LexM/S. P. DASARATHARAMA REDDY COMPLEX versus GOVERNMENT OF KARNATAKA AND ANOTHER
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[2013] 14 S.C.R. 579 M/S. P. DASARATHARAMA REDDY COMPLEX v. GOVERNMENT OF KARNATAKA AND ANOTHER (Civil Appeal No. 1586 of 2004) OCTOBER 25, 2013 [G.S. SINGHVI, V. GOPALA GOWDA AND C. NAGAPPAN, JJ.) Contract - Works contract - Disputes pertaining thereto A B - Clause in the contract - Analysis of- If it could be construed C as an arbitration clause - Distinction between expert determination and arbitration - Held: On facts, in terms of the relevant clauses in the agreements entered into between· the parties, any dispute or difference between the parties was required to be first referred to the Chief Engineer or the D Designated Officer of the Department - The Chief Engineer or the Designated Officer was not an independent authority or person, but was in fact having over all supervision and charge of the execution of the work - Decision of the Chief Engineer was non-adjudicatory subject to the right of the E aggrieved party to seek remedy - Thus, relevant clauses in the agreements entered into between parties provided for settlement of disputes through Court and could not be relied upon for seeking reference to an arbitrator of any dispute arising under the· contract - Arbitration and Conciliation Act, 1996 - ss. 11 (6) and (8). F Contracts were awarded by the Government of · Karnataka and/or its agencies/instrumentalities for execution of particular projecUworks. Disputes arose between the parties out of the said contracts. G In the instant appeals the issue for consideration before this Court was whether the relevant clauses in the contracts entered into between the parties (Clause 29 in 579 H 580 SUPREME COURT REPORTS (2013] 14 S.C.R. A one of the contract and similar clauses in other contracts) ought to be treated as an arbitration clause providing for resolution of the disputes by arbitration or were in the nature of departmental dispute resolution mechanism. B Disposing the appeals, the Court HELD: There is distinction between an expert determination and arbitration. In terms of Clause 29 of the Agreement entered into between the parties (the appellant and the respondents in Civil Appeal No.1586/ C 2004) and similar other clauses, any dispute or difference irrespective of its nomenclature in matters relating to specifications, designs, drawings, quality of workmanship or material used or any question relating to claim, right in any way arising out of or relating to the D contract designs, drawings etc. or failure on the contractor's part to execute the work, whether arising during the progress of the work or after its completion, termination or abandonment has to be first referred to the Chief Engineer or the Designated Officer of the E Department. The Chief Engineer or the Designated Officer is not an independent authority or person, who has no connection or control over the work. As a matter of fact, he is having over all supervision and charge of the execution of the work. He is not required to hear the F parties or to take evidence, oral or documentary. He is not invested with the power to adjudicate upon the rights of the parties to the dispute or difference and his decision is subject to the right of the aggrieved party to seek relief in a Court of Law. The decision of the Chief Engineer or G the Designated Officer is treated as binding on the contractor subject to his right to avail remedy before an appropriate Court. The use of the expression 'in the first place' unmistakably shows that non-adjudicatory decision of the Chief Engineer is subject to the right of H P. DASARATHARAMA REDDY COMPLEX v. 581 GOVERNMENT OF KARNATAKA the aggrieved party to seek remedy. Therefore, Clause A 29 which is subject matter of consideration in most of the appeals and similar clauses cannot be treated as an Arbitration Clause. Liberty is given to the aggrieved party to avail appropriate legal remedy, if any. (Paras 15, 21 and 29) [595-E; 608-D-H; 609-A-B; 620-B] B Mysore Construction Company v. Karnataka Power Corporation Ltd. ILR 2000 KAR 4953 - affirmed. Smt. Rukmanibai Gupta ~- Collector, Jabalpur and others (1980) 4 SCC 556; Punjab State and others v. Dina Nath C (2007) 5 SCC 28: 2007 (6) SCR 536; Mal/ikarjun v. Gulbarga University case (2004) 1 SCC 372: 2003 (5) Suppl. SCR 272; Krishna Bhagya Jala Nigam Limited v. G. Harishchandra Reddy and another (2007) 2 sec 720: 2007 (1) SCR 698 and Karnataka State Road Transport
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