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1962 Supreme(MP) 63
High Court Of Madhya Pradesh
H. R. Krishnan, J.
KAMANI ENGINEERING CORPORATION LTD. - Appellant
Versus
MADHYA PRADESH ELECTRICITY BOARD - Respondents
Civil Revn. 453 Of 1962
Decided On : 04/23/1962
B.L.SETH, M.V.TAMSKAR, Y.S.DHARMADHIKARI
Headnote:(1) Arbitration Act, 1940 - S. 34 - scope of - stay of proceedings.
Section 34 of the Arbitration Act, is to the effect that, when, independently of the arbitration, in respect of any matter covered by the arbitration agreement, a party to it commences legal proceedings they should be stayed, But where the legal proceedings are themselves under the Arbitration Act and relate to the competency of the appointment, as the case may be, of an arbitrator, sole arbitrator or umpire there can be no stay under section 34 for the very simple reason that the legality of such appointment has to be investigated under the Act before the arbitration proceeds at all.[Para 9
(2) Arbitration Act, 1940 - S. 9 (b), proviso - sole arbitrator appointed by one party to dispute - setting aside of the appointment - matters to be considered.
Proviso to Cl. (b) of S. 9 of the Arbitration Act, 1940 is worded as if it involved no idea of limitation as such. An order under the proviso really enables the defaulting party to remedy his failure to make the appointment within 15 days which the legislature has allowed him for appointing his arbitrator after the receipt of the notice. Looking from this end, therefore, the proviso really enables the Court to condone delay. That way there is a broad analogy between the proviso and section 5 of the Limitation Act, 1908 under which a Court is competent to condone limitation properly so called. But the proviso does not speak of sufficient cause here. All the same, while setting aside the appointment of sole arbitrator, a Court should see whether there is justification on equitable grounds and the setting aside of the appointment is really calculated to promote equity and good conscience. [Para 13
The moment the defaulting party satisfies the Court that he has not been obstructive or evasive and has acted with due diligence, the appointment of sole arbitrator should be set aside. The other party may be entitled to costs to compensate him for any inconvenience resulting from the defaulter's failure to appoint arbitrator in time. But he cannot try to take an advantage which would be unconscionable except in the three special circumstances, namely, obstruction, evasion or gross negligence. Nor need the Court test it by the closeness with which it would test an application for condonation of delay and ask for an explanation for the delay of each single day. [Para 14
[Also see 1963 JLJ-SN 174]
( 1 ) THIS revision is by Messrs Kamani Engineering Corporation (Kamanies for short), a limited liability company with its head office at Bombay and one of the parties to an arbitration proceedings, the other party being the Madhya Pradesh electricity Board (Board for short) from the order of the First Additional District judge, Jabalpur, allowing, subject to payment of special costs Rs. 1,500, the petition filed by the latter for the setting aside under Section 9 (b) proviso, of the arbitration Act of the appointment by the present applicant of his arbitrator Shri mangaldas M. Pakvasa, as the "sole arbitrator" in view of the Board's default in appointing its arbitrator within 15 days of its notice.
( 2 ) MISCELLANEOUS Appeal No. 51 of 1962 (Kamani Engineering Corporation Limited bombay v. The M. P. Electricity Board, Jabalpur), which has been heard along with this civil revision, is from the order of the Additional District Judge, refusing to stay under Section 34 of the Arbitration Act the proceedings under the proviso to section 9 (b) for setting aside the appointment of the sole arbitrator. Actually the miscellaneous appeal has not to be separately discussed by me in view of the order that I propose to make in this civil revision. The revision application has been presented and opposed at some length by both the parties. But the problems that arise are quite simple. The main problem is whether the Additional District judge was exercising his discretion properly and with sufficient judicial reasons, when under the proviso to Section 9 (b) of the Arbitration Act he set aside the appointment as sole arbitrator of the arbitrator appointed by the applicant, and whether there are compelling reasons at this stage why this Court in revision should disagree with the Additional District Judge and restore that appointment. On this subject the wording of the proviso is unqualified, and there is practically no case law, probably because of the rarity of such cases.
( 3 ) INCIDENTALLY, we have to touch upon three other propositions propounded in the alternative by the Board, namely the dispute arose not on 27-1-1962 but only on 5-2-1962; that in terms of the arbitration agreement, the operation of Section 9 (b) was excluded and the party was incompetent to appoint sole arbitrator; and finally, that by writing on 6-2-1962 to the applicant that it has accepted fife invitation to send the matter in dispute for arbitration and was going to appoint the arbitrator by name, the Board had already complied with Section 9 (b) and the communication of the name of arbitrator was only a matter of detail which could be done beyond 15 days limit.
( 4 ) THE facts-relevant for our purposes are the following. The Kamanies are an engineering concern supplying electrical fittings to the Electricity Boards in different States. The Board had dealings with them apropos of which they owed money. When by October 1961 the bills were checked up, it was found that there was a very considerable difference between what the former demanded and what the latter was prepared to give. The first was Rs. 11,35,350 while the second was about one-tenth, i. e. , Rs. 1,19,000 (in round figures ). Naturally, there was correspondence between the parties in which attempts were made to verify and clear mistakes and misunderstandings but there was no progress. In the course of january 1962 we find that the Kamanies were anxious that the difference should go to arbitration; the Board was not against it in principle but wanted to explore possibilities of an amicable settlement. The attitude of the respective par ties is of significance only in regard to the question as to the date on which exactly the dispute did arise. It was on the 6th February 1962 according to the Board and according to the Kamanies not later than 27th January 1962, i. e. about 8 days earlier. If and when the dispute did arise it had to go to arbitration in the manner provided in condition No.
