Holding

Clause 16.3 is an appeal provision, not an arbitration agreement; therefore, no arbitrator can be appointed under Section 11(6) of the Arbitration and Conciliation Act, 1996.

Summary

The South Delhi Municipal Corporation (SDMC) entered into a 2011 agreement with SMS AAMW Tollways Private Ltd for toll tax collection, which included Clause 16 detailing a two‑stage dispute‑resolution mechanism: first to a Competent Officer and then an appeal to the Commissioner. After a loss of about Rs 80 crore due to the dismantling of the Rajokri toll plaza, SMS AAMW sent a notice of arbitration and later filed an arbitration petition under Section 11(6) of the Arbitration and Conciliation Act, 1996, invoking Clause 16.3 as an arbitration clause. The Delhi High Court appointed an arbitrator, but SDMC appealed to the Supreme Court. The Supreme Court examined whether Clause 16.3 constituted an arbitration agreement and held that it was merely a departmental appeal provision, a creature of statute, not an arbitration clause. Consequently, the Court ruled that no arbitrator could be appointed under Section 11(6) and set aside the High Court order, allowing the appeal.

Issues considered

Whether Clause 16.3 of the 2011 agreement between SDMC and SMS AAMW constitutes an arbitration clause within the meaning of the Arbitration and Conciliation Act, 1996.
Whether a High Court can appoint an arbitrator under Section 11(6) of the Act when the dispute‑resolution clause is merely an appeal provision.
How to distinguish a departmental appeal from arbitration under statutory interpretation.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11(6)

Subjects

arbitrationarbitration clausedepartmental appealinterpretation of contractSection 11(6)Arbitration and Conciliation Actstatutory bodydispute resolutionSupreme Court

Judgment

1120 [2018] 13
SUPREME COURT S.C.R. 1120
REPORTS [2018] 13 S.C.R.

A SOUTH DELHI MUNICIPAL CORPORATION
v.
SMS AAMW TOLLWAYS PRIVATE LTD.
(Civil Appeal No. 11249 of 2018)
B NOVEMBER 22, 2018
[S. A. BOBDE AND L. NAGESWARA RAO, JJ.]
Arbitration:
Appointment of Arbitrator – By High Court – Relying on clause
C 16.3 of the Agreement in question – Propriety of – Held: Clause
16.3 of the Agreement in question was not an arbitration clause – It
provided for departmental appeal – Purpose of the clause was to
vest the Competent Officer and Commissioner with supervisory
control – The intention was not to provide for a forum for resolving
disputes – Right of appeal is a creature of statute and can only be
D
exercised in the manner provided by the statute – Court should not
adopt a different approach while construing a clause in a contract
executed by a statutory body, providing for an appeal, therefore, it
was not proper for the High Court to appoint arbitrator u/s. 11(6)
of Arbitration and Conciliation Act, 1996 – Interpretation of Statutes
E – Rules of Interpretation.
Nature of arbitration – Held: Arbitration should be an enquiry
in the nature of a judicial enquiry.
Allowing the appeal, the Court

F HELD: 1. The Agreement dated 14.05.2011 between the
appellant and the respondent provides for various mutual rights,
liabilities and obligations of the two parties for the collection of
toll tax from specified commercial vehicles at all border entry
points within the NCT of Delhi. Clause 16 of the agreement
provides for the resolution of disputes at two stages. First, by
G the Competent Officer of the SDMC vide Clause 16.2 followed
by the Commissioner of the Municipal Corporation vide Clause
16.3. [Paras 12 and 14][1125-F; 1126-G-H]
2. Clause 16.3 of the agreement under which an application
to appoint an Arbitrator under Section 11(6) of the Arbitration
H and Conciliation Act, 1996 was made, is described as an appeal
1120
SOUTH DELHI MUNICIPAL CORPORATION v. SMS AAMW 1121
TOLLWAYS PRIVATE LTD.

in the said Clause. It is a settled principle of interpretation that A
unless the word raises an ambiguity it is not necessary to consider
another meaning. Indeed, it is an appeal since the Contractor is
entitled to take recourse to appeal, if the Contractor is dissatisfied
with the decision of the Competent Officer including a possible
failure to decide within the prescribed period i.e. within 30 days.
B
The appellate provision can be invoked only by the Contractor
dissatisfied by the decision of the Competent Officer. The other
side, i.e. a Competent Officer who has raised a demand which
the Contractor has not complied with cannot file such an appeal.
The right of appeal is restricted to a dissatisfied Contractor only.
And that too upon a failure to obtain redressal under Clause 16.2. C
This mechanism is clearly an appeal in the nature of a
departmental appeal commonly provided in several department
rules including service rules. Such departmental appeals are
invariably decided by a designated officer and can only be invoked
by a dissatisfied party such as a contractor or an employee. Such
D
appellate powers obviously cannot be invoked by parties unless
the language of the provision setting up the appeal provides for
it, expressly or by necessary implication. A right of appeal is a
creature of statute and can only be exercised in the manner
provided by the statute. [Paras 17 and 18][1128-A-F]
Corporation of the City of Nagpur v. Employees AIR E
1960 SC 675 : [1960] SCR 942; Nelson Motis v. Union
of India (1992) 4 SCC 711 : [1992] 1 Suppl. SCR
325; Nathi Devi v. Radha Devi Gupta (2005) 2 SCC
271 : [2004] 6 Suppl. SCR 1141 ; Ganga Bai v. Vijay
Kumar (1974) 2 SCC 393 : [1974] 3 SCR 882; State of F
Haryana v. Maruti Udyog Ltd. (2000) 7 SCC 348 :
[2000] 3 Suppl. SCR 185; Raj Kumar Shivhare v.
Directorate of Enforcement (2010) 4 SCC 772 : [2010]
4 SCR 608 – relied on.
3. The Court should not adopt a different approach while G
construing a clause in a contract executed by a statutory body
and providing for an appeal. The language of Clause 16.3 does
not lend itself to any other construction other than that it provides
for an appeal against the decision of a Competent Officer rendered
under Clause 16.2. [Para 19][1128-F-G]
H
1122 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 4. An arbitration should be an enquiry in the nature of a
judicial enquiry i.e. an enquiry which involves hearing both the
parties. The appeal involved in the present case clearly does not
involve hearing both the parties. On the contrary, the authority
which decides the appeal is in a sense the other party. The
Commissioner is a higher officer than the Competent Officer in
B
the same organization. It is, therefore, clear that the appeal to
the Commissioner is not intended to provide a forum for a decision
by an impartial adjudicator but is only intended to ascertain some
matter for the purpose of preventing differences from arising and
not for settling them after they have arisen. It is thus clear that
C the Commissioner is not intended to be an arbitrator, as his
jurisdiction cannot be invoked by both the parties. [Para 21]
[1129-D-F]
5. Arbitration has always been understood to mean the
process by which a dispute is resolved by an arbitrator chosen or
D acceptable to both sides under an arbitration agreement between
the two parties. In the present case, under Clause 16 of the
Agreement, only the party dissatisfied by the order of the
Competent Officer can approach the Commissioner. It is,
therefore, not possible to hold that the proceedings before the
Commissioner constitutes as an arbitration. [Para 22][1129-G]
E
K.K. Modi v. K.N. Modi (1998) 3 SCC 573 : [1998] 1
SCR 601; State of Orissa v. Damodar Das (1996) 2
SCC 216 : [1995] 6 Suppl. SCR 800; State of U.P. v.
Tipper Chand (1980) 2 SCC 341 – relied on.

F Russell on Arbitration – referred to.
6. In the present case, Clause 16 and in particular Clause
16.3 does not provide for the reference of any dispute that may
arise between the parties to an Arbitrator. The purpose of this
Clause is to vest the Competent Officer and the Commissioner
G with supervisory control over the execution of work and
administrative control over it from time to time and thus to
prevent disputes. The intention is not to provide for a forum for
resolving disputes. Thus, in the present circumstances, no
Arbitrator could have been appointed by the High Court under
Section 11(6) of the Arbitration and Conciliation Act, 1996.
H [Para 24][1132-C-D]
SOUTH DELHI MUNICIPAL CORPORATION v. SMS AAMW 1123
TOLLWAYS PRIVATE LTD.

Case Law Reference A
[1960] SCR 942 relied on Para 17
[1992] 1 Suppl. SCR 325 relied on Para 17
[2004] 6 Suppl. SCR 1141 relied on Para 17
[1974] 3 SCR 882 relied on Para 18 B
[2000] 3 Suppl. SCR 185 relied on Para 18
[2010] 4 SCR 608 relied on Para 18
[1998] 1 SCR 601 relied on Para 22
C
[1995] 6 Suppl. SCR 800 relied on Para 23
(1980) 2 SCC 341 relied on Para 23
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 11249
of 2018
From the Judgment and Order dated 17.06.2016 of the High Court D
of Delhi at New Delhi in Arbitration Petition No. 475 of 2015.
Gourab Banerji, Sr. Adv., Ms. Harsha Peechara, Praveen Swarup,
Ashish Tiwari, Subhro Mukherji, Ms. Raka Chaterji, Sahil Tagotra, Advs,
for the Appellant.
E
Sachin Datta, Sr. Adv., Ms. Gayatri Verma, Ms. Prity Sharma,
Ms. Purnima Raj, Vasanth, Vikas Mehta, Advs. for the Respondent.
The Judgment of the Court was delivered by
S. A. BOBDE, J. 1. Leave granted.
2. The Appellant-South Delhi Municipal Corporation (hereinafter F
referred to as ‘SDMC’)has challenged the impugned order dated
17.06.2016 passed by the learned Single Judge of the Hon’ble High
Court of Delhi, New Delhi in Arbitration Petition No. 475/2015. By that
order,the learned Single Judge allowed the Petition filed by the
Respondent-SMS AAMW Tollway Private Ltd. (hereinafter referred to G
as ‘SMS AAMW’)under Section 11(6) of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as ‘the Act’).
Brief Facts
3. The National Highways Authority of India (hereinafter referred
to as ‘NHAI’) entered into a State Support Agreement (hereinafter H
1124 SUPREME COURT REPORTS [2018] 13 S.C.R.

A referred to as ‘the SSA’) dated 27.5.2004/22.2.2005with M/s Jaypee-
DSC Ventures Limited (hereinafter referred to as ‘Concessionaire’) for
the design, engineering, financing, procurement, construction, completion,
operation, maintenance and the toll collection of certain sections of the
NH-8 highway.
B 4. The arrangement under the SSA was that the Concessionaire
of the NHAI shall not only collect the toll under the concession agreement
executed between NHAI and its Concessionaire, but also the entry toll
(toll tax) levied by the Appellant-SDMC on entry of specified commercial
vehicles into the territory of NCT of Delhi. The Appellant-SDMC is a
‘designated agency’ of the Government of NCT of Delhi under the SSA.
C
5. The Appellant-SDMC, for the purpose of collection of toll tax
from all border entry points within the NCT of Delhi, decided to engage
a contractor and accordingly floated a tender, inviting bidsfrom interested
parties. The Respondent-SMS AAMWbeing the successful bidder was
awarded the work for collection of toll tax for a period of 3 years and a
D Bilateral Agreement dated 14.05.2011 (hereinafter referred to as ‘the
Agreement’) was entered into between the Appellant-SDMC and the
Respondent-SMSAAMW.
6. As per the Agreement, the Respondent-SMS AAMWwas
obliged to pay an amount of Rs.26 crores every month to the Appellant-
E SDMCin lieu of the tax collected fromall entry points within the NCT of
Delhi. However, the said toll tax for Rajokri integrated toll plaza was
said to be collected vide the mechanism set out under the SSA i.e. it will
be collected by the NHAI’s Concessionaire and passed on to the
Respondent-SMS AAMW.
F 7. Thereafter, on 19thFebruary 2014, the Rajokri integrated toll
plaza was dismantled, apparently, as a result of an understanding between
the parties to the SSA. It is the case of Respondent-SMS AAMW that
due to this situation, it was forced to incur the expenses to arrange for
the collection of the Appellant-SDMC’s toll tax from the Rajokri
G Integrated toll plaza. As a result,the Respondent-SMS AAMW suffered
a huge loss amountingto approximately Rs.80 crore.
8. Thereafter, a notice of Arbitration dated 09.03.2015 was sent
by the Respondent-SMS AAMW to the Appellant-SDMC, and to the
other parties under the SSA, detailing the issues and disputes that had
H
SOUTH DELHI MUNICIPAL CORPORATION v. SMS AAMW 1125
TOLLWAYS PRIVATE LTD. [S. A. BOBDE, J.]

arisen under Clause 9 of the SSA. The Appellant-SDMC vide letter A
dated 7.5.2015 raised a demand of Rs.97,08,76,449/-against the
Respondent-SMS AAMW.To thisRespondent-SMS AAMWresponded
vide letter dated 11.05.2015, clarifying the mistakes in computation,by
the Appellant-SDMC. Thereafter, Appellant-SDMC reconciled the
accountsand reduced the demand to Rs.80,46,31,504/- vide letter dated
B
13.05.2015.
9. TheRespondent-SMS AAMW being dissatisfied with the
decision contained in the letter dated 13.05.2015, preferred an appeal
under Clause 16.3 of the Agreement vide letter dated
26.05.2015.Subsequently, the Appellant-SDMC vide letterdated
17.06.2015, intimated to the Respondent-SMS AAMW that since there C
is no arbitration clause inexistence between the parties, the arbitration is
not acceptable.
10. However, the Respondent-SMS AAMW filed the Arbitration
Petition No.475/2015 under Section 11(6) of the Act before the High
Court of Delhi for appointment of an Arbitrator relying on Clause 9 of D
the SSA and Clause 16 of the Agreement dated 14.05.2011. The learned
Single Judge of Delhi High Court allowed the petition filed by the
presentRespondent-SMS AAMWunder Section 11(6) of the Act, and
appointed Justice Deepak Verma, Former Judge of this Court as the
sole Arbitrator. E
11. The decision of this case turns on the answer to the question
whether Clause 16.3 ofthe Agreement dated 14.05.2011 between the
Appellant-SDMC on the one hand and the Respondent-SMS AAMW
on the other hand contains an agreement for arbitration.
12. The Agreement dated 14.05.2011provides for the various F
mutual rights, liabilities and obligations of the two parties for the collection
of toll tax from specified commercial vehicles atall border entry points
within the NCT of Delhi.
Clause 16 of the Agreement in its entirety reads as follows:-
G
“16. DISPUTE RESOLUTION
16.1 Except where otherwise provided in the Agreement,
all questions and disputes in any way arising out of or
relating to the Agreement shall be dealt with as mentioned
below.
H
1126 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 16.2 In the event the Contractor considers any work
demanded of it as being outside the requirements of the
Agreement, or disputes any record or decision given in
writing by the Competent Officer in any matter in
connection with or arising out of the Agreement, to be
unacceptable, it shall promptly within [15] days request
B
the Competent Officer in writing to give his instructions or
decision in respect of the same. Thereupon, the Competent
Officer shall give his written instructions or decision within
a period of [30] days from the receipt of the Contractor’s
letter.
C 16.3 If the Competent Officer fails to give his instructions
or decision in writing within the aforesaid period or if the
Contractor is dissatisfied with the instructions or decision
of the Competent Officer, the Contractor may, within [15]
days of receipt of the Competent Officer’s instructions or
D decision, appeal to the Commissioner who shall afford an
opportunity to the Contractor to be heard, if the latter so
desires, and to offer evidence in support of its appeal. The
Commissioner shall give his decision in writing within [30]
days of receipt of Contractor’s appeal which shall be
acceptable to the Contractor.”
E
13. Furthermore, Clause 20 which makes reference to disputes
arising out of the agreement reads as follows:
“20. MISCELLANEOUS PROVISIONS
20.1 Governing Laws and Jurisdiction
F
(a)……
(b) All disputes arising out of this Agreement shall be
subject to sole and exclusive jurisdiction of the courts of
Delhi only.”
G 14. Thus, from a plain reading of Clause 16one can see that it
provides for the resolution of disputes at two stages. First, by the
Competent Officerof the SDMCvide Clause 16.2 followed by the
Commissioner of the Municipal Corporation vide Clause 16.3.

H
SOUTH DELHI MUNICIPAL CORPORATION v. SMS AAMW 1127
TOLLWAYS PRIVATE LTD. [S. A. BOBDE, J.]

The First Stage:- A
If a case arises wherein a Contractor finds that if the work
demanded is outside the scope of the agreement or feels the need to
dispute any decision of the Competent Officeror if any record created
by him is unacceptable, he may request the Competent Officerto decide
its representation or give instructions. The Competent Officeris obliged B
to decide within 30 days from the receipt of such a letter from the
Contractor.
The Second Stage:-
If the Competent Officerfails to decide within 30 days or if the
Contractor is dissatisfied with his decision, the Contractor may, within C
15 days from receipt of the decision by the Competent Officer, file an
appeal to the Commissioner, SDMC. The Commissioner is obliged to
afford an opportunity to the Contractor to be heard and the Contractor is
entitled to produce evidence in support of this case.At this stage, the
Commissionermay give his decision in writing within 30 days. The clause D
makes the decision compulsorily ‘acceptable’ to the Contractor
presumably meaning that it shall be binding on him.
15. In the present case as stated earlier, the notice of arbitration
was sent by the Contractor on 09.03.2015 under the SSA. By letter
dated 26.05.2015, the Contractor i.e. SMS AAMW filed an appeal under E
Clause 16.3 of the Agreement. This appeal was preferred against the
decision contained in the letter of the Competent Officer, SDMCdated
13.05.2015. The Appellant-SDMC sought to produce additional evidence
and further sought that the decision should be taken under Clause 16.3.
There is no doubt that the Respondent-SMS AAMW resorted to the
provision of appeal against the decision of the Appellant-SDMC in its F
letter dated 13.05.2015. In that letter, they did not seek the appointment
of an arbitrator but merely sought decision by an officer higher in rank
than the members of high level committee,akin to invoking an appellate
provision.
16. The question before us is whether Clause 16.3 which provides G
for an appeal really provides for an arbitration and therefore whether
the High Court was entitled to appoint an Arbitrator under Section 11(6)
of the Act.

H
1128 SUPREME COURT REPORTS [2018] 13 S.C.R.

A 17. It is necessary to advert to certain features of Clause 16 to
determine whether the clause provides for arbitration or a departmental
appeal. Firstly,Clause 16.3 under which an application to appoint an
Arbitrator under Section 11(6) of the Act was made is described as an
appeal in the said Clause. It is a settled principle of interpretation that
unless the word raises an ambiguity it is not necessary to consider another
B
meaning1.
Indeed, it is an appeal since theContractor is entitled to take
recourse to appeal, if the Contractor is dissatisfied with the decision of
the Competent Officer including a possible failure to decide within the
prescribed period i.e. within 30 days. It is significant,that the appellate
C provision can be invoked only by the Contractor dissatisfied by the
decision of the Competent Officer. The other side, i.e. a Competent
Officer who has raiseda demand which the Contractor has not complied
with cannot file such an appeal. The right of appeal is restricted to a
dissatisfiedContractor only. And that too upon a failure to obtain redressal
D under Clause 16.2.
18. This mechanism is clearly an appeal in the nature of a
departmental appeal commonly provided in several department rules
including service rules. Such departmental appeals are invariably decided
by a designated officer and can only be invoked by a dissatisfied party
E such as a contractor or an employee. Such appellate powers obviously
cannot be invoked by partiesunless the language of the provision setting
up the appeal provides forit expressly or by necessary implication. It is
settled law that a right of appeal isa creature of statute and can only be
exercised in the manner provided by the statute2.

F 19. We see no reason, why this Court should adopt a different
approach while construing a clause in a contract executed by a statutory
body and providing for an appeal.The language of Clause 16.3 does not
lend itself to any other construction other than that it provides for an
appeal against the decision of a Competent Officer rendered under
Clause 16.2.
G
1
(Ref. Corporation of the City of Nagpur v. Employees AIR 1960 SC 675, Nelson
Motis v. Union of India (1992) 4 SCC 711, Nathi Devi v. Radha Devi Gupta (2005)
2 SCC 271).
2
(Ref. Ganga Bai v. Vijay Kumar (1974) 2 SCC 393, State of Haryana v. Maruti Udyog
Ltd. (2000) 7 SCC 348, Raj Kumar Shivhare v. Directorate of Enforcement (2010) 4
H SCC 772)
SOUTH DELHI MUNICIPAL CORPORATION v. SMS AAMW 1129
TOLLWAYS PRIVATE LTD. [S. A. BOBDE, J.]

20. The Respondent-SMS AAMW placed reliance on the following A
passage from Russell on Arbitration, which reads as follows:-
“If it appears from the terms of the agreement by which a
matter is submitted to a person’s decision, that the intention
of the parties was that he should hold an enquiry in the nature
of a judicial enquiry and hear the respective cases of the B
parties and decide upon evidence laid before him, then the
case is one of an arbitration. The intention in such case is
that there shall be a judicial inquiry worked out in a judicial
manner. On the other hand, there are cases in which a person
is appointed to ascertain some matter for the purpose of
preventing differences from arising, not of setting them when C
they have arisen.”
21. This was relied on by the Respondent-SMS AAMW to support
the submission that Clause 16.3 does not provide for an appealto the
Commissioner but provides for arbitration by the Commissioner. The
passage above clearly contemplatesthat an arbitration should be an enquiry D
in the nature of a judicial enquiry i.e. an enquiry which involves hearing
both the parties. The appeal involved in the present case clearly does
not involve hearing both the parties. On the contrary,the authority which
decides the appeal is in a sense the other party. The Commissioner is a
higher officer than the Competent Officer in the same organization. It is, E
therefore, clear that the appeal to the Commissioner is not intended to
provide a forum for a decision by an impartial adjudicator but is only
intended to ascertain some matter for the purpose of preventing
differences from arising and not for settling them after they have arisen.
It is thus clear that the Commissioner is not intended to be an arbitrator,
as his jurisdiction cannot be invoked by both parties. F

22. Arbitration has always been understood to mean the process
by which a dispute is resolved by an arbitrator chosen or acceptable to
both sides under an arbitration agreement between the two parties. In
the present case, under Clause 16 of the Agreement only the party
dissatisfied by the order of the Competent Officer can approach the G
Commissioner. It is, therefore, not possible to hold that the proceedings
before the Commissioner constitutes as an arbitration. In K.K. Modi v.
K.N. Modi3, this Court observed as follows: -
3
1998 (3) SCC 573
H
1130 SUPREME COURT REPORTS [2018] 13 S.C.R.

A “17. Among the attributes which must be present for an
agreement to be considered as an arbitration agreement
are:
(1) The arbitration agreement must contemplate that the
decision of the tribunal will be binding on the parties to
B the agreement,
(2) that the jurisdiction of the tribunal to decide the rights
of parties must derive either from the consent of the parties
or from an order of the court or from a statute, the terms of
which make it clear that the process is to be an arbitration,
C (3) the agreement must contemplate that substantive rights
of parties will be determined by the agreed tribunal,
(4) that the tribunal will determine the rights of the parties
in an impartial and judicial manner with the tribunal owing
an equal obligation of fairness towards both sides,
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 lastly,
(6) the agreement must contemplate that the tribunal will
make a decision upon a dispute which is already
E
formulated at the time when a reference is made to the
tribunal.
18. The other factors which are relevant include, whether
the agreement contemplates that the tribunal will receive
evidence from both sides and hear their contentions or at
F
least give the parties an opportunity to put them forward;
whether the wording of the agreement is consistent or
inconsistent with the view that the process was intended to be
an arbitration, and whether the agreement requires the
tribunal to decide the dispute according to law.”
G 23. The scope of Clause 16 is limited. Clause 16.1 provides that
all the questions and disputes arising out of the Agreement shall be dealt
with as follows i.e. as provided in Clause 16.2 and Clause 16.3. Clause
16.2 enables a Contractor to request the Competent Officer to give his
instructions or decisions in writing, in case of eitherwhen (a) the
H
SOUTH DELHI MUNICIPAL CORPORATION v. SMS AAMW 1131
TOLLWAYS PRIVATE LTD. [S. A. BOBDE, J.]

Contractor considers any work demanded of him as being outside the A
requirements of the Agreement, or (b) disputes any record or decision
given in writing by the Competent Officer in connection to the Agreement
as unacceptable. The Competent Officer is enjoined to give his written
instructions or decisions within a period of 30 days. He enjoys complete
discretion in deciding the dispute.Clause 16.3 provides that in case of an
B
instance whereby the Competent Officer does not come to a decision,
the Contractor may appeal to the Commissioner who shall afford an
opportunity to the Contractor to be heard and offer evidence. Neither
the Competent Officer nor the Commissioner is enjoined to act judicially
i.e. the decision on the basis of evidence adduced by both the parties. In
fact, both the authorities, the Competent Officer and the Commissioner C
are required to deal with only one party i.e. the Contractor. This cannot
be characterized as an enquiry of a judicial nature which necessarily
involves a consideration of the case of both sides by an independent
Arbitrator.Additionally, there is no provision in Clause 16.3 of the
Agreement to refer any dispute or reference to arbitration. In State of
D
Orissa v. Damodar Das4, this Court approved the following observations
in State of U.P. v. Tipper Chand: -
“11. This Court was called upon to consider a similar
clause in State of U.P. v. Tipper Chand [(1980) 2 SCC 341].
The clause was extracted therein. After consideration
thereof, this Court held that after perusing the contents of E
the said clause and hearing learned counsel for the parties
“we find ourselves in complete agreement with the view
taken by the High Court. Admittedly, the clause does not
contain any express arbitration agreement. Nor can such
an agreement be spelt out from its terms by implication, F
there being no mention in it of any dispute, much less of a
reference thereof. On the other hand, the purpose of the
clause clearly appears to be to vest the Superintending
Engineer with supervision of the execution of the work
and administrative control over it from time to time.” G
It would, thereby, be clear that this Court laid down as a
rule that the arbitration agreement must expressly or by
implication be spelt out that there is an agreement to refer

4
1996 (2) SCC 216
H
1132 SUPREME COURT REPORTS [2018] 13 S.C.R.

A any dispute or difference for an arbitration and the clause
in the contract must contain such an agreement. We are in
respectful agreement with the above ratio. It is obvious
that for resolution of any dispute or difference arising
between two parties to a contract, the agreement must
provide expressly or by necessary implication, a reference
B
to an arbitrator named therein or otherwise of any dispute
or difference and in its absence it is difficult to spell out
existence of such an agreement for reference to an
arbitration to resolve the dispute or difference contracted
between the parties……”
C 24. We find that the present Clause 16 and in particular Clause
16.3 does not provide for the reference of any dispute that may arise
between the parties to an Arbitrator. The purpose of this Clause is to
vest the Competent Officer and the Commissioner with supervisory
controloverthe execution of work and administrative control over it from
D time to time and thus to prevent disputes. The intention is not to provide
for a forum for resolving disputes. Thus, in the present circumstancesno
Arbitrator could have been appointed by the High Court under Section
11(6) of the Arbitration and Conciliation Act, 1996, therefore, the impugned
order dated 17.06.2016 is set aside.
E 25. The appeal is accordingly allowed.

Kalpana K. Tripathy Appeal allowed.

F

G

H