IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA FAOs No.191 & 192 of 1994 Decided on : September 24, 2008 FAO No.191/1994 Himachal Khand Udyog …Appellant. Versus United India Insurance Co. & another …Respondents. FAO No.192/1994 Himachal Khand Udyog …Appellant. Versus United India Insurance Co. …Respondent. Coram The Hon’ble Mr. R.B. Misra, Judge. The Hon’ble Mr. Justice Surjit Singh, Judge. Whether approved for reporting?1 No. For the Petitioner(s) : Mr. Dushyant Dadwal, Advocate. (In both the appeals) For the Respondents : Mr. Anand Sharma, Advocate, with Mr. Jagan Nath Sharma, Advocate. Per Surit Singh, Judge( Oral ) In these two appeals common questions of law and fact are involved and also both the appeals are directed against the same judgment, i.e. judgment dated 21st May, 1994, of the learned Single Judge, therefore, they are being disposed of by a common judgment. 2. First, relevant facts may be noticed. Appellant, M/s Himachal Khand Udyog, purchased two insurance policies from the respondent, during the year 1988-89. One policy was in respect of building & machinery and the other in respect of raw Whether reporters of the local papers may be allowed to see the judgment? …2… material required for manufacture of sugar. Clause 13 of the Policy, which is reproduced hereinbelow, provided for settlement of disputes that could have arisen between the parties, by arbitration:- “13. If any difference shall arise as to the quantum to be paid under this policy (liability being otherwise admitted) such difference shall independently of all questions be referred to the decision of an arbitrator to be appointed in writing by the parties in difference, or if they cannot agree upon a single arbitrator, to the decision of two disinterested persons as arbitrators of whom one shall e appointed in writing by each of the parties within two calendar months after having been required so to do in wiring by the other party in accordance with the provision of the Arbitration Act, 1940, as amended from time to time and for the time being in force. In case either party shall refuse or fail to appoint arbitrator within two calendar moths after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint sole arbitrator and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them in writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings. It is clearly agreed and understood that no difference or dispute shall be referable to arbitration as hereinbefore provided, if the Company has disputed or not accepted liability under or in respect of this policy. It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this policy that the award by such arbitrator, arbitrators or umpire of the amount of loss or damage shall be first obtained.” 3. According to the appellant, a dispute, referable to the Arbitrators, in terms of the aforesaid Clause 13 of the Policy, arose and, therefore, a notice was issued by it to the respondent on 29th May, 1990, Ex. F, calling upon it to agree to …3… the appointment of a sole Arbitrator, in terms of the aforesaid clause contained in the Policy. Respondent replied to the notice on 31st May, 1990, vide Ex. G, denying that any dispute, referable to the Arbitrator, in terms of the arbitration clause of the Policy, had arisen. Appellant then wrote another letter dated 31st May, 1990, Ex. H, calling upon the respondent to agree for the appointment of sole Arbitrator or Arbitrators with the consent of the parties (sic), as per terms and conditions of the Policy. There was no response to this letter, dated 31st May, 1990, Ex. H. Thereafter, appellant appointed Shri R.D. Sharma, Advocate, Una, as sole Arbitrator and asked him to enter upon arbitration and give award. Arbitrator gave notice to the respondent but there was no response. Thereafter, the Arbitrator conducted arbitration proceedings and gave two separate ex-parte awards, because disputes, according to the appellant, had arisen in respect of both the policies. 4. Appellant approached this Court for making the awards Rule of Court. Notice of the application filed by the appellant was given to the respondent, who filed objections. One of the objections was that the appointment of the Arbitrator was illegal, being not in consonance with the arbitration clause. This objection of the respondent found favour with the learned Single Judge, who, vide impugned judgment, held that Arbitrator’s appointment was illegal, being contrary to the provision of arbitration clause, reproduced hereinabove, and, hence, the awards were set aside. Appeals …4… are directed against the aforesaid judgment of the learned Single Judge. 5. We have heard the learned counsel for the parties and perused the record. 6. Admitted factual position is that when the alleged dispute arose, letter dated 29th May, 1990, Ex. F, was addressed by the appellant to the respondent. Through this letter, request was made to the respondent to agree to the appointment of sole Arbitrator or Arbitrators, in terms of the arbitration clause. Respondent replied to the aforesaid letter, vide communication dated 31st May, 1990, Ex. G, wherein it denied that any dispute referable to the Arbitrator had arisen. Appellant then wrote another letter dated 31st May, 1990, Ex. H, in which again a request was made to the respondent to agree for appointment of a sole Arbitrator or Arbitrators, with the consent of both the parties (sic), in terms of the Policy. Thereafter, vide letter dated 20th July, 1990, Shri R.D. Sharma, Advocate, was appointed as sole Arbitrator. 7. As is clear from a bare reading of Arbitration clause, reproduced hereinabove, the dispute arising between the parties, under the Policy, was to be referred to the decision of an Arbitrator to be appointed, in writing, by both the parties. The clause further provided that in case the parties could not agree upon a single Arbitrator, the dispute was to be referred to two disinterested persons, as Arbitrators, of whom one was to be appointed, in writing, by each of the parties, within two calendar months, after having been required so to do, in writing, …5… by the other party, in accordance with the provision of Arbitration Act, 1940. The clause further said that in case either party refused or failed to appoint Arbitrator, within two calendar months, after receipt of notice, in writing, requiring appointment of Arbitrator, the other party was to be at liberty to appoint sole Arbitrator. The appointment of sole Arbitrator by the appellant was contrary to the arbitration clause contained in the Policy inasmuch as no notice informing the respondent that the parties having failed to appoint a sole arbitrator, two arbitrators were required to be appointed, in terms of the arbitration clause contained in the policies and that it (the respondent) should appoint its arbitrator. The course adopted by the appellant was not only contrary to the arbitration clause, but also to the provision of Section 9 of the Arbitration Act, 1940, which says that a party can appoint a sole Arbitrator, only if the opposite party, even after notice, fails to appoint its Arbitrator, within 15 days of the receipt of such notice. In view of the abovestated position, we find no merit in the appeals. The same are, therefore, dismissed. ( R.B. Misra ), J. September 24, 2008(sd) ( Surjit Singh ), J.