STEEMEN LIMITED Vs. THE STATE OF HIMACHAL PRADESH ETC.

JUDGEMENT

(1.) This is an application under Ss. 5, 8, 11, 12 and 31 read with Sec. 41 of the Arbitration Act. The Union territory of Himachal Pradesh wanted to construct a bridge across the river Ravi at Sitla in Chamba Division. Accordingly notice inviting tenders was issued and the tender submitted by M/s Steemen Limited, Rahim Manzil, Sanjauli, Simla, was accepted on 31 -12 -1969 and they were entrusted to do the work. Subsequently the Union territory got the status of a State on 25 -1 -1971 and as such for the present the State of Himachal Pradesh is one of the parties to the contract. On 14 -1 -1970 the agreement was signed and the Managing Director of the Petitioner -company who signed on behalf of the company was Gopi Krishan Khanna. Thereafter certain disputes arose on 29 -6 -1971 and as many as ten points of differences were referred to by the Petitioner -company. The Department, however, felt that there was "slow progress" and accordingly they took the drastic step of rescinding the contract on 5 -7 -1971. M/s Steemen Limited appealed to the Government and the order rescinding the contract was cancelled by the Government. On 9 -7 -1971 the disputes were referred to the arbitration of one Narinder Nath, Superintending Engineer. Clause 29 of the agreement inter alia provided that "any question, claim, right, matter or thing whatsoever arising out of the contract" was to be referred to the sole arbitration of a person to be appointed by the Chief Engineer, H.P.P.W.D. incharge of the work at the time of dispute. It was further provided in Clause 29 of the agreement that the arbitrator to whom the matter is originally referred in the case of being transferred or vacating his office, or being unable to act for any reason, the Chief Engineer, H.P.P.W.D. shall appoint another person to act as arbitrator in accordance with the terms of the contract. It was then laid down in the same clause that it is also a term of the contract that no person other than a person appointed by such Chief Engineer, H.P.P.W.D., should act as arbitrator. In exercise of Clause 29, the Superintending Engineer was appointed on 14 -9 -1971 by the Chief Engineer Shri H. C. Malhotra, who was incharge of the work at the time of the dispute. However, Shri Narinder Nath, Superintending Engineer, resigned on 27 -10 -1971 and Shri H. C. Malhotra appointed Shri R. K. Sarkar, Superintending Engineer, in his place to act as arbitrator. According to Petitioner -company Shri R. K. Sarkar did not pay much attention to the arbitration work. Since 1971 he could hold only nine sittings which too were of perfunctory nature and no substantial progress could be made. Above all, the arbitrator was sought to be influenced by another Chief Engineer Shri R. C. Singh and Annexures I and II are appended to the rejoinder submitted by the Petitioner -company, which go to prove that fact. Annexure -I is the letter dated 17 -9 -1973 issued by the arbitrator in which he considered it "unfortunate" that he could not adhere to the instructions issued by the Chief Engineer relating to the arbitration. He pointedly mentioned:

(2.) The usual reply of the Respondents, who are the State of Himachal Pradesh, the Chief Engineer, the Executive Engineer and Shri R.K. Sarkar, is that, there was no delay on the part of the arbitrator and that he was acting with sufficient vigilance and despatch in proceeding with the reference. It was primarily stated that Shri R.K. Sarkar, Superintending Engineer, himself showed inability to proceed with the reference and that he resigned. Thereafter Shri R.C. Singh, Chief Engineer, appointed Shri O.P. Sublok, Superintending Engineer, as arbitrator on 3 -4 -1975. The main contention of the Respondents is that the petition has become infructuous because of that appointment. It was also pleaded that the court has lost its jurisdiction to try the dispute between the parties as another arbitrator has been appointed.

(3.) In their rejoinder the Petitioner -company also con tended that Shri R.C. Singh could not appoint the arbitrator as that function could legally be ascribed to Shri H.C. Malhotra, Chief Engineer, who was incharge of the work at the time of the dispute. Therefore, the appointment of Shri Sublok by Shri R.C. Singh was ab initio illegal and cannot be sustained by the court.