Delhi High Court
W.S. Construction Co. vs Hindustan Steel Works Construction ... on 24 May, 1989
Equivalent citations: AIR1990DELHI134, 1989(2)ARBLR253(DELHI), [1990]68COMPCAS286(DELHI), 38(1989)DLT452
Author: Y.K. Sabharwal
Bench: Y.K. Sabharwal
JUDGMENT Y.K. Sabharwal, J.
(1) By agreement dated 26th June 1981 entered into between the parties respondent No. 1 awarded to the petitioner a contract for construction of civil and plumbing works of school building at Beida District in Libya. The contract contains an arbitration clause which inter-alia provides that except where otherwise provided for in the contract, all questions and disputes shall be referred to the sole arbitration of the Managing Director and if the Managing Director is unable or unwilling to act to the sole arbitration of some other person willing to act as such arbitrator. The arbitration clause further provides that the arbitrator to whom the matter is originally referred being transferred or vacation of his office or being unable to act for any reason such Managing Director at the time of such transfer, vacation of office or inability to act shall appoint another person to act as arbitrator in accordance with the terms of the contract. It is further provided that no person other than a person appointed by such Managing Director shall act as an arbitrator. According to the arbitration agreement the venue of the arbitration shall be the registered office of M/s. Hindustan Steel Works Construction Ltd. It is the common case of the parties that the registered office of the company is at Calcutta.
(2) Certain disputes arose in respect of the aforesaid contract. On the petitioner invoking the arbitration clause. the respondent No. 2 Managing Director, by letter dated 28-7-84 appointed Brig. Gur Dayal, General Manager of the respondent No. 1 company as an arbitrator. On 2nd January 1986 Brig. Gur flayed had resigned as General Manager of respondent No. I company and since then he is not in the employment of the company. By letter dated 1st March 1986 the Managing Director of respondent No. 1 company appointed Sh. V.B. Hazela, respondent No. 3, as arbitrator in place of Brig. Gur Dayal.
(3) The petitioner has invoked various provisions of Indian Arbitration Act, 1940 (for short the 'Act') inter-alia contending that respondent No. 3 Mr. Hazela has no authority to act as an arbitrator as according to the petitioner Brig. Gur Dayal has not vacated the office of the arbitrator and continues to be the arbitrator. It is further pleaded by the petitioner that respondent No. 3 Mr. Hazela was appointed as an arbitrator on 1st March 1986 and till date he has even failed to accept the said appointment as no communication whatsoever was received from the said arbitrator. The petitioner has prayed for revocation of the authority of respondent No. 3 and for grant of extension of time for a period of four months for making and publishing the award by Brig. Gur Dayal. In the alternative, the petitioner has prayed that the arbitrator be appointed by this court.
(4) The petition is being resisted by respondents: It is contended on behalf of the respondents that on resignation Brig. Gur Dayal automatically ceased to be the arbitrator It is contended that Brig. Gur Dayal continued as arbitrator as long as he held the office of the General Manager. Reliance is placed by the respondents on the arbitration clause which, inter-alia, provides that on vacation of office by the arbitrator originally appointed the Managing Director shall appoint another person to act as an arbitrator. It is not seriously disputed by learned counsel for the petitioner that the terms of arbitration clause Brig. Gur Dayal could not continue as an arbitrator after having resigned as General Manager of respondent No. I company, on or about 2-1-1986. Accordingly, there is no question of granting extension of time for Brig. Gur Dayal for his making and publishing the award.
(5) The next question to be considered is whether Mr. Hazela is liable to be removed as an arbitrator or not. As observed above, Mr. Hazela was appointed as an arbitrator by Managing Director of respondent No. I company by his letter dated 1-3-86. The present petition was filed on 12-2-87. It is contended by learned counsel for the petitioner that Mr. Hazela has not sent any communication to him though the petition was filed nearly 11 months after his appointment. Mr. Dewai, learned counsel for the petitioner submits that there is no long and unreasonable delay on the part of Mr. Hazela to act and there is no explanation whatsoever for this delay. It is contended that the time for making and publishing the award is four months and in spite of more than three years having expired Mr. Hazela has not acted in the matter. The petition was filed nearly Ii months after the letter dated 1-3-86 and fill then also Mr. Hazela had not acted as an arbitrator or sent any communication to the petitioner. These facts are not seriously disputed by the respondents. It is not contended as to what action was taken by Mr. Hazela after his appointment. The respondents have simply denied that Mr. Hazela has failed to make reasonable dispatches in entering upon the reference. Beside the denial no further particulars were given. It is evident that Mr. Hazela has failed to use all reasonable dispatch in entering on and proceeding with the reference and mating an award for unreasonably long period which remains totally unexplained on the record Mr. Hazela till date, has not even given any notice to the petitioner fixing any date of hearing. He has even failed to enter on the reference and his act clearly amounts to refusal to act. Thus respondent No. 3, Mr. Hazela is liable to be removed as an arbitrator.
(6) The question then to be considered is who should be appointed as the arbitrator, learned counsel for the respondents relying upon the arbitration clause which, inter-alia, provides that "IT is also a term of this contract that no person other than a person appointed by such Managing Director, as aforesaid shall net as arbitrator......."
submits that only the. Managing Director can appoint arbitrator and this court has no jurisdiction to appoint an arbitrator in view of the arbitration clause between the parties. Reliance has also been placed by Dr. Ghosh, learned counsel for the respondents on Supreme Court in M/s. Prabhat General Agencies etc. Vs. Union of India and another, and it is submitted that in view of law laid down by Supreme Court and the terms of the arbitration clause as aforesaid, on removal of respondent No. 3 only the Managing Director is entitled to appoint an arbitrator. In my opinion, the aforesaid judgment of the Supreme Court has no applicability to the present case as the Supreme Court was only considering scope of Section 8 of the Act and not the scope of section 12 of the Act. Under Section 12 of the Act the court has to appoint an arbitrator where the one is removed by the court. The terms of agreement cannot supersede the statutory provisions. Under Section 12 of the Act, on removal of respondent No. 3 as arbitrator I have either to appoint a person to act as sole arbitrator in place of respondent No 3 or to order that the arbitration agreement would cease to have effect. There are no grounds for taking recourse to the later option. The contention that power to appoint an arbitrator remains with the Managing Director stands concluded against the respondents by judgment of this court as also judgments of High Courts of Jammu & Kashmir and Orissa. (See : Omp 50/83 M/s. M. S. Khanna and another Vs. N.D.M.C. and Another decided by Jagdish Chandra J. on 12th November 1984(2), M's. Mohinder Singh and Co. Vs. Union of India & Others Air 1972 Jammu & Kashmir 63(3) and Fertiliser Corporation of India Vs. Ravi Kumar Ohri .
(7) I may notice that Justice Jagdish Chandra J. had removed the arbitrator as he had not acted for nearly Ii months. In the case before Justice Jagdish Chandra J. some explanation for delay was put forth which was not found to be satisfactory but in the present case no explanation whatsoever is forthcoming.
(8) Before appointing an arbitrator to adjudicate upon the disputes between the parties wh'ch were subject matter of arbitration before Brig. Gur Dayal. It is necessary to decode the question as to the venue of the arbitration. The arbitration agreement provides that the venue of the arbitration shall be the registered office of respondent No. 1 company which is admittedly at Calcutta. The petitioner has prayed that the venue of arbitration shall be at Delhi. No cogent grounds have been made out for directing that the venue of the arbitration shall be at Delhi and not at Calcutta as agreed upon between the parties. Accordingly, I appoint Mr. Mathura Nath Banerjee. Bar-at-law Bar Library Club, 1st Floor High Court of Calcutta. Calcutta to act as a sole arbitrator in the matter. The fee of the arbitrator is tentatively fixed at Rs. 15000.00 which shall be paid by the parties in equal shares. The petition is allowed in the above terms leaving the parties to bear their own costs.