Paragraph numbers below are the court’s original numbering, recovered from the source text.
11. That apart, in Para 23 of the decision in the case of K. K. Modi (supra), this Court also noticed its earlier decision in the case of State of U.P. v. Tippar Chand, [1980] 3 SCC 241. In that case, the test as indicated above was also recorded in which it was stated that "this court said that there was F no mention in this clause in any dispute much less any reference thereof."
12. Keeping the ingredients as indicated by this Court in the case of K. K. Modi (supra) in mind for holding a particular agreement as an arbitration agreement, we now proceed to examine the aforesaid ingredients in the context G of the present case. (a) Clause 4 of the Work Order categorically states that the decision of the Superintending Engineer shall be binding on the parties. (b) The jurisdiction of the Superintending Engineer to decide the rights H [2007) 6 S.C.R. A of the parties has also been derived from the consent of the parties to the Work Order. ( c) The agreement contemplates that the Superintending Engineer shall determine substantive rights of parties as the clause encompasses all varieties of disputes that may arise between the parties and does not restrict the B jurisdiction of the Superintending Engineer to specific issues only. ( d) That the agreement of the parties to refer their disputes to the decision of the Superintending Engineer is intended to be enforceable in law as it is binding in nature.
13. In view of the aforesaid conditions being satisfied, which were based on the principles laid down by this Court in K.K. Modi's case (supra), there cannot be any doubt in our mind that the arbitration agreement does exist. Clause 4 of the Work Order is an Arbitration Agreement. The learned Counsel appearing on behalf of the appellants contended that the ingredients D laid down in the case of K.K. Modi are not satisfied in the present case and therefore following the principles laid down in that case, this Court must hold that clause 4 of the Work order cannot be construed as an arbitration agreement. We are unable to accept this contention of the learned counsel of the appellants for two reasons. First, in view of our discussions herein earlier, to the effect that all the ingredients to hold a particular agreement as an arbitration E agreement have been satisfied in the preset case. Secondly, the factual situations in the case of K.K. Modi (supra) and in the case before us are very 1different. That case dealt with the !~valuation and distribution of assets, which required expert decision rather than arbitration. The clause in the K.K. Modi case (supra) had a very restricted operation as it dealt with only disputes F regarding implementation of contract whereas, in the case before us, Clause 4 is much wider in its ambit as it deals with any dispute between the contractor l!lld the depa1tment.
14. The words "any dispute'' appears in Clause 4 of the Work Order. Therefore only on the basis of the materials produced by the parties in G support of their respective claims a decision can be arrived at in resolving the ~ispute between the parties. The use of the words 'any dispute' in Clause 4 of the Work Order is wide enough to include all disputes relating to the said Work Order. Therefore, when a party raises a dispute for non-payment of money after completion of the work, which is denied by the other party, such a dispute would come within the meaning of 'arbitration agreement' between H fie parties. Clause 4 of the Work Order also clearly provides that any dispute PUNJAB STATE v. DINANATH[TARUNCHATTERJEE,J.] between the department and the contractor shall be referred to the A Superintending Engineer, Hyde! Circle No. I, Chandigarh for orders. The word 'orders' would indicate some expression of opinion, which is to be carried out, or enforced and which is a conclusion of a body (in this case Superintending Engineer, Hyde! Circle No. I, Chandigarh). Then again the conclusion and decision of the Superintending Engineer will be final and binding on both the B parties. This being the position in the present case and in view of the fact that Clause 4 of the Work Order is not under challenge before us, the decision that would be arrived at by Superintending Engineer, Hyde! Circle No. I, Chandigarh must also be binding on the parties as a result whereof Clause 4 must be held to be a binding arbitration agreement.
15. In the decision of this Court in the case of State of UP v. Tippar Chand (supra), this Court however held that the clause in dispute in that decision between the parties did not amount to an arbitration agreement. In c that decision, this Court further held that clause under consideration before them which provided that except where otherwise specified in the contract the decision of the Superintending Engineer for the time being shall be final, D conclusive and binding on all the parties to the contract upon all questions relating to the meaning of the specifications etc and the decision of the Superintending Engineer as to the quality, workmanship etc. shall be final, conclusive and binding between the parties does not constitute an arbitration agreement but while arriving at such a conclusion this Court referred to a E decision of the Jammu and Kashmir High Court in the case of Dewan Chand v. State of Jammu and Kashmir, AIR (1961) J & K 58. Jn the Dewan Chand case (supra) the relevant clause runs as follows:- "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. This Court in that decision had put strong reliance on the expression "any dispute F between the contractor and the department" and approved the conclusions arrived at by the J & K High Court. It came to the conclusion by interpretation of that clause that there did not exist any arbitration agreement as the decision of the Superintending Engineer in connection with the work done by the contractor was meant for supervision and execution of the work and administrative control over it from time to time. However, in Clause 4 of the G Work Order in the present case, which specifically states that in case of any dispute between the appellants and the contracting parties, the matter shall be referred to the Superintending Engineer. Therefore, the use of the words "any dispute" would clearly mean that it would lead to conclude that the said agreement was in fact an arbitration agreement and thus these words do not H A restrict the scope of the contract.
16. Before parting with this aspect of the matter we may note the decision of State of Orissa v. Damodar Das, [1996] 2 SCC 216 on which strong reliance was placed before us by the! learned counsel for the appellants. This decision of this court may not be helpful to the appellants as we find the B agreement in question in that case was different from Clause 4 of the Work Order. For proper appreciation, we may reproduce the agreement in the case of Damodar Das which reads as under:- c "25. Decision of Public Health Engineer to be final – Except where otherwise specified in this contract, the decision of the Public Health Engineer 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; 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 our of, or relating to, the contract, drawings specifications estimates, instructions, orders or these conditions, or otherwise concerning the works or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or the sooner determination thereof of the contract."
17. A plain reading of this c:Jause in the case of Damodar Das, it is ¢vident that the powers of the Public Health Engineer were essentially to ~upervise and inspect. His powers were limited to the questions relating to ~he meaning of the specifications; drawings and instructions, quality of '!Vorkmanship or materials used on the work, or any other question, claim, F tight, matter, drawings specifications estimates_, instructions, orders or these ¢onditions, or otherwise concerning the works or the execution or failure to execute the same. However, in the case before us, the Superintending Engineer was given full power to resolve any dispute arising between the parties which power in our view is wide enough to cover any nature of dispute raised by the parties. The Clause in the instant case categorically mentions the word G "dispute" which would be referred to him and states "his decision would be final and acceptable/binding on both the parties."
18. That being the position, we are of the view that the clause in the case ofDamodar Das and Clause 4 of the Work Order of the present case are totally different. We accordingly do not find any reason to hold otherwise. PUNJAB STATE v. DINANATH[TARUNCHATTERJEE,J.] –">-'
19. At the risk of repetition we may also say before parting with this A judgment that Clause 4 of the Work Order speaks for a dispute between the parties. It also speaks of a dispute and all such disputes between the parties to the Work Order shall be decided by the Superintending Engineer, Anandpur Sahib Hydel Circle No. I. Obviously, such decision can be reached by the Superintending Engineer, Anandpur Sahib Hydel Circle No. I only when it is B referred to him by either party for decision. The reference is also implied. As the Superintending Engineer will decide the matter on reference, there cannot be any doubt that he has to act judicially and decide the dispute after hearing both the parties and permitting them to state their claim by adducing materials in support. In Clause 4 of the Work Order it is also provided as noted herein earlier that the decision of the Superintending Engineer shall be final and such c agreement was binding between the parties and decision shall also bind both the parties. Therefore, the result would be that the decision of the Superintending Engineer would be finally binding on the parties. Accordingly, in our view, as discussed herein above that although the expression "award" or "arbitration" does not appear in Clause 4 of the Work Order even then such D expression as it stands in Clause 4 of the Work Order embodies an arbitration clause which can be enforced.
20. For the reasons aforesaid, we are of the view that Clause 4 of the Work Order can safely be interpreted to be an arbitration agreement even though the term 'arbitration' is not expressly mentioned in the agreement. In E view of our discussions made herein earlier, we therefore conclude that Clause 4 of the Work Order constitutes an arbitration agreement and if any dispute arises, such dispute shall be referred to Superintendent Engineer for decision which shall be binding on the parties.
21. Before parting with this judgment, we may consider a short F 'r submission advanced at the Bar on the question of limitation in filing the application under· Section 20 of the Act. At the risk of repetition, we may keep it on record that the Additional Senior Subordinate Judge, Ropar, held that the application was filed in time whereas the appellate court held that the application was barred by limitation. However, the High Court in revision restored the order of the Additional Senior Subordinate Judge, Ropar, by holding that application was filed within the period of limitation.
22. For the purpos.: of deciding the question of limitation, it may be stated that the application under Section 20 of the Act was filed within 3 years from the date the demand notice was made by the respondent as contemplated H [2007) 6 S.C.R. A under Article 13 7 of the Limitation Act.
23. In order to determine wh1:n the cause of action arose, it is essential for us to refer to a case decided by this court. In the case of S. Rajan v. State of Kera/a, [ 1992] 3 SCC 608 it was held by this Court that the right to apply for arbitration proceeding under Section 20 of the Arbitration Act, 1940 runs B from the date when the dispute arises. It observed: "Reading Article 13 7 and Sub-section (I) of Section 20 together, it must be said that the right to apply accrues when the difference arises or differences arise, as the case may be, between the parties. c It is thus a question of fact to be determined in each case having regard to the facts of that case."
24. Accepting the principles laid down in the case of S. Rajan (supra), this Court in the case of Hari Shankar Singhania and Ors. v. Gaur Hari Singhania and Ors., (2006] 4 SCC 658 again reiterated the principle that an D application under section 20 of the Act for filing the arbitration agreement in ~ourt and for reference of the dispute to arbitration in accordance therewith i~ required to be filed within a period of three years when the right to apply accrues and that the said right accrues when difference or dispute arises between the parties to the arbitration agreement. Keeping the principles in mind, let us now examine as to when difference or dispute arises between the E parties to the arbitration agreement, when the right to apply accrues. As r)oted herein earlier, demand notice was served on the appellants by the respondent on 16th April 1990 and the application under section 20 of the Act was filed on 13th November 1990 which is admittedly within the period of limitation as contemplated under Article 137 of the Limitation Act.
25. The Additional District judge, Roopnagar, Punjab, held on the question oflimitation in filing the application under section 20 of the Act that the cause of action did not arise when notice of demand was served but arose when the respondent first acquired either the right of action or the right to require that arbitration takes place upon the dispute concerned.
26. Keeping the decisions of this court in the cases of S. Rajan (supra) and Hari Shankar Singhania (supra) in mind, in our opinion, the view of the Additional District Judge was totally erroneous. In the aforesaid two decisions, it was held that the right to apply accrued for the difference arising between the parties only when service of demand notice was effective, which should H be the date for holding that the difference had already arisen between the Jr PUNJAB STATE v. DINANATH[TARUNCHATTERJEE.J.) parties. Such being the settled law, we are of the view that the application A under section 20 of the Act was clearly filed within the period of limitation.
27. F orthe reasons aforesaid we do not find any merit in these appeals. Accordingly, the appeals are disposed of with no orders as to cost. B.S. Appeals dismissed of. B