JUDGMENT
Hemant Gupta, J.
1. The challenge in the present revision petition is to the order passed by the learned trial court, whereby an application filed by the petitioner for removal of Shri B.K. Saini, as an arbitrator for adjudication of the dispute between the parties, was declined.
2. An agreement dated 24.04.1987 for supply of transformers was executed between the petitioner and the Electricity Board. Since dispute arose between the parties, Shri T.S. Bhatia, Chief Engineer (R&A) was appointed as a sole arbitrator. He entered upon reference and directed the parties to file the respective claims, but on 14.08.1995, the post of Chief Engineer (R&A) was redesignated as Chief Engineer (R&D) with further direction that the Chief Engineer (R&D) would confine his activities to research and coordination only and will not handle the arbitration activities. Then Shri K.S. Dhillon was appointed as a sole arbitrator by the Board. Thereafter, the petitioner disputed the appointment of Shri Dhillon, having been appointed without the consent of the petitioner. Shri Dhillon left India. Therefore, appointment of Shri K.S. Dhillon was superseded and Shri B.K. Saini was appointed as arbitrator. The petitioner challenged the appointment of Shri B.K. Saini, as an arbitrator, by way of an application before the trial court. The impugned order has been passed on such application.
3. It is the stand of the Board that Shri K.S. Dhillon, was appointed as an arbitrator after the post of Chief Engineer (R&D) was abolished. Subsequently, Shri B.K. Saini was nominated as a sole arbitrator and the case was fixed at the stage of arguments and that the arbitrator has been nominated as per the terms and conditions of the purchase order. The learned trial court declined the application filed by the petitioner on the ground that in terms of Clause 23 of the agreement, the appointment of the arbitrator was to be by designation and by the Board. The arbitrators earlier appointed could not render award for one or the other reason. Therefore, the respondents have appointed another arbitrator in terms of the arbitration clause.
4. Learned counsel for the petitioner has vehemently argued that once an arbitrator has been appointed by the competent authority, the power to appoint another arbitrator after his refusal to act or if for any other reason, the vacancy has become available, vests with the court in terms of Section 8(1)(b) of the Arbitration Act, 1940 (hereinafter referred to as ‘the Act’) and the arbitrator cannot be appointed in terms of the agreement. He has relied upon Shamji Mal v. L. Sefton & Co. Ltd., Mirzapur and Anr. (1954) 56 PLR 187; Jind Co-operative Sugar Mills Ltd. v. Sunder Das and Co. 1991 (2) Rev. LR 312 : 1991(2) Arb. LR 310 (P&H) and the Hon’ble Supreme Court’s judgment reported as State of West Bengal v. National Builders .
5. On the other hand, learned counsel for the respondent has vehemently argued that the power to appoint an arbitrator vests with the respondent in terms of Clause 23 of the agreement. The respondent has not failed to nominate arbitrator after the vacancy arose. It is contended that the power to appoint arbitrator by the court will arise only if the respondents fail to appoint an arbitrator. It was contended that in terms of Section 8(l)(b) of the Act, if the agreement is silent as regards the supply of the vacancy, the law presumes that the parties have to supply the vacancy. Reliance is placed upon Prabhat General Agencies v. Union of India and Anr. ; Harbans Singh Tuli & Sons Builders Pvt Ltd. v. Union of India ; and State of West Bengal v. National Builders (supra).
6. Before considering the respective judgments, it would be appropriate to reproduce Section 8(1) of the Act:
8. Power of court to appoint arbitrator or umpire.
(1) In any of the following cases,-
(a) where an arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not after differences have arisen, concur in the appointment or appointments; or
(b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or
(c) where the parties or the arbitrators are required to appoint an umpire and do not appoint him,
any party may serve the other parties or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.
(2) If the appointment is not made within fifteen clear days after the service of the said notice, the court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an aw ard as if he or they had been appointed by consent of all parties.
7. A perusal of the above provisions would show that Section 8(1)(a) of the Act, is applicable in respect of appointment of an arbitrator. Section 8(1)(b) deals with the situation where an appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, the parties are not to supply such vacancy. The said provisions were considered by the Hon’ble Supreme Court in Prabhat General Agencies’ case. In the said case, the parties by an agreement designated Judicial Commissioner of H.P. as an arbitrator. The Judicial Commissioner has refused to act as an arbitrator and the parties have not supplied that vacancy, therefore, the court found that since the vacancy has not been supplied, the court shall appoint a new arbitrator. It was held to the following effect:
The parties have not supplied that vacancy. Therefore, the only question is whether the agreement read as a whole shows either explicitly or implicitly that the parties intended that the vacancy should not be supplied. It may be noted that the language of the provision is not ‘that the parties intended to supply the vacancy’ but on the other hand it is that the parties did not intend to supply the vacancy. In other words if the agreement is silent as regards supplying the vacancy, the law presumes that the parties intended to supply the vacancy. To take the case out of Section 8(1)(b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy. We have now to see whether the agreements before us indicate such an intention.
8. In Harbans Singh Tuli and Sons Builders Pvt. Ltd.’s case the respondent-Union of India has not appointed an arbitrator when a notice was issued by the petitioner to appoint an arbitrator. An application was filed before the learned trial court. During the pendency of an application for appointment, the respondents have appointed an arbitrator. The court after considering the scope of Section 8(1)(a) and Section 8(l)(b) of the Act held to the following effect (paras 9 and 10 of Arb. LR):
18. Sub-section (1)(a) would apply to a case of initial appointment of an arbitrator or arbitrators. The implication is in the arbitration agreement, the arbitrator or arbitrators must not have been named. Where, therefore, they are named, this section will have no application. Similarly, the arbitrator or arbitrators are required to be appointed by all parties to the reference with consent. On the contrary, if there is some other mode of appointment, for example, Section 4, where the parties to the agreement agree that the arbitrator has to be appointed by a person designated in the agreement either by name or hold, for the time being in office, certainly, this section will not apply. It has also been held by this court in Chander Bhan Harbhajan Lal v. State of Punjab that even in case where by agreement between the parties, one of them alone is given power to make the appointment without consulting others, this sub-section would apply.
19. Now, we come to Sub-section (1) Clause (b). This Sub-section covers such of those cases where the arbitration is pending. However, a vacancy has arisen in any one of the following contingencies:
(i) Death,
(ii) Incapacity,
(iii) Refusal,
(iv) Neglect to act.
It also requires to be noted that two other conditions are required to be satisfied before the vacancy is sought to be filled up:
(i) The arbitration agreement did not indicate the vacancy was not intended to be filled up.
(ii) The parties could not concur in the choice.
The court found that the vacancy arisen on account of the resignation of the successive arbitrators was actually supplied by Engineer-in-chief and the question of concurrence in relation to the choice of arbitrator does not arise.
9. In fact, the judgment in National Builder’s case is relied upon by both the parties. Therefore, the effect of the said case would be relevant to consider the ratio decidendi of the said case. In the said case, the arbitrator could be the Chief Engineer or a nominee of the Chief Engineer. The Chief Engineer, who was acting as an arbitrator passed an order after 59 sittings refusing to extend the time for arbitration but also declined a request of the contractor to resign as an arbitrator. The contractor moved an application for revoking the authority of the sole arbitrator and filling the vacancy by appointing another arbitrator. While considering various judgments, the court opined that the court’s primary concern should be to uphold the arbitration but once the court is satisfied that the arbitrator has refused to discharge his obligations, then it is the statutory duty to intervene and act according to Section 8(1)(b) of the Act. Since the Chief Engineer insisted that the arbitrator was continuing and on the other hand, the arbitrator has refused to extend the time and brought arbitration to an end, the Hon’ble Supreme Court found that the courts do not appear to have committed any error in law in drawing an adverse inference that the arbitrator has refused to act. While considering the authority of the Chief Engineer to appoint another arbitrator in terms of Clause 25 of the agreement, the court found that where the arbitrator appointed refuses to act, next appointment could again he made either as agreed between the parties and provided for in the arbitration clause or by consensus. But where either is absent, no party to the arbitration agreement can be forced to undergo same procedure for the simple reason that the arbitrator having refused to act, he cannot be asked to arbitrate again. In law, the result of such refusal is that the agreement clause cannot operate. The court held to the following effect (para 5 of Arb. LR):
But where the arbitrator so appointed refuses to act the next appointment could again be made either as agreed between the parties and provided for in the arbitration clause or by consensus. But where either is absent no party to the arbitration agreement can be forced to undergo same procedure, for the simple reason that the arbitrator having refused to act he cannot be asked to arbitrate again. In law, the result of such refusal is that the agreement clause cannot operate. It, therefore, follows that in a case where the arbitration clause provides for appointment of a sole arbitrator and he had refused to act then the agreement clause stands exhausted. And it is for the court to intervene and appoint another arbitrator under Section 8(1)(b), if arbitration agreement does not show that it was intended that the vacancy shall not be supplied. That is the agreement should not debar any further arbitration. If it is provided in the agreement that if the arbitrator appointed in accordance with the agreement refuses to act then the dispute shall be resolved by another arbitrator. There is an end of the matter. But if the agreement does not show this then the next arbitrator can be appointed by the court only. The expression used in the sub-section is clear indication that the court is precluded from exercising its power only if the parties intended that the vacancy should not be filled. In other words the court shall exercise jurisdiction to appoint another arbitrator except where it is specifically debarred from doing so. The word ‘show’ used in the clause appears to be significant. It in fact furnishes key to the construction of the expression. Mere neglect or refusal to act alone is not sufficient to empower the court to intervene. The agreement must not further show that the parties intended that the vacancy shall not be supplied. To put it affirmatively in absence of clear words or explicit language to the contrary the court may appoint another arbitrator. The true effect of the word is that it extends jurisdiction of the court to exercise power, if the agreement does not specifically debar it from doing so. To put it simply the court’s power to interfere and appoint an arbitrator comes into operation if the arbitrator refuses to act and the agreement does not show that the parties did not intend that the vacancy shall not be supplied.
10. In P.G. Agencies v. Union of India it was held by this court that the language of the provision is not “that the parties intended to supply the vacancy” but on the other hand it is that “the party did not intend to supply the vacancy”. In other words, if the agreement is silent as regards supplying the vacancy the law presumes that the parties intended to supply the vacancy. To take the case out of Section 8(1)(b) what is required is not the intention of the parties to supply the vacancy but their intention is not to supply the vacancy. In Chander Bhan Harbliajan Lal v. State of Punjab , it was held that where a committee of arbitrators nominated by the government becomes incapable of acting as such it was within the competence of the court to proceed to appoint a new committee. In Union of India v. R.B. Raghunath Singh & Co. , the arbitration clause provided for settlement of dispute and differences by the Chief Commissioner/Director of Storage, Ministry of Food, Government of India and his decision was to be final and binding. The post of Director of Storage was abolished and the Chief Commissioner refused to act. The question arose whether the court could appoint an arbitrator in exercise of power under Section 8(1)(b). It was claimed on behalf of the Union of India that where there was a named arbitrator even though he was named by the office, it was not open to the court to supply the vacancy in his place under Section 8(1)(b) of the Act. The contention was repelled and it was held that the argument was without any substance as “the court had power to supply the vacancy under Section 8(1)(b) only if the arbitration agreement did not show that the parties did not intend to supply the vacancy.
11. The above extracts from the judgment would show that the power to appoint arbitrator by the court was upheld for the reason that the sole arbitrator has refused to act and, therefore, the jurisdiction to appoint another arbitrator vests with the court. In the present case, the authority competent to appoint an arbitrator has not refused to appoint an arbitrator. The clause of the agreement reproduced above, does not show that it was intended that the vacancy should be filled, therefore, in the absence of any such clause, it is presumed that the parties have agreed to supply the vacancy. Therefore, when Shri Dhillon has gone abroad, the vacancy of such an arbitrator could be supplied by the department in terms of Section 8(1)(b) of the Act. It was only when the department refused to appoint an arbitrator as was the case in National Builders, the case of Prabhat General Agencies, etc. that the arbitrator was required to be appointed by the court.
On the other hand, in Harbans Singh Tuli’s case the department has appointed an arbitrator and it was held that such appointment is not a valid appointment.
12. The judgment in Shamji Mal’s case is again not applicable to the facts of the present case, inasmuch as the question raised in the said case was whether an arbitrator, who has resigned or otherwise incapacitated, can be changed by the department. It was held that the department cannot supersede the authority of arbitrator, who has been appointed. In Jind Co-operative Sugar Mills Ltd/s case the judgment in Shamji Mal’s case has been followed without considering the earlier judgments of the Hon’ble Supreme Court referred to above.
13. Therefore, I am of the opinion that the order passed by the learned trial’ court cannot be said to be suffering from any patent illegality or irregularity, which may warrant interference by this court, in exercise of its revisional jurisdiction.
Hence, the present revision petition is dismissed.