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High Court Of Calcutta
S. K. ROY CHAUDHURY
V.G.GHAWDA PVT.LTD. - Appellant
Versus
UNION OF INDIA - Respondent
Matter 58 Of 1978
Decided On : 03/08/1978
ARBITRATION - APPOINTMENT OF ARBITRATOR - RESIGNATION OF ARBITRATOR - POWER OF COURT TO APPOINT ARBITRATOR - SECTION 8 OF THE ARBITRATION ACT, 1940 - INTERPRETATION - APPLICABILITY - LIMITATION - ARTICLE 137 OF THE LIMITATION ACT, 1963 - ESTOPPEL - ARBITRATION AGREEMENT - CONSTRUCTION.
Fact of the Case:
Petitioner and respondent entered into a construction contract with an arbitration clause. Disputes arose, and the petitioner demanded arbitration. The respondent failed to refer the disputes to arbitration, so the petitioner filed an application under Section 20 of the Arbitration Act, 1940. The court directed the filing of the arbitration agreement and made an order of reference to joint arbitrators. One of the arbitrators resigned, and the petitioner requested the respondent to concur in the appointment of a new arbitrator. The respondent appointed an arbitrator, but the petitioner challenged the validity of the appointment. The petitioner filed an application under Section 8 of the Arbitration Act, 1940, for the appointment of an arbitrator by the court.
Finding of the Court:
The court held that the application under Section 20 of the Arbitration Act, 1940, was not barred by limitation under Article 137 of the Limitation Act, 1963, as it was made within three years from the date on which the right to apply accrued. The court also held that the respondent was estopped from challenging the order under Section 20, as it had been given effect to and acted upon by both parties. The court further held that Section 8 of the Arbitration Act, 1940, was applicable to the present case, as the arbitration agreement did not contain any procedure for the appointment of a substitute arbitrator in place of an arbitrator who had resigned or refused to act. The court also held that the power of appointment of the arbitrators by the General Manager, South Eastern Railway, under the arbitration agreement had exhausted after it had been exercised pursuant to the order of reference made by the court. Therefore, the court appointed an arbitrator in place of the arbitrator who had resigned.
Issues: 1. Whether the application under Section 20 of the Arbitration Act, 1940, was barred by limitation under Article 137 of the Limitation Act, 1963? 2. Whether the respondent was estopped from challenging the order under Section 20 of the Arbitration Act, 1940? 3. Whether Section 8 of the Arbitration Act, 1940, was applicable to the present case? 4. Whether the power of appointment of the arbitrators by the General Manager, South Eastern Railway, under the arbitration agreement had exhausted after it had been exercised pursuant to the order of reference made by the court?
Ratio Decidendi: 1. The right to apply under Section 20 of the Arbitration Act, 1940, accrues only after a demand is made to refer the disputes to arbitration under the arbitration agreement. Therefore, the application under Section 20 in which an order has already been made cannot be said to be barred by limitation. 2. The respondent was estopped from challenging the order under Section 20 of the Arbitration Act, 1940, as it had been given effect to and acted upon by both parties. 3. Section 8 of the Arbitration Act, 1940, is applicable to the present case, as the arbitration agreement did not contain any procedure for the appointment of a substitute arbitrator in place of an arbitrator who had resigned or refused to act. 4. The power of appointment of the arbitrators by the General Manager, South Eastern Railway, under the arbitration agreement had exhausted after it had been exercised pursuant to the order of reference made by the court.
Final Decision: The court appointed an arbitrator in place of the arbitrator who had resigned.
( 1 ) THIS is an application under Section 8 of the Arbitration Act, 1940 for appointment of an Arbitrator by the Court in place and stead of an Arbitrator who has resigned.
( 2 ) THE facts shortly are that the petitioner entered into a construction contract with the respondent dated the 26th of June, 1958, for the construction of a new railway line on the terms and conditions mentioned in the said agreement. The said agreement contained an arbitration clause in the general conditions of contract which was incorporated in the said contract between the parties. The said clauses are Clause. 62 and 63. As disputes and differences arose in terms of the said contract and the petitioner demanded reference to arbitration of the disputes in terms of the arbitration clause on or about 31st of March 1973, and as the respondent failed to refer the disputes to arbitration an application under Section 20 of the Arbitration Act, 1940, was made before this Court by the petitioner on the 6th of Sept. , 1974, being special Suit No 25 of 1974, and by an order dated the 18th of March, 1975, the arbitration agreement was directed to be filed in this Court and an order of reference was made to the Joint Arbitrators to be appointed in terms of the arbitration clause. Pursuant to the said order of reference, the General Manager of the South Eastern Railway in terms of the arbitration agreement appointed one Mr. Section K. N. Nayar and Mr. Section Sengupta as the joint Arbitrators by his letter dated the 16th of Sept. 1976. It appears that the Arbitrators entered on the reference and thereafter, one of the said Arbitrators Md. Section K. N. Nayar resigned from the office of the Co-Arbitrator by his letter dated the 23rd, of June, 1977, addressed to the General Manager, South Eastern Railway. The petitioner addressed a letter to the General Manager, South Eastern Railway dated the 20th of July, 1977, requiring the said General Manager, to concur in the appointment of an Arbitrator out of the names mentioned in the said letter.
( 3 ) IT is alleged by the petitioner that the General Manager, by a letter dated the 19th of July, 1977, wrongfully in purported exercise of his authority appointed one Mr. V. P. Dang as an Arbitrator in place of Mr. Section K. N. Nayar who has since resigned. Thereafter, the Joint Arbitrators by their letter dated the 30th of July, 1977, required the petitioner to submit its statement of Claim before the said Joint Arbitrators Mr. Section Sengupta and Mr. V. P. Dang. The petitioner by his letter dated the llth of Aug. 1977, challenged the validity of the appointment of Mr. Dang by the General Manager alleging the same as not in accordance with the arbitration agreement and thereby refused to file the statement of claim until the Tribunal of Arbitration is properly constituted. It is alleged by the petitioner that no appointment by filling up the vecancy caused by the resignation of the said Arbitrator, Mr. Section K. N. Nayar has been made by mutual consent of the parties. Therefore, the present application was filed on the 25th of Jan. 1978 for appointment of an Arbitrator by the Court in place and stead of the said Arbitrator Mr. Section K. N. Nayar who has resigned.
( 4 ) MR. Goutam Guha, appearing for the petitioner, submitted that all the requirements under Section 8 (1) (b) of the Arbitration Act, 1940, have been satisfied in this case as the petitioner after the resignation of one of the said two Arbitrators caused a notice to be served on the respondent to concur in the appointment of an Arbitrator in place and stead of the said Arbitrator, Mr. Section K. N. Nayar, and as the respondent failed to do so the present application has been made for the appointment of an Arbitrator to fill up the vacancy. Mr. Guha submitted that there is no intention of the parties expressed in the said arbitration agreement not to fill up the vacancy and therefore, the Court has the jurisdiction to appoint the sa
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