Raman Wasudev Walawalkar v. Larsen and Toubro Ltd. and another
1999-12-17
D.K.DESHMUKH, F.I.REBELLO
body1999
DigiLaw.ai
JUDGMENT -D.K. DESHMUKH, J.:---This is a reference made by the learned arbitrator under the provisions of section 13(b) of the Arbitration Act, 1940. The question that has been submitted for the opinion of the Court is "Can a party by conduct either waiver of objection or by acquiescence impliedly consent to appointment of a Sole Arbitrator?" This question arose in the following factual background. 2.Admittedly there is a contract entered into between the claimant and the respondent dated 31-7-1991. There is an arbitration clause in that agreement, which reads as under:- "Please note that any dispute or difference arising out of this contract shall be settled by an arbitration as per the provisions of the Indian Arbitration Act x of 1940. The venue of any such arbitration shall be in Greater Bombay." It appears that the claimant issued a notice dated 25th October, 1994 to the respondent detailing the disputes that have arisen between the parties and invoking the arbitration clause. The portion of the notice that is relevant for the present purpose reads as under:- "Accordingly, our clients hereby invoke Clauses 24.0 of the said Contract dated 31st July, 1991, and nominate and appoint Mr. Raman W. Walawalkar, Advocate, Bombay High Court, having his office at C/o Bhatt Saldanha, Maker Bhavan No. 1 Sir Vithaldas Thackersey Marg, Bombay-400 020, as their arbitrator for reference of the dispute. Under instructions from our aforesaid clients, we further call upon you to nominate and appoint your arbitrator within 15 clear days from the date of receipt of this notice and inform us of such appointment. Kindly take note that in the event of your failure to nominate or appoint your arbitrator as stipulated hereinabove, our clients would become entitled to appoint said Mr. Raman W. Walawalkar, Advocate, High Court as the Sole Arbitrator, under the provisions of the Indian Arbitration Act, 1940 and the Award of the Sole Arbitrator would be final and binding upon all concerned." 3.It is clear from the notice dated 25th October, 1994 that the claimant issued this notice presupposing that the arbitration was to be conducted by two arbitrators. One each to be appointed by both the parties. The letter dated 25th October, 1994 was replied to by the respondents. In that reply there is nothing said by the respondent about the appointment of the arbitrator.
One each to be appointed by both the parties. The letter dated 25th October, 1994 was replied to by the respondents. In that reply there is nothing said by the respondent about the appointment of the arbitrator. All that was said was that the claimant should lodge his claim with the underwriters. On 9th December, 1994, the claimant wrote to the arbitrator appointed by them referring to their notice dated 25th October, 1994 and stating that as the respondents have failed to appoint their arbitrator within 15 days of the notice under section 9(b) of the Arbitration Act, Shri Walawalkar is appointed as a sole arbitrator. It appears that information was also given by the claimant to the respondents. It appears thereafter Shri Walawalkar the arbitrator issued notice to the parties. In response to that notice the respondents appeared before the arbitrator and filed their reply. Para one of that reply reads as under:- "At the outset, the respondents say that they have not consented to the appointment of Shri R.W. Walawalkar as the sole arbitrator." 4.On the basis of rival pleadings, it appears that the arbitrator framed points for determination. Point No. 1 reads as under:- "Is consent of the respondents required for the appointment of the arbitrator as the sole arbitrator." It appears, therefore, two points were decided as preliminary point. Thereafter, there was a petition filed in this Court for grant of extension of time to the arbitrator to make the award, which this Court granted by its order dated 27th April, 1998 in Arbitration Petition No. 101 of 1998. It further appears that on 12th September, 1998, an application was submitted to the arbitrator Shri Walawalkar by the respondents. The respondents stated therein that they have already lodged objections to Shri Walawalkar acting as sole arbitrator and that they are appointing one Shri S.R. Shah as their arbitrator. It appears that thereafter again proceedings before Shri Walawalkar, arbitrator went on. The respondents also gave consent for extension of time for making of the award. Ultimately it appears that Shri Walawalkar referred the above referred question for opinion of this Court. 5.It is clear from Clause 24 of the agreement between the parties that it provides that the arbitration of the dispute between the parties shall be in accordance with the provisions of the Arbitration Act, 1940.
Ultimately it appears that Shri Walawalkar referred the above referred question for opinion of this Court. 5.It is clear from Clause 24 of the agreement between the parties that it provides that the arbitration of the dispute between the parties shall be in accordance with the provisions of the Arbitration Act, 1940. Perusal of section 3 of the Arbitration Act shows that unless different intention appears in the arbitration agreement, the provisions set out in first schedule are deemed to be included in the arbitration agreement. It is thus clear that as the arbitration agreement between the parties does not make any provision for conduct of the arbitration and as according to that Clause the arbitration is to be conducted according to the provisions of the Act, it is obvious that in so far as the appointment and conduct of the arbitration is concerned, it is only the provisions of the Act, which are relevant. Perusal of first schedule to the Act shows that in case there is no contrary provision made in the arbitration agreement, the arbitration has to be referred to a sole arbitrator. Therefore, in the present case arbitration will have to be made by a sole arbitrator. Therefore, it is provision of section 8 of the Arbitration Act which becomes relevant. Section 8 of the Arbitration Act reads as under:- "(1) In any of the following cases (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 has arisen, concur in the appointment or appointments; or (b) If any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties or the arbitrators as the case may be, do not supply the vacancy; or (c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him; any party may serve the 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.
(2) If the appointment is not made within fifteen clear days after the service of the said notice the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties." Perusal of section 8 shows that when the reference has to be made to one arbitrator to be appointed by consent of the parties, one of the parties to the agreement has to serve a written notice on the other party to concur in the appointment of the arbitrator made by it. Sub-section (2) of section 8 thereof vests a power in the Court to make that appointment. Thus, procedure that was required to be followed in the present case was for the claimant to suggest the name of an arbitrator and call upon the respondents to concur in that appointment. Perusal of the notice dated 25th October, 1994 shows that notice was not issued under the provisions of section 8 of the Act, it was issued under section 9 of the Act. Because, by that notice the claimant communicated the name of its nominee to the respondents and called upon the respondents to appoint their nominee.
Perusal of the notice dated 25th October, 1994 shows that notice was not issued under the provisions of section 8 of the Act, it was issued under section 9 of the Act. Because, by that notice the claimant communicated the name of its nominee to the respondents and called upon the respondents to appoint their nominee. At this juncture, it becomes necessary to refer to the provisions of section 9 of the Act which read as under:- "Where an arbitration agreement provides that a reference shall be to two arbitrators one to be appointed by each party, then, unless a different intention is expressed in the agreement, (a) if either of the appointed arbitrators neglects or refuses to act, or is incapable of acting or dies, the party who appointed him may appoint a new arbitrator in his place; (b) if one party fails to appoint an arbitrator, either originally or by way of substitution as aforesaid, for fifteen clear days after the service by the other party of a notice in writing to make the appointment such other party having appointed his arbitrator before giving the notice, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent; Provided that the Court may set aside any appointment as sole arbitrator made under Clause (b) and either on sufficient cause being shown allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit." Perusal of section 9 shows that the provisions of that section come into play where arbitration agreement provides for a reference to two arbitrators. The term arbitration agreement has been defined by section 2(a) of the Act to mean the written agreement to submit present or future differences to arbitration. In the present case, written agreement between the parties read alongwith the provisions of section 3 and 1st Schedule of the Act was for referring disputes to the sole arbitrator and therefore provisions of section 9 clearly had no application. The question of inferring any consent from the conduct of the respondents would arise only in case the notice which is initially issued is a proper and valid notice.
The question of inferring any consent from the conduct of the respondents would arise only in case the notice which is initially issued is a proper and valid notice. In the present case, at no point of time the respondents were called upon as required by provisions of section 8 to concur in the appointment of the sole arbitrator appointed by the claimant. In the absence of a proper notice being given to the respondents, in my opinion, no inference can be drawn from their conduct. It is clear that if a valid notice under section 8 has been given then an inference can certainly be drawn from the conduct of the respondents after receiving notice. In the present case, it is further to be seen here that despite the fact that no proper notice was ever given by the claimant, the respondents have raised a specific objection to the jurisdiction of the arbitrator to conduct the arbitration proceedings. In the present case, it appears that both the parties to some extent were under misappreciation of law and therefore the conduct of the parties which is under misappreciation of law, in my opinion, cannot be deemed to constitute either waiver or estoppel. Therefore in my opinion the proper answer to the question that has been referred can be that "Yes", the conduct of the party can amount to waiver or implied consent, but for that purpose it must be shown that conduct was not because of misappreciation of law or misconception of law. In the present case, I do not find any conduct attributable to the respondents from which any inference of waiver or consent can be derived. In the result, therefore, the question referred under section 13(b) is answered accordingly. Petition disposed of Certified Copy expedited. Order accordingly. -----