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High Court Of Delhi
W.S.CONSTRUCTION COMPANY - Appellant
Versus
HINDUSTAN STEEL WORKS CONSTRUCTION LIMITED - Respondent
ORIGINAL MISCELLANEOUS PETITION 17 of 1987
Decided On : 05/24/1989
ARBITRATION - APPOINTMENT OF ARBITRATOR - REMOVAL OF ARBITRATOR - POWER OF COURT TO APPOINT ARBITRATOR - ARBITRATION ACT, 1940, SECTIONS 8, 12.
Fact of the Case:
A dispute arose between the parties regarding a construction contract in Libya. The arbitration clause in the contract provided for the appointment of an arbitrator by the Managing Director of the respondent company. The Managing Director appointed Brig. Gur Dayal as the arbitrator, who later resigned from his position as General Manager of the company. The Managing Director then appointed Mr. Hazela as the arbitrator, who failed to take any action in the matter for over 11 months.
Finding of the Court:
The court held that Brig. Gur Dayal ceased to be the arbitrator upon his resignation as General Manager of the company. The court also held that Mr. Hazela was liable to be removed as an arbitrator for failing to use all reasonable dispatch in entering on and proceeding with the reference and making an award for an unreasonably long period. The court further held that it had the power to appoint an arbitrator under Section 12 of the Arbitration Act, 1940, despite the arbitration clause providing for the appointment of an arbitrator by the Managing Director.
Issues: 1. Whether Brig. Gur Dayal continued to be the arbitrator after his resignation as General Manager of the company? 2. Whether Mr. Hazela was liable to be removed as an arbitrator? 3. Whether the court had the power to appoint an arbitrator under Section 12 of the Arbitration Act, 1940, despite the arbitration clause providing for the appointment of an arbitrator by the Managing Director?
Ratio Decidendi: 1. The court held that Brig. Gur Dayal ceased to be the arbitrator upon his resignation as General Manager of the company, as the arbitration clause provided that the arbitrator would vacate office upon resignation. 2. The court held that Mr. Hazela was liable to be removed as an arbitrator for failing to use all reasonable dispatch in entering on and proceeding with the reference and making an award for an unreasonably long period. 3. The court held that it had the power to appoint an arbitrator under Section 12 of the Arbitration Act, 1940, despite the arbitration clause providing for the appointment of an arbitrator by the Managing Director, as the terms of the agreement cannot supersede the statutory provisions.
Final Decision: The court removed Mr. Hazela as an arbitrator and appointed Mr. Mathura Nath Banerjee as the sole arbitrator in the matter. The court also directed the parties to bear their own costs.
( 1 ) BY agreement dated 26th June 1981 entered into between the parties respondent No. 1 awarded to the petitioner a contract for construction of civil and plumbing works of school building at Beida District in Libya. The contract contains an arbitration clause which inter-alia provides that except where otherwise provided for in the contract, all questions and disputes shall be referred to the sole arbitration of the Managing Director and if the Managing Director is unable or unwilling to act to the sole arbitration of some other person willing to act as such arbitrator. The arbitration clause further provides that the arbitrator to whom the matter is originally referred being transferred or vacation of his office or being unable to act for any reason such Managing Director at the time of such transfer, vacation of office or inability to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. It is further provided that no person other than a person appointed by such Managing Director shall act as an arbitrator. According to the arbitration agreement the venue of the arbitration shall be the registered office of M/s. Hindustan Steel Works Construction Ltd. It is the common case of the parties that the registered office of the company is at Calcutta.
( 2 ) CERTAIN disputes arose in respect of the aforesaid contract. On the petitioner invoking the arbitration clause. the respondent No. 2 Managing Director, by letter dated 28-7-84 appointed Brig. Gur Dayal, General Manager of the respondent No. 1 company as an arbitrator. On 2nd January 1986 Brig. Gur flayal had resigned as General Manager of respondent No. I company and since then he is not in the employment of the company. By letter dated 1st March 1986 the Managing Director of respondent No. 1 company appointed Sh. V. B. Hazela, respondent No. 3, as arbitrator in place of Brig. Gur Dayal.
( 3 ) THE petitioner has invoked various provisions of Indian Arbitration Act, 1940 (for short the act ) inter-alia contending that respondent No. 3 Mr. Hazela has no authority to act as an arbitrator as according to the petitioner Brig. Gur Dayal has not vacated the office of the arbitrator and continues to be the arbitrator. It is further pleaded by the petitioner that respondent No. 3 Mr. Hazela was appointed as an arbitrator on 1st March 1986 and till date he has even failed to accept the said appointment as no communication whatsoever was received from the said arbitrator. The petitioner has prayed for revocation of the authority of respondent No. 3 and for grant of extension of time for a period of four months for making and publishing the award by Brig. Gur Dayal. In the alternative, the petitioner has prayed that the arbitrator be appointed by this court.
( 4 ) THE petition is being resisted by respondents: It is contended on behalf of the respondents that on resignation Brig. Gur Dayal automatically ceased to be the arbitrator It is contended that Brig. Gur Dayal continued as arbitrator as long as he held the office of the General Manager. Reliance is placed by the respondents on the arbitration clause which, inter-alia, provides that on vacation of office by the arbitrator originally appointed the Managing Director shall appoint another person to act as an arbitrator. It is not seriously disputed by learned counsel for the petitioner that the terms of arbitration clause Brig. Gur Dayal could not continue as an arbitrator after having resigned as General Manager of respondent No. I company, on or about 2-1-1986. Accordingly, there is no question of granting extension of time for Brig. Gur Dayal for his making and publishing the award.
( 5 ) THE next question to be considered is whether Mr. Hazela is liable to be removed as an arbitrator or not. As observed above, Mr. Hazela was appointed as an arbitrator by Managing Director of respondent No. I company by his letter dated 1-3-86. The present petition was filed on 12-2
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