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1984 Supreme(Bom) 202
IN THE HIGH COURT OF BOMBAY
(Nagpur)
Deshpande, M.S. J.
Western Coalfields Ltd. and another .... Applicants
Versus
Harichand Rai (A Registered Firm) .... Opponent.
Civil Revn. Appln. No. 107 of 1980 with Civil Revn. Appln. No. 470 of 1980 decided on 16-7-1984.
Advocate Appeared:
For Applicants S.C. Mehadia.
For opponent V.R. Manohar, P.G. Palshikar and V. P. Kukday.
Section 8(1)(a) of the Arbitration Act applies only when the arbitration agreement provides for the appointment of arbitrators by the consent of the parties, which means that the individual arbitrators are to be appointed by consent, which is quite different from their nomination by one of the parties, in pursuance of the express terms of the agreement.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - SECTION 8(1)(A) OF THE ARBITRATION ACT - CONSENT OF PARTIES - INTERPRETATION - KEY LEGAL PRINCIPLE: Section 8(1)(a) of the Arbitration Act applies only when the arbitration agreement provides that the arbitrators are to be appointed by the consent of the parties, which means that the individual arbitrators are to be appointed by consent, which is quite different from their nomination by one of the parties, in pursuance of the express terms of the agreement.
Fact of the Case:
In two separate cases, the applicants challenged the orders passed by the trial courts appointing arbitrators under section 8 of the Arbitration Act. The arbitration clause in both cases provided that disputes were to be referred to an arbitrator nominated by the Managing Director of the Western Coalfields Limited.
Finding of the Court:
The court held that the arbitration clause did not come within the purview of section 8(1)(a) of the Arbitration Act, as it did not provide for the appointment of arbitrators by the consent of the parties. The court interpreted section 8(1)(a) to mean that the individual arbitrators must be appointed by consent, which is different from their nomination by one of the parties.
Issues: Whether the arbitration clause in the agreements came within the purview of section 8(1)(a) of the Arbitration Act.
Ratio Decidendi: The court relied on the plain meaning of section 8(1)(a) of the Arbitration Act, which requires the appointment of arbitrators by consent of the parties. The court distinguished this from the nomination of arbitrators by one of the parties, which was provided for in the arbitration clause in the present case.
Final Decision: The court allowed both revision applications, set aside the orders passed by the trial courts, and dismissed the applications for the appointment of arbitrators.
2. In Civil Revision Application No. 107 of 1980, the position was that the parties entered into an agreement on 4.6.1976 for transporting sand for Chanda Rayatwari Colliery which was owned by the applicants. The work commenced and was completed on 27-1-1977. The Final Bill was also paid to the opponent in that case and the bank guarantee for Rs. 50,000/-was also released. However, about one-and-a-half years after that was done, the opponent M/s Harichand Rai sent a notice dated 16-9-1978 contending that there was a dispute and calling upon applicant No. 1 to appoint an arbitrator for settlement of the alleged dispute. A reply was sent by the applicants on 28-2-1979 contesting the notice. An application was thereafter made by the opponent for appointment of an arbitrator to the learned Judge, and by an order passed on 17.12.1979, Shri Kamal D. Kanal, an Engineer from Nagpur, was appointed as an . Arbitrator and he was directed to file his award within four months from the date of the order. .
3. In Civil Revision Application No. 470 of 1980, the transportation contract between the opponent Tilakraj Kesarlal Thapar and the applicants was executed on 13.4.1978. Tilakraj Thapar was to furnish a security of Rs. 57,120/ , for due performance of the contract. As he was unable to perform the contract within the time prescribed, the time being of the essence of the contract, a notice was sent to him. In order to avoid forfeiture of the bank guarantee, Tilakraj Thapar sent a notice on 1.4.1980 to the applicants, urging that there was a dispute regarding the contract and that be was entitled to Rs. 50,000/- as damages and asking applicant No. 1 to appoint an Arbitrator, pursuant to clause 9 of the agreement dated 13.4.1978.Applicant No.2, by his letter dated 24.4.1980, repudiated the claim and Tilakrai Thapar filed an application for appointing an arbitrator. Though this application was resisted, an order came to be passed on 17-12-1979 appointing Shri R.K. Tambe as an Arbitrator and directing him to submit his award.
4. These two orders are being challenged by the two revision applications on identical grounds. The arbitration clause No.9 in the two agreements runs as follows: “ARBITRATION:
“If any dispute, question of controversy, the settlencent of which is not herein specifically provided for, shall any time arise between the Western Coalfields Ltd., and the contractor/Contratctors, touching this agreement or any clause of anything herein contained on the construction thereof or any matter connected with this agreement or the operation of the same or the rights or duties or liabilities of either party, then and in every such case either party, shall forthwith give to the other notice of such difference and such dispute or difference shall be referred to an arbitrator nominated by the Managing Director of the Western Coalfields Ltd. and the award of such arbitrator shall be final and binding on the parties. Progress of the work shall not be suspended or delayed on account of the reference of any dispute or difference to arbitration under this clause”.
The trial Courts took the view that the opponents were entitled, by virtue of section 8 of the Arbitration Act, to appoint an arbitrator. Section 8 of the Arbitration Act reads as follows:
“8. (1) In any of the following cases:
(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differences have arisen, concur in the appointment or appointments; or
(b) if any appointed arbitrator or umpire neglects or refuses
