Full Judgment Text
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IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 5605 OF 2008
(Arising out of SLP©No.8195 of 2007)
Union of India & Ors. …Appellants.
Versus
M/s. Talson Builders …Respondent
O R D E R
1. Delay of 264 days in filing the special leave
petition is condoned.
2. Leave granted.
3. This appeal is directed against the judgment
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and final order dated 24 of February, 2006 passed
by the High Court of Judicature at Allahabad in
Original Arbitration Petition No.117 of 2003
whereby the Chief Justice of the High Court had
appointed a retired Judge of the Allahabad High
Court as Arbitrator to decide the dispute raised by
the parties. The order passed by the High Court
runs as under:
“For the purpose of acting as Arbitrator in
this matter, Hon’ble R.K.Gulati of 11,
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Taskhand Marg, Allahabad, a retired
Judge of this Hon’ble Court is hereby
nominated and appointed.”
4. It is not in dispute that the respondents filed
an application for appointment of an Arbitrator
under Section 11(6) of the Arbitration and
Conciliation Act, 1996. The respondent was granted
certain contracts for Military Engineering service
out of which, we are only concerned relating to CA
NO.CWE/KAN/22 of 1996-97. After completion of
contract work, the respondent submitted its final
bill wherein it was specifically certified that the final
bill included all claims raised by it from time to time
irrespective of the fact whether they were admitted
by the department or not and that there were no
more claims in respect of the contract and the
amount so claimed must be held to be full and final
settlement of the claim of the respondent under the
contract agreement. According to the appellants,
the respondent submitted its final bill and received
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full payment without any protest. However, on 14
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of August, 2000, the respondent sent a letter to the
appellants for appointment of an Arbitrator which
was not agreed to by them with the observation that
the final bill in respect of the subject work had been
signed and the amount had already been paid in
full and final settlement and therefore, there was no
dispute to be referred to the Arbitrator as prayed for
by the respondent. By the aforesaid order and
without going into the question whether there was
any dispute pending between the parties, the High
Court, by the impugned order, appointed a retired
Judge of the High Court as an Arbitrator to decide
the dispute between the parties. Now, the question
is - when such objections were raised against the
appointment of an arbitrator on the ground that the
claim could not be referred to the Arbitrator
because of full and final settlement and the claim
stood liquidated, the High Court ought not to have
referred such dispute by appointing an Arbitrator
without deciding the objections so raised, or it
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would be left open to the Arbitrator to go into this
question after the parties had entered appearance
before him. This question has already been decided
by a three-Judge Bench of this Court in Northern
Railway Administration, Ministry of Railway,
New Delhi vs. Patel Engineering Company Ltd.
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dated 18 of August, 2008. This Court after giving
due consideration of the expression “due regard”
has observed in paragraph 13 as follows:
“In all these cases at hand the High
Court does not appear to have focused on
the requirement to have due regard to the
qualifications required by the agreement or
other considerations necessary to secure
the appointment of an independent and
impartial arbitrator. It needs no reiteration
that appointment of the arbitrator or
arbitrators named in the arbitration
agreement is not a must, but while making
the appointment the twin requirements of
sub-section (8) of Section 11 have to be
kept in view, considered and taken into
account. If it is not done, the appointment
becomes vulnerable. In the circumstances,
we set aside the appointment made in
each case, remit the matters to the High
Court to make fresh appointments keeping
in view the parameters indicated above. “
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5. In view of the aforesaid decision, we have no
other alternative but to set aside the order of the
High Court and request the High Court to go into
the dispute and then dispose of the application for
appointment of an Arbitrator under Section 11(6) of
the Act in accordance with law. It is expected that
the High Court shall decide the said application as
early as possible preferably within three months
from the date of supply of a copy of this order to it.
The impugned order is thus set side. The appeal is
allowed to the extent indicated above. There will be
no order as to costs.
………………………J.
[Tarun Chatterjee]
New Delhi; …………………
…….J.
September 11, 2008. [Aftab Alam]