State of Gujarat and Another vs ASSO. Business Corporation

Jayant Patel, J.—The present appeal arises against the judgment and decree dated 23.01.1990 passed by the lower Court whereby the application is partly allowed and decree is passed in terms of the award except interest at the rate of 15% p.a. from the date of the reference till filing of the award into the Court.

The relevant facts are that there was dispute between the original applicant and the State for execution of the contract for construction of road in Heran Command area. The notice was given by the contractor-original applicant for appointment of the arbitrator with the list. The option was available to the Chief Engineer to select one of the officer from the list, but he did not exercise the power. Consequently, the original applicant appointed one Mr. V.D. Patel as the arbitrator. The claims were filed before the arbitrator and ultimately, the award was passed by the arbitrator allowing the different claims totalling to Rs. 3,74,839/-with interest at the rate of 15% p.a. from the date of the award till the payment or decree whichever is earlier. Such award came to be passed on 20.07.1988. Thereafter, the proceedings were initiated before the lower court for passing decree in terms of the award being Civil Misc. Application No. 165/88. The lower court at the conclusion of the aforesaid proceeding passed the aforesaid judgment and decree. Under the circumstances, the present appeal before this Court.

We have heard Mr. Soni, learned AGP for the Appellant. Respondent is served, but none has appeared on his behalf. We have considered the record and proceedings. We have also considered the judgment and the reasons recorded by the lower court.

The principal ground raised on behalf of the Appellant is that the appointment of the arbitrator was not approved or accepted by the Appellant and therefore, it can be said that the arbitrator has misconducted in law and the decree ought not to have been passed in terms of the award. The learned AGP submitted that there was also no proper appreciation of the evidence on record by the arbitrator which has also not been properly considered by the lower court.

We may record that Clause 52 of the contract agreement reads as under:

Arbitration: All the disputes or differences in respect of which the decision has not been final and conclusive shall be referred for arbitration to a sole arbitrator appointed as follows-Within thirty days of receipt of notice from the contractor of his intention to refer the dispute to arbitration, the Chief Engineer, B and C Department shall send to the contractor a list of three officers of the rank of Superintending Engineer or higher, who have not been connected with the work under this contract. The Contractor shall within fifteen days of receipt of this list select and communicate to the chief Engineer the name of one officer from the list who shall then be appointed as the sole arbitrator. If the Contractor fails to communicate his selection of name within the stipulated period, the Chief Engineer shall without delay select one officer from the list and appoint him as the sole arbitrator. If the Chief Engineer fails to send such list within thirty days, as stipulated, the contractor shall send a similar list to the Chief Engineer within fifteen days. If the Chief Engineer fails to do so the Contractor shall communicate to the Chief Engineer the name of one officer from the list who shall then be the sole arbitrator.

The arbitration shall be conducted in accordance with the provision of the Indian Arbitration Act, or any statutory modification thereof. The decision of the arbitrator shall be final and binding on the parties thereto. The arbitrator shall determine the amount of costs of arbitration to be awarded to either parties.

Performance under the contract shall continue during the arbitration proceedings and the payments due to the contractor shall not be withheld unless they are the subject matter of the arbitration proceedings.

All award shall be in writing and in case of awards amounting to Rs. 1.00 lakh and above, such award shall state the reasons for the amount awarded.

It was not the case of the Appellant that the Chief Engineer had made any appointment of any officer as arbitrator after the dispute was raised. Nor it is the case of the Appellant that in response to the intimation given by the contractor, any option was exercised by the Chief Engineer to select any person out of the said list to work as arbitrator. As per the record, the Chief Engineer failed to select any person and consequently, the contractor nominated one of the person and communicated the name of one of the officer to work as an arbitrator and the said person had functioned as arbitrator and the award has been passed. Language of aforesaid Clause 52 is clear and the relevant is as under:

If the Chief Engineer fails to do so the Contractor shall communicate to the Chief Engineer the name of one officer from the list who shall then be the sole arbitrator.

Therefore, it was a case where there was a failure on the part of the Chief Engineer to select any officer from the list and consequently, the option available to the contractor had prevailed. Clause 52 does not provide for any concurrence thereafter or any approval thereafter of the Chief Engineer or of the State Government who was one of the party to the contract agreement.

The lower court has considered the said aspects in paragraph 19, of course not in happily worded manner. But the ultimate conclusion is rightly recorded that the concurrence or consent of the State Government was not required after the appointment of the arbitrator if the Government has failed to nominate one of the person as the arbitrator within the prescribed period. Under these circumstances, we find that the ultimate conclusion recorded by the lower court does not deserve to be interfered with on the ground that the arbitrator had no authority to conduct the arbitration proceeding.

On the second contention about the appreciation of the material and mistake of fact, it appears that the lower court has rightly observed again not in a happy language that the court cannot sit in appeal over the finding of fact recorded by the arbitrator upon reappreciation of the evidence.

In view of the aforesaid, we find that the appeal lacks merit. Hence, dismissed. No order as to costs.