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Union Of India And Others v. Prabhat Kumar And Bros. And Another
Factual and Procedural Background
The appeal was filed by the Union of India against an order of the High Court in Civil Revision No. 3153 of 1991. A contractual dispute between the Union of India (appellant) and the respondent-contractor was referred to arbitration under Condition 70 of the General Conditions of Contract, which provided for a sole arbitrator (an engineer officer) to be appointed by the authority mentioned in the tender documents, and further contemplated appointment of a new arbitrator if the appointed arbitrator resigned, vacated office, or was unable or unwilling to act.
The appointed arbitrator conducted proceedings until he voluntarily retired from government service on 17-09-1990. Thereafter, the respondent-contractor moved an application before the Senior Sub-Judge, Ferozpur under Section 28 of the Arbitration Act, 1940 seeking extension of time for the arbitrator to make an award. The Union of India objected, contending that the arbitrator, having retired, was no longer competent to function and that a new arbitrator had to be appointed under Condition 70. The Sub-Judge rejected the objection and granted the extension; the District Judge rejected the Union's appeal; and the High Court rejected the Union's civil revision by the impugned order. The matter then came before the Supreme Court.
Legal Issues Presented
- Whether the arbitrator appointed under Condition 70 ceased to be an arbitrator upon retirement from government service, thereby disentitling him from continuing and rendering an extension of time to make the award impermissible.
- Whether, in terms of Condition 70 of the contract, the Union of India was competent (and required) to appoint a new arbitrator after the earlier arbitrator’s retirement.
Arguments of the Parties
Respondent-Contractor's Position
- Filed an application under Section 28 of the Arbitration Act, 1940 seeking extension of time for the arbitrator to make the award after the arbitrator’s retirement.
Union of India’s Arguments
- Objected that the arbitrator, having retired from government service, was no longer competent to function as arbitrator.
- Contended that no further time could be granted to enable the retired arbitrator to make an award.
- Submitted that, under Condition 70, a new arbitrator had to be appointed in place of the retired arbitrator.
Table of Precedents Cited
No precedents were cited in the provided opinion.
Court's Reasoning and Analysis
The Court focused on the contractual arbitration clause (Condition 70) and the status of the arbitrator after retirement. It noted that the dispute and appointment were governed by Condition 70, which expressly provided that where the appointed arbitrator resigns, vacates office, or is unable or unwilling to act for any reason, the appointing authority may appoint a new arbitrator in his place.
Applying this contractual mechanism, the Court held that the arbitrator appointed by the Government ceased to be the arbitrator upon his retirement from government service on 17-09-1990. On that basis, the Court concluded that the Union of India was competent to appoint a new arbitrator under Condition 70. Consequently, the orders of the High Court and the courts below—each of which had allowed the extension of time for the retired arbitrator—were set aside.
The Court also structured how the arbitration would proceed after substitution: it recorded the submission of the Union of India’s counsel that a new arbitrator would be appointed within one month, directed parties to appear before the newly appointed arbitrator, and clarified that prior proceedings and records furnished to the earlier arbitrator before retirement would form part of the proceedings and records before the new arbitrator, while allowing the parties to file fresh documents.
Holding and Implications
ALLOWED: The Supreme Court set aside the impugned order of the High Court and the orders of the courts below, holding that the arbitrator ceased to be an arbitrator upon retirement and that the Union of India was competent to appoint a new arbitrator under Condition 70.
The direct consequence is that arbitration must proceed before a new arbitrator to be appointed by the Union of India (with the Court recording that such appointment would be made within one month). The parties were directed to appear before the new arbitrator, who was directed to complete proceedings expeditiously. The earlier arbitration proceedings and records up to the retired arbitrator’s retirement were to be treated as part of the record before the new arbitrator, and the parties were permitted to file fresh documents. No order as to costs was made. The opinion does not indicate that any broader precedent was newly established beyond these directions in the case.
Order
1. Special leave granted.
2. This appeal is by the Union of India against the order of the High Court in Civil Revision No. 3153 of 1991. A dispute arose between the appellant and the respondent and that dispute was in terms of their contract referred to an arbitrator appointed under Condition 70 of General Conditions of Contract. We shall read Condition 70 so far as it is material:
“Arbitration.— All disputes between the parties to the contract (other than those for which the decision of the CWE or any other person is by the contract expressed to be viable and binding) shall, after written notice by either party to the contract to the either of them, be referred to the sole arbitration of an engineer officer to be appointed by the authority mentioned in the tender documents.
… If the arbitrator so appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new arbitrator to act in his place.”
3. The arbitrator so appointed in terms of Condition 70 conducted the proceedings until he retired voluntarily from the government service on 17-9-1990. The respondent-contractor then filed an application before the Senior Sub-Judge, Ferozpur under Section 28 of the Arbitration Act, 1940 seeking extension of time for the arbitrator to make the award. Objection was raised by the Union of India, the present appellant, on the ground that the arbitrator having retired from government service was no longer competent to function as an arbitrator and no further time could be granted to enable him to make an award. It was further submitted that in terms of Condition 70, a new arbitrator had to be appointed. This contention of the appellant was rejected by the learned Sub-Judge and time was accordingly granted as prayed for by the respondent. Appeal filed by the Union of India was rejected by the learned District Judge. The Civil Revision filed by the Union of India was rejected by the High Court by the impugned order.
4. The question which now arises in this appeal is covered by the order of this Court dated 13-11-1991 which is Annexure P-4 to this appeal.
5. We are of the view that the arbitrator who had been appointed by the Government ceased to be the arbitrator on his retirement from government service on 17-9-1990. In terms of Condition 70, the Union of India is competent to appoint a new arbitrator. Accordingly we set aside the impugned orders of the High Court and the courts below.
6. Counsel appearing on behalf of the Union of India submits that an arbitrator would be appointed in terms of Condition 70 within one month from today. The submission is recorded. In the circumstances, the parties are directed to appear before the new arbitrator to be appointed by the Union of India. The arbitrator shall complete the proceedings expeditiously. We make it clear that the proceedings before the earlier arbitrator and the records furnished to him prior to the date of his retirement will form part of the proceedings and records before the new arbitrator. The parties are at liberty to file fresh documents.
7. The appeal is allowed in the above terms. We make no order as to costs.
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