Full Judgment Text
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CASE NO.:
Special Leave Petition (civil) 11279 of 2006
PETITIONER:
YASHWITH CONSTRUCTION P. LTD.
RESPONDENT:
SIMPLEX CONCRETE PILES INDIA LTD. & ANR.
DATE OF JUDGMENT: 03/07/2006
BENCH:
P.K. BALASUBRAMANYAN & R.V. RAVEENDRAN
JUDGMENT:
JUDGMENT
O R D E R
(CC 3801/2006)
P.K. BALASUBRAMANYAN, J.
1. Delay condoned.
2. On a dispute having arisen, the Managing
Director of the respondent company appointed an
arbitrator in terms of the arbitration clause. The
arbitrator resigned. Thereupon the Managing Director of
the respondent company, in view of the mandate in the
arbitration agreement promptly appointed another
arbitrator. At that stage, the petitioner approached the
Chief Justice of the High Court under Section 11 sub-
Section 5 read with Section 15(2) of the Arbitration &
Conciliation Act, 1996 (for short "the Act"), praying that
the Chief Justice may appoint a substitute arbitrator to
resolve the disputes between the parties. The Chief
Justice found that the appointment of the second
arbitrator by the Managing Director, after the resignation
of the first arbitrator, was valid in law since it was
permissible under the contract and the right to make such
an appointment was saved by Section 15(2) of the Act.
The argument that Section 15(2) of the Act referred to
statutory rules providing for appointment of Arbitrators
and not to a contractual provision for such appointment
was rejected by the learned Chief Justice. It was held by
him that no occasion arose for him to appoint an
arbitrator under Section 11(6) of the Act in the case.
Thus, the application was dismissed leaving the parties to
pursue their claims before the arbitrator appointed by the
Managing Director in terms of arbitration agreement
between the parties.
3. The petitioner challenged the decision of the
learned Chief Justice by way of a Writ Petition in the High
Court. The Division Bench noticed the decision of this
Court in SBP & Co. Vs. Patel Engineering Ltd. &
Another [(2005) 8 SCC 618] holding that the order passed
by the Chief Justice is a judicial order and no Writ Petition
would lie in the High Court challenging such an order and
only an appeal could be filed in the Supreme Court
invoking Article 136 of the Constitution of India. But the
Division Bench thought that since that decision saved
appointments made on or before the date that decision
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was rendered by this Court, the Writ Petition filed by the
petitioner would also be saved and the Writ Petition could be
decided on merits. The Division Bench held that the position
obtaining under Section 8(1) of the Arbitration Act of 1940
differed from that available under the present Act especially in
the context of Section 15 thereof and that in terms of Section
15(2) of the Act, the Managing Director could, on the basis of
the arbitration agreement, appoint another arbitrator when
the originally appointed arbitrator resigned, thus attracting
Section 15(1)(a) of the Act. It further held that Section 15(2)
covered not only cases of appointments under statutory rules
or rules framed under the Act, but it would also take in the
terms of the agreement between the parties for appointment of
an arbitrator and in that view, the Managing Director, in the
case on hand and on the terms of the arbitration agreement,
would have the right to appoint a substitute arbitrator. Thus,
it was held that the learned Chief Justice was right in rejecting
the application made by the petitioner. Thus, the Writ Petition
was dismissed. It is this decision of the Division Bench that is
sought to be challenged in this petition for special leave to
appeal.
4. In our view, the learned Chief Justice and the
Division Bench have rightly understood the scope of
Section 15 of the Act. When the arbitrator originally
appointed in terms of the arbitration agreement withdrew
for health reasons, the Managing Director, as authorized
originally by the arbitration agreement, promptly
appointed a substitute arbitrator. It is true that in the
arbitration agreement there is no specific provision
authorizing the Managing Director to appoint a substitute
arbitrator if the original appointment terminates or if the
originally appointed arbitrator withdraws from the
arbitration. But, this so called omission in the arbitration
agreement is made up by the specific provision contained
in Section 15(2) of the Act. The withdrawal of an
arbitrator from the office for any reason is within the
purview of Section 15(1)(a) of the Act. Obviously, therefore
Section 15(2) would be attracted and a substitute
arbitrator has to be appointed according to the rules that
are applicable for the appointment of the arbitrator to be
replaced. Therefore, what Section 15(2) contemplates is
an appointment of the substituted arbitrator or the
replacing of the arbitrator by another according to the
rules that were applicable to the appointment of the
original arbitrator who was being replaced. The term
"rules" in Section 15(2) obviously referred to the provision
for appointment, contained in the arbitration agreement or
any Rules of any Institution under which the disputes
were referred to arbitration. There was no failure on the
part of the concerned party as per the arbitration
agreement, to fulfil his obligation in terms of Section 11 of
the Act so as to attract the jurisdiction of the Chief Justice
under Section 11(6) of the Act for appointing a substitute
arbitrator. Obviously, Section 11(6) of the Act has
application only when a party or the concerned person
had failed to act in terms of the arbitration agreement.
When Section 15(2) says that a substitute arbitrator can
be appointed according to the rules that were applicable
for the appointment of the arbitrator originally, it is not
confined to an appointment under any statutory rule or
rule framed under the Act or under the Scheme. It only
means that the appointment of the substitute arbitrator
must be done according to the original agreement or
provision applicable to the appointment of the arbitrator
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at the initial stage. We are not in a position to agree with
the contrary view taken by some of the High Courts.
5. Since here, the power of the Managing Director
of the respondent is saved by Section 15(2) of the Act and
he has exercised that power on the terms of the
arbitration agreement, we see no infirmity either in the
decision of the learned Chief Justice or in that of the
Division Bench. We do not think it necessary in this case to
go into the question whether the Writ Petition before the High
Court was maintainable on the basis that it challenged an
order of the Chief Justice rendered on 4.3.2005, prior to the
date of the decision in SBP & Co. Vs. Patel Engineering
Ltd. & Another(supra) rendered on 26.10.2005.
6. In this view of the matter, we see no reason to
grant leave to appeal or issue notice on this petition for
special leave to appeal. The petition is dismissed.