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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOs.               OF 2014 (arising out of SLP(C) Nos.14947-14948 of 2011)

M/s Kaikara Construction Company       … Appellant

VERSUS

State of Kerala and Ors.       … Respondents

J U D G M E N T  

Sudhansu Jyoti Mukhopadhaya, J.

Leave granted.

2. These appeals are directed against order dated 19.07.2010  

passed  by  the  High  Court  of  Kerala  at  Ernakulam  in  

Arbitration Request No.39 of 2009. By the impugned order, the  

appellant’s prayer under Section 11 (6) of the Arbitration  

and Conciliation Act, 1996 for appointment of arbitrator has  

been rejected by the High Court.  

3. The factual matrix of the case is as follows:

On 27.1.2005, the appellant submitted tender, which was  

accepted by the respondents on 21.7.2005. The possession of  

the work site was handed over to the appellant on 2.9.2005.  

The period for completion of the contract expired on 1.9.2007.  

The case of the appellant is that the Company had completed a  

major part of the work. This was disputed by the respondents.  

According to them, only 41% of the work was completed as on

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22.12.2007, based on the original contract price. Based on the  

revised contract price, the progress achieved was only 30% as  

on  22.12.2007;  the  work  carried  out  from  22.12.2007  to  

1.3.2009 was only 12% as against 70% target.  

According to the appellant, a sum of Rs.1,18,87,265/- was  

payable  to  it  but  the  said  amount  was  withheld  by  the  

respondents. As a condition for releasing the amount, the  

appellant was compelled to execute a supplemental agreement.  

The appellant sought extension of the period for completion  

of the work which was granted up to 1.3.2009. On 7.3.2009,  

the appellant requested for appointment of a ‘Dispute Review  

Expert’ as stipulated in the General Conditions of Contract.  

On  9.5.2009,  the  appellant  again  made  a  request  for  

appointment of ‘Dispute Review Expert’ and also for extension  

of  the  "intended  completion  period".  Another  letter  dated  

10.6.2009 was written by the appellant to the Chairman of the  

Council  of  Indian  Roads  Congress  with  similar  prayer  to  

appoint a ‘Dispute Review Expert’ as stipulated in Clause  

36.1 of ITB forming part of the agreement without any  delay,  

with due intimation to the appellant in writing.  

On  7.08.2009,  the  Indian  Roads  Congress  addressed  a  

letter  to  the  Chief  Engineer,  PWD  National  Highways,  

Thiruvananthapuram to inform about the appointment of Dispute  

Review Expert. On 6.10.2009, the Indian Roads Congress wrote  

another  letter  to  the  Chief  Engineer,  Ministry  of  Road  

Transport  &  Highways,  New  Delhi  requesting  him  to  inform

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about the appointment of Dispute Review Expert. However, no  

reply was given to the appellant.  

4. In this background, the appellant moved before the High  

Court  under  Section  11  (6)  of  the  Arbitration  and  

Conciliation Act, 1996 for appointment of an arbitrator. The  

learned Single Judge of the High Court  by impugned order  

dated  19.07.2010  dismissed  the  request  holding  that  no  

arbitration agreement exists.  

5. Review Petition filed by the appellant was also rejected  

by order dated 2.02.2011.   

6. The  appellant  relied  upon  Clauses  24 and  25  of  the  

Standard Bidding Document which forms part of the contract  

and read as follows:

    "24. Disputes  24.1  If  the  Contractor  believes  that  a  

decision taken by the Engineer was either outside  the authority given to the Engineer by the Contract  or that the decision was wrongly taken the decision  shall  be  referred  to  the  Dispute  Review  Expert  within  14  days  of  the  notification  of  the  Engineer's decision.        

25. Procedure for Disputes.     25.1.  The  Dispute  Review  Expert  (Board)  shall give a decision in writing within 28 days  of receipt of notification of a dispute.

25.2 The Dispute Review Expert (Board) shall  be paid daily at the rate specified in the Contract  Data  together  with  reimbursable  expenses  of  the  types specified in the Contract Data and the cost  shall be divided equally between the Employer and  the Contractor, whatever decision is reached by the  Dispute Review Expert. Either party may give notice  to the other to refer a decision of the Dispute  Review Expert to an Arbitrator within 28 days of  the Dispute Review Expert's written decision. If  neither  party  refers  the  dispute  to  arbitration  within  the  next  28  days,  the  Dispute  Review

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Expert's  decision  will  be  final  and  binding.

25.3  The  arbitration  shall  be  conducted  in  accordance with the arbitration procedure stated in  the Special Conditions of Contract."

7. Detailed procedure has been stipulated in Sub clause (a)  

to (f) of Clause 25.3 of the Standard Bidding document.  

8. It  appears  that  appellant  by  letter  dated  11.8.2009  

requested  the  Superintending  Engineer,  National  Highway,  

Central Circle, Kochi, to agree to the appointment of a sole  

arbitrator mentioned in the letter. But no reply was given.

9. The respondents in their counter affidavit opposed the  

prayer  and  contended  that  if  arbitration  is  the  mode  of  

settlement of disputes, the names of Dispute Review Experts  

are to be specifically mentioned in the contract data, which  

was not done in the present case. In the contract entered  

into between the parties on 25.08.2005, there was a specific  

clause which reads as follows:

"The parties to this contract agree and undertake  the condition that arbitration shall not be a means  of settlement of dispute or claims or anything on  account of this contract."

10. It was contended on behalf of the respondents that in  

absence of nomination of Dispute Review Expert, there is no  

valid arbitration agreement.  

11. Learned counsel for the appellant relied upon decision  

of this Court in M.K. Abraham and Company v. State of Kerala

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and another, (2009) 7 SCC 636.  In the said case, the Court  

noticed  that  a  letter  dated  28.9.1994  was  issued  by  the  

Ministry of Surface Transport, Government of India informing  

all  the  State  Public  Works  Departments  and  all  Chief  

Engineers in all the States dealing with National Highways,  

that a standard contract clause prescribing the procedure to  

be  followed  for  appointment  of  arbitrators  was  to  be  

incorporated  in  the  bidding  conditions  for  the  National  

Highway  works  and  that  the  arbitration  clause  should  be  

compulsorily  made  part  of  the  bidding  conditions  in  the  

respective  states.  In  said  case,  this  Court  noticed  the  

aforesaid letter dated 28.08.1994 and Clauses 24 and 24(a) of  

the  notice  inviting  tenders  for  works  as  printed  in  the  

standard form of agreement executed between the parties and  

observed as follows:

“24. In the present case, as noticed above, the  contract consists of a typewritten contract agree- ment between the appellant and the second respon- dent [which does not contain any terms and condi- tions, but which merely states that the contract is  for execution of the described work as per the ac- companying articles of agreement, plan, specifica- tion  and  conditions  of  contract  approved  by  the  Project Director (SE), National Highway (ADB), Cir- cle Adappally, Cochin] with several printed forms  with cyclostyled additions as annexures and hand- written corrections. The printed form of articles  of agreement has an attachment slip.

25. The contract in the present case does not  contain any handwritten terms in regard to arbitra- tion. The contract has printed clauses barring ar- bitration  [Clauses  24  and  24(a)  of  the  notice  inviting tenders for works and a preamble clause  and Clause 3 in the articles of agreement]. A cy- clostyled slip signed by both parties  containing  the words “arbitration clause as per the Ministry

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of Surface Transport’s Letter No. RW/NH-34041/3/94- DO-III dated 28-9-1994 will be applicable” is at- tached to the printed articles of agreement.

26. By applying the well-settled principles re- lating to construction of contract the following  position will emerge:

(i) the terms of the articles of agreement will  prevail over the terms of notice inviting tenders  for works, and

(ii) the term contained in the cyclostyled at- tachment to the printed form of articles of agree- ment will prevail over the terms of the printed ar- ticles of agreement. Consequently, the contents of the attachment slip  to the printed form of articles of agreement pro- viding for arbitration will prevail over the bar on  arbitration contained in the notice inviting ten- ders for works and the articles of agreement. As a  result, it has to be held that there is a provision  for arbitration in regard to the disputes between  the respective appellant and the respondents.”

However, the High Court distinguished the case relied  

upon by the appellant.  

12. In  the  letter  of  acceptance  dated  21.07.2005,  the  

Superintendant  Engineer  intimated  the  appellant  the  

acceptance of the offer given by the appellant at paragraph 9  

therein, it was specifically mentioned that all terms and  

conditions of notice inviting tenders and tender documents  

shall be binding on the said contract and the contractor. In  

the bidding document supplied to the appellant by respondent  

no.3 arbitration clauses were incorporated at clause 25 and  

25.3 as noticed above. At Clause 36 the provisions of Dispute  

Review Expert was mentioned as follows:

“36. Dispute Review Expert

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36.1 The  Employer  proposes  that  [name  of  proposed  Dispute  Review  Expert  as  indicated  in  Appendix]  be  appointed  as  Dispute  Review  Expert  under the Contract, at a daily fee as indicated in  Appendix plus reimbursable expenses.  If the Bidder  disagrees with this proposal, the Bidder should so  state in the Bid. If in the Letter of Acceptance,  the Employer has not agreed on the appointment of  the  Dispute  Review  Expert,  the  Dispute  Review  Expert shall be appointed by the Council of Indian  Roads Congress at the request of either party.”  

13. In the agreement clause (3) it was mentioned that the  

parties to the contract agreed and undertake the conditions  

that arbitration shall not be means of settlement of disputes  

or claims or anything on account of the said contract.  

14. The  case  was  heard  and  judgment  was  reserved.  

Subsequently, parties  have filed joint  application showing  

the name of the arbitrator mutually agreed to by the parties  

as under:

“Hon. Justice Mr. K. John Mathew  

Former Judge of the Hon. High Court of Kerala, Veekshanam Road, Kochi, 682018 Kerala State

Sd/- Advocate for the Petitioner  Babu Thomas K For Rabin Maujumdar

Sd/-

Adv. M T George Advocate for the respondents”

15. In  view  of  stand  taken  by  the  parties  and  as  they  

mutually agreed for arbitration by retired Hon’ble Judge of  

the Kerala High Court, without going into the question of

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merit, we set aside the impugned order dated 19th July, 2010  

and refer the matter to Hon’ble Mr. Justice K. John Mathew  

(retired). The parties will negotiate and settle the terms  

and  conditions  of  arbitration.  It  is  expected  that  the  

arbitration proceeding will be concluded at an early date.

16. The  appeals  stand  disposed  of  with  aforesaid  

observations. No costs.  

…………………………………………………………………….J.                       (SUDHANSU JYOTI MUKHOPADHAYA)

…………………………………………………………………….J.                  (DIPAK MISRA)

NEW DELHI, JULY 01, 2014.

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ITEM NO.1A               COURT NO.6                 SECTION XIA (For Judgment)

              S U P R E M E  C O U R T  O F  I N D I A                           RECORD OF PROCEEDINGS

Civil Appeal No(s). …......../2014 (@ SLP (C) Nos. 14947-14948/2011)

M/S. KAIKARA CONSTRUCTION CO.                      Appellant(s)

                               VERSUS

STATE OF KERALA AND ORS.                           Respondent(s)

Date : 01/07/2014 These appeals were called on for pronouncement  of Judgment today.

For Appellant(s) Mr. Rabin Majumder ,Adv.

For Respondent(s) Mr. M. T. George ,Adv.

      Hon'ble Mr. Justice Sudhansu Jyoti Mukhopadhaya pronounced  the reportable judgment of the Bench comprising His Lordship and  Hon'ble Mr. Justice Dipak Misra.

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The appeals are allowed in terms of the signed reportable  judgment.

(MEENAKSHI KOHLI)                               (USHA SHARMA)   COURT MASTER                                   COURT MASTER  

[Signed reportable judgment is placed on the file]