Appeals Nos
2441 and 2442 of 1968
Appeals by special leave from the judgment and order dated October 17 1968 of the Bombay High Court in Arbitration Petitions Nos 49 and 50 of 1968
I N Shroff for the appellant in CA No 24411968
V M Tarkunde and I N Shroff for the appellant in CAs
2442 of 1968
section V Gupte B R Agarwala for the respondent in both the appeals
The Judgment of the Court was delivered to Ray J
These two appeals are by special leave against I the judgment dated 17 October 1968 of the High Court at Bombay determining under section 33 of the that the umpire rightly entered upon the reference and further extending the time till 31 December 1968 for making an award thereof by the umpire
Two questions arise for consideration in these appeals
First whether there can be any valid appointment of umpire by arbitrators without obtaining consent of the appointee to be an um 697 pire
Second on the construction of the arbitration agreement in the present case was the operation of paragraph 4 of Schedule I of the excluded with the result that the umpire could enter upon the reference only in the event of a difference arising between the arbitrators
On 26 April 1967 there was an arbitration agreement between the partnership firm of Indian Engineering Company and Keshavsinh Dwarkadas Kapadia
Kapadia had appointed Ms Chetan Trading Company as the sole selling agent of Kapadia s several products including aluminium and copper wire by an agreement dated 16 September 1965
Chetan Trading Company in their turn appointed Indian Engineering Company as their sole selling agent in respect of aluminium and copper wires
Chetan Trading Company terminated their agreement with Indian Engineering Company
Kapadia also terminated the sole selling agency with Chetan Trading Company Indian Engineering Company contended that on the termination of the sole selling agency between themselves and Chetan Trading Company Indian Engineering Company became the sole selling agent of Kapadia in terms of the agreement  dated 16 September 1965
Indian Engineering Company claimed damages against Kapadia for breach of the agreement
Kapadia claimed damages and moneys from Indian Engineering Company Disputes arose between the parties
These disputes were referred to arbitration in accordance with the agreement dated 26 April 1967
There was a similar arbitration agreement between Chetan Trading Company and Indian Engineering Company on 5 June 1967 in respect of their disputes and claims against each other
The arbitration agreement and the arbitrators were identical in both the cases
Clauses 1 2 5 and 6 of the arbitration agreement which are relevant for the purposes of the present appeals are as follows Clause 1 All the disputes and differences arising out of or in relation to the said Sole Selling Agency Agreement be and they are hereby referred to the arbitration of the said Shri H G Advani and Shri J N Gandhi
Clause 2 That the arbitration shall be governed by them provisions of the 
Clause 5 The arbitrators shall make and publish their award within four months from the date of their entering upon the reference and they are hereby authorised to extend the said time from time to time as may be required with the previous written consent of both the parties hereto
698 Clause 6 The said arbitrators shall before proceeding with the arbitration appoint an umpire and in the event of any difference arising between them they shall refer the matter to the umpire for his decision and award
The arbitrators Messrs Advani and Gandhi held their first meeting on 12 September 1967
At the said meeting before entering upon the reference the arbitrators appointed an umpire in the following terms Mr Porus Mehta failing him Mr Murzban Mistry appointed umpire
On 11 January 1968 the time laid down by clause 5 of the agreement for making the award expired
On 14 January 1968 the respondents wrote to the appellants to obtain the neces sary extension of time for making the award
The appellants did not comply with the request and on 6 March 1968 wrote to the arbitrators that Mr Advani one of the arbitrators would be biased in favour of the respondents
Thereafter the respondents through their solicitors called upon the arbitrators to refer the matter to the umpire and also by a separate letter called upon the umpire Mr Porus A Mehta to enter on the reference as umpire appointed by the arbitrators
Mr Mehta fixed a meeting on 27 May 1968
The appellants raised certain objections
The meeting was adjourned
Another meeting was fixed on 17 June 1968
At the meeting held on 17th June 1968 Mr Mehta gave certain directions in regard to the proceedings and instructions thereof and fixed 12 July 1968 for hearing
The appellants by letter dated 12 July 1968 addressed to Mr Mehta contended that the consent of the umpire was not obtained before his appointment and therefore there was no valid appointment of the umpire
Mr Mehta fixed the meeting on 13 July 1968 and decided to proceed with the arbitration and adjourned the meeting to 20 July 1968
The appellants obtained an adjournment on the ground that the appellants wanted to file a petition challenging the appointment of Mr Mehta as an umpire
Mr Mehta adjourned the matter till 30 July 1968
In this context of events the appellants filed applications under section 33 of the which resulted in the order appealed against
Three contentions which had been advanced An the High Court were repeated here
First that the arbitrators before pro ceeding with the reference did not obtain consent of the umpire to his appointment as umpire and therefore there was no appointment of umpire
Secondly under clause 6 of the arbitration agreement operation of paragraph 4 of Schedule I of the 699 was excluded and the umpire could enter upon the reference only in the event of a difference arising between the arbitrators on their disagreement
No difference arose between the arbitrators in the present case but only time for making the award expired
Therefore the umpire had no right to enter upon the reference
Thirty under clause 6 of the arbitration agreement the umpire had no right to enter upon the reference unless the arbitrators referred the matter to the umpire
The High Court relied on the decision of the Judicial Committee in Mirza Sadik Husain vs Mussanmat Kaniz Zohra Begam and Anr1 38 IA 181 and held that the umpire signified the consent by taking up the office and the umpire rightly entered on the reference
The High Court held that the contingency provided for in paragraph 4 of Schedule I to the was not excluded
The High Court however said that if the High Court was wrong in the view that paragraph 4 of Schedule I to the was not excluded expiry of time to make an award could not be regarded as a disagreement between the arbitrators
The third contention of the appellants was also rejected by the High Court on the ground that clause 6 of the arbitration agreement in the present case did not apply when the arbitrators did not make an award within time
Counsel for the appellants contended that the words if any appointed arbitrator or umpire I neglects or refuses to get  occurring in section 81 of the mean that one can refuse to act only after one has accepted the appointment
This contention was supported by relying on the following observation in Russell on Arbitration 18th Edition at page 212 Acceptance of offices Acceptance of the office by the arbitrator appears to be necessary to perfect his appointment
It has been so decided in the case of an umpire and it would seem to be only reasonable that an appointment should not be considered effective until the person appointed has agreed either expressly or tacitly to exercise the function of the office
Two decisions are cited in Russell in support of the view expressed by the author
These decisions are Ringland vs Lowndes 7   ER 749 and Tradax Export section A vs Volkawagenwerk 3 AG  1969 2 OB 599
The decision in Tradax Export case supra has been affirmed by the Court of Appeal as will appear in It is important to notice the distinction between appointment and acceptance of office
The present appeals concern the appointment of an umpire
The questions of effectiveness or per 700 fection of appointment are by the nature of things subsequent to appointment unless the agreement or the statute provides otherwise
Arbitrators and umpire too are often appointed by the parties
Sometimes an umpire is appointed by arbitrator
The constitution of the arbitral body and the manner in which the appointments are made are primarily dealt with in the arbitration agreement or else the will apply
In some cases the appointment of arbitrator may require special consideration
If for instance two arbitrators are required to be appointed one by each party an appointment of arbitrator by a party is not complete without communication thereof to the other party
The reason in the words of Lord Denman is this  Neither party can be said to have chosen an arbitrator until he lots the other party know the object of his choice See Thomas vs Fredricks  1 847 10 QB 775
Where each party was to appoint a valuer by 31 May 1847 and one of the parties nominated a referee late on 31 May and sent by that night s post a notice thereof to the defendant who received it on 1 June it was held that the plaintiff had not nominated a referee by 31 May See Tew vs Harris The necessity for communication of appointment of arbitrator to the parties as also to the appointee depends often on the languae of the arbitration clause
In the Tradax Export case supra the arbitration clause was as follows   
Any claim must be made in writing and claimant s arbitrator appointed within three months  of final discharge and where this provision is not complied with the claim shall be deemed to be waived and absolutely barred
This is described as the usual Centrocon arbitration clause in charterparty agreement
It is noticeable that in the Centrocon arbitration clause the claimant is required to appoint an arbitrator within three months of final discharge of cargo or else the claim is barred
An effective appointment of an arbitrator in such a clause is necessary to constitute arbitral authority within the stipulated time to prevent the claim from being barred
Therefore in such a clause not only communication to the appointee but also the acceptance of office by the appointee is essential for effective appointment of arbitrator within the meaning of the clause
A mere nomination or appointment unknown to the appointee was held not to be an appointment far less an effective appointment of arbitrator within the meaning of that clause
The appointment will be effective only when the appointed arbitrator accepts office and is armed with the duty and authority of an arbitrator
Even in such a clause the stage of effective appointment will be when he has indicated his willingness to act in that matter
701 In the Tradax Export case supra the charterers gave notice of appointment to the arbitrator
Three months expired The other side contended that there was no appointment of arbit rator within the stipulated time
The arbitrator was not set in motion
Neither was the arbitrator clothed with the mandate of arbitration nor was the machinery of arbitration invoked by the charterers
The appointment of an arbitrator there had to be perfected and implemented by calling upon the appointee to act
In the Tradax Export case supra the Court of Appeal observed that if an application under section 27 of the English Arbitration Act 1950 had been made the court would have granted relief as explained in Liberian Shipping Corporation Pegasus  vs A King  Sons Ltd Section 27 of the English Arbit ration Act is a special provision conferring power upon the court to extend the time for commencement of arbitration proceedings where in the circumstances of the case undue hardship would otherwise be caused
This aspect indicates that in the Centrocon clause commencement of proceedings by effective appointment is vital and that is why relief against rigour of time clauses is granted under section 27 of the English Arbitration Act 1950
In the present appeals the reference was to arbitrators and they were required to appoint an umpire
The appointment of an umpire by two arbitrators means that the arbitrators are to coneur in appointing an umpire
There is no particular method of appointment of an umpire prescribed by the Act
The usual method of appointment of an umpire by the arbitrators is in writing
Arbitrators who are required to appoint an umpire are under no obligation to obtain the approval of the choice of the personnel by the parties who appointed the arbitrators
If any party is dissatisfied with the choice that will not affect the validity of the appointment See Oliver vs Collings ER 1045
The appointment by arbitrators of an umpire should be the act of the will and judgment the two
Such an appointment is to be one of the choice and not of chance
See Re
Cassell  ER 232
If an umpire declines the office the appointment is ineffectual
Ile arbitrators in such a case can make another appointment of an umpire if the arbitration agreement empowers them to do SO Or the court can appoint an umpire in lieu of an appointed umpire who refuses to act
Declining the office will be refusal to act
It is therefore apparent that appointment of umpire is something different from the acceptance of office by the umpire
The arbitrator Or umpire assumes his office when he accepts the appointment
There is no NO authority for the proposition that consent of the appointee is required before an umpire is appointed by the arbitrators
The observations in Russll on arbitration
18 th Ed 702 at page 212 do not support that submission
The decision in Ringland vs Lowndes supra which is referred to in Russell had very special features
Under the Public Health Act 1848 a disputed claim to compensation was to be settled by arbitration
Arbitrators were required to make an award within 21 days after the appointment or within extended time if any
If arbitrators neglected or refused to appoint an umpire for seven days after being requested so to do by any party the court of quarter sessions would on the application of such party appoint an umpire
In that case arbitrators were appointed in January 1861
The arbitrators refused to appoint an umpire
The plaintiff applied at the Easter sessions to appoint an umpire but failed in consequence of want of a notice of his intention to make such application
The plaintiff thereafter gave the required notice and the second application was made at the Midsummer sessions
One Johnson was named as umpire
But as his consent had not been obtained no formal appointment was made
A third application was made at the Michaelms sessions and Johnson was on 14 October appointed umpire and accepted the appointment
The question for consideration was whether the appointment of the umpire was at the Midsummer sessions or at the Michaelmas sessions
Under the statute the award was to be made within three months from the umpires appointment
The umpire made an award on 30 December 1861
If the appointment was in the Midsummer sessions the Award would be bad
It will appear from the report 15 CB  NS 173 at pp
178 179 and 749 at pp
752 and 759 that it was the duty
and practice of the clerk of the peace to make an entry of the acts and proceedings of the court from Which the orders of the court were subsequently formally drawn up and no order would in the course of practice be formally drawn up unless the assent of the umpire to act had been previously obtained
Counsel for the board in Ringland s case did not strongly press the objections that  an order was made at the Midsummer sessions because there was no formal order of the Court in Midsummer sessions
The decision in Ringland vs Lowndes supra went up on appeal as will appear from   ER 207 The appeal however was on actual decision in Tringlands case supra is to whether a party who attended before an arbitrator under protest cross examined adversary s witnesses and called witnesses did not preclude himself from afterwards objecting that the arbitrator was proceeding without authority it will appear at conceded that the appointment of Johnson as an umpire took Place the October sessions
the special provisions of the statute the mode
of making an application to the court of quarter Sessions me practice of the court in regard to drawing up of 703 orders for appointment of umpire and the specific requirement of consent of the appointee to an order for appointment of umpire are all special and peculiar features in Ringland vs Lowndes supra to support the view that acceptance of umpirage is necessary for the appointment of the umpire
The decision of the Judicial Committee in Mirza Sadiq Husain vs Musammat Kaniz Zohra Begam supra was on the meaning of the words refuses to act  occurring in section 510 of the Code of Civil Procedure 1882
That section conferred power on the court to appoint a new arbitrator or umpire if the arbitrator or the umpire refuses to act
The Judicial Committee did not accept the construction put upon the words refuses to act  by the High Courts in India that the power of the court under section 5 10 to appoint a new arbitrator in place of another arises only when that other had first consented to act and thereafter refused or became incapable
The Judicial Committee said it appears to their Lordships that when an
arbitrator is nominated by parties his refusal to act is signified as clearly by his refusal to accept nomination as by any other course he could pursue
His refusal to act necessarily follows for he has not performed the first action of all namely to take up the office by signifying his assent to his appointment Their Lordships do not enter at lengthinto the matter as it appears that any other construction would open the way to an easy defeat of the provisions of the statute
Under section 8 of the Arbitration Act 1940 if any umpire refuses to act and the arbitration agreement does not show that it was intended that the vacancy should not be supplied and the parties or the arbitrators as the case may be do not supply the vacancy any party may take recourse  to the provisions of the statute for appointment of umpire
The construction which the Judicial Committee put upon the words refuses to act  in Mirza Sadik Husain s case supra applies to the provisions contained in the 
Where the arbitrators appoint an umpire upon the condition of the umpire s acceptance of office the arbitrators wilt have power to reappoint an umpire if the post is refused Where again the arbitrators appoint an umpire without any such condition of acceptance of office and the appointee declines the office the arbitrators in accordance with their powers under the arbitration agreement ea appoint an umpire again
The court has also power to appoint in lieu of an appointed umpire who refuges to act as stated in section 8 of the 
In all these cases the appointment of an
umpire becomes effective by acceptance of the office
Thereupon the power of appointment is exhausted
If the appointed person 704 after acceptance of office refuses to act or will not act the parties have to take recourse to the court
When the umpire assumes his office he accepts the appointment
The acceptance may be express or implied
Ile acceptance need not be in writing
It may be evidenced by conduct
It may be also by proceeding with the arbitration
In Mirza Sadik Husain s case supra both the parties by agreement appointed arbitrators to settle their respective rights
One of the arbitrators refused to act
The respondents in that case declined to nominate another arbitrator in their behalf 
The Judicial Committee said that this declinature was within their rights the reason being that the arbitrator refused to accept office or to act after he had been appointed
The arbitrators in the present case completed their appointment of umpire before entering on the reference
Thereafter it remained for the umpire to act or to refuse to act
The question of acceptance of appointment of umpire arises with reference to the stage when he is called upon to act
The does not say that appointment of umpire by arbitrators is to be made only after obtaining consent of the appointee
The arbitrators here appointed an umpire before entering on the reference The appointment was not conditional upon the acceptance of appointment by the umpire
The scheme of arbitration proceedings indicates that the appointment of umpire and the acceptance of office are two separate matters arising at different stages in the proceedings
When the umpire is called upon to proceed in terms of the appointment he will either assent expressly or by conduct to act or he will decline to act
The High Court was correct in holding that there was a valid appointment of the umpire and the umpire rightly entered upon the reference
Ile umpire s authority commenced when he entered upon the reference on being asked to proceed with the reference
The other contention on behalf of the appellants that para graph 4 of the First Schedule to the was excluded by clause 6 of the arbitration agreement in the present case is unsound
Section 3 of the provides that an arbitration agreement unless a different intention is expressed therein shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference
Paragraph 4 of the First Schedule provides that if the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration 705 agreement or to the umpire a notice in writing stating that they cannot agree the umpire shall forthwith enter on the reference in lieu of the arbitrators
Clause 6 of the arbitration agreement does not state that only in the event of a difference arising between the arbitrators there shall be a reference to the umpire
There is no intention in the agreement to exclude the operation of paragraph 4 of the First Schedule to the 
In the present case the agreement provided for appointment of umpire
The agreement also provided for making of the award by the arbitrators
It is therefore apparent that the intention of the parties was that when arbitrators would allow their time to expire without making the award the umpire would enter on the reference in lieu of the arbitrators
The High Court expressed the view that if the arbitrators allowed the time to expire that by itself would not amount to disagreement between the arbitrators
As to what constitutes disagreement cannot be laid down in abstract or inflexible propositions
It will depend upon the facts of the case as to whether there was a disagreement
The High Court did not agree with the view expressed in Russel on Arbitration 18th Ed
at pages 205 and 208 that failure to make an award in time where the agreement prescribed time in which the arbitrators award is to be made would amount to disagreement
In Lossifoglu vs Counmantaro 1941 1 KB 396 the arbitration clause provided in case the arbitrators so appointed disagree they shall appoints an umpire
One of the arbitrators repeatedly endeavoured to arrange a meeting with the other but failed to arrange such a meeting
The arbitrator then unsuccessfully attempted to obtain consent of the latter to the appointment of umpire
Thereafter application was made to the court for the appointment of umpire
Disagreement between the arbitrators may take various shapes and forms
In the present case the arbitrators by reason of attitude of a party in correspondence addressed to the arbitrators could not agree to proceed with the matter
Where one of the arbitrators decline to act and the other is left alone it will in a case of this type amount to disagreement between the two arbitrators
In the Present case there was disagreement between the arbitrators
Time to make the award also expired
Therefore from both points of view the umpire had authority to inter upon the reference
For these reasons we are of opinion that the High Court was correct in making the order
The appeals are dismissed
The order of the High Court is upheld In view of the fact that the time granted by the High Court till 31 December 1968 for making the award cannot apply the umpire Porus A Mehta is I L3Sup
Cl72 706 granted time for three months to make the award
Three months will run from the date of service of this order by any party to these appeals
The appellants will pay one set of hearing fee to the respondents
VPS Appeals dismissed


Summary:
Disputes having arisen between the appellant and the respondent they were referred to arbitration in accordance with an arbitration agreement
The arbitrators entered upon the reference and also appointed an umpire
After the time for making the award had expired the appellant took the stand that one of the arbitrators would be biased in favour of the respondents
The respondents therefore called upon the arbitrators to refer the matter to the umpire and also wrote to the umpire and the umpire entered upon the reference
Thereafter the appellants filed applications under section 33 of the 
The High Court held that the umpire rightly entered upon the reference and extended the time to enable the umpire to make an award
In appeal to this Court it was contended that  1 the appointment of the umpire was not valid because the consent of the appointee was not obtained and 2 under cl 6 of the Arbitration agreement the operation of para 4 Sch
I of the was excluded and the umpire could enter upon the reference only in the event of a difference arising between the arbitrators and the arbitrators referred the matter to the umpire
Dismissing the appeal HELD  1 There is a distinction between appointment and acceptance of an office
The question of effectiveness or perfection is ordinarily subsequent to appointment
The scheme of arbitration proceedings indicates that the appointment of an umpire and the acceptance of office are two separate matters arising at different stages in the proceedings
699 H 700 A 704 E When the arbitrators are required to appoint an umpire it only means that the arbitrators are to concur in appointing the umpire
There is no particular method of appointment of an umpire though the usual method is by writing
Arbitrators who are required to appoint an umpire are under no obligation to obtain the approval of the choice of the person by the parties who appointed the arbitrators
If any party is dissatisfied with the choice it will not affect the validity of the appointment nor is the appointment conditional upon the acceptance of appointment by the umpire
The necessity for communication of appointment to the parties as well as to the appointee depends on the language of the arbitration clause
The does not say that the appointment of umpire by the arbitrators is to be made only after obtaining the consent of the appointee
700 D E 701 D F 704 D E When the umpire assumes his office he accepts the appointment
Acceptance may be express or implied
It need not be in writing it may be evidenced by conduct
It may also be evidenced by proceeding with 696 the arbitration
When the umpire is called upon to proceed in terms of the appointment he will either assent expressly or by conduct to act or he will decline to act
704 A B D E F Mirza Sadik Husain vs Mussamat Kaniz Zohra Begam LR 38 IA 181 applied
Ringland vs Lowndes   and Tradax Export SA vs Vokswagenwerk AG  explained and distinguished
2 a Paragraph 4 of the first schedule provides that if the arbitra delivered to any party to the arbitration agreement or to the umpire a notice in writing stating that they cannot agree the umpire shall forthwith enter on the reference in lieu of the arbitrators Mere is no intention in cl 6 of the agreement to exclude the operation of this paragraph
On the contrary the agreement shows that the intention of the parties was that when the arbitrators allowed time to expire without making the award the umpire should enter on the reference in lieu of the arbitrators
704 H 705 A C b In the present case the arbitrators by reason of the attitude of one of the parties could not agree to proceed with the matter
Where one of the arbitrators declines to act and the other is left alone in a case of this type it will amount to disagreement between the arbitrators
705 F G c Failure to make an award in time where the agreement prescribed time does in
certain circumstances amount to disagreement
705 D E Iossifoglu vs Counmantaros and Russel on Arbitration 18th Ed pp 205 208 referred to