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1999 Supreme(Ori) 315
IN THE HIGH COURT OF ORISSA
A. Pasayat, J.
DEVEE SUPPLY SYNDICATE - APPELLANT
Versus
GENERAL MANAGER, SOUTH EASTERN RAILWAY AND OTHERS - RESPONDENT
M.J.C. No. 9 of 1997
Decided On : 30-07-1999
R.K. Rath, B.R. Sarangi and J.N. Jena, for the Appellant; D.N. Mishra, G.S. Namtoar and S.K. Panda, for the Respondent
A party's neglect to appoint an Arbitrator after receiving a notice under Section 20(4) of the Arbitration and Conciliation Act, 1996, gives the court the jurisdiction and power to appoint an Arbitrator.
Headnote:
ARBITRATION - APPOINTMENT OF ARBITRATOR - SECTION 11 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - APPOINTMENT OF ARBITRATOR BY COURT - CONDITIONS - INTERPRETATION OF SECTION 20(4) OF THE ACT.
Fact of the Case:
Petitioner, a tenderer for the disposal of Swarf, filed a petition for the appointment of an Arbitrator under Section 11 of the Arbitration and Conciliation Act, 1996 (the 'Act') due to breaches of contract by the Railway authorities (opposite parties). The opposite parties claimed that the Petitioner was rightly asked to submit 'No claim for taking back the security deposit' and that there was no need for an Arbitrator.
Finding of the Court:
The court observed that the opposite parties had neglected to act upon the contract by not appointing an Arbitrator after receiving the notice from the Petitioner. The court also noted that the appointment of an Arbitrator by the opposite parties during the pendency of the case was based on an unfounded order, as the court had not passed any such order.
Issues: Whether the appointment of an Arbitrator by the opposite parties during the pendency of the case was valid.
Ratio Decidendi: The court held that the appointment of an Arbitrator by the opposite parties was impermissible and that the court had the jurisdiction and power to appoint an Arbitrator under Section 20(4) of the Act. The court relied on the Supreme Court decision in G. Ramachandra Reddy and Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service, which held that when a party neglects to appoint an Arbitrator after receiving a notice, the court can appoint an Arbitrator.
Final Decision: The court appointed Shri Biranchi Narayan Misra, Retired Chairman of the Orissa Arbitration Tribunal, as the Arbitrator in the case.
JUDGMENT :
A. Pasayat, A.C.J.
1. This is an application for appointment of an Arbitrator in terms of Section 11 of the Arbitration and Conciliation Act, 1996 (in short, the 'Act').
2. It is the Petitioner's case that an Arbitrator is to be appointed to resolve the dispute between the parties. According to it, opposite parties invited tender for disposal of "Swarf" for 240 MTs (plus or minus 25%.). Petitioner submitted its tender. Along with other tenders, its tender was considered and accepted. A formal agreement was signed incorporating the terms and conditions of the work to be undertaken. Railway authorities (the opposite parties) committed various breaches of conditions, and did not fulfil its part of the contract. Instead of compensating Petitioner for such breaches, several penal measures were resorted to. Petitioner made a demand for compliance of terms by the opposite parties which they refused. That being the position, Petitioner demanded appointment of an Arbitrator to settle the dispute on which opposite parties avoided to act. Though there is an arbitration clause in the agreement, opposite parties did not act according to it. Therefore, this petition has been filed.
3. In the counter affidavit filed it was stated by opposite party Nos. 1 to 4 as follows:
... The Petitioners ha's rightly been asked to' submit 'No claim for taking back the security deposit'. There is no reason or necessity for appointment of an Arbitrator. As the same was not done it cannot be said that for not appointment of arbitrator the railway is obstructing the legitimate dues of the Petitioner and have fallen a deaf ear and are completely biased." (Since this is a verbatim quotation from the counter, there appears to be spelling/typing mistakes).
An additional affidavit has been filed by the opposite stating that during pendency of the case opposite party No. 1 has appointed one Mr. R.C. Sethy, Senior Divisional Accounts Officer, South Eastern Railway, Khurda Road as a sole Arbitrator for adjudicating the dispute or difference between the parties. It has been stated that this fact has been communicated to the Petitioner vide letter dated 22-4-1999. According to learned Counsel for the Petitioner, the course adopted is impermissible.
4. At this juncture it is necessary to take note of certain observations made by the Apex Court in. G. Ramachandra Reddy and Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service "Thus when the notice was given to the opposite contracting party to appoint an arbitrator in terms of the contract and if no action had been taken, it must be deemed that he neglected to act upon.the contract. When no agreement was reached, even in the court between the parties, the court gets 'jurisdiction and power to appoint on arbitrator. Even if Section 8(a) per se does not apply notice was an intimation to the opposite contracting party to act upon the terms of the contract and his/its non-availment entails the forfeiture of the power to appoint an arbitrator in terms of the contract and gives right to the other party to invoke the court's jurisdiction u/s 20. In the instant case the Respondent did not appoint an arbitrator after the notice was received. The Respondent averred in the written statement that it was under consideration,. Even before the learned single Judge he did not even state that he was willing to appoint an arbitrator. The learned single Judge rightly exercised the power u/s 20(4) of the Act and appointed the arbitrator. The Division Bench, therefore, was not right in holding that the Respondent has by giving option to the Appellant to agree for appointment of an arbitrator out of the five named persons had left it to the Appellant to appoint an arbitrator and allowing Appellant to appoint an arbitrator made by the learned single Judge must be deemed to have been approved by us.
The aforesaid decision of the apex Court was followed by this Court in Union of India and Anr. v. Prahallad Moharana: A.I.R 1996 Ori
