FOOD CORPORATION OF INDIA versus SREEKANTH TRANSPORT

Citation: [1999] 3 S.C.R. 699 · Decided: 14-05-1999 · Supreme Court of India · Bench: V.N. KHARE, U.C. BANERJEE · Disposal: Dismissed

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Judgment (excerpt)

FOOD CORPORATION OF INDIA 
A 
v. 
SREEKANTH TRANSPORT 
MAY 14, 1999 
[V.N. KHARE AND UMESH C. BANERJEE, JJ.] 
B 
Arbitration Act 1940: Section 20-Excepted clause-Government 
contract-Positive abandonment of the right of ddjudication of the excepted 
matter through its officer by dominus litus-Reference of the subject matter 
of excepted clause to arbitrator-Held : in normal circumsta.'1ces. Excepted C 
clause 'is not dealt with-But in view of express abandonment of right such 
a course is correct. 
The respondent filed a suit under section 20 of the Arbitration Act. 
The Trial Court referred the three principal claims of the suit for arbitration D 
but refused to refer the fourth claim, as the subject matter of the same was 
covered under clause 12 (excepted matter) of the agreement During pendency 
of the appeal in High Court against the trial court's order, the appellant 
initiated civil proceeding by filing a suit in respect of the subject matter of 
the fourth claim of the respondent's suit. The respondent objected to it on 
the ground that since dominus litus has taken recourse to adjudicatory E 
process of civil court rather than getting the matter decided by its own 
Senior Regional Manager, the issue covering the appellant's suit which has 
direct nexus with the three issues of the respondent's suit, also be referred 
to arbitrator. High Court referred all the issues in dispute in respondent's 
suit, to the arbitrator holding that the suit of appellant had intrinsic 
connection with the fourth claim of the respondent's suit. Hence this appeal. F 
Dismissing the appeal, this Court 
HELD: 1.1. In normal circumstances the issue as regards the excepted 
matters is not dealt with by this court. By reason of the factual situation in G 
the matter, the High Court was not left with any option but to direct such 
a course of action more so by reason of an express abandonment of right. 
In the normal course of events if the particular clause was not available in 
the contract between the parties, the disputes in its entirety by reason of the 
scope and purview of the Arbitrator clause, could have been referred to 
arbitration. But if it is by reason of the factum of incorporation of clause H 
699 
700 
SUPREME COURT REPORTS 
[1999] 3 S.C.R. 
A 12 and the subsequent abandonment thereof by reason of a decision to have 
the claim covered under clause 12 to be adjudicated by a forum different from 
that of the Senior Regional Manager, this Court concurs with the High 
Court that the fourth dispute being the subject matter of a civil suit initiated 
by Food Corporation of India also be referred to arbitration. [706-F-H] 
B 
1.2. Also there appears to be a positive relinquishment or abandonment 
of a right so far as the adjudication of the excepted matters are concerned 
by the appellant Corporation since the Corporation itself wanted to have it 
adjudicated by a Civil Court. [704-H; 705-Al 
C 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. (s) 1582-83 
of 1994. 
D 
From the Judgment and Order dated 4.10.93 of the Madras High Court 
in O.S. Nos. 39-40of1990. 
Y. Prabhakar Rao for the Appellant. 
Shambhu Prasad Singh, M/s Arputham and Aruna & Co., for the 
Respondent. 
The Judgment of the Court was delivered by 
E 
BANERJEE, J. These appeals by the grant of Special Leave pertains to 
the effect of the usual 'excepted clause' vis-a-vis the arbitration clause in a 
Government contract. While it' is true and as has been contended, that the 
authorisation of the arbitrators to arbitrate, flows from the agreement but the 
High Court in the judgment impugned thought it fit to direct adjudication of 
p 
'excepted matters' in the agreement itself by the arbitrators and hence these 
appeals before this Court. 
At the outset, it is pertinent to note that in the usual Governmental 
contracts, the reference to which would be made immediately hereafter, there 
is exclusion of some matters from the purview of arbitration and a senior 
G officer of the Department usually is given the authority and power to adjudicate 
the same. The clause itself records that the decision of the senior officer, 
being the adjudicator, shall be final and binding between the parties - this is 
what popularly known as 'excepted matters' in a Government or Governmental 
agencies' contract. 
H 
'Excepted matters' obviously, as the parties agreed, do not require any 
... 
F.C.I. v. SREEKANTH TRANSPORT [BANERJEE, J.] 
701 
further adjudication since the agreement i

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