IMPORTANT POINTS
When respondent consented to appointment of arbitrator contrary to arbitration agreement, a presumption is raised that there was a new contract by way of novation.
When the respondent consented to appointment of someone else than a Railway Gazetted officer as arbitrator, it cannot go back and challenge the appointment.

Judgment

ANIL R. DAVE, J.

1. Leave granted.

2. At the request of the learned counsel appearing for the parties, the appeals are taken up for hearing as only one legal issue is involved in both the appeals.

3. The learned counsel appearing for the appellant has submitted that the appellant is a contractor, who had entered into a contract with the respondent for certain construction works. There were certain disputes and therefore, as per the agreement between the parties, the disputes had to be resolved by an Arbitrator. The following clause was part of the agreement, which enabled the parties to refer the dispute to an Arbitrator:

“63.3(a)(iii). It is a term of this contract that no person other than a Gazetted Railway Officer should act as an arbitrator/umpire and if for any reason, that is not possible, the matter is not to be referred to the arbitration at all.”

4. As the respondent did not appoint an Arbitrator, an application under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’) had been filed before the Chief Justice and ultimately Justice Kalyanmoy Ganguly, a former High Court Judge had been appointed as a sole Arbitrator.

5. In the arbitration proceedings, the objection had been raised by the respondent with regard to validity of the appointment of an Arbitrator but the Arbitrator, after hearing the concerned parties held that his appointment was valid and thereafter he made an Award on 16th July, 2007.

6. The validity of the said Award had been challenged under Section 34 of the Act, but the Award had been upheld on 24th April, 2013. The said order had been challenged by an appeal before the Division Bench of the Calcutta High Court and the High Court was pleased to set aside the Award on the ground that the Arbitrator had not been validly appointed, thus, the Award had been quashed and set aside by an order dated 24th December, 2013.

7. The aforestated order has been challenged in these appeals.

8. The learned counsel appearing for the appellant-contractor has raised only one submission to the effect that the Arbitrator had been appointed with the consent of both the parties. He had referred to the order dated 27th March, 1988 whereby, under the provision of Section 11(6) of the Act, the Arbitrator had been appointed. The relevant portion of the said order reads as:

“Perused the order dated 19th February, 1998 of S.K. Sinha, J. Both parties have agreed that Shri Kalyanmoy Ganguly, a retired Judge of this Court be appointed as the sole arbitrator to decide all claims, counter claims ……..”

9. It has been further submitted that after having given consent for appointment of a former High Court Judge as an Arbitrator, it would not be proper on the part of the respondent-Union of India to change its version and object to the said appointment.

10. It has been further submitted by him that the Award has been set aside only on the ground that the Arbitrator was not validly appointed.

11. In the aforestated circumstances, the learned counsel has submitted that the impugned order passed by the High Court deserves to be quashed and set aside.

12. On the other hand, the learned counsel appearing for the Union of India has submitted that in view of clause 64.3(a)(iii) of the Arbitration Agreement, which pertains to arbitration clause, it is very clear that no person other than a Gazetted Railway Officer should be appointed as an arbitrator/umpire and if for any reason it is not possible to appoint such a person as an Arbitrator, the matter was not to be referred to an Arbitrator at all.

13. It has been submitted by him that as a Gazetted Railway Officer had not been appointed as an Arbitrator, the only option available to the parties was to file a civil suit because as per the aforestated clause, dispute was not to be referred to an Arbitrator.

14. For the aforestated reasons, it has been submitted by the learned counsel appearing for the respondent-Union of India that the Arbitrator had not been val