PUNJAB STATE & ORS. versus DINA NATH

Citation: [2007] 6 S.C.R. 536 · Decided: 14-05-2007 · Supreme Court of India · Bench: TARUN CHATTERJEE · Disposal: Dismissed

Judgment (excerpt)

A 
PUNJAB STA TE & ORS. 
v. 
DINA NATH 
MAY 14, 2007 
B 
[T ARlJN CHATTERJEE AND AL TAMAS KABIR, JJ.] 
Arbitration Act. 1940-Sections 2(a) & 20-Limitation Act, 1963-
Article 137-Contractor filing an application before trial court for 
)-
c appointment of an arbitrator under a relevant clause of the Work Order to 
settle dispute-State opposing the application contending that the relevant 
clause of the Work Order is not an arbitration agreement and that the 
application is barred by /imitation-Trial Court allowing the application of 
the contractor but reversed by the appellate court in State appeal-High 
Court upholding the judgment ofl'he trial court-Correctness of-Held, there 
D is no particular form of arbitration agreement-On facts, the relevant clause 
of the Work Order is an arbitration agreement and the application to appoint 
an arbitrator is not barred by /imitation-Hence, appointment of arbitrator 
'T" 
is valid in law. 
• 
E 
Appellant-State issued a Work Order to respondent for a construction 
work. After completion of the work, the respondent issued a notice to prepare 
final bills and take final measurements for the purpose of payment under the 
Work Order. Due to a dispute regarding preparation of the final bills by the 
appellants, the respondent issued a notice to the appellants to refer the dispute 
is arbitration as per the relevant clause or the Work Order. Since the 
F 'appellants failed to respond to the notice, the respondent filed an application 
under section 20 of the Arbitration Act, 1940 before trial Court seeking 
appointment of an arbitrator. The trial Court allowed the application 
.,,..,. 
construing the relevant clause of the Work Order to be an 'arbitration 
agreement' under section 2(a) of the Act and holding that the application is 
! not barred by limitation. The appellate Court allowed the State appeal A Civil 
G Revision Petition filed by the respondent was allowed by High Court. 
In appeal to this Court, the appellant contended that the relevant clause 
under the Work Order cannot be construed as an arbitration agreement; that 
lthe application is barred by limitation; and that there was no existence of any 
... 
H 
536 
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> 
PUNJAB STA TE v. DINA NATH 
537 
dispute for reference to arbitration under the Work Order since it had got A 
the work executed at its own cost when the respondent failed to execute the 
work under the Work Order. 
Dismissing the appeal, the Court 
HELD: I.I. A bare perusal of the definition of'arbitration agreement' B 
under section 2(a) of the Arbitration Act, 1940 would clearly show that an 
arbitration agreement is not required to be in any particular form. What is 
required to be ascertained is whether the parties have agreed that if any 
dispute arises between them in respect of the subject matter of the contract, 
such dispute shall be referred to arbitration. In that case such agreement C 
would certainly spell out of an arbitration agreement. However, from the 
definition of the arbitration agreement, it is also clear that the agreement 
must be in writing and to interpret the agreement as an 'arbitration 
agreement' one has to ascertain the intention of the parties and also treatment 
of the decision as final. If the parties had desired and intended that a dispute 
must be referred to arbitration for decision and they would undertake to abide D 
by that decision, there cannot be any difficulty to hold that the intention of the 
parties to have an arbitration agreement; that is to say, an arbitration 
agreement immediately comes into existences. [Para 8] (542-C, D, E) 
Rupmani Bai Gupta v. Collector of Jabalpur, AIR (1981) SC 479, 
referred to. 
E 
1.2. The Work Order between the parties can be interpreted to be an 
arbitration agreement. The omission to mention the words "arbitration" and 
I 
"arbitrator" cannot be a ground to hold that the said clause was not an 
arbitration agreement within the meaning of Section 2(a) of the Act. The 
essential requirements are that the parties have intended to make a reference F 
---,.-
to. arbitration and treat the decision of the arbitrator as final. As the condition, 
to constitute an 'arbitration agreement' have been satisfied, the relevant clause 
of the Work Order must be construed to be an arbitration agreement and 
dispute raised by the parties must be referred to the arbitrator. 
[Paras 9 and IOI (542-F; 543-A, B, CJ G 
Bihar State Mineral Development Corporation v. Encon Building, 
[2003) 7 SCC 

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