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Case Number

C.O No. 765 of 1988

Advocates

Tarun Chatterjee with J. R. Chatterjee
S. P. Roy Chodhury

Judges

Monoj Kumar Mukherjee
Sudhanshu Sekhar Ganguly, JJ.

Acts

provisions of S. 8 of the Arbitration Act. Section 8(1)(a)
Section 8 forms part of Chap. II of the Arbitration Act
provisions of S. 20 of the Arbitration Act.11.
S. 20(4) of the Arbitration Act
S. 8 of the Arbitration Act.5.
S. 8(2) of the Arbitration Act
S. 8 of the Arbitration Act
S. 20. Section 8

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Smart Summary

Structured Summary of the Opinion (Sudhanshu Sekhar Ganguly, J.)

Factual and Procedural Background

The dispute arises from a contract for earth filling under which the opposite party performed some work for the petitioner No. 1 and substantial portions of the opposite party's bills remained unpaid. The contract contained an arbitration clause (Clause 16). Invoking the clause, the opposite party filed an application registered as Misc. Case No. 27 of 1987 before the Assistant District Judge, 3rd Court, Alipore under S. 8(2) of the Arbitration Act seeking appointment of an arbitrator.

Petitioner No.1 contested that application on several grounds: (a) an earlier application for the same relief, Misc. Case No. 2 of 1987, had been dismissed on contest on 18-5-1987 and a review application Misc. Case No. 19 of 1987 remained pending; (b) a suit T.S. No. 234 of 1986 under S. 20(4) of the Arbitration Act for filing the arbitration agreement was pending; (c) lack of territorial jurisdiction (contract executed at Denkuni, Hooghly); and (d) merits — alleging incomplete work, engagement of other agencies to finish the work, exaggerated claims and prior payments.

The opposite party asserted she had sent a registered notice dated 19-5-1987 for appointment of an arbitrator under Clause 16; the petitioner denied receipt of that notice but admitted receipt of an Advocate's letter dated 2-7-1987. The Assistant District Judge held that the registered notice must have reached the petitioner and alternatively that the Advocate's letter was sufficient; he found the S. 8(2) petition maintainable and appointed a retired High Court judge as arbitrator. The present revisional application challenges that order.

Legal Issues Presented

Whether the application under S. 8(2) of the Arbitration Act (Misc. Case No. 27/1987) was maintainable when an earlier application for the same relief had been dismissed and a review in respect of that dismissal remained pending.
Whether a party may proceed under S. 8(2) while a suit under S. 20(4) of the Arbitration Act (T.S. No. 234 of 1986) remains pending in respect of the same arbitration agreement.
Whether the Assistant District Judge had territorial jurisdiction to entertain the S. 8(2) application when the contract and cause of action arose in the district of Hooghly.
Whether the opposite party complied with the preconditions of Clause 16 of the contract (which required reference to an arbitrator to be appointed on application by the Chairman and Managing Director, National Project Construction Corporation Ltd.) before invoking S. 8(2).
Whether an appointing authority's nominee (here, a nominee of the Chairman-cum-Managing Director) is to be regarded as an arbitrator appointed by consent of the parties under S. 8(1)(a).

Arguments of the Parties

Petitioner No. 1's Arguments

The same relief had been the subject-matter of Misc. Case No. 2 of 1987 which was dismissed on contest; a review application Misc. Case No. 19 of 1987 in relation thereto remained pending, and therefore the present application was barred by res judicata or otherwise not maintainable.
A suit (T.S. No. 234 of 1986) instituted under S. 20(4) of the Arbitration Act for filing the arbitration agreement was pending; the S. 8(2) application should not proceed concurrently.
The learned Judge at Alipore lacked territorial jurisdiction because the contract and cause of action arose at Denkuni, Hooghly.
On merits: the opposite party had not completed the work, other agencies had to be engaged to finish it, some items of the bill were exaggerated, and the opposite party had already been paid for the work performed.
The petitioner denied receipt of the registered notice dated 19-5-1987 which the opposite party relied upon as a precondition for S. 8(2) relief.

Opposite Party's Arguments

She had sent a notice for appointment of an arbitrator under Clause 16 dated 19-5-1987 by registered post; that notice was a precondition to apply under S. 8(2) and thus the S. 8(2) petition was maintainable.
The petitioner admitted receipt of an Advocate's letter dated 2-7-1987 from the opposite party, which the Assistant District Judge found adequate to permit appointment of an arbitrator if required.
On merits, she contended she was entitled to unpaid bills (this is implicit from the fact of her application and claims; the opinion records contention that bills remained unpaid).

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Surendra v. Union of India, AIR 1965 Cal 183	Held that where the arbitration clause provided that a named authority (Secretary to the Government) would appoint the arbitrator, the appointment by that authority is virtually an appointment by consent of the parties under S. 8(1).	The court relied on this decision to support the proposition that an arbitrator appointed by the agreed appointing authority (here, the Chairman of NPCC) is to be treated as an arbitrator appointed by consent of the parties.
A.K. Ghosh and Brothers v. State of West Bengal, (1975) 1 Cal LJ 52	Held that where the contract provided appointment by a named official (Chief Engineer or his nominee) that appointment amounted to appointment by consent of parties.	Applied as authority for the same principle — that a nominee of the agreed appointing authority is considered an arbitrator appointed by consent.
Food Corporation of India v. S.K. Samanta, AIR 1979 Cal 193	Held that a person appointed by the Managing Director of the Corporation would be an arbitrator appointed by consent of both parties.	Relied upon to reinforce the High Court's consistent view that an arbitrator appointed by the agreed appointing authority equates to appointment by consent of parties.
Union of India v. D.P. Singh, AIR 1961 Pat 228	(Referred) Authorities holding similar view that appointment by agreed appointing authority amounts to appointment by consent.	Grouped with other decisions supporting the same principle; used to demonstrate a line of authority consistent with the High Court's approach.
Boriah v. Indian Telephones, AIR 1973 Mys 309	(Referred) Authority consistent with the view that an appointing authority's nominee is an arbitrator appointed by consent.	Relied upon as additional support for treating an appointing authority's nominee as an arbitrator appointed by consent of the parties.
Brij Bhusan v. Chief Engineer, AIR 1972 Punj & Har 266	Took a different view (i.e., not in line with the view that an appointing authority's nominee is equivalent to appointment by consent).	The court noted this differing view but, with respect, preferred to follow the consistent line of decisions from this High Court and similar authorities instead of this contrary view.
Ved Prakash v. Union of India, AIR 1984 Delhi 325 (FB)	Took a view different from the line relied upon by this High Court.	The court acknowledged the contrary authority but chose to abide by the view consistently held by this High Court.
Sunil v. Union of India, AIR 1978 Cal 37	Took a different view; facts involved a procedure (panel nominations and appointments) that the court distinguished on the basis of materially different facts.	The court distinguished this decision on facts and noted that the decision could be distinguished as was done in Food Corporation Of India & Ors. v. Sunil Krishna Samanta, AIR 1979 Cal 193.
Food Corporation Of India & Ors. v. Sunil Krishna Samanta, AIR 1979 Cal 193	Distinguished Sunil; expressed view consistent with the High Court's approach regarding appointing authority nominees.	Used as a factual distinction and to support the court's preference for the High Court line of authority.

Court's Reasoning and Analysis

The court proceeded through several analytical steps grounded in the text of the Arbitration Act and the contract clause:

On procedure: The learned Assistant District Judge did not consider or record findings on the technical objections raised by the petitioner (res judicata/earlier dismissal and pending review, pending S. 20 suit, and territorial jurisdiction). The revisional court considered that omission significant and held the learned Judge should have considered those objections.
On concurrent proceedings under S. 8 and S. 20: The court analysed the differing scope of S. 8 (Chap. II — arbitration without court intervention) and S. 20 (Chap. III — arbitration with court intervention where no suit is pending). It explained that S. 8 empowers a court to appoint an arbitrator of its choice where the arbitrator is to be appointed by consent but the parties fail to agree or where an appointed arbitrator cannot act; S. 20(4) contemplates filing the arbitration agreement in court and the court ordering reference to an arbitrator appointed by the parties or, if the parties cannot agree, to an arbitrator appointed by the court.
From that textual distinction the court concluded a party may pursue relief under either section depending on the steps taken, but cannot pursue the same relief simultaneously under both sections because the sections prescribe different procedures and can yield different results (e.g., two arbitrators appointed by different routes). The court noted Section 20 explicitly provides one can move under that section instead of proceeding under Chap. II, and the court inferred the converse principle also applies: one cannot resort to S. 20 if one has already started proceedings under S. 8. Applying that principle, since a suit under S. 20 (T.S. No. 234 of 1986) was pending, the court held the S. 8 application should not have been permitted to continue.
On territorial jurisdiction: The court criticised the learned Judge for not addressing the territorial jurisdiction objection (cause of action allegedly arising in Hooghly) and held the Judge should have required the opposite party to explain why jurisdiction at Alipore was proper.
On compliance with Clause 16: Clause 16 specified that in the event of a dispute the matter would be referred to an arbitrator to be appointed on application by the Chairman and Managing Director, National Project Construction Corporation Ltd. The court observed there was no finding that the opposite party ever approached that Chairman for appointment of an arbitrator. Sending a notice to petitioner No.1 (or an Advocate's letter) did not fulfil the express provision of Clause 16 which required application to the Chairman. Thus the opposite party had not satisfied the contractual precondition for S. 8(2) relief.
On whether Clause 16 falls within S. 8(1)(a): The court addressed whether an appointing authority's nomination counts as appointment by consent under S. 8(1)(a). Relying on a consistent line of Calcutta High Court decisions and some other authorities, the court accepted the principle that where the parties have agreed that an appointing authority (e.g. the Chairman) will appoint an arbitrator, the arbitrator so appointed by that authority is to be treated as an arbitrator appointed by consent of the parties. The court noted contrary views in some decisions but preferred to follow the High Court's established view and distinguished cases of different facts.
On consequences of the above: Even accepting that an appointing authority's nominee would be treated as an arbitrator appointed by consent, the court held that the opposite party had not approached the appointing authority; therefore she had no right to invoke S. 8(2). The petition under S. 8(2) was thus premature and not maintainable on the grounds stated (pending S.20 suit, non-compliance with Clause 16, and jurisdictional objections).

Holding and Implications

Holding:

The impugned order passed by the Assistant District Judge in Misc. Case No. 27 of 1987 is set aside and the said order is hereby quashed.

Implications and direct consequences:

The S. 8(2) petition (Misc. Case No. 27 of 1987) before the Assistant District Judge was found to be premature and not maintainable for the reasons given (pending T.S. No. 234 of 1986 under S. 20, failure to comply with Clause 16 by not approaching the appointed authority, and unresolved jurisdictional/technical objections).
The opposite party is left at liberty to pursue her reliefs in the suit instituted under the provisions of S. 20 of the Arbitration Act (T.S. No. 234 of 1986) — i.e., the court quashed the S. 8(2) proceeding and directed that the opposite party pursue S. 20 reliefs instead.
Parties were directed to bear their own costs.
The court followed the High Court's established line of authority on the legal proposition that a nominee of the agreed appointing authority is to be treated as an arbitrator appointed by consent; the opinion does not purport to lay down novel law beyond applying and preferring that line of authority.

Note: The Supplementary concurrence of Monoj Kumar Mukherjee, J. is recorded succinctly in the opinion ("I agree").

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National Project Construction Corporation Ltd. And Others v. S.P Enterprise (P) .

Sudhanshu Sekhar Ganguly, J.:—The present matter arises out of an application under S. 115 of the Civil P.C

2. Admittedly in terms of a contract of earth filling the opposite party executed some work for the petitioner 1 and her bills, to a considerable extent, remained unpaid. The contract contained an arbitration clause, being clause 16 and invoking the same the opposite party submitted an application, registered as Misc. Case No. 27 of 1987 before the learned Assistant District Judge, 3rd Court, Alipore under S. 8(2) of the Arbitration Act for the appointment of an Arbitrator. The petitioner 1 contested the said application. It was urged by the petitioner 1 first that on the selfsame ground the opposite party submitted another application before the learned Judge — being Misc. Case No. 2 of 1987 — which was dismissed on contest on 18-5-87 and the review application being Misc. Case No. 19 of 1987 in respect of the same remaining pending, the instant application was barred by res judicata. It was also urged that the present application was not maintainable since the opposite party instituted T.S No. 234 of 1986 for filing of the Arbitration Agreement under S. 20(4) of the Arbitration Act and the said suit was still pending. It was also urged that since the contract was executed at Denkuni, Hooghly and the work was also executed there, the learned Judge had no jurisdiction to entertain the matter. The case of the opposite party was also challenged on merits and it was urged that the opposite party did not finish the work entrusted with her and other agencies had to be engaged to complete the work. It was also urged that the opposite party exaggerated her claims in respect of some items of her bill and that she has already been paid fully for whatever work she has done.

3. It appears that before the learned Assistant District Judge it was urged from the side of the opposite party that a notice for appointment of an Arbitrator under cl. 16 of the agreement had been sent to the petitioner on 19-5-1987 under registered post. The receipt of this notice was denied from the side of the petitioner and it was urged from their side that the petition under S. 8(2) was not maintainable in the absence of such a notice. The petitioner, however, admitted receipt of an Advocate's letter dt. 2-7-1987 from the side of the opposite party. The learned Judge holding that the aforementioned notice dt. 19-5-1987 must have reached the petitioner since it had been sent under registered post and further that in any case the petitioners could have appointed an Arbitrator on the basis of the Advocate's letter dt. 2-7-1987 found the application under S. 8(2) maintainable in law and he appointed a retired Hon We Judge of this Court as the Arbitrator in this case. Hence, this revisional application.

4. In the impugned order the learned Judge did not consider the technical objections taken from the side of the petitioner. We feel that he should have considered and recorded his findings with regard to these objections. We fail to understand how the present application under S. 8(2) of the Act could be maintainable with an earlier application (Misc. Case No. 2 of 1987) for the selfsame relief on identical grounds and under the same provisions of law dismissed on contest and a review application (Misc. Case No. 19 of 1987) in respect of the same remaining pending. We also do not think that with application under S. 20(4) of the Arbitration Act (T.S No. 234 of 1986) pending, the present application under S. 8(2) should have been permitted to continue. Section 8 forms part of Chap. II of the Arbitration Act which contains provisions for arbitration without intervention of a court. Section 20 on the other hand comprises the only section of Chap. III of the Act which provides for arbitration with intervention of a court where there is no suit pending. The scope and the provisions of S. 8 are different from those of S. 20. Section 8 applies so far as the appointment of an Arbitrator is concerned where in terms of the agreement the arbitrator is to be appointed by consent of the parties and the parties do not consent in such appointment even after service of a notice of fifteen days by one of the parties or where (2) the Arbitrator appointed — presumably by consent of the parties — cannot or does not act. Under such circumstances the court can on the application of the party to the agreement serving the notice appoint an Arbitrator of its choice after giving the other party an opportunity of being heard. Under Section 20 on the other hand the aggrieved party may petition the Court straightway for filing of the agreement in court and the court where the party fails to show sufficient cause “shall order the agreement to be filed, and shall 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”. A party may pursue his relief under either section depending upon the circumstances and the steps taken by him, but he cannot pursue his relief under both the sections, simultaneously. This is because the proceedings under the two sections contemplate not the same end-result. Under S. 8 the court may appoint any Arbitrator of its choice whereas under S. 20(4) the court compulsorily has to refer the dispute to the Arbitrator appointed by the parties and it is only where the parties have not appointed any particular person or authority to act as an Arbitrator that the court can refer the dispute to an Arbitrator of its choice. The two sections prescribe different procedures and yield different reliefs and if a party is permitted to pursue his selfsame relief in respect of the selfsame dispute under both the sections simultaneously that may indeed lead to the engagement of two Arbitrators — one appointed by the parties as per their agreement of arbitration and the other by the Court — in respect of the selfsame dispute. Presumably to avoid such a confusing state of affairs it has been specifically laid down in Section 20 that one can move under that section instead of proceeding under Chap. II. It means that one cannot have recourse to S. 20 if one has already started a proceeding under S. 8 of the Act. What applies to S. 20 also applies to Section 8 and for the same reason, though that has not been mentioned specifically in the Act as it has been done in the case of Section 20. In the circumstances stated we are of the view that with the application under S. 20 of the Act pending in the shape of T.S No. 234 of 1986, the learned Judge should not have allowed the opposite party No. 1 to continue with the present application under S. 8 of the Arbitration Act.

5. Similarly, we also feel that the learned Judge should not have left the objection regarding territorial jurisdiction unattended. He should have explained and called upon the opposite party to explain how he could have exercised jurisdiction in respect of a case, the cause of action in which arose prima facie within the district of Hooghly.

6. There is also another reason why the present application under S. 8 of the Arbitration Act cannot be considered as maintainable. Clause 16 of the Contract between the parties — the arbitration clause — provided that in case of any dispute the matter would be referred for arbitration to an Arbitrator to be appointed on application by the Chairman and Managing Director, National Project Construction Corporation Ltd., New Delhi-19, vide para 4 of the present revisional application. It does not appear from the order of the learned Judge that the opposite party had ever approached the said Chairman for the appointment of an Arbitrator. All that appears from the impugnged order is that the opposite party sent a notice to the petitioner 1 on 19-5-1987 for the appointment of an Arbitrator. That is not the same thing as applying to the Chairman for the appointment of an Arbitrator since the petitioner 1 is not the Chairman. Flouting the express provision of Cl. 16, the opposite party could not by-pass the Chairman and come to the Court straight for the appointment of an Arbitrator after serving a notice on the petitioner 1. The learned Judge argues that the petitioner 1 could have appointed an Arbitrator on the notice of the learned Advocate for the opposite party dt. 2-7-1987. In this also the learned Judge was clearly in the wrong since, as per the arbitration clause the opposite party had to approach the Chairman and not the petitioner 1 for the appointment of an Arbitrator. Considering all the circumstances we are inclined to hold, therefore, that since the opposite party had not fulfilled the preconditions of the arbitration clause, her application under S. 8 of the Act was not maintainable in law.

7. A question arose as to whether the arbitration clause in the present case came under and was in conformity with the provisions of S. 8 of the Arbitration Act. Section 8(1)(a) contemplates a situation where the arbitration agreement provides that the reference shall be to one or more arbitrators to be appointed by consent of the parties and all the parties do not concur in the appointment or appointments. In the case at hand the parties agreed by the Arbitration Clause that the Arbitrator would be chosen and appointed by the Chairman-cum-Managing Director of the National Project Construction Corporation. So far as this High Court is concerned the law by now is well settled that in such a case as the present the Arbitrator appointed by the agreed appointing authority will be considered to be an Arbitrator appointed by consent of the parties. In Surendra v. Union of India, AIR 1965 Cal 183 the Arbitration Clause provided that the Secretary to the Government of India, Ministry of Works, Housing and Supply would be the Arbitrator and if he was unable or unwilling to act, some other person appointed by him and willing to act was to be the Arbitrator. It was held that the appointment by the Secretary was virtually an appointment made by consent of parties under S. 8(1) because the parties agreed while entering into the contract to leave the choice of another person as arbitrator to the Secretary, in case the Secretary was unable or unwilling to act as Arbitrator. In A.K Ghosh and Brothers v. State of West Bengal, (1975) 1 Cal LJ 52 the Arbitration Clause provided that the Chief Engineer or in case of his inability or unwillingness to act, his nominee was to be appointed as the sole Arbitrator. It was held that it was an agreement that by consent of parties the sole Arbitrator would be the Chief Engineer or his nominee. In Food Corporation of India v. S.K Samanta, AIR 1979 Cal 193 the Arbitration Clause provided that all disputes were to be referred to the sole arbitration of any person appointed by the Managing Director of the Food Corporation of India. It was held that any person so, appointed by the Managing Director of the Corporation would be the Arbitrator appointed by consent of both the parties. Similar views were also expressed in Union Of India… v. D.P Singh…Opposite Party., AIR 1961 Pat 228; Boriah v. Indian Telephones, AIR 1973 Mys 309. True a different view was taken in Brij Bhusan v. Chief Engineer, AIR 1972 Punj and Har 266 and Ved Prakash v. Union of India, AIR 1984 Delhi 325 (FB). With all respect to their Lordships we are inclined, however, to abide by the view so consistently held by this High Court. It is true in Sunil v. Union of India, AIR 1978 Cal 37, a different view was taken. The facts of this case were, however, very much different. In this case the arbitration agreement provided that the Railway was to send a panel of more than 3 names of Railway Officers to the Constractor and out of the said panel the Contractor would suggest a panel of three names out of which the General Manager would appoint one Arbitrator as the contractor's nominee and then the General Manager would appoint a second Arbitrator of equal status as the Railway's nominee without his consent of any kind. It is under such circumstances that it was held, it could not be said in view of the terms of Arbitration Agreement that the Arbitrators were to be appointed with the consent of the parties. The decision certainly can be distinguished on facts as it was done in Food Corporation Of India & Ors. v. Sunil Krishna Samanta, AIR 1979 Cal 193.

8. In the case at hand the provision was that in case of dispute the Arbitrator would be appointed by the Chairman of the National Project Construction Corporation. Where, on being approached by either party, the Chairman appoints his nominee, in view of the decisions cited above, such nominee would be the Arbitrator appointed by consent of the parties. Where such an Arbitrator neglects or refuses to act or is incapable to acting or dies, the aggrieved party may serve the other party or the Arbitrator as the case may be with a written notice to concur in the appointment or in supplying the vacancy under the provisions of S. 8(1) of the Act and if the appointment is not made within fifteen clear days after the service of the said notice the said party may petition the Court for appointing an Arbitrator under the provisions of S. 8(2) of the Act. Where on the other hand the appointing authority refuses to appoint an Arbitrator even after being approached, the aggrieved party may move the court under S. 10 of the Act.

9. This, however, more or less hypothetical since it does not appear that the opposite party in the present case had any right to move the court under the provision of S. 8(2) of the Act since she had not approached the named authority under the agreement for the appointment of Arbitrator.

10. In view of what has been stated above, we are inclined to hold that the petition of the opposite party under S. 8(2) of the Arbitration Act before the learned Assistant District Judge, Alipore was premature and that it was also not maintainable on the other grounds mentioned above. In view of the matter we are of the view that the said proceeding should be quashed leaving the opposite party to pursue her reliefs in her suit instituted under the provisions of S. 20 of the Arbitration Act.

11. Hence, the impugned order passed by the learned Assistant District Judge, 3rd Court, Alipore in Misc. Case No. 27 of 1987 is hereby set aside and the said order is hereby quashed. Parties do bear their own costs.

Monoj Kumar Mukherjee, J.:— 12. I agree.

Order accordingly.

National Project Construction Corporation Ltd. And Others v. S.P Enterprise (P) .

Structured Summary of the Opinion (Sudhanshu Sekhar Ganguly, J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner No. 1's Arguments

Opposite Party's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

National Project Construction Corporation Ltd. And Others v. S.P Enterprise (P) .

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