PHERUMAL AND CO Vs. UNION OF INDIA

JUDGEMENT

(1.) THIS is an application for removal of an arbitrator and for appointment of a new arbitrator in his place and stead. The petitioner is a firm of contractors who did certain works for the South Eastern Railway under a contract. The contract contains an arbitration clause being clause No. 34 whereby the dispute between the parties under the contract shall be referred to the arbitration of such railway officer retired or in service as shall be nominated to be the arbitrator by the General Manager, South Eastern Railway for the time being in his absolute discretion.' The petitioner instituted a suit in this Court being Suit No. 965 of 1960, inter alia, for recovery of the balance of his claim for works done and for refund of security deposit. On the application of the Government under Section 34 of the Indian Arbitration Act the suit was stayed on February 6, 1961. Against this order of stay an appeal was preferred but ultimately the appeal was withdrawn by consent. On February 25, 1963 the General Manager, South Eastern Railway appointed Mr. N.K. Mitra, a superannuated Chief Engineer of the South Eastern Railway, as arbitrator. Unfortunately in the letter of nomination he specified five disputed claims for adjudication. The petitioner's case is that apart from the 5 claims referred to, the petitioner had other claims exceeding more than Rs. 2 lacs. In the state of facts filed by the petitioner before Shri N.K. Mitra, the Arbitrator, the petitioner not merely included the 5 claims specified in the letter but their other claims as well. The Government in its counter state of facts contended that the additional claims made in the petitioner's state of facts were outside the scope of reference and the Arbitrator had no jurisdiction to adjudicate their claims. I should have noted that before filing the state of facts the petitioner requested the General Manager by their letter dated April 4, 1963 to clarify the position to the effect that other claims of the contractor were intended to be adjusted by arbitration. The General Manager by his letter of July 3, 1963 contended that the reference was in terms of the order passed by me staying the suit and the question of additional claims did not arise. On July 19/27, 1963 the General Manager appointed Shri N. Hazra, the present Chief Engineer, as arbitrator in place of Shri N.K. Mitra who died in June 1963. The letter of appointment was in the same terms as in the case of appointment of Shri N.K. Mitra, i.e., the letter specified the 5 disputed claims. Thereupon the petitioner took out a notice under Section 33 of the Arbitration Act for determination of the effect of the arbitration agreement and for a direction that all other disputes are referable. There was a further prayer for removal of Shri Hazra and/or declaring his appointment to be invalid. The application ended by a consent order whereby it was agreed that Shri Hazra was not to act as arbitrator and the petitioner will be at liberty to raise such disputes as they please and the Railway would be entitled to object to the same on the ground that the disputes did not exist before the original reference. Thereupon the General Manager made a third nomination in favour of Shri P.V. Raghava Rao, Engineer-in-Chief. The letter of nomination is in the same terms as before, i.e. it specified the 5 items of disputed claim only though it indicated that the petitioner would be entitled to other reliefs. Along with the letter of appointment a copy of the consent order was sent by the General Manager to Shri Rao, the new Arbitrator. On August 18, 1964 Shri Rao directed the petitioner to file his statement of claim. The last paragraph of that letter reads as follows:

(2.) ON November 19, 1964 the petitioner addressed the following letter to the Arbitrator requesting him to stay his hands.

(3.) MR. Debi De, learned counsel for the respondent submitted that the Arbitrator, in fact has accepted the contention of the petitioner and allowed him to make claims other than the 5 items referred to in the letter of nomination. The petitioner, therefore, has no grievance on that score. In MR. De's submission the petitioner has therefore no occasion to make a fuss and make a mountain out of a molehill of this letter. The General Manager is no doubt the head of the Railway Administration and as such, a party to proceeding. But he has under the arbitration agreement another function to discharge. He is the authority to nominate an arbitrator. The offending letter was addressed to the General Manager not in his capacity as head of the Railway Administration but as the nominating authority. On receipt of the petitioner's letter dated September 1, 1964 the Arbitrator felt that the letter of nomination was not in order and he wanted to have it clarified and corrected. The concluding sentence of the letter proves conclusively that that was the object of the letter. The Arbitrator felt rightly or wrongly that the letter runs counter to the High Court order and that in order to invest him with jurisdiction it was necessary to state that apart from the 5 items specified in this letter the petitioner was entitled to make other claims. Undue importance should not be attached to the next preceding sentence in which the Arbitrator made an observation that he did not think it proper to go beyond the direction given in the letter of the General Manager. The letter is absolutely innocuous according to MR. De, It does indicate that the Arbitrator would not be impartial. On the other hand, it indicates that the Arbitrator accepted the contention of the petitioner in preference to what he believed to be the viewpoint of the General Manager. MR. De emphasized that the offending letter is not a communication by a party to the Arbitrator but it is a communication by the Arbitrator to the nominating authorities. It is a bona fide attempt by a lay arbitrator to understand and clarify the letter of nomination and nothing more. MR. De submitted that at the time of writing the letter the Arbitrator had no knowledge of what the disputes were. His re-action on a first look of the letter addressed by the petitioner on Sept. 1, 1964 was that the letter of nomination of the General Manager required clarification. Hence he wrote the offending letter. The letter had no reference to the dispute the Arbitrator had to adjudicate. Hence it was not imperative for the Arbitrator either to give the petitioner a copy or intimate to the petitioner that he addressed such a letter to the Arbitrator. In writing the offending letter and not furnishing the petitioner with a copy the Arbitrator cannot be held to have misconducted in the proceeding.