Union of India and another vs M/s Amarnath Aggarwal Construction Private Ltd.

A.L. Bahri, J.—This revision petition is directed against order dated 6th October, 1987, passed by Senior Sub Judge, Ludhiana, appointing Shri B.R. Bansal, Superintending Engineer, Punjab Housing Board, Chandigarh, Mohali, to be arbitrators after removing Shri Sarvesh Chander appointed by the present petitioner and Shri V.P. Duggal, appointed by the present respondent as arbitrators. This order was passed on an application filed u/s 8(2) of the Arbitration Act by M/s. Amar Nath Aggarwal, the respondent.

The respondent M/s. Amar Nath Aggarwal, a building contractor entered into a contract with the present petitioners for construction of godown for storing of food grams. After the godown was constructed, certain payments were made to him. The dispute having occurred regarding the amount due, a notice was served upon the present petitioners to appoint an arbitrator in accordance with the arbitration clause in the agreement. As no arbitrator was appointed within 15 days from the service of the notice. M/s. Amar Nath Aggarwal appointed their own arbitrator Shri V.P. Duggal An application u/s 8(2) of the Arbitration Act, was also filed requesting the Court to recognise the arbitrator appointed or to appoint another arbitrator. In the reply filed on behalf of the present petitioners to the application, it was asserted that Shri B.R. Bansal Superintending Engineer, was appointed as arbitrator on receipt of the notice served by M/s Amar Nath Aggarwal. It was also asserted that in view of the arbitration clause, only the Chief Engineer could appoint an arbitrator Thus, he there M/s Amar Nath Aggarwal nor the Court appoint any arbitrator. After the parties led evidence, the impugned order was passed.

Shri R.S. Chahar, counsel for the petitioners after referring to the arbitration clause has argued that only Chief Engineer could make appointment of the arbitrator and the Court could not appoint any arbitrator in the matter. The extract of arbitration clause is as under:-

It is also a term of this contract that no person other than the person appointed by such Chief Engineer or Administrative Head of them, as aforesaid should act as arbitrator and if for any reason that is not possible, the matter is not to be referred to arbitration at all.

The contention of the Counsel for the petitioners cannot be accented in the facts and circumstances of the case in hand. Annexure A/2 is the notice dated 9th December, 1985 issued by M/s Amar Nath Aggarwal to Chief Engineer C.P.W.D. (petitioner No. 2) requesting him to appoint an arbitrator within the specified period of 15 days as per arbitration agreement. It was also made clear that if any arbitrator was not appointed within the specified period, it would be treated as refusal on the part of petitioner No. 2 to appoint the arbitrator. However it was on 11th February, 1986 that the Chief Engineer appointed Sarvesh Chander as arbitrator. This was done after expiry of 15days period as mentioned in the notice. Section 8 sub-clause (2) of the Arbitration Act reads as under:-

Power of Court to appoint arbitrator or umpire.-(1) **

(2) If the appointment is not made within fifteen clear 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 or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties.

Since in the present case, the department did not appoint the arbitrator within 15 days from the service of the notice, the Chief Engineer forfeited his right of appointment of an arbitrator and thus it is for the Court to appoint an arbitrator as required u/s 8(2) of the Arbitration Act. In this context, reference may be made to the decision of the Orissa High Court in Niranjan Swain Vs. State of Orissa and Others, as well as judgment of this Court in Banarsi Dass Mittal v. Housing Board Haryana and others C.R. No. 3097 of 1987, decided by Gokal Chand Mittal J; on 14th January, 1988, holding as above.

The contention of counsel for the petitioners that there should be separate application for removal of Shri Sarvesh Chander, who was appointed as arbitrator by the Chief Engineer in the proceedings and u/s 8(2) of the Arbitration Act Sarvesh Chander could not be removed as an arbitrator This contention is devoid of merit on the reasoning already mentioned above. The intention of the parties from the reading of the arbitration agreement is that the matter is to be decided by the arbitrator and not that the parties should be forced to enter into litigation to ordinary course. That being the position, the Court could appoint an arbitrator ignoring the appointment of an arbitrator by the department made beyond the specified period.

For the reasons stated above. I find no merit in this revision petition which is dismissed. The arbitrator appointed by the Court will proceed with the arbitration proceedings and decide the dispute according to law. There will be no order as to costs in these proceedings.