Patna High Court
State Of Bihar And Anr. vs Digvijay Construction on 16 May, 1995
Equivalent citations: 1995(2)BLJR1035
JUDGMENT S.K. Chattopadhyaya, J.
1. This civil revision application arises out of a proceeding started by the plaintiff-Opposite party by an application under Section 20 of the Arbitration Act (shortly 'the Act'). The application was registered as Title Suit No. 13/91 in the Court of the Subordinate Judge, II, Seraikella and the petitioner was described as the defendant.
2. There was an agreement entered into between the parties and Clause 52 thereof provides that in case of any dispute between the parties, the matter shall be referred to the sole arbitrator to be appointed in accordance with this clause. The contract of the Opposite party was terminated by the petitioner. For resolving the dispute the Opposite party prayed before the Court for directing the petitioner to file the agreement in Court and also for a direction from the Court for appointing an arbitrator in the manner as provided in Clause 52 of the agreement. By order dated 27.8.1993 the Court below heard the parties on the point of appointment of arbitrator. It was argued on behalf of the petitioner that without approaching the Chief Engineer for appointment of an arbitrator, the Opposite party could not have fried an application under Section 20 of the Act requesting the Court to appoint an arbitrator. However, during course of argument the lawyer appearing on behalf of the petitioner conceded to the submission of the Opposite party and, as such the objection was rejected. The operative portion of the said order is to the effect; "Write a letter to the Chief Engineer, Subarnarekha Multipurpose Project to send three names of expert and competent persons for appointment of an arbitrator out of them by this Court". The prayer made by the Opposite party to send the aforesaid order to the concerned Chief Engineer be special messager, was also allowed on 10.9.1993. Neither the names were sent nor the petitioner took any step. The case was adjourned to 26.9.1993 for sending the name of the arbitrators. The petitioner, on that date, prayed for some time for furnishing the names of the arbitrators and the ease was thus adjourned to 18.10.1993. Another petition was filed on 15.10.1993 with a prayer to grant two months time for sending the panel of arbitrators but the said petition was not moved. The said prayer was opposed by the Opposite party and after considering the facts and circumstances of the case another indulgence was given to the petitioner for furnishing the panel of arbitrator and the case was again adjourned till 26.12.1993. On 5.11.1993 a panel approved by Chief Engineer was filed in Court and on 26.11.1993 both the parties filed separate applications and prayed before the Court that the arbitrator mentioned in their respective petitions should be appointed. However, on 16.12.1993 another petition was filed on behalf of the petitioner praying therein to adjourn the case on the ground that on the instruction of the high officials, a Govt. Advocate was to be appointed in place of private lawyer. On that date the Court found that though names of arbitrators had been filed in Court by both sides but each party wanted to appoint arbitrator from his list. Under these controversies, the Court thought it proper to appoint an arbitrator by the Court itself and the case was fixed for passing Order on 10.1.1994. Shree A. Hussain was appointed as A.G.P. and it was prayed on 10.1.1994 that sometime should be given to him to submit the panel of arbitrators Last indulgence was given on that date. It was directed that panel should be furnished on 17.1.1994, during course of hearing, both the parties agreed on the name of one. K.P. Shukla, retired Chief Engineer of Irrigation Department of the State of Bihar for appointment of arbitrator. Though the Opposite party initially pressed for appointment of one Sri R.N. Das or Shree G.C. Lahari for such appointment but ultimately both the parties agreed to the name of Sri Shukla and on such agreement the Court below, by the aforesaid order, appointed Shree Shukla for arbitration and he was requested to submit his award within a month.
On 15.3.1994 a petition was filed by the petitioner for changing the name of said Sri Shukla as arbitrator on the ground that his name was not proposed by any of the parties and, as such, his appointment was not agreeable to the defendant. It was further prayed that an arbitrator agreeable to both the parties be appointed and the name of Sri Shukla be changed. On 22.11.1994 another petition was filed by the petitioner informing the Court that the appointment of Sri Shukla was not agreeable to the petitioner and the matter regarding appointment of arbitrator is open to the Court under the Arbitration Act. A prayer was made to appoint arbitrator from among the panel filed by the defendant or in the alternative, any person except Mr. Shukla for the ends of justice. Upon such petition being filed on the same day the Court below acceeded to the request made by the petitioner and for appointing an arbitrator a letter was directed to be sent to the Principal, R.I.T. Jamshedpur requesting him to send the name of a Professor of Civil Engineering presently engaged in civil construction work. The name of Professor A.K. Khan was sent by the Registrar of the said College to the Court. However, it was noticed during course of argument that Sri Khan was not in the rank of Professor and, as such, another letter of request was sent to Principal, R.I.T., Jamshedpur to send the name of a person in the rank of Professor. Neither parties raised any objection to the said order. On such request being made the names of some persons in the rank of Professor were sent and by the impugned order dated 15.12.1994 the Court below appointed Dr. J.P. Singh as the sole arbitrator. Against this order the instant application.
3. Mr. V. Shivnath, learned O.P.I has challenged the said order on the ground that : (i) the Opposite party could not have moved the Court under Section 20 of the Act before approaching the Chief Engineer for appointment of an arbitrator; (ii) the Court below had no power under Section 20(4) of the Act to appoint a person as an arbitrator who is foreign to the list of Chief Engineer unless the Court finds that the department was not prepared to file the list of arbitrators and (iii) while referring the dispute to the arbitrator, in view of Clause 52 of the agreement, the Court was bound to give a direction to the arbitrator to give a reasoned award and as no such direction was given in the order of reference, the order is bad in law. In support of his aforesaid contentions he has relied on the decisions in the case of Union of India v. Prafulla Kumar Sanyal , in the case of Raipur Development Authority etc etc. v. Chokhamal Construction etc etc. reported in AIR 1990 SC 1426 and in the case of S. Rajan v. State of Kerala and Anr. reported in AIR 1992 (3) SCC 608.
4. Mr. Bishwajit Mukherjee, leaned counsel appearing on behalf of the Opposite party has attempted to support the order impugned with industry and precession. He contended that from the facts available on record it is apparent that though the suit was filed in the year 1991 but the petitioner with an ulterior motive to frustrate the terms of agreement, has lingered the matter by not appointing any arbitrator as contemplated under Clause 52 of the agreement. Secondly, Mr. Shukla was appointed arbitrator by the Court not on its own accord but on the agreement of both the parties. Before that the Court gave several opportunities to the Chief Engineer of Subarnarekha Multipurpose Project to send the panel of arbitrators so that any one of them can be appointed by the Court. When on several occasions the department failed to supply the said panel, the parties agreed to the name of Sri Shukla and even after his appointment on agreement, the petitioner prayed before the Court to change the name of Sri Shukla on the ground that his name was not acceptable to the petitioner. In such circumstance it is contended that the Court was fully justified in appointing an arbitrator out of the names sent by the Registrar R.I.T., Jamshedpur. Controverting the, arguments of Mr. V. Shivnath, Mr. Mukherjee contends that law does not bind the Court to direct the arbitrator to give a reasoned award and if such direction is given the order will be vitiated.
5. On the backdrops of the aforesaid uncontroverted facts the questions which are to be answered in the instant ease is (i) when the Court finds that in spite of notice given to the petitioner no panel of arbitrators was furnished whether the Court was empowered to appoint an arbitrator? (ii) whether the Opposite party could have approached the Court under Section 20 of the Act without following the procedures as contemplated under Clause 52 of the agreement and (iii) whether it was incumbent upon the Court to give a direction while referring the dispute to the arbitrator to give a reasoned award?
6. From Clause 51 of the agreement it appears that when the contractor finds that any work demanded of him to be outside the requirements of the contract, it shall ask the Executive Engineer in writing for written instruction and/or decision. He can do so even when he considers that any drawing records or ruling of the Executive Engineer which is in connection with or arising out of the contract or carrying out of work is unacceptable. On receipt of such written instruction or decision the contractor will proceed immediately to comply with such instruction or decision. However, if the Executive Engineer fails to give such instruction or decision within 30 days after being requested or if the contractor is dissatisfied with the instruction so received, the contractor may within 30 days thereafter, appeal to the Superintending Engineer. The officer shall give a decision thereof, of course after giving a reasonable opportunity to the contractor. Even if the contractor is dissatisfied with the decision, he can within a period of 30 days from such decision, indicate his intention to refer the dispute to the arbitrator. If he fails to do so, the decision shall be final and conclusive.
7. From a bare perusal of the aforesaid clause it appears that it relates to existing dispute. In the instant case it is not in dispute that the contract was terminated and in such view of the matter it cannot be said that the Opposite party was required to ask the Executive Engineer for certain instruction or decision regarding some clarification in relation to continuation of the contract.
8. On the other hand, Clause 52 of the agreement deals with the arbitration clause which says that all the disputes or differences in respect of which decision has not been final and conclusive, shall be referred to the arbitrator for arbitration to be appointed as contemplated under the clause itself. This clause, inter alia, provides that within 30 days of receipt of notice from the contractor of his intention to refer the dispute to arbitrator, the Chief Engineer shall send a list of three officers of the rank of Superintending Engineer or higher to the contractor. The contractor, in his turn, shall within 15 days on receipt of the said list, select the name of one officer from the list and communicate his intention to the Chief Engineer. The same officer shall be appointed as the sole arbitrator. On failure of the contractor to communicate his selection within the said period, the Chief Engineer has been vested with power to select one officer without delay from the list and appoint him as the sole arbitrator. On the other hand, if the Chief Engineer fails to send the list within 30 days, the contractor is at liberty to send a similar list to the Chief Engineer within 15 days and then the Chief Engineer shall select one officer from the list so submitted and appoint him as an arbitrator within 15 days. If the Chief Engineer fails to do so, the contractor shall select one of the officers from the list and communicate the same to the Chief Engineer who shall be the sole arbitrator. This clause further says that neither party is entitled to bring a claim to the arbitration if the arbitrator has not been appointed before expiration of 30 days after defects liability period.
9. There is no assertion in the revision application that the contractor-Opposite party did not issue any notice as required under Clause 52. What is stated is that "without complying with the said formalities, Clause 52 of the agreement was not applicable and no reference to an arbitrator was maintainable."
This would be more clear from the fact that pursuant to order dated 27.8.1993 a panel was submitted by the petitioner in the Court below on 5.11.1993. Again on 10.1.1994 time was prayed for filing the panel of arbitrators on the ground of appointment of new counsel, that is, Mr. Hussain.
10. On perusal of aforesaid facts it is clear that the Department was given sufficient opportunity even by the Court itself to furnish the panel of arbitrators. First such opportunity was given by order dated 27.8.1993. Again on 27.9.1993, time to file the panel was extended to 18.10.1993. On prayer being made by. the petitioner, again the period was extended to 26.11.1993 for submitting the list. However, in the meantime, the panel of arbitrator was submitted by the petitioner on 5.11.1993. As both parties filed their respective separate list and pressed for appointing an arbitrator from their own list, the Court fixed 13.12.1993 for hearing on the matter. The parties were heard on 16.12.1993 and the case was adjourned to 10.1.1994 for passing of order. At this juncture, the Department appointed a new counsel that is the, A.G.P. Again petition was filed by the petitioner informing the Court that A.G.P. has been engaged in this case, time should be given to file a panel of arbitrators by him. This prayer, it appears, was also allowed by the Court and time till 17.1.1994 was granted for the same.
This is one phase of the episode. I am really not in a position to appreciate as to why, after appointment of A.G.P., time was prayed for filing a panel ? The same was already filed on 5.11.1993 and the matter was heard on 16.12.1993. However, then the second phase. On 17,1.1994, as it appears, no fresh list was submitted by the A.G.P., rather during course of hearing both parties agreed to the name of Sri Shukla, Retd. Chief Engineer of Irrigation Department of the State of Bihar. Accordingly, the Court directed Sri Shukla to submit the award within one month. Immediately after appointment of Sri Shukla a petition was filed by the petitioner to change him and to appoint another arbitrator. This petition shows the conduct of the Department. Even the A.G.P. was highly embarassed in filing such petition which is clear from his letter to the Administrator (Annexure F). This letter shows that the A.G.P., Sri Altaf Hussain, by his letter dated 7.4.1994 addressed to the Administrator, Subarnarekha Multipurpose Project intimated him that it was agreed by the plaintiff-Opposite party as well as by the officers representing the Camp Division to the name of Sri K.P. Shukla and on the basis of department's instruction said A.G.P. made submission in open Court about the agreement on behalf of the department. The counsel also intimated that on the basis of their joint agreement the Court was pleased to appoint Sri K.P. Shukla as the sole arbitrator to arbitrate the matter involved in title Suit No. 13/91. The said letter of the A.G.P. proceeds further that on 5.3.1994 the officers of the department instructed him to file a petition on the ground that there was no agreement between the parties about the appointment of Sri K.P. Shukla and prayer should be made to the Court to appoint arbitrator form the panel submitted by the department. The learned lawyer being embarssed such requests, intimated the Administrator that "inspite of dissuading them from filling such petition which would be contradictory against moral principle and legally untenable, I like to impress upon you that I had to face an embrassing situation in Court today for moving such frivolous petition. I, therefore requests you to advise me properly through a competent staff in the matter." This letter of the A.G.P., if read with the order dated 17.1.1994, will clearly show that the name of Sri K.P. Shukla was agreed upon by the parties themselves. Even after his appointment a petition was filed to change the name of Sri Shukla and the order dated 22.11.1994 reveals that Sri.N.K.Gupta, counsel appearing on behalf of the petitioner submitted in writing that the defendant will have no objection if any other person is appointed in place of Mr. Shukla.
11. Section 20(4) of the Arbitration Act reads as follows:
Where no sufficient cause is shown, the Court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties where in the agreement or otherwise, or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court.
Section 20 of the Act is merely a machinery provision and substantive rights of the parties are found in Section 8 and that the arbitration shall proceed as said in Sub-section (5) of Section 20, in accordance with other provisions of the Act, but this stage is reached only after the stage of application of Sub-section (4) is over. For that reason, Sub-section (5) of Section 24 states with the word 'thereafter"
12. On the premises of the aforesaid facts in my view, the conduct and attitude of the petitioner-defendant compelled the Court below to exercise his power under Section 20(4) of the Act by appointing Dr. Singh. By no stretch of imagination it can be said that no opportunity was given to the petitioner to submit its list before the impugned order. It is well established that when two persons agree to have their differences settled through arbitrator what they really mean is that actual-decision of the dispute will rest with a third person called an arbitrator, though Court may have to intervene to regulate arbitration proceeding, or to give the award of the arbitrator sanction of law. Thus where a Court finds that either of the parties is trying to frustrate the agreement by not appointing the arbitrator, the Court has power to appoint an arbitrator of its choice. More so, in the instant case, the Court before appointing Dr. Singh, had given ample opportunity to the Department to furnish a panel. The parties agreed for the name or Sri Shukla but even then the Department backed out, so the Court in my opinion, has rightly appointed the arbitrator after getting him name from the R.I.T., Jamshedpur.
13. A statement in paragraph 10 of this revision application has been made that the Court below arbitrarily by its order dated 17.1.1994, appointed Sri Shukla although none of the parties had suggested his name in their respective panels submitted in the Court. This statement has been verified on oath as true to the information derived from the records of the case. As I have noticed earlier that the name of Sri Shukla as arbitrator was agreed upon by both the parties before the Court and Annexure-1 to the counter affidavit is a documentary proof thereof. In such circumstances, the Assistant Engineer, Subarnarekha Multipurpose Project, Sri Ram Vijoy Singh who has sworn the affidavit, has deliberately made a false assertion in order to mislead and misguide the Court. I refrain from making any comment against him excepting depricating his conduct.
14. In the case of G. Ram Chandra Reddy and Co. v. Chief Engineer, Madras Zone Military Engineering Service , the Apex Court while noticing the case of Prafulla Kumar (supra) and also the case of Kandyal Co-operative Spinning Mills Ltd. v. K.B. Mohan Rao under somewhat similar circumstances, has held as follows:
Thus when the notice was given to the Opposite contracting party to appoint an arbitrator in terms of the contract and if no action had been taken, it must be deemed that he neglected to act upon the contract. When no agreement was reached, even in the Court between the parties, the Court gets jurisdiction and power to appoint an arbitrator. Even if Section 8(a) per se does not apply, notice was an intimation to the Opposite contracting party to act upon the terms of the contract and his/its non-availment entails the forfeiture of the power to appoint an arbitrator in terms of the contract and gives right to the other party to invoke the Court's jurisdiction under Section 20. In the instant case the respondent did not appoint an arbitrator, after notice was received. The respondent averred in the written statement that it was under consideration. Even before the learned Single Judge he did not even state that he was willing to appoint a arbitrator. The learned Single Judge rightly exercised the power under Section 20(4) of the Act and appointed the arbitrator. The Division Bench therefore, was not right in holding that the respondent has by giving option to the appellant to agree for appointment of an arbitrator out of the five named persons had left it to the appellant to appoint an arbitrator and allowing appellant to appoint an arbitrator. On the other hand, the appointment of an arbitrator made by the learned Single Judge must be deemed to have been approved by us.
15. In Prafulla Kumar's case the Supreme Court specifically laid down that Sub-section (4) requires "the Court shall make an order of reference to the arbitrator appointed by the parties under the agreement or otherwise if such arbitrator had not been appointed when the parties cannot agree, to appoint an arbitrator, the Court may proceed to appoint an arbitrator by itself." In Prafulla Kumar's case no notice was given to the appellant to appoint an arbitrator in terms of the contract before the suit was filed and no action was taken pending suit except contending that the matter was under active consideration. (Emphasis is mine). But this is not the case here. Under this circumstances, if the contention of Mr. Shivnath is accepted, it would amount to giving premium to the inaction of the department depriving the contractor of the remedy of arbitration frustrating the contract itself.
16. The next submission of Mr. Shivnath that the order of the Court below is vitiated as it has failed to direct the arbitrator to give reason for the award, is also devoid of any merit. Clause 52 postulates among others that all award shall be in writing and in case of awards amounting to rupees one lac and above, such award shall state the reasons for the amount awarded, It is well settled that giving reasons in support of a decision could not be considered to be rule of natural justice either in law for arbitration or under the administrative law. In Chokhemal Contractor's case (supra) the Supreme Court has held that except where the arbitration agreement or, deed of submissions or the order made by the Court, such as, one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration, requires that the arbitrator or the umpire should give reasons for the award, but the award cannot be set aside on the ground that the same is not supported by reasons.
17. The aforesaid settled law has been reiterated in a recent decision in the case of Food Corporation of India v. Jagdish Chandra Saha . In the present case Clause 52 contemplates that where the award is more than rupees one lac and above, reasons should be assigned for the amount awarded. This agreement is to be construed by the arbitrator and in my view it was not necessary for the Court to give a direction to the arbitrator to give reasons in the award. This can be viewed from another angle as well. While referring the dispute to the arbitrator it was not possible for the Court to presume that the awarded amount would be one lac or more than that Supposing the arbitrator is entitled to get an amount less than one lac rupees or the claim of the contractor is frivolous and he is not entitled to get any claim, can it be said that even then under this situation the arbitrator was required to give reasoned award ? If this is not so, then how the Court, while referring the dispute to the arbitrator will visualise as to what would be the awarded amount. The terms of agreement is to be interpreted by the arbitrator during the course of arbitration proceeding and if he fails to follow any of its terms, that may affect the validity or otherwise of the award itself and not the order of reference. The agreement between the parties cannot bind the Court for doing certain thing in a particular manner. In my considered opinion, the learned Court below has not committed any irregularity in not directing the arbitrator to give a reasoned order.
18. After giving anxious consideration to the submissions of the counsel for the parties I am of the opinion that the trial Court has not committed any error of law in passing the impugned order and it does not call for any interference by this Court.
19. In the result, this application is dismissed with costs. Having regard to the fact that the dispute relates to the year 1991. I direct the arbitrator to conclude the arbitration proceeding within a period of six weeks from the date of receipt/production of a copy of this order.