ARBN SETH KERORIMAL ADWANI Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS is an application under Section 33 of the Indian Arbitration Act challenging the validity of an arbitration agreement and an award passed thereunder. The petitioner undertook the construction of a runway at Gauhati Airfield under a contract with the Government evidenced by a tender submitted by him and accepted on behalf of the President, Indian Union by the Chief Engineer, C.P.W.D., Aviation Wing, on or about October 28, 1950. Time allowed for completion of the work was six months from the date of the written order: to commence the work, which, in the instant case, is November 15, 1950. Work of construction was not completed within time and it is alleged in the petition that not only the petitioner cannot be held responsible for this delay but that it has been recognised in writing by the senior Government officials-that this delay is not attributable to any fault OF laches on the part of the contractor. The construction work was actually completed on October 29, 1951. On April 25, 1952, the contractor by his letter to the Executive Engineer claimed refund of the security deposit including the earnest money deposited by the contractor. It is alleged by the Government that by an order dated August 30, 1952, the Chief Engineer directed that the security deposit may he refunded after deducting 3 per cent of the cost of the work as penalty. On October 9, 1952, the security deposit was actually refunded to the petitioner after deducting Rs. 16,512/- and the amount was received by the petitioner under protest. The said sum of Rs. 16,512/- represents 3 per cent of the total cost. The petitioner's case is that he was never told that the deduction had been made as and by way of penalty. In fact the petitioner does not admit the imposition of the penalty at all. The petitioner repeatedly demanded the refund, of the amount and also wanted to know on what account the said sum had been deducted but to no effect, according to this petitioner. By a letter dated May 5, 1954 addressed by the petitioner's Advocate, the Government was requested to refer the dispute to arbitration in terms of the arbitration clause in the contract. By a letter dated July 23, 1954, the Additional Chief Engineer referred the dispute to arbitration. The petitioner did not attend the arbitration proceedings. In due course, an award was published by the Superintending Engineer who was appointed arbitrator. Thereupon the present proceedings have been started by the petitioner.

(2.) IT is convenient at this stage to state the two clauses in the agreement which are relevant for the purpose of this application. Clause 25 of the agreement is the arbitration; Clause 2 is the penalty clause which read as follows:-- Clause 25: "Except where otherwise provided-in the contract all questions and disputes * * * in any way arising out of or relating to the contract * * * shall be referred to the sole arbitration of the Chief Engineer/Additional Chief Engineer, Central Public Works Department and if the Chief Engineer/Additional Chief Engineer is unable or unwilling to act to the sole arbitration of some other person appointed by the Chief Engineer/ Additional Chief Engineer willing to act as arbitrator * * * Clause 2 : The time allowed for carrying- out the-work as entered in the tender shall be strictly observed by the contractor * * * * and the-contractor shall pay as compensation an amount equal to 1 per cent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide, on the amount of estimated cost of the whole work as shown by the tender for every day that the work remains uncommenced or unfinished after the proper dates. * * * Provided always that the entire amount of compensation to be paid under the provisions of this clause shall not exceed 10 per cent on the estimated cost of the work as shown in the tender."

(3.) TAKING the first point first, it has to be considered whether the arbitration agreement is void for uncertainty. It is contended by Mr. Law that it is not clear who is to act as arbitrator. The agreement refers to "Chief Engineer/Additional Chief Engineer". It is submitted that an element of uncertainty has been introduced in the clause and it is not certain whether the Chief Engineer or the Additional Chief Engineer was intended to act as arbitrator under the arbitration clause. Mr. Kar appearing for the Government submitted that the clause means that "the Chief Engineer and failing him the Additional Chief Engineer is to act as arbitrator" and on this construction the arbitration agreement becomes definite and not void for uncertainty. Inspiration of this argument is derived from an observation made by Banerjee, J. in the case of Dwarkadas and Co. v. Daluram Goganmull decided by a Full Bench of this Court and. The arbitration agreement in the cited case reads as follows: