1. Contractual arbitration clause — failure to appoint arbitrator by designated authority — application under Section 8, Arbitration Act, 1940. (Para 1 , 2 )
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1999 Supreme(SC) 502
SUPREME COURT OF INDIA
S.N.Phukan : S.R.Babu
Mohinder Kumar Jain
Versus
Beas Construction Board
Case No. : 1988 , 1989 of 1991
Date of Decision : 4/15/99
Under the Arbitration Act, 1940, if a party authorized by contract to appoint an arbitrator fails to do so within the time stipulated in a notice, the court has jurisdiction to appoint an arbitrator under Section 8 of the Act.
Headnote:(A) Arbitration Act, 1940 - Section 8 - Appointment of Arbitrator - Where a contract authorizes a party to appoint an arbitrator, but no arbitrator is appointed by that party within the time stipulated in the notice served by the other party, the court would have jurisdiction in terms of Section 8 of the Act. (Para 3)
(B) Jurisdiction - Application of Section 8 versus Section 20 of the Arbitration Act, 1940 - If the appointing authority fails to act upon a request within the stipulated period, an application under Section 8 is maintainable. (Paras 2 and 3)
Facts of the case:
The parties entered into a contract containing an arbitration clause providing for the appointment of an arbitrator by a designated authority upon written request. The appellant served a notice requesting the appointment of an arbitrator within a specified period, but the authority failed to do so. An application was filed under Section 8 of the Arbitration Act, 1940, which was allowed by the trial court. However, the High Court set aside this order, holding that Section 20 of the Act should have been invoked instead of Section 8.
Findings of Court:
The court held that in situations where a party authorized to appoint an arbitrator fails to do so within the time stipulated in the notice, the court possesses jurisdiction under Section 8 of the Arbitration Act, 1940.
Issues: Whether an application under Section 8 of the Arbitration Act, 1940 is maintainable when the party authorized by the contract to appoint an arbitrator fails to make the appointment within the stipulated time.
Ratio Decidendi: Following the established principle that failure to appoint an arbitrator within the stipulated time by the authorized party grants the court jurisdiction under Section 8 of the Arbitration Act, 1940, the order of the High Court was set aside and the trial court's order was restored.
Result: Appeals allowed.
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Table of Contents
2. Whether an application under Section 8 of the Arbitration Act, 1940 is maintainable or if Section 20 should be invoked when an arbitrator is not appointed. (Para 2 , 3 )
3. The court found that jurisdiction under Section 8 is available when a party authorized to appoint an arbitrator fails to do so within the stipulated time. (Para 3 , 4 )
4. Courts have jurisdiction under Section 8 of the Arbitration Act, 1940, if a party authorized by contract fails to appoint an arbitrator within the stipulated time. (Para 3 , 4 )
5. High Court order set aside — trial court order restored — arbitrator directed to proceed with the matter. (Para 4 , 5 )
6. Does a court have jurisdiction under Section 8 of the Arbitration Act, 1940, if a party fails to appoint an arbitrator as per the contract?
Yes, where a contract authorizes a specific party to appoint an arbitrator, but that party fails to do so within the time stipulated in the notice served by the other party, the court possesses jurisdiction under Section 8 of the Act. (Para 3 , 4 )
(1) THE appellat and respondent had entered into a contract which has provided Clause 25-A for appointment of an ArbitratoR.The said clause reads as follows: "Clause 25-A-If any question, difference of objection whatsoever arise in any way connected with or arising out this instrument or the meaning or operation of any part thereof the rights, duties or liabilities of either party then save insofar as the decision of any such matter is here in before provided for and has been so decided, every such matter including whether its derision has been otherwise provided for and/or whether it has been finally derided accordingly, or whether the contract should be terminated or has been rightly terminated and as regards the rights and obligations of the parties as the result of such termination shall be referred for arbitration to be appointed by the Chief Engineer Electrical Beas Project, Chandigarh on written request either from the contractor or from the XEN, written within 180 days or in the months from the date of payment of final bill to the contractor or from the date of requisite notice is sent to the contractor to the effect that his final bill is ready for payments and his derision shall be final and binding and where the matter involves a claim for the payment or recovery or deduction of money only the amount, if any, awarded in such arbitration shall be recoverable in respect of the matter so referred. "
(2) THE appellant made a request to the Chief Engineer by serving a notice upon him to appoint an Arbitrator within 15 days of the receipt of the said notice on 7/2/1988. However, within the period stipulated in the notice, the Chief Engineer did not appoint the ArbitratoR.Thereafter the appellant filed an application as provided under Section 8 of the Arbitration Act, 1940 before the court of Senior Sub-Judge, Chandigarh. The trial court allowed the application and directed the appointment of an ArbitratoR.Aggrieved by that order, the resspondent filed a revision petition in the High court and the High court took the view that an application under Section 8 of the Act was not proper and if at all the appellant ought to have invoked Section 20 thereof and thus there was no occasion for the court to appoint an ArbitratoR.The High court allowed the appeal and dismissed the application filed by the appellant. That is why this appeal has been presented before us.
(3) LEARNED Counsel appearing for the appellant drew our attention to the decision of this court in Nandyal Co-op. Spinning Mills Ltd. vs. K.V. Mohan. Rao, which has exhaustively considered an identical situation and took the view that where a contract authorises a party to appoint an Arbitrator, but no Arbitrator is appointed by that party within time stipulated in the notice served by the other party, court would bet jurisdiction in terms of Section 8 of the Act.
(4) APPLYING the aforesaid principle to the facts of the present case, we set aside the order made by the High court and restore that of the trial court. Now the Arbitrator appointed by the trial court shall proved with the matter as expeditiously as possible.
(5) THE appeals are allowed accordingly. However, in the circumstances of the case, there shall be no order as to costs.
