Arbitration Act, 1940

Section 20

Section 20(4)

Section 39

JUDGMENT

N. N. Mithal, J. - Defendants revisionists are assailing the order of the court below on the ground that the order passed by it was incomplete and improper.

A preliminary objection was raised on behalf of the plaintiff opposite parties questioning the maintainability of the revision. It is contended that the order is appealable and no revision lies. This objection is without any merit. Under the Arbitration Act, an appeal is provided under Section 39 thereof amongst others against an order passed under Section 20 making or refusing to make a reference. In a Division Bench decision of this Court in State of U.P. v. Hindustan Construction Company Ltd. Bombay (1978 ALJ 1178), it was observed that before making an order under sub-section (4) of Section 20 of the Act, the court must necessarily find out if the arbitrators have been named in the agreement and if not it will have to ask the parties to nominate the arbitrator in accordance with the agreement and it is only after this has been done that an order under Section 20(4) of the Act referring the dispute to the arbitrator can be made. An order merely deciding that a dispute is to be referred to arbitrator does not amount to an order making a reference as contemplated by Section 20(4).

It was further observed in the said decision that before making an order referring a dispute to the arbitrators appointed by the parties or one nominated by the court, the court has to first resolve the controversy between the parties on the question as to whether the dispute can or cannot be referred to arbitration.

The order challenged in the revision is as follows :

"Dava bahap Vadigan Virudh Prativadigan Pakshkaron dwara manoneet panchon dwara vivad nirnay hetu sandarbhit kiye jane hetu agyapt kiya jata hai. Ubhai Paksh vad vyaya swayan vahan karen."

It is admitted that the parties had not agreed to refer the dispute to a named arbitrator either in the agreement or even at a later stage. In view of this, the order obviously cannot be said to be one passed under Section 20(4) of the Act and must be deemed to be an interim order not finally disposing of the application under Section 20 of the Act. In this view of the matter, the preliminary objection raised is overruled.

On an application being made under Section 20 of the Arbitration Act, the court is required to record a finding on the following questions :

(1) That there exists an agreement between the parties on refer a dispute to arbitration;

(2) That there is a dispute between the parties; and

(3) That the dispute is covered by the terms of the agreement for referring the dispute to arbitration.

After having recorded a clear finding on the above three questions, the court has to make an order of reference setting out the points in dispute referring the same to the arbitrator/arbitrators who are either named in the agreement or have been consented to by the parties and, if not, to one appointed by the court. In the present case, although the court has recorded a finding that there is a dispute between the parties which is referable to arbitration, yet the court has not made a reference of specific disputes to any arbitrator.

Learned counsel for the revisionists vehemently urged that the language in which the operative portion of the order of the court below is couched shows that it has finally disposed of the application under Section 20 purporting to refer the dispute to the arbitrators nominated by the parties. Learned counsel appears to be justified though only partially in his submissions and the use of the word 'agyapt' in the order does indicate that what the court purported topic was to finally dispose of the matter. Obviously it could not so without making a specific reference to arbitrators named by it in the order itself.

It was urged by the learned counsel for the opposite parties that even the order may be couched in a faulty language, the court never intended

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