Case: M/S.S.B.P. &amp; Co Vs. M/S. Patel Engineering Ltd.

from office for any reason or by or pursuant to agreement of the parties and not where the arbitrator appointed by either party declines to accept the appointment or refuses to act as such and that the term `rules appearing in Section 15(2) takes within its fold not only the statutory rules, but also the terms of agreement entered into between the parties. 22. The words `refuse and `withdraw have not been defined in the Act. Therefore, we may usefully refer to dictionary meanings of these words. As per P. Ramanatha Aiyars Advanced Law Lexicon (Third Edition 2005), the word `refuse means to decline positively; to express or show a determination not to do something. As per Century Dictionary, the word `refuse means to deny, as a request, demand or invitation; to decline to accept; to reject, as to refuse an offer. As per New Oxford Illustrated Dictionary, Volume II, p.1421, the word `refuse means - say or convey by action that one will not accept, submit to, give, grant, gratify consent. The dictionary meanings of the word `withdraw are as follows: 1. The Law Lexicon (Third Edition, 2005) - to take back or away something that has been given, allowed, possessed, experienced or enjoyed; to draw away. 2. Blacks Law Dictionary (Eighth Edition, p.1632) - the act of taking back or away, removal; the act of retreating from a place, position or situation. 3. New Oxford Illustrated Dictionary (Volume II, p.1894) - pull aside or back, take away, remove, retract; retire from presence or place, go aside or apart. 23. The above extracted meanings of two words bring out sharp distinction between them. While the word `refuse denotes a situation before acceptance of an invitation, offer, office, position, privilege and the like, the word `withdraw means to retract, retire or retreat from a place, position or situation after acceptance thereof. Therefore, Section 15(2) of the Act does not per se apply to a case where an arbitrator appointed by a party to the agreement declines to accept the appointment or refuses to arbitrate in the matter. Of course in a given case, refusal to act on the arbitrators part can be inferred after he has entered upon arbitration by giving consent to the nomination made by either party to the agreement. 24. Insofar as this case is concerned, we find that the arbitrator appointed by respondent No.1, namely, Shri S.N. Huddar declined to accept the appointment/arbitrate in the matter on the ground that in his capacity as Superintending Engineer and Chief Engineer, he was associated with Koyna Hydel Project implying thereby that he may not be able to objectively examine the claims of the parties or the other party may question his impartiality. To put it differently, Shri S.N. Huddar did not enter upon the arbitration. Therefore, there was no question of his withdrawing from the office of arbitrator so as to enable respondent No.1 to appoint a substitute arbitrator. In any case, in the absence of a clear stipulation to that effect in the agreements, respondent No.1 could not have appointed a substitute arbitrator and the learned designated Judge gravely erred in appointing the third arbitrator by presuming that the appointment of Shri S.L. Jain was in accordance with law. 25. The decision in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (supra) on which reliance has been placed by Shri Dave does not help the cause of respondent No.1. A careful reading of that judgment shows that immediately after the arbitrator appointed by the Managing Director of the respondent-Company resigned, another arbitrator was appointed in accordance with arbitration agreement. The permissibility of appointment of another arbitrator by the Managing Director of the respondent-Company is clearly evinced from the following extracts of paragraphs 2 and 3 of the judgment: "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....... 3.........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......" Although, the language of paragraph 4 of the judgment gives an impression that the Court decided the matter by presuming that the agreement between the parties did not contain a provision for appointment of a substitute arbitrator if the original appointment terminates or if the original arbitrator withdraws from the arbitration and this omission is supplied by Section 15(2) of the Act, if that paragraph is read in conjunction with paragraphs 2 and 3 it becomes clear that the arbitration agreement did provide for appointment of another arbitrator in the event originally appointed arbitrator was to resign and there was no plausible reason for the Court to presume that there is an omission in the agreement on the issue of appointment of a substitute arbitrator. In any case, the judgment cannot be read as laying down a proposition of law that in the absence of a specific provision in the arbitration clause, either party to the agreement can appoint a substitute arbitrator in the event of the originally appointed arbitrator refusing to act. 26. At the cost of repetition, we consider it necessary to observe that the agreements entered into between the appellant and respondent No.1 do not contain a provision for appointment of a substitute arbitrator in case arbitrator appointed by either party was to decline to accept appointment or refuse to arbitrate in the matter. Therefore, respondent No.1 cannot draw support from the ratio of the judgment in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (supra).

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]20. We may now advert to the scope of Clause 19 of piece work agreement, which provides for appointment of two arbitrators, one by each party, with liberty to the arbitrators to appoint an Umpire, in case of difference or their failure to reach an agreement within one month of their appointment. The award made by two arbitrators or Umpire, as the case may be, is treated as final, conclusive and binding on the parties. This clause also specifies the consequence of failure of either party to the difference or dispute to appoint an arbitrator within 30 calendar days counted from the date of notice in writing given by the other side or refusal of the arbitrator appointed by either party to accept such appointment or act upon the same. In that event, the arbitrator appointed by the other party becomes entitled to proceed with the reference as the Sole Arbitrator and make an award. There is nothing in Clause 19 from which it can be inferred that in the event of refusal of an arbitrator to accept the appointment or arbitrate in the matter, the party appointing such arbitrator has an implicit right to appoint a substitute arbitrator. Thus, in terms of the agreement entered into between the parties, respondent No.1 could not appoint Shri S.L. Jain as a substitute arbitrator simply because Shri S.N. Huddar declined to accept the appointment as an arbitrator. The only consequence of Shri S.N. Huddars refusal to act as an arbitrator on behalf of respondent No.1 was that respondent No.2 who was appointed as an arbitrator by the appellants became the Sole Arbitrator for deciding the disputes or differences between the parties21. The learned designated Judge appointed the third arbitrator because he was of the view that in terms of Section 15(2), a substitute arbitrator could be appointed where the mandate of an already appointed arbitrator terminates. In taking that view, the learned designated Judge failed to notice that Section 15(1) provides for termination of the mandate of arbitrator where he withdraws from office for any reason or by or pursuant to agreement of the parties and not where the arbitrator appointed by either party declines to accept the appointment or refuses to act as such and that the term `rules appearing in Section 15(2) takes within its fold not only the statutory rules, but also the terms of agreement entered into between the parties22. The words `refuse and `withdraw have not been defined in the Act. Therefore, we may usefully refer to dictionary meanings of these words. As per P. Ramanatha Aiyars Advanced Law Lexicon (Third Edition 2005), the word `refuse means to decline positively; to express or show a determination not to do something. As per Century Dictionary, the word `refuse means to deny, as a request, demand or invitation; to decline to accept; to reject, as to refuse an offer. As per New Oxford Illustrated Dictionary, Volume II, p.1421, the word `refuse meanssay or convey by action that one will not accept, submit to, give, grant, gratify consent23. The above extracted meanings of two words bring out sharp distinction between them. While the word `refuse denotes a situation before acceptance of an invitation, offer, office, position, privilege and the like, the word `withdraw means to retract, retire or retreat from a place, position or situation after acceptance thereof. Therefore, Section 15(2) of the Act does not per se apply to a case where an arbitrator appointed by a party to the agreement declines to accept the appointment or refuses to arbitrate in the matter. Of course in a given case, refusal to act on the arbitrators part can be inferred after he has entered upon arbitration by giving consent to the nomination made by either party to the agreement24. Insofar as this case is concerned, we find that the arbitrator appointed by respondent No.1, namely, Shri S.N. Huddar declined to accept the appointment/arbitrate in the matter on the ground that in his capacity as Superintending Engineer and Chief Engineer, he was associated with Koyna Hydel Project implying thereby that he may not be able to objectively examine the claims of the parties or the other party may question his impartiality. To put it differently, Shri S.N. Huddar did not enter upon the arbitration. Therefore, there was no question of his withdrawing from the office of arbitrator so as to enable respondent No.1 to appoint a substitute arbitrator. In any case, in the absence of a clear stipulation to that effect in the agreements, respondent No.1 could not have appointed a substitute arbitrator and the learned designated Judge gravely erred in appointing the third arbitrator by presuming that the appointment of Shri S.L. Jain was in accordance with lawAlthough, the language of paragraph 4 of the judgment gives an impression that the Court decided the matter by presuming that the agreement between the parties did not contain a provision for appointment of a substitute arbitrator if the original appointment terminates or if the original arbitrator withdraws from the arbitration and this omission is supplied by Section 15(2) of the Act, if that paragraph is read in conjunction with paragraphs 2 and 3 it becomes clear that the arbitration agreement did provide for appointment of another arbitrator in the event originally appointed arbitrator was to resign and there was no plausible reason for the Court to presume that there is an omission in the agreement on the issue of appointment of a substitute arbitrator. In any case, the judgment cannot be read as laying down a proposition of law that in the absence of a specific provision in the arbitration clause, either party to the agreement can appoint a substitute arbitrator in the event of the originally appointed arbitrator refusing to act26. At the cost of repetition, we consider it necessary to observe that the agreements entered into between the appellant and respondent No.1 do not contain a provision for appointment of a substitute arbitrator in case arbitrator appointed by either party was to decline to accept appointment or refuse to arbitrate in the matter. Therefore, respondent No.1 cannot draw support from the ratio of the judgment in Yashwith Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. (supra).