KARNATAKA POWER TRANSMISSION CORPORATION LIMITED AND ANOTHER versus M/S. DEEPAK CABLES (INDIA) LTD.

Citation: [2014] 4 S.C.R. 771 · Decided: 07-04-2014 · Supreme Court of India · Bench: ANIL R. DAVE · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2014] 4 S.C.R. 771 
KARNATAKA POWER TRANSMISSION CORPORATION 
LIMITED AND ANOTHER 
v. 
MIS. DEEPAK CABLES (INDIA) LTD. 
(Civil Appeal No. 4424 of 2014) 
APRIL 07, 2014 
[ANIL R. DAVE AND DIPAK MISRA, JJ.] 
A 
B 
Arbitration and Conciliation Act, 1996: s.11 (6) -
Appointment of arbitrator - Dispute between the parties -
C 
Respondent seeking appointment of arbitrator - Resisted by 
appellant on the ground that the agreement did not provide 
for arbitration - Held: Clause 48 of the agreement provided 
that when disputes or differences of any kind arise between 
the parties relating to the performance of the works during 
D 
progress of the works or after its completion or before or after 
the termination, abandonment or breach of the contract, it is 
to be referred to and settled by the engineer - There is also a 
stipulation that his decision in respect of every matter so 
referred to shall be final and binding upon the parties until the 
E 
completion of works and is required to be given effect to by 
the contractor who shall proceed with the works with due 
diligence - This clause did not provide any procedure to even 
remotely indicate that the concerned engineer was required 
to act judicially as an adjudicator by following the principles 
of natural justice or to consider the submissions of both the 
parties - This only depict that the said clause was engrafted 
to avoid delay and stoppage of work and facilitate smooth 
carrying on of the work - The language employed in the clause 
F 
did not spell out the intention of the parties to get the disputes 
G 
adjudicated through arbitration - Apart from that clause 4. 1 of 
the agreement stated that it was specifically agreed by and 
between the parties that all the differences or disputes arising 
?ut of the Agreement or touching the subject matter of the 
771 
H 
772 
SUPREME COURT REPORTS 
[2014) 4 S.C.R. 
A Agreement would be decided by a competent Court at 
Bangalore - Thus, clause 48, read in conjunction with clause 
4.1, clearly established that there was no arbitration clause 
in the agreement. 
8 
Appellant No. 1, a State Transmission utility invited 
tenders for establishing sub-stations. Respondent-
company was successful bidder and contract was 
entered with it. Dispute arose and tile respondent filed 
application under Section 11 (5) and (6) of the Arbitration 
and Conciliation Act, 1996 before the High Court for 
C appointment of an arbitrator. The application was resisted 
by the appellant on the ground that clause 48 did not 
provide for arbitration and same cannot be co...,strued as 
an arbitration clause. The High Court held that a plain 
reading of clause 48 would indicate that it partak~ the 
D character of an arbitration clause and, accordingly, 
appointed a sole arbitrator to adjudicate the matters in 
dispute. Hence these appeals. 
E 
Allowing the appeals, the Court 
HELD: 1. Section 7 of the Arbitration and Conciliation 
Act, 1996 states that unless an arbitration agreement 
stipulates that the parties agree to submit all or certain 
disputes which have arisen or which may arise in respect 
. F of defined legal relationship, whether contractual or not, 
there cannot be a reference to an arbitrator. It conveys 
that there has to be intention, expressing the consensual 
acceptance to refer the disputes to an arbitrator. In the 
absence of an arbitration clause in an agreement, as 
defined in sub-section (4) of Section 7, the dispute/ 
G disputes arising between the parties cannot be referred 
to the arbitral tribunal for adjudication of the dispute. 
[Para 9] [779-F-H; 780-A] 
2. Clause 48 is to the effect that it provides for the 
H parties to amicably settle any disputes or differences 
KARNATAKA POWER TRANSMISSION CORP. LTD. v. 773 
DEEPAK CABLES (INDIA) LTD. 
arising in connection with the contract. This is the first 
A 
part. The second part is that when disputes or differences 
of any kind arise between the parties to the contract 
relating to the performance of the works during progress 
of the works or after its completion or before or after the 
termination, abandonment or breach of the contract, it is 
B 
to be referred t,o and settled by the engineer, who, on 
being requested by either party, shall give notice of his 
decision within thirty days to the owner and the 
contractor. There is also a stipulation that his decision in 
respect of every matter so referred to shall be final and c 
binding upon the parties until the completion o

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