Divisional Railway Manager and Another vs N.C. Singera Raj

P.A. Mohammed, J.—In this batch of appeals the main question that arises for decision is whether the court has power or jurisdiction to appoint an arbitrator not named in the arbitration agreement u/s 20(4) of the Arbitration Act, 1940 (hereinafter referred to as ''the Act'').

The broad common features of these appeals are thus: The main Appellant in these appeals is the Union of India represented by the General Manager, Southern Railway Headquarters, Madras and the Respondents are the railway contractors who had undertaken railway contract work under the Appellant. They have executed separate agreements with the Appellant for carrying out the contract work on certain terms and conditions which are specified in the relative agreements. Since dispute and difference arose between the parties in relation to or arising out of the arbitration agreements the Respondents filed applications under Sections 8 and 20 of the Act before the cavil courts for compelling the Appellants to file the arbitration agreements in court and to appoint an Arbitrator by the court itself. The trial court after the enquiry appointed arbitrators not named in the arbitration agreement u/s 20(4) of the Act. The Appellants being aggrieved by the judgments and decrees so passed by the courts below have filed the present appeals. The Respondents, inter alia, raised a preliminary objection that the present appeals are not maintainable u/s 39 of the Act.

What confers jurisdiction on the arbitrators to adjudicate the difference and dispute between the parties is an arbitration agreement as defined in Section 2(a) of the Act. The terms and conditions contained in the agreement have decisive role to play in resolving the dispute in the process of arbitration. In the present context Clause 64 of the General Conditions of contract as amended upto 1986 is most relevant and it is applicable to all contracts involved in these cases. Hence the said clause is ectyped hereunder:

(1) In the event of any dispute or difference between the parties hereto as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account, or as to the withholding by the Railway of any certificate to which the contractor may claim to be entitled to, or if the railway fails to make a decision within a reasonable time then and in any such case, but except in any of the ''excepted matters'' referred to in Clause 63 of these conditions, the contractor, after 90 days of his presenting his final claim on disputed matters, may demand in writing that the dispute or difference be referred to arbitration. Such demand for arbitration shall specify the matters which are in question, dispute or difference and only such dispute or difference of which the demand has been made and no other, shall he referred to arbitration.

(2) Work under the contract shall, unless otherwise directed by the Engineer, continue during the Arbitration proceedings, and no payment due or payable by the Railway shall be withheld on account of such proceedings provided however it shall be open for the Arbitrator or Arbitrators to consider and decide whether or not such work should continue during arbitration proceedings.

(3) (a) Matters in question, dispute or difference to be arbitrated upon shall be referred for decision to:

(i) A sole arbitrator who shall be the General Manager or a Gazetted Railway Officer nominated by him in that behalf in cases where the claim in question is below Rs. 5,00,000 (five lakhs) and in cases where the issue involved are not of a complicated nature. The General Manager, shall be the sole judge to decide whether or not the issue involved are of a complicated nature.

(ii) Two Arbitrators, who shall be Gazetted Railway Officers of equal status to be appointed in the manner laid down in Clause 64(3)(b) for all claims irrespective of the amount or value of such claims if the issues involved are of a complicated nature. The General Manager shall be the sole judge to decide whether the issues are of a complicated nature, or not. In the event of the two arbitrators being divided in their opinion the matter under dispute will be referred to an umpire to be appointed in the manner laid down in Clause (3)(b) for his decision.

(iii) It is a term of this contract that no person other than a Gazetted Railway Officer should act as an arbitrator/umpire and if for any reason, that is not possible the matter is not to be referred to arbitration at all.

(iv) In cases where the claim is upto 3,00,000 (Rupees three lakhs) the arbitrator(s)/umpire so appointed, as the case may be, shall give the award on all matters referred to arbitration indicating therein break-up of the sums awarded separately on each individual item or dispute. In cases where the claim is more than Rs. 3,00,000 (Rupees three lakhs) the Arbitrator(s) umpire so appointed, as the case may be, shall give intelligible award (i.e. the reasoning loading to the award should be stated) with the sums awarded separately on each individual item of dispute referred to arbitration.

(b) For the purpose of appointing two arbitrators as referred to in Sub-clause (a)(ii) above, the Railway will send a panel of more than three names of Gazetted Railway Officers of one or more departments of the Railway to the contractor, who will be asked to suggest to the General Manager one name out of the list for appointment as the contractor''s nominee. The General Manager while so appointing the contractor''s nominee, will also appoint a second arbitrator as the Railway''s nominee either from the panel or from outside the panel ensuring that one of the two arbitrators so nominated is invariably from the Accounts Department. Before entering upon the reference the two arbitrators shall nominate an umpire who shall be a gazetted officer to whom the case will be referred to in the event of any difference between the two arbitrators. Officers of the junior administrative grade of the Accounts Deparnment of the Railways shall be considered as of equal status to the officers in the intermediate administrative grade of other departments of the Railway for the purpose of appointment as arbitrators.

Clause 63 of the General Conditions of Contract is also relevant in the present cases. It provides, inter alia, that all disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the works or after their completion and whether before or after the determination of the contract, shall be referred by the contractor to the Railway and the Railway shall within a reasonable time after their presentation make and notify the decision thereon in writing. Clause 64(3)(a) provides that the matters in question, disputes or differences to be arbitrated upon shall be referred for decision to a sole arbitrator who shall be the General Manager or a Gazetted Railway Officer nominated by him in that behalf in case where the claim in question is below Rs. 5 lakhs and in cases where the issue involved is not of a complicated nature. Inasmuch as the claim involved in each of the appeals is above Rs. 5 lakhs, Clause 64(3)(a)(i) will not apply in the present cases. However, Clause 64(3)(a)(ii) thereof will apply in the present cases for which parties are at one. As per this sub-clause two arbitrators who shall be Gazetted Railway Officers in equal status to be appointed in the manner laid down in Clause 64(3)(b) for all claims of Rs. 5,00,000 and above and for all claims irrespective of the amount or value of such claims if the issues involved are of a complicated nature. The mechanism for the appointment of two arbitrators is laid down in Clause 64(3)(b). It provides that for appointing these two arbitrators, Railway will send a panel of three names of Gazetted Railway Officers of one or more departments of the Railways to contractor. Then the contractor will be asked to suggest one name out of that panel to the General Manager for appointment as his nominee. The General Manager while so appointing the contractor''s nominee will also appoint a second arbitrator as the Railway''s nominee either from the panel or from outside the panel ensuring that one of the two arbitrators so nominated is invariably from the Accounts Department. Before entering upon the reference two arbitrators shall nominate an umpire who shall be a gazetted officer to whom the case will be referred to in the event of any difference between the two arbitrators. The above procedure only indicates the appointment of two arbitrators and an umpire by the General Manager or Gazetted Railway Officer nominated by him in this behalf. On a plain reading of the above clauses what we could perceive is that there is no named arbitrator or specified arbitrator to whom the difference and dispute can be referred. The test normally would be to find out, is there an identifiable person or persons in the clauses of the arbitration agreement to whom the dispute can straight away be referred. In this context, it may well be seen that there are ever so manv Gazetted Railway Officers who are qualified to be nominated as arbitrators or umpire. Therefore what is laid down in the above clauses is only the prescription of the procedure for appointment of the arbitrator or umpire to whom the dispute can be referred to for settlement at a stage prior to the filing of the application before court u/s 8 or 20 or both as the case may be.

The above procedural process reminds us what the Supreme Court said in Nandyal Coop. Spinning Mills Ltd. Vs. K.V. Mohan Rao, that-

The contract did not expressly provide for the appointment of a named arbitrator. Instead power has been given to the administrative head of the Appellant to appoint sole arbitrator.

Further, it observed in G. Ramachandra Reddy and Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service, that-

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.

Let us see how the arbitrator has been named or specified in an arbitration agreement involved in the case in Secretary to Government, Transport Deptt., Madras Vs. Munuswamy Mudaliar and Another, . There the arbitrator has been described as this: "Superintending Engineer (Highways and Rural Works), Rural Roads Circle, Tiruchirapalli". This is a case where the arbitrator has been named or specified. That means the parties to the agreement have no difficulty in identifying the arbitrator to whom the dispute can be referred. When the Clause 64 of the present agreement is analysed in the aforesaid background it would sufficiently reveal that this is not a case where named or specified arbitrators have been appointed to whom the dispute and difference between the parties can be referred.

The main question referred to at the outset centres round the power or jurisdiction of the courts u/s 20(4) of the Act to appoint an arbitrator not named in the arbitration agreement. Section 20 is contained in Chapter III which deals with arbitration with the intervention of a court where there is no suit pending.

In this context it may be noticed that Section 8 which confers power on the court to appoint arbitrator or umpire is contained in Chapter II which deals with arbitration without intervention of a court. Sub-section (1) of Section 20 provides that where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in court. This provision indicates that the party has the option either for proceeding u/s 20 or u/s 8 in Chapter II. But the provisions of Section 20 can be availed of only if no proceeding under Chapter II has been initiated. (See The Union of India (UOI) Vs. Shri Om Prakash, and Ramvallabh Tibrewalla Vs. Dwarkadas and Co., In all the present cases no separate proceeding u/s 8 has been initiated and therefore all the applications involved in these appeals are substantially u/s 20 of the Act.

After numbering and registering the application as provided in Sub-section (2) of Section 20 the court shall direct notice thereof to all the parties to the agreement under Sub-section (3) requiring them to show cause within a time specified why the agreement should not be filed. Sub-section (4) of Section 20 which is more relevant in the present context is extracted hereunder:

(4) Where no sufficient cause is shown, the court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the court.

This Sub-section will be attracted only when the Defendants failed to show ''sufficient cause'' to a notice requiring them as to why the agreement should not be filed in court as provided in Sub-section (3). When sufficient cause is not established the court can make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the court. The court is empowered to direct the Defendants to file the agreement in court and to make an order of reference to the arbitrator appointed by the parties in the agreement or otherwise. That means if there is a named or specified arbitrator appointed by the parties in the agreement the court shall straight away pass an order of reference to such arbitrator. If that course is not possible due to the absence of named arbitrator in the agreement then the court shall make an order of reference to the arbitrator, if any, as agreed upon by the parties when the matter is pending before the court. When this course is also unavailable then the court is at the final stage of making an order of reference to an arbitrator appointed by the court itself. What we perceive here is that the court has no absolute or unqualified discretion to appoint an arbitrator u/s 20(4) ignoring the named or agreed arbitrator. The power of the court in this regard is totally dependent on the absence of a named or appointed arbitrator in the agreement and an arbitrator agreed upon by the parties to the agreement. In the present cases the court gets power or jurisdiction to refer the dispute to the arbitrator appointed by itself on occurrence of the two events referred to herein above.

The operational technic of Section 20(4) of the Act can be visibly understood if we examine the decision of the Supreme Court in Rajan v. State of Kerala (1992) 2 KLT 435 (S.C.). That was a case where subordinate Judge ignoring the appointed arbitrator provided in the agreement, directed the parties to submit their respective panels for arbitrator so as to enable the court to appoint the arbitrator or arbitrators, as the case may be, out of such panels. Clause (3) of the agreement involved in that case provided that the arbitrator for fulfilling the duties set forth in the arbitration clause shall be the Superintending Engineer, Buildings and Roads Circle, Trivandrum. Therefore the Supreme Court said that it was a case where the agreement itself specified the name of the arbitrator. Therefore the court further said that in such situation it was obligatory upon the learned subordinate judge in case he was satisfied that the dispute ought to be referred to the arbitrator or refer the dispute to the arbitrator specified in the agreement. Then the apex court further held thus:

It was not open to him to ignore the said clause of the agreement and to appoint another person as an arbitrator. Only if the arbitrator specified and named in the agreement refuses or fails to act does the court get the jurisdiction to appoint another person or persons as the arbitrator. Tbis is the clear purport of Sub-section (4). It says that the reference shall be to the arbitrator appointed by the parties. Such agreed appointment may be contained in the agreement itself or may be expressed separately. To repeat, only in cases where the agreement does not specify the arbitrator and the parties cannot also agree upon an arbitrator, does the court get the jurisdiction to appoint an arbitrator or warrant for the learned subordinate Judge to call upon the parties to submit panels of arbitrators. He was bound to refer the dispute only to the arbitrator named and specified in the agreement.

emphasis supplied

What is laid down in the above decision is that the court shall refer the dispute only to the arbitrator named and specified in the agreement, when that is distinctly clear from the clauses of the agreement. What emerges from the above discussion is that after the arbitration agreement has been ordered to be filed, the court shall proceed to make reference firstly to the arbitrator appointed by the parties in the agreement, secondly to the arbitrator not named in the agreement but with regard to whom the parties agreed otherwise and thirdly when the parties cannot agree upon an arbitrator, to an arbitrator appointed by itself.

The counsel for the Appellants contended that the courts should always consider the feasibility of appointing arbitrators according to the terms of the contract. In other words the argument is that even in a case where there are no named arbitrators, the court should endeavour to act in terms of the agreement before taking up the burden of appointing the arbitrator by itself. The relevance of this plea is based on certain observations contained in the decision in Union of India (UOI) Vs. Prafulla Kumar Sanyal, . Of course in the aforesaid case the Supreme Court observed in paragraph 5 as this:

In the instant case, as an arbitrator has not been appointed by the parties and as the parties are not agreed upon an arbitrator the court may proceed to appoint an arbitrator, but in so doing it is desirable that the court should consider the feasibility of appointing an arbitrator according to the terms of the contract.

The court is not required to appoint an arbitrator who has not actually been agreed but for whose appointment adequate provision has been made. In such case the possibility of appointing an arbitrator according to the terms of the contract should be considered first before any arbitrator is appointed by the court. The above quoted observation of the Supreme Court in Union of India (UOI) Vs. Prafulla Kumar Sanyal, was made in the context that both parties in that case expressed a desire before the Supreme Court that the President should be asked to appoint an arbitrator according to Clause 29 of the agreement. It was in consideration of such a request the apex court has made the observation as to the feasibility of appointing an arbitrator according to the terms of the contract. Further it must be recalled that no notice was given to the Appellants therein (Union of India) to appoint an arbitrator in terms of the contract before the suit was filed and no action was taken pending the suit except contending that the matter was under active consideration. If both parties in the said case (supra) have not expressed the desire that the President should be asked to appoint an arbitrator the position would have been different. In this context the following observation in paragraph 3 of the above decision is relevant.

Construing strictly the words of Sub-section (4), the court is not bound to make an order of reference to the person that is to be appointed by the President of India or in the event of his not willing to a person to be appointed by the administration, for the arbitrator has not been appointed as contemplated in the Sub-section. Therefore, it will not be obligatory on the part of the court to make an order of reference to the arbitrator that may be appointed by the President. If an arbitrator had not been appointed as required in the Sub-section, the court is to find whether the parties could agree, upon an arbitrator. If the parties agree, the court has to appoint the person agreed to as an arbitrator. If there is no such agreement, the court will have to appoint an arbitrator of its choice.

In Nandyal Coop. Spinning Mills Ltd. Vs. K.V. Mohan Rao, the Supreme Court observed:

It would thus be clear that if no arbitrator had been appointed in terms of the contract within 15 days from the date of receipt of the notice, the administrative head of the Appellant had abdicated himself of the power to appoint arbitrator under the contract. The court gets jurisdiction to appoint an arbitrator in place of the contract by operation of Section 8(1)(a). The contention of Shri Rao, therefore, that since the agreement postulated preference to arbitrator appointed by the administrative head of the appellam1 and if he neglects to appoint, the only remedy open to the contractor was to have recourse to civil suit is without force. It is seen that under the contract the Respondent contracted out from adjudication of his claim by a civil court. Had the contract provided for appointment of a named arbitrator and the named person was not appointed, certainly the only remedy left to the contracting party was the right to suit. That is not the case on hand. The contract did not expressly provide for the appointment of a named arbitrator. Instead power has been given to the administrative head of the Appellant to appoint sole arbitrator. When he failed to do so within the stipulated period of 15 days enjoined u/s 8(1)(a), then the Respondent has been given right u/s 8(1)(a) and request the court to appoint an arbitrator. If the contention of Shri Rao is given acceptance it would amount to putting a premium on inaction depriving the contractor of the remedy of arbitration frustrating the contract itself.

(emphasis supplied)

In G. Ramachandra Reddy and Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service, the Supreme Court observed:

The court should endeavour that the contract should always be given effect to, though the contracting party had failed to act according to contract. It is to be seen whether the contract provided for the appointment of a named arbitrator, and if so, the parties normally would be bound by the terms of contract and the court would not be justified to appoint any arbitrator unless the arbitrator refused or neglected to enter upon the reference etc. In the absence of any named arbitrator it would be open to the contracting parties to agree for an appointment of an arbitrator by agreement even after the proceedings were laid in the court u/s 20 of the Act. In the absence of any such agreement the court gets jurisdiction and power to appoint arbtirator.

(emphasis supplied)

The following factual situation contained in G. Ramachandra Reddy and Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service, is more or less similar to the facts involved in the present case.

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.

In view of what is discussed above we have no hesitation in holding that the courts below in these cases were fully justified in appointing arbitrators to settle the difference and dispute between the parties in exercise of power conferred u/s 20(4) of the Act.

Now let us examine briefly the facts of each case leading to the appointment of the arbitrators by the courts below for adjudicating the dispute between the parties.

M.F.A. No. 293/97

This appeal arose from the judgment of the Prinicipal Sub Judge, Thiruvananthapuram in O.S. (Arb.) No. 496 of 1993, dated 30th March 1996. The Plaintiff N.C. Singeraraj filed application under Sections 4, 8 and 20 of the Act praying for an order for filing agreement No. 22 T.V.C./88 and to make an order of reference of disputes to an arbitrator. The agreement was entered into between the parties on 23rd February 1988 for providing cement concrete apron as specified therein. Later dispute and difference arose between the parties and Defendants were not amenable to settle them. Accordingly the Plaintiff caused statutory notice dated 4th December 1992, but no reply was given by the Defendants. Thereafter the present suit was filed on 3rd April 1993. The Defendants in the written statement denied the allegations. They also expressed their readiness to make payments for all the works done by the contractor. After the enquiry the court directed the Defendants to file the agreement in court. Basing on the decision of the Supreme Court in G. Ramachandra Reddy and Co. Vs. Chief Engineer, Madras Zone, Military Engineering Service, he court below observed that it had to appoint an arbitrator of its own choice. It is further observed that even though the Plaintiff had sent Ext. A-1 notice, the Defendants did not care to respond and that they had no case that they had sent any reply to the notice. In the course of hearing it was submitted by the counsel on both sides that later the court had appointed a Retired Chief Engineer (Electrical Department) as the arbitrator. In the arbitration Railway has participated through out the proceeding and it was during the pendency of the arbitration proceeding the present appeal was preferred before this Court. Ultimately an award was passed on 15th April 1997 but in view of the order passed by this Court in C.M.P. No. 1109/97 award has not been enforced so far against the Appellants.

M.F.A. No. 315/98

This appeal arose from the judgment of the Sub Court, Trichur in O.S. (Arb.) No. 770/92, dated 25th September 1997. The Plaintiff-contractor entered into an agreement on 18th June 1991 with the Railway Department for the construction of a new B.G. Railway line from Thrissur to Guruvayoor as specified in the agreement. Later dispute and difference arose between the parties and hence a notice was issued to the Defendants on 14th February 1992 calling upon the Defendant to send a panel of three Gazetted Railway Officers to enable the Plaintiff to suggest one name out of the panel for appointment as joint arbitrator. However no such panel was given to the Plaintiff and there was no response from the side of the Defendants. Ultimately the suit was filed on 29th May 1992 for directing the Defendants to file the arbitration agreement in court and to make an order of reference to the arbitrator appointed by the court. After the enquiry the court below decreed the suit as prayed for and appointed Kumari Justice P. Janaki Amma (Retd.) as the sole arbitrator to decide the dispute. Being aggrieved by the said judgment this appeal has been preferred.

M.F.A. Nos. 764, 765 and 766/97

Plaintiff in all these cases is one K.R. Ravindranathan and he entered into agreements with the Defendants for doing three separate construction works for the railway. Since difference and disputes arose between the parties Plaintiff requested the railway to submit a panel of names of Gazetted Railway Officers to set in motion the arbitration process in the agreement. However, the General Manager has not forwarded the panel of names to the Plaintiff. Therefore the suits were filed before the court below under Sections 2 and 20 of the Act. The court found that the General Manager failed to send panel of arbitrators for referring the dispute. Ultimately the court decreed the suits by referring the dispute to the arbitrator. The court further directed both sides to submit names of three retired District Judges with their consent in all the cases. However the parties failed to submit the names of the retired District Judges as required. Finally on 10th January 1997 both sides made a submission that Justice K. J. Joseph may be appointed as arbitrator. Acting on the said submission, the court passed three separate orders appointing Justice K.J. Joseph (Retd.) as the arbitrator. The said orders were passed by the court below on 10th October 1996 in I.A. Nos. 1421, 1422 and 1423 of 1996.

M.F.A. Nos. 275 and 332 of 1997

These appeals arose from the judgments in O.S. (Arb.) No. 805/93 and 1073/93, both dated 23rd August 1996. N.C. Singeraraj is the contractor-Plaintiff in both the cases and the Defendants are the officers of the Southern Railway. In view of the dispute and difference between the parties, suits were filed under Sections 5, 8, 11 and 20 of the Act before the court below. The court below by separate judgments directed the Defendants to file the relative agreements in court. Thereafter separate orders were passed holding that the court has got power to appoint arbitrator u/s 20(4) of the Act. Accordingly the parties were directed to file the panel within 15 days. It is against the said orders the present appeals were filed. In the course of hearing, counsel on both sides submitted that subsequent to the impugned orders awards were passed by the arbitrators in both the cases, However, the enforcement of the award against the Appellants has been stayed in view of the interim orders passed by this Court in the present appeals.

The counsel for the Appellants raised a contention that the Appellants have not consented to the appointment of Justice K.J. Joseph as the arbitrator in O.S. Nos. 212, 213 and 214/92. We see no substance in this contention. Learned Sub Judge directed both parties to submit panel of three names of retired District Judges with their consent. However, they committed default in submitting the panel. Thereafter both parties submitted before the court below that Justice K.J. Joseph may be appointed as the arbitrator in those three cases. In other words, that was an appointment on consent. If the Appellants dispute the statement ot the learned Judge in the orders passed in I. A. Nos. 1421, 1422 and 1423 of 1996 they should have taken steps to review those orders pointing out that they did not consent to such an appointment. Therefore the statements contained in those orders passed by the courts are conclusive and final. The Supreme Court in State of Maharashtra Vs. Ramdas Shrinivas Nayak and Another, held:

The principle is well settled that statements of fact as to what transpired at the hearing, recorded in the judgment of the court, are conclusive of the facts so stated and no one can contradict such statements by affidavit or otherwise. If a party thinks that the happenings in court have been wrongly recorded in a judgment, it is incumbent upon the party, while the matter is still fresh in the minds of the judges to call the attention of the very judges who have made the record to the fact that the statement made with regard to his conduct was a statement that had been made in error.

Under Section 114 of the Evidence Act the court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the partciular case. Illustration (c) to the said section provides, the court may presume that the judicial acts have been regularly performed. When this being the presumption as to judicial acts we are bound to accept the statement of the judges recorded in their judgments as to what transpired in court. Where a statement appears in the judgment of a court that a particular thing happened or did not happen before it, it ought not ordinarily to be permitted to be challenged by a party unless both the parties to the litigation agree that the statement is wrong, or the court itself admits that the statement is erroneous. In such circumstances, the remedy of the party aggrieved is by way of review. See Isac v. Appsons Pharmaceuticals (1998) 2 KLT 724 Therefore the controversy now created by the counsel for the Appellants on the appointment of Justice K.J. Joseph is far from real and has no basis at all. It is an admitted case that Justice K.J. Joseph had already started functioning as the arbitrator m the above three cases and both sides without demur participated in the proceedings before the arbitrator who conducted few sittings. That being the position, we dispel all the contentions raised by the Appellants in this regard.

Counsel appearing for the Respondents raised on objection that the present appeals are not maintainable u/s 39 of the Act which reads thus:

Appealable orders.-(1) An appeal shall lie from the following orders passed under this Act (and from no others) to the court authorised by law to hear appeals from original decrees of the court passing the order;

An order-

(i) superseding an arbitration;

(ii) on an award stated in the form of special cases;

(iii) modifying or correcting an award;

(iv) filing or refusing to file an abritration agreement;

(v) staying of refusing to stay legal proceedings where there is an arbitration agreement;

(vi) setting aside or refusing to set aside and award Provided that the provisions of this section shall not apply to any order passed by a small cause court.

(2) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or take away any right to appeal to the Supreme Court.

If the impugned orders come within the purview of Section 39(1)(iv) that is to say, filing or refusing to file an arbitration agreement, the appeal shall lie to this Court. The question is whether the impugned orders can be treated to be orders coming u/s 39(1)(iv) of the Act. In Dhanrajamal Gobindram Vs. Shamji Kalidas and Co., he Supreme Court observed:

This argument overlooks the fact that this is a statutory arbitration governed by its own rules, and that the powers and duties of the court in Sub-section (4) of Section 20 are of two distinct kinds. The first is the judicial function to consider whether the arbitration agreement should be filed in court or not. That may involve dealing with objections to the existence and validity of the agreement itself. Once that is done, and the court has decided that the agreement must be filed, the first part of its powers and duties is over. It is significant that an appeal u/s 39 lies only against the decision on this part of Sub-section (4). Then follows a ministerial act of reference to arbitrator or arbitrators appointed by the parties. That also was perfectly possible in this case if the parties appointed the arbitrator or arbitrators. If the parties do not agree, the court may be required to make a decision as to who should be selected as an arbitrator, and that may be a function either judicial, or procedural, or even ministerial, but it is unnecessary to decide which it is.

(emphasis supplied)

In Union of India (UOI) Vs. M.S. Grewal and Co., it has been observed that where an applicant sought to enforce the arbitration agreement as it was and he did not plead either that there was no arbitrator appointed by the agreement or that the arbitrators appointed were unfit to be arbitrators or that the portion of the agreement relating to the appointment of arbitrators was not being enforced, an order directing the filing of the arbitration agreement but appointing a person as arbitrator who was not the person mentioned in the agreement as the arbitrator amounted to an order refusing to file the arbitration agreement and an appeal lay against such an order. Where an order is passed u/s 20 appointing a person other than the person named in the arbitration agreement as an arbitrator it is in effect an order refusing to file an arbitration agreement. Such an order is appealable. See The Controller of Stores and Another Vs. Kapoor Textile Agencies, Since the impugned orders in these cases are coming within the scope of Clause (iv) of Section 39(1) it cannot be said that the present appeals are not maintainable.

The counsel for the Appellants in M.F.A. Nos. 293/97 and 315/98 pointed out that the appeals filed u/s 39(1)(iv) of the Act are maintainable in view of the decision of this Court in Union of India v. V.M. Mathai ILR (1987) Ker. 155 wherein it has been held thus:

Whether the order is viewed as an order falling u/s 39(1)(iv) being an order made otherwise than in accordance with the agreement between the parties or, as an order totally outside the powers conferred on the court u/s 20, thereby rendering it liable to be impeached in revision, the parties are not helpless and this Court is not without power to correct the error. Whether we consider the impugned order as a revisable order by treating this appeal as a Revision Petition, or, as an appealable order within the meaning of Section 39(1)(iv) we hold that the impugned order has no merits. It is accordingly set aside.

What this Court said in the above decision is that even if the order passed by the court below is not an order strictly coming within the scope of Section 39(1)(iv) of the Act, the parties are not left with no remedy in that they can challenge the decision in a revision petition. What this Court is concerned is the substance of the attack and not form in which it has been laid.

From the discussion aforesaid, we can safely conclude that the appeals filed in these cases are maintainable. However; in this context it is necessary to point out that in M.F.A. No. 275/97 and 332/97, Appellants have not challenged the separate judgments delivered by the court below directing the Defendants to file the arbitration agreements. The appeals are filed only against subsequent orders separately passed by the court below appointing the arbitrators. In these cases also, even though the earlier judgments directing the Appellants to file the arbitration agreements in court have not been challenged, the remedy by way of revision is available to the Appellants against the subsequent orders appointing the arbitrators. Here also the dictum laid down by the Division Bench of this Court in V.M. Mathai''s case ILR (1987) Ker. 155 supra, would apply. That being the position, we are inclined to hold that the appeals filed in these cases are maintainable and hence the objections raised by the Respondents are disallowed.

Counsel for the Appellant in M.F.A. Nos. 293/97 and 315/98 contended that as per Clause 64 of the agreement referred to above, the General Manager is the authority for the appointment of arbitrators. The learned Counsel relied on Clause 64(3)(a)(ii) which says that one of the terms governing the contract is that no person other than the Gazetted Railway Officer should act as arbitrator or umpire and if for any reason that is not possible the matter is not to be referred to arbitration at all. According to the counsel the above terms of the contract are binding between the parties and therefore the court is not justified in appointing an outside arbitrator. In other words the counsel contends that the appointment of an outside arbitrator is not envisaged in the arbitration clause. The counsel has no case that there is a named arbitrator or umpire in the arbitration agreement. What is provided is that the General Manager has to appoint an arbitrator or arbitrators. When a clear mechanism has been provided in the agreement and the contractors approached the General Manager for invoking that mechanism so as to enable them to appoint their nominees it is for the General Manager to furnish a panel to the contractors as provided in Clause 64(3). The report of the contractors in that behalf was obviously turned down by the General Manager and in fact no reply was given by him to the contractors intimating the reasons for doing so. In the aforesaid situation, the contractors were compelled to approach the court invoking the provisions under the Act and that is how the matter reached before this Court. When the application has been presented before court for invoking the powers under the Act, the General Manager cannot turn round and say that the Court has no power to appoint an outside arbitrator. Clause 64 (3)(a)(ii) is binding between the parties and the procedure laid down therein ought to have been adopted prior to the stage of filing the suit before the court. The court functions clearly under the provisions of the Act and hence Appellants cannot contend that there would not be any arbitration at all by reason of the provisions contained in Clause 64(3)(a)(iii). In the absence of a gazetted railway officer the agreement does not name or specify an arbitrator. What the clause said is that in the absence of a gazetted railway officers "the matter is not to be referred to arbitration at all". One of die contracting parties cannot, by his own default make the powers of the court under Arbitration Act redundant. In such situation it is arduous for this Court to say the remedy of the contractors is to have recourse to civil court. If such an argument is accepted, no doubt it would amount to a premium for inaction depriving the contractors for arbitration frustrating the contract itself.

Counsel for the Appellants in M.F.A. Nos. 293 of 1997 and 315/98 raised a contention that the matters referred to the arbitrator in these cases would come within the purview of "excepted matters" envisaged in Clause 64(1) of the General Conditions of Contract and that therefore they are not arbitrable matters. The contention is that "excepted matters" are not the differences or disputes in relation to or arising out of the contracts entered into between the parties. Counsel appearing for the contractor in M.F.A. No. 293/97 controverted this submission pinpointing that there was no such case for the Appellants in the written statement filed before the court below, Apart from stating that there was no dispute or difference between the parties arising for consideration, there was no specific ease for the Appellant that the dispute and difference between the parties would come within the scope of ''excepted matters'' as provided in Clause 64(1). The counsel further pointed out that no grounds in this regard had been raised in the appeal memorandum. On a perusal of the judgment in O.S. (Arb.) No. 496/93, we cannot trace out any such points argued before the court below. On the contrary we have noticed an observation by the court below in the impugned judgment to the effect that the Defendants had no claim that the matters referred to in Ext. A-l would come under "excepted matters" referred to in Clause 63 of the General Conditions of the contract. In the above factual background we do not propose to go into this question in M.F.A. 293/97 but in M.F.A. 315/98 this question do arise which we will presently discuss. However in this context though an identical question was raised in M.F.A. Nos. 275/97 and 332/97 no such point was raised in the written statements filed by the Appellants. It appears no such question was raised before the court below and there was no discussion on this question in the impugned judgment. We therefore refrain from considering this contention in these two appeals.

However, in M.F.A. 315/98 arising from O.S. (Arb.) No. 770/92, learned Counsel for the Appellant pressed this point for consideration by us. A specific ground had been raised in the present appeal memorandum in this regard and thus contended that the difference and dispute between the parties in that case were excluded from the purview of the arbitration clauses in the agreement. In paragraph 26 of the written statement the Defendant contended with reference to paragraph 29 of the plaint that the matters referred to by the Plaintiff are "excepted matters" as per Clause 63 of the General Conditions of contract and hence not arbitrable. We have noted that though an issue has not been specifically framed by the Court below with regard to the point concerning "excepted matters" an issue has been framed to the effect that whether the dispute and difference between the parties are referable to arbitration. Whatever that be we are of the view that such a contention has been raised before the court below, but it has not been specifically decided by it. In this context what course of action do we to accept in view of the background that dispute between the Plaintiff and Defendants has been referred to the arbitrator and a retired Judge of this Court has already been appointed as the arbitrator, is a matter which we will presently discuss hereunder.

Clause 63 of the General Conditions of contract provides that the decisions, directions, classification, measurements, drawings and certificates with respect to any matters the decisions of which is specially provided for by these or other special conditions, given and made by the Railway, or by the Engineer on behalf of the Railway, are matters which are referred to hereinafter as "excepted matters" and shall be final and binding upon the contractor. What is contemplated under the Clause 63 is that all disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the works or after their completion and whether before or after the determination of the contract, shall be referred by the contractor to the Railway and the Railway shall within a reasonable time after their presentation make and notify decisions thereon in writing. Any decisions, direction, classification, measurements, drawings and certificates with respect to any matters the decisions of which is specially provided for and rendered by the Railway are matters which are referred to as "excepted matters". When such dispute comes within the meaning of ''excepted matters'' it may be possible to argue that it may not come within the purview of settlement by the arbitrator. But at the same time it is pointed out that itself is a dispute liable to be adjudicated by the arbitrator.

The question is when an arbitrator has been appointed by the court u/s 20(4) of the Act whether the court has got power to direct him to decide the question as to the arbitrability of the dispute referred to him. As far as the present case is concerned, it is contended that the dispute which arose between the parties out of or in relation to the contract are not arbitrable matters and therefore the arbitrator cannot be asked to decide that question. Before going any further, if we examine Clause 63 of the agreement it could be seen that matters coming within that clause itself are amounted to disputes and differences, if the aggrieved contracting party cannot agree with the decision, direction, classification, measurements, drawings and certificates with respect to any matters the decision on which is specially provided for. For deciding this question also the services of the arbitrator are found to be essential.

It is argued that the arbitrator has no power to decide the matters relating to his own jurisdiction. It cannot be said so in absolute terms and in all circumstances. Russel on Arbitration (20th Edition) page 91 says:

A reference of ''any dispute...touching these presents or any clause or matter or thing herein contained, of the construction thereof'' has been held to cover disputes as to the scope of the arbitration clause.

Willesford v. Watson (1873) L.R. 8 Ch. 472. What is seen from the above decision is that practically this would depend upon whether on the face of the arbitration clause its scope is open to any real doubt. In Brown v. Genossenschaft Oesterreichischer (1954) 1 Q.B. it has been held that the arbitrator is always entitled to enquire whether or not he has jurisdiction. Adopting the rule in Rex v. Fulham (1951) 2 K.B. 1 the Queen''s Bench held in Brown''s case (1954) 1 Q.B. supra, thus:

Arbitrators whose jurisdiction is challenged are entitled to make their own inquiries into the question whether or not they have jurisdiction in order to determine their own course of action, although the result of their inquiry can have no effect on the rights of the parties. Their award is in no way affected by the fact that it expressly or impliedly refers to a finding by the arbitrators as to their jurisdiction.

In Wadsworth v. Smith (1871) 6 Q.B. 332 Blackburn, J. said:

Where by an agreement the right of one of the parties to have or do a particular thing is made to depend on the determination of a third person, that is not a submission to arbitration, nor is the determination an award; but where there is an agreement that any dispute about a particular thing shall be inquired of and determined by a person named, that may amount to a submission to arbitration, and the determination, though in the form of a certificate, be an award.

The counsel for the Respondent in M.F.A. No. 315/98 also places reliance on the following decisions. Food Corporation of India Vs. Surendra, Devendra and Mohendra Transport Co., , Wazirchand Mahajan and Another Vs. Union of India (UOI), and Central Warehousing Corporation v. Varghese (1971) 1 KLT 67.

In this context it is apt to refer to a recent decision of the Supreme Court in The Southern Gas Ltd. Vs. Visveswaraya Iron and Steel Ltd., . That was a case where an agreement was entered into between the Appellant and the Respondent towards delivering, taking, using etc. of oxygen on certain terms and conditions. Clause 7 of the agreement is the ''force majeure''. This clause provides that to the extent and during the period either of the parties is prevented from delivering or taking oxygen or using it in accordance with the agreement due to the operation of one or more of the force majeure events they shall be relieved of their respective obligations of delivering or taking and paying for such oxygen. The claim of the Respondent was that during a certain period, it was unable to take oxygen as per the agreement because there were more than 70 per cent power cuts due to which it could not run its ID Plant which in turn depended upon the electric pig iron furnace, which was highly power oriented. On this premise, a dispute arose and an arbitrator was sought to be appointed. The court when moved appointed an arbitrator u/s 20 of the Act. The Respondent company took up the matter in appeal before the High Court who reversed the judgment of the trial court to some extent pertaining to some items in dispute. The Supreme Court in the course of the judgment observed:

The orders of the High Court have been challenged herein on the ground that whether or not it was a case of ''force majeure'', was a preliminary question determinable by the arbitrator. In other words, if the Respondent could successfully plead and prove to the satisfaction of the arbitrator that ''force majeure'' clause was attracted, it would preclude other disputes being raised before and determined by the arbitrator. In any event, the matter initially had to go to the arbitrator to be stopped or continued after the decision on the question of ''force majeure''. We think that the Appellant is on sound ground in contending this way towards interpretation of the agreement contained in Clause (7) above-referred to read with Clause (22) providing for arbitration. Even learned Counsel for the Respondent appreciated the logic of the argument and has in the manner submitted to it before us.

Therefore the court said that the arbitrator should first go into the question whether the dispute falls within the ambit of the arbitration agreement dependent on the determination whether the breach could invoke the ''force majeure'' clause or not, and if not then to proceed further within his domain to determine all questions as raised by the parties. The principle laid down in this decision can well be applied to the facts of the present case. In that premise on an anxious consideration of the entire matter we feel that the arbitrator in this case shall proceed with this question that the dispute and difference would come within the ambit of ''excepted matters'' as envisaged in Clause 63, and after deciding that question if goes in favour of the Appellant, the matter need not go any further. Otherwise the arbitrator can proceed with further within his domain to determine all the questions raised by the parties.

On behalf of the Respondents in M.F.A. Nos. 293/97, 275/97 and 332/97, it was contended that the Appellants acquiesced to the award passed by the court below inasmuch as they participated in the arbitration proceedings in consequence of which the awards have been passed by the arbitrators.

If the parties to the reference either agree before-hand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence.

(emphasis supplied)

[See Rahcassi Shipping Co. S.A. v. Blue Star Line Ltd. (1969) 1 Q.B. 173]. Therefore the Appellants in those appeals cannot now turn round and say that the awards passed by the arbitrator are liable to be set aside. Similar question arises in M.F.A. Nos. 764, 765 and 766/97 where the arbitrator appointed by the court had already conducted the hearings and the Appellants participated in the proceedings. There too the principle laid down in the decision (supra) would apply.

In view of the discussion herein above, the contentions urged by the Appellants in M.F.A. Nos. 293/97, 764/97, 765/97, 766/97, 275/97 and 332/97 are negatived. Accordingly those appeals are dismissed.

In M.F.A. No. 315/98 the matter is remanded to the court below to modify the reference directing the arbitrator appointed by the court first to decide the question whether the dispute and difference between the parties would come within the meaning of ''excepted matters'' and then proceed further accordingly. No order as to costs in all these appeals.