Rajendra Nath Mittal, J. - (1.) BRIEFLY the facts are that the Union of India invited tenders for supplying meat on hoofs. The Petitioner gave tender which was accepted on 24th May, 1973. There was an arbitration clause in the tender. The dispute having arisen between the parties the Petitioner made an application under Section 20 of the Arbitration Act (hereinafter referred to as 'the Act') on 16th April, 1976 in the court of Senior Sub Judge, Ambala to appoint an arbitrator in terms of the agreement. The Court directed the Quarter Master General, Army Headquarters, New Delhi to appoint an arbitrator in terms of the said clause. He appointed Brig. Saran Dass as the arbitrator. He gave the award dated 4th August, 1977 which was set aside by the Court on the application of the Petitioner vide order dated 24th February, 1983.
(2.) AFTER the award having been set aside, the Union of India filed an application on 14th April, 1983 for appointment of another arbitrator. The application was contested by the Petitioner who inter alia pleaded that the arbitration agreement stood exhausted after the award had been set aside. The learned Senior Sub Judge held that in view of Section 10 of the Act the arbitration agreement did not stand exhausted. Consequently he ordered that the Quarter Master General should appoint a new arbitrator. The Petitioner went up in appeal before the learned District Judge, Ambala who affirmed the order of the Senior Sub Judge. It has come up in revision against the order of the District Judge to this Court. The only submission of the learned Counsel for the Petitioner is that as soon as the award was set aside, the arbitration agreement stood exhausted and, therefore, the Court had no jurisdiction to order the Quarter Master General to appoint a fresh arbitrator. In support of his contention he has placed reliance on Juggilal Kamalpat v. General Fibre Dealers Ltd. : A. I. R. 1962 S. C. 1123.
(3.) I have duly considered the argument but do not agree with it. The arbitration agreement between the parties reads as follows: 23(a) Any dispute or difference arising in the interpretation or application of the provisions of this contract, settlement of which is not herein provided for, shall be referred to arbitration of the officer sanctioning the contract or his successor in office or of any officer nominated by QMG Army HQ. (b) The award of the arbitrator shall be final and binding on both the parties. (c) In the event of the arbitrator to whom the matter is originally referred being transferred or vacating this office or being unable to act for any reasons, the QMG Army H Qs at or subsequent to the time of such transfer, vacation of office or unable to act shall appoint another person to act as arbitrator in accordance with the terms of this contract. Such person will be entitled to proceed with the case under arbitration from the state at which it was left by his predecessor. (d) A demand for arbitration shall be in writing and made within six months from the date of termination of the contract. The date of termination of contract shall mean and include: - (i) The last date of collection of goods according to the terms of contract. (ii) In case where the contract is cancelled wholly or partly the date when the letter of cancellation is issued. (e) Subject as aforesaid the Arbitration Act 1940 of any statute modification or enhancement thereof for the time being in force any rules made thereunder shall apply to arbitration proceedings under clause. 19. Power to supersede arbitration where award become void or is set aside. - Where an award has become void under Sub -section (3) of Section 16 or has been set aside, the Court may by order supersede the reference and shall thereupon order that the arbitration agreement shall cease to have effect with respect to the difference referred. From a reading of the section it is clear that in case the award is set aside by the Court, it can supersede the reference. However, it is in the discretion of the Court to supersede the reference or not. I am fortified in the above view of the Division Bench of Calcutta High Court in The Baranagore Jute Factory Co. Ltd. v. M/s Hulaschand Rupchand : A. I. R. 1958 Cal. 490. It was observed there that the setting aside of an award does not, by itself, terminate the reference, except obviously where the award is set aside on a finding that the reference itself was invalid. In other cases, that is where the reference is valid and only the award is bad, after the award is set aside, the reference has to be superseded by a further order, it if i desired to terminate it. If there is no order of supersession, the reference and the agreement both survive. In such a case there can be no question of either the reference coming to an end or the arbitration agreement having been exhausted by the reference, already made. If the Court makes a further order superseding the reference, it must direct that the agreement as well shall cease to have effect so that both come to an end. The combined effect of the two orders which must always be jointly made is that the provision for arbitration is superseded altogether and it is because of such effect that Section 25 of the Act describes an order under Section 19 as 'an order superseding the arbitration'. Similar observation were made by a Division Bench of this Court in Firm Gulab Rai Girdhari Lal v. Firm Bansi Lal Hansraj, A. I. R. 1959 P&H. 102. It was held there in that the word 'may' in Section 19 is a word of permission rather than of command. Section 19 thus confers full discretion on the Court to say in each particular case whether the reference should or should not be superseded. When a Court making an order under this section does not expressly supersede the reference and direct that the arbitration agreement shall cease to have effect, it must be deemed to have declined to exercise the power. The view taken in the cases above was affirmed by the Supreme Court in Juggilal's case (supra). The relevant observations are as follows: - The scheme of the Act therefore is whether the arbitration is under Chap. II, Chap. III or Chap. IV, to give discretion to the Court to decide whether to supersede the reference or not. Where it decides to supersede the reference it has to order that the arbitration agreement shall cease to have effect with respect to the differences referred; but where it decides not to supersede the reference the reference and the arbitration agreement subsist and if there is machinery provided in the arbitration agreement for making a further reference or for continuing the same reference, further arbitration can take place. The contention therefore urged on behalf of the Appellant that once the award is set aside the arbitrator becomes functus officio and consequently there can be no further reference with respect to the dispute decided by the award which is set aside, must fail in view of the specific provisions of Section 19 of the Act. It was further observed that Section 19 gives power to the Court not to supersede the reference and so leave the arbitration agreement effective even when it sets aside the award and thereupon it will depend upon the terms of the arbitration agreement whether arbitration proceedings can go on with respect to the same dispute or with respect to some other disputes arising under the arbitration agreement. -Similar view was taken by Jammu and Kashmir High Court in Union of India v. The Lakshmi Ice Factory, A. I. R. 1964 J. & K. 10. It was observed therein that under Section 19 unless the reference was superseded the original agreement of arbitration would remain intact and the arbitrator would be properly seized of the arbitration proceedings before him. The same section was interpreted by the Delhi High Court in Messrs R. B. Seth Jessa Ram Fateh Chand, Naya Bazar, Delhi v. Union of India, (1975) 77 P. L. R. D. 61. The learned Judge followed Juggilal's case (supra) and made similar observations therein.;