Punjab State Electricity Board vs M/S Him Papers and Packages Pvt. Ltd.

J.V. Gupta, J.—This petition is directed against the order of the Sub Judge 1st Class, Patiala, dated 17.1.1987 whereby application u/s 8(2) of the Arbitration Act, 1940 filed on behalf of M/s. Him Papers and Packages Pvt. Ltd. was allowed and Shri S.S. Verma, Advocate, was appointed as an arbitrator to adjudicate the matter between the parties.

There was an agreement dated 12.4.1985 between the parties for the supply of paper to the Punjab State Electricity Board The contractor of M/s Him Papers and Packages Pvt. Ltd. supplied the same in three lots, but lots No. 2 and 3 were Dot accepted as according to the Electricity Board, it was not in accordance with the specification. Consequently dispute had arisen between the parties which according to the arbitration agreement was to be referred to the sole arbitrator a nominee of the purchaser Board. The Contractor gave notice dated 29.1.1986 for appointment of the arbitrator by the Electricity Board. The said notice was received by the Board on 7.2.1986. Since the matter was not referred to the sole arbitrator as per agreement between the parties Exh. P 4, the contractor filed an application u/s & of the Arbitration Act on 28.4.1986 for appointment of the Arbitrator by the Court During the pendency of that petition the Board appointed Shri Adarsh Kumar Chief Engineer as arbitrator on 12.5.1986. The said arbitrator entered into reference on 20.5.1986. Even the contractor appeared before him and took part in the proceedings. However, on 17.1.1987 by the impugned order the said arbitrator Shri Adarash Kumar was removed and the Court appointed Shri S.S. Verma Advocate as the sole arbitrator to adjudicate the matter between the parties. The said arbitrator gave his award dated 7.3.1987 which was filed in Court on 13.3.1987. Objections to the said award were filed which are still pending for adjudication. Meanwhile, at the time of motion hearing on 31.3 1987 further proceedings for making the award a rule of the Court were stayed.

Learned Counsel for the Petitioner Board submitted that according to the arbitration agreement if any dispute or differences had arisen between the parties, the same were to be referred for the sole arbitration of nominee of the purchaser Board. Though the arbitrator could not be appointed within 15 days from the service of notice on 7.2.1986 but in any case the arbitrator was appointed on 12.5.1986 during the pendency of the petition u/s 8 of the Arbitration Act. Moreover, argued the learned Counsel since the dispute involved technical matter, only a nominee of the Board could be the proper person and not an Advocate who was appointed by the Court as arbitrator to adjudicate the matter The learned Counsel mainly relied upon the Division Bench judgment of this Court reported at Union of India (UOI) Vs. New India Constructors, Delhi and Others, , wherein it was held that the expression in Section 8 "the Court may appoint" does not mean that the Court must appoint an arbitrator. The use of the word ''may'' implies that the discretion is given to the Court. That discretion has to be exercised properly, and not arbitrarily, it has also been observed therein that though there had been laches in appointing the arbitrator but the Government Departments do not always act very promptly. The delay of 2,3/4 months was not such that the appointment of Superintending Engineer made by the Chief Engineer should be cancelled, when the appointment did not contravene the arbitration clause.

On the other hand, learned Counsel for the Respondent submitted that the dispute did not involve any technical matter as it was only the question of supply of paper and, therefore, the appointment of an Advocate, namely, Shri S.S. Verma Was most appropriate. According to the learned Counsel, the present case was covered under the provisions of Section 8(a) and was not a case of Section 8(b) of the Arbitration Act and therefore, when the Board failed to appoint the Arbitrator within 15 days after service of notice, the Court was within its jurisdiction to appoint any person out side the arbitration agreement as an arbitrator. In support of his contention he referred to Union of India and Anr. v. Amarnath Aggarwal Construction Private Ltd (1988) 94 P.L.R 678. and Banarsi Dass Mittal v. Housing Board, Haryana 1988 (1) Arb. L.R. 170.

After hearing the learned Counsel for the parties, I am of the considered view that when the Board; appointed an arbitrator on 12,5,1986 during the pendency of the proceedings u/s 8 of the Arbitration Act, as per the terms of the arbitration agreement, then there was no occasion for the Court to appoint a different arbitrator out side the arbitration agreement. The present case is covered by the provisions of Clause (a) of Section 8 and not by Clause (b) of Section 8 of the Arbitration Act. Sub-section (2) of Section 8 provides that if the appointment is not made within 15 days after service of the said notice, the Court may on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators. This clause came up for consideration before the Division Bench judgment of this Court in Messrs New India Constructors'' case (supra)''. The facts of the present case are some what similar and, therefore, the ratio thereof is fully applicable to the facts of the present case, in paragraph 3 thereof, it has been observed that "the notice to the Chief Engineer to act under Clause 25 was served on him on 7.12.1(sic)51. Though he did not act on this application immediately, he did make an appointment though no doubt the appointment was made after the application had been put into Court. The appointment was made at the end of February 1952-less than three months after the notice had been made to the Chief Engineer. There have been laches. But Government Departments do not always act very promptly. The question is whether this delay of 2-3/4 months has been such that the appointment made by the Chief Engineer should be cancelled." The Court further found that "since the appointment of Shri C.P. Malik as an arbitrator in that case did not contravene the provisions of Clause 25 of the agreement, it should have been upset by the Court The words of Clause (2) of Section 8 are "the Court may appoint". The use of the word "may" implies that a discretion is given to the Court. That discretion has to be exercised properly, not arbitrarily". In these circumstances, since on 12.5.1986 Shri Adarsh Kumar Chief Engineer, had been appointed as an arbitrator, in pursuance of the notice issued by the contractor, the Court should not have cancelled this appointment and appoint an Advocate to act as arbitrator.

The judgments relied upon by the learned Counsel for the Respondent are distinguishable on facts and in any case in view of the Division Bench judgment of this Court, which was not noticed in any of those cases, I am bound by the same.

Apart from that it could not be successfully argued on behalf of the Respondent that the dispute did not involve the technical matter. Whether supply of paper was in accordance with the specification or not does involve some technicality and could only be decided properly by an expert in the job On that account also the appointment of an Advocate as arbitrator was not proper and thus the discretion exercised by the learned Subordinate Judge 1st Class, was not justified.

In the circumstances, this petition succeeds The impugned order is set aside and the case is sent back to the Court of Subordinate Judge 1st Class, Patiala, for appointing Shri Adarsh Kumar Chief Engineer as the arbitrator and directing him to give his award within four months thereof. The parties have been directed to appear in his Court on 25.1.1989.