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Supreme Court of India

STATE OF ORISSA AND ANR.versusSRI DAMODAR DAS

Citation
1995 INSC 904
Decided
15 December 1995
Disposal
Appeal(s) allowed

Holding

Clause 25 does not constitute an arbitration agreement and the notice for arbitration was filed outside the limitation period, rendering the claim time‑barred.

Summary

The State of Orissa appealed against the appointment of an arbitrator under Sections 8 and 20 of the Arbitration Act, 1940, filed by contractor Sri Damodar Das. The Supreme Court examined whether Clause 25 of the water‑supply contracts, which made the decision of the Public Health Engineer final, amounted to an arbitration agreement within the meaning of Section 2(a) of the Act. It held that the clause merely vested supervisory powers in the Engineer and did not expressly or by necessary implication refer disputes to an arbitrator, so no arbitration agreement existed. The Court then considered the limitation period under Section 37 of the Arbitration Act, read with Article 137 of the Limitation Act, 1963, and ruled that the cause of arbitration accrued when the notice demanding an arbitrator was served on 15 September 1980, which was well beyond the three‑year limitation for contracts executed in 1967‑77. Consequently, the petitions under Sections 8 and 20 were dismissed and the appointment of the arbitrator set aside.

Issues considered

  • The existence of an arbitration agreement in Clause 25 of the contracts
  • The point at which the cause of arbitration accrues for limitation purposes
  • Whether the claim is barred by the three‑year limitation period under the Limitation Act, 1963
  • Whether acceptance of payment without protest bars the contractor from invoking arbitration

Legislation cited

Subjects

ArbitrationArbitration agreementLimitation periodSection 8 Arbitration ActSection 20 Arbitration ActSection 37 Arbitration ActContract clause interpretationPublic Health EngineerTime‑barred claim

Judgment

A                        STATE OF ORISSA AND ANR.
                                           v.
                               SRI DAMODAR DAS

                                DECEMBER 15, 1995

B       [K. RAMASWAMY, FAIZAN UDDIN AND B.N. KIRPAL, JJ.]

          Arbitration Act, 1940 : Sections 8, 20 and 37.

          Limitation-Commencemellf of-From the date on which cause of
C arbitration acc1ued--Cause of arbitration-Whether arises-On unequivocal
    denial of claim of one parry by the other-This is so even if there is a provision
    in the arbitration clause that no cause of action shall accrue until award is
    made.

          Arbitration Act, 1940: Section 2(a).
D          Arbitration Clause-Agreement to refer dispute or difference to ar-
    bitrator-1'.fust be spelt out expressly or by necessary implication-Clause
    empowering decision of Public Health Engineer as final in dispute relating to
    specifications, drawing or quality of work-Held: does not constitute an
    arbitration clause.
E
          Limitation Act, 1963 :

          Anic/e 137 of Schedule-Applicable to application under Section 20 of
    the Arbitration Act, 1940.

          Deeds and Documents :
F
           Clause in contract-Must be read as a whole.

       The respondent-contractor was awarded three contracts for execut-
  ing water supply work. In respect of two contracts, after executing some
G work, he abandoned the contract and accepted the measurements and
  payment of the fourth running bill without any objection on July 19, 1976
  and October 6, 1977 respectively. With regard to the first, which was
  executed in 1967, he accepted the measurement and payment of the bill
  without raising any objection.

H          On September 15, 1980, the respondent wrote a letter to the Chief
                                      800
                              STATEv. DAMODARDAS                             801


-      Engineer, Public Health alleging that disputes had arisen out of and A
       relating to the aforesaid agreement for the works done and called upon
       the Chief Engineer to nominate an arbitrator who in turn informed the
       respondent that since there was no arbitration clause in the agreement,
       the question of relevance to arbitrator did not arise. The respondent
       thereon filed applications under Sections 8 and 20 of the Arbitration act, B
       1940 in the court of sub.ordinate Judge for appointment of an arbitrator.

             The Subordinate Judge allowed the application under Section 8 and
       directed the parties to file the agreement in the Court and also to nominate
       panel of names for appointment as an arbitrator. On revision and appeals
       having been filed, the High Court dismissed the revision and miscel- C
       laneous appeals. Aggrieved by the High Court's judgment the appellants
       have preferred the present appeal.

              On hehalf of the appellants it was contended that there was no
       arbitration agreement between the parties; that the question of reference
       did not arise; that works having been executed as early as in 1967 and 1976, D
       the dispute was barred by limitation; and that the respondent having
       received the amounts without any protest, conld not avail of the arbitra·
       ti on.

             On behalf of the respondent it was contended that the decision of E
       the Public Health Engineer was final in respect of any claim, right, matter
       or thing whatsoever in any arising out of, or relating to, the contract; that
       by necessary implication envisages, within its ambit, an ar~itration of a
       dispute or difference between the appellants and the respondent; that the
       respondent having issued a notice calling upon the Chief Engineer to
       appoint or nominate an arbitrator and the Chief Engineer having failed F ·
       to do so, he was entitled to invoke the jurisdiction Qf the Court under
       Sections 8 and 20 of the Act; that the claim was made on september 15,
       1980 and the applications were immediately filed thereafter; and that the
       claims were not barred by limitation.

            Allowing the appeal, this Court
                                                                                   G

              HELD : 1.1. The period of limitation for commencing an arbitration
       runs from the date on which the "cause of arbitration" accrued, that is to
       say, from the date when the claimant first acquired either a right of action
       or a right to require that an arbitration take place upon the dispute H

....
    802                   SUPREME COURT REPORTS [1995) SUPP. 6 S.C.R.

A concerned. The period of limitation for the commencement of an arbitra·
                                                                                    .
    tion runs from the date on which, had there been no arbitration clause,
    the cause of action would have accrued : 1:just as in the case of actions the
    claim is not to be brought after the expiration of a specified number of
    years from the date on which the cause of action accrued, so in the case of
    arbitrations, the claim is not to be put forward after the expiration of the
B
    specified number of years from the date when the claim accrued". Even if
    the arbitration clause contains a provision that no cause of action shall
    accrue in respect of any matter agreed to be referred until an award is
    made time still runs from the normal date when the cause of action would
    have accrued if there had been no arbitration clause. [806-E-G]
c
          Russel on Arbitration by Anthony Walton (19th Edition) page 4-5,
    referred to.

         1.2. Subject to the Limitation Act, 1963, every arbitration must be
  commenced within the prescribed period. Just as in the case of actions the
D claim is not to be brought after the expiration of a specified number of
  years from the date "'hen the cause of action accrues, so in the case of
  arbitrations the claim is not to be put forward after the expiration of a
  specified number of years from the date when the claim accrues. For the
  purpose of Section 37(1) of the Arbitration Act, 1940 'action' and 'cause
E or arbitration' should be construed as arbitration and cause of arbitra·
  !ion. The cause of arbitration arises when the claimant becomes entitled
  to raise the question, that is, \\'hen the claimant acquires the right to
  require arbitration. An application under Section 20 of the Act is governed
  by Article 137 of the Schedule to the Limitation act, 1963 and must be made
  \lithin 3 years from the date when the right to apply first accrues. There
F is no right to apply until there is a clear and unequivocal denial of that
  right by the respondent. It must, therefore, be clear that the claim for
  arbitration must be raised as soon as the cause for arbitration arises as
  in the case of cause or action arisen in a civil action. [806-H, 807-B·CJ

          Law of Arbitration by Justice Bachawat, p· 549, referred to.
G
         2.1. Cause of Arbitration shall be deemed to have commenced when
    one part serves the notice on the other party requiring the appointment of
    an arbitrator. Arbitration implies to charter out timeous commencement
    of arbitration availing the arbitral agreement, as soon as difference of
H dispute has arisen. Delay defeats justice and equity aids promptitude and
                                                                                    ~-
                        STATE v. DAMODAR DAS                             803

resultant consequences. Defaulting party should bear the hardship and A
should not transmit the hardship to other party, after the claim in the
cause of arbitration was allowed to be barred. [807-E-F]

      Panchu Gopa!Bose v. Board of Tntstees for Port of Calcutta, [1993)
4 sec 338, referred to .
                                                                                B
     2.2. It is seen that the first contract was of year 1976-68 and was ex-
ecuted in 1967 itself. The amount was stated to have been received in Septem-
ber 1967 itself. The notice admittedly was issued on september 15, 1980
which is hopelessly barred by limitation. Any other construction would feed
impetus to choose the convenant at convenience or in concert. [808-B]
                                                                                c
      3.1. A reading of the clause in the contract as a conjoint whole, would
give this Court an indication that during the progress of the work or after
the completion er the sooner determination thereof the contract, the Public
Health Eugineering has been empowered to decide all question relating to
the meaning of the specifications, drawings, quality of work etc. and his       D
decision shall be final. [809-F]

      M/s. Ram Lal Jagan Nath v. Punjab State through Collector, Hissar &
Anr., AIR (1966) Punjab 436, held in-applicable.

       3.2. If the decision of the Public Health Engineer would become final    E
it is not even necessary to have it made rule of the Court. under the
Arbitration Act. A careful reading of the Clause in the contract would give
this Court indication that the Public Health Engineer is empowered to
decide all the question enumerated therein other than any disputes or
differences that have arisen between the contractor and the Government.
But for the Clause there is no other contract to refer any dispute or           F
difference to an arbitrator named or otherwise. [809-E-F]

      3.3. A clause in the contract cannot be split into two parts so as to
consider one part to give rise to difference or dispute and another part
relating to execution of work, its workmanship etc. It is settled now that      G
clause in the contract must be read as a whole. [809-H, 810-A)

      3.4. It is obvious that for resolution of any dispute or difference
arising between two parties to a contract the agreement must provide
expressly or by necessary implication, a reference to an arbitrator named
therein or othenvise of any dispute or difference and in its absence it is      H
    804                  SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.

A difficult to spell out existeuce of such an agreement for reference to an
    arbitration to resolve the dispute or difference contracted between the
    parties. [810-G)

          State of U.P. v. Tipper Chand, [1980] 2 SCC 341, followed.

B        Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors., [1980) 4 SCC
    556 and P.K Ramaiah & Co. v. NTPC, [1994) Supp. 3 SCC 126, held
    inapplicable.

          CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2987 of

c 1982.
         From the Judgment and Order dated 15.2.92 of the Orissa High
    Court in Misc. A. No. 64 of 1982.

       Indrajit Ray, {Adv. Genl., Orissa), Raj Kr. Mehta and Ms. M.
D Chakraborty for the Appellant.
         Yashank Ayharyu, Rajiv Kapur, Sanjay Kapur and M.K. Michael for
    the Respondents.

          The Judgment of the Court was delivered by
E         RAMASWAMY, J. These appeals arise from the orders of the High
    Court of Orissa dated February 15, 1982 made in Miscellaneous Appeal
    No. 65 of 1982 etc. The respondent-contractor was entrusted with the work
    "construction of sump and pump chamber etc. for pipes Wis to village
    Kentile" as per agreement dated September 21, 1967, "Village Kentile water
F   supply scheme construction of 20,000 gallons capacity R.R. masonary
    underground Reservoir" as per agreement dated July 19, 1976 and "Piped
    water supply to Kentile - Construction of 0.135 M.G.D. Treatment Plant"
    as per agreement dated October 6, 1977 for the years 1967-68, 1975-76 and
    1976-77 respectively. In respect of latter two contracts, after executing
G   some work, he abandoned the contract and accepted the measurements
    and payment of the fourth running bill without any objection on July 19,
    1976 and October 6, 1977 respectively. With regard to the first, he accepted
    the measurement and payment of the bill without raising any objection.

         On September 15, 1980, the respondent wrote a letter to the Chief
H   Engineer, Public Health, Orissa alleging that disputes had arisen out of and
             STATE v. DAMODAR DAS [K RAMASWAMY, J.]                     805

relating to the aforesaid agreement for the works done and called upon the A
Chief Engineer to nominate an arbitrator who in turn informed the respon-
dent that since there was no arbitration clause in the agreement, the
question of reference to arbitrator did not arise. The respondent thereon
filed applications under Sections 8 and 20 of the Arbitration Act in the
Court of Subordinate Judge, Bhubaneswar for appointment of an ar- B
bitrator. By orders dated September 7 and 14, 1981, the Subordinate Judge
allowed the application under Section 8 and directed the parties to file the
agreement in the CO\lrt and also to nominate panel of names for appoint-
ment as an arbitrator. On revision and appeals having been filed, the High
Court, by its order dated February 15, 1982, dismissed the revision and
miscellaneous appeals. Different arbitrators came to be appointed by the C
Court in each case. Thus, these appeals for special leave.

        Two contentions have been canvassed before us impugning the
 legality of the order of the Subordinate Judge as confrrmed by the High
 Court to appoint the arbitrator. The first contention is that there is no D
  arbitration agreement between the parties. Therefore, the question of
 reference does not arise. It is further contended that works having been
 executed as earlier as in 1967 and 1976, the dispute is barred by limitation.
 Another contention raised is that the respondent having received the
  amounts without any protest, cannot avail of the arbitration. The learned E
 counsel for the respondent, on the other hand, contended that the decision
 of the Public Health Engineer is final in respect of any claim, right, matter
 or thing whatsoever in any way arising out of, or relating to, the contract
 or conditions or otherwise concerning the works or execution or failure to
 execute the same or any orders or conditions during the progress of the
 work or after the completion or sooner determination thereof by necessary F
 implication envisages, within its ambit, an arbitration of a dispute or
 difference between the appellants and the respondent. The respondent
}'having i<>sued a notice calling upon the Chief Engineer to appoint or
 nominate an arbitrator and the Chief Engineer having failed to do so, he
 is entitled to invoke the jurisdiction of the Court under Sections 8 and 20 G
 of the Act. The Subordinate Court and the High Court, therefore, were
 right in their conclusion that the clause in question provides for an arbitra-
 tion of the dispute. The claim was made on September 15, 1980 and the
 application are immediately filed thereafter. Therefore, the claims are not
 barred by limitation.                                                          H
    806                   SUPREME COURT REPORTS [1995] SUPP. 6 S.C.R.

A          The diverse contentions give rise to the question whether the claims
    are barred by limitation and whether the clause in the contract gives rise
    to an arbitration. Section 37(1} of the Arbitration Act, 1940 (for Short, 'the
    Act') provides that all the provisions of the Indian Limitation Act, 1908
    (since repealed and adopted by Limitation Act 1963} shall apply to arbitra-
B   lions as they apply to the proceedings in Court. Sub-section (2) with 11011
    obsta11te clause provides that "a cause of action shall, for the purpose of
    limitation, be deemed to have accrued in respect of any such matter at the
    time when it would have accrued but for that term in the agreement". An
    arbitration shall be deemed to have commenced under sub-section (3)
    when one party to the arbitration agreement serves on the other parties
C   thereto a notice requiring the appointment of an arbitrator, or where the
    arbitration agreement provides that the reference shall be to a person
    named or designated in the agreement requiring that the difference be
    submitted to the person so named or designated. Section 3 of the Limita-
    tion, 1963. enjoins the court to consider the question of limitation whether
D   it is pleaded or not.

           Russell on Arbitration by Anthony Walton (19th Edition) at page 4-5
    states that the period of limitation for commencing an arbitration n:ns from
    the date on which the "cause of arbitration" accrued, that is to say, from
    the date when the claimant first acquired either a right of action or a right
E   to require that an arbitration take place upon the dispute concerned. The
    period of limitation for the commencement of the arbitration runs from the
    dale on which, had there been no arbitration clause, the cause of action
    would have accrued: "just as in the case of actions the claim is not to be
    brought after the expiration of a specified number of years from the date
F   on which the cause of action accrued, so in the case of arbitrations, the
    claim is not to be put forward after the expiration of the specified number
    of years from the date when the claim accrued". Even if the arbitration
    clause contains a provision that no cause of action shall accrue in respect
    of any matter agreed to be referred until an award is made time still runs
    from the normal date when the cause of action would have accrued if there
G   had been no arbitration clause.

          In Law of Arbitration by Justice Bachawat at page 549 commenting
    on Section 37, it is stated that subject to the Limitation Act, 1963, every
    arbitration must be commenced within the prescribed period. Just as in the
H   case of actions the claim is not to be brought after the expiration of a
             STATE v. DAMODAR DAS [K RAMASWAMY, J.]                   807

specified number of years from the date when the cause of action accrues, A
so in the case of arbitrations the claim is not to be put forward after the
expiration of a specified number of years from the date when the claim
accrues. For the purpose of Section 37(1) 'action' and 'cause of arbitration'
should be construed as arbitration and cause of arbitration. The cause of
arbitration arises when the claimant becomes entitled to raise the ques- B
tion, that is, when the claimant acquires the right to require arbitration. An
application under Section 20 is governed by Article 137 of the schedule to
the Limitation Act, 1963 and must be made within 3 years from the date
when the right to apply first accrues. There is no right to apply until there
is a clear and unequivocal denial of that right by the respondent. It must,
therefore, be clear that the claim for arbitration must be raised as soon as C
the cause for arbitration arises as in the case of cause of action arisen in
a civil action.


        In Panchu Gopal Bose v. Board of Trustees for Port of Calcutta, [1993]
 4 SCC 338, this Court had held that the provisions of the Limitation Act D
 would apply to arbitrations and notwithstanding any terms in the contract
 to the contrary, cause of arbitration for the purpose of limitation shall be
 deemed to have accrued to the party, in respect of any such matter at the
 time when it should have accrued but for the contract. Cause of arbitration
 shall be deemed to have commenced when one party serves the notice on E
 the other party requiring the appointment of an arbitrator. The question is
 when the cause of arbitration arises in the absence of issuance of a notice
.or omission to issue notice for long time after the contract was executed?
 Arbitration implies to charter out timeous commencement of arbitration
 availing the arbitral agreement, as soon as difference or dispute has arisen.
 Delay defeats justice and equity aids promptitude and resultant consequen- F
 ces. Defaulting party should bear the hardship and should not transmit the
 hardship to the other party,after the claim in the cause of arbitration was
 allowed to be barred. It was further held that where the arbitration agree-
 ment does not really exist or ceased to exist or where the dispute applies
 outside the scope of arbitration agreement allowing the claim, after con- G
 siderable lapse of time, would be a h.arassment to the opposite party. It
 was accordingly held in that case that since the petitioner slept over his
 rights for more than 10 years, by his conduct he allowed the arbitration to
 be barred by limitation and the Court would be jtL,tified in relieving the
 party from arbitration agreement under Sections 5 and 12(2)(b) of the Act. H
    808                   SUPREME COURT REPORTS [1995) SUPP. 6 S.C.R.

A          It is seen that the first contract was of year 1967-68 and was executed
                                                                                     .....
    in 1967 itself. The amount was stated to have been received in September
    1967 itself. The notice admittedly was issued on September 15, 1980 which
    is hopelessly barred by limitation. Any other construction would feed
    impetus to choose the covenant at convenience or in concert. With regard
    to other two claims, it is stated by the learned counsel for the respondent
B   that the appellant had extended the time for execution of work till 1979
    but admittedly in respect of the claim arising out of Civil Appeal Nos. 2544
    and 2987 of 1982, he admittedly completed the execution of work on
    December 30, 1977. In the third case, he abandoned the work. However,
    in view of the dispute that the respondent had the benefit of extension of
C   the execution of the work, it cannot be laid that there would be no dispute
    as to whether the claims are barred by limitation. Under those circumstan-
    ces, it would be difficult to decide whether the two claims are barred by
    limitation. That would be a matter for decision by arbitrator.

D        The question, therefore, is whether there is any arbitration agree-
    ment for the resolution of the disputes. The agreement reads thus :

             '25. Decision of Public Health Engineer to be fmal - Except where
             otherwise specified in this contract, the decision of the Public
             Health Engineer for the time being shall be final, conclusive and
E            binding on all parties to the contract upon all questions relating
             to the meaning of the specifications; 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 in any way arising out of, or
F            relating to the contract, drawings specifications estimates, instruc-
             tions, 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
              the sooner determination thereof of the contract."

G         Section 2(a) of the Act defines "arbitration agreement" to mean 'a
    written agreement to submit present or future differences to arbitration,
    whether an arbitrator is named therein or not" Indisputably, there is no
    recital in the above clause of the contact to refer any dispute or difference
    present or future to arbitration. The learned counsel for respondent songht
H   to contend from the marginal note, viz., "the decision of Public Health
            STATE v. DAMODAR DAS [K. RAMASWAMY, J.]                   809

Engineer to be final" and any other the words "claim, right, matter or thing, A
whatsoever in any way arising out of the contract, 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 the sooner
determination thereof of the contract" and contended that this clause is B
wide enough to encompass within its ambit, any disputes or differences
arising in the aforesaid execution of the contract or any question or claim
or right arising under the contract during the progress of the work or after
the completion or sooner determination thereof for reference to an arbitra-
tion. The High Court, therefore, was right in its conclusion that the
aforesaid clause gives right to arbitration to the respondent for resolution C
of the dispute/claims raised by the respondent. In support thereof he relied
on Ram Lal Jagan Nath v. Punjab State through collector, Hissar & Anr.,
AIR 1966 Punjab 436. It is further contended that for the decision of the
Public Health Engineer to be final, the contractor must be given an
opportunity to submit his case to be heard either in person or through D
counsel and a decision thereon should be given. It envisages by implication
existence of a dispute between the contractor and the Department. In other
words, the parties construed that he Public Health Engineer should be the
sole arbitrator. When the claim was made in referring the dispute to him,
it was not referred to the Court. The respondent is entitled to avail the E
remedy under Sections 8 and 20 of the Act. We find it difficult to give
acceptance to the contention. A reading of the above clause in the contract
as a conjoint whole, would give us an indication that during the progress
of the work or after the completion or the sooner determination thereof of
the contract, the Public Heath Engineer has been empowered to decide all
questions relating to the meaning of the specifications, drawings, instruc- F
tions hereinbefore mentioned and as to the quality of workmanship or
material used on the work or as to any other question, claim, right, matter
or thing whatsoever in any way arising out of, or relating to, the contract
drawings specifications estimates, instructions, orders or those conditions
or otherwise concerning the work> or the execution or failure to execute G
the same has been entrusted to the Public Health Engineer and his decision
shall be final. In other words, he is nominated only to decide the questions
arising in the quality of the work or any other matters enumerated herein-
before and his decision shall be final and bind the contractor. A clause in
the contract cannot be split into two parts so as to consider one part to H
    810                   SUPREME COURT REPORTS (1995] SUPP. 6 S.C.R.

A give rise to difference or dispute and another part relating to execution of
    work, its workmanship etc. It is settled now that clause in the contract must
    be read as a whole. If the construction suggested by the respondent is given
    effect then the decision of the Public Health Engineer would become final,
    and it is not even necessary to have it made rule of the Court under the
B   Arbitration Act. It would be hazardous to the claim of a contractor to give
    such instruction and give power to the Public Health Engineer to make any
    dispute final and binding on the contractor. A careful reading of the clause
    in the contract would give us an indication that the Public Health Engineer
    is empowered to decide all the questions enumerated therein other than
    any disputes or differences that have arisen between the contractor and the
C   Government. But for Clause 25, there is no other contract to refer any
    dispute or difference to an arbitrator named or otherwise.

          This Court was called upon to consider similar clause in State of U.P.
    v. Tipper Chand, (1980] 2 SCC 341. The clause was extracted therein. After
D   consideration thereof, this Court held that after perusing the contents of
    the said clause and hearing learned counsel for the parties "we find
    ourselves in complete agreement with the view taken by the High Court.
    Admittedly, the clause does not contain any express arbitration agreement.
    Nor can such an agreement be spelt out from its terms by implication, there
E   being no mention in it of any dispute, much less of a reference thereof. On
    the other hand, the purpose of the clause clearly appears to be to vest the
    Superintending Engineer with supervision of the execution of the work and
    administrative control over it from time to time". It would, thereby, be clear
    that this Court laid down as a rule that the arbitration agreement must
    expressly or by implication be spelt out that there is an agreement to refer
F   any dispute or difference for the arbitration and the clause in the contract
    must contain such an agreement. We are in respectful agreement with the
    above ratio. It is obvious that for resolution of any dispute or difference
    arising betvvcen t\vo parties to a contract, the agrccn1cnl must provide
    expressly or by necessary implication, a reference to an arbitrator named
G therein or otherwise of any dispute or difference and in its absence it is
    difficult to spell out existence of such an agreement for reference to an
    arbitration to resolve the dispute or difference contracted between the
    parties. The ratio in Smt. Rukmanibai Gupta v. Collector, Jabalpur & Ors.,
    (1980] 4 SC 556 does not assist the respondent. From the language therein
H   this Court inferred, by implication, existence of a dispute or difference for
                    STATEv. DAMODARDAS[KRAMASWAMY,J.]                          811
.....   arbitration. The Full Bench judgment of the Punjab & Haryana High Court A
        relied on by the counsel was expressly overruled by this Court in Tipper
        Chand's case (supra). Therefore, it is no longer good law. Moreover, notice
        was not given to the Public Health Engineer to enter upon the reference
        but was issued to Chief Engineer to refer the dispute to an arbitrator. The
        contention in the rejoinder of the appellants that the respondent received B
        the amount with protest to conclude that the amount was received in full
        and final settlement of the Act, cannot be accepted unless there is proof
        or admission in that behalf. The ratio in P.K Ramaiah & Co. v. NTPC,
        [1994] Supp. 3 SCC 126 has no application to the facts of the case.

              We, therefore, hold that clause 25 of the agreement does not contain C
        an arbitration agreement nor it envisages any difference or dispute that
        may arise or had arisen between the parties in execution of the works for
        reference to an arbitrator. The High Court following its earlier decision in
        M/s. Praharaj Partners v. State of Olissa & Ors., in Miscellaneous appeal
        No. 153179 and Civil Revision No. 478179 dated February 26, 1981. The D
        learned Judge in that judgment relied on the Full Bench Judgment of the
        Punjab & Haryana High Court and on Rukmanibai Gupta's case (supra).
        The High Court's decision has already been overruled and Rukmanibai
        Gupta's case (supra) has no application. The decision of the High Court,
        therefore, is clearly unsustainable in law.
                                                                                      E
               The appeals are accordingly allowed. Appointment of the arbitrator
        in furtherance of the orders of the Subordinate Judge stands set aside. The
        respective petitions filed by the respondent under Sections 8 and 20 stand
        dismissed but, in the circumstances, parties are directed to bear their own
        costs throughout.
                                                                                      F
        v.s.s.                                                   Appeals allowed.


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