{"id":41055,"date":"1993-10-13T00:00:00","date_gmt":"1993-10-12T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/state-of-w-b-vs-national-builders-sahai-j-on-13-october-1993"},"modified":"2017-02-14T15:29:40","modified_gmt":"2017-02-14T09:59:40","slug":"state-of-w-b-vs-national-builders-sahai-j-on-13-october-1993","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/state-of-w-b-vs-national-builders-sahai-j-on-13-october-1993","title":{"rendered":"State Of W.B vs National Builders (Sahai, J) on 13 October, 1993"},"content":{"rendered":"
Supreme Court of India<\/div>\n
State Of W.B vs National Builders (Sahai, J) on 13 October, 1993<\/div>\n
Equivalent citations: 1994 AIR 200, \t\t 1994 SCC (1) 235<\/div>\n
Author: R Sahai<\/div>\n
Bench: Sahai, R.M. (J)<\/div>\n
           PETITIONER:\nSTATE OF W.B.\n\n\tVs.\n\nRESPONDENT:\nNATIONAL BUILDERS (Sahai, J)\n\nDATE OF JUDGMENT13\/10\/1993\n\nBENCH:\nSAHAI, R.M. (J)\nBENCH:\nSAHAI, R.M. (J)\nPANDIAN, S.R. (J)\nANAND, A.S. (J)\n\nCITATION:\n 1994 AIR  200\t\t  1994 SCC  (1) 235\n JT 1993 (6)   144\t  1993 SCALE  (4)187\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
The Judgment of the Court was delivered by
\nR.M.  SAHAI,  J.- The two questions of law  that  arise\t for
\nconsideration  in  this\t appeal are if\tthe  refusal  of  an
\narbitrator  to resign while not accepting the joint  request
\nof  the parties to extend time for arbitration and leave  it
\nto  them to decide their future course of action amounts  to
\nrefusal\t to  act  by the arbitrator within  the\t meaning  of
\nSection 8(1)(b) of the Arbitration Act (in brief ‘the  Act’)
\nand if it be so whether the power to appoint next arbitrator
\nvests in the court or it has once again to be in  accordance
\nwith the procedure provided in the agreement.\n<\/p>\n
2.   Dispute  about  settlement\t of  claim  in\trespect\t  of
\nconstruction  of  250  bed hospital  at\t Basudevpura  having
\narisen between the respondent (contractor) and the appellant
\n(Public\t Works Department of the State of West\tBengal)\t the
\nChief Engineer nominated a Superintending Engineer as
\n238<\/span>
\narbitrator  in accordance with Clause 25 of  the  agreement,
\nthe relevant part of which runs as under:\n<\/p>\n
\t      “Except\twhere  otherwise  provided  in\t the
\n\t      contract all questions and disputes …  shall
\n\t      be  referred  to the sole arbitration  of\t the
\n\t      Chief Engineer of the department.\t Should\t the
\n\t      Chief Engineer be for any reason be  unwilling
\n\t      or  unable  to act as  such  arbitrator,\tsuch
\n\t      questions and disputes shall be referred to an
\n\t      arbitrator  to  be  appointed  by\t the   Chief
\n\t      Engineer.”\n<\/p><\/blockquote>\n
3.   When  despite 59 sittings the proceedings did not\tcome
\nto   an\t  end  and  the\t  arbitrator   entertained   certain
\napplications  of  the  appellant  at  a\t belated  stage\t the
\nrespondent sought his resignation for legal misconduct.\t The
\napplication  was  decided by the arbitrator  by\t a  detailed
\norder with following observations:\n<\/p>\n
\t      “I  have given my opinion that there has\tbeen
\n\t      no misconduct on any of the grounds before  me
\n\t      by  the  learned\tclaimant, yet I\t am  of\t the
\n\t      opinion  justice delayed is  justice  denied
\n\t      and  since in this case there has\t been  delay
\n\t      and the process in which the learned Advocates
\n\t      of  both the parties are leading and  pleading
\n\t      the case, delay is inevitable, if the claimant
\n\t      suffers from loss of confidence and apprehends
\n\t      miscarriage  of  justice from  the  arbitrator
\n\t      whose award is vital to him I shall not intend
\n\t      to  interfere  in\t his  way  of  pursuit\t for
\n\t      justice.\n<\/p><\/blockquote>\n
\t      I, therefore, direct that further extension of
\n\t      time  on consent of both the parties will\t not
\n\t      be  allowed  by me and the  extended  date  of
\n\t      arbitration is being allowed to expire.
\n\t      As regards claimants’ humble prayer to me that
\n\t      I would be pleased to resign from the  office,
\n\t      I\t am restraining myself in issuing any  order
\n\t      as  it concerns interest of both\tthe  parties
\n\t      and I leave it to both the parties to decide.”\n<\/p><\/blockquote>\n
With this order the respondent approached the Chief Engineer
\nand  sought  for appointment of a retired  Additional  Chief
\nEngineer  named in the application as the  sole\t arbitrator.
\nThe  request  was  not accepted as according  to  the  Chief
\nEngineer the arbitrator appointed was still continuing.\t The
\nrespondent  was however permitted to approach the court\t for
\nextension  of  time.   Tile respondent,\t instead  of  filing
\napplication  for extension of time, approached the Court  of
\nAssistant District Judge under Section 12(2) of the Act\t for
\nrevoking  authority of the sole arbitrator and\tfilling\t the
\nvacancy\t by appointing another arbitrator.  The\t application
\nwas allowed as in the opinion of the court the arbitrator in
\nthe circumstances of the case had refused to act.  The order
\nwas  challenged by way of application under Article  227  of
\nthe  Constitution.   The application was  dismissed  as\t the
\ninference  drawn  by  the trial court  that  the  arbitrator
\nrefused\t to  act was a plausible one.  It  is  against\tthis
\norder  that this appeal has been filed.\t It is not clear  if
\nduring pendency of the application under Article 227 in\t the
\nHigh  Court the appellant had applied for any interim  order
\nfor  stay  of  further proceedings  before  the\t arbitrator.
\nHowever even if it was prayed for then it presumably was not
\ngranted as,
\n239<\/span>
\nadmittedly,   during   pendency\t of  the   application\t the
\narbitrator appointed by the Assistant District Judge started
\nthe proceedings in which the Executive Engineer appeared but
\nexpressed  his\tinability to participate in absence  of\t any
\ninstruction  from  the\tdepartment  and\t also  because\t the
\ndepartment  had decided to challenge the order of the  trial
\ncourt before the High Court.  In any case it is not disputed
\nthat  the arbitrator, since, has given the award  which\t has
\nnot   been  challenged\tby  the\t department.   May  be\t the
\ndepartment might have been advised, that the finality of the
\naward could be subject to decision of this appeal as if\t the
\nappointment of the next arbitrator is held to be invalid the
\nproceedings consequent to it shall fall automatically.\n<\/p>\n
4.   To\t decide\t if  the court\twas  justified\tin  assuming
\njurisdiction to appoint another arbitrator as the arbitrator
\nappointed  by the Chief Engineer under Clause 25 refused  to
\nact, it is necessary to examine the scope of Section 8(1)(b)
\nof the Arbitration Act which reads as under:
\n“8. (1) In any of the following cases(a) ….\n<\/p>\n
\t      (b)   If\tany appointed arbitrator  or  umpire
\n\t      neglects or refuses to act, or is incapable of
\n\t      acting,\tor   dies,   and   the\t arbitration
\n\t      agreement, does not show that it was  intended
\n\t      that  the vacancy should not be  supplied\t and
\n\t      the  parties or the arbitrators, as  the\tcase
\n\t      may be, do not supply the vacancy; or\n<\/p>\n
\t      (c) ….\n<\/p>\n
\t      any  party may serve the other parties or\t the
\n\t      arbitrators,  as\tthe  case  may\tbe,  with  a
\n\t      written notice to concur in the appointment or
\n\t      appointments or in supplying the vacancy.”
\nThis provision vests the court with supervisory jurisdiction
\nto  interfere with relationship between the parties and\t the
\narbitrator if any of the situations as provided in this sub-
\nsection\t  comes\t into  being.\tWhat  was  claimed  by\t the
\nrespondent, which has been accepted by the courts below,  is
\nthat  the  sole arbitrator appointed by the  Chief  Engineer
\nrefused to act.\t The question, therefore, is what does\tthis
\nexpression mean?  Refusal to act in legal sense means denial
\nto  do\tsomething  which one is obliged\t to  do\t under\tlaw.
\nBlack’s Law Dictionary explains it thus: ‘The act of one who
\nhas, by law, a right and power of having or doing  something
\nof  advantage, and declines it’.  In private law,  of  which
\narbitration  is a part with court’s power to  supervise\t and
\nintervene   in\t arbitral   proceedings\t  within   statutory
\nframework,  an\tarbitrator  who is  appointed,\twith  common
\nconsent\t of  parties, may not proceed with  arbitration\t for
\nvarious\t reasons.   The\t refusal to act may  be\t express  or
\nimplied.   If an arbitrator resigns or informs\tthe  parties
\nhis inability to act it would be express refusal.  And\teven
\nthe courts cannot force him to arbitrate.  In Shibcharan  v.
\nRatiraman  when\t despite his refusal the  Subordinate  Judge
\ndirected  the records to be sent back to the arbitrators  to
\nsubmit the award
\n1 ILR (1885) 7 All 20: 1884 AWN 212
\n240<\/span>
\nwithin\tten days who, thereafter, made the same it  was\t set
\naside by the High Court and it was held:\n<\/p>\n
\t      “Expression  has recently been given  by\tthis
\n\t      Court  to\t the  view, that  one  of  the\tmost
\n\t      essential principles of the law of arbitration
\n\t      is,  that\t the  adjudication  of\tdisputes  by
\n\t      arbitration  should be the result of the\tfree
\n\t      consent  of  the arbitrator to  undertake\t the
\n\t      duties  of arbitrating between the  contending
\n\t      parties  who have agreed to repose  confidence
\n\t      in his judgment.\tIndeed, the finality of such
\n\t      award  is\t based entirely upon  the  principle
\n\t      that the arbitrators are judges chosen by\t the
\n\t      parties  themselves, and that such judges\t are
\n\t      willing  to  settle the disputes\treferred  to
\n\t      them.\n<\/p><\/blockquote>\n
\t      This essential characteristic of the effect of
\n\t      such adjudications is necessarily vitiated  if
\n\t      compulsion is employed by the Court.”\n<\/p><\/blockquote>\n
5.   Refusal to act may be inferred as well.  On what  facts
\nsuch  an  inference can be raised cannot be laid  down\twith
\ncertainty.  There can be no fixed principle for it.  When an
\narbitrator  has failed to discharge his obligation so as  to
\ngive  rise  to an inference that he has refused\t to  act  it
\nshall  have  to\t be  decided  by  the  court  on  facts\t and
\ncircumstances of each case.  For instance in Priyabrata Bose
\nv.  Phani Bhusan Ghose2 the High Court held that  even\twhen
\nthe  arbitrator was not willing to proceed unless  his\tfees
\nwere  paid in advance, it was refusal to act.\tInaction  by
\nthe  arbitrator or inordinate delay in rendering  the  award
\nare  yet  some\tof other reasons due to\t which\tcourts\thave
\nraised an inference that the arbitrator refused to act. (See
\nManohar Singh Sahay & Co. v. Jogendra Singh Kalra3, State of
\nU.P. v. Sardul Singh Kulwant Singh4 and Gajanand Sita Ram v.
\nPhul Chand Fateh Chand5.  The parties appoint an  arbitrator
\nby  consent and he undertakes to decide the dispute  out  of
\nhis free will.\tHe may withdraw his consent expressly or may
\nact  in\t a manner giving rise to inference that he  was\t not
\nwilling to act any more.  In either case the basic principle
\nis that the arbitrator cannot be forced to act.\t But such an
\ninference should not be readily raised.\t The court’s primary
\nconcern\t should be to uphold the arbitration.  But once\t the
\ncourt  is  satisfied  that the\tarbitrator  has\t refused  to
\ndischarge  his\tobligations then it has\t statutory  duty  to
\nintervene and act in accordance with Section 8(1)(b) of\t the
\nAct.   From  the order of the arbitrator  extracted  earlier
\nwhat  is  made out is that he felt that the  respondent\t had
\nlost  confidence  in  him.  With opinion,  thus\t formed,  he
\nrefused\t to accede to the request of the parties  to  extend
\nthe time for the award and directed parties to decide  their
\nfuture\tcourse of action.  True that he did not resign.\t  It
\nis  also  true\tthat the Chief Engineer\t insisted  that\t the
\narbitrator was continuing.  But where the arbitrator refused
\nto extend time and brought arbitration to an end leaving  it
\nopen  to parties to decide their future course of action  as
\none of the parties whose vital stakes were involved did\t not
\nhave confidence in him, the courts
\n2 AIR 1937 Cal 523
\n3 AIR 1984 Pat
\n3: 1983 BBCJ (HC) 606
\n4 AIR 1985 All 67: 1985 All CJ 117
\n5 AIR 1930 All 675: 1930  ALJ 1373
\n241<\/span>
\ndo not appear to have committed any error of law in  drawing
\ninference that the arbitrator had refused to act.\n<\/p>\n
6.   More important issue than this that was urged was\tthat
\nsince  Clause  25  of  the  agreement  empowered  the  Chief
\nEngineer  to nominate any other person to act as  arbitrator
\nthe intention was to fill the vacancy in the same manner  as
\nprovided  in the agreement.  This raises an important  issue
\nas  to whether the power of the Chief Engineer to  arbitrate
\nhimself\t or  to nominate any other person as  arbitrator  is
\nexhausted or revived after the earlier arbitrator  nominated
\nby  him\t refused to act.  In other words does the  power  to
\nappoint a sole arbitrator under the agreement come to an end
\nwith such appointment or every time an arbitrator refuses to
\nact  the  parties are to take recourse\tto  appoint  another
\narbitrator as provided in the agreement itself.\t  Settlement
\nof  dispute  between  the  parties  through  medium  of\t  an
\nindependent person in whom both parties repose confidence is
\nthe basic foundation on which the entire law of\t arbitration
\nis  founded.   When  the  agreement  provides  that  dispute
\nbetween parties shall be referred to the person named in  an
\nagreement  it is an appointment by consent.  But  where\t the
\narbitrator so appointed refuses to act the next\t appointment
\ncould again be made either as agreed between the parties and
\nprovided for in the arbitration clause or by consensus.\t But
\nwhere either is absent no party to the arbitration agreement
\ncan  be\t forced to undergo same procedure,  for\t the  simple
\nreason\tthat the arbitrator having refused to act he  cannot
\nbe  asked  to arbitrate again.\tIn law the  result  of\tsuch
\nrefusal\t is that the agreement clause cannot  operate.\t It,
\ntherefore,  follows  that in a case  where  the\t arbitration
\nclause provides for appointment of a sole arbitrator and  he
\nhad  refused  to  act  then  the  agreement  clause   stands
\nexhausted.  And it is for the court to intervene and appoint
\nanother\t arbitrator under Section 8(1)(b),  ‘if\t arbitration
\nagreement  does\t not  show that it  was\t intended  that\t the
\nvacancy\t should\t not be supplied’.  That is,  the  agreement
\nshould not debar any further arbitration.  If it is provided
\nin  the\t agreement  that  if  the  arbitrator  appointed  in
\naccordance  with  the  agreement refuses  to  act  then\t the
\ndispute shall be resolved by another arbitrator, there is an
\nend of the matter.  But if the agreement does not show\tthis
\nthen the next arbitrator can be appointed by the court only.
\nThe  expression used in the subsection is  clear  indication
\nthat  the court is precluded from exercising its power\tonly
\nif  the\t parties  intended that the vacancy  should  not  be
\nfilled.\t   In\tother  words  the   court   shall   exercise
\njurisdiction  to appoint another arbitrator except where  it
\nis  specifically  debarred from doing so.  The\tword  ‘show’
\nused  in the clause appears to be significant.\tIt  in\tfact
\nfurnishes  the\tkey to the construction of  the\t expression.
\nMere  neglect or refusal to act alone is not  sufficient  to
\nempower\t the  court to intervene.  The\tagreement  must\t not
\nfurther\t show  that the parties intended  that\tthe  vacancy
\nshall  not be supplied.\t To put it affirmatively in  absence
\nof  clear  words or explicit language to  the  contrary\t the
\ncourt  may appoint another arbitrator.\tThe true  effect  of
\nthe  word  is that it extends jurisdiction of the  court  to
\nexercise power, if the agreement does not specifically debar
\nit  from  doing so.  To put it simply the court’s  power  to
\ninterfere and appoint an arbitrator comes into operation  if
\nthe arbitrator
\n242<\/span>
\nrefuses\t to  act and the agreement does not  show  that\t the
\nparties\t did  not  intend  that the  vacancy  shall  not  be
\nsupplied.  In Prabhat General Agencies v. Union of India6 it
\nwas held by this Court: (SCC p. 82, para 4)
\n\t      “… that the language of the provision is not
\n\t      ‘that  the  parties  intended  to\t supply\t the
\n\t      vacancy’ but on the other hand it is that ‘the
\n\t      party  did not intend to supply the  vacancy’.
\n\t      In  other words if the agreement is silent  as
\n\t      regards supplying the vacancy the law presumes
\n\t      that  the\t parties  intended  to\tsupply\t the
\n\t      vacancy.\t To  take the case  out\t of  Section
\n\t      8(1)(b) what is required is not the  intention
\n\t      of the parties to supply the vacancy but their
\n\t      intention not to supply the vacancy.”\n<\/p>\n
In  Chander  Bhan Harbhajan Lal v. State of Punjab7  it\t was
\nheld that where a committee of arbitrators nominated by\t the
\nGovernment  becomes  incapable\tof acting as  such  “it\t was
\nwithin\tthe competency of the Court to proceed to appoint  a
\nnew  committee”.  In Union of India v. R.B.  Ch.   Raghunath
\nSingh & Co.8 the<\/a> arbitration clause provided for  settlement
\nof     dispute\t  and\t differences\tby     the     Chief
\nCommissioner\/Director\tof   Storage,  Ministry\t  of   Food,
\nGovernment  of\tIndia and his decision was to be  final\t and
\nbinding.  The post of Director of Storage was abolished\t and
\nthe  Chief Commissioner refused to act.\t The question  arose
\nwhether the Court could appoint an arbitrator in exercise of
\npower  under Section 8(1)(b).  It was claimed on  behalf  of
\nthe  Union of India that where there was a named  arbitrator
\neven  though he was named by office, it was not open to\t the
\nCourt  to  supply  the vacancy in his  place  under  Section
\n8(1)(b) of the Act.  The contention was repelled and it\t was
\nheld  that the argument was without any substance  as:\t“the
\nCourt  had  no\tpower to supply the  vacancy  under  Section
\n8(1)(b) only if the arbitration agreement did show that\t the
\nparties\t did not intend to supply the vacancy.\tIf  no\tsuch
\nintention  could be culled from the arbitration clause,\t the
\ncourt  could supply the vacancy.” (SCC p. 22, para 4) It  is
\nthus settled that even where an authority is named by office
\nto  be\tthe sole arbitrator but he refuses to act  then\t the
\njurisdiction  to  appoint another arbitrator  vests  in\t the
\ncourt.\t Since Clause 25 of the agreement extracted  earlier
\ndoes not indicate that the parties did not intend to  supply
\nthe  vacancy  the  court  in  our  opinion  rightly  assumed
\njurisdiction  under  Section  8(1)(b)  to  appoint   another
\narbitrator.\n<\/p>\n
7.   Basis   for  assuming  such  jurisdiction,\t as   stated
\nearlier, is that the clause is rendered inoperative.   Where
\nthe agreement provides for appointment of a specific  person
\neither by name or by designation and that person refuses  to
\nact then the question of appointing him again cannot  arise.
\nRefusal\t by  such a person results in the  agreement  clause
\nceasing to operate.  When two parties agree for\t appointment
\nof  A  or B by name or designation and the person  so  named
\nrefuses\t to act then the agreement shall be deemed  to\thave
\nexhausted  itself.   The person so named having\t refused  to
\nact, he
\n6 (1971) 1 SCC 79
\n7 (1977) 2 SCC 715
\n8 (1979) 4 SCC 21
\n243<\/span>
\ncannot be asked again to arbitrate.  That would be  contrary
\nto  the very basis of arbitration that no one can be  forced
\nto act against his free will.  It would also be contrary  to
\nthe  agreement\tand  if there is  no  agreement\t to  appoint
\nanother person, the only remedy is to approach the court  to
\nexercise its statutory power and appoint another arbitrator.
\nSame  result follows where the arbitration  clause  empowers
\nthe  sole  arbitrator  either to  arbitrate  himself  or  to
\nnominate  anyone else.\tIt was urged that the  principle  of
\nagreement  clause  coming to an end cannot apply  where\t the
\nsole  arbitrator  has been given power to  nominate  another
\nperson.\t  According to the learned counsel once the  nominee
\nrefused\t to  act the Chief Engineer was again  empowered  to
\nnominate  another person in his place.\tIn our\topinion\t the
\nsubmission  is not well founded in law.\t A person  nominated
\nby the sole arbitrator stands substituted in his place.\t  He
\ndoes  not have any independent personality.  The  power\t and
\nauthority  exercised  by him is the same  as  the  authority
\nwhich nominated him.  Therefore, once the nominee refuses to
\nact it shall be deemed that the arbitrator mentioned in\t the
\narbitration  clause  has refused to act and  therefore,\t the
\nclause\twould  cease to operate in the same  manner  as\t the
\nChief Engineer himself has refused to act.  The\t appointment
\nof next arbitrator could, only be in accordance with Section
\n8(1)(b) of the Act.\n<\/p>\n
8.   For  these\t reasons the appeal fails and  is  dismissed
\nwith costs.\n<\/p>\n
248<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India State Of W.B vs National Builders (Sahai, J) on 13 October, 1993 Equivalent citations: 1994 AIR 200, 1994 SCC (1) 235 Author: R Sahai Bench: Sahai, R.M. (J) PETITIONER: STATE OF W.B. Vs. RESPONDENT: NATIONAL BUILDERS (Sahai, J) DATE OF JUDGMENT13\/10\/1993 BENCH: SAHAI, R.M. (J) BENCH: SAHAI, R.M. (J) PANDIAN, S.R. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-41055","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nState Of W.B vs National Builders (Sahai, J) on 13 October, 1993 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/state-of-w-b-vs-national-builders-sahai-j-on-13-october-1993\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"State Of W.B vs National Builders (Sahai, J) on 13 October, 1993 - 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