Arbitration:
Appointment of Arbitrator – By High Court – Relying on clause
16.3 of the Agreement in question – Propriety of – Held: Clause
16.3 of the Agreement in question was not an arbitration clause – It provided for departmental appeal – Purpose of the clause was to vest the Competent Officer and Commissioner with supervisory control – The intention was not to provide for a forum for resolving disputes – Right of appeal is a creature of statute and can only be exercised in the manner provided by the statute – Court should not adopt a different approach while construing a clause in a contract executed by a statutory body, providing for an appeal, therefore, it was not proper for the High Court to appoint arbitrator u/s. 11(6) of Arbitration and Conciliation Act, 1996 – Interpretation of Statutes – Rules of Interpretation.
Nature of arbitration – Held: Arbitration should be an enquiry in the nature of a judicial enquiry.
Allowing the appeal, the Court
HELD: 1. The Agreement dated 14.05.2011 between the appellant and the respondent provides for various mutual rights, liabilities and obligations of the two parties for the collection of toll tax from specified commercial vehicles at all border entry points within the NCT of Delhi. Clause 16 of the agreement provides for the resolution of disputes at two stages. First, by the Competent Officer of the SDMC vide Clause 16.2 followed by the Commissioner of the Municipal Corporation vide Clause
16.3. [Paras 12 and 14][1125-F; 1126-G-H]
2. Clause 16.3 of the agreement under which an application to appoint an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996 was made, is described as an appeal in the said Clause. It is a settled principle of interpretation that unless the word raises an ambiguity it is not necessary to consider another meaning. Indeed, it is an appeal since the Contractor is entitled to take recourse to appeal, if the Contractor is dissatisfied with the decision of the Competent Officer including a possible failure to decide within the prescribed period i.e. within 30 days. The appellate provision can be invoked only by the Contractor dissatisfied by the decision of the Competent Officer. The other side, i.e. a Competent Officer who has raised a demand which the Contractor has not complied with cannot file such an appeal. The right of appeal is restricted to a dissatisfied Contractor only. And that too upon a failure to obtain redressal under Clause 16.2. This mechanism is clearly an appeal in the nature of a departmental appeal commonly provided in several department rules including service rules. Such departmental appeals are invariably decided by a designated officer and can only be invoked by a dissatisfied party such as a contractor or an employee. Such appellate powers obviously cannot be invoked by parties unless the language of the provision setting up the appeal provides for it, expressly or by necessary implication. A right of appeal is a creature of statute and can only be exercised in the manner provided by the statute. [Paras 17 and 18][1128-A-F]
Corporation of the City of Nagpur v. Employees AIR 1960 SC 675 : [1960] SCR 942; Nelson Motis v. Union of India (1992) 4 SCC 711 : [1992] 1 Suppl. SCR 325; Nathi Devi v. Radha Devi Gupta (2005) 2 SCC
271 : [2004] 6 Suppl. SCR 1141 ; Ganga Bai v. Vijay Kumar (1974) 2 SCC 393 : [1974] 3 SCR 882; State of Haryana v. Maruti Udyog Ltd. (2000) 7 SCC 348 : [2000] 3 Suppl. SCR 185; Raj Kumar Shivhare v. Directorate of Enforcement (2010) 4 SCC 772 : [2010]
4 SCR 608 – relied on.
3. The Court should not adopt a different approach while construing a clause in a contract executed by a statutory body and providing for an appeal. The language of Clause 16.3 does not lend itself to any other construction other than that it provides for an appeal against the decision of a Competent Officer rendered under Clause 16.2. [Para 19][1128-F-G]
4. An arbitration should be an enquiry in the nature of a judicial enquiry i.e. an enquiry which involves hearing both the parties. The appeal involved in the present case clearly does not involve hearing both the parties. On the contrary, the authority which decides the appeal is in a sense the other party. The Commissioner is a higher officer than the Competent Officer in the same organization. It is, therefore, clear that the appeal to the Commissioner is not intended to provide a forum for a decision by an impartial adjudicator but is only intended to ascertain some matter for the purpose of preventing differences from arising and not for settling them after they have arisen. It is thus clear that the Commissioner is not intended to be an arbitrator, as his jurisdiction cannot be invoked by both the parties. [Para 21] [1129-D-F]
5. Arbitration has always been understood to mean the process by which a dispute is resolved by an arbitrator chosen or acceptable to both sides under an arbitration agreement between the two parties. In the present case, under Clause 16 of the Agreement, only the party dissatisfied by the order of the Competent Officer can approach the Commissioner. It is, therefore, not possible to hold that the proceedings before the Commissioner constitutes as an arbitration. [Para 22][1129-G] K.K. Modi v. K.N. Modi (1998) 3 SCC 573 : [1998] 1 SCR 601; State of Orissa v. Damodar Das (1996) 2 SCC 216 : [1995] 6 Suppl. SCR 800; State of U.P. v. Tipper Chand (1980) 2 SCC 341 – relied on.
Russell on Arbitration – referred to.
6. In the present case, Clause 16 and in particular Clause
16.3 does not provide for the reference of any dispute that may arise between the parties to an Arbitrator. The purpose of this Clause is to vest the Competent Officer and the Commissioner with supervisory control over the execution of work and administrative control over it from time to time and thus to prevent disputes. The intention is not to provide for a forum for resolving disputes. Thus, in the present circumstances, no Arbitrator could have been appointed by the High Court under Section 11(6) of the Arbitration and Conciliation Act, 1996. [Para 24][1132-C-D]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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