@JUDGMENTTAG-ORDER
A.P. Sen, J.@mdashThis revision, filed by the Municipal Corporation, Indore, is directed against an order of the Second Additional District Judge, Indore, allowing an application filed by the non-applicant u/s 8 of the Arbitration Act, 1940.
2. The facts, in brief, are as follows: The non-applicant, who is a contractor carrying on business of construction work, entered into a contract with the Municipal Corporation, Indore, for the work of Premix Bitumen Carpeting of Bhamori Road, near Nandanagar Chouraha. After completion of the work the non-applicant accepted payment of the final bill under protest, and then served a notice on the Administrator, Municipal Corporation Indore, u/s 8 of the arbitration Act (hereinafter referred to as "the Act"), treating Clause 47 of the agreement to be an arbitration clause. In that notice he raised various disputes, and inasmuch as the Municipal Corporation had been superseded, called upon the Administrator to fill up the vacancy. The Corporation not having compiled with the notice, the non-applicant applied u/s 8 of the Act.
3. The decision of the revision turns on the construction of Clause 47 of the agreement which reads,--
47. AH works under execution by contract shall be under the directions of the Municipal Council for the time being whose decision shall, notwithstanding anything hereinbefore contained, be final, conclusive and binding on all questions relating to the quality of workmanship and materials used on the work.
This, by no stretch of reasoning can be treated as an arbitration clause.
4. Section 2(a) of the Act reads,--
2. In this Act, unless there is anything repugnant in the subject or context,--
(a) arbitration agreement" means a written agreement to submit present or future differences to arbitration, whether an arbitrator is named therein or not;
"Arbitration" is a reference to the decision of one or more persons, with or without an umpire, or some matter or matters in difference between the parties. In its broad sense, a submission to arbitration is therefore an agreement made by two or more parties between whom some differences have arisen, or may thereafter arise whereby they appoint another person to adjudicate upon such differences and agree to be bound by his decision. It is stated in Russell oh Arbitration, Sixteenth Edn., p. 1,--
The essence of......arbitration......is that some dispute is referred by the parties for settlement to a tribunal of their own choosing". Broadly stated, two questions have been urged; (i) whether Clause 47 is an arbitration clause; and (ii) whether the administrator can u/s 423(1)(a)(i)(c) of the Madhya Pradesh Municipal Corporation Act, 1956 exercise the powers of the Municipal Corporation after its supersession.
5. The learned Additional District Judge, in holding that Clause 47 is an arbitration clause, relies upon the following observations of Abdul Rahman, J., in Governor-General in Council v. Simla Banking & Industrial Co. Ltd., AIR 1947 Lah 215.
It is true that the words "arbitration" "arbitrator" or "arbitration agreement" do not appear in the clause but that is, in my view, immaterial as long as the parties can be found to have agreed to allow the matter to be decided by a person of their own selection whose decision was to be final, conclusive and binding on them. A perusal of the clause would show that not only the questions as the "quality of workmanship or materials used on the work" were left to be decided by "the Superintending Engineer of the Circle for the time being" but "any other question, claim right, matter or thing whatsoever, in any way arising out of, or relating to the contract" etc, were, after they had arisen between the parties, also agreed to be left to him for his decision.
No doubt, that is the basic decision; but it is distinguishable. The observations relied upon cannot be read out of their context. In that case Abdur Rahman, J. was interpreting Clause 25 of an agreement between the Governor-General in Council and a firm of contractors to the following effect:
Except where otherwise specified in the contract the decision of the Superintending Engineer of the circle for the time being shall be final, conclusive, and binding on all parties to the contract upon all questions relating to the meaning of the specifications, designs, drawings, and instructions hereinbefore mentioned, and as to the quality of workmanship, or materials used on the work, or as to any other question, claim, right, matter or thing whatsoever, in......any way arising out of, or relating to the contract designs, drawings, specifications, estimates, instructions, orders, or these conditions, or otherwise concerning the works, or the execution of failure to execute the same, whether arising during the progress of the work, or after the completion or abandonment thereof.
The latter part of the agreement in that case was in very comprehensive terms, wide enough to include any other question, claim, right, matter, or thing whatsoever, and the decision of the Superintending Engineer thereon was final. In the present case, Clause 47 does not contain any such term.
6. The decision in Dewan Chand v. The State of J. and K. AIR 1961 J. & K. 58, is also distinguishable. In that case, the relevant clause read,--
For any dispute between the contractor and the Department the decision of the Chief Engineer PWD Jammu and Kashmir, will be final and binding upon the contractor.
That clause, in substance, amounted to an arbitration agreement within the meaning of section 2(a) of the Act. It clearly contemplated that the parties had agreed that any dispute arising between them shall be referred to the Chief Engineer and that his decision shall be final.
7. The meaning and the intention of the parties have to be gathered from the language used. Prima facie, the common form of an arbitration agreement is well known. It is usual to use the expressions, "any dispute arising with respect to any matter connected with the contract", "any dispute difference or question touching the construction, meaning, or effect of these presents......or the rights or liabilities of the parties", "all disputes arising out of the contract" etc. On a plain reading, Clause 47 gave to the "Municipal Council" the authority to issue directions in the matter of execution of the work, and its decision was to be final and binding on the parties on all questions relating to the quality of workmanship and materials used on the work. The words "all works under execution shall be under the directions of the Municipal Council" must and ought to be construed to mean that during the execution of the contract the Municipal Corporation had the authority to issue directions. Clause 47 also invested the Municipal Corporation with authority to supervise and control the quality of the work and materials used. That implied the right of rejection of sub-standard work.
8. Counsel for the non- applicant drew my attention to Heavy Electricals (India) Ltd. Bhopal v. Pannalal 1973 JLJ 28: 1975 MPLJ 26. That decision instead of supporting the non-applicant, is rather against him. There, the agreement in question, i.e., the agreement between the Heavy Electricals (India) Ltd., and a contractor, contained not only the usual arbitration clause, but also a finality clause like Clause 47 in the instant case. A Divisional Bench of this Court had to consider the impact of such finality clause on the arbitration clause and held that the matters falling within the purview of the finality clause were outside the ambit of the arbitration clause. That decision clearly supports the view that I have taken, viz., that the matters covered by such finality clause cannot be referred to arbitration.
9. The learned Additional District Judge, therefore, acted illegally and with material irregularity in allowing the application u/s 8 of the Act, treating Clause 47 as an arbitration clause and directing the parties to name their respective arbitrators.
10. In view of my answer to the first question the second does not really arise. But, since the question was argued at length, I proceed to deal with it.
11. The contention that the reference was to be to the "Municipal Council" in terms of Clause 47 i.e., to a corporate body, and upon its supersession there was a vacancy in the office and that the Administrator could not assume the power to adjudicate, cannot be accepted. In support of the contention reliance is placed on the following foot note in Halsbury''s Laws of England, Third Edn. Vol. 2, Paragraph 63. p 28 :
(f) Re Keighley, Maxsted & Co, and Durant & Co, (1893) 1 Q. B. 405, C. A. If it is a condition of the arbitrators appointment and of their jurisdiction to act that they shall be members of a specified body, an award made by arbitrators who are not so qualified is null and void (Jungheim Hopkins and Co., v. Foukelmann, (1909) 2, K. B. 948).
The law is stated in Russell on Arbitration, 16th Edn. p.106, thus:--
A reference may be to a body or class of persons who may vary from time to time, and the reference will be treated as being to the members of that body or class at the time when the dispute comes up for decision.
12. The agreement was drawn up in a printed form containing the term "Municipal Council". It is urged that the term "Municipal Council" must, in the context, mean the "Municipal Corporation" by reason of section 413 of the Madhya Pradesh Municipal Corportion Act, 1956. That section only embodies a rule of construction. When the provisions of the Act are applied to a city, then, unless a different intention appears, all references to a "Municipal Council" in every enactment or instrument in force when the provisions of this Act are applied, shall be construed as having reference to the "Municipal Corporation. The agreement in question was neither an enactment nor an instrument in force within the meaning of section 413 ibid. But the parties have assumed it to be so.
13. The contention that a contractual term cannot be statutorily altered can hardly be accepted. There is a fallacy in the argument. u/s 423(1)(a)(i)(c) of the Municipal Corporation Act, 1956, all powers and duties of the Corporation are to be exercised by the Administrator. That includes the power to issue directions in relation to all works under execution by contract, and also the power to reach decisions on all questions relating to the quality of workmanship and materials used on the works. Such power to issue direction in regard to works under progress is essentially an executive function. The power to reach a decision as to quality of workmanship and materials used is a quasi-judicial function according to the view taken in Heavy Electricals (India) Ltd. Bhopal v. Pannalal (supra) &
14. There is a distinction between the Municipal Corporation and the Corporators. u/s 7 of the Madhya Pradesh Municipal Corporation Act, 1956 the Municipal Corporation is a body corporate having common seal and perpetual succession. In contra-distinction to this, the Municipal Corporation as constituted by the elected and selected Councilors may either be superseded or dissolved under sections 422 or 422-A of that Act. In
No doubt, learned counsel is right in contending that there is a distinction between the Administrator and the Municipal Council. But that distinction has no significance. The suit for perpetual injunction was flied against the Municipal Council. That suit was decreed against the council and the decree was put into execution against it. The Council having been superseded, all powers and duties of the Council under the Act, until the Council was re-constituted, had to be exercised and performed by the Administrator. Although the Administrator was not the Municipal Council, the supersession did not mean that the Municipal Council as a corporate body ceased to exist. u/s 18 of the Act, the Municipal Council is a body corporate with perpetual succession.
Any other view would completely paralyse the working of a statutory body like the Municipal Corporation, which always exists. On its supersession or dissolution the corporate powers must, in the nature of things, be exercisable by some-one. That is provided for by section 423 of the Madhya Pradesh Municipal Corporation Act, 1956, which sets forth the consequences that ensue upon such supersession or dissolution. The view of the learned Additional District Judge that there is a vacancy in the office of the arbitrators is, therefore not correct.
15. In the result, the revision succeeds and is allowed, the order passed by the learned Additional District Judge is set aside and the application filed by the non-applicant u/s 8 of the Arbitration Act, 1940 is dismissed with costs. Counsel fee Rs. 50 if certified.
