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High Court Of Delhi
ALKARMA - Appellant
Versus
DELHI DEVELOPMENT AUTHORITY - Respondent
Suit 396A of 1980
Decided On : 04/08/1981
ARBITRATION - APPOINTMENT OF ARBITRATOR - ENGINEER MEMBER REFUSING TO APPOINT ARBITRATOR - COURT'S POWER TO ORDER APPOINTMENT - ARBITRATION AGREEMENT NOT DESTROYED - IMPOSSIBILITY AND REFUSAL DISTINGUISHED - ENGINEER MEMBER'S ROLE AS THIRD PARTY - JUDICIAL AND MINISTERIAL FUNCTIONS OF COURT UNDER S. 20(4) OF THE ARBITRATION ACT, 1940.
Fact of the Case:
The petitioner, a contractor, entered into a contract with the respondent, Delhi Development Authority (DDA), for the execution of work of construction. A dispute arose between the parties, and the contractor invoked the arbitration clause in the contract. The engineer member of the DDA appointed an arbitrator, who made an award. The contractor completed the work, and the DDA prepared the final bill and finalized it. The contractor was not satisfied with the way in which his final bill was settled and raised a number of disputes. He requested for the appointment of an arbitrator, and the engineer member acceded to his request. However, the contractor realized that he had omitted to refer certain disputes to the appointing authority when he made the second request for appointment of arbitrator. He wrote letters to the engineer member requesting that these disputes also be referred to the arbitrator, but received no reply. He then filed a petition under s. 20 of the Arbitration Act, 1940 for the appointment of an arbitrator in respect of the outstanding disputes.
Finding of the Court:
The court held that the contractor's claim was genuine and bonafide, and that the engineer member was not right in declining to exercise his power under clause 25 of the agreement. The court further held that the principle of Order II Rule 2 Civil Procedure Code does not apply to arbitration proceedings, and that the doctrine of constructive res judicata does not bar the present reference. The court also held that the arbitration agreement is not destroyed if the engineer member refuses or fails to appoint an arbitrator, and that the court has an overriding power on the designated authority in the arbitration agreement and can compel it to appoint an arbitrator in terms of the clause.
Issues: 1. Whether the contractor's claim for the appointment of a third arbitrator is genuine and bonafide? 2. Whether the principle of Order II Rule 2 Civil Procedure Code applies to arbitration proceedings? 3. Whether the doctrine of constructive res judicata bars the present reference? 4. Whether the arbitration agreement is destroyed if the engineer member refuses or fails to appoint an arbitrator? 5. Whether the court has an overriding power on the designated authority in the arbitration agreement to compel it to appoint an arbitrator in terms of the clause?
Ratio Decidendi: 1. The court held that the contractor's claim was genuine and bonafide, as he had repeatedly written to the engineer member requesting for the appointment of an arbitrator, and the engineer member had failed to reply to any of the letters till 8-9-80. 2. The court held that the principle of Order II Rule 2 Civil Procedure Code does not apply to arbitration proceedings, as the arbitrator is not a court and the rule applies only to proceedings before a court. 3. The court held that the doctrine of constructive res judicata does not bar the present reference, as the contractor had requested for the reference of the disputes to the arbitrator while the second arbitration was in progress, and the engineer member had taken no notice of the request. 4. The court held that the arbitration agreement is not destroyed if the engineer member refuses or fails to appoint an arbitrator, as the clause contemplates a case where, for example, the engineer member's post is abolished in the set up of the DDA or the constitution of that body is changed by an Act of the legislature, but it does not say that the engineer member's refusal is final and the court shall have no power over him. 5. The court held that the court has an overriding power on the designated authority in the arbitration agreement to compel it to appoint an arbitrator in terms of the clause, as s. 20(4) of the Arbitration Act, 1940 empowers the court to order the agreement to be filed and to make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
Final Decision: The court allowed the application with costs, ordered the arbitration agreement to be filed, and directed the engineer member to appoint an arbitrator within one month and refer the disputes set out in the annexure to the letter of 3-10-79 to the arbitrator.
Key Points: - The court has an overriding power under s. 20(4) to compel the designated authority to appoint an arbitrator and refer disputes, even if the engineer member refuses, thus not destroying the arbitration agreement (!) (!) (!) . - Arbitration can proceed with successive references; Order II Rule 2 CPC does not apply to arbitration, and constructive res judicata does not bar a new reference where disputes were omitted earlier and the engineer member did not respond (!) (!) . - The arbitration clause remains in force; the engineer member’s role is ministerial, and refusal does not terminate or destroy the arbitration agreement; the court can order filing of the agreement and appoint an arbitrator via the designated authority or substitute appointment if necessary (!) (!) (!) (!) . - The court ordered filing of the arbitration agreement and directed the engineer member to appoint an arbitrator within one month to refer disputes to the arbitrator (!) .
( 1 ) THE facts. This case raises a rather interesting point. It arises upon a petition under s. 20 of the Arbitration Act (the Act ). It arises in this way Shri Jai Kishan Das of M|s Alkarma, petitioner, is a contractor. He entered into a contract with the respondent, Delhi Development Authority (DDA) for the execution of work of construction. He was awarded the work of fixing aluminium windows in Vikas Minar, a building where DDA sits. This work was awarded to him in 1973.
( 2 ) THE contractor did the work. While the work was in progress certain disputes arose between the parties. The contract contains an arbitration clause. This is clause 25. It reads :
"except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality or workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of or relating to the contract, design, drawings, specifications, estimates, instruction, orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same shall be referred to the sole arbitration of the person appointed by the Engineer Member, Delhi Development Authority at the time of disputes. It will be no objection to any such appointment that the arbitrator so appointed is a Delhi Development Authority employee, that had to deal with the matters to which the contract relates and that in the course of his duties as Delhi Development Authority employee he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being "unable to act for any reason, such Engineer Member Delhi Development Authority as aforesaid 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. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Engineer Member Delhi Development Authority as aforesaid should act as arbitrator and, if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs. 50,000. 00 (Rupees fifty thousand) and above, the arbitrator will give reason for the award. Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute. "
( 3 ) THE contractor invoked the arbitration clause. The public official designated in the agreement to appoint the arbitrator is the engineer member of the D. D. A. He appointed Sh. Balbir Singh, his own Superintending Engineer, as the sole arbitrator. He decided the disputes. He made the award. This was the first arbitration.
( 4 ) THE contractor completed the work. DDA prepared the final bill on 15th April, 1978 and finalised it. The contractor was not satisfied with the way in which his final bill was settled. He raised a number of disputes. He requested for the appointment of an arbitrator on 14th July, 1978. This was his second request for appointment of the arbitrator under clause 25. The engineer member acceded to his request This time Mr. G. Subramanyam, another Superin- tending Engineer, was appointed as the arbitrator on 20th March, 1979. He heard the parties. On 20th May, 1980
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