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Orissa High Court
R. N. MISRA, C.J. AND N. K. DAS, J.
State of Orissa - Appellant
Versus
Laxminarayan Samantaray - Respondents
Original Jurn. Case No.1356 of 1981
Decided On : 29 September 1981
ARBITRATION - JURISDICTION OF ARBITRATOR - JOINT REFERENCE - NECESSITY - ARBITRATOR S ACTION IN IDENTIFYING DISPUTES WITHOUT HEARING PARTIES - VALIDITY - RULES OF NATURAL JUSTICE.
Fact of the Case:
The petitioner, the State of Orissa, challenged the order passed by the Arbitrator in a dispute referred to him under the arbitration clause of an F-2 contract between the petitioner and the opposite party. The Arbitrator, without hearing the petitioner, identified the disputes to be investigated. The petitioner contended that the Arbitrator was not amenable to the extraordinary jurisdiction of the Court, that the writ application was barred by constructive res judicata, and that a joint reference of the disputes was necessary for the Arbitrator to entertain the same.
Finding of the Court:
The Court held that the Arbitrator was not amenable to the extraordinary jurisdiction of the Court under Article 226 of the Constitution. The Court also held that it was not necessary for there to be a joint reference of the disputes in order to entitle the Arbitrator to entertain the same and enter upon adjudication thereof. The Court further held that the Arbitrator's action in identifying the disputes without hearing the petitioner was not open to challenge on the ground that he did not extend a hearing to the petitioner.
Issues: 1. Whether the Arbitrator was amenable to the extraordinary jurisdiction of the Court under Article 226 of the Constitution? 2. Whether it was necessary for there to be a joint reference of the disputes in order to entitle the Arbitrator to entertain the same and enter upon adjudication thereof? 3. Whether the Arbitrator's action in identifying the disputes without hearing the petitioner was open to challenge on the ground that he did not extend a hearing to the petitioner?
Ratio Decidendi: 1. The Court held that the Arbitrator was not amenable to the extraordinary jurisdiction of the Court under Article 226 of the Constitution, relying on the decision of Lord Chief Justice Goddard in R. v. Disputes Commr. of Dental Tech., (1953) 1 All ER 327, which held that certiorari or prohibition will not issue to an arbitrator unless he is acting under statutory powers. 2. The Court held that it was not necessary for there to be a joint reference of the disputes in order to entitle the Arbitrator to entertain the same and enter upon adjudication thereof, relying on the decision of the Delhi High Court in P.C. Aggarwal v. K.N. Khosla, AIR 1975 Delhi 54, which held that the Supreme Court in Thawardas s case never intended to say that for every matter of arbitration there must be a joint reference of the disputes, otherwise the Arbitrator would have no jurisdiction to entertain the disputes. 3. The Court held that the Arbitrator's action in identifying the disputes without hearing the petitioner was not open to challenge on the ground that he did not extend a hearing to the petitioner, as the Arbitrator had not decided the disputes but had merely identified the disputes to be investigated.
Final Decision: The Court dismissed the writ application with costs.
Judgement
R. N. MISRA, C. J. :- This application under Art.226 of the Constitution by the State of Orissa through an Executive Engineer calls in question the order passed on 11th of February, 1981 (Annexure-5) by the Arbitrator (opposite party No.2) in a dispute referred to the said Arbitrator in terms of cl. 23 of an F-2 contract between the petitioner and opposite party No.1.
2. Opposite party No.1, a contractor, undertook execution of the work entitled "Improvement to Sikhar-Karuo Road under M.N.P. from Kilometre 0/0 to 8/0." and F-2 contract No.10 of 1978-79 was executed between the parties. Incorporated in the contract was an arbitration clause to the following effect :-
"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawing and instructions hereinbefore mentioned and as to the quality of 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, designs, drawings, specifications, estimates, instructions, orders or these conditions, or otherwise concerning the work or the execution or failure to execute the same, whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of a Superintending Engineer of the Public Works Department, unconnected with the work at any stage nominated by the concerned Chief Engineer.
xx xx xx xx"
The Chief Engineer rescinded the said contract on 4-4-1980, as in his opinion the contractor did not stick, to the time schedule for the completion of the work and entrusted the work to a new agency and called upon the contractor to show cause as to why he may not be required to meet the difference in the costs of the execution of the work. Opposite Party No.1 thereupon raised disputes relating to the contract and asked the Chief Engineer to appoint an arbitrator in terms of the arbitration clause. The Chief Engineer nominated opposite party No.2 as the Arbitrator by order under Annexure-1 and stated therein :-
"The reference of the disputes as may be required will be made by the parties themselves."
When appointment of the Arbitrator was duly notified, the Arbitrator called upon the contractor (opposite party No.1) to file his statement of claims and called upon the State represented by the Executive Engineer to file counter statement thereto. The contractor laid claim but the petitioner made an application to the Arbitrator to stay further proceedings till disputes were validly and legally referred to him. He also informed the Arbitrator that as long as there was no joint reference by both the parties, he had no jurisdiction to entertain the claim and enter upon the reference. The Arbitrator rejected the application of the petitioner as not maintainable and called upon it to file its counter statement by 15-5-1980. The State Government, in the meantime, with a view to sustaining a counter claim against the contractor went before the Subordinate Judge of Cuttack in an application under Sec.20 of the Arbitration Act and by that court s order dated 2-9-1980, the claims of the State Government were referred to the same Arbitrator for adjudication. Petitioner moved this Court by filing an application under Art.226 of the Constitution in O.J.C. No.1977 of 1980 challenging the action of the Arbitrator and a Bench of this Court without going into the merits of the matter disposed of the said application by saying :-
"The Chief Engineer, in exercise of authority conferred upon him under cl. 23 of the standard F-2 Agreement, appointed an arbitrator in the person of opposite party No.2 and directed the parties to raise their disputes before him. The appointed arbitrator has now called upon the State to file its claim/counter statement. The State challenges the direction in Annexure-4 by which notice has been given by the arbitrator fixing a da
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