Case: Union of India Vs. Prafulla Kumar Sanyal

The Union of India called for tenders for the construction of a bridge on Imphal River in the State of Manipur. The respondent submitted his tender and the tender was accepted by the appellant at Manipur on February 20, 1965. On March 11, 1965, a formal agreement was entered into in writing between the parties. On behalf of the President of India, the Executive Engineer, Hydro Electric & Bridges Project Division, executed the agreement. The deed of agreement contained an arbitration clause which provided that "except where otherwise provided in the contract, all questions and disputes arising out of or relating to the contract shall be referred to the sole arbitration of the person appointed by the President of India which such designation only as he may specify for Manipur Territory and if he is unwilling to act, to the sole arbitration of some other person appointed by the arbitration"2. A dispute arose between the parties and the respondent filed a suit against the Union of India in the High Court of Calcutta under the Arbitration Act and prayed that the arbitration agreement dated March 1, 1965 be filed and that an order of reference be made to the arbitrator under the terms of the said agreement. Before the single Judge who took the matter at the first instance, the application was resisted on the ground that no part of the cause of action had arisen within the jurisdiction of the Calcutta High Court. Learned single Judge rejected this contention on behalf of the appellant herein holding that the averments made in paragraphs 13 to 15 and paragraphs 18 to 21 showed that parts of cause of action had arisen within the jurisdiction of the Court and the Court had jurisdiction to try any suit in respect of the saidif such suit had been filed in the Calcutta High Court. In this view, the court rejected the objection filed by the Union of India and appointed Mr. Tapash Banerjee, a member of the Bar, as the arbitrator. Against the judgment, the Union of India preferred a Letters Patent Appeal. In the Letters Patent Appeal, the Union of India did not impeach the conclusion and finding of the learned Judge that the Court had jurisdiction to deal with the matter. But, it was submitted on behalf on the Union of India that clause 29 of the agreement provided that any matter of dispute shall be referred to the sole arbitration of the person appointed by the President of India (with such designation only as he may specify for Manipur Territory) or if he is unwilling to act to the sole arbitrator some other person appointed by the arbitrator. An arbitrator can be appointed only under the terms of the agreement. The High Court rejected this contention on the ground that the arbitration agreement does not mention any appointed arbitrator. The arbitration agreement states that an abritrator has to be appointed by the President of India or if he is unwilling to act to the sole arbitration, some other person has to be appointed by the Administration. The High Court in appeal held that it was manifest that there was no arbitrator appointed in the agreement

Court's reasoning:
5. In the instant case, as an arbitrator has not been appointed by the parties and as the parties are not agreed upon an arbitrator the court may proceed to appoint an arbitrator, but in so doing it is desirable that the court should consider the feasibility of appointing an arbitrator according to the terms of the contract. In this case the respondent in his petition has prayed for an appointment of an arbitrator under the terms of the agreement. Before us both the parties expressed a desire that the President should be asked to appoint an arbitrator according to clause 29 of the agreement. We feel that there could be no objection to this suggestion and we accordingly ask the President to appoint an arbitrator as contemplated under clause 29 within two months from today. The arbitrator so appointed will immediately enter on his duties and dispose of the reference as expeditiously as possible.