Hyderabad Urban Development Authority vs Raghunandan

P.L.N. Sarma, J.—Respondent in O.P. No. 179 of 1991 is the petitioner in this revision. It is challenging the order of the 1st Additional Judge, City Civil Court, Hyderabad, in O.P. No. 179 of 1991 dated 8.7.1993 appointing a Retired Chief Engineer (Roads & Buildings) as Arbitrator on an application filed u/s 8 of the Arbitration Act, 1940 (for short "The Act").

The parties are referred to as HUDA and Contractor for convenience sake.

The tender submitted by the contractor was accepted by HUDA and the acceptance was communicated to the contractor by communication dated 19.6.1985. Agreement was also concluded between the parties on 14.6.1985. The work entrusted to the contractor as per the agreement is the construction of 269 houses for Vemana Co-operative Housing Society at Chanda Nagar. The approximate estimated value was fixed at Rs. 55,55,944/-. 80 ps. According to the Contractor, work was completed and a notice was issued to HUDA on 21.3.1991 to settle his claim within a period of one month and in spite of the notice, the claim was not settled. Clause 13 of the agreement provided for determination of disputes by arbitration. The said clause provided that for claims above Rs. 50,000/- the court of competent jurisdiction at Hyderabad is the Arbitrator and therefore, the contractor filed an application u/s 8 of "the Act" before the 1st Addl. Judge, City Civil Court, Hyderabad in O.P. No. 179 of 1991 praying the court to appoint an arbitrator or settle the disputes by itself. Admittedly, the claim of the contractor is more than Rs. 50,000/-. Hence, O.P. No. 179 of 1991 was presented to the court as aforesaid.

The same was resisted by HUDA-petitioner herein on several grounds-one such ground being that Clause 13 of Schedule ''D'' of the agreement provided that for a claim exceeding Rs. 50,000/- the same should be instituted before a competent court and it should not be the subject matter of arbitration and therefore the only course open to the contractor, even in a case where the claim exceeds Rs. 50,000/- is to institute a regular suit and he cannot invoke arbitration clause. I am not referring to the other allegations made in the counter for the reason they are not relevant for the purpose of disposal of the case at this stage.

On the respective contentions of the parties and after considering the material placed before him, the learned Judge appointed, as aforesaid, a retired Chief Engineer (R & B) as arbitrator Questioning the said appointment, HUDA filed the present revision.

The main contention raised by Shri K. Janardan Rao, learned counsel appearing for the petitioner-HUDA is that invocation of Section 8 of "The Act" in the present case is not sustainable. The conditions precedent for invoking Section 8 have not been satisfied or fulfilled in the present case and, therefore, appointment of an arbitrator is not sustainable. It is stated by the learned counsel that if any appointed arbitrator refused to act and the arbitration agreement does not provide that the parties can supply the vacancy, then either of the parties may serve the other parties with a written notice to concur in the appointment or appointments or in supply of vacancy and if the appointment is not made within 15 clear days after the service of the said notice; the court, on the application of the party u/s 8, gets undoubted power to appoint an arbitrator. In the present case, even assuming that the named arbitrator, i.e., the court refused to act, serving of notice by either of the parties to the other to concur in the appointment or appointments in the supply of vacancy and the subsequent steps contemplated under sub-section (2) of Section 8 of "The Act" have not been fulfilled and the named arbitrator, while refusing to act, cannot straightway appoint an arbitrator.

On the other hand, Shri C. Poornaiah, learned counsel for the respondent-contractor contended that the present case being a peculiar one where the arbitrator as well as the court which has to appoint an arbitrator, is the same, and the court has dual capacity and when it refuses to act as an arbitrator it has power to appoint an arbitrator. In the present case, the court must be deemed to have refused to act as an arbitrator and on its refusal, the court appointed a retired Chief Engineer as an arbitrator and it is in accordance with the provisions of Section 8 of "The Act" and the same is in accordance with law.

In this case, the arbitration clause which is referred to above is as follows :

"13. The arbitration for fulfilling the duties set forth in the Arbitration Clause of the standard preliminary specification shall consist of the following members in accordance with the instructions laid down in G.O. Ms. No. 456, dated 24.10.1983."

---------------------------------------------------------------------------- Value of Amount Panel of Arbitrators ---------------------------------------------------------------------------- 1. Claims upto Rs. 10,000. The Superintending Engineer (R & B), Head Quarters Circle, Hyderabad. 2. Claims above Rs. 10,000 The Chief Engineer (Buildings & upto Rs. 50,000. Errum Manzil, Hyderabad. 3. Claims above Rs. 50,000. Court of competent jurisdiction, Hyderabad. ----------------------------------------------------------------------------

Admittedly, the claim of the contractor in the present case is more than Rs. 50,000/-. Therefore, the named arbitrator, as per the clause of the agreement, is the court of competent jurisdiction, Hyderabad. It is true that in the O.P. filed u/s 8 of "The Act", the contractor clearly mentioned that the court has to appoint an arbitrator or settle it by itself. However, the learned Judge does not seem to be aware of that fact that he can also act as an arbitrator. I do not find any observation or any material in the Judgment to show that he refused to act as an arbitrator. On the other hand, the learned Judge seems to have proceeded on the basis that he is competent to appoint an arbitrator. In fact, the learned Judge stated that the petitioner is justified in approaching the said court for the appointment of arbitrator u/s 8(1)(a) of "The Act". In fact, while referring to the contentions also, the learned Judge stated that the contractor contended that if the claim is more than Rs. 50,000/-, it is the trial court which has to appoint an arbitrator.

Having regard to the above, I am of the opinion that the appointment of arbitrator even before considering whether the court itself is prepared to arbitrate in the matter between the parties or not, is not sustainable and therefore, the order under revision is liable to be set aside and the matter has to go back to the trial court for acting as an arbitrator in the dispute between the parties to these proceedings. In case, the court is not willing to act as an arbitrator. It will say so in writing. In such an event, the steps contemplated u/s 8 of the "The Act" will have to be taken before an arbitrator is appointed by the court under sub-section (2) of Section 8 of "The Act".

Revision petition is allowed and the matter is remanded back to trial court. The learned Judge will decide whether to act as an arbitrator or not within a period of three weeks from the date of receipt of a copy of this order. No costs.

Petition allowed.