Case: Parbhat General Agencies Etc Vs. Union Of India &amp; Anr. Etc

reason to think that the arbitration will be infructuous at all. If the particular officer sanctioning the contracts refuses to act or is incapable of doing so by reason of his absence or otherwise there are provisions in the Arbitration Act for the appointment of another arbitrator in his place and the arbitrator so appointed will be quite competent to proceed with the arbitration." 11. In Union of India v. Raj Narain Misra, ILR (1952) 1 Cal 324. S. R. Das Gupta 3. (as he then was) held that in the absence of an indication in the agreement against supplying any vacancy in the office of the arbitrator and in view of the provision in S. 8 of the Arbitration Act, 1940, for supplying a vacancy, the agreement for arbitration cannot become infructuous due to a vacancy. 12. In Fertilizer Corporation of India Ltd. v. M/s. Domestic Engg. Installation, AIR 1970 All 31 a Division Bench of the Allahabad High Court laid down that a perusal of Clause (4) of Section 20 of the Act indicates that there are three courses open to the court under that provision of law. After the arbitration agreement has been ordered to be filed the Court shall proceed to make a reference firstly to the arbitrator appointed by the parties in the agreement; secondly to the arbitrator not named in the agreement, but with regard to whom the parties agree otherwise; and thirdly when the parties cannot agree upon an arbitrator, to an arbitrator appointed by itself. 13. The respondents, in support of their case that the vacancy could not be filled up relied on the decision of the Rajasthan High Court in Chief Engineer, Buildings and Roads, Jaipur v. Harbans Singh, AIR 1955 Raj 30 . Therein Wanchoo C. J. (as he then was) after referring to the various clauses in the agreement and particularly to the clause which said"that the Chief Engineer shall be the sole arbitrator and judge in case of dispute......" came to the conclusion that the parties to the agreement intended that the vacancy should not be filled up if the Chief Engineer refused or failed to act. The said decision turned on the facts of that case. The learned judges who decided that case came to the conclusion by reference to the various clauses in the agreement that the parties to the agreement intended not to supply the vacancy. Hence this decision is clearly distinguishable. 14. Reliance was next placed by the respondents on the decision of the Division Bench of the Calcutta High Court in Bharat Construction Co. Ltd. v. Union of India, AIR 1954 Cal 606 . Therein Chakravartti C. J. speaking for the court opined that it is doubtful whether Clause (b) of Section 8 (1) of the Arbitration Act at all applies to a case where a named arbitrator, obviously chosen for the possession of qualifications special to him, has become unavailable or refused to act; but any way the applicability of that clause in a particular case, must be determined by the test laid down in the section itself; the test is that the arbitration agreement must not show that it was intended that the vacancy should not be supplied: in other words however individual the original choice may appear to be, if the agreement itself contains sufficient indication that the parties nevertheless intended that, in default of their original nominee, they would be prepared to fill up the vacancy by choosing another arbitrator, the section will apply and a new appointment may be made either by the parties or by the Court, as the case may be. 15. In our opinion the learned judge while approaching the question from a correct angle fell into the error of thinking that the agreement must indicate that the parties intended to fill up the vacancy. That is not what S. 8 (1) (b) says. What that section says is that"the arbitration agreement does not show that it was intended that the vacancy should not be supplied." 16. Reference was next made to the decision of the Judicial Commissioner, Himachal Pradesh in Dist. Co-operative Federation Ltd.s case, AIR 1901 Him Pra 35 (supra). Therein the learned judge purporting to follow the decision in Harbans Singhs case AIR 1955 Raj 30 (supra) held that it may reasonably be assumed that the way arbitrator is appointed by the parties with reference to the office the intention is that the arbitration should be conducted by the holder of that office and by none else; and on refusal of such an arbitrator to act, the Court has no power to appoint another in his place. The learned judge, in our opinion, has misunderstood the decision of the Rajasthan High Court and the principles of law enunciated by him are not borne out by the provisions of S. 8 (1) (b). 17. Lastly reference was made on behalf of the respondents to the decision of the Punjab High Court in M/s. Isherdass Sahni and Bros. v. Union of India, 68 Pun LR 325, wherein one of us (Grover J.) after referring to the various decisions rendered under Section 8 (1) (b) and Section 20 (4) of the Act and noticing the conflict of the judicial opinion rejected the revision petition solely on the ground that he would not be justified in the exercise of his revisional powers in setting aside the view taken by the lower Court. In fact in the course of his judgment he observed:"If the matter were res integra I might have agreed with one view or the other but in my opinion the court below has on a consideration of the material facts and relevant law came to the conclusion that the arbitration agreement in question showed that there was no intention to fill up the vacancy. I would not be justified in revision in setting aside that finding even if I was disposed not to concur with the decision of the trial court on this point."

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

Explanation:
1[ds]3. It may be noted that the agreements in these appeals relate to the exploitation of certain forest produce. The disputes that have arisen between the parties are not of technical nature requiring any specialised knowledge on the part of the arbitrator. It is clear from the terms of the agreements that the Judicial Commissioner was not appointed as an arbitrator because of any special or technical knowledge possessed by him relating to the subject matter of the dispute. Evidently he was appointed, though in our opinion quite improperly, arbitrator because he was a high judicial officer. The relevant provisions of the Act which bear on the point under consideration are Sections 8 (1) and 20 (4) of the Act6. In the cases before us it is admitted that there is an agreement to refer the dispute to arbitration. It is also admitted that the parties had designated the Judicial Commissioner of Himachal Pradesh as the arbitrator for resolving any dispute that may arise between them in respect of the agreement. The Judicial Commissioner had refused to act as the arbitrator. The parties have not supplied that vacancy.It may be noted that the language of the provision is not that the parties intended to supply the vacancy but on the other hand it is that the parties did not intend to supply the vacancy. In other words if the agreement is silent as regards supplying the vacancy, the law presumes the parties intended to supply the vacancy. To take the case out of Section 8 (1) (b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy7. As mentioned earlier the only relevant provision in the agreements before us is the provision relating to arbitration. The other provisions in the agreements do not throw any light as regards the intention of the parties. We have earlier mentioned that the Judicial Commissioner, Himachal Pradesh could not have been appointed as the arbitrator for any specialised knowledge possessed by him relating to any dispute that may arise under the agreement. What the Judicial Commissioner could have competently done if he had acted as an arbitrator could certainly be done by an independent and impartial person possessing adequate knowledge of law. In our opinion the language of Section 8 (1) (b) is plain and unambiguous and the terms of the agreement before us do not in the least show that the parties intended not to supply the vacancy8. The Judicial Commissioner as well as the learned subordinate judge erred in thinking that merely because the arbitrator was designated with reference to the office held by him, it should be inferred that the parties intended not to supply the vacancy. Evidently the parties did not mention the name of any particular Judicial Commissioner as arbitrator because there may be a change in the personnel. The appointment of Judicial Commissioner as arbitrator by itself does not afford any indication that the parties to the agreement intended not to supply into vacancy if the Judicial Commissioner refused to act or is incapable of acting15. In our opinion the learned judge while approaching the question from a correct angle fell into the error of thinking that the agreement must indicate that the parties intended to fill up the vacancy.16. Reference was next made to the decision of the Judicial Commissioner, Himachal Pradesh in Dist.Cooperative FederationLtd.s case, AIR 1901 Him Pra 35. Therein the learned judge purporting to follow the decision in Harbans Singhs case AIR 1955 Raj 30   (supra) held that it may reasonably be assumed that the way arbitrator is appointed by the parties with reference to the office the intention is that the arbitration should be conducted by the holder of that office and by none else; and on refusal of such an arbitrator to act, the Court has no power to appoint another in his place. The learned judge, in our opinion, has misunderstood the decision of the Rajasthan High Court and the principles of law enunciated by him are not borne out by the provisions of S. 8 (1) (b)17. Lastly reference was made on behalf of the respondents to the decision of the Punjab High Court in M/s. Isherdass Sahni and Bros. v. Union of India, 68 Pun LR, wherein one of us (Grover J.) after referring to the various decisions rendered under Section 8 (1) (b) and Section 20 (4) of the Act and noticing the conflict of the judicial opinion rejected the revision petition solely on the ground that he would not be justified in the exercise of his revisional powers in setting aside the view taken by the lower Court.