1. Construction contract dispute — invocation of arbitration — removal of named arbitrator by High Court — appointment of substitute advocate arbitrator. (Para 2 , 3 , 4 )
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1993 Supreme(SC) 1154
SUPREME COURT OF INDIA
M.N.Venkatachaliah, C.J.I., S.Mohan, J.
City And Industrial Development Corporation Of Maharashtra
Versus
Motiram Budharmal
Case No. : 7244 of 1993
Date of Decision : 12/7/93
Advocates Appeared: Chidambaram P. : John K.J. : Parekh Manish : Parekh P.H. : Sagarand Uday : Salve H.N. : Venugopal P.
Advocates:
HARISH N.SLAVE, K.J.JOHN, MANISH PARIKH, P.CHIDAMBARAM, P.H.Parekh, P.VENUGOPAL RAO, UDAY SAGAR
HARISH N.SLAVE, K.J.JOHN, MANISH PARIKH, P.CHIDAMBARAM, P.H.Parekh, P.VENUGOPAL RAO, UDAY SAGAR
An arbitrator cannot be removed for lack of dispatch if the party seeking removal has been remiss or caused unexplained delays. Additionally, where parties specify a technical expert as arbitrator for a technical dispute, the court should respect that choice rather than appointing a non-expert.
Headnote:
Arbitration Act - Section 8 – Claim of compensation - Arbitration clause in the agreement - First respondent invoked arbitration clause in agreement - It was contested by second respondent stating that claims put forth were not - Thereafter first respondent by a letter protested and alleged bias against Respondent 3 - He also prayed for removal of Respondent 3 as arbitrator - After a gap of nearly first respondent issued notice requesting Respondent 3 to proceed with arbitration alleging that if this was not done, proceedings for revocation of his authority and/or for his removal would be adopted – Held, Hence this is not a case which would fall under Section 11 of the Act. Accordingly, the exercise of the power by the High court under the order appealed against cannot be upheld - Once, we reach this conclusion, it is unnecessary to go into the legal aspect and decide whether the parties intended that the vacancy should not be supplied and, therefore, a new arbitrator should not have been appointed. Besides, this is a case in which the parties intended that Respondent 3, Chief Engineer, alone should be the arbitrator, having regard to the facts that he is possessed of technical expertise, the dispute itself being of technical nature in relation to building construction. Therefore, the appointment of advocate arbitrator will not be effectual. Respondent 3 Chief Engineer is directed to enter upon arbitration and shall complete the proceedings before 31/03/1994 after due notice to parties - When third respondent wrote a letter in answer to the first respondent that the claims put forth were not arbitral what the first respondent did was to write a reply - In that letter, he alleged bias against the third respondent. On that score, he should be removed. After this letter no action was taken for more than by the first respondent - It was filed an arbitration petition for removal of the arbitrator - But learned Single Judge dismissed the petition and directed the third respondent to hold a preliminary meeting on the question as to whether the-claims are arbitral - IN opposition to this, the learned counsel for the respondents would urge that this is a case in which the arbitration agreement stipulated only Chief Engineer to be the arbitrator - Parties did not intend not to supply the vacancy - Therefore, the High court was fully competent to appoint another arbitrator after the removal of named arbitrator. Such a power is available to High court under Section 12(2(a) of Act - In support of this argument, reliance is placed on Chief Engineer, Rural Engineering - Present case falls under S. 11 and 12 of Act - IF agreement is silent as regards supplying the vacancy law, it is urged, presumes that the parties intended to supply the vacancy - Where therefore the court is moved under Section 8 of the Act to appoint an arbitrator, it was well within its jurisdiction to appoint another arbitrator. Reliance is placed on Preheat General Agencies v. Union of India - Appeal is allowed
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Table of Contents
2. Whether a named technical arbitrator can be replaced by an advocate and whether the arbitrator's delay warranted removal under the Arbitration Act. (Para 5 , 7 , 8 , 9 , 10 )
3. Respondent's own delays outweighed the arbitrator's minor errors; the technical nature of the dispute necessitated an arbitrator with technical expertise rather than legal training. (Para 12 , 13 )
4. Removal of an arbitrator for lack of dispatch requires a finding of unreasonable delay not caused by the party seeking removal. (Para 12 , 13 )
5. Appeal allowed — High Court order set aside — original named arbitrator reinstated with directions to complete proceedings. (Para 13 , 14 )
6. When can an arbitrator be removed for lack of dispatch?
An arbitrator may be removed if they fail to use reasonable dispatch in proceeding with the reference. However, if the party seeking removal has been remiss or caused unexplained delays, the arbitrator's delay may not warrant removal. (Para 12 , 13 )
7. Can a court appoint a non-technical arbitrator for a technical dispute?
Where the parties intended a specific arbitrator with technical expertise to resolve a technical dispute, the appointment of a substitute arbitrator without such expertise, such as an advocate, may be ineffective. (Para 5 , 13 )
8. How is the power to supply a vacancy in arbitration determined under Section 8 of the Arbitration Act?
The court must first determine if the parties intended to supply the vacancy. If the arbitration agreement evinces an intention not to supply the vacancy, the court has no power under Section 8(1)(b) to appoint a substitute. (Para 6 )
Judgment
S.MOHAN, J.
(1) LEAVE granted.
(2) THE appellant is a government company being wholly owned by the government of Maharashtra. Respondent 1 M/s Motiram Budharmal is a partnership firm carrying on business as builders and contractors. Respondent 3 is a Chief Engineer of the appellant company.
(3) ON 8/02/1982, the appellant firm issued work order to the first respondent for construction of E type building in Sector 10, Vashi, New Bombay. It was stipulated that the work .should be completed by 7/08/1983. The work was not completed by the first respondent within that date. On 30/06/1984, the work was completed. On 29/06/1987, the first respondent wrote to the appellants Executive Engineer alleging breach on the part of the appellant. He also put forth various claims. The first respondent inyoked the arbitration clause in the agreement. It was contested by second respondent stating that claims put forth were not arbitrable. Thereafter, the first respondent by a letter dated 15/10/1987 protested and alleged bias against Respondent 3. He also prayed for removal of Respondent 3 as arbitrator. After a gap of nearly 2-1/2 years on 15/05/1990, the first respondent issued notice requesting Respondent 3 to proceed with the arbitration alleging that if this was not done, proceedings for revocation of his authority and/or for his removal would be adopted.
(4) THE first respondent filed Arbitration Petition No. 125 of 1990 in the Bombay High court. In that proceeding, he prayed for removal of Respondent 3 as arbitrator and for revocation of his authority. It was directed that Respondent 3 should decide on the question whether the claims are arbitrable or not and to render a decision on the claims on merits by 31/12/1992. Inview of this direction, the third respondent wrote to the parties intimating that he proposed to enter upon the reference and fixed the meeting for that purpose. However, the letter erroneously stated that the meeting was to take place on 17/02/1992. On receipt of this letter, the first respondent stated that since the letter was received only on 15/05/1992, it was not possible to attend the meeting. Therefore, on 15/04/1993, the first respondent filed another Arbitration Petition No. 78 of 1993 seeking the removal of the third respondent as sole arbitrator. On this petition, the High court passed the impugned order on 14/06/1993 directing the removal of third respondent as sole arbitrator and appointed an Advocate of the High court as arbitrator in his place. It is the correctness of this order, which has been questioned in this appeal.
(5) THE learned counsel for the appellant would urge that having regard to the terms of arbitration clause where there is a named arbitrator namely, the Chief Engineer, it is not open to the court to appoint an advocate arbitrator. If the intention of the parties was that the dispute being technical in nature, it should be decided by a person with technical expertise, appointment of an advocate will not remedy the situation.
(6) IN order to invoke Section 8 of the Arbitration Act (hereinafter referred to as the Act), it has to be decided first whether the parties intended to supply the vacancy. When the arbitration agreement evinces an intention not to supply the vacancy, the court will have no power under Section 8(l)(b) of the Act. This is not a case where the contract is silent about supplying the vacancy.
(7) THE High court, it is urged, had failed to take into account the conduct of the first respondent, the party applying for removal. Such a conduct clearly shows that he was not interested in proceeding with the arbitration. After writing the letter dated 18/05/1992, no step, whatever, was taken by the first respondent. When the first respondent was not interested, the High court should have held that the arbitration agreement ceased to have effect. A declaration to that effect ought to have been made: that would have been
