Citation Codes

Equivalent Citations

citation codes

Case Number

Misc. Appeal Nos. 280 and 281 of 1977

Advocates

S.Patnaik
S.Mohanty
R.K.Rath
N.C.Panigrahi
G.Rath
A.S.Naidu

Judges

Hon'ble Mr. Justice Naba Kumar Das

Acts

Section 39(1)(iv) of the Arbitration Act of 1940 (hereinafter referred to as the Act)
Indian Partnership Act of 1932 (hereinafter referred
ARBITRATION ACT 1940
provisions in the Indian Arbitration Act

See more information ...

Smart Summary

Structured Summary of the Opinion — Appeals under the Arbitration Act, 1940

Factual and Procedural Background

The appeals arise under Section 39(1)(iv) of the Arbitration Act, 1940 and challenge two separate decisions of the learned Subordinate Judge of Cuttack. Those decisions allowed applications under Section 20 of the Act and directed the defendant-appellant (the Company) to file the Arbitration Agreement for a reference of the disputes to arbitration.

The factual matrix (as stated in the opinion) is as follows:

Messrs. Tata Iron and Steel Co. Ltd. (the Company) held a chromite mine at Sukinda and a dolomite mine in Sundergarh, Orissa.
The plaintiff-respondent (the Firm) is a registered partnership firm (Indian Partnership Act, 1932) that contracted with the Company to perform mining-related services under two time-limited agreements (initially entered on 8-2-1969 and 1-11-1969), both ultimately extended up to February 1973. The agreements contained escalation clauses and an arbitration clause.
In December 1972 the Firm sought enhanced rates under escalation clauses; by letter dated 9-2-1973 the Company refused the request (giving specific reasons: renewals under same terms and no cost increases of the type covered by the escalation clause).
On 20-1-1975 the Firm renewed its escalation claims, asserting substantial sums for each contract. On 16-4-1975 the Company offered Rs. 3,01,554.80 in full and final settlement of certain claims but stated the escalation claim was "receiving our attention" and declined interest.
After six weeks without further communication, on 2-6-1975 the Firm issued notice invoking the arbitration clause and proposing a named arbitrator (Shri B.D. Dhawan) and calling on the Company to concur in the appointment.
The Company did not reply to that notice. The Firm filed two separate Section 20 applications (Title Suits No. 17 of 1975 and No. 14 of 1975) to have the court make the necessary reference to arbitration; the matters were ultimately transferred to the Subordinate Judge at Cuttack and were allowed there. The Company appealed both decrees to this court.

Legal Issues Presented

Whether there was an existing dispute on the date the respective applications under Section 20 were made.
Whether the named arbitrator (the holder of the office specified in the arbitration clause) was available to arbitrate.
If the named arbitrator was not available, whether the court is entitled to appoint another arbitrator to fill the vacancy (i.e., whether the arbitration clause shows an intention that the vacancy should not be supplied, thereby making court appointment impermissible).

Arguments of the Parties

Appellant (Company) — Principal contentions

There was no dispute existing when the Section 20 applications were made; the arbitration clause required mutual settlement efforts before court intervention and the claims were under consideration by the Company.
The named arbitrator (an office-holder designated by title in the clause) was intended to be the arbitrator and parties did not intend to fill any vacancy by appointing another; therefore there was no cause of action for court appointment of an arbitrator.
Because the claims were large and required investigation, until there was a definite rejection the Firm should not have rushed to court; the Company was still considering the claims.

Respondent (Firm) — Principal contentions

There were existing disputes: the Company had refused the escalation claim earlier and thereafter remained silent despite repeated communications and a notice invoking arbitration.
The Company’s silence and failure to communicate an intention to negotiate or settle justified the Firm proceeding to court for appointment of an arbitrator.
The arbitration clause continued to subsist; the Firm called upon the Company to concur in appointment of a named arbitrator and, in the absence of concurrence, sought court assistance under Section 20.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Union of India v. D.N. Revri & Co., (1976) 4 SCC 147; AIR 1976 SC 2257	Illustrates issues arising when the office or appointing authority designated in an arbitration clause is changed or bifurcated; considered whether an appointment was open to attack when administrative structures changed.	The court observed the ratio of that decision had no application to the instant facts and did not apply it to defeat the Firm's position (the court distinguished the present case from the facts in D.N. Revri).
Governor-General in Council v. Associated Live-stock Farm (India) Ltd., AIR 1948 Cal 230	Holds that in the absence of any agreement showing that a vacancy should not be filled, a vacancy in the office of arbitrator can be supplied and another arbitrator appointed under the Arbitration Act.	The court relied on this principle to support the conclusion that where the named office no longer exists, the vacancy can be supplied and arbitration need not be rendered infructuous.
Hindustan Steel Ltd. v. Engineers and Contractors, AIR 1964 Pat 468	Applied the principle that a vacancy in the office of arbitrator may be filled where the agreement does not indicate an intention that the vacancy should not be supplied.	Cited by the court as an authority following the same principle; used to reinforce the view that the court may fill the vacancy.
State of Orissa v. Modern Construction Co., (1971) 1 Cut WR 521	Confirmed and applied the same principle (regarding filling vacancies) in this Court.	Referenced as an authority supportive of the position that the court may appoint a replacement arbitrator when the agreement is silent about supplying a vacancy.
Prabhat General Agencies etc. v. Union of India, (1971) 1 SCC 79; AIR 1971 SC 2298	Explained the requirements for Section 8(1)(b) of the Arbitration Act: (1) agreement to arbitrate; (2) appointment of arbitrator(s); (3) neglect/refusal/incapacity/death of arbitrator; (4) agreement not showing that vacancy should not be filled; (5) parties not having supplied the vacancy.	The court quoted this case at length and applied its exposition to conclude that, absent a negative intention in the agreement, the law presumes the vacancy may be supplied and the court has jurisdiction under Section 20(4) to appoint an arbitrator.

Court's Reasoning and Analysis

The court organized its decision around three specific questions that mirror the issues framed in the courts below: existence of a dispute at the time of the applications, availability of the named arbitrator, and the court's power to appoint a replacement if the named arbitrator was not available.

1. Existence of a dispute:

The court noted the chronology: claim advanced in Dec. 1972; Company refused the claim on 9-2-1973; the Firm renewed its claim on 20-1-1975; Company replied on 16-4-1975 indicating the escalation claim was "receiving our attention"; the Firm gave a notice invoking arbitration on 2-6-1975; no reply followed; applications were filed on 26 and 28 June 1975.
The Company argued that while its consideration of the claims continued, there was no "existing dispute" and thus no ground for Section 20 relief. The Firm argued that the Company's extended silence after having earlier rejected the claim, coupled with the passage of time and absence of any communication indicating a willingness to negotiate, entitled it to treat the claim as not mutually settled and to invoke court assistance.
The court found in favour of the Firm: given the prior refusal, the long delay, and the Company's indifferent silence (including failure to inform the Firm that negotiation was ongoing), the Subordinate Judge rightly concluded a dispute existed when the Section 20 applications were filed.

2. Availability of the named arbitrator:

The arbitration clause named the holder of an office — the Divisional Manager (Raw Materials Division) — as arbitrator. The court examined office orders and evidence showing the post was redesignated (Divisional Manager became Director, Raw Materials; later the office was abolished and responsibilities divided, with Divisional Manager (Mines) taking certain functions).
On those facts, the court concluded that the named office "no more exists" in the precise form referred to in the clause and that, because the appointment nominated an office-holder rather than a named person, it was not possible to identify an existing office as a direct substitute. Therefore the named arbitrator was not available and a vacancy existed.

3. Power of the court to appoint another arbitrator (filling the vacancy):

The court examined Section 8(1)(b) of the Arbitration Act, 1940 (quoted in the opinion) and the interpretative guidance provided by earlier authorities, notably the Calcutta decision (Governor-General in Council v. Associated Live-stock Farm), and the Supreme Court's exposition in Prabhat General Agencies.
The court emphasized the test articulated in Prabhat: the court must determine whether the agreement, read as a whole, "shows either explicitly or implicitly that the parties intended that the vacancy should not be supplied." If the agreement is silent on that negative intention, the law presumes the vacancy may be supplied and Section 8(1)(b) operates.
The appellant contended an implicit negative intention because the office-holder originally chosen had particular qualifications pertinent to the contract's execution. The court found no material evidence supporting this contention and no indication that the parties intended the arbitration clause to become unworkable if the office ceased to exist.
Given the absence of any expressed negative intention in the arbitration clause and the authorities supporting court power to fill vacancies, the court concluded the court had jurisdiction under Section 20(4) of the Act to appoint an arbitrator and supply the vacancy.

Overall, the court applied statutory provisions and settled authorities to the proved facts: it treated the Company's conduct (prior refusal, delayed response, subsequent silence) as giving rise to an existing dispute; it found the designated arbitrator's office had ceased to exist in the required form; and it held the agreement did not show an intention that the vacancy should not be filled, thereby entitling the court to appoint an arbitrator.

Holding and Implications

Core Ruling: Both appeals are DISMISSED and the orders of the learned Subordinate Judge (which allowed the applications under Section 20 and directed the defendant-appellant to file the Arbitration Agreement for reference to arbitration) are affirmed.

Direct consequences for the parties (as stated in the opinion):

The Subordinate Judge's orders directing the reference to arbitration stand; the court has jurisdiction under Section 20(4) to make necessary appointments to fill the vacancy in the office of arbitrator.
The parties were directed to bear their own costs in this Court.

Broader implications: The court applied and relied on settled principles from prior decisions (including Prabhat General Agencies and the Calcutta decision) to reaffirm that, absent an agreement showing a negative intention not to fill a vacancy, the arbitration vacancy can be supplied and a court may appoint an arbitrator. The opinion does not purport to announce a new legal principle beyond the application of these authorities to the facts before it.

Show full summary ...

M/S. Tata Iron And Steel Co. Ltd. v. M/S. Rajrishi Mineral Industries .

1. These two appeals under Section 39(1)(iv) of the Arbitration Act of 1940 (hereinafter referred to as the ‘Act’) are directed against two separate decisions of the learned Subordinate Judge of Cuttack allowing the applications under Section 20 of the Act and directing the defendant-appellant to file the Arbitration Agreement for a reference of the disputes to arbitration.

2. Messrs. Tata Iron and Steel Co. Ltd. (hereinafter referred to as the ‘Company’) are holders of a chromite mine located at Sukinda and a dolomite mine in the district of Sundergarh - both within the State of Orissa. Plaintiff-respondent in these appeals is a firm of contractors registered under the Indian Partnership Act of 1932 (hereinafter referred to as the ‘Firm’). On 8-2-1969, an agreement was entered into between the Company and the Firm (Ext. H) initially for a period of 13 months from February, 1969, but the same had been extended up to Feb., 1973, whereunder, the Firm undertook to do mining, sorting, cleaning, trimming, blending, transport and stacking of chromite from the chromite mine at Sukinda and to transport the same to rail-head. A similar agreement Was entered into on 1-11-1969 between the parties whereunder the Firm undertook to perform similar acts in the dolomite mine of the Company located within the district of Sundergarh. Initially the contract was for one year, but was extended on the same terms and conditions up to February, 1973. Both these agreements contain an escalation clause and an arbitration clause on similar terms. The Firm pressed for enhancement of the rates under the escalation clause in the two contracts in Dec., 1972, but it was turned down on 9-2-1973 (Ext. 1) and the Firm was informed:

“With reference to your letter No. RMI/BSP/72/659 dated 5th Dec., 1972, the question, of increasing your rates under the escalation clause for your work at Gomardih and Sukinda mines was examined by the Accounts Division.

3. It has been pointed out to you earlier that—

(a) the agreements for your work at Sukinda and Gomardih were entered into by our Company with you from 1-2-1969 and 1-1-1970 respectively and have since been renewed on annual basis. Since renewals of the agreements have been made under the same terms and conditions of the original Agreement’, a revision of rate cannot now be considered;

(b) moreover, none of the cost increases have arisen on account of the factors specified in the ‘escalation clause’ contained in the agreements.

4. In the circumstances, we regret our inability to accede to your request for any increase over the prevailing rates.”

5. On 20th January, 1975, the Firm renewed its claim reiterating that the claims were genuine and appeared to have been not entertained in the absence of supporting materials. For the chromite contract, the Firm claimed Rs. 5,98,671.66 and for the other, claimed Rs. 12,35,562.11. On 16-4-1975, the Company intimated the Firm:

“……… We have looked into the matter and are prepared to pay to you the amount of Rs. 3,01,554.80 as per settlement arrived at, in full and final settlement of your claim under the mining contracts at Gomardih and Sukinda but without prejudice to your claim for escalation which has since been received by us under cover of your letter………… dated 20-1-1975. Kindly note that no interest as claimed by you in your letter No………of 13-2-1975 will be paid. On receipt of your acceptance, we shall let you have our cheque for the aforesaid amount of Rs. 3,01,554.80 p. The escalation claim is receiving our attention and will be dealt with on its own merits.”

6. After waiting for about six weeks, the Firm sent a notice on 2nd June, 1975, saying:

“Your are fully aware that certain disputes have arisen regarding our claims of Escalation and the outstanding payments and the interest accrued thereon, as advised to you in our various letters. As these have not been mutually settled, therefore, these are to be determined by an arbitrator in terms of the arbitration clause 23 of the contract.

It is learnt that you have made certain changes in your Raw Materials Division and as a result of which the arbitrator named in the arbitration clause of the contract by virtue of his designation in office is incapable of functioning as an arbitrator. As arbitration clause still subsists, therefore, in order to determine our claims you are called upon to please concur in the appointment of Shri B.D Dhawan,……… as sole arbitrator and to join in the reference of the disputes to him for adjudication within a period of fifteen days from the receipt of this notice……………”

7. The Company in spite of receipt of the aforesaid communication, sent no reply. The Firm thereupon filed two separate applications under Section 20 of the Act : one in the court of the Subordinate Judge, Jaipur, in regard to the dispute relating to the chromite contract on 26-6-1975 which came to be registered as Title Suit No. 17 of 1975 and the other in the court of the Subordinate Judge at Sundergarh on 28-6-1975 which came to be registered as Title Suit No. 14 of 1975. This Court directed both the disputes to be transferred to the court of Subordinate Judge, Cuttack and that is how both the cases came to be dealt with by the learned Subordinate Judge at Cuttack.

3. The Company resisted the applications contending that there was no dispute existing at the time the two applications were made and keeping the terms of the arbitration clause in view, there could be no cause of action for making the applications. It was further pointed out that there was no merit in the Firm's stand that the named Arbitrator was not available and in case he was not available, the arbitration clause became inoperative and since parties did not intend to fill up the vacancy, no arbitrator could be appointed.

4. In view of these defences, the learned Subordinate Judge framed identical issues in the two cases being:

1. Is there a dispute between the parties to be adjudicated through arbitration as per the arbitration clause in the agreement ?

2. Is the named arbitrator available to arbitrate the disputes ?

3. Has the court authority to appoint an arbitrator to adjudicate the disputes between the parties ?

8. Before the learned Subordinate Judge, both parties produced some documents and the Company examined a witness. On each point, the learned Subordinate Judge found against the Company and allowed the applications. Therefore, the Company has come in appeal against the two decrees drawn up in the two suits. Miscellaneous Appeal No. 280 of 1977 relates to the dispute arising out of the chromite contract while the other is from the dolomite contract. As parties are the same and common questions arise and counsel chose to advance one set of arguments, both the appeals are being disposed of by a common judgement.

9. On the arguments advanced before me, three questions arise for determination:

(i) Was there an existing dispute on the date the respective applications were made ?

(ii) Is the named contractor available? and

(iii) In case he is not, is the court entitled to appoint another in the vacancy? The arbitration clause in the two contracts being common is to the following effect:

“Any question, dispute or difference that shall arise in regard to the Agreement, which is not settled mutually between the parties hereto, shall be referred to arbitration of the Divisional Manager (Raw Materials Division) of the Company. The arbitration shall be governed by the provisions of the Arbitration Act, 1940.”

10. There is no dispute at the Bar that unless there be an existing dispute, no application under Section 20 of the Act is maintainable. On the facts of the case, Mr. Mohanti for the Company contends that there was no dispute while Mr. Rath for the Firm takes a different stand and argues that there were existing disputes. This, therefore, becomes a factual dispute and has to be determined on the basis of the facts on record.

11. As already noted, both the contracts were in force up to Feb., 1973. In Dec., 1972, the Firm had represented for escalation and on the 9th of Feb., 1973 the Company had refused to entertain such a claim. After the contracts were over and the relationship of principal and agent between the parties had terminated, the Firm renewed its claim under the escalation clause. Almost three months after the claim was laid, the Company indicated to the Firm that the claim was receiving attention (the entire letter has already been extracted).

12. The Firm waited for full six weeks and on 2-6-1975, issued the notice relating to appointment of arbitrator. It is not the stand of the Company that this notice was not duly received by it. There was, however, no response. As already noted, on the 26th and the 28th respectively of the month of June, 1975, the two applications were filed in the respective courts.

13. Mr. Mohanti for the Company contends that the claims were huge and required investigation and, therefore, until there was a definite rejection of the claim by the Company, the Firm should not have rushed to the court. Relying on the terms of the arbitration clause. Mr. Mohanti contends that the referable disputes are those which are not settled mutually between the parties and when the claims raised by the Firm were under consideration of the Company, the claims could not be treated to be disputes. The submission seems to be that until there is a failure on the part of the Company to make a reference of an existing dispute, the Court does not come into the picture for appointing an arbitrator. Mr. Rath, however, emphasises on two features. The Company had almost three month's time i.e from 20th of Jan. till 16th of April of 1975 when it sent its reply that the claim was receiving attention. Six weeks' time intervened between the Company's reply and the Firm's notice. In case the time thus taken was not sufficient to examine the claims and the Company was anxious to settle the claims but wanted further time for scrutiny of the claims, nothing stood in its way of informing the Firm that its claims were still under examination and as no dispute had arisen within the arbitration clause, the Firm should not proceed to the court. The contention of Mr. Rath is cogent and reasonable and the indifferent silence on the part of the Company has been rightly utilised by the learned Subordinate Judge against it. In the setting of things, particularly when the contracts had terminated by efflux of time and the claim had been laid for over five months and no definite communication was being given as to whether the same was going to be accepted and even though a notice had been given, no reply was being sent, I do not think, the learned Subordinate Judge was wrong in holding that the Firm was entitled to proceed on the footing that the Company had no intention of mutually settling the claim.

14. Two other arguments of Mr. Rath are also in support of this proposition, namely (i) The Company had earlier turned down the same claim and (ii) though the case was pending for more than two years in the court below, at no stage the Company made an attempt to tell the trial Court that it was going to negotiate the differences and, therefore, no arbitration was necessary. In fact, in the written statement in the present case, the Company again denied the claim. I find no justification to take a different view from the learned Subordinate Judge's conclusion. The first point, therefore, be determined against the Company and in favour of the Firm.

15. Under the arbitration clause, the dispute was to be referred to the named arbitrator - the Divisional Manager (Raw Materials Division) of the Company. On 11th of January, 1972, as per Ext. E, the Divisional Manager came to be re-designated as Director, Raw Materials. On 5th of Oct. 1973 (Ext. F), the post of Director, Raw Materials was abolished and one Mr. S.S Manjrekar, then General Superintendent (Mines), was redesignated as Divisional Manager (Mines). In the written statement, the Company had contended:

“……… In any event, the functions of Divisional Manager (Raw Material Division) have now been taken over after the abolition of the office of the Divisional Manager (Raw Material Division) by the Divisional Manager (Mines) of the Defendant……….”

16. The Company's witness stated in his evidence-in-chief:

“In the year 1969 there was a post designated as ‘Divisional Manager (Raw Materials)’. He was in-charge of technical operations, production, costs and other administrative matters. The Divisional Manager (Mines) is in over-all charge of the Mines for its entire operation. Sri S.S Manjrekar is the Divisional Manager (Mines) now…………”

17. In cross-examination, this witness stated:

“……………It is true that on the date of this contract there was a post of Divisional Manager (Raw Material Division) which is not there now. This post has undergone a change by re-designating as Director, Raw Materials and in respect of Mines, it is Divisional Manager (Mines). The functions of the Divisional Manager (Raw Materials Division) have been divided amongst Director of Raw Materials and Divisional Manager (Mines) redesignated as such. The Director of Raw Materials assumes charge of the post of Divnl. Manager (Raw Material Division) by change of designation…………”

18. In view of the aforesaid evidence and with reference to the two office orders already referred to, there is no doubt that the named arbitrator by designation no more exists. Here is a case where a person had not been named but a holder of an office had been nominated arbitrator by common consent. The office has now been so divided that it is not possible to identify some other existing office to be the substitute of the office the holder of which by consent of parties had been appointed arbitrator. In this connection, the learned counsel for both sides had placed reliance on the decision of the Supreme Court in the case of Union of India v. D.N Revri and Co., (1976) 4 SCC 147 : AIR 1976 SC 2257, wherein the partnership firm (respondent in the appeal) had entered into a contract with the Union of India for the supply of 30,000 tons of East German sugar under certain terms and the agreement had an arbitration clause to the following effect (at p. 2259):—

“All questions, disputes or differences whatsoever which may at any time arise between the parties to the agreement touching the agreement or the subject-matter thereof, arising out of or in relation thereto and whether as to construction or otherwise shall be referred to a single arbitrator for decision. Such a single arbitrator shall be nominated by the Secretary to the Government of India in the Ministry of Food and Agriculture in his absolute discretion and the decision of such arbitrator shall be final and binding upon the parties…………”

19. On 27th of February, 1958, the Secretary, Department of Food in the Ministry of Food and Agriculture nominated an arbitrator. The said arbitrator gave an award and the Union of India proceeded to take steps to make the award a rule of the court. The respondent resisted the application and asked for setting aside of the award on two grounds, one of which was that the arbitrator had not been validly appointed, inasmuch as the Ministry of Food and Agriculture envisaged in the arbitration clause had been bifurcated and two separate Ministries had come into existence by the Presidential Order from 19th of Oct., 1956, one being of Food and the other of Agriculture. Even after reintegration of the Ministries of Food and Agriculture into one single Ministry, the arbitration agreement could not be given effect to since there came into existence two Secretaries in the Ministry. On the facts of the case and taking into account the conduct of the respondent in participating before the arbitrator, the court came to the conclusion that the appointment of the arbitrator was not open to attack. I am inclined to think that the ratio of the decision has no application to the case in hand.

20. On the facts already discussed, the learned Subordinate Judge seems to have come to the correct conclusion on this aspect of the matter that the named arbitrator is not available and thus there has been a vacancy in the office of arbitrator. The second aspect of the matter must also be decided against the appellant.

21. The last point is on the basis of the contention advanced by learned counsel for the appellant that parties have not intended to fill up the vacancy and, therefore, it is not for the court to make an appointment now and the arbitration clause must be held to have become unforceable. The relevant part of Section 8 of the Act provides:—

“(1) In any of the following cases:—

(b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should at be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy; or

any party may serve the other parties or the arbitrators as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy.

(2)…………”

22. Examining this aspect of the matter, S.R Das, J., as the learned Judge then was, in the case of Governor-General in council v. Associated Live-stock Farm (India) Ltd., AIR 1948 Cal 230, observed:—

“…………I am inclined to agree with Mr. Chaudhuri. I do not find anything in the arbitration clause suggesting that the parties agreed that any vacancy in the office of arbitrator should not be filled up. In the absence of any such agreement the vacancy can be easily supplied and there is no reason to think that the arbitration will be infructuous at all. If the particular officer sanctioning the contracts refuses to act or is in capable of doing so by reason of his absence or otherwise there are provisions in the Indian Arbitration Act for the appointment of another arbitrator in his place and the arbitrator so appointed will be quite competent to proceed with the arbitration………….”

23. This principle was followed by a Division Bench of the Patna High Court in the case of Hindustan Steel Ltd. v. Engineers and Contractors, AIR 1964 Pat 468 and by the learned Chief Justice of this Court in the case of State of Orissa v. Modern Construction Co., (1971) 1 Cut WR 521. The dictum of the Calcutta case was specifically approved by the Supreme Court in the case of Prabhat General Agencies etc. v. Union of India, (1971) 1 SCC 79 : AIR 1971 SC 2298. There it was pointed out (at p. 2300):—

“Section 20 is merely a machinery provision. The substantive rights of the parties are found in Sec. 8(1)(b). Before S. 8(1)(b) can come into operation it must be shown that (1) there is an agreement between the parties to refer the dispute to arbitration; (2) that they must have appointed an arbitrator or arbitrators or umpire to resolve their dispute; (3) anyone or more of those arbitrator's or umpire must have neglected or refused to act or is incapable of acting or has died; (4) the arbitration agreement must not show that it was intended that the vacancy should not be filled and (5) the parties or the arbitrators as the case may be had not supplied the vacancy.”

24. The Court further pointed out:—

“……… Therefore the only question is whether the agreement read as a whole shows either explicitly or implicitly that the parties intended that the vacancy should not be supplied. It may be noted that the language of the provision is not that the parties intend to supply the vacancy but on the other hand it is that the parties did not intend to supply the vacancy. In other words if the agreement is silent as regards supplying the vacancy, the law presumes that the parties intended to supply the vacancy. To take the case out of S. 8(1)(b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy………”

25. Thus, unless a negative intention is indicated, Section 8(1)(b) of the Act would be applicable and under the provisions of Section 20(4) of the Act, which confers power on the court to appoint arbitrator or umpire, jurisdiction would be vested in the court to make the appointment and thus fill up the vacancy.

26. Appellant's counsel has not been able to show the negative intention of the arbitration clause. Appellant's counsel had contended that in nominating the named arbitrator parties had taken into consideration the fact that the named arbitrator was associated with execution of the work of a complicated type as was the subject-matter of the agreements and that was a feature which could be taken into consideration as implicitly indicating the intention of parties not to fill up the vacancy by replacing him. There is no material to support this submission, nor is there any material to show that the execution of the contract is of such a type that apart from the named arbitrator, no other person could be competent to handle the dispute successfully. In the instant case, there fore the court had jurisdiction to make the appointment under Sub-Sec. (4) of Section 20 of the Act. The third point must, therefore, also be decided against the appellant.

27. All the contentions advanced on behalf of the appellant have failed and, therefore, both the appeals are dismissed and the orders of the learned Subordinate Judge are affirmed. I would call upon the parties to bear their own costs in this Court.

28. Appeals dismissed.

M/S. Tata Iron And Steel Co. Ltd. v. M/S. Rajrishi Mineral Industries .

Structured Summary of the Opinion — Appeals under the Arbitration Act, 1940

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Appellant (Company) — Principal contentions

Respondent (Firm) — Principal contentions

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

M/S. Tata Iron And Steel Co. Ltd. v. M/S. Rajrishi Mineral Industries .

Comments