Yashwith
Construction P. Ltd. Vs. Simplex Concrete Piles India Ltd. & Anr [2006] Insc
359 (3 July 2006)
P.K.
Balasubramanyan & R.V. Raveendran
O R D
E R (CC 3801/2006) P.K. BALASUBRAMANYAN, J.
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Delay condoned.
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On a dispute
having arisen, the Managing Director of the respondent company appointed an
arbitrator in terms of the arbitration clause. The arbitrator resigned.
Thereupon the Managing Director of the respondent company, in view of the
mandate in the arbitration agreement promptly appointed another arbitrator. At
that stage, the petitioner approached the Chief Justice of the High Court under
Section 11 sub- Section 5 read with Section 15(2) of the Arbitration &
Conciliation Act, 1996 (for short "the Act"), praying that the Chief
Justice may appoint a substitute arbitrator to resolve the disputes between the
parties. The Chief Justice found that the appointment of the second arbitrator
by the Managing Director, after the resignation of the first arbitrator, was
valid in law since it was permissible under the contract and the right to make
such an appointment was saved by Section 15(2) of the Act.
The
argument that Section 15(2) of the Act referred to statutory rules providing
for appointment of Arbitrators and not to a contractual provision for such appointment
was rejected by the learned Chief Justice. It was held by him that no occasion
arose for him to appoint an arbitrator under Section 11(6) of the Act in the
case.
Thus,
the application was dismissed leaving the parties to pursue their claims before
the arbitrator appointed by the Managing Director in terms of arbitration
agreement between the parties.
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The petitioner
challenged the decision of the learned Chief Justice by way of a Writ Petition
in the High Court. The Division Bench noticed the decision of this Another
[(2005) 8 SCC 618] holding that the order passed by the Chief Justice is a
judicial order and no Writ Petition would lie in the High Court challenging
such an order and only an appeal could be filed in the Supreme Court invoking
Article 136 of the Constitution of India. But the Division Bench thought that
since that decision saved appointments made on or before the date that decision
was rendered by this Court, the Writ Petition filed by the petitioner would
also be saved and the Writ Petition could be decided on merits. The Division
Bench held that the position obtaining under Section 8(1) of the Arbitration
Act of 1940 differed from that available under the present Act especially in
the context of Section 15 thereof and that in terms of Section 15(2) of the
Act, the Managing Director could, on the basis of the arbitration agreement,
appoint another arbitrator when the originally appointed arbitrator resigned,
thus attracting Section 15(1)(a) of the Act. It further held that Section 15(2)
covered not only cases of appointments under statutory rules or rules framed
under the Act, but it would also take in the terms of the agreement between the
parties for appointment of an arbitrator and in that view, the Managing
Director, in the case on hand and on the terms of the arbitration agreement,
would have the right to appoint a substitute arbitrator. Thus, it was held that
the learned Chief Justice was right in rejecting the application made by the
petitioner. Thus, the Writ Petition was dismissed. It is this decision of the
Division Bench that is sought to be challenged in this petition for special
leave to appeal.
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In our view, the
learned Chief Justice and the Division Bench have rightly understood the scope
of Section 15 of the Act. When the arbitrator originally appointed in terms of
the arbitration agreement withdrew for health reasons, the Managing Director,
as authorized originally by the arbitration agreement, promptly appointed a
substitute arbitrator. It is true that in the arbitration agreement there is no
specific provision authorizing the Managing Director to appoint a substitute
arbitrator if the original appointment terminates or if the originally
appointed arbitrator withdraws from the arbitration. But, this so called
omission in the arbitration agreement is made up by the specific provision
contained in Section 15(2) of the Act. The withdrawal of an arbitrator from the
office for any reason is within the purview of Section 15(1)(a) of the Act.
Obviously, therefore Section 15(2) would be attracted and a substitute
arbitrator has to be appointed according to the rules that are applicable for
the appointment of the arbitrator to be replaced. Therefore, what Section 15(2)
contemplates is an appointment of the substituted arbitrator or the replacing
of the arbitrator by another according to the rules that were applicable to the
appointment of the original arbitrator who was being replaced. The term
"rules" in Section 15(2) obviously referred to the provision for
appointment, contained in the arbitration agreement or any Rules of any
Institution under which the disputes were referred to arbitration. There was no
failure on the part of the concerned party as per the arbitration agreement, to
fulfil his obligation in terms of Section 11 of the Act so as to attract the
jurisdiction of the Chief Justice under Section 11(6) of the Act for appointing
a substitute arbitrator. Obviously, Section 11(6) of the Act has application
only when a party or the concerned person had failed to act in terms of the
arbitration agreement.
When
Section 15(2) says that a substitute arbitrator can be appointed according to
the rules that were applicable for the appointment of the arbitrator
originally, it is not confined to an appointment under any statutory rule or
rule framed under the Act or under the Scheme. It only means that the
appointment of the substitute arbitrator must be done according to the original
agreement or provision applicable to the appointment of the arbitrator at the
initial stage. We are not in a position to agree with the contrary view taken
by some of the High Courts.
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Since here, the
power of the Managing Director of the respondent is saved by Section 15(2) of
the Act and he has exercised that power on the terms of the arbitration
agreement, we see no infirmity either in the decision of the learned Chief
Justice or in that of the Division Bench. We do not think it necessary in this
case to go into the question whether the Writ Petition before the High Court
was maintainable on the basis that it challenged an order of the Chief Justice
rendered on 4.3.2005, prior to the Ltd. & Another(supra) rendered on
26.10.2005.
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In this view of
the matter, we see no reason to grant leave to appeal or issue notice on this
petition for special leave to appeal. The petition is dismissed.
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