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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
FIRST APPEAL NO.644 OF 1991
M/s.Padmashree Enterprises,
851/2, VRINDAVAN
Bhandarkar Institute Road,
Erandwane,
Pune 411 004,
by its Sole Proprietor
Shri S.S.Banhattiig ..Appellant
(Claimant in Suit
Respondent in Misc.
Application)
versus
1. The State of Maharashtra,
through Government Pleader,
High Court, Bombay.
2. The Executive Engineer,
Kanher Canal Division,
Satara ..Respondents
(Respondent in Suit.
Applicant in Misc.
Application)
Mr.Atul Rajadhyaksha, Senior Counsel with Mr.Kedar
Wagle, Pankaj Vernekar i/b. V.D.Surve for the
appellants.
Mrs.Gita Mulekar AGP for the respondent No.1.
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Mr. Vijay Patil for Respondent No.2.
CORAM : R.Y.GANOO, J.
DATE : 12th JUNE, 2009.
ORAL JUDGMENT:
1. Appellants herein were awarded contract to carry
out certain Civil Construction Work in regard to
Krishna Project.
ig The appellants and respondents
have for the purpose of complying with the terms and
conditions of the said agreement entered into what
may be referred to as Tender Contract and in the
tender contract there were clauses No.54 and 55
concerning reference of dispute to arbitration in
case dispute arises between the appellants and
respondents. As to which points could be referred
to the Arbitrator is well discussed in clauses 54
and 55 of the tender contract and there is no
dispute about it. The record also indicates that
between the appellants and the respondents certain
dispute arose in regard to the performance of the
contract and the related aspects and as a result of
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that the appellants called upon the respondents to
proceed to take steps to refer the dispute to
arbitration and this was done in terms of letter
dated 13.6.1985. The record also shows that in
terms of clause 55 of the Tender Contract the
respondents were required to inform names of
three persons out of whom one could be accepted by
the appellants as Arbitrator. The record shows that
the Respondents
ig did not communicate to the
appellants the said three names. It is seen that
thereafter on 10.9.1985 the appellants furnished to
the respondents three names and requested the
respondents to select one person for being appointed
as Arbitrator in terms of Clause 55 of the tender
contract. The said letter was replied to by the
respondents by letter dated 24.9.1985 and the
respondents took a stand that as the terms and
conditions prescribed in Clause 55 of the tender
contract were not complied with no further action
can be taken for the purpose of referring the
dispute to arbitration. That letter dated 24.9.1985
was treated by the appellants as the circumstance
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viz. Failure of Machinery for the purpose of
appointment of Arbitrator by consent of both the
parties as envisaged under Rule 55 of the tender
contract.
2. Mr.S.S.Banhati who was concerned with the present
appellants instituted Misc. Application No.581 of
1986 in the Court of Civil Judge, Senior Division,
Pune for appointment of the Arbitrator in accordance
with the provisions of Section 8 of the Arbitration
Act, 1940 (for short said Act). According to the
appellants on account of various developments which
took place between the appellants and respondents in
the matter of referring the dispute to Arbitrator,
the Arbitrator could not be appointed by consent and
therefore the Court had power to appoint Arbitrator
under Section 8 of the Arbitration Act, 1940, by
exercising the powers conferred upon the Court in
accordance with the provisions of Section 8(1)
(Clause a) of said Act. It must be mentioned that
notice of this application was served upon the
respondents and the learned Civil Judge, Senior
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Division, Pune, by his Judgment and Order dated
27.2.1987 granted the said application and appointed
Shri R.G.Kulkarni, Superintending Engineer as the
sole Arbitrator to decide the dispute (claims)
raised by the present applicant.
3. Record shows that Mr.R.G.Kulkarni who was appointed
as Arbitrator took charge of the dispute and
performed the job as an Arbitrator.
ig Before the Ld.
Arbitrator Mr.Kulkarni the appellants put up their
claim. The respondents herein also lodged their
counter claim and the claim of the appellants as
well as the claim of the respondents were attended
to by the learned Arbitrator Mr.Kulkarni. It is
seen that appropriate opportunity was given to both
the sides to present their respective cases and the
learned Arbitrator by his award dated 22.10.1998
gave his ruling and declared the award. Thereafter
this award was filed in the Court at Pune on
31.10.1988. This was done by the appellant as a
successful party was required to apply for decree in
terms of the award. The application was filed by
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the present appellants requesting the concerned
Court for converting the award into decree. The
application was numbered as Special Civil Suit No.
1091 of 1988.
4. As per the provisions of Section 30 of the said Act,
the respondents herein filed Civil Misc. Application
No.12 of 1989 praying that the award passed by the
learned Arbitrator
ig should be set aside. The
proceedings filed by the present appellants as well
as the Civil Misc. Application No.12 of 1989 came to
be tagged together and the said proceedings were
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assigned to the Learned 6 Joint Civil Judge, Senior
Division, Pune, (Hereinafter referred to as the
learned Judge). The learned Judge heard the
respective parties and passed the following Order
dated 15.3.1990.
The award in the instant case is set aside.
Civil Misc. Application No.12/1989 is allowed
and the impugned award is set aside as found non-
est and void-ab-initio. As the award is set aside
there is no necessity to pass a decree in
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pursuance thereof under Section 17 of the
Arbitration Act.
Considering the circumstances of the case, I
further find and order that both the parties to
bear their own costs of these proceedings.
Decree be drawn accordingly
5. By the said award the Special Civil Suit No.1091 of
1988 was dismissed.
ig The Civil Misc. Application No.
12 of 1989 was granted and the award was set aside.
Being aggrieved by this Judgment and Order dated
15.3.1990, the appellants have filed the present
First Appeal. Before this Court, learned Senior
Counsel Mr.Rajadhyaksha and learned Advocate Mr.
Patil and AGP Mrs.Mulekar were heard on the question
of correctness of Order dated 15.3.1990. Learned
Senior Counsel Mr. Rajadhyaksha read to me the
provisions of Clause 54 and 55 of the tender
contract as well as the proceedings which were
initiated by the present appellants being
Application under Section 8 of the said Act and
Order passed below it, and text of the award which
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came to be attended to by the learned Judge.
Learned Senior Counsel Mr. Rajadhyaksha has
submitted that if one reads all these proceedings it
is clear that both the parties, namely the
appellants and the respondents were in agreement
that the disputes raised by the appellants as well
as the respondents could be referred to the
Arbitrator. He further submitted that provisions of
Clause 55 in the
ig tender contract indicated the
procedure for appointment of Arbitrator. He further
submitted that the record clearly indicates that in
view of certain developments the Arbitrator could
not be appointed in accordance with the machinery
set out in accordance with Clause 55 of the tender
Contract and therefore the present appellants were
required to file application under Section 8 of the
said Act. He pointed out that the concerned Court
which entertained the said application and appointed
Mr.R.G.Kulkarni as an Arbitrator. He stressed that
this Order appointing Mr.R.G.Kulkarni was not
challenged by the respondents and the respondents
appeared before Mr.R.G.Kulkarni opposed the claim
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of the appellants, tendered their counter claim and
invited the Arbitrator to pass the award. Learned
Senior Counsel Mr. Rajadhyaksha therefore submitted
that the way in which the developments took place in
the matter clearly indicate that both the parties
wanted to resolve the dispute through Arbitration.
Learned Senior Counsel Mr.Rajadhyaksha submitted
that the learned Judge who passed the Order dated
15.3.1990 erred in coming to the conclusion that the
Arbitrator appointed under Section 8 of the said
Act was not proper. Learned Senior Counsel Mr.
Rajadhyaksha submitted that if one appreciates
clause 55 of the Tender Contract it would clearly go
to show that if due procedure set out in clause 55
was acted upon by both the parties the said
Arbitrator would have been appointed by consent of
both the parties. He submitted that on
interpretation of clause 55 of tender contract it
should have been held that procedure for appointment
of arbitrator was Appointment of Arbitrator by
Consent and once no Arbitrator was appointed by
consent, the party which was intending to have
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Arbitrator appointed could resort to provisions of
Section 8 of the said Act and call upon the Court to
appoint the Arbitrator. Learned Senior Counsel Mr.
Rajdhyaksha contended that the procedure followed in
Section 8 of the said Act was attended to by the
appellants and the Court passed an Order appointing
Mr.R.G.Kulkarni as Arbitrator and therefore
appointment of abritrator was proper. Learned
Senior Counsel Mr. Rajadhyaksha took me through the
contents of paragraph 10 of impugned Order and
submitted that the learned Judge erred in arriving
at conclusion that the Arbitrator was to be
appointed by named Authority. Learned Senior
Counsel Mr. Rajadhyaksha submitted that the learned
Judge wrongly resorted to the judgment in the case
of Union of India vs. M/s.Ajit Mehta and Associates,
Pune and Others reported in AIR 1990, Bombay 45. He
submitted that reference to this judgment, and in
particular reference to paragraph 9 of the said
judgment was incorrect and there was nothing like
Arbitrator being appointed by the named authority in
so far as this case is concerned. Learned Senior
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Counsel Mr. Rajadhyaksha therefore submitted that
the learned Judge erred in arriving at the
conclusion that Clause 55 of the tender contract
goes to show that the Arbitrator was to be
appointed by named Authority. He submitted that if
this submission of his is accepted by this Court,
then the appointment of R.G.Kulkarni will have to be
treated as properly made and then Special Civil Suit
NO.1091 of 1988 as well as Civil Misc. Application
No.12 of 1989 filed by the respondents will have to
be remanded to same Court which decided both the
proceedings for decision on merits as the learned
Judge who passed the Order on 15.3.1990 has not
passed Orders on both the proceedings on merits.
6. Learned Counsel Mr. Patil appearing on behalf of the
respondent No.2 opposed the submissions advanced by
learned Counsel Mr. Rajadhyaksha. He contended that
Clause 55 of the tender Contract, if construed in
proper manner would clearly go to show that the
Chief Engineer of Irrigation Department, Specified
Projects, Pune was the authority named in Clause 55
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for the purposes of appointment of Arbitrator and
because Arbitrator was not appointed by Chief
Engineer, Irrigation Department, Specified Projects,
Pune the appointment of R.G.Kulkarni as Arbitrator
was not proper. Learned Counsel Mr. Patil tried to
support the Order passed by the learned Judge who
rejected both the proceedings and contended that the
Order impugned in this First Appeal is properly
passed and no interference is required.
7. Learned Counsel Mrs. Mulekar supported the
submissions advanced by learned Counsel Mr.Patil.
8. After having considered the rival submissions, I
hold that the point required to be decided by this
Court is whether Clause 55 of the tender Contract
lays down the procedure for appointment of
Arbitrator by consent. Once the finding is recorded
in that behalf, further views can be expressed by
this Court. A perusal of Clause 55 of the tender
Contract would clearly go to show that if the
dispute is to be referred to the Arbitrator between
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the appellants and the respondents the Chief
Engineer, Irrigation Department, Sp. Projects, Pune,
in the first place was required to suggest name of
three persons and the present appellant was required
to accept one of them so that the Order can be
passed by the Chief Engineer for appointment of that
person as Arbitrator. It also shows that if no
steps are taken by the Chief Engineer to give the
list of three persons then it was for the appellant
to give the names of three persons and then the
Chief Engineer was required to accept one of them.
This will clearly go to show that whosoever would
have been appointed as Arbitrator either from the
list given by the Chief Engineer or from the list
given by the Appellants would have been appointed
by consent of both the parties as both of them had
given their willingness to accept the person as
Arbitrator.
9. In view of the aforesaid observations, I hold that
the procedure prescribed for the appointment of
Arbitrator between the appellant and respondents was
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Appointment of Arbitrator by Consent . I also hold
that in the event of failure of machinery for
appointment of Arbitrator by Consent as above the
party which was interested in having Arbitrator
appointed had to go to the Competent Court as
provided under Section 8 of the said Act.
10.I now come to the observations of the learned Judge
who passed the impugned Order.
ig The learned Judge
has observed as follows:
Considering the procedure given for appointment of
the arbitrator as contemplated under clause 55, it
could be see that the arbitrator is to be appointed
in a given procedure by the claimant separately viz.
The Chief Engineer and if he failed to appoint the
arbitrator as provided then by the contractor
himself. Therefore, it is the case where the
arbitrator is not to be appointed by consent of both
the parties, but it is to be appointed by the named
authority firstly by the Chief Engineer and on its
failure in prescribed manner by the contractor
himself, and therefore, the ruling cited is
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aplicable in the instant case as appointment of the
arbitrator by name under Section 8 by the Court is
itself illegal and without jurisdiction.
Consequently the proceedings before the arbitrator
are vitiated and must be observed categorically as
void and hence award passed by the arbitrator is
void-ab-initio and non-est.
11.In my view this observation would be contrary to
the scheme which was provided under Clause 55 of the
tender condition and there was no question of either
Chief Engineer or the representative of the
Appellants appointing a particular person as
Arbitrator. The clause 55 of tender contract is
very clear viz. three names would originate from
one side and one name out of them was to be
accepted. Whether the three names would get
originated at the instance of Chief Engineer or
appellant was not relevant. In the end the
appointment would be by consent and there was
nothing like appointment of Arbitrator by named
Authority. After having read the impugned Order, I
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am inclined to observe that the learned Judge
without any specific reasons introduced the concept
of appointment of Arbitrator by Named Authority in
so far as the present case is concerned. None of
the parties ever thought of Appointment of
Arbitrator by Named Authority . In my view, the
learned Judge who passed the impugned Order without
any specific reasons and justification came to the
conclusion that the appointment of the Arbitrator
was to be made by the Named Authority . He erred
in coming to the conclusion that tender contract
introduced the concept of appointment of Arbitrator
by Named Authority .
12.For the aforesaid reasons, the observations of the
learned Judge in the impugned judgment to that
extent will have to be set aside. Once this is
done, the final Order passed by the impugned Judge
will also have to be set aside as the appellant as
well as respondents must get opportunity to present
their points before the Court to enable the learned
Judge to decide whether the award should be
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converted into decree or it should be set aside.
This will mean that both the proceedings will have
to be remanded to the concerned Court. The
concerned Court will have to give chance to the
appellant as well as the respondents in the
respective proceedings and pass the final Order.
13.In view of the aforesaid discussion, the first
appeal is being disposed of by passing the following
Order:
ORDER
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i. Judgment & Order dated 15.3.1990 passed by the 6
Joint Civil Judge, Senior Division, Pune in
Special Civil Suit No.1091 of 1988 filed by the
present appellants and the Civil Misc. Application
No.12 of 1989 filed by the present respondents is
set aside.
ii.Special Civil Suit No.1091 of 1988 and Civil
Misc. Application No.12 of 1989 are restored to
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the file of the Court of 6 Joint Civil Judge,
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Senior Division, Pune, Accordingly, both the
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proceedings are remanded to the Court of 6 Joint
Civil Judge, Senior Division, Pune.
iii.The record and proceeding be sent back to the
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Court of 6 Joint Civil Judge,Senior Division,
Pune.
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iv.Upon receipt of the record by the 6
ig Joint Civil
Judge, Senior Division, Pune, he shall issue
notices to the appellants as well as to the
respondents and fix the date for hearing of
Special Civil Suit No.1091 of 1988 and Civil Misc.
Application No.12 of 1989 and that he shall hear
and dispose of these two proceedings on merits in
accordance with the provisions of law. It is
th
hereby ordered that the 6 Joint Civil Judge,
Senior Division, Pune to whom the proceedings are
remanded shall hear and dispose of both the
proceedings as expeditiously as possible and
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preferably by 30 January, 2010. It is hereby
clarified that no views are expressed by this
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Court on the merits of the aforesaid two
proceedings.
v. In the facts and circumstances of the case there
shall be no Order as to costs.
(R.Y.Ganoo, J.)
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