Calcutta High Court
National Project Construction ... vs S.P. Enterprise (P) on 8 July, 1988
Equivalent citations: AIR1989CAL155, AIR 1989 CALCUTTA 155, (1989) 1 CAL HN 339 (1988) 2 CURCC 575, (1988) 2 CURCC 575
Author: Monoj Kumar Mukherjee
Bench: Monoj Kumar Mukherjee
JUDGMENT Sudhanshu Sekhar Ganguly, J.
1. The present matter arises out of an application under Section 115 of the Civil P.C.
2. Admittedly in terms of a contract of, earth filling the opposite party executed some work for the petitioner 1 and her bills, to a considerable extent, remained unpaid. The contract contained an arbitration clause, being clause 16 and invoking the same the opposite party submitted an application, registered as Misc. Case No. 27 of 1987 before the learned Assistant District Judge, 3rd Court, Alipore under Section 8(2) of the Arbitration Act for the appointment of an Arbitrator. The petitioner 1 contested the said application. It was urged by the petitioner 1 first that on the selfsame ground the opposite party submitted another application before the learned Judge -- being Misc. Case No. 2 of 1987 -- which was dismissed on contest on 18-3-87 and the review application being Misc. Case No. 19 of 1987 in respect of the same remaining pending, the instant application was barred by res judicata. It was also urged that the present application was not maintainable since the opposite party instituted T.S. No. 234 of 1986 for filing of the Arbitration Agreement under Section 20(4) of the Arbitration Act and the said suit was still pending. It was also urged that since the contract was executed at Denkuni, Hooghly and the work was also executed there, the learned Judge had no jurisdiction to entertain the matter. The case of the opposite party was also challenged on merits and it was urged that the opposite party did not finish the work entrusted with her and other agencies had to be engaged to complete the work. It was also urged that the opposite party exaggerated her claims in respect of some items of her bill and that she has already been paid fully for whatever work she has done.
3. It appears that before the learned Assistant District Judge it was urged from the side of the opposite party that a notice for appointment of an Arbitrator under Clause 16 of the agreement had been sent to the petitioner on 19-5-1987 under registered post. The receipt of this notice was denied from the side of the petitioner and it was urged from their side that the petition under Section 8(2) was not maintainable in the absence of such a notice. The petitioner, however, admitted receipt of an Advocate's letter dt. 2-7-1981 from the side of the opposite party. The learned Judge holding that the aforementioned notice dt. 19-5-1987 must have reached the petitioner since it had been sent under registered post and further that in any case the petitioners could have appointed an Arbitrator on the basis of the Advocate's letter dt. 2-7-1987 found the application under Section 8(2) maintainable in law and he appointed a, retired Hon'ble Judge of this Court as the Arbitrator in this case. Hence, this revisional application.
4. In the impugned order the learned Judge did not consider the technical objections taken from the side of the petitioner. We feel that he should have considered and recorded his findings with regard to these objections. We fail to understand how the present application under Section 8(2) of the Act could be maintainable with an earlier application (Misc. Case No. 2 of 1987) for the selfsame relief on identical grounds and under the same provisions of law dismissed on contest and a review application (Misc. Case No. 19 of 1987) in respect of the same remaining pending. We also do not think that with application under Section 20(4) of the Arbitration Act (T.S. No. 234 of. 1986) pending, the present application under Section 8(2) should have been permitted to continue. Section 8 forms part of Chap. II of the Arbitration Act which contains provisions for arbitration without intervention of a court. Section 20 on the other hand comprises the only section of Chap. III of the Act which provides for arbitration with intervention of scope court where there is no suit pending. The cope and the provisions of Section 8 are different from those of Section 20. Section 8 applies so far as the appointment of an Arbitrator is concerned where in terms of the agreement the arbitrator is to be appointed by consent of the parties and the parties do not consent in such appointment even after service of a notice of fifteen days by one of the parties or where (2) the Arbitrator appointed -- presumably by consent of the parties -- cannot or does not act. Under such circumstances the court can on the application of the party to the agreement serving the notice appoint an Arbitrator of its choice after giving the other party an opportunity of being heard. Under Section 20 on the other hand the aggrieved party may petition the Court straightway for filing of the agreement in court and the court where the party fails to show sufficient cause "shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or, where the parties cannot agree upon an Arbitrator, to an Arbitrator appointed by the Court". A party may pursue his relief under either section depending upon the circumstances and the steps taken by him, but he cannot pursue his relief under both the sections, simultaneously. This is because the proceedings under the two sections contemplate not the same end-result. Under Section 8 the court may appoint any Arbitrator of its choice whereas under Section 20(4) the court compulsorily has to refer the dispute to the Arbitrator appointed by the parties and it is only where the parties have not appointed any particular person or authority to act as an Arbitrator that the court can refer the dispute to an Arbitrator of its choice. The two sections prescribe different procedures and yield different reliefs and if a party is permitted to pursue his selfsame relief in respect of the selfsame dispute under both the sections simultaneously that may indeed lead to the engagement of two Arbitrators --one appointed by the parties as per their agreement of arbitration and the other by the Court -- in respect of the selfsame dispute. Presumably to avoid such a confusing state of affairs it has been specifically laid down in Section 20 that one can move under that section instead of proceeding under Chap. II. It means that one cannot have recourse to Section 20 if one has already started a proceeding under Section 8 of the Act. What applies to Section 20 also applies to Section 8 and for the same reason, though that has not been mentioned specifically in the Act as it has been done in the case of Section 20. In the circumstances stated we are of the view That with the application under Section 20 of the Act pending in the shape of T.S. No. 234 of 1986, the learned Judge should not have allowed the opposite party No. 1 to continue with the present application under Section 8 of the Arbitration Act.
5. Similarly, we also feel that the learned Judge should not have left the objection regarding territorial jurisdiction unattended. He should have explained and called upon the opposite party to explain how he could have exercised jurisdiction in respect of a case, the cause of action in which arose prima facie within the district of Hooghly.
6. There is also another reason why the present application under Section 8 of the Arbitration Act cannot be considered as maintainable. Clause 16 of the Contract between the parties -- the arbitration clause -- provided that in case of any dispute the matter would be referred for arbitration to an Arbitrator to be appointed on application by the Chairman and Managing Director, National Project Construction Corporation Ltd., New Delhi-19, vide para 4 of the present revisional application. It does not appear from the order of the learned Judge that the opposite party had ever approached the said Chairman for the appointment of an Arbitrator. All that appears from the impugnged order is that the opposite party sent a notice to the petitioner 1 on 19-5-1987 for the appointment of an Arbitrator. That is not the same thing as applying to the Chairman for the appointment of an Arbitrator since the petitioner 1 is not the Chairman. Flouting the express provision of Clause 16, the opposite party could not by-pass the Chairman and come to the Court straight for the appointment of an Arbitrator after serving a notice on the petitioner 1. The learned Judge argues that the petitioner 1 could have appointed an Arbitrator on the notice of the learned Advocate for the opposite party dt. 2-7-1987. In this also the learned Judge was clearly in the wrong since, as per the arbitration clause the opposite party had to approach the Chairman and not the petitioner 1 for the appointment of an Arbitrator. Considering all the circumstances we are inclined to hold, therefore, that since the opposite party had not fulfilled the preconditions of the arbitration clause, her application under Section 8 of the Act was not maintainable in law.
7. A question arose as to whether the arbitration clause in the present case came under and was in conformity with the provisions of Section 8 of the Arbitration Act. Section 8(1)(a) contemplates a situation where the arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and all the parties do not concur in the appointment or appointments. In the case at hand the parties agreed by the Arbitration Clause that the Arbitrator would be chosen and appointed by the Chairman-cum-Managing Director of the National Project Construction Corporation. So far as this High Court is concerned the law by now is well settled that in such a case as the present the Arbitrator appointed by the agreed appointing authority will be considered to be an Arbitrator appointed by consent of the parties. In Surendra v. Union of India, the Arbitration Clause provided that the Secretary to the Government of India, Ministry of Works, Housing and Supply would be the Arbitrator and if he was unable or unwilling to act, some other person appointed by him and willing to act was to be the Arbitrator. It was held that the appointment by the Secretary was virtually an appointment made by consent of parties under Section 8(1) because the parties agreed while entering into the contract to leave the choice of another person as arbitrator to the Secretary, in case the Secretary was unable or unwilling to apt as Arbitrator. In A. K. Ghosh and Brothers v. State of West Bengal, (1975) 1 Cal LJ 52 the Arbitration Clause provided that the Chief Engineer or in case of his inability or unwillingness to act, his nominee was to be appointed as the sole Arbitrator. It was held that it was an agreement that by consent of parties the sole Arbitrator would be the Chief Engineer or his nominee. In Food Corporation of India v. S. K. Samanta, the Arbitration Clause provided that all disputes were to be referred to the sole arbitration of any person appointed by the Managing Director of the Food Corporation of India. It was held that any person so appointed by the Managing Director of the Corporation would be the Arbitrator appointed by consent of both the parties. Similar views were also expressed in Union of India v. D. P. Singh, ; Boriah v. Indian Telephones, AIR 1973 Mys 309. True a different view was taken in Brij Bhusan v. Chief Engineer, and Ved Prakash v. Union of India, (FB). With all respect to their Lordships we are inclined, however, to abide by the view so consistently held by this High Court. It is true in Sunil v. Union of India, , a different view was taken. The facts of this case were, however, very much different. In this case the arbitration agreement provided that the Railway was to send a panel of more than 3 names of Railway Officers to the Constractor and out of the said panel the Contractor would suggest a panel of three names out of which the General Manager would appoint one Arbitrator as the contractor's nominee and then the General Manager would appoint a second Arbitrator of equal status as the Railway's nominee without his consent of any kind. It is under such circumstances that it was held, it could not be said in view of the terms of Arbitration Agreement that the Arbitrators were to be appointed with the consent of the parties. The decision certainly pan be distinguished on facts as it was done in Food Corporation of India v. Sunil Krishna, .
8. In the case at hand the provision was that in case of dispute the Arbitrator would be appointed by the Chairman of the National Project Construction Corporation. Where, on being approached by either party, the Chairman appoints his nominee, in view of the decisions cited above, such nominee would be the Arbitrator appointed by consent of the parties. Where such an Arbitrator neglects or refuses to act or is incapable to acting or dies, the aggrieved party may serve the other party or the Arbitrator as the case maybe with a written notice to concur in the appointment or in supplying the vacancy under the provisions of Section 8(1) of the Act and if the appointment is not made within fifteen clear days after the service of the said notice the said party may petition the Court for appointing an Arbitrator under the provisions of Section 8(2) of the Act. Where on the other hand the appointing authority refuses to appoint an Arbitrator even after being approached, the aggrieved party may move the court under Section 10 of the Act.
9. This, however, more or less hypothetical since it does not appear that the opposite party in the present case had any right to move the court under the provision of Section 8(2) of the Act since she had not approached the named authority under the agreement for the appointment of Arbitrator.
10. In view of what has been stated above, we are inclined to hold that the petition of the opposite party under Section 8(2) of the Arbitration Act before the learned Assistant District Judge, Alipore was premature and that it was also not maintainable on the other grounds mentioned above. In view of the matter we are of the view that the said proceeding should be quashed leaving the opposite party to pursue her reliefs in her suit instituted under the provisions of Section 20 of the Arbitration Act.
11. Hence, the impugned order passed by the learned Assistant District Judge, 3rd Court, Alipore in Misc. Case No. 27 of 1987 is hereby set aside and the said order is hereby quashed. Parties do bear their own costs.
Monoj Kumar Mukherjee, J.
12. I agree.