UNION OF INDIA Vs. PRAFULLA KUMAR SANYAL

JUDGEMENT

(1.) This appeal is preferred by special leave by the Union of India against the judgment and order of the Calcutta High Court dated 31st July, 1968. The Union of India called for tenders for the construction of a bridge on Imphal River in the State of Manipur. The respondent submitted his tender and the tender was accepted by the appellant at Manipur on 20-2-1965. On 11-3-65, a formal agreement was entered into in writing between the parties. On behalf of the President of India, the Executive Engineer, Hydro Electric and Bridges Project Division, executed the agreement. The deed of agreement contained and arbitration clause which provided that except where otherwise provided in the contract, all questions and disputes arising out of or relating to the contract shall be referred to the sole arbitration of the person appointed by the President of India with such designation only as he may specify for Manipur Territory and if he is unwilling to act, to the sole arbitration of some other person appointed by the arbitrator."

(2.) A dispute arose between the parties and the respondent filed a suit against the Union of India in the High Court of Calcutta under the Arbitration act and prayed that the arbitration agreement dated 1st March 1965 be filed and that an order of reference be made to the arbitrator under the terms of the said agreement. Before the single Judge who took the matter at the first instance, the application was resisted on the ground that no part of the cause of action has arisen within the jurisdiction of the Calcutta High Court. Learned single Judge rejected this contention on behalf of the appellant herein holding that the averments made in paragraphs 13 to 15 and paragraphs 18 to 21 showed that parts of cause of action had arisen within the jurisdiction of the Court and the Court had jurisdiction to try any suit in respect of the said subject-matters if such suit had been filed in the Calcutta High Court. In this view, the Court rejected the objection filed by the Union of India and appointed Mr. Tapash Banerjee, a member of the Bar, as the Arbitrator. Against the judgment, the Union of India preferred a Letters Patent appeal. In the Letters Patent appeal, the Union of India did not impeach the conclusion and finding of the learned Judge that the Court had jurisdiction to deal with the matter. But, it was submitted on behalf of the Union of India that the clause 29 of the agreement provided that any matter of dispute shall be referred to the sole arbitration of the person appointed by the President of India (with such designation only as he may specify for Manipur Territory) or if he is unwilling to act to the sole arbitration of some other person appointed by the arbitrator. An arbitrator can be appointed only under the terms of the agreement. The High Court rejected this contention on the ground that the arbitration agreement does not mention any appointed arbitrator. The arbitration agreement states that an arbitrator has to be appointed by the President of India or if he is unwilling to act to the sole arbitration, some other person has to be appointed by the Administration. The High Court in appeal held that it was manifest that there was no arbitrator appointed in the agreement.

(3.) Under Section 20 (4) of the Arbitration Act when an agreement is filed, the Court is required to make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise, or where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the Court. The sub-section requires that the Court shall make an order of reference to the arbitrator appointed by the parties whether in the agreement or otherwise. If no such arbitrator had been appointed and when the parties cannot agree upon an arbitrator, the Court may proceed to appoint an arbitrator by itself. Thus if an arbitrator had been appointed whether in the agreement or otherwise, the Court shall make an order of reference to him. In this case, clause 29 of the agreement provides that every dispute shall be referred to the sole arbitration of the person appointed by the President of India or if he is unwilling to act to the person appointed by the arbitrator. An arbitrator, in fact, has not been appointed by the President though the provision has been made for such appointment. Construing strictly the words of sub-section (4) the Court is not bound to make an order of reference to the person that is to be appointed by the President of India or in the event of his not being willing to a person to be appointed by the administration, for the arbitrator has not been appointed as contemplated in the sub-section. Therefore, it will not be obligatory on the part of the Court to make an order of reference to the arbitrator that may be appointed by the President. If an arbitrator had not been appointed as required in the sub-section, the Court is to find whether the parties could agree upon an arbitrator. If the parties agree, the Court has to appoint the person agree to as an arbitrator. If there is no such agreement, the Court will have to appoint an arbitrator of its choice.