M.K. ABRAHAM & CO. versus STATE OF KERALA & ANR.

Citation: [2009] 10 S.C.R. 395 · Decided: 07-07-2009 · Supreme Court of India · Bench: R.V. RAVEENDRAN · Disposal: Appeal(s) allowed

Judgment (excerpt)

-· • 
[2009] 10 S.C.R. 395 
M.K. ABRAHAM & CO. 
v. 
STATE OF KERALA & ANR. 
(Civil Appeal No. 4151 of 2009) 
JULY 7, 2009 
[R.V. RAVEENDRAN AND J.M. PANCHAL, JJ.] 
A 
B 
Atbitration and Conciliation Act, 1996- s. 11 -Award of 
contract by Central Government, through State Public Works 
Department -
State Government barring arbitration in C 
Government contracts entered by PWD- Arbitration 
specifically barred by Notice Inviting Tender and by Standard 
Form of Agreement - Central Government by a Notification 
· making arbitration compulsory for the contract - A slip signed 
by both the contracting parties, stating that ::irbitration clause 
D 
3;w11 be applicable, attached to the contracts - He.Id: 
Arbitration agreement exists between the parties in terms of 
t.'le Notification issued by Central Government - The slip 
attached to the contract will prevail over the printed conditions 
of the contract, barring arbitration - Contract. 
E 
Contract - Rules of construction of contract - Explained. 
Deeds and Documents - Agreements - Construction of 
- Held: The best form of agreement is where all the relevant 
clauses/forms are incorporated in a single document with 
F 
several sections dealing with different aspects/subjects, 
avoiding any overlapping. 
In both the cases, appellants entered into 
agreements separately in respect of the project of G 
National Highway-49, which was executed by the Ministry 
of Surface Transport, Government of India through the 
Pub.He Works Department ef the State. The Ministry of 
Surface Transport, by a communication dated 28.9.1994 
395 
H 
396 
SUPREME COURT REPORTS 
[2009] 10 S.C.R. 
A informed all the States dealing with the National Highway 
Project, that a standard contract clause prescribing the 
procedure to be followed for appointment of arbitrators 
was finalized by the Ministry. The communication 
instructed them to incorporate the said clause in the 
B bidding conditions, and to ensure that the said arbitration 
clause was compulsorily made a part of bidding 
conditions. In view of the said communication, a slip, 
stating that arbitration clause as per the letter of the 
Ministry shall be applicable, signed by both the ~rties, 
c was attached to the respective contracts ot'the 
appellants. 
The appellants' pe~itions u/s. 11 of Arbitration and 
Conciliation Act, 1996, for appointm2nt of Arbitrators for 
deciding the disputes between the parties, were 
D dismissed by the designate of Chief Justice of High 
Court, holding that having regard to specific bar against 
arbitration contained in clause 24 and 24 (a) of 'Notice 
Inviting tenders for Works' and Clause (3) of standard 
form of agreement, there could not be any reference to 
E arbitration. The designated also held th'at the 
(Communication dated 28.9.1994) of the Ministry of 
Surface Transport was not accepted by the State it 
cannot be said to have become part of the contract Writ 
petition against the order was dismissed as not 
F maintainable. Hence the present appeals against the 
order of the Designate of the Chief Justice if India. 
Allowing the appeals, the Court 
HELD: 1.1 The State Government took a decision in 
G or about 1986 to delete the provision for arbitration clause 
in PWD contracts. As a consequence, the standard form 
of 'Notices inviting Tenders for Works' [clauses 24 and 
24(a)] and the standard form of Agreement (clause 3) 
contain specific printed conditions which bar arbitration. 
H Further the preamble to the standard form of Agreement 
..
M.K. ABRAHAM & CO. v. STATE OF KERALA & 
397 
ANR. 
.t 
also clearly states "whereas the contractor has also 
A 
signed the copy of the Madras Detailed Standard 
Specifications (MOSS) excluding clause 73 and other 
clauses relating to arbitration contained therein ...... " 
(Para 8] [407-0-E] 
1.2. There is no doubt that if the contract contained 
B 
a provision specifically barring arbitration, there can be 
.. + 
no reference to arbitration. But the position is different 
where the standard format of the State PWD is used with 
modifications in regard to construction contracts of c 
another department which has taken a policy decision to 
have a provision for arbitration compulsorily in all its 
contracts, and in view of it, the arbitration clause is made 
a part of the contract by a further addition to the standard 
" " 
form of Agreement. [Para 9] [407-G-H; 408-A] 
D 
1.3. The State Government, by its G.O. (MS). No. 68/ 
88/PWD dated 19.11.1988 clarified, w

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