1. A contract was entered into between the parties on 12.05.1977 for laying and termination of power/control/excitation and communication cable, installation of cable trays, support, pipes and accessories etc. by the respondent. The agreement inter se the parties contained an arbitration clause i.e. Clause 25 which inter alia provided that “no person other than a person appointed by the Chairman, Central Electricity Authority or member (Thermal) Central Electricity Authority should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all.”

2. In view of the disputes arising inter se the parties, the respondent filed an application under Section 20 of the Arbitration Act, 1940 (“the said Act” for short) which was registered as Suit No.28-A/1979. The appellant also had certain counter claims. The matter was directed to be referred to arbitration in terms of the order dated 09.05.1979 which called upon the designated authority to do the needful within 2 months.

3. The Chairman, Central Electricity Authority claims to have appointed Sh.C.S.Sreenivasan as the sole arbitrator to adjudicate the disputes vide an order dated 05.07.1979 and this fact is stated to have been communicated to the Registrar, High Court of Delhi on 13.07.1979. The respondent, however, denies knowledge of any such order being brought to its notice.

4. It appears that the respondent was engaged as a contractor in two other contracts with the appellant where also disputes had arisen inter se the parties and the respondent had requested for appointment of an arbitrator in all the three contracts including the one in dispute. Some correspondence is stated to have been exchanged for settlement of disputes in relation to all the three contracts which resulted in the appellant issuing a letter dated 23.07.1980 qua the three contracts. The letter specifies that in view of the earlier correspondence exchanged qua settlement of disputes in connection with the three contracts, as per request of the respondent and without prejudice to the legal rights of the appellant, the Chairman and Managing Director of the appellant had nominated Sh.C.K.Varughese as the sole arbitrator in the disputes arising out of the aforesaid contracts subject to the respondent withdrawing all court cases from the court within 15 days from the date of issue of this letter and to also arrange for extension of validity of all bank guarantees for a period of 5 months from the date of withdrawal of the cases. The letter also sought confirmation from the respondent. It, however, emerges that no finalization in this behalf could take place and thus as per the appellant vide letter dated 12.03.1981 a quietus was put to the issue of an overall settlement. The appellant then addressed a letter dated 08.05.1981 to Mr. C.S. Sreenivasan with reference to his earlier appointment as an arbitrator and requested him to enter upon reference at his immediate convenience. A copy of this letter was sent to the respondent. This letter was responded to by the respondent on 13.05.1981 alleging that there was a contradiction between the earlier letter dated 23.07.1980 and the subsequent letter dated 08.05.1981 since as per the letter of 23.07.1980 Mr. C.K. Varughese had been appointed as a sole arbitrator whereas in the subsequent letter dated 08.05.1981, the reference was to Mr. C.S. Sreenivasan as the sole arbitrator. The appellant then issued a letter dated 22.05.1981 stating that there was no contradiction as the letter dated 23.07.1980 was without prejudice to the legal rights of the appellant and that issue had been brought to an end vide the letter dated 12.03.1981. Since the respondent had not withdrawn the court cases, it was presumed that they were not interested in the settlement of disputes outside the Court and that chapter had been closed. The dispute qua the contract in question was alleged to have resulted in appointment of Mr.C.S.Sreenivasan as

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