Holding

Clause 4 of the Work Order is an arbitration agreement and the Section 20 application was filed within the limitation period.

Summary

The Punjab State issued a work order containing a clause that any dispute between the department and the contractor would be referred to the Superintending Engineer, whose decision would be final and binding. After the contractor completed the work, a dispute arose over final bills and measurements, and the contractor filed an application under Section 20 of the Arbitration Act, 1940 for appointment of an arbitrator. The trial court held that the clause constituted an arbitration agreement and that the application was filed within the three‑year limitation period prescribed by Article 137 of the Limitation Act, 1963. The appellate court reversed this view, holding that the clause was not an arbitration agreement and that the application was time‑barred; the High Court restored the trial court’s decision. The Supreme Court examined the definition of an arbitration agreement under Section 2(a) of the 1940 Act and held that the clause satisfied all the required ingredients, and that the limitation period began when the demand notice was served, making the application timely. Consequently, the Court dismissed the appeals, confirming the validity of the arbitration agreement and the appointment of an arbitrator.

Issues considered

Whether Clause 4 of the Work Order constitutes an arbitration agreement within the meaning of Section 2(a) of the Arbitration Act, 1940.
Whether the application for appointment of an arbitrator under Section 20 of the Arbitration Act, 1940 was barred by the limitation period under Article 137 of the Limitation Act, 1963.

Legislation cited

Arbitration Act, 1940s. 20, s. 2(a)
Limitation Act, 1963s. Article 137

Subjects

arbitration agreementArbitration Act 1940Limitation Act 1963work order clauseSection 20 applicationfinal and binding decisionSuperintending Engineerdispute resolution

Judgment

A PUNJAB STA TE & ORS.
v.
DINA NATH

MAY 14, 2007

B [TARlJN CHATTERJEE AND ALTAMAS KABIR, JJ.]

Arbitration Act. 1940-Sections 2(a) & 20-Limitation Act, 1963-
Article 137-Contractor filing an application before trial court for )-
appointment of an arbitrator under a relevant clause of the Work Order to
c settle dispute-State opposing the application contending that the relevant
clause of the Work Order is not an arbitration agreement and that the
application is barred by /imitation-Trial Court allowing the application of
the contractor but reversed by the appellate court in State appeal-High
Court upholding the judgment ofl'he trial court-Correctness of-Held, there
D is no particular form of arbitration agreement-On facts, the relevant clause
of the Work Order is an arbitration agreement and the application to appoint
an arbitrator is not barred by /imitation-Hence, appointment of arbitrator
'T"
is valid in law.

Appellant-State issued a Work Order to respondent for a construction
•
E work. After completion of the work, the respondent issued a notice to prepare
final bills and take final measurements for the purpose of payment under the
Work Order. Due to a dispute regarding preparation of the final bills by the
appellants, the respondent issued a notice to the appellants to refer the dispute
is arbitration as per the relevant clause or the Work Order. Since the
F 'appellants failed to respond to the notice, the respondent filed an application
under section 20 of the Arbitration Act, 1940 before trial Court seeking
appointment of an arbitrator. The trial Court allowed the application .,,..,.
construing the relevant clause of the Work Order to be an 'arbitration
agreement' under section 2(a) of the Act and holding that the application is
not barred by limitation. The appellate Court allowed the State appeal A Civil
!

G Revision Petition filed by the respondent was allowed by High Court.
In appeal to this Court, the appellant contended that the relevant clause
under the Work Order cannot be construed as an arbitration agreement; that
lthe application is barred by limitation; and that there was no existence of any ...
H 536
PUNJAB STATE v. DINA NATH 537
dispute for reference to arbitration under the Work Order since it had got A
the work executed at its own cost when the respondent failed to execute the
work under the Work Order.

Dismissing the appeal, the Court

HELD: I.I. A bare perusal of the definition of'arbitration agreement' B
under section 2(a) of the Arbitration Act, 1940 would clearly show that an
arbitration agreement is not required to be in any particular form. What is
required to be ascertained is whether the parties have agreed that if any
--<'
dispute arises between them in respect of the subject matter of the contract,
such dispute shall be referred to arbitration. In that case such agreement C
would certainly spell out of an arbitration agreement. However, from the
definition of the arbitration agreement, it is also clear that the agreement
must be in writing and to interpret the agreement as an 'arbitration
agreement' one has to ascertain the intention of the parties and also treatment
of the decision as final. If the parties had desired and intended that a dispute
must be referred to arbitration for decision and they would undertake to abide D
by that decision, there cannot be any difficulty to hold that the intention of the
parties to have an arbitration agreement; that is to say, an arbitration
> agreement immediately comes into existences. [Para 8] (542-C, D, E)

Rupmani Bai Gupta v. Collector of Jabalpur, AIR (1981) SC 479,
referred to. E
1.2. The Work Order between the parties can be interpreted to be an
arbitration agreement. The omission to mention the words "arbitration" and
I
"arbitrator" cannot be a ground to hold that the said clause was not an
arbitration agreement within the meaning of Section 2(a) of the Act. The
essential requirements are that the parties have intended to make a reference F
---,.- to. arbitration and treat the decision of the arbitrator as final. As the condition,
to constitute an 'arbitration agreement' have been satisfied, the relevant clause
of the Work Order must be construed to be an arbitration agreement and
dispute raised by the parties must be referred to the arbitrator.
[Paras 9 and IOI (542-F; 543-A, B, CJ G
Bihar State Mineral Development Corporation v. Encon Building,
[2003) 7 SCC 418; K.K. Modi v. K.N Modi, [1998) 3 SCC 573 and State of
UP. v. Tippar Chand, (1980[ 3 SCC 241, referred to.

1.3. The Work Order categorically states that the decision of the H
538 SUPREME COURT REPORTS (2007] 6 S.C.R.

A Superintending Engineer shall be binding on the parties. The jurisdiction of
the Superintending Engineer to decide the rights of the parties has also been
derived from the consent of the parties to the Work Order. The agreement
contemplates that the Superintending Engineer shall determine substantive
rights of parties as the clause encompasses all varieties of disputes that may
B arise between the parties amd does not restrict the jurisdiction of the
Superintending Engineer to specific issues only. That the agreement of the
parties to refer their disputes to the decision of the Superintending Engineer
is intended to the enforceabl1e in law as it is binding in nature. The relevant
Clause of the Work Order is an Arbitration Agreement. All the ingredients
to hold a particular agreement as an arbitration agreement have been satisfied
C in the present case. The relevant clause in the Work Order is wide in its
ambit as it deals with any dispute between the contractor and the department.
As the Superintending Engineer will decide the matter on reference, 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.
[Paras 12, 13 and 191 [543-G; 544-C, F; 547-BI
D
1.4. The use of the words 'any dispute' in the relevant Clause of the
T
Work Order is wide enough to include all disputes relating to the said Word
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
E would come within the meaning of 'arbitration agreement' between the parties.
The relevant Clause of the Work Order also clearly provided that any dispute
between the department and the contractor shall be referred to the
Superintending Engineer 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. Then again the conclusion and decision of the
F Superintending Engineer will be final and binding on both the parties. This
being the position and since the relevant Clause of the Work Order is not
under challenge, the decision that would be arrived at by Superintending
Engineer must also be binding on the parties as a result whereof the relevant
Clause must be held to be a binding arbitration agreement.
(Para 141 [544-G-H; 545-A, Bl
G
State of Orissa v. Damodar Das, (199612 SCC 216, distinguished.

Dewan Chand v. Stale of Jammu & Kashmir, AIR (1961) J&K 58,
referred to.
H 1.5. The application under section 20 of the Arbitration Act, 1940 for
PUNJAB STATE 1>. DINA NATH [TARUN CHATTERJEE, J.) 539
._ appointment of an arbitrator was filed with 3 years from the date of demand
notice was made by the respondent under Article 137 of the Limitation Act,
A
1963. The right to apply accrued for the difference arising between the parties
I only when services of demand notice was effective, which should be the date
for holding that the difference had already arisen between the parties. Hence,
the application under section 20 of the Arbitration Act was clearly filed within
the period of limitation. (Paras 22 and 261 (547-G; 548-G-H; 549-AI
B

S. Rajan v. State of Kera/a, (1992) 3 SCC 608 and Hari Shankar
Singhania & Ors. v. Gaur Hari Singhania & Ors., (20061 4 SCC 658, referred
'· -{ to.

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5197 of2000.
c
From the Final Judgment and Order dated 05.08.1999 of the High Court
of Punjab and Haryana at Chandigarh in Civil Revision No. 3547of1997.

WITH D
C.A. No. 5198 of2000.
~
R.K. Rathore, AAG., Pb., M.K. Verma, Aron K. Sinha, Harinder Mohan
)>
Singh and Kaushal Yadav for the Appellants.

Manoj Swarup for the Respondent.
E

Rr-Ex-parte

The Judgment of the Court was delivered by

T ARUN CHATTERJEE, J. l. The crucial question that needs to be F
decided in these appeals is whether Clause 4 of Work Order No.114 dated 16th
y of May, 1985 (in short 'Work Order') which says that: "Any dispute arising
between the department and the contractor/society shall be referred to the
Superintending Engineer, Anandpur Sahib, Hyde! Circle No. I Chandigarh for
orders and his decision will be final and acceptablelbinding on both the G
parties" constituted an arbitration agreement.

2. Before proceeding further, we may bring it on record that though the
facts in both the appeals are identical, but for purposes of disposal of these
.,._
appeals, the facts in CA No. 5197 are being considered which are as follows:
H
540 SUPREME COURT REPORTS [2007] 6 S.C.R.

A 3. The parties entered into a contract for the work of dowel drain and
wire crate at RD No. 9400 to l 0400 kms. in the State of Punjab. The appellants
made running payments to the respondent during the period of execution of
the works in terms of the Work Order. However, after completion of the work,
the final measurements were no1t made, nor the final bills were prepared. The
dispute remained pending with the department for which the respondent
B called upon the appellants to finalise the dispute and prepare the final bill as
per the rates quoted by the respondent and accepted by the appellants. A
final notice was issued on 16th April, 1990, calling upon the appellants to refer
the dispute to an arbitrator as per Clause 4 of the Work Order. Since the
appellants had failed to appoint an Arbitrator, the respondent filed an
C application before the Additional Senior Subordinate Judge, Ropar, Punjab
~ -
under Section 20 of the Arbitration Act, 1940 (in short 'the Act') seeking
appointment of an Arbitrator.

4. By an order dated 20th October, 1993 the learned Additional Senior
Subordinate Judge, Ropar, Punjab after hearing both the parties, allowed the
D application filed by the respondent and referred the dispute for decision to
the Superintending Engineer, Anandpur Sahib, Hyde! Circle No. I Chandigarh.
The Additional Senior Subordinat1~ Judge, Ropar, while allowing the application,
T
held that Clause 4 of the Work Order must be construed to be an arbitration
agreement within the meaning of Section 2(a) of the Act and that the application
E filed under Section 20 of the Act was filed within the period of limitation.
According to the learned Additional Senior Subordinate Judge, Ropar, the
cause of action arose from the date the final notice of demand was sent, i.e.,
16th April 1990, which was well within the period of 3 years from the date of
filing the application as contemplated under Article 137 of the Limitation Act
1963. Feeling aggrieved by the aforesaid order, the appellants preferred an
F appeal in the Court of the District Judge, Roopnagar, Punjab, which by an
order dated 24th April, 1997 was allowed, inter a!ia, on a finding that Clause
4 of the Work Order could not be held to be an 'arbitration agreement' nor
the dispute was covered within the ambit of the Act. On the question of
, limitation in filing the application under Section 20 of the Act, the appellate
G court held that the application under Section 20 of the Act was barred by
1

limitation. Feeling aggrieved by the order of the learned Additional District
Judge, Roopnagar, Punjab, reversing the order of the Additional Senior
Subordinate Judge, Ropar, the respondent filed a Civil Revision Case before
the High Court of Punjab and Haryana at Chandigarh, which by the impugned
order was allowed and the order of the Additional Subordinate Judge, Ropar
H was restored. Dissatisfied with this order of the High Court, a special leave
PUNJAB STATE v. DINA NATH [T ARUN CHATTERJEE, J.] 541
petition was filed by the appellants, which on grant of leave was heard in the A
presence of the learned counsel for the parties.

5. Having heard the learned counsel for the parties and after going
through the impugned order of the High Court as well as the orders of the
appellate court and the trial court and the materials on record and considering
the clauses in the Work Order, we are of the view that the High Court was B
fully justified in setting aside the order of the appellate court and restoring
the order of the Additional Subordinate Judge by which the dispute was
referred to arbitration for decision. Before proceeding further, we may, however,
take note of some of the relevant clauses in the Work Order which read as
under: - c
"Clause 13 of the Work Order: - "If the contractor does not carry out
the work as per the registered specifications, the department will have
the option to employ its own labour or any other agency to being the
work to the departmental specification and recover the cost therefrom."

Clause 4: "Any dispute arising between the department and the D
contractor/society sh.all be referred to the. Superintending Engineer,
Anandpur Sahib, Hyde! Construct Circle No. I, Chandigarh for orders
and his decision will be final and acceptable/binding on both parties."

6. As pointed out herein earlier, the trial court on consideration of E
Clause 4 of the Work Order held that Clause 4 of the Work Order must be
held to be an arbitration agreement and accordingly an arbitrator was appointed
in compliance with Clause 4 of the Work Order At this stage we feel it
appropriate to examine in detail whether clause 4 of the Work Order can be
held to be an arbitration agreement within the meaning of Section 2(a) of the
A~ F
7. Section 2[a] of the Act defines 'arbitration agreement' which means
a written agreement to submit present or future differences to arbitration
whether arbitrator is named therein or not. Mr. Tathore learned Additional
Solicitor General appearing on behalf of the appellants contended that although
the Work Order was allotted to the respondent on 16th May, 1985, the G
respondent had failed to execute the work allotted to him and the appellants
had got the work executed at its own cost in terms of clause 13 of the Work
Order which, as noted herein earlier, provides that in case the contractor does
not execute the allotted work, the department could get the same executed by
other agencies or by itself. He further contended that owing to such failure H
542 SUPREME COURT REPORTS [2007] 6 S.C.R.

A on the part of the respondent, final bills were not prepared nor were the final -'.:
measurements taken for the purpose of payment to the respondent. Accordingly,
Mr. Tathore contended that there was no existence of any dispute and
accordingly the question of referring such disputes in terms of Clause 4 of
the Work Order could not arise at all. This submission of Mr. Tathore was
B contested by the learned counsel for the respondent. Therefore, a dispute
arose as to whether the respondent had completed the work allotted to him
under the Work Order. This is an issue, according to the High Court as well
as the Subordinate Court, which should be referred for decision to an arbitrator.

8. A bare perusal of the definition of arbitration agreement would clearly
C show that an arbitration agreement is not required to be in any particular form.
What is required to be ascertained is whether the parties have agreed that
-
if any dispute arises between them in respect of the subject matter of the
contract, such dispute shall be referred to arbitration. In that case such
agreement would certainly spell out an arbitration agreement. [See Rupmani
Bai Gupta v. Collector of Jabalpur, AIR (1981) SC 479] However, from the
D definition of the arbitration agreement, it is also clear that the agreement must
be in writing and to interpret the agreement as an 'arbitration agreement' one
has to ascertain the intention of the parties and also treatment of the decision
as final. If the parties had desired and intended that a dispute must be referred
to arbitration for decision and they would undertake to abide by that decision,
E there cannot be any difficulty to hold that the intention of the parties to have
an arbitration agreement; that is to say, an arbitration agreement immediately
comes into existence.

9. In the case of Bihar State Mineral Development Corporation v.
Encon Building, (2003] 7 SCC 418, this Court held that "there is no dispute
p with regard to the proposition that for the purpose of construing an arbitration
agreement, the term "arbitration" is not required to be specifically mentioned
therein." Looking to the opinion of the Hon 'ble Judges in the said case and
also considering clause 4 of the Work Order in depth, we are of the opinion
that Clause 4 of the Work Order between the parties can be interpreted to be
an arbitration agreement even though the term "arbitration" is not expressly
G mentioned in the agreement. In this decision of this Court the test of 'dispute'
1

and 'reference' was again reiterated. In Para 17, it was stated that there cannot
be any doubt whatsoever that an arbitration agreement must contain broad
consensus between the parties that the disputes and differences should be
referred to a domestic tribunal.
H
PUNJAB STATE v. DINA NA TH [TARUN CHATTERJEE, J.] 543
10. We have already noted Clause 4 of the Work Order as discussed A
hereinabove. It is true that in the aforesaid Clause 4 of the Work Order the
words "arbitration" and "arbitrator" are not indicated; but in our view, omission
to mention the words "arbitration" and "arbitrator" as noted herein earlier
cannot be a ground to hold that the said clause was not an arbitration
agreement within the meaning of Section 2[a] of the Act. The essential
requirements as pointed out herein earlier are that the parties have intended B
to make a reference to an arbitration and treat the decision of the arbitrator
as final. As the conditions to constitute an 'arbitration agreement' have been
satisfied. we hold that clause 4 of the Work Order must be construed to be
an arbitration agreement and dispute raised by the parties must be referred
to the arbitrator. In the case of K.K. Modi v. K.N. Modi [I998] 3 SCC 573, this C
Court had laid down the test as to when a clause can be construed to be an
arbitration agreement when it appears from the same that there was an
agreement between the parties that any dispute shall be referred to the
arbitrator. This would be clear when we read Para 17 of the said judgment and
points 5 and 6 of the same which read as under:
D
"5. That the agreement of the parties to refer their disputes to the
decision of the tribunal must be intended to be enforceable in law;
and

6. Agreement must contemplate that the tribunal will make a
decision upon a dispute, which is already formulated at the time when E
reference is made to tribunal."

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
544 SUPREME COURT REPORTS [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.

C 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
4of 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.] 545
- 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
c
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
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
546 SUPREME COURT REPORTS [2007] 6 S.C.R.

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:-

"25. Decision of Public Health Engineer to be final - Except where ,..
otherwise specified in this contract, the decision of the Public Health
c 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
D 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."

E 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.
H
PUNJAB STATE v. DINANATH[TARUNCHATTERJEE,J.] 547
--">-'
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
referred to him by either party for decision. The reference is also implied. As B
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
expression as it stands in Clause 4 of the Work Order embodies an arbitration D
,. 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 G
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
548 SUPREME COURT REPORTS [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.
It is thus a question of fact to be determined in each case having
c 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
application under section 20 of the Act for filing the arbitration agreement in
D ~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 T

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.

F 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.
G 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
PUNJAB STATE v. DINANATH[TARUNCHATTERJEE.J.) 549
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. Forthe 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

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