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1971 Supreme(Cal) 201
HIGH COURT OF CALCUTTA
A. C. GUPTA, AMIYA KUMAR MUKHERJI
K. C. CHATTERJEE - Appellant
Versus
THE DURGAPUR PROJECTS LTD. - Respondent
A. F. O. O. 102 Of 1969
Decided On : AUGUST 24, 1971
AMIYA BIKASH, ARCHANA SENGUPTA, S.K.GUHA
The court has the power to appoint an arbitrator even if the post of Chief Engineer, who was designated as the sole arbitrator in the contract, is lying vacant.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - VACANCY IN THE POST OF CHIEF ENGINEER - COURT'S POWER TO APPOINT ARBITRATOR - ARBITRATION ACT, 1940, SECTION 20.
Fact of the Case:
A dispute arose between a building contractor and a company over the revision of rates for changes in the design and drawings of a building. The contract contained an arbitration clause providing for the appointment of the Chief Engineer as the sole arbitrator. The Chief Engineer had already suggested certain revised rates which were found unacceptable by the contractor. The contractor applied to the court under Section 20 of the Arbitration Act, 1940, for the appointment of an arbitrator, contending that the Chief Engineer had disabled himself from acting as an arbitrator.
Finding of the Court:
The court held that the dispute was covered by the arbitration clause in the contract and that the Chief Engineer had rendered himself incapable of acting as an arbitrator. The court also found that the post of Chief Engineer was lying vacant and that there was no bar to the court appointing an arbitrator in such circumstances.
Issues: 1. Whether the dispute between the parties was covered by the arbitration clause in the contract? 2. Whether the Chief Engineer had disabled himself from acting as an arbitrator? 3. Whether the court had the power to appoint an arbitrator in the absence of a Chief Engineer?
Ratio Decidendi: 1. The court held that the dispute was covered by the arbitration clause in the contract because it related to a matter that was specifically mentioned in the clause. 2. The court held that the Chief Engineer had disabled himself from acting as an arbitrator because he had already suggested certain revised rates which were found unacceptable by the contractor. 3. The court held that it had the power to appoint an arbitrator in the absence of a Chief Engineer because the arbitration agreement did not indicate that the parties intended that the agreement would come to an end in such circumstances.
Final Decision: The court allowed the appeal, set aside the judgment of the lower court, and remitted the case back to the lower court with directions to order the arbitration agreement to be filed and to make an order of reference to an arbitrator to be appointed by the court.
( 1 ) THIS appeal is under Section 39 (1) (iv) of the Arbitration Act from an order refusing to file an arbitration agreement. The appellant, a firm of building contractors, submitted tender for the construction of an Auto Exchange at Durgapur which was accepted by the respondent, Durgapur Projects Ltd. , and a formal contract was executed on the 11th March, 1964. The contract contained an arbitration clause namely Clause 25, the relevant part of which is as follows:"except where otherwise provided in the contract all questions and disputes. . shall be referred to the sole arbitration of the Chief Engineer of the Department. Should the Chief Engineer be for any reason unwilling or unable to act as such arbitrator, such question and dispute shall be referred to an arbitrator to be appointed by the Chief Engineer. The award of the arbitrator shall be final, conclusive and binding on all parties to this contract. "
( 2 ) THE appellant alleges that the respondent subsequently revised the design and the drawings for the building introducing radical changes. Admittedly in terms of Clause 12 of the contract the appellant was entitled to payment at revised rates for the changes. Under Clause 12 the Engineer-incharge has the "power to make any alterations in, omissions from, additions to and substitutions for the original specification, drawings, designs and instructions that may appear to him to be necessary or advisable. " Clause 12 states inter alia that in such a case the Engineer-incharge shall revise the rates at which payment was to be made by "determining the rates on analysis worked out from (a) the basic rates of materials and labour provided in the current schedule of rates or (b) the current market rates of materials and labour when even basic rates for the work are not available in the schedule. " Clause 12 further provides that"in the event of any dispute regarding rates determined on analysis for any altered, additional or substituted work under this clause, the decision of Superintending Engineer of the Circle shall be final and binding". According to the appellant the respondent failed and neglected to refix the rates as required under Clause 12 while the work was in progress. On 28th May, 1965, the appellant addressed a letter to the Chief Engineer of the respondent Company complaining that they had "come to understand that your office had drastically reduced the costing to an unworkable level" and requesting the favour of his intervention and "restoration of the cuts". This letter is Ext. A (11) in the case. On 12th July, 1965 the Chief Engineer wrote back to the appellant offering certain revised rates which were not found acceptable by the appellant. Then on 11th March 1966 the appellant again wrote to the Chief Engineer of the respondent Company requesting him to "refer the matter in dispute to the sole arbitration of the Chief Engineer of the Department as per contract" in view of the "differences of opinion" that had arisen between the contracting parties. It does not appear that this letter, Ext. 1/x, was answered by the Chief Engineer. Ultimately on 28th September, 1966 the appellant made an application under Section 20 of the Arbitration Act in the Court of the Subordinate Judge at Asansol wherein they contended that the Chief Engineer having already "meddled" in the dispute had "committed himself to a certain position in the matter" and had thereby disabled himself from acting as the sole arbitrator as also from nominating any one else as arbitrator. On these statements the appellant prayed that the arbitration agreement contained in the contract between the appellant and the respondent for the construction of the Auto Exchange Building at Durgapur be filed, a sole arbitrator be appointed by the Court and an order of reference to arbitration be made. The respondent filed a written-statement contending that as the Chief Engineer on reference to him by the appellant had fixed and revised the rates i
