JUDGMENT
G.P. Singh, C.J.
1. This order shall also dispose of Misc. (First) Appeal No. 9 of 1978 and Civil Revisions Nos. 83 and 84 of 1978.
M/s. Uttam Singh Dugal and Co. (P.) Ltd. (hereinafter referred to as the contractors) entered into two contracts with M/s. Hindusthan Steel Ltd. (hereinafter referred to as the employers) for construction of civil engineering works in the Coke Oven Zone part and Open Hearth Zone part of the Bhilai Steel Project. The contract agreements being CE/96/62 and CE/97/62 were executed on 7/8th November, 1962. The agreements are expressed to be made on 28th May, 1962. The contractors started work in one zone on 12th Aug., 1962 and in the other zone on 13th September, 1962. The works were completed by 31st December, 1967. The contract agreements contain identical terms and conditions. By letter dated 18th August, 1971 the contractors, claimed additional payment for both the works on account of escalation in wages under the Minimum Wages Act, 1948 during the currency of the contracts. These claims were based on Clause 32 of the General Conditions of Contracts as modified by the parties. The employers did not accept these claims. The contractors then by their letter dated 17th April, 1972 named their arbitrator under Clause 76 of the General Conditions of Contracts for deciding the claims in respect of both the contracts. The employers in their reply by letter dated 3rd May, 1972 did not accept that the claims made by the contractors were justified or could go to arbitration. The employers, however, named their arbitrator. The arbitrators decided two preliminary issues by their order dated 6th September, 1973. These related to the questions (1) whether there were valid and binding contracts between the parties, and (2) whether the dispute raised by the contractors fell within the arbitration clause of the said contracts. Both these issues were decided in favour of the contractors. The arbitrators, however, left it open to the parties to obtain a final decision on these questions from a competent Court. Faced with an objection as to their jurisdiction the arbitrators had two courses open. They could refuse to deal with the matter at all and leave the parties to go to the Court or they could go into the question of jurisdiction and proceed with the reference if they
found that there existed arbitration agreements between the parties covering the disputes raised before them leaving the parties to have the point finally settled by the Court (see Russel on Arbitration, 19th Edition, p. 99). It is the latter course which the arbitrators adopted in the instant case. The employers then filed two applications under Section 33 of the Arbitration Act, 1940 in the Court of the Additional District Judge, Durg. These Misc. Judicial Cases were finally registered as M. J. C No. 1/77 and M. J. C. No. 2/77. It was contended by the employers in these applications that there were no binding contracts between the parties and so the arbitrators had no jurisdiction to proceed with the reference made to them. These applications were allowed by a common order passed by the Additional District Judge on 27th September, 1977. It was held by the Additional District Judge that there were no binding contracts between the parties and so the arbitration clause in the contracts was not attracted. The contractors have filed Misc. (First) Appeal No. 7 of 1978 and Civil Revision No. 84 of 1978 against the order passed in M. J. C. No. 1/77, and Misc. (First) Appeal No. 9 of 1978 and Civil Revision No. 83 of 1978 against the order passed in M. J. C. No. 2/77. The appeals have been filed under Section 39 of the Arbitration Act but as a matter of prudence revisions have also been filed to meet the situation in case it is held that the orders passed by the Additional District Judge are not appealable under Section 39 of the Act
3. Before proceeding to mention the contentions raised by the learned counsel, it would be convenient to refer to certain documents which led to the execution of the contract agreements. Invitation to tender, Instructions to tenderers and General conditions of contracts for construction works are contained in a booklet issued by the employers. These documents, subject to modification that may be made in individual cases, form part of every contract, Clause 32 of the General Conditions of Contracts reads as follows:–
“32. In respect of all labour directly or indirectly employed on the works, the contractor shall comply with all rules framed from time to time by Government (Central or State) or other local authority, and legislations governing labour for the protraction of health, sanitary arrangements, wages, welfare of safety of workers in building and construction works. The rules and other statutory
obligations in regard to fair wages, the welfare measure and safety of labour etc., will be deemed to be part of the contract.”
The contractors submitted their tenders for the two works under a forwarding letter dated 25th November, 1961 (Ex. RD-6). The contractors wrote in this letter that in pricing their tender they had made the assumptions as mentioned in paras (1) to (z-1) of the letter. Para (f) of this letter is material and is as given below:–
“(f) that in case there is any increase in the wage structure by any legislation, we will be entitled to corresponding amount.”
In order to discuss the various points mentioned by the contractors in their tenders, a meeting of the officers of the employers and the contractors took place on 7th and tth April, 1962. The minutes of the meeting are exhibited as RD-36. These minutes, in so far as they deal with Clause 32 of the General Conditions of Contracts and para (f) of the contractors’ letter dated 25th November, 1961 read as follows:–
“It was agreed that Dugal would give the percentage of labour content in each item of work for scrutiny and approval by HBL. Variation in the minimum wage rates of the lowest category .i e. unskilled workers only would be applied to percentage of labour content and the payment adjusted accordingly. Provision of amenities for labour will be entirely the responsibility of the tenderer.
Any other changes in the Labour Law will be admitted for escalation.”
By letter dated 28th May, 1962 (Ex. RD-7) and later (referred to as the award letter) which was preceded by a telegram dated 24th May, 1962 to the same effect, the employers wrote to the contractors that their tenders were accepted as per the terms and conditions contained in the Invitation to tender, Instruction to tenderers and General Conditions of contracts etc., subject to the modifications mentioned in the letter. As regards Clause 32 of the General Condition of contracts the following modification was mentioned in this letter:–
“you will give the percentage of labour content in such item of work for scrutiny and approval by us. Variation in the minimum wage rates of the lowest category i. e. unskilled worker only would be applied to the percentage of labour content and payment adjusted accordingly. Provision of amenities for labour will be entirely your responsibility.
No other changes in the labour laws will be admitted for escalation.
We will do our utmost to obtain exemption for the construction labour from the Factory Act, but we cannot assume any responsibility or liability in this respect.” The contractors in reply to this letter by their letter dated 8th June, 1962 (Ex. RD-30) pointed out that there were certain discrepancies between the conditions as set out in the letter of the employers dated 28th May, 1962 and the minutes of conference held on 7th and 8th April, 1962. The contractors suggested a meeting to clarify the discrepancies. It appears that a meeting was held on 25th July, 1962 as desired by the contractors. By letter dated 6th August, 1962 (Ex. RD-1) the employers asked the contractors to start the work. In reply the contractors wrote on 10th August, 1962 (Ex. RD-31) stating that they have taken up the work subject to clarifications on the points discussed in the meeting on 25th July, 1962. The employers then by letter dated 1st Sept., 1962 (Ex. RD-10) wrote to the contractors to depute their authorised representative to sign the contract agreements. It was mentioned in this letter that the question of clarification on the award letter after examination had been referred to the Head Office and the final decision arrived at will be incorporated as corrigendum to the contracts. The contractors in reply to this letter wrote on 17th October, 1962 to the employers (Ex. RD-12) stating that they agreed to accept the contracts subject to the conditions mentioned in this lelter and in case the conditions mentioned were not accepted by the competent authority, the deletion of these conditions shall not be binding on them. With reference to Clause 32 of the General Conditions of Contracts and the modification mentioned in para (f) of the letter forwarding the tenders and the modification accepted in the employers’ award letler dated 28th May, 1962, the contractors wrote as follows:–
“Clause 32 and Tenderer’s para (f) accepted.
However, it may be noted that in the meeting held on 7th and 8th April, 1962 at Ranchi it was agreed that any other change in labour law will be admitted for escalation of rates as provided in our para F of forwarding letter No. DLH/43 dated 25th November, 1961.
Para G of Tenderer’s letter.
We have explained and confirmed that out rates do not cover the application of factory
Act. In case the employer is unable to obtain exemption of application of factory Act, we are prepared to agree to lump sum of Rs. Ten lakhs for both Zones towards such expenses.”
The employers, in reply, sent to the contractors the letter dated 2nd November, 1962 (Ex. RD-13) in which clarifications were given on the points raised by the contractors. It was also stated that the employers’ award letter dated 28th May, 1962, the contractors’ letter dated 17th October, 1962 and the employers’ letter dated 2nd November, 1962 will form part of the contracts. As regards Clause 32 this letter stated as follows:–
“Clause 32 and Tenderer’s para (f).
In the agreed minutes of negotiations held at Ranchi, under this clause there is a typographical error, as the correct sentence should read “No other changes in the labour law will be admitted for escalation.” This will be referred to Head Office for further clarification.”
The contractors signed the contract agreements on 7th November, 1962 and the employers signed the same on 8th November, 1962. The contract agreements specifically mention that the employers’ award letter dated 25th May, 1962, the contractors’ letter dated 17th October, 1962 and the employers’ dated 2nd November, 1962 shall form part of the contract agreements. However, on 7th Nov., 1962 i.e. on the very date when the contractors signed the contract agreements, they also sent another letter to the employers which is Ex. RD-32. It mentions the contractor’s point of view in respect of certain clauses and states that subject to above, the contract is hereby accepted and signed. As regards Clause 32, the letter states as follows:
“Clause 32 and Tenderer’s para (f).
We are quite sure that in the meeting held on 7th and 8th April, 1962 at Ranchi, it was agreed that any other changes in labour laws will be admitted for escalation of rates. This may kindly be confirmed at an early date.”
4. The employers, by letter dated 25th Dec., 1964 (Ex. RD-58) wrote to the contractors for filing labour contents of each item, on which the contractors by their letter dated 23rd Jan., 1965 (Ex. RD-16) enclosed the schedule of percentage of labour contents in respect of both the works. The employers by their letter dated 30th Nov., 1965 (Ex. D) sent to ihe contractors a copy of approved schedule of percentage of labour contents. As earlier stated, both the works were complet-
ed by the Act of Dec., 1967. The claims in respect of both the works on the ground of escalation in wages on the basis of Clause 32 as modified by the contract agreements were made by the contractors by their letter dated 18th Aug., 1971. The employers did not agree to the claim and, as stated by us earlier, reference to the arbitrators followed.
5. The arbitration clause in the contract agreements in Clause 76 of the General Conditions of Contracts which reads as follows:–
“76. All questions, disputes or difference of any kind, whatsoever, arising out of, or in connection with the contract, at any time, whether during the progress of the work or after its completion or whether before or after the determination of the contract, other than questions, disputes or differences for the decision of which specific provisions have been made in the foregoing clause of these conditions (hereinafter referred to “excepted and decision on such “excepted matters” according to the said specific provisions shall be final and binding on the Contractor and shall not be re-opened or attempted to be reopened on the ground of any informality, omission, delay or error in the proceeding in or about the same or on any other ground whatsoever) shall be submitted in writing by the contractor to the Employer, and the Employer shall, within a reasonable time, after the submission of the same, make and notify its decision thereon in writing.
If the Contractor be dissatisfied with the decision of the Employer on any matter in question, dispute or difference on any ground in connection with this contract or as to the Withholding by the employer of any certificate to which the contractor may claim to be entitled to, or if the Employer fails to make a decision within a reasonable time, then and in any such case but not including any of the excepted matters, or matters for which the contractor has given no claim certificates, the Contractor may within ten days of the receipt of such decision or after the expiry of a reasonable period of time, as the case may be, demand in writing that such matter in question, dispute or difference in connection with this contract be referred to arbitration. Such demand for arbitration shall be delivered to the Employer by the Contractor and shall specify the matters which are in question, dispute or difference and only such question, dispute or difference other than any of the excepted matters in respect of the contract of which the demand has been made and no other shall be referred to arbitration.
The further progress of any work under the contract shall unless otherwise directed by the Engineer, continue during the arbitration proceedings, and no payment due or payable by the Employer shall be withheld on account of such proceedings, provided, however, that it shall also be open to the arbitrator or arbitrators to consider and decide whether or not such work shall continue during the arbitration proceedings.
Matters in question, dispute or difference oiher than the excepted matters, in respect of this contract to be submitted to arbitration as aforesaid, shall be referred for decision to-
(i) a sole arbitrator who shall be the Chairman or any officer of the Employee nominated by the Chairman in that behalf in cases in which the claim in question is below Rs. 50,000/- and in cases in which the issues involved are not of a complicated nature. The Chairman or the officer nominated shall be the sole judge to decide whether or not the issues involved are of a complicated nature.
(ii) The arbitration of two persons, one to be nominated by the Employer and the other by the Contractor or failing agreement between these two arbitrators to an Umpire appointed by them before proceeding with the Arbitration in respect of all claims of and above the value of Rs. 50,000/- and for all claims, irrespective of the amount or value of such claims, if the issue involved therein are of a complicated nature.
Such submission shall be deemed to be a submission to arbitration and the decision of such arbitration shall be final and conclusive and the Provisions of the Indian Arbitration Act, 1940 and of the rules thereunder and all statutory modifications thereof shall govern all such arbitration proceedings and shall be deemed to apply to and be incorporated in this contract.”
6. The Additional District Judge has held that there were no concluded contracts and so there existed no arbitration agreements as the parties did not agree upon the various matters which are referred to in the contractors’ letter dated 17th Oct., 1962 (Ex. RD-12) and the employers’ letter dated 2nd Nov., 1962 (Ex. RD-13). Reference in this connection is also made to the contractors’ letter dated 7th Nov., 1962 (Ex. RD-32) which they wrote at the time of signing the contract agreements. The learned counsel appearing for the employers before us supported the finding of the Additional District Judge on this point. The learned counsel
also submitted in the alternative that at any rate Clause 32 of the General Conditions of contracts did not form part of the contracts as the parties had not till the end agreed upon as to its scope and contents. The learned counsel further submitted that as Clause 32 did not form part of the contract agreements, the dispute referred to the arbitrators which was solely in relation to Clause 32 was beyond the jurisdiction of the arbitrators and the arbitration clause had no application to the said dispute.
7. The fact remains that the two works which were undertaken by the contractors were completed by them and millions were paid to them by the employers on that account. It would be really very strange in this background to hold that there were no concluded contracts in respect of these works between the parties. Nevertheless we have to examine the correctness of this finding reached by the Court below. We have also to examine the alternative argument of the learned counsel for the employers that Clause 32 at least did not form part of the contracts.
8. We will first take up the matters other than Clause 32 of the General Conditions of contracts in respect of which it is said that the parties did not agree and there remained uncertainty in the contracts. The documents which are material in this respect are contractors’ letter dated 17th Oct., 1962 (Exhibit RD-12), employers’ letter dated 2nd Nov., 1962 (Ex. RD-13) and contractors’ letter dated 7th Nov., 1962 (Ex. RD-32). The first point which the contractors raised in their letter dated 17th Oct., 1962 was as to the form of security. Clause 3 of the Invitation to Tender requires that upon the acceptance of the tender the successful tenderer shall deposit such further sum as along with the earnest money will amount to 21% of the value of the contract. Clause 3 requires that this deposit should be made in cash or in the form of Government security. The contractors in their letter dated 17th Oct., 1962 said on this point that they would deposit this amount in the form of insurance bonds. They also stated that they had already submitted insurance bonds for both the works. The employers’ reply in their letter dated 2nd Nov., 1962 was that the point relating to conversion of security deposit into insurance bonds instead of bank guarantee was under consideration. In their letter dated 7th Nov., 1962 the contractors submitted that their request that security should be taken in the form of insurance bonds be kindly accepted. Now a proper construction of all the three letters along with the terms
contained in the Invitation to tender which forms part of the contract agreements will be that ultimately the contractors left it to the employers to accept or not to accept their request for acceptance of security in the form of insurance bonds and in case it was not accepted they were prepared to deposit the security as provided in Clause 3 of the Invitation to tender. It is not possible to hold that the parties were not agreed as to the form of security. The agreement was that the security would be deposited in the manner provided in Clause 3 of the Invitation to tender unless the employers accepted the request of the contractors to accept security in the form of insurance bonds. The second point which the contractors made in their letter dated 17th Oct., 1962 relates to Clause 45 of the General Conditions of contracts. This clause provides for liability to pay liquidated damages for not completing the work within the time prescribed. In the award letter dated 25th May, 1962 the employers stated that liquidated damages will be levied at 1 1/2% per fortnight of delay or part thereof on the total value of the contracts. The contractors in their letter dated 17th Oct., 1962 said that liquidated damages be calculated on the value of the incomplete work only and not on the total value of the contracts. The employers in their letter dated 2nd Nov., 1962 replied on this point that the request of the contractors that levy of liquidated damages should be related to the value of incomplete work will be referred to the Head Office for final decision. In their letter dated 7th Nov., 1962 the contractors stated that the Head Office of the employers may kindly agree to the contractors* submission on that point. Now here again the matter is left to be decided by the Head Office. The parties agreed that liquidated damages for delay in completing the works would be levied at a certain percentage on the value of the entire contract or on the value of the incomplete work as may be decided by the Head Office of the employers and there is no uncertainty. The learned counsel for the contractors in this connection rightly submitted that if on a particular matter the contract provides for acceptance of the opinion or decision of a party to the contract or a third party as in Illustration (e) to Section 29 of the Contract Act that matter cannot be held to be vague or uncertain and the contract cannot be invalidated for uncertainty. The learned counsel is, however, not right in the submission which he also made that the arbitration clause by itself is a machinery to avoid uncertainty in the matters on which the parties
had not agreed. This would amount to conceding the power of filing the gaps or supplementing the parties’ contracts and it is well settled that the arbitrators have no such power unless it is expressly conferred by the contract which is not the case here (see Russel, 19th Edition, p. 28). The third point that contractors made in their letter dated 17th Oct., 1962 was a request for advance payment against hypothecation of old machinery or an advance payment of Rs. 15,00,000. This related to Clause 55 (B) of the General Conditions of contracts. The employers communicated their decision on this point in their letter dated 2nd Nov., 1962. It was stated that for items of old equipment purchased after the date of issue of tender payment of secured advance would be considered provided the engineer was satisfied regarding reasonableness of the prices paid and a declaration given by the contractors that they had not drawn any advance previously on the equipment from any other government undertaking. It is also mentioned that running bills will be passed for 90% payment by the end of succeeding months. It will be seen that the point made by the contractors on the question of advance on the security of machinery in their letter dated 17th Oct, 1962 was in the form of request. The decision of the employers on that point was communicated to the contractors. In their letter dated 7th Nov., 1962 the contractors did not take any further objection on this question except saying that they have been informed that they shall be paid an advance against seven dumpers in addition to the advance on machinery purchased after the invitation to tender. Here again there is no such ambiguity which cannot be cleared for the contractors accepted what the employers said. The fourth point which the contractors made in their letter dated 17tb Oct., 1962 related to para 25 (b) of the special conditions mentioned in the award letter. In this paragraph it is said that all rates will be treated as firm up to plus or minus 20% variation in quantity. The contractors in their letter dated 17th Oct., 1962 said that in case the value of work decreased by more than 20%, they will charge 5% more on the entire contract. In their reply the employers wrote in the letter dated 2nd Nov., 1962 that the rate is to remain firm for plus or minus 20% variation in quantities and not for the plus of minus 20% variation of the total value of the contract. They, however, said that a reference will be made to Head Office for final decision. The contractors in their letter dated 7th Nov., 1962 wrote on this
point that they will abide by the decision on their submission. Here again the contractors accepted to abide by the decision of the Head Office leaving no ambiguity on the point.
9. We lastly come to CL 32 of the General Condition of contracts, We have already quoted this clause in para 3 above. Briefly stated, the clause envisages that the contractors will comply with all legislations governing labour that may be passed from time to time including laws relating to fair wages, welfare measure, safety etc. In their letter dated 25th Nov., 1961 while submitting the tender the contractors said that if there was any increase in the wage structure, they will be entitled to “corresponding amount”. There was a meeting on 7th and Sth April, 1962 the minutes of which in this respect have been quoted above. It was agreed between the parties in accordance with these minutes that the contractors shall be entitled to increased payment in case of increase of minimum wage rates of unskilled workers only and that the increased payment will be applied to the percentage of labour content in each item of work which the contractors would give for scrutiny and approval of the employers. The minutes then say “Any other changes in the labour law will be admitted for escalation”. The word “any” appears to be a mistake for the word “no”. The contractors, however, tried to make out some point in their favour because of this typographical mistake. In the award letter the employers accepted as already agreed that the contractors will be entitled to increased payment if there is an increase in the minimum wage rates of lowest category of workers, i. e. unskilled workers and that this increased payment would be applied to the percentage of labour content of each item of work which the contractors would submit for scrutiny and approval by the employers. In the award letter, however, the typographical mistake was corrected and it was clearly stated that no other changes in the labour laws will be admitted for escalation. It was further stated that the employers would do their utmost to obtain exemption for the construction labour from the Factories Act but they could not assume any responsibility or liability in this respect. The contractors in their letter dated 17th Oct., 1962 accepted what was said by the employers for increased payment in case of variation in wages of the lowest category workers i. e. unskilled workers. They, however, reiterated their stand bearing on the typographical mistake in recording the minutes of the meeting dated 7th and 8th April, 1962 that any other changes
in the labour law will be admitted for escalation. As regards exception from application of Factories Act, the contractors further said that their rates do not cover the application of Factories Act and that in case the employers are unable to obtain exemption of application of Factories Act, they would agree to lump sum payment of Rs. 10,00,000/-for both these works towards such expenses. The employers in their letter dated 2nd Nov., 1962 pointed out the error in the minutes of the meeting dated 7th and 8th April, 1962 and said that this will be referred to the Head Office for further clarification. As regards the application of Factories Act the employers wrote that the matter was under consideration and that it was premature at that stage to consider any question of lump sum payment In their letter dated 7th Nov., 1962 the contractors again submitted that it was agreed in the meeting held on 7th and 8th April, 1962 at Ranchi that any other changes in labour laws will be admitted or escalation of rates. As regards the application of Factories Act the contractors said that they had been informed by the engineer that the Factories Act had no application but in case it was applied in future they will be entitled to fair consideration of the request which they had already made. A perusal of the documents which form part of the contract would go to show that as regards Clause 32 the parties were clearly agreed that if there was any increase in the minimum wages the contractors will be entitled to increased payment in relation to labour content of each work. It was also agreed that the variation of minimum wages of the last category of workers, i. e. unskilled workers only would enable the contractors to claim extra payment and that the increase of minimum wages of other category of workers would not enable the contractors to make any claim of extra payment. The parties also agreed that the Factories Act was not applicable and, therefore, the question of being compensated on account of application of Factories Act was premature. As regards other laws, the parties differed on the point as to what was agreed in the meeting held on 7th and 8th April, 1962. According to the contractors, the minutes were correctly recorded to the effect that any other changes in the labour laws will be admitted for escalation. The point of view of the employers was that the word “any” was a mistake for the word “no” and that it was agreed that “no other changes in the labour laws will be admitted for escalation”. The difference on this point, however, did not mean that the
contracts did not come into existence or that there was such ambiguity or uncertainty which made the contracts void. The General Conditions of Contracts which contain. Clause 32 formed part of the contracts. According to Clause 32 it was for the contractors to follow the labour laws and any change in labour legislation could not affect the amount payable by the employers to the contractors under the contract agreements. Clause 32 as contained in the General Conditions of Contracts would prevail except on the points it was clearly varied by the parties as disclosed by the award letter dated 28th May, 1962, the contractors’ letter dated 7th Oct., 1962 and the employers’ letter dated 2nd Nov., 1962 which also formed part of contract agreements. As already noticed, a clear variation agreed upon was that increase in minimum wage of the lowest category of workers would entitle the contractors to extra payment in respect of labour content of each work. Thus, so far as the Minimum Wages Act is concerned, the parties agreed upon this variation of Clause 32. In respect of other laws, the employers insisted that tho contractors would not be entitled to any extra payment whereas the contractors insisted that it was agreed that they would be entitled to extra payment The result would he that Clause 32 as contained in the General Conditions of Contracts would prevail subject to the variation agreed upon in respect of the increase in rates of minimum wages under the Minimum Wages Act. It cannot therefore, be said that the contract documents read as a whole do not make the position certain as regards changes in other labour laws.
10. Solemn contracts entered into between the parties are not to be readily declared invalid for uncertainty as to certain terms, at any rate in those cases where the parties have acted upon the contracts which have been fully executed. In construing a contract the object of the Court is to do justice between the parties and the Court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation. Difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted. (See Scammel v. Ouston 1941 (1) All ER 14 at p. 25). As observed by a Full Bench of this Court: “Document: embodying a business agreement should b” construed fairly and broadly and there must be implied in such document! a term which
will give such business efficacy to the transaction as must have been intended by the parties. No doubt, one cannot add to a contract an implied term inconsistent with or which contradicts the express terms of ihe contract But in a suitable case one can imply a term if it is necessary to give it business efficacy”. (Gulab Chand v. Kudilal, AIR 1959 Madh Pra 151) (at p. 162) (FB). Lord Denning has expressed or imposed a term whenever it is reasonable to do so in order to do what is fair and just between the parties (see The Discipline of Law, page 37). He expressed this view in the case of Liverpool City Council v. Irwin, (1975) 3 All ER 658. In appeal, however, the House of Lords though agreeing with the conclusion of Lord Denning did not accept the broad proposition that the Court is entitled to read in by implication all reasonable terms. The House of Lords observed that terms may be implied on Ihe basis of established usage or for giving business efficacy to the contracts or on the ground of necessity. ((1976) 2 All ER 39 (HL) at pp. 43, 44). A reference in this connection may also be made to Section 29 of the Contract Act which says that agreements, the meaning of which is not certain, or capable of being made certain, are void. A contract can become void under the section only when its terms cannot be made certain. Mere vagueness or uncertainty which can be removed by proper interpretation cannot make a contract void. In dealing with commercial and business contracts which have been acted upon by the parties, the Court should be very slow in finding defects and to reject them as meaningless. This should be done only in extreme cases.
11. Applying the principles stated above and for the reasons already given, we are satisfied that there is no such ambiguity in the terms of the contract agreements and in the documents forming part thereof which cannot be clarified or made certain and, therefore, it is not possible for us to hold’ that the contract agreements were void. As regards the alternative argument of the learned counsel for the employer* that the disagreement between the parties continued till the end as to the terms of Clause 32 and, therefore, it did not form part of the contarct agreements, we have already stated that the argument is not found and Clause 32 as contained in the General Conditions of Contracts would govern the parties subject to such variation as was expressly or impliedly agreed upon. The variation clearly agreed was that any increase in minimum wages of the lowest
category of workers would entitle the contractors to claim extra payment in respect of the labour content of each work. To this extent there was absolutely no disagreement between the parties and this definitely formed part of contract between the parties. It is under this provision that the contractors based their claims. It is true that the contractors continued to say that any other change in other labour laws would enable them to claim extra payment whereas the employers continued to say that no other change would enable the contractors to claim extra payment but this did not have any effect on the contracts. The contractors never claimed any extra payment for any change in any other law. Their claim fop extra payment rested solely on the ground of increase in the rates of minimum wages for unskilled workers. As the parties did not agree upon the variation of Clause 32 except in respect of the Minimum Wages Act, that clause as originally contained in the General Conditions of Contracts prevailed except as to change in the rates of minimum wages. It is not possible to accept the argument of the learned counsel for the respondent that there was absolutely no agreement in respect of Clause 32 and that it did not form part of the contract agreements.
12. The arbitration clause permits arbitration on “all questions, disputes or difference of any kind whatsoever arising out of or in connection with the contract” after first approaching the employers for their decision. The contractors lay their claims for extra payment on Clause 32 of the General Conditions as modified in the contract agreements, The disputes as to whether the contract was entered into at all or whether it was void ab initio do not fall within the ambit of the arbitration clause. But when the parties agree or it is found that a binding contract exists, and if it is necessary to have recourse to the contract to settle the dispute that has arisen then it is a “dispute arising out of the contract” falling within the jurisdiction of arbitrators. (See Heyman v. Darwins Ltd., 1942 AC 356; A. M. Mair & Co. v. Gordhandas Sagarmull, AIR 1951 SC 9; Union of India v. Salween Timber and Construction Co., AIR 1969 SC 488 and Umrao Singh v. State of M. P., 1976 MPLJ 91 at p. 99: AIR 1976 Madh Pra 126 at pp. 133-134). The question whether there was increase in minimum wages during the currency of the contracts whether the contracts were operative from 28th May, 1972 or only from 7/8th Nov., 1972 and whether the contractors were justified in claiming
extra payment under Clause 32 are all questions arising out of and in connection with the contracts and the arbitrators have jurisdiction to proceed with the references.
13. On the findings reached by us, the orders of the Additional District Judge in both the cases have to be set aside. But it is contended by the learned counsel for the employers that the appeals filed by the contractors are not maintainable and that no interference can be made in revisions because there is no error of jurisdiction committed by the Court below. The learned counsel for the contractors submitted that the appeals were tenable under Section 39(1)(i) or Section 39(1)(viii) of the Arbitration Act. Clauses (i) and (vii) of Section 39(1) on which reliance was placed by the learned counsel for the contractors provide for appeals against orders superseding an arbitration and setting aside or refusing to set aside an award. The expression “superseding an arbitration” must be construed in the light of the provisions made in the Act for supersession of arbitration (gee Bhaiyalal v. Sawai Singhai Pannalal, AIR 1944 Nag 152). The relevant sections are Sections 12, 19 and 23. The order passed by the Court below is not under any of these provisions. It is not an order superseding an arbitration. The order merely declares that there is no arbitration agreement between the parties. The effect of the decision may be that the arbitrators will not be able to proceed with the reference, still it cannot be said that the order of the Additional District Judge is an order superseding the arbitration. It is an order made under Section 33 pronouncing upon the existence or validity of an arbitration agreement. Similarly, it is also not possible to say that the order of the Court below has set aside any award made by the arbitrators. The argument on this point of the learned counsel for the contractors is that the arbitrators by their order dated 6th Sept., 1973 made an interim award that they had jurisdiction to proceed with the reference and the effect of the orders of the Additional District Judge is to set aside this award and so the orders are appealable. Section 27 of the Arbitration Act permits the arbitrators to make an interim award and if the Court sets aside an interim award, there is no doubt that an appeal will lie under Section 39(1)(vii). The difficulty, however, is in accepting the submission that the order of the arbitrators dated 6th Sept., 1973 is an interim award. Before an order of the arbitrators may be held to be an interim award, it must decide a part of the claim or an issue of liability. What the arbitrators did in this case was to
decide a preliminary issue relating to their jurisdiction. As the order of the arbitrators does not decide the claim or even any part of the claim of any issue of liability, it cannot be held to be an interim award. The learned counsel for the contractors placed reliance in support of his submission on Anand Prakash v. Assistant Registrar, Cooperative Societies, AIR 1968 All 22, at p. 28. This case, in our opinion, cannot be read to decide that even a finding on a question of jurisdiction would amount to an interim award. We, therefore, held that the orders of the Additional District Judge were not orders either superseding an arbitration or setting aside an award. The orders were, therefore, not appealable.
14. The question then is whether interference can be made in revision. As earlier pointed out by us, the argument of the learned counsel for the employers on this point is that the orders of the Court below do not suffer from any error of jurisdiction. The argument is that the Court below had jurisdiction to decide whether there were binding contracts between the parties and although it may have decided the said point wrongly, it cannot be said to have committed any error of jurisdiction. Now interference in the revisional jurisdiction under Section 115 of the Civil P. C. can be made out only on the ground that the Court below has exercised a jurisdiction illegally or with materials irregularity. A Court acts illegally in the exercise of its jurisdiction when it acts in breach of some provisions of law and with material irregularity when it commits some error of procedure in the course of the trial which is material and affects the ultimate decisions (Venkatgiri Ayyangar v. Hindu Religious Endowments Board, AIR 1949 PC 156). The concept of error of law affecting jurisdiction has been widened by the decision in Anisminic Ltd. v. Foreign Compensation Commission, (1969)2 AC 147 (HL). A Tribunal having jurisdiction over a matter at the initial stage exceeds its jurisdiction by breaking the rules of natural justice, applying a wrong legal test and answering the wrong question, faiUng to take relevant consideration into account or basing the decision on legally irrelevant considerations. (Dermith Judicial Review of Administrative Action, 4th Edn., p. 113). Anisminic Ltd.’s case has led to the obliteration of any distinction between errors of law within jurisdiction and errors of law affecting jurisdiction. According to Lord Denning: “Whenever a Tribunal goes wrong in law, it goes outside the jurisdiction conferred on it and its decision is void because
Parliament only conferred jurisdiction on the Tribunal on condition that it decided in accordance with law”. (Discipline of Law, p 74, Pearhnan v. Keepers and Governors of Harrow School, (1978) 3 WLR 736. A Anisminic Ltd.’s case was followed by us in Bhupendra Singh v. G. K. Umath, AIR 1970 Madh Pra 91, and by the Supreme Court in Union of India v. Tarachand Gupta & Bros., AIR 1971 SC 1558. It was also applied by the Supreme Court in the context of revisional jurisdiction under Section 115, C. P. C. in M. L. Sethi v. Rule P. Kapur, AIR 1972 SC 2379. In the instant case, the Court below held that there were no completed contracts between the parties because of ambiguity or uncertainty which the Court found in the contractors’ letter dated 17th Oct., 1962, the employers’ letter dated 2nd Nov., 1962 and the contractors’ letter dated 7th Nov., 1962. The Court below did not make any real effort of construing fairly and broadly the letters and documents which form part of the contracts. The Court below failed to clearly comprehend the meaning of Section 29 of the Contract Act that an agreement cannot be declared void merely on the ground of uncertainty but only and only when it is not possible to make its meaning certain. The Court below misconstrued Section 29, asked a wrong question, applied a wrong test and thus acted illegally in the exercise of its jurisdiction. In our opinion, therefore, it is open for us to interfere in the revisional jurisdiction under Section 115, Civil P. C.
15. For the reasons given above, the appeals are dismissed as not maintainable but without any order as to costs. The civil revisions are allowed. The orders passed by the Court below are set aside. The applicants in these revisions will get costs from the non-applicant. Counsel’s fee Rs. 500/-in each revision.
