(1.)THIS rule is directed against order No. 19 dated 30th May. 1973, rejecting the petitioner's application under section 5,9 and 41 of the Arbitration Act by the learned Judge, Second Bench, City Civil Court, Calcutta.
(2.)THE facts giving rise to this rule, briefly, are as follows: On December 18, 1962, there was an agreement in writing between the petitioner and the opposite party by which the petitioner agreed to purchase from the opposite party and the opposite party agreed to sell to the petitioner certain goods as per specification mentioned in the said agreement. The agreement contained an arbitration clause which provided that if any dispute or difference arose between the parties relating to the due performance of the contracts then the matter in difference shall be referred by either party on 15 days' notice to the other, to an Arbitrator to be appointed by the petitioner and the opposite party jointly or in the absence of such agreement to two arbitrators, one to be appointed by the petitioner and the other by the opposite party, and. in case of disagreement between the Arbitrators to an Umpire to be appointed by the arbitrators before proceeding with the arbitration, and the decision of such arbitrator [arbitrators or umpire shall be final and. binding or both the parties. The provisions of the Indian Arbitration Act, 1940 and the rules made thereunder were also made applicable to such arbitration. In or about May 26, 1972, dispute arose between the parties regarding the payment of certain alleged commission by the petitioner to the opposite party. On 30th May, 1972, the petitioner received from the opposite party a letter dated 26th May, 1972, appointing one mr. B. K. Sampat as its Arbitrator and calling upon the petitioner to notify its choice of Arbitrator within 15 days' of the receipt of the said letter. The petitioner did not however appoint its own arbitrator in terms of the aforesaid agreement. The petitioner thereafter received a letter dated 24th July, 1972, from the said Mr. B. K. Sampat stating that inspire of receipt of letter dated 26th May, 1972, from the opposite party as the petitioner did not, take any step to appoint its arbitrator the said Mr. Sampat shall act as the sole Arbitrator in the matter and the petitioner was requested to submit its papers and statements of its case. On 3rd August, 1972, the petitioner wrote to the opposite party and also informed Mr. Sampat by sending him a copy of that letter, that the petitioner had nominated Mr. L. P. Murarka as the petitioner's Arbitrator in the dispute. Thereafter the petitioner received a letter from the opposite party dated 11th August, 1972, informing it that as the time for appointment of the petitioner's arbitrator had long elapsed the Arbitrator appointed by the opposite party had already entered upon the reference in terms of the letter dated 24th July. 1972 and the arbitration will be proceeded with by the opposite party before the said sole Arbitrator. The said letter was received by the petitioner on the 16th August, 1972. On 28th August, 1972, the petitioner moved an application before the City Civil Court praying, inter alia, for an injunction restraining the opposite party from proceeding with the said reference before the aforesaid sole Arbitrator. The petitioner further prayed for accepting its nomination of Mr. L. P. Murarka to act as an arbitrator with the said Mr. B. K. Sampat offer condoning of delay in making the appointment by the petitioner. The said application was contested on behalf of the opposite party, and. it was dismissed by the trial court. Against the said order the petitioner has obtained the present rule.
Mr. Tibriewal learned Advocate, appearing in support of the rule has contended in the first place that there was no appointment of Mr. Sampat as the sole Arbitrator in the present case and as such he has no jurisdiction to proceed with the reference as the sole Arbitrator. His contention is that after the appointment of Mr. Sampat as the Arbitrator on behalf of the opposite party as communicated to the petitioner by the opposite party's letter dated 26th May, 1972, there was no appointment of Mr. Sampat by the opposite party as sole Arbitrator after the expiry of the statutory period of 15 days. He contends further that the petitioner was never informed of the alleged appointment of Mr. Sampat as the sole Arbitrator by the opposite party. The provision for appointment of a sole Arbitrator is contained in section 9 of the Arbitration Act, 1940. The relevant portion of which is as follows:
"where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement (a ). . . . . . . . . . . . . . . . . . . . . . . . . . . "
(b) if one party fails to appoint an arbitrator either originally or by way of substitution as aforesaid, for fifteen clear days after the service by the other party of a notice in writings to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference and his award shall be binding on both parties as if he had been appointed by consent: provided that the Court may set aside any appointment as sole arbitrator made under clause (b) and either, on sufficient cause being shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit. Explanation -. . . . . . It is clear, therefore, that the section contemplates two appointments. Firstly, the appointment of an arbitrator of the choice of one of the parties to the dispute and after informing the other party of such appointment by him, if the other party fails to appoint his arbitrator, then the party who has appointed his arbitrator may appoint that arbitrator as the sole arbitrator. It was accordingly contended by mr. Tibriewal that unless the second appointment as the sole arbitrator is made, the arbitrator has no power to arrogate to himself the functions of a sole arbitrator and act as such. It was further contended by Mr. Tibriewal that even if an appointment is made as sole arbitrator so long as that fact is not made known to the other party to the dispute the appointment is not complete and the arbitrator cannot proceed with the reference as a sole arbitrator. In support of his contention mr. Tibriewal relied upon the decisions in Donald Cambel and Co. v. Jeshraj girdharilal, A. I. R. 1920 P. C. 123; Harichand v. Lachhmandas, A. I. R. 1948 East punjab 11 and M. I. Shahdar v. Mohd. Abdulla Mir, A. I. R. 1967 J. and K. 120. The view taken in these decisions is that unless the appointment of the sole arbitrator is in accordance with the provisions of section 9 clause (b) the appointment is not valid in law and the mere failure of the other side to the dispute to appoint its own arbitrator does not automatically make the arbitrator appointed by one party, the sole arbitrator in the dispute. The fact that notice is given by the arbitrator to one of the parties to the dispute that the arbitrator is going to act as the sole arbitrator in the case cannot be regarded as substantial compliance with the provisions of section 9 (b) unless there has been an appointment as a sole arbitrator. That being so the opposite party's letter dated 11th August, 1972, addressed to the petitioner cannot confer the power of a sole arbitrator upon Mr. Sampat.
(3.)MR. S. R. Banerjee appearing en behalf of the opposite party contended before us that all that section 9 (b) requires is that there must be appointment of the arbitrator already appointed, as a sole arbitrator. According to him, it is not necessary that the other party should be informed of such appointment as sole arbitrator. In support of his contention he relied upon Annexure 'b' to the affidavit -in- opposition which is a photo static copy of a letter said to have been written on the 10th July, 1972, by his client to Mr. B. K. Sampat forming the latter that the opposite party has appointed Mr. Sampat to act as a sole arbitrator in the reference. It appears from the said letter that a carbon copy thereof was sent to M/s S. K. Sawday and Co. which is a firm of Advocates which is acting on behalf of the opposite party. From this letter Mr. Banerjee argued that the appointment of Mr. Sampat as sole arbitrator by the opposite party was made on the 10th July, 1972, which is long prior to the petitioner's letter darted 4th August 1972 intimating mil Sampat about the appointment of mr. Murarka by the petitioner as its arbitrator. Mr. Tibriewal on behalf of the petitioner characterised this letter as an after-thought and he strongly contended that this letter was brought into existence for the purpose of meeting the present case of the petitioner. Mr. Tibriewal contended that if this letter had really been in existence it is only natural that Mr. Sampat would have mentioned about the same in his letter dated 24th July, 1972, which is Annexure 'b' to the present petition before us. On the other hand Mr. Sampat's letter dated 24th july, 1972, mentions that since the petitioner did not appoint its arbitrator although a long time had el-aped from the receipt of notice about the appointment of the arbitrator by the opposite party Mr. Sampat would act as the sole arbitrator. He does not mention in his letter that he has already been appointed the sole arbitrator by the opposite party. Secondly, Mr. Tibriewal contended that in the letter dated 11th August, 1972, written by the opposite party it has not been mentioned that the opposite party had appointed mr. Sampat as the sole arbitrator on the 10th July, 1972, It is merely stated in the said letter that the time for the petitioner to choose its own arbitrator has long elapsed and the sole arbitrator has already entered upon the reference. It is not stated that the petitioner not having chosen its own arbitrator mr. Sampat was appointed as the sole arbitrator by the opposite party on the 10th July, 1972. Thirdly it was contended that even this photo static copy was not produced before the trial court. What was annexed to the affidavit-in-opposition filed in the trial court is a plain copy of the aforesaid alleged letter which did not disclose that a copy of the letter was purported to have received on the 8th August. 1972 by the advocates' firm m\s S. K. Sawday and Co. It was pointed cut that there was no explanation why a letter sent from Calcutta on the 10th july, 1972, would be received on the 8th August, 1972 in Calcutta, where the advocates' firm as well as the Calcutta branch Office of the opposite party are situate. Mr. Tibriewal further contended that the very language of the aforesaid letter dated 10th July, 1972, indicates that it was drafted by a lawyer. In our view there is considerable force in the contention put forward by Mr. Tibriewal in this behalf. In our view, therefore, the said letter must be left out of consideration for the purpose of deciding whether there was any appointment of Mr. Sampat as sole arbitrator in the reference. In this connection it was worthwhile to note the view upon which the trial court proceeded with regard to this aspect of the case. On this point the trial court has observed "that in matters under the Arbitration Act the court generally proceed on affidavits and Annexures and things are taken on their face value. Whether a particular letter is genuine or not cannot be decided in such a proceeding". It is true in such proceedings the courts generally go by affidavits only. But affidavit evidence, that is, evidence brought before the court by way of affidavit, is also evidence in the case, and therefore, it is the duty of the court to consider how far such affidavit evidence can be believed or not In our view, it is not correct to say that in a matter like this affidavits and Annexures are to be taken at their face value. If that is so, then any and every statement can be made in an affidavit and whatever document one chooses to rely upon may be annexed to an affidavit and the court will have to accept everythings as true and correct.