SINGHAL ENGINEERING CO Vs. STATE OF U P

JUDGEMENT

(1.) M. N. Shukla, J. This is an appeal under Section 39 (1) of the Arbitration Act in which interpretation of Section 12 of the Arbitration Act (hereinafter referred to as the Act) is involved. Briefly, the facts are that the dispute between the plaintiff-appellant and the opposite parties was referred by virtue of an arbitration agreement to two arbitrators, one of whom was nominated by the appellant contractor and this arbitrator was Lt. Col. D. K. Ghosh and the second arbitrator was Sri D. D. Sanyal, Engineer, who was nominated by the State of U. P. The former accepted the appointment on 15-10-1972, while the latter accepted the appointment on 24-10-1972. The sitting of the arbitrators could not actually commence before 22-1-1973. It appears that on account of these circumstances the time of one month during which the umpire ought to have been appointed was lost and the arbitrators failed to appoint an umpire as required by paragraph 2 of the first schedule of the Arbitration Act, 1940. The proceedings were rather protracted and as many as 25 hearings took place. Ultimately, however, the arbitrators having failed to agree with each other, no award was given. The arbitrators returned the papers to the court with the prayer that in these circumstances either an umpire or a sole arbitrator may be appointed by the court. Apart from this, the plaintiff moved an application dated 9-2-1974 under Sections 8 and 12 of the Act, praying that the arbitrators be removed and the court may appoint a sole arbitrator to enter on arbitration of the matter agreed to be referred by the original agreement. The Additional Civil Judge, Jhansi by his order dismissed the plaintiff's application and held that the arbitration agreement shall cease to have effect.

(2.) THE main point urged on behalf of the appellant was that the aforesaid order was arbitrary and illegal and the proper order for the court on the facts of the case should have been to remove the two arbitrators and appoint a sole arbitrator in the case. It was vehemently submitted that the order superseding the arbitration agreement was wholly unjust and contrary to law. Sri Rajaram Agarwal, appearing for the appellant submitted that the plaintiff's application dated Feb. 9, 1974 should have been construed as an application under Sections 11 and 12 of the Act and the relevant claim of the plaintiff came fully within the ambit of Section 12 (2) (a) of the Act. On the other hand, Sri S. N. Upadhyaya, the learned Chief Standing Counsel contended that the preliminary requirements of Section 12 were not satisfied and consequently the plaintiff's prayer regarding the appointment of a sole arbitrator in the circumstances of the instant case was untenable and that the impugned order was fully justified on facts and law.

(3.) THE above two Sections read together unfold the scheme of the Arbitration Act in so far as the removal of arbitrators is concerned and the appropriate orders which the Court may pass in order to avoid miscarriage of justice. It is contemplated by Section 11 that on the application of any party to a reference the Court may remove an arbitrator and the grounds envisaged by the Section are failure of the arbitrator or arbitrators to use all reasonable dispatch in entering on and proceeding with the reference and making an award. This implies that failure to use all reasonable dispatch can occur at three stages, namely, in the initial entering, on the reference, in making the award. It is on the existence of these conditions that any party to a reference is entitled to ask for the removal of the arbitrator. It is manifest that an application for removal of the arbitrator would lie only under Section 11. However, the mere fact that the plaintiff's application dated February 9, 1974 did not purport to be under Section 11 is of no consequence. If the conditions necessary for attracting that provision are present in the case before us, the court should treat the application as one under the appropriate provisions of law. We have no hesitation in holding that on the facts of the present case the arbitrators had failed to use all reasonable dispatch at all the three stages of the proceedings contemplated by Sec. 11. We have already referred to the various dates from which it would be evident that owing to the exigencies of the situation one month's period within which the appointment of an umpire should have been made, elapsed and no such appointment was made. THEreafter also the actual commencement of the hearing before the arbitrators did not take place immediately. THE proceedings continued for nearly one full year and it is not commendable that the arbitrators should have taken such an inordinately long time in realising the truth that they were not able to agree with each other. However, the facts which cannot be escaped are that for all their efforts to resolve their differences the arbitrators despaired of success in this direction and ultimately had to resort to the action of surrendering their papers to the Court and requesting it to take appropriate action in the matter. Without casting any aspersion on the bona fides of the arbitrators it must, however, be noticed that they failed to use all reasonable dispatch in conducting the proceedings and were ultimately unable to make an award because of the differences between them which proved irreconcilable. Thus, all the requirements of Section 11 were fully satisfied in the present case and the court would have been justified in exercising its powers under that Section and removing the arbitrators. THE court below, however, dismissed the application on the sole ground that the plaintiff omitted to avail of the right of asking for the removal of the arbitrators in good time and consequently in its opinion the plaintiff's application was liable to be dismissed. We are unable to endorse this view of the learned Judge. Unless there was some thing evidently disquieting the parties to the reference would have in the ordinary course looked forward to an award in which both arbitrators concurred. It is only when all efforts on the part of the arbitrators to sink their differences failed that it dawned on the arbitrators as well as the parties that there was no way open except to move the court. It is in these peculiar circumstances that the application under Sections 8 and 12 was presented by the plaintiff. THE plaintiff's conduct did not smack of negligence or want of bona fides in not claiming the removal of the arbitrators earlier in point of time. Hence, the dismissal of the application on the ground stated in the impugned order was altogether erroneous.