REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No. 753 OF 2007
Eastern Coalfields Ltd. ....Appellant
Versus
Sanjay Transport Agency & Anr. ....Respondents
JUDGMENT
Dr. Mukundakam Sharma, J.
1. This appeal is directed against the order dated 9 th January, 2006
whereby the Calcutta High Court referred the dispute arising between
the parties herein to the sole arbitration of Hon’ble Mr. Justice D.K.
Basu a retired Judge of Calcutta High Court, with a request to him to
adjudicate upon and decide the dispute between the parties. The
aforesaid order came to be passed on an application filed by the
respondents herein under Section 11 (6) of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as `the Act’). By filing
the said application, the respondents prayed for appointment of an
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arbitrator relying on the alleged arbitration agreement being clause
No. 14.
2. The parties entered into an excavation contract whereby the
respondents undertook to carry out certain works on behalf of the
appellant herein. In the contract signed by the parties there is a clause
being clause No. 14 with the caption “Settlement of
Disputes/Arbitration”. Part of the said clause which is relevant to the
context of this case is reproduced hereunder :
“…….It is incumbent upon the contractor to avoid
litigations and disputes during the course of execution.
However, if such disputes take place between the contractor
and the department, effort shall be made first to settle the
disputes through committees at different levels made for this
purpose by the company.”
3. The aforesaid clause 14 in the Agreement, however, was scored out
and the same was replaced by another clause being clause No. 14.
When the parties entered into the agreement and signed the agreement
what remains in the agreement was clause No. 14 with the caption
“Arbitration with regard to the commercial disputes between the
Public Sector Enterprises inter se and Public Sector Enterprises and
Government Departments.” It reads as follows :
"ARBITRATION WITH REGARD TO THE
COMMERCIAL DISPUTES BETWEEN THE PUBLIC
SECTOR ENTERPRISES INTER SE AND BETWEEN
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THE PUBLIC SECTOR ENTERPRISES AND
GOVERNMENT DEPARTMENTS."
“In the event of any dispute of difference relating to the
interpretation and application of the provisions of the
commercial terms of the contract such dispute or difference
shall be referred by either party to the arbitration, to one of
the arbitrators in the Department of Public Enterprises, to be
nominated by the Secretary to the Government of India
incharge of the BUREAU OF PUBLIC ENTERPRISES.
The Arbitration Act, 1940 shall not be applicable to the
arbitration under this clause. The award of the arbitrator
shall be binding upon the parties to the dispute, provided
however, any party aggrieved by such award, may make
further reference for setting aside or revision of the award to
the Law Secretary, Department of Legal Affairs, Ministry of
Law & Justice, Government of India. Upon such reference,
the dispute shall be decided by the Law Secretary or the
Special Secretary/Additional Secretary when so authorised
by the Law Secretary, whose decision shall bind the parties
finally and conclusively. The parties to the dispute will
share equally the cost of arbitration, as intimated by the
arbitrator.”
4. The aforesaid clause No. 14 relates to disputes of commercial nature
arising between the Public Sector Enterprises inter se and between the
Public Sector Enterprises and Government Departments. The text that
follows also makes the said position clear which provides that after the
award is given by the arbitrator in the department of public sector
enterprises, reference for setting aside or revision of the award is to be
made to the Law Secretary, Department of Legal Affairs, Ministry of
Law & Justice, Government of India. The said clause, therefore,
concerns the commercial disputes arising between the Public Sector
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Enterprises inter se and between such enterprises and Government
Departments. The said clause will have no application to an
agreement which is entered into between the appellant and the
respondents, one of whom is a private party. Since that arbitration
clause is not applicable to the case in hand, therefore, the appointment
of the arbitrator by the Calcutta High Court exercising jurisdiction
under Section 11 (6) of the Act was improper.
5. It is well settled rule of interpretation that the section heading or
marginal note can be relied upon to clear any doubt or ambiguity in
the interpretation of any provision and to discern the legislative intent.
The section heading constitutes an important part of the Act itself, and
may be read not only as explaining the provisions of the section, but it
also affords a better key to the constructions of the provisions of the
section which follows than might be afforded by a mere preamble.
The said interpretation can well be applied to understand and construct
the various clauses of an arbitration agreement also, which is in the
realm of commercial contract. While interpreting so, the Court may
not depend only on the text but context as well in order to fully
comprehend the context and the meaning of the clause.
6. We, accordingly, set aside the said order and give liberty to the
respondents to approach the Civil Court for adjudication and resolving
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the disputes and lis between the parties arising out of the said contract.
Needless to say that the respondents herein will be entitled to get the
benefit of Section 14 of the Limitation Act.
7. Accordingly, the appeal stands disposed of to the aforesaid extent.
……………………………………J.
[Dr. Mukundakam Sharma]
…………………………………J.
[Dr. B.S. Chauhan]
New Delhi,
May 22, 2009
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