Case: State of Maharashtra &amp; Others Vs. Khanzode Engineers Private Limited

3.The Respondent/ construction company was awarded the contract for construction of buildings for Government Girls Polytechnic at Yavatmal, as per the Work Order dated 11.03.1995. It appears that there arose certain disputes between the parties, and a demand of arbitration, as contemplated under clause 67 Section 11 of General Conditions of Contract, was made by the Respondent/ company by its communication dated 24.01.2000 addressed to the Executive Engineer, Road Project Division, Yavatmal, who in turn remarked that the matter could be referred to the arbitration. But at the level of Chief Engineer, a decision was taken to the effect that since no arbitral disputes arose, the matter need not be referred to the arbitrator and the request put forth by the Respondent seeking arbitration, was turned down and same was communicated to the Respondent, vide communication dated 29th February, 2001 issued by the Chief Engineer, Public Works Region, Amravati. It is in this context, having been aggrieved by the said decision, declining the request for referring the matter to the Arbitrator, the Respondent had filed an application under section 11 of the Act in this Court.      4.Mr. J.N.Patel, learned Judge of this Court, was nominated by the Chief Justice to exercise the powers under Section 11 of the Act. Accordingly, by order dated 20th October, 2000, Mr. Patel, J. appointed Mr. A.K.Shenolikar, B.Sc. B.E.(Hons.) F.I.E. (Ind) Member IWRS Retd. Chief Engineer, Irrigation Department, Maharashtra Government Consulting Engineer, 306 Himalaya Park, 99. Shivaji Nagar, Nagpur 400010, as an Arbitrator. In the order, it was made clear that apart from the disputes sought to be referred by the Respondent, if there arose any arbitral disputes, they could also be referred to the arbitrator. It is curious enough to note that even after issuance of the notice by Mr. Patel, J., the applicant has not chosen to appear before him subsequently, when the matter came up for appointment of person as an arbitrator on 20th October, 2000, the learned A.G.P. was appearing for the Respondent Nos.1 to 3. But, it appears from the order, he has not made any submission on that day. However, on 20th October, 2000, Mr. A.K.Shenolikar, as aforesaid, was appointed as sole arbitrator. Therefore, the order dated 6th October, 2000 and 20th October, 2000, passed by Mr. J.N.Patel, J. in exercise of the powers under Section 11 of the said Act, are under challenge by way of this writ petition.

Court's reasoning:
6.It is true that thes (present petitioners) were absent, in which case the learned Single Judge could have granted prayer as prayed for by the applicant (present respondent) in their application. However, instead of granting its prayer, the learned Single Judge has appointed the sole arbitrator, as aforesaid. In this context, we have to disallow the contention raised by the respondent herein that the/ State having remained absent themselves before the learned Single Judge and having obtained order ex parte, the State Government or the petitioners herein cannot challenge that order of appointing the sole arbitrator. In the first blush the said argument appears to be attractive, because Section 11 of the Act contemplates that if a party is not following the procedure laid down by the Arbitration agreement for the purpose of appointment of an arbitrator, then Chief Justice or his nominee Judge can appoint an arbitrator even contrary to the procedure laid down in the arbitration agreement. It is true, that the Chief Engineer/ petitioner No.2 herein, by his letter dated 29th February, 2000 refused to appoint an arbitrator in the manner prescribed under clause 67 of Vol.I of the agreement for arbitration, contending that since there arose no arbitral dispute, there is every justification for invoking section 11 of the Act. But the respondent/company approached the learned Single Judge of this Court by way of aforesaid arbitration application, seeking appointment of an arbitrator in terms of the arbitration Clause 67. The State Government or the Respondent could have never expected that relief, which was not asked for, would be granted by the learned Single Judge of this Court, particularly which is more disadvantageous to them. Then definitely in that circumstances, the respondent has a cause of action to challenge that order by way of the writ petition. Because it is in violation of principle of natural justice. Therefore, merely because the respondent/State remained absent before the learned Single Judge will not disentitle it to challenge that order when the order is vitiated by violation of principles of natural justice or fair play. The defendant or a respondent, as the case may be, may remain absent from a court in response to a notice to appear. Normally circumstances may constrain a party to remain absent before the court on a particular day, then the Court may pass an ex parte order, and then subsequently that party can approach the Court and say to the Court that there is justifiable reasons and circumstances which compelled it to remain absent itself from the Court. Then in that eventuality, exercising the discretion, the Court may condone the absence of that party. In another context after perusal of the pleadings and the relief sought for by the petitioners/ plaintiff the defendant or the respondent may take a reasonable decision that it need not put any contest because in its judgment the plaintiff is lawfully entitled for the relief sought for and that the Court can grant the relief; and in that case party is entitled to remain absent thinking that no more money and time be spent on that litigation. In such situation, any litigant is entitled to remain absent and suffer the consequence of decision. But the Court, passes an order contrary to what has been prayed for, that too when it is disadvantageous to the party who remains absent from the Court, then definitely that party can challenge that order in an appeal. For the aforesaid reasoning, we are constrained to set aside the order of the learned Single Judge7.According to the appellant they were ready to appoint arbitrator as prescribed in clause 67 of the arbitration agreement and the petitioners have also approached for the said relief. The learned Single Judge took a different course and appointed sole arbitrator. It is well settled law in the realm of arbitration, that even if when the Court exercises with limited jurisdiction in the realm of arbitration, as far as possible the legal effect to be given to the arbitration agreement between the parties. Here in this case we could see that both the parties are willing to abide by the arbitration agreement and we find no reason to deviate from that procedure. No legal impediment of any other circumstances is standing in the way of giving effect to the agreement of the parties. Therefore, we are inclined to set aside the order of the learned Single Judge, allowing the parties to go with the arbitration in the light of provisions of clause 67 of the arbitration agreement.