TMI Blog1961 (5) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... been completed sometime in 1957. During the progress of the work eight running bills were submitted and paid in terms of the contract. The payment of the ninth bill, however, was withheld on the ground that the roof of the factory building constructed was leaking at several places. It appeared that the contractor at first attempted to effect repair. The repairs effected however, was not found to be satisfactory. The Architect was of opinion that the workmanship was bad which was disputed by the contractor. The dispute between the parties as appearing in the correspondence will appear from the letter addressed by the plaintiff to the Chief Engineer, Central Public Works Department of May 23, 1980 which is set out hereunder : ''Whereas National Carbon Company has complained about leakages, the arbitrator should examine and give an award as to the said leakages, reasons and extent thereof, and determine the responsibility , if any, of Gannon Dunkerley for the same, and, if so the extent of cost recoverable from Gannon Durkerley for its rectification. The arbitrator shall also give directions as to the date of payment of monies due to Gannon Dunkerley and Co., and consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute which shall be submitted to him and of which notice shall have been given as aforesaid. Upon every and any such reference the cost of and incidental to, the reference and award respectively, shall be in the discretion of the arbitrator who may determine the amount thereof, and shall direct by whom and to whom and in what manner the same shall be borne and paid. This submission shall be deemed to be a submission to arbitration within the meaning of the Indian Arbitration Act, 1940. and any statutory modification thereof for the lime in force. The Employer and Contractor hereby also agree to any right of action under the contract with regard to the matters hereby expressly agreed to be so referred to arbitration. 3. The grounds on which the application is resisted have been set out in paragraph 24 of the affidavit filed on behalf of the defendant by J. W. Hutchinson. It is contended that (1) in terms of the contract the Architect was to decide whether the workmanship was good and satisfactory and the Architect having already indicated that the workmanship was not satisfactory, there is no dispute between the parties under the said contract which can be referred to arbitr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to have their dues adjudicated upon by the arbitrator. This, in my judgment is 3 clear statement of the disputes or matters in difference viz : (a) unreasonably withholding of the certificate by the Architect, (b) claim for works done amounting to ₹ 59,941.52 nP. wrongly refused. This is sufficient compliance of the Rules and I hold accordingly that the petition is in order. 6. The Arbitration Act provides for arbitration (a) without intervention of the Court, (b) with intervention of the Court and (c) in suit. Chapter II lays down provisions for arbitration without the intervention of the Court, Chapter III for arbitration with the intervention of the Court, while Chapter, IV lays down provisions for arbitration in suit. There were the same three classes of arbitration prior to the Act of 1940. It may be said that each one of the chapters is a self-contained statute in the subject though it cannot be said that they are mutually exclusive. (See Section 20(5) in Ch. III and Section 25 of Ch. IV). In both the classes of arbitration, namely, arbitration with the intervention of the Court and arbitration in suit inter alia the provisions of Chapter II are attracted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spute as set out in the letter of May 23, 1960, but the dispute as set out in paragraph 15 of the petition set out above. The dispute raised in the said paragraph is (a) whether the plaintiff is entitled to ₹ 59,951.52 nP. for works done and (b) whether the architect has wrongfully withheld the certificate. Mr. De has relied on an observation in Halsbury's Laws of England 3rd Ed. Vol. 3, Article 1039 at pp. 522-23 which reads as follows: 1039. Where a building contact contains a clause by which the determination of certificate of the architect is made final and conclusive, between the parties or is made a condition precedent to any right of the contractor to payment, and the contract also contains a clause by which all disputes are to be referred to arbitration, a question arises as to how far the arbitration clause affects the certificate clause. Where the arbitration clause, as in many cases, in express terms excepts certain masters and leaves them to the sole discretion of the architect, no arbitration can arise in respect of these matters except by agreement, and, in the absence of an allegation of fraud, neither the Court nor the Arbitrator has Jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. Previous written notice, I agree, is imperative under the agreement and it may well be argued that in the absence of such previous notice the arbitrator would not be vested with jurisdiction to deal with the dispute. In the instant case however no reference has been made yet. Notice of dispute is contained in the petition itself and the order of reference asked for is after such notice has been received by the defendant in the petition itself. In my judgment notice of dispute being in the petition itself, the condition laid down in the arbitration clause as to notice has been satisfied and there is no impediment to an order of reference being made on that ground. 11. The next point urged is that under the arbitration clause the Executive. Engineer, C. P. W. D. or his nominee alone can be appointed Arbitrator and no other. That is the express agreement between the parties. The Executive Engineer having refused to act and/or to appoint an arbitrator in the instant case no arbitrator can be appointed and no order for reference can be made in consequence. In support of this contention Mr. De argued than the language of the agreement clearly indicates that the parties intended tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovisions in the Indian Arbitration Act for the appointment of another arbitrator in his place and the arbitrator so appointed will be quite competent to proceed with the arbitration. Mr. Bhabra pointed out that the instant arbitration agreement provides that this submission shall be deemed to be a submission to arbitrate within the meaning of the Arbitration Act, 1940 and any statutory modification therefore for the time being in force. This indicates in Mr. Bhabra's submission that the provisions as to filling up the vacancy provided in the Arbitration Act was expressly within the contemplation of the parties when the agreement was entered into The language of the arbitration agreement in the cited case however is different and I do not think that the construction of an arbitration clause couched in different language can be of assistance in construing the instant agreement. In the instant agreement there is no named arbitrator. The arbitrage to be appointed is the incumbent of an office viz. the Chief Engineer C. P. W. D. or his nominee, It is not stated that no person other than the Chief Engineer or his nominee can be appointed as an arbitrator. The consent of the Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 388 : ILR (1937) Cal 434 is also a case in which the named arbitrator refused to act. It was held that the Court had no power to appoint an arbitrator in place of the arbitrator who has refused to act under Schedule II of the Code of Civil Procedure. Expressly the learned Judges recorded their approval of the view taken by the Madras High Court in the case noticed above. A Full Bench of the Madras High Court in, the case of Satyanarayanamurthi v. Venkataramanamurthi reported in, reiterated the same view and affirmed the decision in. It was held that the Court had no power Under Schedule II of the Code of Civil Procedure to appoint an arbitrator in place and stead of the named arbitrator who is unable or unwilling to act. The case of Tara Prasad v. Baijnath Prasad decided by a division Bench of the Patna High Court and reported in was also a case under Schedule II of the Code. If was held in that case that - There is some difference between the procedure that is to be followed where the reference to arbitration is made in a pending suit and where there is a mere agreement for reference to arbitration which is sought to be filed in Court. In the latter case the Court obviously ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gineer thereafter appointed C. P. Malik, Superintending Engineer to act as arbitrator. The trial Court set aside the appointment and appointed a lawyer as arbitrator. In appeal the High Court held that the appointment of C. P. Malik should have been upheld and made an order accordingly. In his judgment Soni, J., upheld the contention of the Solicitor General that in cases where there is a named arbitrator with power to appoint one in case he is unable acts, the named arbitrator has two-fold function--one as an arbitrator to adjudicate the dispute. His second function is to appoint an arbitrator, as a persona designata. In the event of his not functioning as an arbitrator the case becomes one under Section 4 of the Arbitration Act and the Act does not provide a machinery to appoint an arbitrator on the failure of the persona designata to appoint an arbitrator. In such a case no recourse can be taken to Section 8 of the Arbitration Act to have an arbitrator appointed by the Court. The Count was not called upon to express its opinion whether in such a case the Court had the power to appoint an arbitrator under Section 20. Soni J., gave his opinion on the construction of section 8 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chapter II and perhaps could have made an application under Section 8 to have an arbitrator appointed in order to give effect to the arbitrator clause. But if the parties choose to Proceed under Chapter III and make an application under Section 20 reference can only be made to the arbitrator agreed to by the parties and only in those cases where the parties could not agree the reference can be made to an arbitrator appointed by the Court. The Court is not empowered to appoint an arbitrator in case the parties bad agreed to an arbitrator who is unwilling or unable to act. It is only after an order is made under Section 20 and not before that the other provisions of the Act in Chapter II to wit section 8 becomes applicable to the arbitration proceedings with the intervention of the Court. The word 'thereafter' in Sub-section (5) of Section 20 makes this clear. 13. The construction of Section 20(4) contended by Mr. Niren De is undoubtedly a plausible construction. On the language used fin Section 20(4) it may be contended that only when the parties cannot agree upon an arbitrator that the court is empowered to appoint. In cases where the parties agreed to an arbitrator eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unwilling to act, this Court would have justification to make an effective reference by appointing an arbitrator in place of the arbitrator unable or unwilling to act. This he can do even now after the present application, is dismissed on the acceptance of the construction of Section 20(4) of the Act con-tended for by Mr. Niren De. This leads me to think that Section 20(4) should be liberally interpreted as to cover all the three class of cases indicated before and the court is empowered to appoint an arbitrator in the cases where the agreed arbitrator is unwilling and/or unable to act. Mr. De's argument, as noted before is that the Court is empowered to appoint arbitrator in two cases; (a) when the panties have agreed to an arbitrator, and (b) when the parties cannot agree and not in the third class of cases in which the arbitrator having been agreed to by the parties becomes unable or unwilling to act. This is the lacuna of the Act, according to the submission of Mr. Niren De. This lacuna, how-ever, can be avoided if it is constituted that the second class of cases contemplated by Sub-section (4) not only includes cases where at no previous point of inne the parties agreed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l be bound to appoint an arbitrator on an application being made under Section 8 of Chapter II immediately after the dismissal of the application made under Section 20. While, therefore, recognising the plausibility of the construction of Section 20(4) conceded for by Mr. Niren De, which indicates a Iaquna in the section and gives a restricted power to the Court under Sub-section (4), I am inclined to accept the other construction which gives the Court a wider power of making in order of reference to its own arbitrator in all cases when the parties do not agree to an arbitrator . Whether they did not agree to an arbitrator at any point of time or whether they agreed previously to an arbitrator, who having proved to be unable or unwilling to act, the parties could not agree to a new arbitrator both these cases are treated oh the same footing in Section 20(4) of the Act. This wide construction will put the two classes of arbitration, namely, arbitration with arid without the intervention of the Court on the same footing. I am unable to see any reason why there should be difference in the two classes of arbitration This construction again leaves no lacuna and does not lead to the inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay of the suit, even, if it is satisfied that there is an arbitration agreement and the disputes between the parties are covered by the arbitration agreement, in any judgment, the Court has the same discretion under Section 20 and has jurisdiction to refuse an application for filing an agreement and directing a reference in such cases in which the court has power to refuse stay under Section 34. So also in cases in which the Court is, for one reason or other, powerless to appoint an arbitrator, the Court has jurisdiction to refuse an order of filing the agreement. The Court is required under Section 20 not only to order filing the agreement but also to make a reference. Indeed, the order of reference is more important than ; the order filing the agreement. If no order for reference can be made, there is no point in filing the arbitration agreement and, in my judgment, , the Court has no power to do so. In my judgment, the Court has 'no power to make an order filing the agreement without passing an order 1 of reference at the same time. 15. Holding as I do that the Court has a discretion in the matter of filing the agreement and directing a reference under Section 20, even i ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
