

10.02.2010, it was mentioned that the dispute cannot be referred to

arbitration as clause 23 was deleted with effect from 18.11.1992 by

virtue of one notification and no such plea was taken that as per the

tender conditions the clause 23 was to be excluded. This court finds

that the appellants have consciously chosen not to participate in the

arbitration proceedings and accordingly did not raise their point of

jurisdiction before the learned arbitrator in-spite of repeated

opportunities granted by the learned arbitrator. This court is of a

considered view that it was not open to the appellant to raise such

point of jurisdiction involving mixed questions of fact and law for

the first time in petition under section 34 of Arbitration and

Conciliation Act, 1996.

21. This court finds that the appellants having appeared before the

learned Arbitrator at one point of time prayed for time and

subsequently they abandoned the proceedings and allowed the

learned Arbitrator to proceed in the matter and did not file any

written statement to dispute the claim. This court also finds that the

learned Arbitrator was careful enough to take into consideration

objection of the State in connection with existence of arbitration

clause on the basis of whatever was available on record including

20

letter dated 10.02.2010, which was filed by the respondent before

the learned Arbitrator, this court finds that the appellants allowed

the learned Arbitrator to proceed in the matter and when the

Arbitrator was scheduled to pronounce the judgment on 24

th

December, 2011, they claimed to have filed a petition in the office of

the learned Arbitrator regarding dismissal of S.L.P. therefore

proposed petition to be filed before the High Court that too after

expiry of two months from the date of dismissal of the S.L.P. which

was dismissed vide order dated 21.10.2011. Even as per the

appellants request to adjourn the case was filed in the office of the

learned Arbitrator only on 23.12.2011. From perusal of the lower

court records this court finds that receiving copy of the letter dated

23.12.2011 has been filed by the appellants which appears to have

been signed by one clerk and there is nothing on record to suggest

that the same was brought to the notice of the learned Arbitrator.

Even final award which has been passed does not indicate the filing

of any such letter before the learned Arbitrator. This court further

finds that even if it is assumed that the said letter was brought to

the notice of the learned Arbitrator, then also, merely because the

party is going to file a petition cannot be a ground for not

pronouncing the award.

22. The counsel for the appellant has submitted that objection to

jurisdiction can be taken under Section 34 of the Arbitration and

Conciliation Act, 1996. He has referred to Para 35 and 36 of another

judgment reported in (2018) 4 SCC 793 (Kerela State Electricity

Board and Another vs. Kurien E. Kalathil and Another) Paragraph

no. 35 and 36 of the said judgment reads as follows:-

35. “After pointing out the disputed claims of additional work (Ext. P-59)

and on the oral consent of the counsel for the appellant, the High Court has

referred the parties to arbitration appointing Justice K.A. Nayar as the

arbitrator. Arbitrator/Tribunal is a creature of the contract between the

parties. There was no arbitration agreement between the parties. The

question falling for consideration is whether the High Court was right in

referring the parties to arbitration on the oral consent given by the counsel

without written instruction from the party.

36. Jurisdictional precondition for reference to arbitration under Section 7

21

of the Arbitration and Conciliation Act is that the parties should seek a

reference or submission to arbitration. So far as reference of a dispute to

arbitration under Section 89 CPC is concerned, the same can be done only

when parties agree for settlement of their dispute through arbitration in

contradistinction to other methods of alternative dispute resolution

mechanism stipulated in Section 89 CPC. In so far reference of the parties

to arbitration, oral consent given by the counsel without a written memo

of instructions does not fulfil the requirement under Section 89 CPC.

Since referring the parties to arbitration has serious consequences of taking

them away from the stream of civil courts and subject them to the rigour of

arbitration proceedings, in the absence of arbitration agreement, the court

can refer them to arbitration only with written consent of parties either by

way of joint memo or joint application; more so, when Government or

statutory body like the appellant Board is involved.”

23. This court is of the considered view that the aforesaid judgement

does not help the appellants in any manner and is clearly

distinguishable on facts. In the instant case the reference to learned

arbitrator is based on a written agreement containing clause 23 and

is not merely on account of consent during disposal of Arbitration

Application No. 6/2010. In the aforesaid judgment the reference to

arbitrator was solely on the basis of oral consent of counsels.

24. This court further finds that contract herein is not a statutory

contract and no element of public policy is involved in this case.

25. So far as contention of the appellants that clause-23 by itself cannot

be said to be an arbitration clause is concerned, they have relied

upon the judgment passed by the Hon’ble Supreme Court reported

in (2014) 1 SCC 516 ( Vishnu versus State of Maharashtra)

paragraph no. 11,12,13 which reads as follows:-

11. We have considered the respective arguments.

Clauses 29 and 30 of the B-1 Agreements entered into

between the parties read as under:

“29. All works to be executed under the contract shall

be executed under the direction and subject to the

approval in all respects of the Superintending Engineer

of the Circle for the time being, who shall be entitled to

direct at what point or points and in what manner they

are to be commenced, and from time to time carried on.

22

30. Except where otherwise specified in the contract

and subject to the powers delegated to him by the

Government under the Code Rules then in force the

decision of the Superintending Engineer of the Circle for

the time being shall be final, conclusive, and binding on

all parties to the contract upon all questions, relating

to the meaning of the specifications, designs, drawings,

and instructions hereinbefore mentioned and as to the

quality of workmanship, or materials used on the

work, or as to any other question, claim, right, matter,

or thing whatsoever, if any way arising, out of, or

relating to the contract designs , drawings,

specifications, estimates, instructions, orders, or 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 or abandonment thereof.”

12. Para 224 of the Maharashtra Public Works Manual,

as amended by Government C.M. No. C.M. No. CAT-

1070/460-DSK.2, dated 09.05.1977, reads as under:

“224. Clause 30 of B-1 and B-2 Agreement forms lays

down that the decision of the Superintending Engineer

in certain matters relating to the contract would be

final. The Superintending Engineer’s decision taken

under this clause should be considered as that taken as

an arbitrator and this should be considered as the

decision taken under that Arbitration Act. The

decisions taken by the Superintending Engineer under

the other clauses should be considered different from

his decision taken under Clause-30 of B-1 and B-2

tender agreements as an arbitrator.”

13.We shall first consider the question whether Clause

30 of the B-1 Agreements can be construed as an

arbitration clause:

13.1 A conjoint reading of Clauses 29 and 30 of B-1

Agreements entered into between the parties shows

that the appellant had to execute all works subject to

the approval in all respects of the Superintending

23

Engineer of the Circle, who could issue directions from

time to time about the manner in which work was to

commence and be executed. By virtue of Clause 30, the

decision of the Superintending Engineer of the Circle

was made final, conclusive and binding on all the

parties in respect of all questions relating to the

meaning of the specifications, designs, drawings,

quality of workmanship or materials used on the work

or any other question relating to claim, right, matter or

things arising out of or relating to the contract designs,

drawings, specifications, estimates, instructions,

orders etc.

13.2 These two clauses by which the Superintending

Engineer was given overall supervisory control were

incorporated for smooth execution of the works in

accordance with the approved designs and

specifications and also to ensure that the quality of

work is not compromised. The power conferred upon

the Superintending Engineer of the Circle was in the

nature of a departmental dispute resolution mechanism

and was meant for expeditious sorting out of problems

which could crop up during execution of the work.

13.3 Since the Superintending Engineer was made

overall in-charge of all works to be executed under the

contract, he was considered by the parties to be the

best person who could provide immediate resolution of

any controversy relating to specifications, designs,

drawings, quality of workmanship or material used

etc. It was felt that if all this was left to be decided by

the regular civil courts, the object of expeditious

execution of work of the project would be frustrated.

This is the primary reason why the Superintending

Engineer of the Circle was entrusted with the task of

taking decision on various matters.

13.4 However, there is nothing in the language of

Clause-30 from which it can be inferred that the parties

had agreed to confer the role of arbitrator upon the

Superintending Engineer of the Circle.”

24

26. This court finds that the Hon’ble Supreme Court in paragraph no.

19 has referred to the judgement passed in the case of K.K. Modi

versus K.N. Modi reported in (1998) 3 SCC 573 wherein the

attributes of an arbitration agreement has been culled out. Further

vide para 30 and 31 the judgement passed in the case of Punjab

State versus Dina Nath has been referred and quoted. Para 30 and

31, of the said judgement reported (2014) 1 SCC 516 is quoted as

follows:-

31. After noticing the judgment in K.K. Modi v. K.N. Modi, the

Court observed(Dina Nath case, SCC pp. 33-34, paras 12 & 14)

“12. Keeping the ingredients as indicated by this Court

in K.K. Modi in mind for holding a particular

agreement as an arbitration agreement, we now

proceed to examine the aforesaid ingredients in the

context of the present case :

(a) Clause 4 of the Work Order categorically states

that the decision of the Superintending Engineer shall

be binding on the parties.

(b) The jurisdiction of the Superintending Engineer

to decide the rights of the parties has also been derived

from the consent of the parties to the Work Order.

(c) The Agreement contemplates that the

Superintending Engineer shall determine substantive

rights of parties as the Clause encompasses all

varieties of disputes that may arise between the parties

and does not restrict the jurisdiction of the

Superintending Engineer to specify issues only.

(d) That the agreement of the parties to refer their

disputes to the decision of the Superintending Engineer

is intended to be enforceable in law as it is binding in

nature.

* * *

14. The words ‘any dispute appears in Clause 4 of

the Work Order. Therefore, only on the basis of the

materials produced by the parties in support of their

respective claims a decision can be arrived at in

resolving the dispute between the parties. The use of

25

the words ‘any dispute’ in Clause 4 of the Work Order

is wide enough to include all disputes relating to the

said Work Order. Therefore, when a party raises a

dispute for non-payment of money after completion of

the work, which is denied by the other party, such a

dispute would come within the meaning of ‘arbitration

agreement’ between the parties. Clause 4 of the Work

Order also clearly provides that any dispute between

the department and the contractor shall be referred to

the Superintending Engineer, Hydel Circle No. 1,

Chandigarh for orders. The word ‘orders’ would

indicate some expression of opinion, which is to be

carried out, on enforced and which is to be carried out,

or enforced and which is a conclusion of a body (in this

case Superintending Engineer, Hydel Cirlce No. 1,

Chandigarh). Then again the conclusion and decision of

the Superintending Engineer will be final and binding

on both he parties. This being the position in the

present case and in view of the fact that Clause 4 of the

Work Order is not under challenge before us, the

decision that would be arrived at by Superintending

Engineer, Hydel Circle No 1, Chandigarh must also be

binding on the parties as a result whereof Clause-4

must be held to be binding arbitration agreement.”

32. The Bench distinguished the judgment in State of Orissa v. Damodar

Das by making the following observations : (Dina Nath case, SCC

pp. 35-36 para 17)

17. “From a plain reading of this clause in Damodar Das it

is evident that the powers of the Public Health Engineer

were essentially to supervise and inspect. His powers were

limited to the questions relating to the meaning of the

specifications, drawings and instructions, quality of

workmanship or materials used on the work, or as to any

other question, claim, right, matter, drawings,

specifications, estimates, instructions, orders or these

conditions, or otherwise concerning the works or the

execution or failure to execute the same. However, in the

case before us, the Superintending Engineer was given full

26

power to resolve any dispute arising between the parties

which power in our view is wide enough to cover any

nature of dispute raised by the parties. The clause in the

instant case categorically mentions the word ‘dispute’

which would be referred to him and states ‘his decision

would be final and acceptable/binding on both the

parties.”

33. In our opinion, neither of the judgments relied upon by Shri

Mukherjee help the cause of his client. In Mallikarjun case this Court

noted that the Superintending Engineer, Gulbarga Circle, Gulbarga

was not an officer of the University and he did not have any

authority or jurisdiction either to supervise the construction work or

issue any direction to be contractor in relation to the project. The

Court also emphasised that the parties had agreed that any dispute

arising from the contract would be referred to the decision of the

Superintending Engineer. These factors are missing in the instant

case. Likewise, Clause 4 of the Work Order which came up for

interpretation in Punjab State v. Dina Nath contemplated resolution

by the Superintending Engineer of any dispute arising between the

department and the contractor. Therefore, the relevant clause of the

Work Order was rightly treated as an arbitration agreement.”

27. Ultimately, the Hon’ble Supreme court in (2014) 1 SCC 516 found

that the agreement involved in the said case was not an arbitration

agreement.

28. Applying the same test as has been considered by the Hon’ble

supreme court, this court finds, that clause 23 of the agreement

involved in this case clearly uses the term “any dispute” and

provides that the decision of the Superintending engineer of the

circle shall be final, conclusive and binding upon all the parties; the

jurisdiction to decide the dispute by the said authority has been

derived as per the agreement executed with the consent of the

parties; the Agreement contemplates that the Superintending

Engineer shall determine substantive rights of parties as the Clause

encompasses all varieties of disputes that may arise between the

parties and does not restrict the jurisdiction of the Superintending

Engineer to specific issues only AND the agreement of the parties

to refer their disputes to the decision of the Superintending

Engineer is intended to be enforceable in law as it is binding in

27

nature.

Accordingly, this court finds that clause 23 of the agreement

involved in this case, upon its bare perusal, is certainly an

arbitration agreement when seen in the light of the ratio of

aforesaid judgment passed by Hon’ble Supreme Court.

29. This court further finds that number of judgments has been relied

upon by the respondent as mentioned above wherein matters have

been referred to the Arbitrator resorting to the similar clause-23 of

the F 2 agreement. The counsel for the appellants in response to this

statement of the respondent has tried to draw the distinction

between the clause which were under consideration by this court in

other judgments and clause 23 involved in this case by submitting

that Arbitration and Conciliation Act, 1996 was specifically

mentioned in the arbitration clause involved in the other judgment,

but in the instant case, there is no such reference. This court finds

that reference or non reference of Arbitration and Conciliation Act,

1996 in the arbitration clause itself has no bearing and it is the

clause as such which is to be examined to see as to whether there is

any provision for getting the dispute resolved through arbitration.

Accordingly, the distinction which has been sought to be drawn by

the counsel appearing on behalf of the appellants has no merits and

accordingly such argument is hereby rejected.

30. This court finds that learned court below has passed a detailed

judgment considering all the points raised by the appellants and

every point has been rejected while considering the ground for

setting aside of the award as mentioned in the application under

Section 34 of the Arbitration and Conciliation Act, 1996 and has

taken note of the fact that the appellants never participated in the

proceedings before the learned Arbitrator and it was not open to

them to raise such point now. Further the learned court below has

also considered that challenge to award is permissible on the

grounds under Section 34 of the Arbitration and Conciliation Act,

1996 and the court does not sit in appeal over the award. Learned

court below also held that appropriate reasoning has been assigned

in deciding the claim. Although the appellants did not appear

before the learned Arbitrator, even then due care was taken while

28

deciding the claim. The learned court below also held that the

appellants had failed to prove that any element of public policy is

involved in this case so as to assail the award passed by the learned

Arbitrator.

31. This court finds that the impugned order passed by the learned

court below is itself well reasoned order dealing with all the points

raised by the appellant before the learned court. The scope of

Section 34 of the Arbitration and Conciliation Act, 1996 is very

limited and the court does not sit in appeal against the award

passed by the learned Arbitrator.

32. This court finds that none of the grounds as pointed out by the

appellants call for any interference in the award passed by the

learned Arbitrator or in the impugned order passed by the learned

court below. Accordingly, this appeal is hereby dismissed.

33. Pending I.A., if any, stands dismissed as not pressed.

(Anubha Rawat Choudhary, J.)

Binit/A.F.R.