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High Court Of Calcutta
Amitava Lala
INLAND CONSTRUCTION COMPANY - Appellant
Versus
UNION OF INDIA - Respondent
G. A. 4885 Of 1999
Decided On : 02/15/2000
ARBITRATION AND CONCILIATION ACT, 1996 - SECTION 11(5) - APPOINTMENT OF ARBITRATOR - FAILURE OF PARTIES TO AGREE - COURT'S INTERVENTION - SCOPE AND PROCEDURE - INTERPRETATION OF CLAUSE 25 OF ARBITRATION AGREEMENT.
Fact of the Case:
The petitioner sought to vacate and recall an order passed by the court appointing an arbitrator under Section 11(5) of the Arbitration and Conciliation Act, 1996, arguing that the application should have been treated under Section 11(6) and that the matter should have been referred to arbitration as per the arbitration clause in the agreement.
Finding of the Court:
The court held that the application was rightly made under Section 11(5) of the Act as there was a failure on the part of the parties to agree on the appointment of an arbitrator within 30 days from the date of notice. The court interpreted Clause 25 of the arbitration agreement and held that the provision that if there is no agreement between the parties regarding the appointment of an arbitrator, the matter is not to be referred to arbitration at all, is illegal as it supersedes the statute.
Issues: 1. Whether the application should have been treated under Section 11(5) or Section 11(6) of the Arbitration and Conciliation Act, 1996. 2. Whether the court could intervene and appoint an arbitrator under Section 11(5) when the arbitration agreement contained a detailed procedure for appointment of arbitrators. 3. Whether Clause 25 of the arbitration agreement, which provided that if there is no agreement between the parties regarding the appointment of an arbitrator, the matter is not to be referred to arbitration at all, is valid.
Ratio Decidendi: 1. Section 11(5) of the Arbitration and Conciliation Act, 1996 provides for the appointment of an arbitrator by the court upon request of a party if the parties fail to agree on an arbitrator within 30 days from the date of receipt of a request by one party from the other party to agree. 2. The court has the power to intervene and appoint an arbitrator under Section 11(5) even if the arbitration agreement contains a detailed procedure for appointment of arbitrators, as the purpose of the Act is to provide a speedy and efficient mechanism for resolving disputes through arbitration. 3. Clause 25 of the arbitration agreement, which provided that if there is no agreement between the parties regarding the appointment of an arbitrator, the matter is not to be referred to arbitration at all, is illegal as it supersedes the statute and defeats the purpose of the Arbitration and Conciliation Act, 1996.
Final Decision: The court dismissed the application to vacate and recall the order appointing an arbitrator, holding that the order was validly passed under Section 11(5) of the Arbitration and Conciliation Act, 1996.
( 1 ) THE Court : This is an application for vacating and recalling the order passed by this Court on 17th June, 1991 in A. P. No. 117 of 1999 which is as follows :-"this is an application under section 11 (5) of the Arbitration and Conciliation Act, 1996. The contention of the petitioner is that although the demand was made to comply with the formalities for appointment of arbitrator in the dispute in between the parties, but the authorities concerned, being the respondent herein, did not adhere to give due concurrence to such demand for the purpose of appointment of arbitrator; as a result whereof the jurisdiction of this Court has been invoked. It appears from sub-section (2) of section 11 of the Act that subject to sub-section (6), which is not the subject matter herein, parties are free to agree on a procedure for appointing arbitrator or arbitrators. Sub-section (5) prescribes for failing in agreement referred to in sub-section (2) in on arbitrator with a sole arbitrator. If the parties fail to agree on the arbitrator within thirty days from the receipt of a request by one party from another party to so agree, the appointment shall be made, upon request of a party, by the Hon'ble the Chief Justice or any person or institution designated by him. The expression "or any person or institution designated by him" under the said sub-section (5) is creating lot of confusion in the mind of the people and causing unnecessary delay in arbitration proceedings. Such is contrary to the very basis of Act. The law prescribes that the principal Civil Court has jurisdiction to entertain, try and determine, the subject matter of the context. The principal Civil Court does not necessarily mean the Chief Justice alone. The pusne judges too are the part and parcel of Chief Justice of the High Court. The problem is now-a-days that the administrators are becoming defecto law maker due to lack of potentiality is the legislative body. Hence such result is inevitable. However, it is high time for the legislature to take this issue for necessary clarification. Now, let us confine to the cause of action of this applicaton. Cause of action is refusal or failure on the part of the authority to give concurrence as to notice of appointment of Arbitrator within 30 days from the date of notice. Therefore appointment of Arbitrator with the intervention of the Court is obvious. A single Bench Judgment of Andhra Pradesh High Court reported in 1999 (1) Arbi LR 179 (V. Ramana Reddy v. Union of India etc.) also took the similar view. As a result whereof I pass an order in terms of prayer (b) of the petition and send the matter to the Hon'ble the Acting Chief Justice for the purpose of filling up the vacancy of the arbitrator and for further directions, if any, for the purose of giving a particular time frame for making and publishing the award. Therefore, this application is disposed of one the above terms. Cost of this application will be costs in the arbitration proceedings. The Department and all parties concerned are to act on a signed copy minutes of the operative part of this judgment on the usual undertaking. "
( 2 ) AS soon as the matter was placed before the Hon'ble Chief Justice for the purpose of filling up the vacancy, the petitioner in this application took the objection about the appointment of the Arbitrator through the intervention of the Court. As a result whereof, this petitioner with a supporting affidavit dated 6th December, 1999 moved an application with such prayer as above for vacating and recalling the order passed by this Court and direction upon the Chief Engineer, Central Public Works Department to appoint Arbitrator in terms of Clause 5 of the agreement being annexure-C to the petition.
( 3 ) ANNEXURE-C to the petition prescribes as follows :-"clause 25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein
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