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2000 DIGILAW 73 (CAL)

INLAND CONSTRUCTION COMPANY v. UNION OF INDIA

2000-02-15

AMITAVA LALA

body2000
AMITAVA LALA, J. ( 1 ) THE Court : This is an application for vacating and recalling the order passed by this Court on 17th June, 1991 in A. P. No. 117 of 1999 which is as follows :-"this is an application under section 11 (5) of the Arbitration and Conciliation Act, 1996. The contention of the petitioner is that although the demand was made to comply with the formalities for appointment of arbitrator in the dispute in between the parties, but the authorities concerned, being the respondent herein, did not adhere to give due concurrence to such demand for the purpose of appointment of arbitrator; as a result whereof the jurisdiction of this Court has been invoked. It appears from sub-section (2) of section 11 of the Act that subject to sub-section (6), which is not the subject matter herein, parties are free to agree on a procedure for appointing arbitrator or arbitrators. Sub-section (5) prescribes for failing in agreement referred to in sub-section (2) in on arbitrator with a sole arbitrator. If the parties fail to agree on the arbitrator within thirty days from the receipt of a request by one party from another party to so agree, the appointment shall be made, upon request of a party, by the Hon'ble the Chief Justice or any person or institution designated by him. The expression "or any person or institution designated by him" under the said sub-section (5) is creating lot of confusion in the mind of the people and causing unnecessary delay in arbitration proceedings. Such is contrary to the very basis of Act. The law prescribes that the principal Civil Court has jurisdiction to entertain, try and determine, the subject matter of the context. The principal Civil Court does not necessarily mean the Chief Justice alone. The pusne judges too are the part and parcel of Chief Justice of the High Court. The problem is now-a-days that the administrators are becoming defecto law maker due to lack of potentiality is the legislative body. Hence such result is inevitable. However, it is high time for the legislature to take this issue for necessary clarification. Now, let us confine to the cause of action of this applicaton. Cause of action is refusal or failure on the part of the authority to give concurrence as to notice of appointment of Arbitrator within 30 days from the date of notice. However, it is high time for the legislature to take this issue for necessary clarification. Now, let us confine to the cause of action of this applicaton. Cause of action is refusal or failure on the part of the authority to give concurrence as to notice of appointment of Arbitrator within 30 days from the date of notice. Therefore appointment of Arbitrator with the intervention of the Court is obvious. A single Bench Judgment of Andhra Pradesh High Court reported in 1999 (1) Arbi LR 179 (V. Ramana Reddy v. Union of India etc.) also took the similar view. As a result whereof I pass an order in terms of prayer (b) of the petition and send the matter to the Hon'ble the Acting Chief Justice for the purpose of filling up the vacancy of the arbitrator and for further directions, if any, for the purose of giving a particular time frame for making and publishing the award. Therefore, this application is disposed of one the above terms. Cost of this application will be costs in the arbitration proceedings. The Department and all parties concerned are to act on a signed copy minutes of the operative part of this judgment on the usual undertaking. " ( 2 ) AS soon as the matter was placed before the Hon'ble Chief Justice for the purpose of filling up the vacancy, the petitioner in this application took the objection about the appointment of the Arbitrator through the intervention of the Court. As a result whereof, this petitioner with a supporting affidavit dated 6th December, 1999 moved an application with such prayer as above for vacating and recalling the order passed by this Court and direction upon the Chief Engineer, Central Public Works Department to appoint Arbitrator in terms of Clause 5 of the agreement being annexure-C to the petition. ( 3 ) ANNEXURE-C to the petition prescribes as follows :-"clause 25. ( 3 ) ANNEXURE-C to the petition prescribes as follows :-"clause 25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned and as to the quality or workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, 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 abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, Central Public Works Department, in charge of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the said Central Public Works Department at the time of such appointment. It will be no objection to any such appointment that the Arbitrator so appointed is a Government servant that he had to deal with the matters to which the contract relates that in the course of his duties as Government servent he had expressed views on all or any of the matters in dispute or difference. The arbitration to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or Administrative head as aforesaid at the time of such transfer, vacation office or inability to act shall appoint another person to act as Arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the State at which it was left by his predecessor. It is also a term of his contract that no person other than a person appointed by such Chief Engineer or Administration head of the CPWD, and aforesaid should act as Arbitrator and if for any reason, that is not possible, the matter is not to be referred to Arbitration at all. In all cases where the amount of the claim in dispute is Rs. 75,000/- (written in ink pen), and above, the arbitrator shall give reasons for the award. 3a. In all cases where the amount of the claim in dispute is Rs. 75,000/- (written in ink pen), and above, the arbitrator shall give reasons for the award. 3a. Subject as aforesaid the provisions of the Arbitration Act, 1940, or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. 3b. It is also a term of the contract that the party invoking arbitration shall specify the dispute or disputes to the referred to arbitration under this clause together with the amount or amounts claimed in respect of each such disputes. 3c. It is also a term of the contract that if the contractor (s) do/does not make any demand for arbitration in respect of any claim (s) in writing within 90 days of receiving the intimation from the Government that the bill is ready for payment, the claim of the contractor (s) will be deemed to have been waived and absolutely beared and the Government shall be discharged and released of all liabilities under the contract in respect of these claims. 3d. The arbitrator (s) may from time to time with consent of the parties enlarged the time, for making and publishing the award. 3e. The decision of superintending Engineer regarding the quantum of reduction as well as justification thereof in respect rules for substandard work which may be decided to be accepted will be final and would not be open to arbitration. " ( 4 ) BY showing a part of such clause that in terms of the contract no person other than a person appointed by the Chief Engineer of or administrative head of the CPWD as aforesaid should act as Arbitrator and if for any reason, that is not possible, the matter is not to be referred to the Arbitrator at all. Surprisingly, thereafter, it is contended that subject as aforesaid, the provision of Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for time being enforce shall apply to the arbitration proceedings under this clause. The contention of the petitioner is that the application in which the order was passed cannot be treated as an application under section 11 (5) of the Arbitration and Conciliation Act, 1996. The contention of the petitioner is that the application in which the order was passed cannot be treated as an application under section 11 (5) of the Arbitration and Conciliation Act, 1996. The application is actually coming under section 11 (6) of such of the Arbitration and Conciliation Act, 1996. The petitioner further contended that by an order dated 11th June, 1998, a single Bench of this Court, in similarly placed situation recalled a similar order which is annexed herein being annexure 'e' to the petition. ( 5 ) MR. Dipak Basu, learned senior counsel appearing in support of the application contended that in view of para 14 of the judgment reported in AIR 1965 Calcutta 404 (Union of India v. M/s. Himco India Pvt. Ltd.) to establish :"where the arbitration agreement contains adequate and exhaustive machinery for appointment of arbitrators including substitutional appointments in case the appointed arbitrator refuses to act etc. the fact that the appointed arbitrator has not yet signified his willingness to act as arbitrator does not debar the Court from making an order of reference of the dispute to him. If he subsequently refuses to act as the arbitrator the procedure laid down in the arbitration agreement will prevail and will have to be followed. " ( 6 ) ACCORDING to me, factually the above order is made applicable as to question of refusal of the arbitraor which is not the case hereunder. In the present case, there is an allegation of a negligence on the part of the appropriate authority of a party in forwarding the matter to the arbitrator. Section 20 of the Arbitration Act, 1940 was applied in the referred case. In the present case the application was made under section 11 (5) of the Arbitration and Conciliation Act, 1996. This present Arbitration and Conciliation Act of 1996 gives power to appoint Arbitrator through the intervention of the Court. Such power is also available under various sections of the Old Arbitration Act, i. e. Act of 1940. Therefore, power of the Court cannot be interfered with in the manner as is proposed under this application. Moreover, the Clause 25 of the arbitration clause comprises the scope of the Arbitration Act, 1940 or any statutory modifications or re-enactment thereunder. Such power is also available under various sections of the Old Arbitration Act, i. e. Act of 1940. Therefore, power of the Court cannot be interfered with in the manner as is proposed under this application. Moreover, the Clause 25 of the arbitration clause comprises the scope of the Arbitration Act, 1940 or any statutory modifications or re-enactment thereunder. Therefore, the other part of such clause which provides that if there is no agreement in between the parties in resspect of appointment of arbitrator under the clause itself the matter is not to be referred to the arbitration at all is according to this Court, an illegality as to the contract once accepted for arbitration method. Contract between the parties is one and contract between the parties to refer the matter to the arbitrator is other which is governed by the law of Arbitration. There cannot be any estoppel against the statute. Therefore, if case of any dispute referable to arbitration is available, it is entirely for the Court as to whether the matter will be referred back to any arbitrator to be appointed by the Court or as per the arbitration clause but arbitration cannot be wiped out and regular suit will be instituted in this respect merely by any agreement of the parties superseding the statute. ( 7 ) UPON going through the scope and ambit of section 11 of the Arbitration and Conciliation Act, 1996, I find that sub-section (6) under the Act provides procedure of appointment of arbitrator agreed upon by the parties. Even under such sub-section, a party may request to the Chief Justice or any person or instiitution designated by him to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment. Such sub-section speaks subject to sub-section (2) wherein it has provided that the parties are free to agree on a procedure for appointing the arbitrator or arbitrators. Therefore, if I read sub-section (2), I shall find the parties are to agree on a procedure and they have agreed under the facts and circumstances of this case. The sub-section (2) provides that in case of failure the Chief Justice may be requested. Therefore, if I read sub-section (2), I shall find the parties are to agree on a procedure and they have agreed under the facts and circumstances of this case. The sub-section (2) provides that in case of failure the Chief Justice may be requested. Sub-section (5) provides that in case of failure of any agreement referred to the sub-section (2) in any arbitration with a sole arbitrator if the parties fail to agree on the arbitrator within 30 days from the date of receipt by one party from the other party to show agree the appointment shall be made, upon request to a party by the Chief Justice or any person or institution designated by him. Therefore, procedure of appointment of the arbitrator either is to be made in sub-section (5) or in sub-section (6) but all are subject to sub-section (2 ). Therefore, when the party agreed for nomination but did not agree to the named arbitrator and if there is delay on the part of the nominator, the party cannot wait for indefinite period otherwise the very foundation of the act will be frustrated. ( 8 ) IN such circumstances, the failure on the part of the parties in respect of appointment within the 30 days, under sub-section (5) will be construed of actual appointment of arbitrator from the date of notice from the parties to the nominator to do so. Since one of the parties has not done so this Court has rightly recorded the reasons and sent the matter to the Chief Justice for his disposal in respect of appointment of arbitrator. ( 9 ) THE petitioner has contended that there is no question of limitation under section (6) of the Act. Therefore, at any point of time, the nominator can nominate the arbitrator. I believe that if such procedure is adopted then the very act of arbitration will have to be declared as non-est because the arbitration is a process of expeditious disposal of the commercial litigations and to make the same further expeditious the earlier act was repealed and the now act was introduced and even thereafter if governmental authority itself take such plea, Court will not adhere the same since it is against the intention of the legislature. Under such circumstances, this point cannot be acceptable by this Court nor the single Bench judgment since without laying down principle can have any binding effect in respect of the matter pending before this Court. ( 10 ) SINCE there is a failure on the part of the authority to appoint an arbitrator within the period of 30 days from the date of notice the matter is squarely covered by section 11 (5) of the Act for the purpose of intervention of the Court and for appointment of arbitrator. ( 11 ) THE respondent has cited a judgment reported in 1999 (2) Arbitration Law Reporters 343 (Nagin Bhai C. Patel v. Union of India) wherein a single Bench of the Bombay High Court held that reference of matter to the Arbitrator even during the pendency of the matter before the Court cannot be entertained. Under such judgment, the provision of similar clause being clause 25 was considered at length. However, I have expressed my view that there is no scope and ambit for recalling the order passed by this Court referring the matter to the Chief Justice for the purpose of appointment of the arbitrator as passed on 17th June, 1999. ( 12 ) MOREOVER, techinically such application cannot be recalled at this belated stage when the petitioner has come forward with an application and filed before this Court only on 8th December, 1999 without any prayer for condonation of delay. The respondent contended that under similar circumstances from an order of this Court and special Leave petition was moved before the Supreme Court of India when the petition for Special Leave to Appeal Civil No. 10900 of 1999 (Union of India and Anr. v. City Builders, Calcutta) was dismissed but since no principle has been laid down, I am only referring the same without making any observation. However, the application stands dismissed. No order is passed as to costs. Xeroxed certified copy of the Judgment be made available to the parties within seven days from the date of putting requisition for the same. All parties are to act on a signed copy minutes of the operative part of this judgment on the usual undertaking. Application dismissed.