It is not open to the Arbitrator to arbitrate upon the disputes which in view of a specific clause in the contract to the effect of they been “excepted” issues.
The question that arose for adjudication before Court was, “when in a contract of arbitration, certain disputes are expressly “excepted”, whether the Arbitrator can arbitrate on such excepted issues and what are the consequences if the Arbitrator decides such issues?”
In the instant case the dispute had arisen with regard to the amount payable to the contractor in relation to extra work done by the contractor. It was not in dispute that some work not covered under the contract was entrusted to the contractor and for determining the amount payable for the said work, certain meetings were held by the contractor and the concerned Engineer but they could not agree to any rate. Ultimately, some amount was paid in respect of the additional work done, which though was not acceptable to the contractor, was accepted under protest.
The Court observed that from the relevant clauses included of the contract it was clear that all the disputes were not arbitrable. Some of the disputes were specifically not arbitrable and in relation to the said disputes the contractor had to negotiate with the concerned party and if the contractor was not satisfied with the rate determined by the said party, it was open to the contractor to file an appeal against the decision of the relevant authority of the concerned party within specified days of communication of the decision to the contractor.
In the instant case, there was no finality on the amount payable to the contractor in relation to the extra work done by the contractor. When disputes were referred to the Arbitrator, the disputes among the “excepted matters” were also referred to the Arbitrator, who, despite the objections of Contractor, decided the said exceptional issues holding that same were not “excepted matters” but arbitrable.It was held that Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to arbitration cannot be presumed. In the instant case, it was not open to the Arbitrator to arbitrate upon the disputes which in view of a specific clause in the contract to the effect of they been “excepted” issues.
When the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act. If a non-arbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. Thus the Arbitrator could not have decided the said “excepted” dispute.
[Harsha Constructions vs. Union of India & Ors.]