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HIGH COURT OF CALCUTTA
H. K. Bose, G. K. Mitter
SURENDRANATH PAUL - Appellant
Versus
UNION OF INDIA - Respondent
A. F. O. O. 242 Of 1963
Decided On : APRIL 29, 1964
ARBITRATION - APPOINTMENT OF ARBITRATOR - POWER OF APPOINTMENT EXHAUSTED - SECOND APPOINTMENT - VALIDITY - COURT'S DISCRETION TO APPOINT ARBITRATOR - DELAY IN RESORTING TO ARBITRATION - STAY OF SUIT.
Fact of the Case:
The appellant, a contractor, entered into contracts with the respondent Union of India for the supply of stationery. The contracts contained an arbitration clause providing for the appointment of an arbitrator by the Secretary to the Government of India, Ministry of Works, Housing and Supply. Disputes arose between the parties and the appellant referred the disputes to the Secretary. The Secretary appointed Sri K. R. Desai as an arbitrator, who entered on the reference but resigned later. The Secretary then appointed Sri V. Ramaswami Iyer as the arbitrator, who also entered on the reference. The appellant challenged the validity of the appointment of both Sri Desai and Sri Iyer. The respondent Union of India applied for a stay of the suit filed by the appellant under Section 34 of the Arbitration Act, 1940. The trial court granted the stay.
Finding of the Court:
The court held that the power of appointment of an arbitrator by the Secretary was not exhausted by a single execution and that the Secretary had the power to appoint a second arbitrator in place of Sri Desai, who had resigned. The court also held that the appointment of Sri Iyer was valid. The court further held that the delay in resorting to arbitration by the respondent Union of India was not such as to show that its intention was to abandon the arbitration agreement and that the court had the discretion to grant a stay of the suit.
Issues: 1. Whether the power of appointment of an arbitrator by the Secretary was exhausted by a single execution. 2. Whether the appointment of Sri Iyer was valid. 3. Whether the delay in resorting to arbitration by the respondent Union of India was such as to show that its intention was to abandon the arbitration agreement.
Ratio Decidendi: 1. The power of appointment of an arbitrator by the Secretary was not exhausted by a single execution because: - The arbitration clause provided for the appointment of an arbitrator by the Secretary, who was a person designated in the agreement. - The appointment by the Secretary was therefore the result of consent of the parties themselves. - The Secretary had the power to appoint a substitute arbitrator in case the arbitrator previously appointed by him died or retired. 2. The appointment of Sri Iyer was valid because: - Sri Desai had resigned and was no longer willing to act as an arbitrator. - There was no Arbitrator "willing to act" as contemplated by the Arbitration clause. - The Secretary had the power to appoint a fresh Arbitrator in such a case. 3. The delay in resorting to arbitration by the respondent Union of India was not such as to show that its intention was to abandon the arbitration agreement because: - The respondent Union of India had been guilty of some delay in proceeding with the arbitration by not appointing an Arbitrator promptly when called upon to do so. - The conduct of the respondent Union of India was not such as to show that its intention was to abandon the arbitration agreement.
Final Decision: The appeal was dismissed with costs. The time to make the award was extended by four months from the date of the judgment.
( 1 ) THIS is an appeal from an order of Mallick, J. dated the 19th July 1963 staying a suit under Section 34 of the Arbitration Act, 1940.
( 2 ) THE appellant who is a contractor under the Controller of Stationery, Government of India, entered into certain contracts with the Controller of Printing and Stationery, Calcutta representing the respondent Union of India for the supply of envelopes, flaps ungummed of different sizes and for the supply of exercise books etc. and deposited a sum of Rs. 12,777/- as security money. The contracts contained an arbitration clause being Clause XVII of the general conditions of contract. The said arbitration clause is as follows: (XVII ). Arbitration--"except where herein otherwise provided any dispute or difference arising; during or after the subsistence of this contract touching any clause, matter or thing herein contained, or the operation or construction hereof, or the rights, duties or liabilities of either party under or in connection therewith shall be referred to the arbitration of the Secretary to the Government of India, Ministry of Works, Housing and Supply and if the Secretary to the Government of India, Ministry of Works, Housing and Supply is unable or unwilling to act to the sole arbitration some other person appointed by the Secretary to the Government of India, Ministry of Works, Housing and Supply willing to act as such Arbitrator. It will be no objection to any such appointment that the Arbitrator so appointed is a Government servant, that he had to deal with matters to which this agreement relates and that in course of his duties as such Government servant he had expressed views on all or any of the matter in dispute or difference. The Award of the Arbitrator so appointed shall be final, conclusive and binding on all parties to this contract.
( 3 ) THE appellant manufactured and supplied the requisite stationery in terms of the said contracts and submitted bills. As the respondent failed to pay a sum of Rs. 10,193. 30 np. being the outstanding balance in respect of the said bills and also failed and neglected to refund the security deposit of Rs. 12,777/-, disputes and differences arose between the parties and on the 8th January 1961 the appellant referred the disputes and differences relating to the said claims to the Secretary to the Government of India; Ministry of Works, Housing and Supply in terms of the arbitration agreement, but no reply was received by the appellant to the letter written to the Secretary till the 3rd July 1961 when the appellant sent a reminder to the Secretary, but as this letter also was not replied to, the appel lant made an application to this Court on the 28th August 1961 for appointment of an Arbitrator under Section 8 of the Arbitration Act, 1940. During the pendency of the said application, on or about the 15th/19th September 1961 the Secretary appointed one Sri K. R. Desai as an Arbitrator in respect of the said reference. On the 28th September 1961 Sri Desai purported to enter on the reference and directed the appellant to file a statement of claim by the 3rd October 1961 or to adopt the statement of claim which he had submitted to the Secretary when the reference was made and which was already on record. On the 4th December 1961 the said application for appointment of Arbitrator which was made by the appellant was dismissed inter alia on the ground that Sri Desai was already appointed the Arbitrator by the Secretary. On the 14th December 1961 Sri Desai again asked the appellant to file his claim by the 15th January 1962. On the 10th January 1962 Messrs. J. K. Sarkar and Co. , solicitors for the appellant, wrote to Sri Desai stating that his appointment as Arbitrator was bad and that he had no jurisdiction to act in the matter. On the 26th March 1962 an application was made by the respondent Union of India for extension of time to make the award, the prescribed period having expired in the meantime. On the 31st May 1962 a n
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