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PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: M/S.  POPULAR BUILDERS, CALCUTTA

DATE OF JUDGMENT:       17/10/2000

BENCH: S.N.Phukan, M.B.Shah, G.B.Pattanaik

JUDGMENT:

PATTANAIK,J.

L.....I.........T.......T.......T.......T.......T.......T..J

     Leave Granted.

     This  appeal by the Union of India is directed against the  judgment  dated 28th of January, 1999 of  the  Division Bench  of Calcutta High Court, dismissing the appeal of  the Union  of  India, arising out of an arbitration  proceeding. The  undisputed  facts are that the respondent  had  entered into  an  agreement with the appellant for  construction  of Annex  Building  to  Telephone   Bhawan  at  Calcutta.   The agreement  between  the  parties  contained  an  arbitration clause  therein.   After the completion of work,  the  final bill  was drawn and was sent to the respondent and he agreed to  accept the final bill and in fact did receive the  money under the final bill without any objection.  But thereafter, he  wrote  a  letter  to   the  concerned  Chief   Engineer, indicating several items of claim and additional works which the  respondent  had executed pursuant to the directions  of the  appropriate  authority and the said work had  not  been included  in  the final bill.  He, therefore, requested  the Chief  Engineer,  the  authority  under  Clause  25  of  the agreement  to appoint an arbitrator and pursuant to the said request, the Chief Engineer by his letter dated 25.11.93 did appoint   an   arbitrator.    Subsequently,  the   appointed arbitrator  was  changed.  Pursuant to an order of the  High Court  and  before the arbitrator, the respondent filed  his claim  on  different  heads.  The Union  of  India-appellant herein, filed his objection as well as filed a counter claim before  the  arbitrator.  The learned Arbitrator  ultimately passed  an  award and that award was filed before  the  High Court,  for  being made a rule of Court under Section 14  of the  Arbitration  Act,  1940.  The Union of India  filed  an objection  under  Sections 30 and 33 for setting  aside  the award.   The learned Single Judge considered the  objections filed by the Union of India and rejecting the same, made the award  a rule of Court.  Against the aforesaid order of  the learned  Single Judge, an appeal was carried to the Division Bench under Section 39 of the Arbitration Act.  The Division Bench  having  dismissed the Unions appeal by the  impugned order, the present appeal has been preferred by the Union of India.   From  the  judgment of the  learned  Single  Judge, rejecting  the  objections of the Union of India as well  as

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the impugned judgment of the Division Bench, it appears that the  Union  of India had urged the sole point of  limitation and  the same had been negatived by the courts below and  in our view rightly.

     Mr.   A.  Subba Rao, the learned counsel for the Union of  India  however raised the question that the  final  bill having  been accepted by the respondent-contractor,  without any  objection, there did not subsist any arbitrable dispute to  be  referred to arbitration, invoking Clause 25  of  the agreement  and, therefore, the impugned award has to be  set aside.   In  support of this contention, reliance  has  been placed  on two decisions of this Court M/s.  P.K.   Ramaiah and  Company  vs.   Chairman & Managing  Director,  National Thermal Power Corpn., 1994 Supp.  (3) S.C.C.  126 as well as a three Judge Bench decision of this Court in Nathani Steels Ltd.   vs.   Associated Constructions, 1995 Supp.(3)  S.C.C. 324.

     Mr.   L.  Nageswara Rao, appearing for the respondent- claimant on the other hand contended that this objection had not specifically been taken in the objection, that was filed under  Sections  30  and  33 of  the  Arbitration  Act,  and therefore,  the Union Government should not be permitted  to take  up this plea in this forum.  He further contended that pursuant  to  the request made by the Contractor, the  Chief Engineer  himself  having  appointed an  arbitrator  on  the ground  that  dispute  subsists for arbitration and  in  the arbitration  proceeding,  the Union Government having  fully participated  and  further,  subsequent  to  the  award,   a rectification  application  having been filed by  the  Union Government  and  in  that application also,  only  challenge being  made on the quantum and not on the ground of  absence of arbitrable disputes, it would not be appropriate for this Court  to  allow the Union Government to take this  plea  at this  belated  stage.   He  also   contended  that  the  two decisions  referred to by the Union Government are prior the appointment  of  arbitrator and none of these decisions  are applicable  to  the  case in hand, where an award  has  been passed  by the appointed arbitrator after due  participation of Union Government in the arbitration proceedings.

     Having considered the rival submissions at the Bar and on  careful  scrutiny of the objections filed by  the  Union Government  under Sections 30 and 33 of the Arbitration Act, though  we  find sufficient force in the contention  of  Mr. Nageswara  Rao,  but  the existence of a dispute  being  the condition  precedent for appointment of an arbitrator  under Clause 25 and in view of the two decisions of this Court and that  the  respondent-claimant  did receive the  final  bill without any protest, we are not persuaded to outright reject the  contention  of Mr.  Subba Rao, appearing for the  Union Government.   It transpires from the award itself that  only as against claim item No.  2, the Union of India had pleaded that  the  said claim cannot be entertained in view  of  the receipt  of  the  final bill by the contractor  without  any protest, though the arbitrator had rejected the said plea of the Union of India.  It is no doubt true as contended by Mr. Nageswara  Rao  that  neither the judgment  of  the  learned Single  Judge nor the judgment of the Division Bench,  which is  under  challenge  in this appeal before this  Court  did indicate  the  fact that the Union of India had raised  this contention  before  the  aforesaid   two  forums  below  but notwithstanding the same when the existence of an arbitrable dispute is the condition precedent for exercise of power for

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appointment  of an arbitrator under Clause 25 and since  the final  bill  that was prepared by the appropriate  authority was  accepted  by the respondent without any protest  as  is apparent  from the letter of the claimant-contractor and the question had been raised before the arbitrator in respect of the  claim  item No.  2 by the Union of India, we  think  it appropriate  to  hold  that so far as claim item No.   2  is concerned,  the  same  could  not  have  been  a  matter  of reference of an arbitrable dispute and as such, the award of the  arbitrator to that extent must be set aside.  So far as the  other claim items are concerned, the Union of India not having  taken  any  objection to the same on  the  aforesaid score  and  that even the objection filed under Sections  30 and  33  of the Arbitration Act not being specific  on  that issue,  we  do not think it appropriate to allow  the  Union Government  to  raise  that objection, so far as  the  other items  of  claim are concerned.  Accordingly,  the  impugned award  in respect of claim item No.  2 is set aside and  the rest  of  the award amount, stand affirmed.  The  appeal  is allowed in part.