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1965 DIGILAW 373 (ALL)

Union of India v. Gopal Dass

1965-09-17

D.S.MATHUR

body1965
JUDGMENT D.S. Mathur, J. - This order shall govern Civil Revision Nos. 149 and 150 of 1963, both by the Union of India and two others, against the order of the Civil Judge of Varanasi entertaining the applications of M/s Gopal Dass and Co. and appointing an arbitrator under Sec. 8 of the Arbitration Act. 2. The material facts of the case are that the opposite party, M/s. Gopal Dass and Co., was given two contracts after execution of agreements each containing an arbitration clause. The arbitration clauses are similar. In the event for any question or dispute arising under or in connection with the contract except as to any matter the decision of which was specifically provided for by the conditions of the contract the same was to be referred to the arbitration of a sole arbitrator nominated by the General Manager of the North Eastern Railway. The decision of the arbitrator was to be final and binding on the parties. In case of the arbitrator leaving the arbitration unfinished on account of his transfer or otherwise the General Manager was to nominate another arbitrator in his place and the arbitrator so nominated would have the same powers as the one originally nominated. Such an arbitration clause is contained in Para. 33 of the agreement (Ex. A-6) of Civil Revision No. 150 of 1963. The arbitration clause in the other case (Civil Revision No. 149 of 1963) is contained in para. 62 of the agreement (Ex. A-l). This clause provides that: "Any question or dispute arising under this agreement (except those for the final decision of which provision is made in this agreement) shall be referred to the arbitration of a Railway Officer not below the rank of Junior Administrative Officer appointed by the General Manager of the North Eastern Railway at the request of either of the parties and the decision of the said arbitrator shall be final and binding on the parties and not open to challenge or review ....." 3. From the above clauses of the two agreements it is evident that all the questions or disputes arising under the agreement (other than those on which the decision of the competent authority is final) were to be referred to the arbitration of a sole arbitrator to be appointed or nominated by the General Manager of the North Eastern Railway. From the above clauses of the two agreements it is evident that all the questions or disputes arising under the agreement (other than those on which the decision of the competent authority is final) were to be referred to the arbitration of a sole arbitrator to be appointed or nominated by the General Manager of the North Eastern Railway. Such disputes could not be raised before the Courts of law unless the arbitrator was moved and made an award and in such a case only the question of the validity of the award could be raised before the Courts of law. 4. Certain disputes arose between the parties whereupon the opposite party, M/s Gopal Dass and Co. served notices upon the General Manager of the North Eastern Railway calling upon him to appoint or nominate the sole arbitrator within 15 days, and when the General Manager did not so appoint or nominate an arbitrator, M/s Gopal Dass and Co. moved two applications under Sec. 8(2) of the Arbitration Act for the appointment of a sole arbitrator. The learned Civil Judge allowed both the applications and appointed Sri K. C. Srivastava, retired District and Sessions Judge and now practising as an advocate, as the sole arbitrator. It may here be noted that in both the cases the General Manager appointed or nominated the sole arbitrator during the pendency of the present proceedings. One of the points for consideration is whether the present applications under Sec. 8(2) of the Arbitration Act were maintainable. If the applications were maintainable, the other point for decision shall be whether it was necessary for the Civil Judge to appoint the nominee of the General Manager as the sole arbitrator or he could so appoint any independent person. 5. Where all the parties to the arbitration agreement refer their disputes to the arbitrator, the arbitration takes place without the intervention of the court and such arbitration is governed by Chapter II of the Arbitration Act. However, where disagreement is on the appointment of an arbitrator or umpire, though arbitration can take place without the intervention of the Court, any of the parties can, if permissible, make an application under Sec. 8 of the Arbitration Act for the appointment of an arbitrator or umpire. However, where disagreement is on the appointment of an arbitrator or umpire, though arbitration can take place without the intervention of the Court, any of the parties can, if permissible, make an application under Sec. 8 of the Arbitration Act for the appointment of an arbitrator or umpire. After the appointment of the arbitrator or umpire arbitration can proceed without the intervention of the court provided that both the parties refer their disputes to the person so appointed for arbitration. Under Sec. 8 of the Arbitration Act the court merely appoints an arbitrator or umpire and beyond that no further order is passed. But where both the parties do not refer their disputes for arbitration to the arbitrator appointed by consent of the parties or by the court, the aggrieved party has no other remedy except to make an application under Sec. 20 of the Arbitration Act for the filing of the arbitration agreement and for the disputes being referred to the arbitrator for making an award. 6. Sub-Sec. (4) of Sec. 20 of the Arbitration Act clearly lays down that reference can be made to the arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. Consequently, where the General Manager refuses to nominate or appoint the sole arbitrator, the court can, if necessary, appoint the arbitrator under sub-Sec. (4) of Sec. 20 provided that the aggrieved party moves the Court under Sec. 20. 7. The Court, therefore, has the power to appoint an Arbitrator under Sec. 8 or under Sec. 20(4) of the Arbitration Act. In one case the appointment is made to enable the arbitrator to proceed with the arbitration without the intervention of the court, while in the other arbitration takes place with the intervention of the court. In other words, therefore, if no application under Sec. 8 for the Arbitration Act is maintainable, the parties to the arbitration agreement shall not suffer any injury as the aggrieved party can seek his remedy by making an application under Sec. 20 of the Arbitration Act. In other words, therefore, if no application under Sec. 8 for the Arbitration Act is maintainable, the parties to the arbitration agreement shall not suffer any injury as the aggrieved party can seek his remedy by making an application under Sec. 20 of the Arbitration Act. Further, even if no application under Sec. 8 can be entertained, the arbitration agreement shall not be ineffective, and it shall be necessary for the parties to take recourse to the arbitration clause and no suit shall be maintainable and in instituted can be stayed under Sec. 34 of the Arbitration Act. 8. In the instant cases the opposite party had prayed for the appointment of a sole arbitrator on the ground that no arbitrator had been appointed or nominated by the General Manager. Consequently,, clauses (b) and (c) of Sec. 8(1) of the Arbitration Act are inapplicable. Clause (a) of this sub-Sec. runs as below : "(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments, any party may serve th other parties or the arbitrators, as. the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy." Where the parties served with the notice do not concur in the appointment or appointments, or in supplying the vacancy, the party giving the notice can move the court under sub-Sec. (2) of Sec. 8 to appoint an arbitrator who shall have the like power to act in the reference and to make an award as if he had been appointed by consent of all parties. 9. The three important ingredients of clause (a) of sub-Sec. (1) of Sec. 8 of the Arbitration Act are that the arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent for the parties; that after the differences have arisen all the parties do not concur in the appointment or appointments; and that a written notice has been duly served calling upon the other party to concur in the appointment or appointments or in supplying the vacancy. Where any of these ingredients are not fulfilled, no application under Sec. 8(2) of the Arbitration Act shall be maintainable though the aggrieved party can seek other remedy in accordance with the provisions of the Arbitration Act. 10. In the instant cases the sole arbitrator was to be appointed or nominated by the General Manager of the North Eastern Railway and after the appointment of the sole arbitrator it can be said though this question is not free from doubts, that the appointment was made by consent of the parties, both the parties having already consented that the person nominated or appointed by the General Manager is sole arbitrator shall function as such. When the consent of the parties can be assumed, how can it be said that there is no concurrence in the appointment of the sole arbitrator where the General Manager appoints or nominates him at a late stage. The second ingredient referred to above can be fulfilled only when all the parties do not concur in the appointment of the sole arbitrator. When the parties had already given their consent, while executing the agreements, that the disputes shall be referred to the arbitration of a person nominated or appointed by the General Manager, they shall be deemed to concur in the appointment of the sole arbitrator whenever such appointment is made by the General Manager. Concurrence of the parties as to the appointment of the arbitrator can be assumed in case it is taken for granted that the person appointed or nominated by the General Manager as the sole arbitrator is in the eye of law, a person appointed by the consent of the parties. 11. In Surendranath Paul v. Union of India, AIR 1965 Calcutta 183 and Union of India v. D. P. Singh, A.I.R. 1961 Patna 228 the effect of a similar arbitration clause was considered and it was held that the sole arbitrator appointed or to be appointed by the General Manager was a person appointed as such by consent of the parties. 12. The effect of the second part of the clause (a) of Sec. 8(1), namely the second ingredient referred to above, was not raised in either of these cases. 13. 12. The effect of the second part of the clause (a) of Sec. 8(1), namely the second ingredient referred to above, was not raised in either of these cases. 13. With due respect I have my doubts whether the person appointed or nominated by the General Manager as sole arbitrator can in the eye for law, be deemed to be an arbitrator appointed by consent of the parties. What can be said is that the parties had consented that the dispute shall be decided by a person nominated or appointed by the General Manager. The arbitrator is appointed or nominated by the General Manager without obtaining the consent of the parties though none of them can challenge the appointment for the arbitrator. This view finds support from certain observations made in Union of India v. Gorakh Mohan Das,1964 ALJ 15. The facts of this case are somewhat different. Therein matters in question, dispute or differences to be arbitrated upon were to be referred for decision to two arbitrators, one of whom was to be treated as the contractors nominee and the other Railways nominee. These two arbitrators had the power to nominate an umpire to whom the matter was to be referred in the event of any differences between the two arbitrators. The General Manager of the Railway was to prepare a panel containing more than three names of officers of the requisite status who could be appointed arbitrator, and out of this panel the contractor was to suggest a panel of three names out of whom an arbitrator as nominee of the contractor was to be selected by the General Manager and such arbitrator was treated as the contractors nominee. The Railways nominee had also to be appointed by the General Manager, not necessarily from the panel. He could be an officer whose name was not included in the panel though he had to be of the same status as the contractors nominee. With the other provisions of the arbitration clause we are not concerned. With regard to the contractors nominee the Division Bench held that the appointment may be said to be by consent of both the parties; but with regards to the Railways nominee it was mentioned that the contractor had no voice at all and, consequently, the provisions of Sec. 8 did not apply. With regard to the contractors nominee the Division Bench held that the appointment may be said to be by consent of both the parties; but with regards to the Railways nominee it was mentioned that the contractor had no voice at all and, consequently, the provisions of Sec. 8 did not apply. The observation made is as below : "The contractors nominee, it is true, will be appointed by the Railway from the panel suggested by the contractor, and, in one sense, may be said to have been appointed by the consent of both parties. But in the appointment of the Railways nominee the contractor has no voice at all. Consequently, we are of opinion that the provisions of Sec. 8 do not apply". 14. The word "but" strongly suggests that the view expressed with regard to the contractors nominee could not apply to the Railways nominee. In other words, the Railways nominee cannot be deemed to have been appointed by consent of both the parties. Further, with regard to the Railways nominee it was held that Sec. 8 was inapplicable. In other words, no application under Sec. 8 can be entertained to fill in the vacancy if no Railways nominee has been appointed to enter into the arbitration. 15. The Railways nominee stands in the same category as the sole arbitrator appointed or to be appointed, in the instant cases, by the General Manager of the North Eastern Railway. In the appointment of both the contractor has no voice at all, and no consent of his is necessary. The only difference is that in a case covered by the Union of India v. Gorakh Mohan Das, 1964 ALJ 15 the Railway nominee is one of the arbitrators while in the instant cases he is the sole arbitrator. However, where vacancy of either kind is to be filled in, the law applicable shall be the same. 16. I am, therefore, of opinion that Sec. 8 of the Arbitration Act does not apply to a case where the General Manager has not appointed or nominated, or appoints or nominates at a late stage, the sole arbitrator, and the only remedy available to the aggrieved party is to move the Court under Sec. 20 of the Arbitration Act. 17. I am, therefore, of opinion that Sec. 8 of the Arbitration Act does not apply to a case where the General Manager has not appointed or nominated, or appoints or nominates at a late stage, the sole arbitrator, and the only remedy available to the aggrieved party is to move the Court under Sec. 20 of the Arbitration Act. 17. When the two applications under Sec. 8 of the Arbitration Act were not maintainable, and even then the court below exercised the jurisdiction, not vested in it, this Court can, in exercise of the revisional jurisdiction, pass a suitable order, i.e., allow the revisions and at the same time dismiss the applications under Sec. 8 of the Arbitration Act. 18. Both the revisions are hereby allowed and the order of the learned Civil Judge passed in the two similar proceedings is set aside. It is further ordered that both the applications under Sec. 8 of the Arbitration Act shall stand dismissed. Costs of both the courts on the parties. Stay orders passed in the two revisions are vacated. Revision allowed.