IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 107_______OF 2009 (Arising out of Special Leave Petition (Civil)

NO.1363 of 2008)

Om Construction Co.        ...   Appellant  

Vs.

Ahmedabad Municipal Corp. & Anr.       ...   Respondents

J U D G M E N T  

ALTAMAS KABIR, J.

1. Leave granted.  

2. The  appellant  herein  is  a  “C”  class  approved

contractor,  whose  tender  was  accepted  by  the

Ahmedabad  Municipal  Corporation  for  providing  and

fixing  Nibhada  Stone  for  paving  and  Footpath  in

Kalupur and Dariapur wards in Central Zone within the

City of Ahmedabad.  The Work Order was issued on 6th

June, 2006, and as per the appellant’s version the

work  was  completed  by  the  end  of  October,  2006.

According to the appellant, after giving credit for

payments which had been made by the Corporation, a

sum of Rs.68,46,872/- was still due towards the work

performed  in  the  Dariapur  ward,  while  a  sum  of

Rs.8,61,760/- was also due for the work carried out

in Kalupur ward.  It is the case of the appellant

that  despite  notice  having  been  served  on  the

Corporation  on  24th May,  2007,  the  said  amounts

remained unpaid. Ultimately, on 6th June, 2007, the

appellant issued a notice to the Corporation setting

out the facts relating to the work performed and the

claim  made  in  detail  and  claimed  a  sum  of

Rs.77,08,632/-, together with interest at the rate of

18% per annum, from the due date till the date of

realization,  which  the  appellant  claimed,  was  the

total outstanding amount.  In the notice it was also

indicated that the claim made by the appellant should

be  accepted  and  payment  should  be  made  within  a

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period of 30 days from the date of receipt of the

notice or that an Arbitrator should be appointed by

the Corporation within a period of 30 days from the

date of receipt of the notice.   

3. As there was no response to the said notice from

the Municipal Corporation nor was any payment made or

Arbitrator appointed, the appellant invoked clause 30

of Form B-I, which provided for the appointment of an

Arbitrator and was made applicable in the contract

entered into between the parties when the appellant’s

tender was accepted.  It appears that under General

Conditions of Contract of the Engineering Department

of  the  Ahmedabad  Municipal  Corporation,  under  its

General  Specifications it is provided that certain

conditions are required to be followed which includes

the condition that Form B-I would be applicable to

the contract and clause 30 of Form B-I is relevant

for this case. The relevant portions of clause 30 of

Form B-I reads as follows :-

 “Clause 30(1)  Disputes to be referred to Tribunal:   The  disputes  relating  to  this

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contract, so far as they relate to any of the following matters, whether such disputes arise  during  the  progress  of  the  work  or after the completion or abandonment thereof, shall  be  referred  to  the  Arbitration Tribunal, Gujarat State;  

(2) ……………

(3) The provision of Arbitration Act, shall in so far as they are inconsistent with the provision of this Act, cease to apply to any dispute  arising  from  a  works  contract  and all  arbitration proceedings in relation to such dispute before an Arbitrator, Court or authority  shall  stand  transferred  to  the Tribunal.”

4. The appellant filed a petition before the Gujarat

High  Court  on  9th July,  2007,  being  Arbitration

Petition  No.  35  of  2007,  under  Section  11  of  the

Arbitration and Conciliation Act, 1996, hereinafter

referred to as “the 1996 Act”, inter alia, praying

for the appointment of an Arbitrator to resolve the

disputes between the parties. The High Court by its

order  dated 20th November,  2007,  rejected  the  said

petition. While doing so, the High Court took note of

Section 2(1)(k) of the Gujarat Public Works Contracts

Disputes Arbitration Tribunal Act, 1992, hereinafter

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referred  to  as  the  “Gujarat  Tribunal  Act”,  which

defines “works contract” to mean a contract made by

the State Government or Public Undertaking which is

notified  in  the  Official  Gazette  by  the  State

Government.  The High Court also noticed Section 2(1)

(l)  of  the  aforesaid  Act,  which  defines  “Public

Undertaking” to, inter alia, mean such class of local

authorities  as  the  State  Government  specifies  by

Notification in the Official Gazette. It was further

noticed that in the absence of such Notification, the

Ahmedabad  Municipal  Corporation  was  not  a  “Public

Undertaking” and the contract entered into by it with

the appellant could not, therefore, be termed as a

“Works Contract” as defined in Section 2(1)(k) of the

aforesaid Act.  The High Court, therefore, held that

the Arbitration Tribunal, Gujarat State, would have

no jurisdiction to entertain the disputes between the

parties emanating from the Work Order in question.   

5. The  High  Court  then  went  on  to  consider  the

applicability  of  the  Arbitration  and  Conciliation

Act, 1996, to the facts of the case.  The High Court

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took note of the fact that the Agreement between the

parties,  and  more  particularly  the  Arbitration

Agreement,  did  not  lay  down  any  procedure  for

appointing  an  Arbitrator  or  Arbitrators.

Accordingly, in the absence of such procedure, the

Designated  Court could not invoke its jurisdiction

under Sub-section (6) of Section 11 of the 1996 Act,

which contemplates a situation, where the appointment

procedure  as  agreed  to  by  the  parties  under  Sub-

section (2) of Section 11 is not followed. The High

Court, therefore, while rejecting the applicability

of the Gujarat Tribunal Act, also closed the doors

for relief under the provisions of the 1996 Act.

6. The said order of the High Court, which has been

challenged in this appeal, therefore, gives rise to

the  question  as  to  whether  in  the  absence  of  any

procedure  in  the  Arbitration  clause  for  the

appointment of an Arbitrator, can the Chief Justice

of the High Court or the Designated Court appoint an

Arbitrator under Section 11(6) of the 1996 Act in

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terms of the Agreement between the parties to have

their disputes settled by arbitration.   

7. Mr.  S.K.  Gambhir,  learned  Senior  Advocate

appearing for the appellant company, submitted that

having regard to the specific condition contained in

the  General  Conditions  of  Contract  regarding  the

application  of  Form  B-I,  the  parties  to  the

Arbitration Agreement could not be forced to file a

suit simply because the procedure for arbitration, as

required under Section 11(6) of the 1996 Act, had not

been agreed upon by the parties or specified therein.

Mr.  Gambhir  urged  that  when  there  was  a  specific

Arbitration Agreement between the parties, the remedy

in respect thereof under the 1996 Act could not be

denied on a mere technicality and if no procedure had

been mentioned in the Arbitration Agreement, it could

not  be  contended  that  on  such  ground  alone  the

provisions of Sub-section (6) of Section 11 could not

be invoked in view of the provisions of Sub-section

(2)  thereof.   Mr.  Gambhir  submitted  that,  in  any

event, Sub-section (2) of Section 11 would have to be

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read  with  Sub-clauses  (3)  to  (5)  as  well  and  the

powers of the Chief Justice or the Designated Court

could not be fettered by Sub-section (6).   It was

submitted that the Chief Justice or the Designated

Court  could  in  given  circumstances  appoint  an

Arbitrator by applying the provisions of Sub-section

(6) of Section 11 of the said Act. It was submitted

that while the High Court had correctly held that the

provisions of the Gujarat Tribunal Act would have no

application in the present case, it had gone wrong in

holding  that  no  relief  could  be  provided  to  the

appellant under the provisions of the 1996 Act also.

8. Mr. Gambhir also contended that the requirements

of Sub-section (6) of Section 11 of the 1996 Act have

all  been  fulfilled,  although,  the  appointment

procedure had not been indicated by the parties.  He

submitted that what was most important is that the

parties had failed to reach an agreement regarding

the  appointment  of  an  Arbitrator  to  resolve  their

disputes, which was the basic requirement to request

the Chief Justice or the Designated Court to secure

the appointment of an Arbitrator.  Mr. Gambhir drew

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our attention to the opinion provided by the Legal

Department  of  the  Ahmedabad  Municipal  Corporation

itself  indicating  that  in  the  event  of  a  dispute

between a contractor and the Corporation in the work

of the Engineering Department, proceedings will have

to  be  initiated  under  the  Arbitration  and

Conciliation Act, 1996.  Mr. Gambhir also drew our

attention  to  an  earlier  order  passed  by  the

Designated  Court  of  the  Gujarat  High  Court  in

Arbitration Petition Nos.46-55 of 2003 in respect of

a similar contract, where a retired Judge of the said

High  Court  was  appointed  as  Sole  Arbitrator  to

resolve the disputes between the parties after the

parties  had  arrived  at  a  consensus  regarding  the

passing of such an order.  

9. Mr.  Gambhir  submitted  that  the  Ahmedabad

Municipal  Corporation had themselves agreed to the

appointment of an Arbitrator under the 1996 Act and

could not, therefore, resile from such position in

the instant case.  

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10. The stand taken by Mr. Gambhir was opposed by Mr.

Shyam Divan, learned Senior Advocate, who supported

the view taken by the High Court and submitted that

the appellant’s remedy lay in the filing of a suit.

In the alternative, it was also submitted that the

decision in the matter could be deferred and a notice

could be issued to the State of Gujarat to indicate

as to whether it had any intention of publishing a

Notification as contemplated in Section 2(k) of the

Gujarat Tribunal Act.  

11. Mr. Divan further submitted that in the absence

of such Notification, clause 30 of Form B-I would

remain  inoperative  and  consequently  the  provisions

relating to the settlement of disputes by arbitration

would also not be available to the parties.    

12. Mr. Divan urged that other than Clause 30 of Form

B-I, there was no other provision for arbitration in

the contract between the parties and the question of

invoking  jurisdiction  under  the  1996  Act  was,

therefore, misconceived. Mr. Divan urged that as the

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basic requirement of Sub-section (6) of Section 11

regarding an agreed procedure had not been fulfilled,

neither the Chief Justice nor the Designated Court

could assume jurisdiction thereunder for appointing

an Arbitrator.   

13. We have carefully considered the submissions made

on behalf of the respective parties and it appears

that we are called upon to decide two questions in

order to decide this appeal. The first and possibly

basic  question  is  whether  in  the  absence  of  a

Notification in the Official Gazette, the Municipal

Corporation  can  at  all  be  considered  as  a  Public

Authority for the purpose of Section 2(1)(k) of the

Gujarat  Tribunal  Act,  1992.  The  other  question  is

whether the absence of a procedure for appointment of

an  Arbitrator in the Arbitration Agreement itself,

would  constitute  a  bar  for  the  appointment  of  an

Arbitrator under Section 11(6) or any other provision

of the 1996 Act, when not only the parties to these

proceedings, but the High Court as well, had arrived

at a conclusion that the provisions of the Gujarat

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Tribunal Act, 1992, would not be applicable in the

instant case.   

14. In this regard, we are inclined to accept the

submissions of Mr. Gambhir notwithstanding the fact

that the Ahmedabad Municipal Corporation had not been

notified to be a “Public Undertaking” as defined in

Section 2(1)(iii) of the Gujarat Tribunal Act, 1992.

There  is  no  dispute  that  the  Ahmedabad  Municipal

Corporation is a local authority and it could assume

the garb of a “Public Undertaking” only pursuant to a

Notification published in that regard in the Official

Gazette.  On the other hand, even if Form B-I loses

its  relevance  as  far  as  the  present  contract  is

concerned,  since  the  parties  have  agreed  to

resolution  of  their  disputes  by  arbitration,  the

provisions of Sub-section (5) of the 1996 Act can be

pressed into service to enable the parties to invoke

the  powers  of  the  Chief  Justice  to  appoint  an

Arbitrator. The stand taken by Mr. Divan is highly

technical  and  is  not  in  aid  of  resolution  of  the

disputes between the parties by an Arbitral Tribunal.

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While  recognizing  the  right  of  the  appellant  to

approach the Chief Justice or the Designated Court

under Section 11(6) of the 1996 Act, the stand of the

respondent Corporation has been that the party should

be relegated to suit, which is quite contrary to the

stand taken by it in the case of other employees.   

15. Section 11 of the 1996 Act deals exclusively with

the  appointment  of  Arbitrators.   Sub-section  (2)

provides  that  the  parties  are  free  to  agree  on  a

procedure  for  appointing  the  Arbitrator  or

Arbitrators  but  subject  to  Sub-section  (6)  which

provides that if an agreed procedure had not been

acted  upon,  the  parties  could  approach  the  Chief

Justice  or  his  Designate  for  appointment  of  an

Arbitrator. Sub-sections (3), (4) and (5) contemplate

different situations in which the Chief Justice or

his  Designate  could  be  requested  to  appoint  an

Arbitrator.  In our view, in the facts of this case,

the answer to the question thrown up in this appeal

lies in Sub-clause (5) of Section 11 of the 1996 Act,

which reads as follows :-

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“(5)  Failing  any  agreement  referred  to  in sub-section  (2),  in  an  arbitration  with  a sole  arbitrator,  if  the  parties  fail  to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the  Chief  Justice  or  any  person  or institution designated by him.”

16. Having arrived at the aforesaid conclusion, the

only question that remains to be decided is whether

this matter should be remitted to the High Court for

appointment  of  an  Arbitrator  or  whether  we  should

ourselves  appoint  an  Arbitrator  in  terms  of  the

Arbitration Agreement.  Remitting the matter to the

High  Court  would  only  mean  another  round  of

litigation, whereas if the appointment is made by us,

the  matter  will  achieve  finality,  which  would

ultimately be beneficial for all concerned.    

17. We,  accordingly,  allow  the  appeal  and  appoint

Hon’ble Mr. Justice C.K. Thakker, a former Judge of

the Supreme Court, presently settled at D-64, Akash

Towers, Judges’ Bungalow Road, Vastrapur, Ahmedabad

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to be the Arbitrator for settlement of the disputes

which have arisen between the parties.  The learned

Arbitrator  shall  fix  his  own  fees  and  shall  also

formulate the procedure to be adopted by him during

the arbitration proceedings. The Arbitrator shall try

and publish his Award as expeditiously as possible,

but positively within six months from the date of

entering upon the Reference. The Arbitrator will also

decide  the  venue  and  sittings  of  the  Arbitral

Tribunal  in  consultation  with  the  parties.   The

judgment and order of the High Court impugned in this

appeal is, accordingly, set aside. The costs of this

appeal  shall  be  the  costs  in  the  arbitration

proceedings.   

_______________J. (ALTAMAS KABIR)

_______________J. (MARKANDEY KATJU)

NEW DELHI Dated: 13.01.2009

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