LexGENERAL MANAGER NORTHERN RAILWAYS AND ANR. versus SARVESH CHOPRA
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A GENERAL MANAGER NORTHERN RAILWAYS AND ANR. v. SARVESH CHOPRA MARCH I, 2002 B [R.C. LAHOTI AND BRIJESH KUMAR, JJ.] Arbitration: Arbitration Act, 1940-Section 20-Excepted matters-Criteria of- C Reference of excepted matters to arbitration-Held, the function of reference of matters to arbitration by Court is not a mechanical administrative function but a judicial function-Jn house remedy for settlement of a matter is not a prerequisite for treating the matter to be an excepted matter-On facts, the claims are excepted matters and hence cannot be referred for arbitration- D Contract Act, 1872-Sections 55 and 56. Respondent was granted a construction contract by appellant- >-- _ Railways. The contract is subject to the General Conditions and Special Conditions of the contract of Railways. Due to certain disputes, the respondent filed a petition before High Court under Section 20 of the Arbitration Act, ; E 1940 praying for filing of the arbitration agreement in the Court and for reference of the six claims set out in the application to arbitration for settlement The Single Judge directed only the first two claims for arbitration and treated the remaining four claims as 'excepted matters' being within clause 63 of the General Conditions of the contract and thereby not arbitrable. F In appeal by the respondent, Division Bench of the High Court held that the four claims are not 'excepted matters' and hence directed for arbitration. In appeal to the Court, the appellant contended that the four claims are covered by different clauses of the Special Conditions of the Contract and hence not arbitration as per clause 63 of the General Conditions of the G contract. H The respondent contended that a matter cannot be treated as an \ 'excepted matter' if it is merely covered by any of the clauses in the Special Conditions of the contract and no in-house remedy is provided by way of decision of an authority of the Railways; and that on filing a petition under 156 GENERAL MANAGER NORTHERN RAILWAYS v. SAR VESH CHOPRA l 5 7 Section 20 of the Act, the Court should order the arbitration agreement to A be filed and make an order of reference to the arbitrator and it is for the arbitrator to adjudicate whether a claim is entertainable or awardable being an 'excepted matter'. Allowing the appeal, the Court HELD: 1.1. While dealing with a petition under Section 20 of the Arbitration Act, 1940, the Court has to examine: (i) whether there is an arbitration agreement between the parties, (ii) whether the difference which B has arisen is one to which the arbitration agreement applies, and (iii) whether there is a cause, shown to be sufficient to decline an order of reference to the C arbitrator. The reference to an arbitration on a petition filed under section 20 is not a function to be discharged mechanically or ministerially by the Court. It is a consequence of judicial determination, the Court having applied its mind to the requirements of Section 20 and formed an opinion, that the difference sought to be referred to arbitral adjudication is one to which the arbitration agreement applies. [163-F-G[ D '°"· 1.2. The Court will look at the nature of the claim as preferred and decide whether it falls within the category of 'excepted matters'. If the claim preferred would be a difference to which the arbitration agreement does not apply, then the Court shall not refer the same to the arbitrator. On the E pleading, 'the applicant may succeed in making out a case for reference, still the arbitration may, on the material produced before him, arrive at a finding that the claim was covered by 'excepted matters'. The claim shall have to be disallowed. If the arbitrator allows a claim covered by an excepted matter, the award would not be legal merely because the claim was referred by the Court to arbitration. The award would be liable to be set aside on the ground F of error apparent on the face of the award or as vitiated by legal misconduct of the arbitrator. [166-G-H) Food Corporation of India v. Sreekanth Transport, (1999] 4 SCC 491; Union of India v. Popular Builders, Calcutta. (2000] 8 SCC 1; Steel Authority of G India Ltd v. J.C. Budharaja, Government and Mining Contractor, (1999] 8 SCC 122; Ch Ramlinga Reddy v. Superintending Engineer and Anr., (1994) 5 Scale 12; Mis A/opi Parshad v. Union of India, (1960] 2 SCR 793; Mis Prabartak Commercial Corporation Ltd v. The Chief Adm
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