Case: Executive Engineer, Irrigation Division, Puri Vs. Gangaram Chhapolia

2. Put briefly, the essential facts are these. The respondent herein is a contractor and had entered into an agreement being Agreement No. 171 within the State Government of Orissa relating to the Excavation of Satankha Distributory with its minor andfrom O. M. to Tail. The respondent raised a dispute and served a notice on the Chief Engineer for the appointment of an arbitrator under Clause 23 of the Agreement. Subsequent to the said notice, he filed an application under Section 8 read with Section 20 of the Act before the Subordinate Judge, Cuttack praying for the appointment of an arbitrator by the Court alleging that the Chief Engineer had not appointed an arbitrator under Clause 23 within the stipulated period of 15 days and therefore lost his power to appoint an arbitrator. The appellant entered appearance in the proceedings and raised an objection against the maintainability of the application under Section 8 read with Section 20 of the Act on the ground that the Chief Engineer had already appointed D. Sahu, Superintending Engineer, Irrigation to be the arbitrator, fact of which was intimated to the respondent on November 20, 1978 and as such there was no occasion for the Court to appoint an arbitrator. On December 19, 1979, the respondent filed another application contending that the appointment of D. Sahu, Superintending Engineer, Irrigation as arbitrator was illegal and improper and hence liable to be set aside. It was asserted by the respondent that as per Clause 23 of the Agreement, the Chief Engineer could appoint a Superintending Engineer belonging to the State Public Works Department, and none else3. The learned Subordinate Judge by the impugned order held that under Clause 23 of the Agreement, the Chief Engineer was empowered to appoint a Superintending Engineer of Works Department who was not connected with the work, as arbitrator and in case no such Superintending Engineer was available, the Chief Engineer had himself to enter upon the reference. He further held that D. Sahu, Superintending Engineer, Irrigation being directly subordinate to the Chief Engineer, his appointment as arbitrator was invalid. The learned Subordinate Judge accordingly set aside the order of the Chief Engineer appointing D. Sahu, Superintending Engineer, Irrigation to be the arbitrator, and further held that the Chief Engineer having failed to appoint an arbitrator within 15 days of the receipt of the notice, he had no power to appoint an arbitrator, and instead directed B. S. Patnaik, retired District and Sessions Judge, Cuttack to be the arbitrator. Dissatisfied with the decision of the learned Subordinate Judge, the appellant went up in revision before the High Court but the High Court declined to interfere saying that it found no justification for the same

Court's reasoning:
It is seen that as per the above clause, the Chief Engineer is under a legal obligation to appoint an S. E. of Works Department unconnected with the work in question and if such S. E. is not available he himself should enter into such reference. There is no denial that Sri. D. Sahu is an S. E. of Irrigation Department who is direct subordinate to the Chief Engineer, Irrigation and so the appointment of Sri. D. Sahu who is the S. E. of the Irrigation is in violation of the terms of the Agreement as per Clause 23 and so in the eye of law, it is not a valid appointment. An appointment of an arbitrator which is invalid one is no appointment. It therefore follows that the Chief Engineer has not made a valid appointment in term of Clause 23 of the deed of agreement within 15 days and so his right to appointment as arbitrator to adjudicate the dispute between the parties is extinguished. Therefore, the reference made by the Chief Engineer to Sri D. Sahu, the S. E. of Irrigation Department is void7. There can be no doubt whatever that the order passed by the learned Subordinate Judge was based on a construction of Clause 23 which was patently erroneous. The learned Subordinate Judge failed to appreciate that the expression "State Public Works Department" in Clause 23 of the Agreement was a wider connotation and he wrongly assumed that D. Sahu, Superintending Engineer, Irrigation did not belong to the State Public Works Department. The Public Works Department has different wings like Irrigation and Power, Public Health and Works Departmentthe very nature of things, a dispute arising out of a works contract relating to the Department of Irrigation as he is an expert on the subject and it cannot obviously be referred to a Superintending engineer, Building and Roads. The only limitation on the power of the Chief Engineer under Clause 23 was that he had to appoint a "Superintending Engineer unconnected with the work" i.e. unconnected with the works contract in relation to which the dispute has arisen. The learned Subordinate Judge was obviously wrong in assuming that since D. Sahu, Superintending Engineer, Irrigation was subordinate to the Chief Engineer, he was not competent to act as an arbitrator or since he was a Superintending Engineer, Irrigation, he could not adjudicate upon the dispute between the parties. The impugned order passed by the learned Subordinate Judge is accordingly setBy reason of the non obstante clause contained in(1) of Sectionof the Act, all references to arbitration in which the State Government, a local or other authority controlled by the State Government, a statutory corporation or a Government company is a party have to be made to the statutory Arbitration Tribunal constituted underion (7) of Sectionprovides that all arbitration proceedings relating to a dispute of the nature specified in(1), on or before the date of commencement of the Act in which is the date of publication of the Act in the Official Gazette, shall stand transferred to and disposed of by the said Arbitration Tribunal