Case Note & Summary
The Hindustan Construction Co. Ltd. (plaintiff) filed an Arbitration Suit under Section 20 of the Arbitration Act, 1940, seeking reference of disputes to arbitration. The plaintiff had submitted a tender on 24th April 1984 to the Union of India (defendants) for a construction contract, which was finalized on 7th February 1985. The contract contained a price variation clause (Clause 13.6) providing for adjustment in prices of materials, labour, and fuel based on specified percentages. Disputes arose between the parties regarding the application and interpretation of this clause. The plaintiff contended that the defendants failed to make proper price adjustments as per the contract. The defendants opposed the reference, arguing that the dispute was not covered by the arbitration agreement. The learned single Judge, by order dated 19th April 1988, referred the matter to a Division Bench. The Division Bench, comprising R.M. Lodha and S.A. Bobde JJ., examined the facts and the arbitration clause. The court found that the dispute clearly arose out of the contract and fell within the ambit of the arbitration agreement. Consequently, the court allowed the petition and directed that the disputes be referred to arbitration. The court appointed an arbitrator and directed the parties to file their statements of claim and defence. The judgment was delivered on 14th December 2006.
Headnote
A) Arbitration Law - Reference to Arbitration - Section 20 of Arbitration Act, 1940 - Existence of Arbitration Agreement - The court considered whether a dispute regarding the price variation clause in a construction contract falls within the scope of the arbitration agreement. The court held that the dispute is arbitrable and directed reference to arbitration. (Paras 1-3)
Issue of Consideration
Whether the dispute regarding the interpretation and application of the price variation clause (Clause 13.6) in the contract between the parties is arbitrable under the arbitration agreement and whether the court should refer the matter to arbitration under Section 20 of the Arbitration Act, 1940.
Final Decision
The court allowed the petition and directed that the disputes be referred to arbitration. The court appointed an arbitrator and directed the parties to file their statements of claim and defence.
Law Points
- Arbitration Act
- 1940
- Section 20
- Reference to arbitration
- Existence of arbitration agreement
- Dispute arising out of contract
- Price variation clause
Case Details
2006 LawText (BOM) (12) 46
Arbitration Suit No. 3489 of 1987
Mr. Milind Vasudeo i/b M/s. Harish Joshi & Co. for the plaintiffs, Mr. Suresh Kumar for the defendants
The Hindustan Construction Co. Ltd.
The Union of India through The Executive Engineer (S&C), Vasai Creek Bridges, Western Railway, and General Manager, Western Railway
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Nature of Litigation
Arbitration suit under Section 20 of the Arbitration Act, 1940 seeking reference of disputes to arbitration.
Remedy Sought
Plaintiff sought reference of disputes arising out of the contract to arbitration.
Filing Reason
Dispute regarding the application and interpretation of the price variation clause (Clause 13.6) in the contract.
Previous Decisions
The learned single Judge (S.N. Variava J.) by order dated 19th April 1988 referred the matter to a Division Bench.
Issues
Whether the dispute regarding the price variation clause is arbitrable under the arbitration agreement.
Whether the court should refer the matter to arbitration under Section 20 of the Arbitration Act, 1940.
Submissions/Arguments
Plaintiff argued that the dispute arose out of the contract and is covered by the arbitration agreement.
Defendants opposed the reference, contending that the dispute is not within the scope of the arbitration clause.
Ratio Decidendi
The dispute regarding the interpretation and application of the price variation clause in the contract falls within the scope of the arbitration agreement, and therefore, the court is justified in referring the matter to arbitration under Section 20 of the Arbitration Act, 1940.
Judgment Excerpts
This Arbitration Suit has been referred to the Division Bench in view of the order dated 19th April, 1988, passed by the learned single Judge.
The facts briefly stated are that on 24th April, 1984, the Plaintiffs submitted their tender to the Defendants. The contract between the parties was arrived at on 7th February 1985.
Clause 13.6 of the Contract provides as under:- '13.6. The contract shall be governed by the General price variations clause as under: Adjustment for variation in prices of materials labour and fuel shall be determined in the manner prescribed below:- ...'
Procedural History
The plaintiff filed Arbitration Suit No. 3489 of 1987 under Section 20 of the Arbitration Act, 1940. The learned single Judge (S.N. Variava J.) by order dated 19th April 1988 referred the matter to a Division Bench. The Division Bench heard the matter and delivered judgment on 14th December 2006.
Acts & Sections
- Arbitration Act, 1940: Section 20
