High Court Of Calcutta
Anil Kumar Sen, B. C. Chakrabarti
FOOD CORPORATION OF INDIA - Appellant
Versus
SUNIL KRISHNA SAMANTA - Respondent
C. R. 1206 Of 1978
Decided On : 02/16/1979
ARBITRATION ACT, 1940 - SECTION 8(1)(A) - APPOINTMENT OF ARBITRATOR - CONSENT OF PARTIES - IMPLIED CONSENT - CLAUSE PROVIDING FOR APPOINTMENT OF ARBITRATOR BY MANAGING DIRECTOR - WHETHER ATTRACTS SECTION 8(1)(A) - HELD, YES.
Fact of the Case:
Food Corporation of India (FCI) and two others filed a Rule against an order dismissing their application under Section 5 of the Arbitration Act, read with Section 151 of the Code of Civil Procedure. The dispute arose from an agreement between FCI and Sunil Krishna Samanta for storing food grains, which contained an arbitration clause. The agreement provided that disputes would be referred to the sole arbitration of a person appointed by the Managing Director of FCI. Sunil Krishna Samanta filed an application under Section 8(2) of the Arbitration Act, alleging that FCI failed to appoint an arbitrator despite notice. FCI objected, arguing that the agreement did not provide for the concurrence or consent of Sunil Krishna Samanta, and thus Section 8(2) was not maintainable.
Finding of the Court:
The court found that the agreement, particularly Clause 41, did not expressly provide for the appointment of an arbitrator by consent of parties. However, the court held that implied consent could be inferred from the agreement, as the opposite party consented to the provision that the arbitrator would be selected by the Managing Director. The court relied on precedents holding that Section 8(1)(a) could apply even when the agreement did not explicitly provide for consent, as long as consent could be implied.
Issues: Whether Section 8(1)(a) of the Arbitration Act is applicable when the arbitration agreement provides for the appointment of an arbitrator by the Managing Director alone, without express provision for consent of parties.
Ratio Decidendi: The court held that Section 8(1)(a) of the Arbitration Act is not excluded in cases where the arbitration agreement provides for the appointment of an arbitrator by the Managing Director alone, without express provision for consent of parties. The court reasoned that consent to the appointment of an arbitrator by the Managing Director, as provided in the agreement, implied consent of both parties. The court also noted that the arbitrator in this case was appointed with the consent of both parties.
Final Decision: The court discharged the Rule filed by FCI and two others, upholding the dismissal of their application under Section 5 of the Arbitration Act. The court found that the application of Sunil Krishna Samanta under Section 8(2) of the Arbitration Act was maintainable, and that the appointment of an arbitrator by the court was valid.
( 1 ) THIS Rule at the instance of Food Corporation of India and two others is directed against Order No. 97 dated 21-1-1978 passed by the learned Subordinate Judge, 1st Court, Howrah in Misc. Case No. 87 of 1975 dismissing an application of the petitioners under Section 5 of the Arbitration Act, read with Section 151 of the Code of Civil Procedure and raises a short question namely whether in the given facts of the case, application of Section 8 (1) of the Arbitration Act is ruled out.
( 2 ) FACTS relevant for appreciation of the point urged are not in dispute. The opposite party Sunil Krishna Samanta had been carrying on business of storing of food grains belonging to the Food Corporation of India (hereinafter called F. C. I.) and entered into an agreement with the F. C. I. The agreement contained an arbitration clause. Clause 41 of the agreement provides that all disputes and differences arising out of or touching or concerning the agreement shall be referred to the sole arbitration of any person appointed by the Managing Director of the F. C. I. It is also provided therein that no person other than a person appointed as such should act as arbitrator and if for any reason that is not possible, the matter is not to be referred to arbitration at all. The O. P. filed an application before the learned Subordinate Judge under Section 8 (2) of the Arbitration Act on an allegation that a dispute having arisen between the parties, he had given notice to the Managing Director for appointment of an arbitrator and that he had failed to do so. It appears that on 25-3-1976, Sri A. K. Nandi was appointed arbitrator on both parties' consent. In the written objection filed by the petitioners to the application under Section 8 (2) the F. C. I. took a plea that in view of the terms of the agreement there was no question of the concurrence or consent of the O. P. Sunil Samanta, the selection of arbitrator being left to the sole discretion of the Managing Director alone, his application under Section 8 (2) was not maintainable.
( 3 ) IT further appears that even thereafter the F. C. I. prayed for appointment of Sri N. N. Bhattacharya as arbitrator in place of Sri Nandi and the Court appointed Sri Bhattacharya the sole arbitrator on consent of both parties. Thereafter the F. C. I. came up with an application under Section 5 of the Act for revoking the reference to arbitration on several grounds including the point that in view of Clause 41 of the agreement, the matter lay outside the scope of Section 8 (l) (a) of the Act and as such the appointment of an arbitrator by the Court was without jurisdiction and therefore liable to be recalled and revoked.
( 4 ) THE learned Subordinate Judge by the impugned order, found against the F. C. I. on all the points and dismissed the application. It is not necessary for us now to go into any other points besides the question of applicability of Section 8 (l) (a) of the Arbitration Act in the facts and circumstances of the case hereinbefore stated. That was the only point urged before us.
( 5 ) MR. Mukherjee appearing for the petitioners contended that the agreement and more particularly Clause 41 thereof makes no provision for the appointment of an arbitrator by consent of parties, and therefore Section 8 (l) (a) of the Act is not attracted. Consequently it was contended that the application of the opposite party under Section 8 (2) of the Act was not maintainable.
( 6 ) WE have set out hereinbefore the relevant provisions of Clause 41 of the agreement. The plain meaning of the clause is that the selection of the arbitrator was left to the choice of the Managing Director. Apparently the opposite party would not be entitled to oppose the selection. In order to attract Section 8 (l) (a) it is necessary that the arbitration agreement should provide for reference to one or more arbitrators to be appointed by consent of parties. In our view the consent referred to in the section need n
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