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1993 Supreme(HP) 180

HIMACHAL PRADESH HIGH COURT
D.P. Sood, J.
M/S. COMPETENT CONSTRUCTION COMPANY - APPLICANT
v.
STATE OF HIMACHAL PRADESH AND OTHERS - RESPONDENTS.
Civil Suit No. 42 of 1992
Decided on : December 23, 1993.

Advocates:
Advocate Appeared:
Bhupender Gupta, for the Applicant.
G. S. Sisodia, Law Officer, for the Respondents.

The authority of an arbitrator appointed by the Chief Engineer under an arbitration clause cannot be revoked on the ground that the arbitrator lacks legal background, unless there are grounds for bias, suspicion of unfairness, continued unreasonable conduct, or pre-judging the matter.

Headnote:

ARBITRATION - APPOINTMENT OF ARBITRATOR - REVOCATION OF AUTHORITY - GROUNDS - LEGAL BACKGROUND OF ARBITRATOR - ARBITRATION CLAUSE PROVIDING FOR APPOINTMENT OF ARBITRATOR BY CHIEF ENGINEER - NO SPECIFIC QUALIFICATIONS PRESCRIBED - ARBITRATOR APPOINTED BY CHIEF ENGINEER HAVING NO LEGAL BACKGROUND - NOT A GROUND FOR REVOKING HIS AUTHORITY.

Fact of the Case:

Petitioner was awarded a contract for construction of Himachal Bhawan, New Delhi, by respondent. Disputes arose after completion of the work and submission of final bill. Petitioner invoked arbitration clause in the agreement and requested Chief Engineer to appoint an arbitrator with legal background. Chief Engineer appointed two Superintending Engineers as arbitrators, but they declined to proceed with the arbitration. Petitioner filed a petition under Sections 5, 8, 9, 12 & 41 of the Arbitration Act in the High Court of Delhi, which was returned for presentation before the District Judge, Shimla. District Judge also returned the petition for presentation before a competent court of civil jurisdiction. Petitioner filed a petition in the High Court of Himachal Pradesh seeking appointment of an arbitrator with legal knowledge.

Finding of the Court:

The court held that the arbitration clause in the agreement provided for appointment of an arbitrator by the Chief Engineer and did not prescribe any specific qualifications for the arbitrator. The court further held that the only grounds for revoking the authority of an arbitrator appointed by the Chief Engineer were bias, suspicion of unfairness, continued unreasonable conduct, or pre-judging the matter. The court found that the petitioner's only ground for seeking revocation of the authority of the newly appointed arbitrator was his lack of legal background, which was not a valid ground under the arbitration clause.

Issues: Whether the authority of an arbitrator appointed by the Chief Engineer under an arbitration clause can be revoked on the ground that the arbitrator lacks legal background.

Ratio Decidendi: The court held that the arbitration clause in the agreement provided for appointment of an arbitrator by the Chief Engineer and did not prescribe any specific qualifications for the arbitrator. The court further held that the only grounds for revoking the authority of an arbitrator appointed by the Chief Engineer were bias, suspicion of unfairness, continued unreasonable conduct, or pre-judging the matter. The court found that the petitioner's only ground for seeking revocation of the authority of the newly appointed arbitrator was his lack of legal background, which was not a valid ground under the arbitration clause.

Final Decision: The court dismissed the petition and vacated the interim stay order restraining the arbitrator from proceeding with the reference. The parties were directed to put up their claims/counter claims before the arbitrator within six weeks and to appear before him on the specified date.

ORDER (ORAL)

D. P. Sood, J. - Petitioner was awarded the work of construction of Himachal Bhawan, Sikandra Road, New Delhi, by respondent No. 1 on 22.8.1978. Agreement including arbitration clause was executed in relation thereto. The work was to be completed within 24 months i.e., on or before 5.9.1980. The work could not be completed for one reason or the other. Petitioner allege non-completion of the work due to hindrance and hurdles created by respondent No. 1. Any how, the time was extended upto 14.2.1982 for the completion thereof. Within the extended period, the building work was completed and it was handed over to respondent No. 4.

2. After submission of the final bill in relation to the above said work done by the petitioner, some disputes arose. It is alleged that though part payments in respect of the bills have been made after unilaterally deducting/ withholding/disallowing huge amount, the balance amount is not being paid. Thus the respondents having failed to make the payment to the petitioner, the latter had been compelled to invoke clause 25 of the agreement seeking a reference of the dispute to an Arbitrator. Clause 25 envisage that if any dispute or claim arises out of the contract such dispute shall be referred to the Chief Engineer for arbitration by a person appointed by him. Petitioner allege that the dispute and claim arose between the parties inter alia, regarding the interpretation of clauses 10C, 43, 12, 5 and other clauses of he agreement. So he requested the Chief Engineer vide his letter dated 26.2.1984 to appoint an arbitrator having legal background and good knowledge of law for the reasons that the dispute involved substantial and complicated questions of law. Petitioner allege that no such efforts has been made till date. According to him, the second respondent (Engineer-in-Chief) mechanically and unilaterally appointed Shri S. C. Kohli and thereafter P. C. Bisht, both Superintending Engineers, one after the other, but each one of them expressed his inability to proceed with the arbitration and conclude the case. Shri P. C. Bisht unilaterally appointed as an Arbitrator is alleged to have entered upon the reference w.e.f. 2.4.1985 but later declined to do so. Resultantly, the petitioner filed the instant petition under Sections 5, 8, 9, 12 & 41 of the Arbitration Act in the High Court of Delhi in exercise of its Civil Original Jurisdiction in August 1985. The said petition was registered as Civil Suit No. 1534-A of 1985. Later vide order passed on July 6, 1988, finding that the court had no jurisdiction, the petition was returned for it presentation before the court of Id. District Judge, Shimla. It appears that the papers pertaining thereto were either not returned or record to the case was not sent to the learned District Judge, Shimla, so the petitioner filed another petition seeking a direction to its Registry to send the record of the original suit referred to above to appropriate authority as is envisaged under Order 7 Rule 10 of the Code of Civil Procedure. A single Bench of High Court of Delhi vide its order dated December 17, 1991 ordered the sending of the record to the appropriate authority, i.e., the learned District Judge, Shimla and also directed the parties to appear in that court on 15.2.1992.

3. The parties to the instant lis put in appearance in the court of the Id. District Judge who also found that the valuation of the subject matter was beyond his pecuniary jurisdiction and consequently vide his order dated March 2, 1992 returned the petition to the petitioner for its presentation before a competent court of civil jurisdiction. Ultimately, this petition was filed before this court on March 31, 1992 and it is in this manner that this court is seized of the dispute in between the parties.

4. Respondents have adopted the reply already filed in the High Court of Delhi. The prayer seeking the appointment of an Arbitrator having legal knowledge in relation to the peculiar facts an













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