Balkrishan Kuthiala vs Himachal Pradesh State Electricity Board etc.

D.B. Lal, J.—This is an application under Sections 5 and 8 of the Arbitration Act, 1940, and the prayer is that the authority of the appointed Arbitrator be revoked and a fresh Arbitrator be appointed u/s 8(2). The facts giving rise to the application, are, that the Petitioner had undertaken the construction work of staff quarters for the project Nahan Giri Hydel and Agreement No. 14 for the years 1966-67 was executed. Under Clause 25 of the said agreement, if any question of dispute was to arise between the parties the same was to be referred to the sole arbitration of a person appointed by the Chief Engineer, H.P. P.W.D. There was a further direction in the clause that in the event of the appointed Arbitrator being vacating his office or being unable to act for any reason, the Chief Engineer H.P. P.W.D. was to appoint another person to act as Arbitrator. Accordingly a dispute having arisen, Shri S. R. Shah, Superintending Engineer, was appointed Arbitrator. The appointment was made on, 6th June, 1970, and the arbitration proceedings dragged on until 1974. A notice was served by the Petitioner on 6th December, 1972, upon the said Arbitrator that he was grossly negligent and had not proceeded with the arbitration and as such he had lost confidence of the Petitioner. It appears that the Petitioner did not take any further steps on that notice. Subsequently, however, Shri S. R. Shah was appointed Chief Engineer and hence he became incapable of acting as Arbitrator. Accordingly the Petitioner served a notice upon the Respondents 3 and 4, namely, the Chief Engineer and the Chairman of the Electricity Board, to supply the vacancy u/s 8. He waited upto 18-6 1974 and on that day filed the present application under Sections 5 and 8 of the Act.

The Respondents have contended that on 1 7-6-1974 another Arbitrator namely, Shri V. M. Bajaj, Superintending Engineer, has been appointed and as such the application has become infructuous. The sole question that arises for decision is: Whether the appointment of Shri V. M. Bajaj can be held to be valid?

The learned Counsel contended that the period of 15 days expired before the appointment of Shri Bajaj was made and, there fore, Section 8(2) applied and the Court has to appoint an Arbitrator. As held in The Union of India v. Mangaldas N. Verma, Bombay AIR 1958 Mad 296 , Section 8(2) is only an enabling section. The party whose notice was ignored is enabled by Section 8(2) to apply to the court for the appointment of an Arbitrator. It does not mean that in each and every case the Court has to appoint an Arbitrator. The use of the expression "may" in Sub-section (2) makes it clear that the discretion has to be observed by the Court. In the present situation a new Arbitrator has been appointed. He is Superintending Engineer. The authority to appoint Arbitrator is not questioned. The technical objection that has been taken is that the period of 15 days has expired and, therefore, the appointment made by the Chief Engineer should not be accepted. I think the discretion should be exercised by enabling the appointment rather than by rejecting it. Section 8(2) does not imply in a mandatory form that in every case where 15 days period has expired the Court must appoint an Arbitrator although the Arbitrator is already appointed by the competent authority. In the instant case the Chief Engineer no doubt delayed the appointment but nevertheless the appointment was made one day before the filing of the present application. The appointment cannot be considered inherently defective or non-est. It is a good appointment made within the Clause 25 of the Agreement. In support of his contention the learned Advocate-General has relied on Union of India (UOI) Vs. New India Constructors, Delhi and Others, . In almost a similar situation a Division Bench held that the expression "the court may appoint" does not mean that the court must appoint an Arbitrator in every situation. The use of the word "may" implies that discretion is given to the Court. That discretion has to be exercised properly and not arbitrarily. As the facts of the present case disclose Shri Bajaj has been appointed and that the appointment is for the benefit of the applicant. In my opinion the appointment cannot be set at naught simply because of the expiry of 15 days period of time when the court could exercise its jurisdiction u/s 8(2) of the Act.

In the result, the authority of the appointed Arbitrator Shri S. R. Shah is revoked u/s 5 and the appointment of Shri V. M. Bajaj is considered to have been duly made under Clause 25 of the Agreement. The said Arbitrator will now proceed expeditiously to decide the dispute between the parties.

The application is, therefore, rejected without making any order as to costs.