PATNA HIGH COURT
H.Mahapatra and Tarkeshwar Nath JJ.
Hindustan Steel Ltd.
Versus
Ingeniurs And Contractors
Appeal From Original Order No. 330 of 1963 ;
Decided On : MAY 15, 1964
ARBITRATION - APPOINTMENT OF ARBITRATOR - POWER OF COURT - SECTION 20(4) OF THE ARBITRATION ACT, 1940 - INTERPRETATION - COURT'S POWER TO APPOINT ARBITRATOR WIDENED - COURT CAN APPOINT ARBITRATOR WHERE PARTIES CANNOT AGREE OR WHERE ARBITRATOR APPOINTED BY PARTIES IS NOT AVAILABLE OR UNABLE TO ACT.
Fact of the Case:
The plaintiff and defendant entered into an agreement for certain works in the power plant of Hindustan Steel Ltd. The agreement provided for arbitration of disputes by the Managing Director of Hindustan Steel Ltd. However, the post of Managing Director was abolished, and the defendant refused to concur in the plaintiff's appointment of an arbitrator. The plaintiff filed an application under Section 20 of the Arbitration Act, 1940, seeking the appointment of an arbitrator.
Finding of the Court:
The court held that the agreement to refer disputes to arbitration was still valid and enforceable, despite the abolition of the post of Managing Director. The court interpreted Section 20(4) of the Arbitration Act, 1940, as giving the court wide powers to appoint an arbitrator, including the power to appoint an arbitrator where the parties cannot agree or where the arbitrator appointed by the parties is not available or unable to act.
Issues: 1. Whether the agreement to refer disputes to arbitration was still valid and enforceable, despite the abolition of the post of Managing Director? 2. Whether the court had the power to appoint an arbitrator under Section 20(4) of the Arbitration Act, 1940, in the circumstances of the case?
Ratio Decidendi: 1. The court held that the agreement to refer disputes to arbitration was still valid and enforceable, despite the abolition of the post of Managing Director, because the agreement did not provide for the termination of the arbitration agreement in the event of the abolition of the post of Managing Director. 2. The court held that it had the power to appoint an arbitrator under Section 20(4) of the Arbitration Act, 1940, in the circumstances of the case, because the parties could not agree on an arbitrator and the arbitrator appointed by the parties was not available or unable to act.
Final Decision: The court dismissed the defendant's appeal and upheld the trial court's order directing the defendant to submit the name of an agreed arbitrator to the court within seven days.
Tarkeshwar Nath, J.
1. This appeal by the defendant is directed against an order passed by the Special Subordinate Judge, Ranchi, directing it to submit to the Court within seven days the name of an agreed person as the sole arbitrator to whom reference would be made. The facts leading to this case are, these. The defendant invited tenders for various works in the power plant of the Hindustan Steel Ltd. Rourkela. The plaintiff filed tenders in respect of some of the works and they are accepted on 25-11-1958. There was an agreement between the plaintiff and the defendant in respect of the work undertaken by the plaintiff. The plaintiff completed the work on 15-9-1959 and later on there was a dispute between the plaintiff and the defendant in respect of several claims of the former, after the bills were submitted to the latter. The plaintiff served a notice on the defendant under Section 8 of the Arbitration Act informing it that the plaintiff had appointed Shri B.N. Choudhary, retired District and Sessions Judge, residing at Lucknow, as the sole arbitrator to decide the dispute. The former asked the latter to concur in his appointment as sole arbitrator! within 15 days from the date of the receipt of the notice. The defendant received the notice on 5-9-1962, but did not care to send reply.
In these circumstances, the plaintiff filed a petition under Sec.20 of the Indian Arbitration Act in the Court of the Subordinate Judge at Ranchi and made a prayer that the defendant; should be ordered to file the agreement and the contract and on the defendants failure to do so the agreement and the contract filed by the plaintiff along with the application should be deemed to have been filed. The plaintiff made a further prayer that Shri B. N, Choudhary should be deemed to be the arbitrator or, alternatively, the Court should appoint an arbitrator and in that event the dispute should be referred to that arbitrator for making an award. This application was registered as Title Suit No. 122 of 1962.
2. The defendant showed cause and challenged the maintainability of the application under Sec.20 of the Arbitration Act. The defendants case was that the Managing Director was no doubt appointed as the sole arbitrator according to the contract, but the post of Managing Director having been abolished, the duties assigned to the Managing Director were being carried on by the General Manager of the Company and as such the dispute should be referred to that General Manager for making an award. The defendant did not agree to the appointment of Shri B. N. Choudhary as arbitrator.
3. The Special Subordinate Judge took the view that no one being the Managing Director of the Hindustan Steel Private Ltd. it was not possible to have an arbitration by a Managing Director and as such the plaintiff was entitled to ask the Court for filling up the vacancy and get an arbitrator appointed by the Court. He thus directed the parties to agree to the appointment of a sole arbitrator acceptable to both the parties or to submit a few names within a week of his order for appointment of an arbitrator facing which he decided to nominate an arbitrator himself. He further held that the agreement and the contract (Ext. A) filed by the plaintiff should be deemed as filed. The defendant being aggrieved by this order has preferred this appeal under Section 39(1)(iv) of the Arbitration Act.
4. Learned Counsel for the appellant contended that the agreement between the parties was to refer the dispute to an officer specifically named, meaning thereby, the Managing Director of the Company, but the constitution of the Company having been changed, there was no Managing Director now and hence the General Manager should be deemed to be the arbitrator. Clause (25) of the agreement (Ext. A) dated 30-1-1959 provides thus:
"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herei
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