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

1. These appeals by special leave raise a common question of law. Therefore they can be dealt with together. The appellants herein entered into agreements with the Union of India under which they were allotted certain areas in a forest to tap Resin Blazes and supply the same to the Turpentine Factory at Sirmur. The agreements entered into included an arbitration clause. That clause is common in all the three agreements. That clause reads thus:"If any question, difference or objection whatsoever shall arise in any way connected with or arising out of this or the meaning or operation of any part thereof or the debts dues or liabilities of either party, then save in so far as the decision of any such matter is hereinbefore provided for and has been so decided, every such matter including whether its decision has been otherwise provided for and whether it has been finally decided accordingly or whether the contract should be terminated or has been rightly terminated and as regards the rights and obligations of the parties as the result of such termination shall be referred for arbitration to the Judicial Commissioner, Himachal Pradesh, and his decision shall be final and binding and where the matter involves a claim for or the payment or recovery or deduction of money, only the amount, if any, awarded in such arbitration shall be recoverable in respect of the matter so referred."2. The parties are agreed that no other clause in the agreements is relevant for our present purpose. Disputes arose between the appellants and the respondents in respect of some claims arising from the said contracts. The appellants requested the respondents to refer the disputes to the arbitration of the Judicial Commissioner, Himachal Pradesh. The respondents declined to agree to make the reference in question. Thereafter the appellants moved the Senior Sub Judge, District Sirmur Nihan under Sec. 20 of the Indian Arbitration Act, 1940 (to be hereinafter referred to as the Act) for ordering the respondents to file the agreements in question in his court and for referring the disputes to the Judicial Commissioner, Himachal Pradesh for arbitration. The learnede accepted these applications and directed the respondents to file the agreements in question into his Court. Thereafter he referred the disputes to the arbitration of the Judicial Commissioner, Himachal Pradesh. The Judicial Commissioner, in our opinion rightly declined to act as an arbitrator. Thereafter the learned subordinate judge was moved to appoint some other arbitrator in place of the Judicial Commissioner. The respondents opposed that prayer on the ground that arbitration clause did not provide for such an appointment. The learned subordinate judge accepted that contention and dismissed the applications. As against that decision the appellants went up in revision to the Judicial Commissioner, Himachal Pradesh. The Judicial Commissioner following an earlier decision of that Court in DistrictCooperative FederationLtd. v. Khub Chand, AIR 1961 Him Pra 35 dismissed the revision petitions holding that under the agreements no reference for arbitration can be made to anyone other than the named authority.

Court's reasoning:
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.