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1986 Supreme(Cal) 456
IN THE HIGH COURT AT CALCUTTA
Pratibha Bonnerjea, J.
Calcutta Metropolitan Development Authority ......Petitioner
Versus
Prasun Roy & Anr. ...... Respondents
Matter No. 1636 of 1985
Decided on : December 8, 1986
Mr. Somenath Chatterjee, P. Roy Chowdhury and D. K. Basu ......for the Petitioner
Mr. A. C. Bhabra and Ahin Chowdhury ......for the Respondents
The Court does not have inherent jurisdiction to appoint an arbitrator and can only do so in accordance with the provisions of the Arbitration Act.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - JURISDICTION OF COURT - SECTION 20(4) OF THE ARBITRATION ACT - WAIVER.
Fact of the Case:
In a contract between the petitioner and the respondent, an arbitration clause provided that disputes would be referred to the sole arbitration of the Director/Unit Head, C.M.D.A. not connected with the particular work. Disputes arose, and the petitioner filed a special suit under section 20 of the Arbitration Act for filing the arbitration agreement and starting a reference with the intervention of the Court. The petitioner alleged that the directors of C.M.D.A. had already expressed their opinion on the disputes and had a reasonable apprehension of bias against them. The Court appointed an independent arbitrator without coming to a definite finding on the petitioner's allegations.
Finding of the Court:
The Court held that the appointment of the arbitrator was invalid and without jurisdiction as the Court did not comply with the provisions of section 20(4) of the Arbitration Act. The Court further held that it did not have inherent jurisdiction to appoint an arbitrator and that the petitioner could not waive its objection to the appointment by participating in the arbitration proceedings.
Issues: 1. Whether the arbitrator had the jurisdiction to entertain the 10 new heads of disputes and the extra claims. 2. Whether the appointment of the arbitrator was valid in view of the provisions of section 20 sub-section (4) of the Arbitration Act. 3. Whether there can be any question of waiver in this case.
Ratio Decidendi: 1. The arbitrator did not have the jurisdiction to entertain the 10 new heads of disputes and the extra claims as the order of reference dated 19.4.83 only directed the disputes mentioned in the Sp. Suit No. 1 of 1983 to be referred to arbitration and Prasun Roy was given leave to make the claims upto the date on the basis of those disputes only till the filing of the statement of claim. 2. The appointment of the arbitrator was invalid as the Court did not comply with the provisions of section 20(4) of the Arbitration Act. The Court either should have given effect to the agreed machinery for appointment of the arbitrator or it could appoint one after coming to a clear finding that all the directors/unit heads of C.M.D.A. were biased against Prasun Roy as all of them had rendered themselves disqualified from being appointed as an arbitrator. 3. There could be no question of waiver on the part of the petitioner because of his taking part in the arbitration proceedings as the order dated 19.4.83 being invalid, the arbitrator had no jurisdiction to proceed with the reference.
Final Decision: The application was allowed. The order dated 19.4.83 and the reference were declared to be invalid. The parties were directed to pay and bear their respective cost of this application as well as the arbitration proceedings.
THE COURT : The petitioner entered into a contract with the respondent pursuant to the Tender No. DD/NY & AD/10 of 1980-81 for construction of various types of buildings under Baisnabghata Patuli Development Project, Group 'B'. The said contract contained an arbitration clause being Clause 25 thereof which provided that all questions and disputes relating to the said contract whether arising during the progress of the work or after completion thereof or abandonment of the same should be referred to the sole arbitration of the Director/Unit Head, C. M. D. A. not connected with the particular work as might be appointed by the Authority. Disputes and differences having arisen between the parties, Prasun Roy as the plaintiff took out the Special Suit No. 1 of 1983 under section 20 of the Arbitration Act for filing the arbitration agreement and starting a reference with the intervention of Court. In that application. Prasun Roy alleged that the director of an the units of C. M. D. A. had already expressed their opinion in respect of the disputes that had arisen between the parties and as they were the members of the Central Tender Committee, he had reasonable apprehension of bias against them. He prayed for an independent arbitrator to be appointed by Court. These allegations in paragraphs 16 and 17 of the petition were specifically denied by C. M. D. A. in its affidavit-in-opposition affirmed by one Dipak Kumar Sen, the Executive Engineer of C. M. D. A. on 25.1.83. Mrs. Khastgir, J. heard the Sp. Suit No.1 of 1983 and delivered a judgment on 19.4.83 whereby she appointed Sri Amitava Guha, a member of the Bar, as the sole arbitrator without coming to a definite finding on the aforesaid allegations made by Prasun Roy. Thereafter, Prasun Roy as the claimant filed a statement of claim before the arbitrator. The basis of the Sp. Suit No. 1 of 1983 was Prasun Roy's letter dated 15.11.82, being Annexure 'B' to the present petition. In that letter Rs. 24,10,364/- was claimed on 34 heads of disputes. Order for reference dated 19.4.83 was made for adjudication of these 34 disputes claiming relief for Rs. 24,10,364/- only. But before the arbitrator, Prasun Roy inflated his claims to the extent of Rs. 32,90,520/- on 44 heads of disputes and thereby added 10 new disputes in the reference. According to C. M. D. A. the appointment of Amitava Guha as the arbitrator was made in violation of the express provisions contained in section 20(4) of the Arbitration Act and is invalid and without jurisdiction. Therefore, the order of reference is bad in law. The petitioner's counsel submits that assuming that the appointment is valid, Prasun Roy's statement of claim having gone beyond the scope of the order of reference dated 19.4.83, the reference became bad and without jurisdiction. It is alleged in the present petition that the petitioner contended before the arbitrator that his appointment was invalid and his attention was drawn to the fact that Prasun Roy's claims were inflated beyond the scope of the order of reference. But inspite of the aforesaid facts, the arbitrator bad proceeded with the reference. Hence the present application under sections 5, 11, 12 and 33 of the Arbitration Act.
2. In the affidavit-in-opposition filed in the present proceeding, Prasun Roy alleged that C.M.D.A. submitted to the jurisdiction of the Arbitrator and contested the said reference without any protest whatsoever upto 76 sittings and as such it waived its right to dispute the validity of the appointment' of the arbitrator. The objection regarding the validity of the appointment was taken with ulterior motive. Regarding the allegations of Prasun Roy's making inflated claims beyond the scope of the order dated 19.4.83. Prasun Roy only craved reference to the records of the Arbitration Proceedings. The records of the case however, corroborate the allegations of C.M.D.A. that 10 new disputes had been added and the claims were inflated before the arbitrator from Rs
