JUDGMENT
Jawahar Lal Gupta, C.J.
1. The appellant executed certain work for the Kerala Police Housing and Construction Corporation Limited. There was a dispute regarding payment and the completion of the work. On August 31, 2000, the appellant filed a petition before Honourable the Chief Justice with the prayer that the matter be referred to an Arbitrator. A copy of this petition has been produced as Ext. P1 with the Original Petition. The matter was referred to the designated Judge. Vide order dated August 16, 2001, the application was dismissed. A copy of the order passed by the Hon’ble designated Judge has been produced as Ext. P14. It was held that there is nothing on record to show that there was an arbitration agreement between the parties. Aggrieved by the order, the appellant filed a petition under Article 226 of the Constitution. It was dismissed by the learned Single Judge vide order dated May 31, 2002. Hence, this appeal.
2. Learned counsel for the appellant has raised a two fold plea. Firstly, it has been contended that in the statement of objects for which the respondent company was established, it was inter alia provided that, it shall be competent to “refer all questions, disputes or differences (whether present or future) arising between the company and any other person whosoever in connection with or in respect of any matter either relating to the business or affairs of the company or otherwise to arbitration, either in India or abroad ….”. Similarly, in the Articles of Association, in Clause 17(viii) it was provided that the company was competent to “refer any claim or demand by or against the company to arbitration, and observe and perform the awards”. By reading these two provisions along with Section 36 of the Companies Act, counsel contends that the dispute has to be referred to an Arbitrator. Secondly, counsel has submitted that in the notice inviting tenders, a provision had been made in Clause 29A for reference to arbitration. Still further, he submits when the terms of the notice inviting tender are read with the document at Ext. P5, reference of dispute to Arbitration is imperative.
3. The two questions that arise for consideration are:
(1) whether the respondent company was bound to refer the dispute to arbitration?
(2) whether there is any arbitration agreement between the parties?
3. Regarding (1): The precise contention of Mr. Babu Thomas, learned counsel for the appellant is that the provisions for reference to Arbitration having been made in the objects with which the company was formed and in the Articles of Association, the respondent has no choice but to refer every dispute to arbitration. Is it so?
4. In the present case, the respondent is a Government Company. It was established primarily with the object of providing housing and office accommodation to the personnel of the Police Department. For this purpose, it had reserved to itself the right to acquire land, construct and maintain buildings, to let them out on rent or lease, for housing employees or for using such buildings as offices. The Board has also reserved (in Clause 18) the right to refer all questions, disputes or differences to arbitration. Similarly, in the Articles of Association, the powers of the Board of Directors were delineated in Clause 17. In Sub-clause (viii), the Board was empowered to refer any claim or demand to arbitration. However, neither of the two clauses can be read to mean that the Corporation was bound to refer every disputes to arbitrator. The provisions are merely enabling. Those impose no duty. Equally, the provisions confer no right on a contracting party to claim a reference to an Arbitrator. Still more, it was also not provided that an arbitration clause shall be incorporated in every agreement that the company may execute. Both the provisions were meant to enable the Corporation to enter upon Arbitration if so advised. Nothing more.
5. Mr. Thomas contends that in view of the provisions of Section 36 of the Companies Act, the Board of Directors has no choice but to refer every dispute to arbitration. We are unable to accept this contention. Section 36, in a nut shell, is meant to provide that the Articles of Association shall bind the company and its directors. Nothing more. The provisions cannot be interpreted to mean that the company or its Directors shall be bound to incorporate a provision for arbitration in every agreement that the company executes. As already observed, the two clauses are in the nature of enabling provisions. In case an arbitration clause is incorporated in an agreement, then the Company and the Board shall be governed thereby. Nothing more.
6. Thus, the first question is answered against the appellant.
7. Regarding (2): Mr. Thomas submitted that in the notice by which the tenders were invited, a provision for settlement of disputes had been made in Clause 25. A further provision regarding arbitration was made in Clause 29A. Thus, a provision for arbitration agreement should be read into the contract, a copy of which has been produced at Ext. P4.
8. The two provisions as contained in Clauses 25 and 29A read as under:
Clause 25: “Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawing and instructions here in before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter of thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the work or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt in the legal jurisdiction of courts at Trivandrum.”
Clause 29A; “Any sum of money due and payable to the Contractor (including the security deposit returnable to him) under the contract may be withheld or retained by way of lien by the Engineer-in-charge/Architect against any claim of the Engineer-in-charge/Architect or Corporation or such other person or persons in respect of payment of a sum of money arising out of or under any other contract made by the Contractor with the Engineer-in-charge/Architect or the corporation or with such other person or persons. It is an agreed term of the contract that the sum of money so withheld or retained under this clause by the Engineer-in-charge/Architect or the Corporation will be kept with held or retained as such by the Engineer-in-charge/Architect or the Corporation or till his claim arising out of the same contract or any other contract is either mutually settled or determined by the arbitration clause or by the competent court, as the case may be and that the Contractor shall have no claim for interest or damages whatsoever on this account or on any other ground in respect of any sum of money withheld or retained under this clause and duly notified as such to the contractor.”
A perusal of Clause 25 shows that for the purpose of settlement of disputes an omnibus provision was made by which the jurisdiction of all Courts except those at Trivandrum was excluded. In other words, it was provided that in case of a dispute arising out of the contract in respect of any matter, no court shall have jurisdiction except the courts at Trivandrum. Thus, the appellant can derive no benefit from the provision contained in Clause 25.
9. Mr. Thomas submits that the only implication of Clause 25 was that the jurisdiction of all civil courts was ousted. In other words, the matter can be decided only by an arbitrator. This contention is wholly misconceived. The exclusion was only of courts outside Trivandrum. Nothing more. The contention raised by the appellant goes against the plain language of the provision. Thus, it is rejected.
10. Mr. Thomas contends that Clause 29A specifically provided for an arbitration. Is to so?
11. A perusal of the document shows that in Clause 29A provision for withholding
and also to have a lien to retain any sum from a contractor has been made. In this
clause, it has been inter alia provided that, “sum of money or moneys so withheld or
retained under the lien….. by the Engineer-in-charge/Architect or Corporation will be
kept withheld or retained …… till the claim arising out of or under the contract is
determined by the arbitrator (if the contract is governed by the arbitration clause) by the competent court as the case may be……”. Thus, on a perusal of Clause 29, it is clear
that the Corporation is competent to withhold the money due to a contractor till the claim is finally settled by the arbitrator or by the Court. However, the clause clearly postulates that the decision of the arbitrator shall be relevant only in a case where the contract is governed by an Arbitration Clause. It is in this background that the provision of Section 29A has to be examined. The provision has already been quoted above. A perusal thereof shows that in the first part the power to withhold or retain the amount of money due and payable to the contractor” arising out of or order any other contract” has been reserved. Thereafter, it has been provided that the money so withheld or retained shall be payable only when the dispute is “either mutually settled or determined by the arbitration clause or by the competent court, as the case may be”.
12. On a consideration of this clause, the only thing which emerges is that a provision for arbitration can be made. If so made, the dispute can be settled by reference to arbitration. However, it is clearly implicit in the provision that unless the contract contains a clause for arbitration, no reference shall be required to be made. Both the provisions as noticed above do not imply that an arbitration clause shall exist in every agreement or contract. A specific provision has to be made. In the present case, no agreement has been produced which may have an arbitration clause.
13. Mr. Thomas contends that Clause 29A by itself incorporates an arbitration clause. We are unable to accept this contention. A perusal of the clause does not support the appellant’s contention.
14. Faced with this situation, learned counsel raised another submission. Relying upon Clause 8.1 of the notice inviting tender, counsel has contended that the provision of the Madras Detailed Standard Specifications are applicable. A copy of the Madras Detailed Standard Specifications has been produced as Ext. P5. Clause 73 of the Standard Specifications provides for arbitration. Thus an arbitration clause should be read into the agreement. Clause 8.1 reads as under:
8.1. In the case of discrepancy between schedule of Quantities, the specifications and/or the Drawings, the following order of preference shall be observed:- i) Description of Schedule of Quantities ii) Particular Specification and Special Condition, if any iii) Drawings iv) Madras detailed standard specification v) C.P.W.D. Specifications vi) Indian Specification of B.I.S.”
A perusal of the above shows that it is only for the purpose of laying down specifications that a reference has been made to the Madras Detailed Standard Specifications etc. The obvious purpose is to ensure that the standard specifications in respect of quantities etc., as laid down by different Governments are followed. We
cannot read the above provision to mean that all provisions as contained in the Madras Detailed Standard Specifications for use in the Public Works Department or the Madras State have ipso facto been incorporated in the agreement between the appellant and the respondent Corporation. Such a contention is wholly untenable. The provision only lays down an order of preference about the specifications. Nothing more.
15. Lastly, the counsel has submitted that on a cumulative reading of the above noticed provisions, it should be inferred that there is an arbitration agreement between the parties as contemplated under Section 7 of the Arbitration and Conciliation Act, 1996. Even this contention cannot be accepted. The plain language of Section 7 shows that an arbitration agreement has to be in writing. In a case where such an agreement is contained in the document signed by the parties, it can be inferred that there is a written arbitration agreement. It has not been shown that the objects of the company, the Articles of Association, the tender notice or the Madras Detailed Standard Specifications has been signed by both the parties. Thus, it cannot be said that there is a written agreement for reference to arbitration between the parties.
16. There is another aspect of the matter. Mr. Raghunath, learned counsel for the respondent Corporation has pointed out that the State and its instrumentalities had a bitter experience of reference of disputes to arbitrators. Even though the dispute was referred to a Government Officer, the awards were normally against the State or its agencies. Thus, the State agencies had been instructed not to incorporate an arbitration clause in any agreement. Thus, even the respondent Corporation had not included an arbitration clause in the agreement with the appellant.
17. The counsel appears to be right. Learned counsel for the appellant had not been able to refer to any provision in the agreement which may even remotely suggest that there was a provision for reference to arbitrator.
18. No other point has been raised.
19. In view of the above, we find no merit in the appeal. It is consequently
dismissed. The parties are left to bear their costs.