CHANDER BHAN HARBHAJAN LAL

STATE OF PUNJAB

February 22, 1977

[M. H. BEG, C.J. AND P. S. KAILASAM, J.]

Arbitration Act, s. 8, lvhether applicable when arbitration agrcernent stipulates appointment of Settlen1ent Con1n1ittee by 011e of the parties-On unilateral abolition of Settle111ent Conin1ittee. whether s. S t'JlJJlicahle.

The parties entered into an agreement for the 'execution of son1e construction work. An arbitration clause in the agreelnent stipulated that if disputes arose, the matter would be referred to a Settlen1ent Committee to be :1ppointed by the State Government.

A dispute arose, and a Settlen1cnt Con1mittee \\'as duly constituted, but was unilaterally abolished by the respondent before it concluded its work, Subsequently the respondent appointed another Settlement Committee whose award was set aside by the Civil Court on the ground that it was made even before the expiry of tlte time given by the Co.mmitte~ to the appellant.

The Committee thereafter ceased to exist, an<l the respondent applied to the trial court for appointing an arbitrator u/s. 8(2) of the Arbitrrition Act.

The appellant opposed the same on two grounds.

Firstly that by unilaterally abolishing the first Settlement Committee, the State Government had put an end to the arbitration clause, and no other committee could be appointed nnd secondly, that s. 8 was not applica-ble. The appellants' objections were rejected by the trial court: and later by the High Court in revision.

In appeal before this Court, the respondent also argued that s. 8 would not apply when one riarty could appoint a Settlement Committee without reference to the other party. ·

Dismissing the appeal, the Court,

HELD : ( 1) The \Vording of s. 8, that any party may serve the other parties with a written notice to concur in the a_ppointn1cnt or appointments, or in supplying the vacancy, will include not o; erving other parties in cases in \\'hich the service on the other partv is not conten1plated.

The ection cannct be read as not being applicable where the agreen1ent provides or the nomi:-iation of the Committee by one of the parties, for the section itself says that the party may serve the other parties. [41F-G]

(2) The Government could have appointed a Comn1ittee by itself \vithout coming to court. There is no indication in the cJausc that when once the Committee was unilaterally dissolved no new Committee could be formed.

VVhen the second Committee ceased to function, it became "incapable of acting'' and, therefore, it was within the competency of the Court to proceed to appoint a new Committee. [41E, F]

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2070/68.

G Appeal i:, y Special Leave from the Judgment and Order dated 16-2-1968 of the Punjab & Haryana High Court in Civil Revision Case No. 107 /66 and

Civil Appeal No. 1784/69.

Appeal by Special Leave from the Judgment and Order dated 25-11-1968 of the Punjab & Haryana High Court in Civil Revision H No. 339 of 1967.

G. L. Sanghi and K. J. John for the Appellants.

S. N. Anand and R. N. Sachthey for the Respondents.

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CHANDER BHAN v. PUNJAB (Kai/asam, J.) 39

The Judgment of the Court was delivered by

KAILASAM, J.-Civil Appeal No. 2070 of 1963 is by special leave by the appellants against the judgment of the Punjab and Haryana High Court dismissing the appellant's petition for revising an order passed by the Subordinate Judge, Ambala City, allowing an application by the State, respondent, and appointing the Arbitration Committee. '!he appellants entered into an agreement with the Public W crks Department, Punjab State, for execution of certain constniction works in August, 1952. They entered into an agreement, Ex.

A-l.

The agreement provided an arbitration clause in the following ter1ns :-

111 the matt.er of dispute, the case shall be referred to the cilicment Committee consisting of a Superintending Engineer, an officer of the Finance Department of the rank of at least Deputy Secretary and an Accounts Officer, all to be nominated by the Government for arbitration whose decision w1it be final." Disputes arose between the parties and the State of Punjab appointed a Settler,, ent Committee by notification dated 31st January, 1958.

The Settlement Committee. entered upon the arbitration but before the Arbitration Committee concluded its work the State Government unilaterally abclished the Committee by an order dated 27th March, 1962.

Subsequently by a notification dated 18th May, 1962, the State Ciovernn1ent constiuted a Com1nittee giving the nan1es of three officers with headquarters at Nangal.

The new Committee took up the dispute as well as a claim made by the Government and issued notice to the parties.

The new Settlement Committee passed an award on 25th July, 1962.

The appellants challenged the v; i!idity of the award in the Civil Court.

The Civil Court set aside the second Settlement Committee's award Oil the ground that it was made by the Committee even before the expiry of thc'time given by it to the appellants.

Thereafter, the second Settlement Committee also ceased to function.

Tbc State Government gave notice to the appellant umjcr section 8(1) of the Arbitration Act to concur in the appointment of a fresh Settlement Committee to arbitrate the matter between the parties.

The appellants did not respond to the notice.

The State Government made an application to the trial court for appointment of an arbitrator under section 3(2) of the Arbitration Act.

The appellants ntised two objections, -namely that section 8 was not applicable to the case and that by abolition of the first Settlement Committee the .Stale Government had put an end. to the arbitration clause agreed to between the parties by the agreement at Ex. A-1.

The learned Judge rejected both the grounds and held that after the State Government withdrew the personnel of the first Settlement Committee they became incapable of acting and therefore the court was entitled to :1ct under section 8(1) (b) of the Act.

On the second point it held that the terms of the arbitration clause in the agreement Ex. A-1 diLi not justify reading into it the condition that the intention of the parties was that the vacancies in the Setth<ment Committee for arbitration were not to be filled.

4-240SCI/77

In the Revision Application before the High Court the appellants in effect raised the, same contentions though in a slightly different form.

The High Court agreed with the view of the trial Judge that when once the Government abolished the first Settlement Committee it became incapable of acting and section 8 (1) (b) became applicable. It also agreed with the trial court and found that there was nothing in the terms of the arbitration clause in Ex. A-1 to justify the contention that when once a Settlement Committee was appointed the power under the clause is exhausted.

The High Court held that the trial court was ji..stified in proceeding under sub-section (1) of section 8 in asking the appellant to give the names for consideration of the court for the reconstitution of the Committee and as the appe.Jlants did not give the names the trial court was justified in accepting the names given by the State Government.

In the <lppeal before us the same contentions were raised.

It was submitted that when one of the parties to the arbitration agreement unilaterally disabled the Settlement Committee from functioning the court wiu not assist that party by holding that the Committee became incapable of acting.

It was contended that the provisions of section 8 of the Arbitration Act will not be applicable when one of the parties could appoint a Settlement Committee by itself without reference to the other party.

The learned counsel for the appellant also contended that when the first Settlement Committee ceased to exist by the government unilaterally pntting an end to it, the arbitration clause worked itself out and no other conunittce could be appointed The relevant clause in the agreement though given earlier is again extracted.

"In the matter of dispute, the case shall be referred to the Seltlement Committee consisting of a Superintending Engineer, an officer of the Finance Department of the rank of at least Deputy Secretary and an Accounts Officer, all to be F noillinalecl by the Government for arbitration whose decision will be final"

The clause is an amendment to the original condition No. 5. The clause furtl1er provided tltat the agreement is supplemental to the original agreement and save as varied as hereinbefore provided the said agreement and all the terms and conditions thereof shall contimre to be binding and in full force and effect. The submission of the learned counsel for the appellant is that the clause referred only to the matter already in dispute and to a settlement committee which had been alrea'lY appointed.

Reliance was placed on tJte words underlined in the clause "Ill the matter of dispute", and "referred to the Settlement Committee".

This plea cannot be accepted for in the Ja:ter part of the condition it is made clear by the words "all to be nominated by the Government for arbitration whose decision will be fin;; I." "To be nominated" contemplates a future appointment. But we do not think that this makes any difference for there could be no doubt that the condition enables the Government to appoint three persons holding the ranks specified in the condition as the Settlement

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CHANDER BHAN v. PUNJAB (Kailasam, !.) 41

Committee.

There is no indication at all that when once the Com- A mittee was dissolved no new committee could be appointed.

In fact it has to be noted that after the first Settlement Committee was dissolved by the unilateral act of the Government a second Committee came into existence and gave an award which was set aside by the Civil Court.

After the award was set aside the second Committee also ceased to function.

There is no material on record to show that the appellants objected to the constitution of the second Committee B on the ground that the condition did not provide for the, appointment of a second Settlement Committee.

There is no reason alleged as to why the second Settlement Committee ceased to function.

If the second Committee was also not terminated by the action of the Government the contention of the appellants that a unilateral act would put the case outside the purview of section 8 of the Arbitration Act would not be available.

On a careful reading of the condition relating to arbitration, we agree with the High Court as well as the trial court that there is no bar to the Government appointing a fresh Committee. for going into the dispute consisting of three officers as stipulated in the condition.

As the appellant would not reply to the letter of the Government seek- D ing to nominate a Settlement Committee the Government moved the court for ai; pointment of the Committee.

The trial court gave an option to the appellant to furnish names but as he did not furnish the names trial court accepted the names suggested by the Government.

On our finding that the Government was entitled to appoint a Committee under the new agreement the Government could have very well appointed a committee by itself without coming to court.

E But may be by way of abundant caution the Government came to court and tile court has appointed a committee as suggested by the State.

We are equally clear that under section 8, the Court is entitled to act and appoint a committee.

As already found by us when the second Settlement Committee ceased to function the Committee

beame "incapable of acting" and therefore it was within the competency of the court to proceed to appoint a new committee.

Equally F ,; ntenable is the contention that section 8 is not applicable to cases where the condition stipulates the appointment of a Settlement Committee by o,1c of the parties.

This submission was made relying on the wording of the section that any party may serve the other parties •• or the arbitrators, as the case may be, with a written notice to concur in the appointment or appointments or in supplying the vacancy. ,:.. .

This part of the section no doubt contemplates two parties but the G section cannot be read as not being applicable where the agreement

~ provides for the nomination of the committee by one of the pames for the section itself says that the party may serve the other parties, "May serve the other parties" will include not serving other parties in cases in which the service on the other party is not contemplated.

In the circumstances we are satisfied that t'1e order of the High Court is prcper and cannot be interfered with.

The appeal is dismissed.

Ihe parties will bear their own costs.

Civil Appeal No. 1734 of 1969

This appeal is similar to the one which we have just now disposed of i.e. C.A.No. 2070 of 1968.

The High Court also dismissed the {>etition .under appeal on the ground that the facts of the case. are similar to the one in Civil Revision Petition No. 107 of 1966 out of which C.A. No. J:J70 of 1968 arose and dismissed the petition on the same grounds.

In this appeal before. us the learned counsel for the appellant adopted the arguments advanced by the counsel in C.A. No. 2070 of 1968 and did not wish to add anything further.

For the reasons stated in C.A.No. 2070 of 1968 we dismiss this appeal also.

No order as to costs.

P.H.P.

Appeals dismissed.