Council of Scientific and Industrial Research and Anr. vs Ganga Construction Corporation

The parties to the litigation are reported to have entered into an agreement for construction of guest house building including sanitary installations

at Regional Research Laboratory premises, Jammu, which, interalia, provided that in case of disputes between them the same shall be referred to

the arbitration of a person to be nominated by the Director General, Council of Scientific and Industrial Research, New Delhi. As the disputes

arose and were brought to the notice of the Director General, Council of Scientific and Industrial Research (CSIR, for short), he appointed Shri S.

K. Narayanan, as arbitrator who entered upon reference and conducted some proceedings. On 3b121983, the nominated arbitrator expressed his

inability to continue as an arbitrator. The respondent claimant thereafter filed a petition in this Court praying therein that as the nominated arbitrator

has failed to act as an arbitrator an independent arbitrator be appointed in his place. The court vide order impugned in this appeal accepted the

contention of the respondent and appointed Shri H. K. Gandotra, retired Chief Engineer, P. W. D., Jammu as an arbitrator with direction to enter

upon the reference and submit his award within the statutory period of four months. It may not be out of place to mention that during the pendency

of this appeal, the Director General, CSIR appointed one Shri H. C. Gupta, Joint Secretary and Legal Advisor, Ministry of Law, Justice and

Company Affairs, New Delhi, as an arbitrator in the case.

We have heard learned counsel for the parties and perused the record, Mr. Bhagotra, learned Counsel appearing for the respondent has

submitted that this appeal is not maintainable as, according to him, the appellant had failed to prefer an appeal against the order of a Single Bench

of this Court dated 2181984. He has relied upon AIR 1970 Allahabad 31, in support of his contention.

Sec. 39 of the Arbitration Act specifies the orders against which an appeal is competent. Clause (4) of subsec. (1) of Sec. 39, deals with the

cases where the Court directs the filing or refusing to file an arbitration agreement which, in fact and in common parlance, means referring the

dispute to the arbitrator or refusing to refer such cases to the arbitrator. It was held in Satya Narayan Aggarwal V. Vaidyanath Mandal (AIR 1972

patna 29) that an order setting aside the appointment of a sole arbitrator amounts to be an order superseding the reference and, therefore,

appeasable. It is not disputed that as and when an arbitrator is appointed, the order is appeasable, but, it is contended, that as the Court had

expressed its views regarding the appointment of an independent arbitrator on 2181984 when it asked the parties to submit the names of the

arbitrators and the appellant kept quiet, it was to be presumed that they had no objection to the appointment of an independent arbitrator at that

time and were now debarred from filing the present appeal. In AIR 1970 Allahabad 31, the appeal was preferred against an order passed under

Sec. 20 of the Arbitration Act directing the filing or arbitration agreement and calling for the names of the agreed arbitrators which order was held

to be appeasable. The filing of the arbitration agreement is the final order contemplated by Sec. 20 of the Arbitration Act and cannot be termed to

be an interim order only proposing to refer the disputes to the arbitrator as was done by this Court vide order dated 2181984. In that order it was

observed:

Objection have not been filed by Mr. Thakur on behalf of the respondent despite a number of opportunities having been granted to him. Mr. Johal

appears, on his behalf. Learned counsel appearing for; the parties, are directed to furnish list of persons to be appointed as Arbitrators in this case

in the following manner :

Learned counsel for the petitioner shall submit there names who are willing to hold arbitration proceedings at Jammu and learned counsel for the

respondent shall also furnish three names who are willing to conduct the arbitration proceedings at Jammu.

It is contended in the application that an arbitrator was appointed in 1982 and the appointed arbitrator could not continue with the arbitration

proceedings and finally on 30121983 he informed the Deputy Registrar of this court that he was not willing to act as an Arbitrator in the case. The

option in terms of C 1.30 of the agreement was exercised and person nominated earlier has delayed the proceedings and has voluntarily opted for

retirement. I have no option but to discharge him as an arbitrator in this case and appoint fresh arbitrator in his place. For appointment of fresh

arbitrator I have asked the parties to submit a panel of names arbitrators/and have their venue at Jammu. It will be, against the interest pf justice if

in respect of a dispute of work which has been, executed in Jammu, parties are directed to proceed to Delhi for arbitration.. Apart from the

inconvenience to the parties, it will cause. heavy financial loss to the parties. Therefore, in my opinion, arbitration proceedings be conducted at

Jammu to save the parties from unnecessary expenditure and. Inconvenient Learned, Counsel for the. Parties shall submit toe panel of names within

15 days from today before the Registry and thereafter the case be listed for further proceedings.

The learned Single Judge had; not removed the nominated arbitrator but only agreed to discharge Him as an arbitrator in terms of C 1 30 of the

agreement executed between the parties. The said order cannot, in any manner be held to be a final order for the purposes of filing an appeal under

Sec. 39 of the Arbitration Act. The Director General, CSIR had in the mentions appointed Shri H. C. Gupta as the arbitrator whose appointment

continues to be in existence even now. Assuming but not admitting that order of the Court dated 2181984 was also appeasable it cannot be said

that the final order by which the agreed arbitrator has been removed, cannot be appealed against. There is no merit in the preliminary objection,

which is rejected.

Learned counsel for the parties have referred to various judgments in support of their rival contentions. Mr. Bhagotra, relying upon the

authorities referred to by him, submits that as the nominated arbitrator has refused to discharge his duties or act as an arbitrator it is only the Court

which can appoint his successor whereas Mr. Thakur has referred to the case law in clause itself contains the exigency of appointing an arbitrator

in place of the vacancy created, the Court in that event, cannot appoint the arbitrator and has to afford an arbitrator in place of the vacancy

created, the Court in that event, cannot appoint the arbitrator and has to afford an opportunity to the appointing authority to exercise its powers.

After considering the rival contentions of the parties and perusing the judgments relied upon by them we have come to the con cushion that in a

case where the agreed nominated arbitrator refuses to act as such it is the Court which can appoint his successor pro vided the arbitration

agreement between the parties does not provide otherwise for filling the vacancy and any procedure to substitute an arbitrator in place of an

arbitrator who has resigned or refused to act as such. In the instant case the parties, are governed by C 1.30 pertaining to the arbitration

agreement, which provides:

(a) Except where otherwise provided in the contract, ail questions and disputes relating to the meaning of the specifications, designs, drawings,

the instructions herein before mentioned and so to the quality of workmanship materials used on the work or so to any question, claim, right, matter

of thing whatsoever, in any way arising out of or relating to the contract, design, drawings, specifications, estimates, instructions, orders or these

conditions or otherwise concerning the woks, or the execution of the same whether arising during the progress of the work after completion of

abandonment thereof shall be referred to the sole arbitration of a person nominated by Director General, Scientific and Industrial Research and if

he is unable or unwilling to act, to the sole arbitration of some other person appointed by him willing to act as such abrogation, the submissions

shall be deemed to be submission to Arbitration under the meaning of the Arbitration Act, 1940 or any statutory modification or reenactment

thereof for the time being in force. The award of arbitrator as appointed shall be final, Conclusive and binding on all parties to this contract.

(b) It is agreed that contractor shall not delay the carrying out of the work by reasons of any reference to arbitration and shall proceed with the

work with all due diligence and shall until the decision of arbitration abide by the decision of the Engineer duly conveyed to him.

(c) The Arbitrator (s) may from time to time with the consent of the parties enlarge the time for making and publishing the award.

A perusal of this clause would clearly show that where the nominated arbitrator is unable or unwilling to act as so arbitrator, title Director General,

CSlR. is under a contractual obligation to appoint some person as new arbitrator in place of the arbitrator who has refused to act as such. Without

having resort to the procedure prescribed under C 1.30 of the agreement executed between the parties, the respondentclaimant rushed to this

Court for the appointment of an independent arbitrator, which was not permissible under law. The Director General, after knowing about the

vacancy created by refusal of Shri S. K. Narayanan to act as an arbitrator, himself appointed Shri A C. Gupta, Joint Secretary & Legit Advisor,

Ministry of Law Justice & Company Affairs, New Delhi in the case. As the arbitrator was to be appointed directly in accordance with the

agreement executed be w the parties, the learned Single Judge was not justified in superseding arbitration clause by appointing an independent

arbitrator vide the judgment impugned in this appeal, the judgment of the learned Single Judge being contrary to the facts of the case and the settled

proposition of law, cannot be sustained and is liable to be set aside.

It is conceded at the bar that after his appointment, Shri. H. C. Gupta could not act as an arbitrator on account of the pendency of this appeal

and in terms of the stay granted by this Court vide the order passed on 13 81985. Mr. Thakur, learned counsel appearing for the appellant has

been fair to concede that Mr. H. C. Gupta, the nominated arbitrator may not be available to act as an arbitrator on account of the lapse of time of

about 8 years. It is submitted by learned counsel for the appellant that the director General, CSIR is prepared to exercise his option and appoint a

new arbitrator in terms of C 1.30 of the Arbitration agreement executed between the parties"".

Under the circumstances the appeal is accepted and the judgment impugned is set aside. The appointment of Shri H. K. Gaodotra as arbitrator

between the parties is quash d. Keeping in view the pendency of the litigation between the parties for over two decades, the Director General,

CSIR, is directed to appoint a new arbitrator in terms of clause 30 of the arbitration agreement within a period of one month from the date of the

judgment failing which I shall be presumed that he has opted not to exercise his powers and in that event the respondentclaimant shall be justified to

pray for the appointment of an independent arbitrator. The arbitrator so appointee shall enter upon the reference and conduct the proceedings at

Jammu as has been agreed to by learned counsel for the appellant. The award shall be filed in the Court within the statutory period.

The parties shall bear their own costs.

All connected C. M. Ps. shall stand disposed of accordingly.