The application is filed under section 8(1)(b) of the Arbitration Act, 1940, for appointment of a retired Supreme Court Judge or High Court Judge in the place of late Mr.Justice K.Venkatasamy, as per arbitration agreements dated 19.2.1991 and 18.6.1991, to resolve the dispute between the applicant and the respondent.
2. In a tender floated by the respondent for civil works which includes construction of buildings, structures and bridges for prawn aqua culture project at Nellore, the applicant was awarded the work for a value of Rs.2,69,68,090/- and the applicant remitted the security deposit of Rs.6,74,200/-, being 2=% of the work value. A further work to the tune of Rs.64,57,951.03 for construction of bridge was also awarded to the applicant, for which the applicant also remitted a sum of Rs.1,64,450/-.
2(a). It is the case of the applicant that even after the completion of the projects, the amounts were not paid, for which notice was sent on 20.10.1995, calling upon the respondent to pay an amount of Rs.71,63,333/- along with interest. As per the terms of agreement which provides for appointment of an employee of the respondent's company as sole Arbitrator and that was not accepted by the applicant and the applicant filed an application under
section 8(2) read with 8(1)(a) of the Arbitration Act, 1940 for appointment of an impartial Arbitrator and that O.P.No.835 of 1998 came to be dismissed on 6.8.1989, against which an appeal in O.S.A.No.153 of 2000 was filed by the applicant.
2(b). It is stated that pending the appeal, the applicant informed the said Arbitrator, Mr.S.Ravi, appointed by the respondent about the pendency of the appeal. However, the Arbitrator passed an ex parte order/award rejecting the applicant's application, against which the applicant filed O.P.No.699 of 2000. O.S.A.No.153 of 2000 came to be dismissed by the Division Bench of this Court with an observation that all contentions of the applicant can be decided in the O.P. filed against the ex parte award. It is stated that the said O.P.No.699 of 2000 was ultimately allowed by this Court on 23.10.2003, setting aside the award dated 5.6.2000 and directing the respondent to appoint an Arbitrator after getting consent of the applicant.
2(c). By letter dated 23.2.2004, the respondent suggested the names of two of its officials to choose one of them as Arbitrator, which suggestion was rejected by the applicant on 10.3.2004 and the applicant suggested the names of five retired Judges of Hon'ble Supreme Court and High Court. Since there was no response from the respondent, the applicant again sent two names of retired Judges on 17.6.2004. Since the appointment was not made by the respondent, the applicant approached this Court under
section 8(1)(a) of the Arbitration Act, 1940 by filing O.P.No.1745 of 2005. Even after service of notice, the respondent has not chosen to appear and therefore, this Court on 13.12.2006 ordered the O.P. appointing the Hon'ble Mr.Justice K.Venkatasamy, a retired Judge of the Supreme Court as Arbitrator.
2(d). Pursuant to the same, the learned Arbitrator entered into the reference and issued notice. It was at that time, the respondent filed Application No.6915 of 2007, to set aside the order of appointment of the Hon'ble Judge dated 13.12.2006 which was dismissed on 19.2.2008. It was against the said order, the respondent filed O.S.A.No.250 of 2008 which was also dismissed on 21.7.2008. In the meantime, the Hon'ble Mr.Justice K.Venkatasamy passed away on 27.9.2008.
2(e). As per
section 8(1)(b) of the Arbitration Act, 1940, the applicant issued notice to the respondent on 6.1.2009, calling upon the respondent to suggest the names of five retired Judges of the Hon'ble Supreme Court and High Court. However, the respondent by letter dated 19.1.2009, instead of accepting one of the names, suggested the names of its officials to be appointed as Arbitrator. Under these circumstances, the present application is filed for appointment of an Arbitrator as stated above.
3. It is the case of the respondent in the counter affidavit that the respondent as well as the petitioner are bound by the written contract between the parties. When the appointment of Arbitrator is under the Arbitration Act,1940 (Act 10 of 1940), as per the provisions of the Act, in cases where the Arbitrator or umpire neglects or refuses to act or is incapable of acting by virtue of death, etc., if the arbitration agreement does not contain any clause for meet out such a contingency, the parties will have to go back to the agreement and act as per the agreement. It is only when the party who has the right to appoint an arbitrator fails to appoint, the aggrieved party can approach this Court for appointment of an Arbitrator.
3(a). As per the terms of agreement, in case of dispute, it was agreed that the Officer of the respondent company shall be appointed as a sole arbitrator. It is stated by the respondent that in O.P.No.835 of 1998, when it was dismissed, this Court directed the respondent to exercise its right to appoint an arbitrator. Even the appeal filed by the applicant in O.S.A.No.153 of 2000 was dismissed without prejudice to the rights of the applicant to raise its contentions regarding legality of the ex parte award passed, which was by that time challenged in O.P.No.699 of 2000. Even in O.P.No.699 of 2000, this Court directed the respondent to appoint an Arbitrator after getting consent of the applicant. Even after the respondent has sent the names of its employees for appointment of arbitrator as per the provisions of the agreement, the applicant filed Application No.1745 of 2005 and obtained ex parte order for appointment of arbitrator, against which appeal was filed by the respondent in O.S.A.No.250 of 2008 which was also dismissed.
3(b). On the demise of Justice K.Venkatasamy, previous arbitrator, the order passed earlier in ApplicationNo.1745 of 2005 has no force and as per the provisions of the contract, the respondent is entitled to appoint arbitrator. The respondent has sent a letter on 19.1.2009, requesting the applicant to consent for appointment of arbitrator as per the terms of the contract. Since there was no reply, the respondent appointed Mr.T.Sampathkumar, an Officer of the respondent company as arbitrator and the said arbitrator commenced the proceedings by sending notice of arbitration to the parties, fixing a date of hearing. The applicant without appearing before the Arbitrator, has filed the present application. Therefore, the application is not maintainable.
4. Mr.Habibulla Basha, learned senior counsel appearing for the applicant has taken me through various orders passed by the learned Single Judge as well as Division Bench of this Court in the application and the appeal respectively to contend that the order passed in A.No.1745 of 2005 dated 13.12.2006 appointing Hon'ble Mr.Justice K.Venkatasamy as sole Arbitrator was not an ex parte order and the respondent having received notice, failed to appear and it was after considering the entire issue, the said order was made. According to him, once the appeal filed to set aside the order dated 13.12.2006 was dismissed by judgement dated 21.7.2008 in O.S.A.No.250 of 2008 approving the appointment of Hon'ble Mr.Justice K.Venkatasamy as Arbitrator, in spite of the terms of agreement, on the demise of the said Arbitrator, it is only natural that another Hon'ble Judge should be appointed in his place and it is not open to the respondent to contend that it should go back to the terms of agreement.
5. On the other hand, Mr.S.A.Rajan, learned counsel for the respondent would submit that as per the provisions of
Section 8(1)(b) of the Arbitration Act, 1940 when an Arbitrator refused to act or died or is incapable to act and when the terms of agreement does not show that the vacancy should not be supplied, in the absence of filling up of vacancy by other party, it is open to any one of the parties to serve on other party a notice for consent for appointment of an Arbitrator in supplying the vacancy. Therefore, according to him, when the Arbitrator appointed who was a Hon'ble Judge of the Supreme Court passed away, by virtue of the said section, the respondent is entitled to make appointment as per the terms of the agreement and in pursuance of the same, a notice was sent suggesting two names as per the agreement. Since there was no response, the respondent company appointed an Arbitrator as per the terms of the agreement, which is well within the rights of the respondent under
Section 8(1)(b) of the Act, 1940.
5(a). The approval given for the appointment of the Hon'ble Judge by the Division Bench comes to an end immediately after the demise of the said Arbitrator and thereafter, it is for the parties to act as per the terms of agreement and to decide once again in the matter of appointment of arbitrator by applying the procedure under
section 8(2) of the Arbitration Act 1940. According to the learned counsel, the respondent has followed the said procedure and made appointment which is well within the jurisdiction. To substantiate his contention that the terms of agreement shall be the basis for appointment of arbitrator, he would rely upon the judgement of the Supreme Court reported in M/s.Prabhat General Agencies etc., vs. Union of India and another [AIR 1971 SC 2298], S.Rajan vs. State of Kerala and another[(1992) 3 SCC 608], The Union of India vs. Mangaldas N.Varma, Bombay [AIR 1958 Mad.298], Surendranath Paul vs. Union of India [AIR 1965 Calcutta 183] and Bijoy Kumar Swaika vs. Shyamsundar [AIR 1976 Calcutta 448].
6. I have heard the learned senior counsel for the applicant as well as the learned counsel for the respondent and perused the records.
7. The issue before this Court is governed by provisions of the Arbitration Act, 1940. The said Act provides for the power to the Court to appoint arbitrator or umpire under
section 8 which is as follows:
" 8. Power of Court to appoint arbitrator or umpire.-
(1) In any of the following cases-
(a) where an 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, after differences have arisen, concur in the appointment or appointments; or
(b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or
(c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him;
any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
(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."
A reading of the said provision makes it clear that in cases where the arbitrator appointed died and there is no clause in the arbitration agreement for the filling up of the vacancy and the parties do not supply the vacancy, any of the parties is entitled to serve notice on the other party for a written consent to appoint an arbitrator in supply of the said vacancy. If within 15 days of the notice such appointment is not made, the Court is entitled to appointment on application of a party who has given notice.
8. In the agreement between the parties, the arbitration clause 8.20 reads as under:
" 8.20. Arbitration.
1. In the event of any dispute or difference between the parties hereto, as to the construction or operation of this contract, or the respective rights and liabilities of the parties on any matter in question, dispute or difference on any account or as to the withholding by the owner/employer of any certificate to which the contractor may claim to be entitle to or if the owner/employer fails to make a decision with a reasonable time, then in any such case, but except in any of the excepted matters referred to in the clause, the contractor, after 90 days of his presenting his final claim on the disputed amounts or difference may refer the matter to arbitration. Such demand for arbitration shall specify the matters which are in question, dispute or difference and only such dispute or difference other than excepted matters, for which the demand has been made and no other dispute or difference, shall be referred for the arbitration by an officer of the owner/employer to be nominated by the owner/consultant, and the provisions of the Indian Arbitration Act,1940 for the time being in force or of any other Act of the Legislature passed in substitution thereof or modifications thereof and for the time being in force, apply to such arbitration.
2. The contractor shall not, except with the consent in writing of the owner/consultant, in any way delay the carrying out of the work by reason of any such matter, question or dispute being referred to arbitration, but shall proceed with the work with all due difference and shall, until the decision of the arbitration is given, abide by the decision of the owner/consultant and no award of the arbitration shall cause and change in this agreement the requirement to adhere strictly to the owner/consultant's instructions with regard to the actual carrying out of the work, except as specifically affected by such award."
9. As per the said clause agreed between the parties, the arbitrator is to be appointed under the Arbitration Act, 1940, who should be an Officer of the respondent company to be nominated. A reading of the agreement does not show that on the arbitrator's inability either by death or otherwise, the vacancy should not be filled up. On the other hand, the said clause makes it clear that the Arbitration Act, 1940 shall be made applicable. It is also not in dispute that the Arbitration Act, 1940 is applicable to the facts of the present case.
10. The facts which are stated by both the parties are not in dispute. When a dispute was raised in respect of the sum claimed viz.,Rs.71,63,333/-, the applicant earlier filed O.P.No.835 of 1998 under
section 8(2) of the Arbitration Act, 1940. A learned Single Judge of this Court considered the arbitration clause 8.20 of the agreement and held that the applicant who has accepted for appointment of an officer of the respondent company as arbitrator, cannot question about the impartiality of such arbitrator even before the arbitrator entered into the reference, and taking note of the fact that even on earlier two occasions such arbitrators were appointed by the respondent, dismissed the petition filed by the applicant with the following observation:
" 14. In the instant case, I feel, the respondent should be allowed to exercise his right to appoint an Arbitrator as per clause 8.20 of the agreement (tender document)"
11. After the dismissal of the said O.P., it is seen that as per the direction of the learned Judge as stated above, the respondent appointed its official, who passed an ex parte award on 5.6.2000, rejecting the claim of the applicant. In the meantime, against the order of learned Judge in O.P.No.835 of 1998, the applicant filed O.S.A.No.153 of 2000. The Division Bench by judgment dated 12.7.2001, having taken note of the fact that as against the ex parte award passed by the Arbitrator dated 5.6.2000, the applicant moved this Court by filing O.P.No.699 of 2000, dismissed the appeal without prejudice to the rights of the applicant to urge all the contentions in the proceedings filed challenging the ex parte award of the arbitrator and the relevant portion of the judgment is as follows:
" Subsequent to the filing of this appeal, the Arbitrator appointed by the respondent has mae an award. That award, we are told to under challenge at the instance of the applicant in O.P.No.690 of 2000. It is open to the appellant to canvass all the points on which it contends that the award is required to be set aside, before the learned single Judge.
2. The appeal is, therefore, dismissed without prejudice to the appellant's right to urge all its contentions regarding the legality and enforceability of that award before the learned single Judge. No costs."
12. Thereafter, O.P.No.699 of 2000 filed by the applicant to set aside the ex parte award dated 5.6.2000 came to be allowed by an order dated 23.10.2003 remitting the matter for appointment of a new arbitrator with direction to the first respondent in the said O.P. who is the respondent in this application to appoint an arbitrator after getting consent of the applicant. The operative portion is as follows:
" 11. In the result, the petition is allowed and the award passed by the arbitrator dated 5.6.2000 is set aside and remitted for the appointment of a new arbitrator.
12. The 1st respondent is directed to appoint an arbitrator after getting the consent of the petitioner, within four weeks from the date of receipt of the copy of this order and both the petitioner and the respondent are at liberty to file their documents and let in evidence before the arbitrator and the arbitrator shall deal with the matter impartially and in accordance with law without being influenced by any of the observations made by the earlier arbitrator or by this court and pass a speaking award within three months from the date of the entering into reference."
13. Based on the said order, when the respondent has written to the applicant on 23.2.2004, giving names of two of its Officers to be appointed as Arbitrator, the same was not accepted by the applicant and in turn, the applicant has suggested the respondent on 10.3.2004 to furnish names of five retired Judges of the Hon'ble Supreme Court or High Court for appointment of arbitrator. Since there was no reply, the applicant has suggested names of five retired Judges of Hon'ble Supreme Court/High Court. It was in those circumstances, since the respondent has not accepted for appointment of any of the Hon'ble judges as arbitrator, the applicant has filed application under
section 8(2) read with
Section 8(1)(a) of the Arbitration Act, 1940 in Application No.1745 of 2005 for a direction to appoint an arbitrator as per the terms of the arbitration agreements dated 19.2.1991 and 18.6.1991. It was, in that application, this Court by order dated 13.12.2006, appointed the Hon'ble Mr.Justice K.Venkatasamy, (since deceased) as Arbitrator. Treating it as ex parte order, the respondent filed applications in A.Nos.6915 and 6916 of 2007 to set aside the said order dated 13.12.2006. In the meantime, it is not in dispute that the learned Arbitrator has entered into the reference by giving notice to the parties. Those applications came to be dismissed on 19.2.2008 with the following observation:
" 13. Further, the applicant herein has not shown how he is prejudiced by the appointment of the Hon'ble Supreme Court Judge and no allegations of bias or partiality are alleged against him. If that being so, it is in the interest of all the parties including the applicant herein to participate in the arbitration proceedings rather than standing on technicalities and protracting things further."
14. An appeal filed against the said order in O.S.A.No.250 of 2008 also came to be dismissed by the Hon'ble First Bench of this Court in judgment dated 21.7.2008 and the relevant portion of the judgment is as follows:
" 2. Be that as it may considering the fact that a retired learned Judge of the Supreme Court has been appointed the sole Arbitrator, we are of the view that we do not want to exercise our discretion to disturb the said appointment. We, therefore, dispose of the appeal by the following order:
We request the Honourable Mr.Justice K.Venkatasamy to enter upon reference and decide the matter and pass the order as early as possible, preferably within a period of six months from the date of His Lordship enters upon reference. The remuneration and other incidental charges are left to the discretion of the learned Arbitrator."
15. In the meantime, the learned Arbitrator, Hon'ble Mr.Justice K.Venkatasamy, passed away on 27.9.2008. It was thereafter, the applicant, through its lawyer, requested the respondent to suggest five names of retired Judges within 15 days. The respondent replied on 19.1.2009 stating that on the demise of the Hon'ble Judge, the order dated 13.12.2006 does not exist and in the light of the order passed in O.P.No.699 of 2000 dated 23.10.2003, the respondent is entitled to appoint an arbitrator as per clause 8.20 of the agreement. Accordingly, the respondent suggested three names of its employees to be appointed as arbitrator giving 15 days notice. It was on receipt of the said notice of the respondent dated 19.1.2009, the applicant moved the present application on 3.2.2009 under
section 8(2) of the Arbitration Act, 1940.
16. In the meantime, by letter dated 11.3.2009, the respondent has appointed one of its officials, by name, Mr.T.Sampathkumar, as arbitrator, who is stated to have given notice to the parties in respect of preliminary hearing. Thereafter, on a letter from the applicant dated 26.3.2009, intimating about the filing of present application, the said arbitrator has kept the arbitration proceedings in abeyance until orders are passed in this application, as it is seen in the communication of the arbitrator dated 9.4.2009.
17. On the factual matrix, it is clear that the order passed by this Court dated 23.10.2003 in O.P.No.699 of 2000, which was filed by the applicant challenging the ex parte award dated 5.6.2000, has become final. While setting aside the award, it was held that the arbitrator has committed a manifest error in not considering the claim of the applicant. It is no doubt true that while setting aside the ex parte award this Court has taken note of the fact that the apprehension of the applicant about bias in respect of the said official of the respondent has some basis. However, ultimately, as narrated above, while setting aside the award dated 5.6.2000, this Court directed the respondent herein to appoint an arbitrator after getting consent of the petitioner within a stipulated time. That direction is in fact as per the arbitration clause in the agreement viz., clause 8.20 which has been extracted above.
18. By virtue of the subsequent event viz., the demise of the Hon'ble Arbitrator, necessarily
section 8(1) of the Act, 1940 is to be applied. As I have stated above, in the absence of any clause in the agreement showing the intention of the parties not to supply the vacancy of arbitrator caused either by death or otherwise, either party has the right to give written notice in respect of supplying the vacancy. The arbitration clause 8.20 in the agreement without any doubt enables an officer of the respondent company to be nominated as arbitrator, subject to the provisions of the Indian Arbitration Act, 1940 as per which either of the parties can issue written notice. It is true that pursuant to the said provision, it was the applicant who gave notice at the first instance on 6.1.2009, calling upon the respondent to suggest five names of retired Judges of Hon'ble Supreme Court/High Court to be appointed as arbitrator. But, still as per the terms of the contract, the applicant has specifically accepted for the appointment of an official of the respondent company as sole arbitrator. Therefore, it cannot be said that by virtue of the powers given to the parties under
section 8(1) of the Arbitration Act, 1940, the written agreement could be superseded by suggesting the names of persons other than those who are accepted as arbitrator under the agreement.
19. In this case, within 15 days from the notice dated 6.1.2009, the respondent has replied on 19.1.2009 reiterating its right under the agreement. In such circumstances, there is no question of this Court exercising its powers under
section 8(2) of the Act,1940. It is not as if the applicant has no remedy in the event of any bias exercised by such official appointed by the respondent as arbitrator in terms of the agreement. Further, on perusal of the entire pleadings and other materials, it is clear that it is not the intention of the parties not to supply the vacancy after the demise of the arbitrator earlier appointed. I am of the view that in the matter of filling up the vacancy, by construing
section 8(1)(b) of the Arbitration Act, 1940, the rights of the parties are to be worked out as per the agreement, especially on the factual matrix of the case that the agreement provides for appointment of arbitrator by the respondent company from among its officials and in the absence of any other provision in the agreement to the contrary.
20. When the agreement specifies for appointment of arbitrator as stated above, there is no reason for the applicant not to agree for the said clause. In fact, it is not even the case of the applicant that it is not agreeing with the clause for appointment of arbitrator so as to enable this Court to exercise its powers under
section 8(2) of the Arbitration Act, 1940. In the absence of any valid reason on the side of the applicant in not agreeing for the appointment of arbitrator as per the agreement, it is not possible to accept the contention of the learned senior counsel that this Court can exercise its jurisdiction under
section 8(2) of the Arbitration Act, 1940. The mere fact that on earlier occasion while setting aside the ex parte award this Court has observed in respect of the arbitrator who happened to be the official of the respondent company that a bias would have been shown due to the reason that promotion was given to the said official during the pendency of the arbitration proceedings, itself is not a ground to come to a conclusion that everyone of the officials so appointed as arbitrator would show bias against the applicant. Needless to state that even in such event, it is not as if the applicant is left in lurch, as there are other remedies available to it under the Act.
21. The Supreme Court in M/s.Prabhat General Agencies etc., vs. Union of India and another [AIR 1971 SC 2298] has held that unless there is either express or implied intention of the parties that the vacancy should not be supplied, there is no power of the Court to make appointment of arbitrator which has to be made as per the terms of the agreement. It was held as under:
" 5. In the cases before us it is admitted that there is an agreement to refer the dispute to arbitration. It is also admitted that the parties had designated the Judicial Commissioner of Himachal Pradesh as the arbitrator for resolving any dispute that may arise between them in respect of the agreement. The Judicial Commissioner had refused to act as the arbitrator. The parties have not supplied that vacancy. Therefore, the only question is whether the agreement read as a whole shows either explicitly or implicitly that the parties intended that the vacancy should not be supplied. It may be noted that the language of the provision is not 'that the parties intended to supply the vacancy' but on the other hand it is that 'the parties did not intend to supply the vacancy'. In other words if the agreement is silent as regards supplying the vacancy, the law presumes that the parties intended to supply the vacancy. To take the case out of
Section 8(1) (b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy. We have now to see whether the agreements before us indicate such an intention."
22. The Supreme Court in S.Rajan vs. State of Kerala and another[(1992) 3 SCC 608] has also categorically held that it is not open to the parties to ignore the clause of the agreement to appoint another person as arbitrator, while construing
section 20 of the Arbitration Act, 1940 which enables the applicant to file in Court the arbitration agreement. The relevant portion is as follows:
" 12. We also think it appropriate to point out that the learned Subordinate Judge was not justified in directing the parties to submit their respective panels of arbitrator so as to enable him to appoint an arbitrator or arbitrators, as the case may be, out of such panels. Clause (3) of the agreement (extracted in the counter affidavit filed by the State of Kerala in this Court, the correctness whereof is not questioned by the learned counsel for the appellant) says that "the arbitrator for fulfilling the duties set forth in the arbitration clause of the Standard Preliminary Specification shall be the Superintending Engineer, Buildings and Roads Circle, Trivandrum". Thus, this is a case where the agreement itself specifies and names the arbitrator. It is the Superintending Engineer, Building and Roads Circle, Trivandrum. In such a situation, it was obligatory upon the learned Subordinate Judge, in case he was satisfied that the dispute ought to be referred to the arbitrator, to refer the dispute to the arbitrator specified in the agreement. It was not open to him to ignore the said clause of the agreement and to appoint another person as an arbitrator. Only if the arbitrator specified and named in the agreement refuses or fails to act does the court get the jurisdiction to appoint another person or persons as the arbitrator. This is the clear purport of sub-section (4). It says that the reference shall be to the arbitrator appointed by the parties. Such agreed appointment may be contained in the agreement itself or may be expressed separately. To repeat, only in cases where the agreement does not specify the arbitrator and the parties cannot also agree upon an arbitrator, does the court get the jurisdiction to appoint an arbitrator. It must, accordingly, be said that in the present case, there was no occasion or warrant for the learned Subordinate Judge to call upon the parties to submit panels of arbitrators. He was bound to refer the dispute only to the arbitrator named and specified in the agreement. This aspect, however, has become academic now in view of the fact that the very application under
Section 20 has been held by us to be barred by limitation. Even so we though it necessary to emphasise this aspect in view of the numerous instances noticed by us where courts ignore the arbitrator specified in the agreement and appoint a different person as the arbitrator."
23. A Division Bench of this Court consisting of P.Rajagopalan, Officiating C.J. and Rajagopala Ayyangar,J. in The Union of India vs. Mangaldas N.Varma, Bombay [AIR 1958 Madras 296], while explaining about the scheme under
section 8 of the Arbitration Act, 1940, held that it is only a party's notice if ignored, then,it would enable the Court to exercise its power/jurisdiction under
section 8(2) of the Act, in the following words:
" 22. .... notices under S.8(1)(c) of the Act, Sec.8(2) is only an enabling section. The party whose notice was ignored is enabled by S.8(2) to apply to the court for the appointment of an Umpire. The scheme underlying Sec.8 is that the default of a party to the reference or even the default of an arbitrator should not normally result in the arbitration agreement itself becoming abortive. ....."
24. The importance of the arbitration agreement and its contents for the purpose of appointing the persons designated in the agreement was reiterated by the Division Bench of Calcutta High Court in Surendranath Paul vs. Union of India [AIR 1965 Calcutta 183] and the relevant portion of the judgment is as follows:
" 18. It was argued that
Section 8(1)(b) contemplates "appointed Arbitrator" chosen by consent of the parties and as in the present case the appointment was made by a person designated in the arbitration agreement, there is no "appointed Arbitrator" within the meaning of S.8(1)(b) of the Act. But as pointed out already the person designated in the agreement derives his power to appoint an Arbitrator from the arbitration agreement which is entered into by consent of parties. So the appointment by the person designated in the agreement is the appointed (arbitrator) by consent of parties."
25. On the basis of the above discussions, I have no hesitation to hold that the applicant does not get as a matter of right the appointment of an outsider as arbitrator in the circumstance that the arbitration agreement specifically provides that the arbitrator should be appointed by the respondent from among its officials. Merely because on an earlier occasion, the appointment of a respected Hon'ble retired Judge of the Supreme Court whose impartiality is known, was approved it does not mean that the parties have agreed to give up the clause in the written agreement so as to enable this Court to exercise its jurisdiction under
section 8(2) of the Arbitration Act, 1940.
26. In such view of the matter, the application fails and the same is dismissed. No costs. It is made clear that the arbitrator so appointed by the respondent as per the provisions of clause 8.20 of the agreement shall proceed with the arbitration proceedings in an impartial and unbiased manner without being influenced by any of the observations hitherto made in the proceedings stated above, and pass an award after giving sufficient opportunity to the parties.
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