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1995 Supreme(Del) 470
High Court Of Delhi
UNIVERSAL CONSORTIUM ENGINIRS PRIVATE LIMITED - Appellant
Versus
STATE TRADING CORPORATION OF INDIA LIMITED - Respondent
UNIVERSAL CONSORTIUM ENGINIRS PRIVATE LIMITED 115 of 1992
Decided On : 07/04/1995
R.K.WATEL, RAMESH KESWANI, S.K.VATEL
Where an arbitrator refuses to act, the power to appoint a new arbitrator vests in the court, and the arbitration clause is exhausted.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - REFUSAL OF ARBITRATOR TO ACT - APPOINTMENT OF NEW ARBITRATOR - POWER TO APPOINT VESTS IN COURT - ARBITRATION CLAUSE EXHAUSTED.
Fact of the Case:
Disputes arose between the parties to a contract, and an arbitrator was appointed. However, the arbitrator refused to act due to health reasons. The petitioner sought the appointment of a new arbitrator, while the respondent appointed a new arbitrator without the petitioner's consent.
Finding of the Court:
The court held that the arbitration clause in the contract did not show the parties having intended that the vacancy shall not be supplied. The Chairman-cum-Managing Director has refused to act as an Arbitrator. Late Chief Justice Mr. Sikri also refused to act for health reasons. In such circumstances it will be deemed that the arbitration clause does not operate and it is only the Court which has to intervene and appoint another Arbitrator.
Issues: Whether the power to appoint a new arbitrator vests in the court or the parties to the agreement.
Ratio Decidendi: When the agreement provides that dispute between the parties shall be REFERRED TO to the person named in an agreement it is an appointment by consent but where the Arbitrator so appointed refused to act, the next appointment can again be made either as agreed between the parties and provided for in the arbitration clause or by consensus but where either is absent, no party to the agreement can be forced to the same procedure for the simple reason that the Arbitrator having refused to act he cannot be asked to arbitrate again. In law the result of such refusal is that the agreement clause cannot operate.
Final Decision: The court allowed the petition and appointed a new arbitrator to resume the arbitration proceedings.
( 1 ) UNIVERSAL Consortium Engineers Pvt Ltd, the petitioner had submitted a tender to the State Trading Corporation of India Ltd. for construction of a multi storey building known as STC Building Complex (Jawahar Vyapar Bhawan) at Tolstoy Marg. The tender was accepted by the respondent. A contract dated 23. 7. 1980 was finalised and entered into between the parties. The contract contained an arbitration clause. The relevant part thereof provided as under: -
"arbitration of Managing Director, STC. If any dispute, question or controversy, the settlement of which is not herein specifically approved for, shall at any time arise between the STC and the contractor relating to this contract or any clause or thing contained or the construction thereof or any matter connected with this contract or the portion of the same or the rights or duties or liabilities of either party then in every such case, the matter in dispute shall be REFERRED TO to the arbitration of the Managing Director, STC or his nominee and his decision shall be binding on both the parties. The provision of Indian Arbitration Act, 1940 as amended from time to time shall apply to such arbitration proceedings. Arbitration proceedings shall be held at Delhi and only Delhi Courts will have jurisdiction in the matter. It will not be open to the contractor to object to the appointment of Chief Engineer, STC and their Architects or their nominee as Arbitrator on the ground that he is an officer of the STC or has dealt with the matter in question in the course of his duties or has expressed views on all or any matters in dispute. Service under this contract shall notwithstanding the existence of any such dispute/ question or controversy continue during the arbitration proceedings and no payments due or vice-versa shall be withheld on account of such proceedings unless such payments are the direct subject of such arbitration proceedings. "
( 2 ) THERE was an addendum dated 10. 10. 1983 added to the main agreement which is not relevant for the controversy at hand.
( 3 ) DISPUTES arose between the parties and the petitioner sought for appointment of an Arbitrator. The Chairman-cum-Managing Director expressed his unwillingness to act as an Arbitrator. Ultimately the parties agreed upon the appointment of a retired Judge of the Supreme Court as an Arbitrator. Late Mr Justice S. M. Sikri, a retired Chief Justice of India, was appointed an Arbitrator.
( 4 ) AS regards issue No. 1 the learned Arbitrator made and published his award which has been made a rule of the Court. As regards issue No. 2, the learned Arbitrator held 86 hearings, the last of which was in May, 1992. Thereafter, on account of sickness the learned Arbitrator could not hold any sitting. He expressed his inability to proceed further with the hearing of the arbitration proceedings. He expired on 24. 9. 1992.
( 5 ) ACCORDING to the petitioner, further construction work was carried on by it during the pendency of the arbitration proceedings and thereafter it has resulted into accrual of further disputes between the parties which disputes are set out in Annexure-1 to the petition under Section 8 (2)/20 (4) of the Arbitration Act.
( 6 ) THE petitioner also served a registered letter dated 21. 7. 1992 calling upon the respondent to concur in supplying the vacancy in the office of the Arbitrator by agreeing to appointment of a retired Judge of the Supreme Court in place of late Mr Justice S. M. Sikri. It was suggested in the alternative that the respondent may suggest three names of retired Judges of the Supreme Court of India or of an equivalent status so that the petitioner may choose one of them to be appointed as an Arbitrator.
( 7 ) ON 26. 8. 1992, the Chairman-cum-Managing Director of the respondent appointed Shri W. D. Dandage, Director-General, CPWD (retired) as the Sole Arbitrator. Operative part of the letter of appointment reads as under:-
"i hereby supply the vacancy caused on the resignation of
