H.D. Bansal vs State of Haryana and Others

D.V. Sehgal, J.—This revision petition is directed against an order dated 15th Oct., 1986 passed by the ld. Senior Sub Judge, Chandigarh, whereby an application filed by the Petitioner under Sections 3, 5, 8, 9, 11 and 12 of the Arbitration Act, 1940 (for short ''the Act'') for revocation of the authority of the Arbitrator and appointment of another Arbitrator has been dismissed.

The Petitioner entered into an agreement with the State of Haryana, Respondent No. 1 through its Executive Engineer, Respondent No. 3, for construction of a new building of Manila Ashram at Karnal. The agreement contained a Clause which provides for adjudication of any dispute between the parties relating to the said work through an Arbitrator to be appointed by the Chief Engineer, Haryana, PWD B& R) Branch. The case as set up by the Petitioner in his application before the ld. trial Court was that the Superintending Engineer, PWD (B & R) Branch, Jind Circle, Respondent No. 2, was appointed as the sole Arbitrator to decide the dispute which had arisen between the parties. He submitted his claim to Respondent No. 2 on 19th Feb., 1985. Respondent No. 2, however, neither proceeded to adjudicate upon the said claim nor he inspected the site of work, nor summoned the record from Respondent No. 1, nor decided the dispute within a period of four months. It was alleged that Respondent No. 2 was liable to be removed as an Arbitrator as he had failed to act with reasonable despatch. It was further averred that the Petitioner through a notice dated 26th Sept., 1985 to Respondent No. 3 u/s 8(1)(b) of the Act stated that on refusal of Respondent No. 2 to act as an Arbitrator the Petitioner proposed to appoint Shri D.P. Gupta, Superintending Engineer, H.S.A.M. Board, Urban Estate, Karnal, as an Arbitrator and required Respondent No. 3 to concur with the appointment of the said officer as an Arbitrator. It was further averred in the application that Respondent No. 3 did not send any reply to the notice giving his concurrence to the appointment of the new Arbitrator. Consequently, in the application a prayer was made that since Respondent No. 2 had failed to use all reasonable despatch his authority as an Arbitrator should be revoked and in his place Shri D.P. Gupta should be appointed as an Arbitrator. Of course in the application some-more allegations were made to the effect that Respondent No. 2 had a bias against the Petitioner and that he had misconducted himself, but no evidence worth the name was produced on the record in support of these allegations. It is, therefore, not necessary to dilate on them.

The application was opposed by Respondents Nos. 1 and 3. A reply was filed on their behalf. It was stated therein that at the request of the Petitioner, the Chief Engineer, Haryana, PWD (B&R) Branch, Chandigarh, had appointed Respondent No. 2 as an Arbitrator on 20th Sept. 1984. Respondent No. 2 on receiving letter of his appointment as an Arbitrator sent a notice dated 28th Sept., 1984 to the Petitioner requiring him to file his statement of claim in a period of two months. However, the Petitioner did not comply with this notice and the period of four months with effect from 28th Sept. 1984 expired. The Petitioner submitted his claim on 19th Feb., 1985 but Respondent No. 2 could not proceed with the arbitration unless the Petitioner and Respondents Nos. 1 and 3 gave their consent to the enlargement of time for making of the award by him. The Petitioner was requested by Respondent No. 3 to give his consent for the purpose but no response was received from him. The allegation, therefore that Respondent No. 2 did not use all reasonable despatch in entering on and proceeding with the reference and making his award was emphatically denied.

On the pleadings of the parties, the ld. trial Court framed the following issues:

Whether the arbitrator is liable to be removed on the ground as stated in para No. 16 of the petition?

Whether this Court has jurisdiction to try the petition?

Relief.

Through the order under revision, the ld. trial Court decided issue No. 1 against the Petitioner. It was held that the Arbitrator could not proceed with the reference as the Petitioner failed to give his consent for the enlargement of time and that Respondent No. 2 could not be held responsible for the delay in adjudication of the dispute referred to him for arbitration. Issue No. 2 was decided in favour of the Petitioner. It was held that the Civil Court at Chandigarh had jurisdiction to entertain the application. As a result, the application of the Petitioner was dismissed. The Petitioner, thus, being aggrieved, has filed the present revision petition.

I have heard the ld. Counsel for the parties as have also gone through the record of the ld. trial Court. The evidence brought on the record has established that on a request made by the Petitioner the Chief Engineer had appointed Respondent No. 2 as an Arbitrator in pursuance of the arbitration Clause contained in the agreement executed between the Petitioner and Respondents Nos. 1 and 3. The appointment was so made by him vide his order dated 20th Sept., 1984. Respondent No. 2 did not lose any time thereafter and issued a notice to the Petitioner on 26th Sept. 1984 to submit his statement of claim with a copy of the same to Respondent No. 3 within a period of two months. The Petitioner, however, failed to comply with this notice. He submitted his claim only on 19th Feb., 1985. It has come in the statement of Shri G.D. Makkar, Executive Engineer R.W.I that he requested the Petitioner to give his consent for the enlargement of time so that Respondent No. 2 could adjudicate upon the claim of the Petitioner as an Arbitrator in accordance with law and make his award. The Executive Engineer also addressed a letter dated 25th Sept., 1985 Ex.R.1 to the Petitioner requesting him to give his consent to enlargement of time to which no response was given by the Petitioner. The Petitioner no doubt sent a notice dated 20th Sept., 1985 Ex.P.2 to Respondent No. 3 proposing appointment of Shri D.P. Gupta as an Arbitrator to which no reply was given by Respondent No. 3.

The question which requires determination is whether Respondent No. 2 failed to use all reasonable despatch to enter on and proceed with the reference and make an award. This is dependent on the question as to whether or not Respondent No. 2 entered on the reference on 28th Sept., 1984 when he issued notice to the Petitioner to file his statement of claim.

Para 3 of the First Schedule to the Act provides that the arbitrator shall make his award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow.

The ld. Counsel for the Petitioner contends Respondent No. 2 could have entered upon the reference only after he had received the statement of claim from the Petitioners on 19th Feb., 1985. He ought to have applied his mind to the claim and issued notice to Respondents Nos. 1 and 3 requiring them to file their statement of defence or fixing a date of hearing. It was on the date of such notice that Respondent No. 2 could have been deemed to have entered on the reference, which, according to the ld. Counsel, Respondent No. 2 failed to do. On the other hand, it is submitted by Mr. N.K. Kapoor appearing on behalf of Respondents Nos. 1 and 3 that after the appointment as an Arbitrator by the Chief Engineer, when Respondent No. 2 issued notice to the Petitioner on 28th Sept., 1984 requiring him to submit his statement of claim, he entered on the reference. Since the Petitioner failed to submit Misstatement of claim in response to this notice for more than four months, the period, stipulated in para 4 ibid expired and Respondent No. 2 could not proceed to adjudicate on the claim of the Petitioner or make his award unless the time was extended in accordance with para 3 ibid read with Section 28 of the Act. He further submits that since despite requests the Petitioner did not give his consent to enlargement of time provided by para 3 ibid, Respondent No. 2 was justified in not taking any further action on the statement of claim submitted by the Petitioner.

After considering the rival contentions and keeping in view the settled law I am of the view that the contention of the ld. Counsel for the Respondents is correct and must prevail. An arbitrator enters on the reference when he takes upon himself the office of the arbitrator and exercises some function as arbitrator. When the arbitrator fixes the date of hearing and issues directions as to pleadings, he exercises the functions of an arbitrator and from that date he should be treated as having entered on the reference. It is not necessary that both the parties must be before him or that there must be some previous peremptory order compelling the arbitrator to conclude the hearing ex-parte. Issuing mandatory direction for pleadings or for particulars or for interrogatories or fixing peremptory dates for hearing can only be done by the arbitrator when he has begun his work as such and taken upon himself the functions of an arbitrator. It has been so held in Harish Chandra Saksena v. Union of India ILR (1966) 1 P&H. This position of law has been reiterated in S.D. Ghai and Co. Vs. Punjabi University, Patiala,

Notice dated 28th Sept., 1984 was issued by Respondent No. 2 to the Petitioner in his capacity as an Arbitrator after he had been appointed as such by the Chief Engineer. He called upon the Petitioner to submit his statement of claim. It is, therefore, clear that he assumed office of the Arbitrator and acting as such called upon the Petitioner through the said notice to submit his statement of claim. There can, therefore, be no doubt that he entered on the reference on 28th Sept., 1984. The Petitioner, however, failed to comply with this notice and did not submit his claim. The period of four months from the date of entering on the reference as stipulated in para 3 ibid expired. It was thereafter that the Petitioner submitted his claim on 19th Feb., 1985. Naturally, Respondent No. 2 could not take any action on the claim so made by the Petitioner unless the time for making the award was extended in accordance with law. It is not disputed that the Petitioner did not give his consent to the enlargement of time so much so that he did not even to the letter Ex.R.1. Sent to him by the Executive Engineer. In such circumstances it could not be said that Respondent No. 2 failed to use all reasonable despatch in entering on the reference, proceeding with the same or making him award. There was, therefore, no occasion for the Petitioner to complaint against the delay on the part of Respondent No. 2. The notice dated 28th Sept,, 1985. Annexure-I was inconsequential.

Therefore, no fault can be found with the finding recorded by the ld. trial Court on issue No. 1. With a view to obviate further delay in adjudication of the dispute in arbitration, I find it expedient and therefore direct Respondent No. 2 to issue notice on the statement of claim made by the Petitioner to Respondents Nos. 1 and 3 within one month from today calling upon them to submit their reply to the same. He shall be deemed to have entered on the reference within the meaning of para 3 ibid from the date of issuance of such a notice. He is allowed four months'' time from the date of the notice to proceed with the reference and to make his award.

With the above observations, this revision petition is disposed of leaving the parties to bear their own costs.