HEAVY ENGINEERING CORPORATION LTD Vs. K SINGH AND CO

JUDGEMENT

(1.) THIS application has been filed by the defendant of Title Suit No. 116 of 1965, arising out of a petition filed by the opposite party in the Court of the Special Subordinate Judge, Kanchi, under Sections 8 and 20 of the Arbitration Act, 1940. The case was valued at Rs. 3,07,193. 75 Paise and the plaintiff's prayer was that the defendant may be called upon to file an agreement between the parties, which was in the defendant's custody, and for referring the dispute to arbitrator to be appointed by the Court. In reply to this petition, the defendant filed a petition on the 17th January, 1966, stating that it had no objection to the appointment of arbitrators in accordance with the terms of the arbitration agreement. Ultimately, by order passed on the 10th February, 1966, the Court appointed Sri Atmanand Singh, Chief Inspector of Factories as the arbitrator, taking the name from a list of names submitted by the plaintiff. After the arbitration matter had been sent to the appointed arbitrator, the petitioner filed an application before the Court below on the 3rd January, 1967, praying that another arbitrator and an umpire may also be appointed, in view of Clause 79(4)(b) of the general conditions of the contract between the parties. That is to say, the defendant now wants that instead of one arbitrator, the dispute should be decided by two arbitrators and an umpire, because the plaintiff's case was above the value of Rs. 50,000. The relevant clauses of the arbitration agreement between the parties are Clauses 79 (4)(a) and 79 (4)(b), which are quoted below:-- Clause 79(4) (a). -- "Matters in question, dispute or difference to be submitted to arbitration as aforesaid shall be referred for decision to, (i) a sole arbitrator who shall be the Chairman or any officer of the employer nominated by him in that behalf in cases in which the claim in question is below Rs. 50,000 and in which the issues involved are not of a complicated nature. The Chairman or the officer nominated shall be the sole judge to decide whether or not the issues involved are of complicated nature; (ii) two arbitrators who shall be the officers of equal status of the employer, to be appointed in the manner laid down in Sub-clause (4)(b) of this clause for and in respect of all claims of and above the value of Rs. 50,000/- and for all claims, irrespective of the amount or value of such claims, if the issues involved therein are of a complicated nature. In the event of the two arbitrators being divided in their opinions, the matter under dispute shall be referred to an umpire to be appointed in the manner laid down in Sub-clause (4)(b) hereunder for his decision." Clause 79 (4)(b). -- "For the purpose of appointing two arbitrators as provided in Sub-clause (4)(a)(ii), the employer shall send a panel of more than three names of officers of the employer to the contractor who will be required to suggest a panel of three names out of the list so sent to him by the employer. The Chairman shall appoint one arbitrator out of this panel as the contractor's nominee, and then appoint a second arbitrator of equal status as the employer's nominee, either from the panel or outside the panel, ensuring that one of the two arbitrators so nominated is invariably from the Accounts Department of the employer. Before entering into the reference, the two arbitrators shall nominate an umpire who shall be an officer of the employer to whom the case shall be referred in the event of any difference of opinion between them." By the impugned order the learned Judge has rejected the defendant's prayer, mentioning the facts of the case upto the appointment of the single arbitrator by order dated the 10th February, 1966, and holding thus:--

(2.) LEARNED counsel for the petitioner has relied upon the arbitration agreement between the parties and has referred to Section 8 of the Arbitration Act, 1940 (Act X of 1940) and has argued that the Court below has not appreciated the true scope of the controversy between the parties at this stage and has omitted to notice that under Section 8(2) of the Arbitration Act, the Court should have appointed two arbitrators, as the agreement between the parties in Clause 79(4) was that a dispute involving a claim above the value of Rs. 50,000/- must be resolved by two arbitrators. The learned Advocate-General appearing for the plaintiff-opposite party has contended that the point raised on behalf of the petitioner is barred by res judicata, in view of the earlier order passed by the learned Subordinate Judge on the 10th February, 1966, by which the dispute had been referred to one arbitrator only. It is further contended that the petitioner had moved this Court in Civil Revision No. 1384 of 1967 against the earlier order, in which the petitioner was unsuccessful. Having heard the learned counsel for the parties, I think that this is a fit case in which appropriate relief must be given to the petitioner and I will, in due course, deal with the effect of the unsuccessful attempt made by the petitioner in Civil Revision No. 1384 of 1967. As indicated above, according to the arbitration agreement between the parties, a claim of the value above Rs. 50,000/- must be decided by two arbitrators, as mentioned in Clause 79(4)(a)(ii). Section 8 of the Arbitration Act envisages a situation where the Court must appoint more than one arbitrator in certain cases and it is manifest that this was one of the cases in which the Court was bound to appoint two arbitrators to resolve this dispute valued at over three lacs of rupees. It will appear that the earlier order passed on the 10th February, 1966 had been passed under some misapprehension without the Court applying its mind to the facts and circumstances of the case and to the law on the subject. After the defendant had filed its rejoinder on the 17th January, 1966, the learned Judge stated in his order-sheet that the defendant had filed a verified petition praying for appointment of arbitrator for referring the dispute for award. The mistake of the Court started at this point and it persisted throughout including the present order under revision, where the learned Judge has stated that on the 17th January, 1966, the defendant had filed a verified petition for appointment of an arbitrator and to refer the dispute for award. As indicated above the defendant had quite rightly asked for appointment of arbitrators in accordance with the terms of the arbitration agreement. The defendant had stated in its petition dated the 17th January, 1966, that "the Court should refer the dispute to them for making the award for which they shall ever pray". Obviously, the learned Judge has not considered this part of the matter or the requirements of clause 79 of the agreement between the parties and all the necessary implications of Section 8(2) of the Arbitration Act. Apart from the order passed earlier on the 10th February, 1966, I do not think that anything stood in the way of the learned Judge in withdrawing his earlier order passed under some misconception.