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Gopalji Kuverji Vs. Morarji Jeram Naranji - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMumbai
Decided On
Case NumberO.C.J. Appeal No. 24 of 1918
Judge
Reported inAIR1919Bom24; (1919)21BOMLR308; 50Ind.Cas.411
AppellantGopalji Kuverji
RespondentMorarji Jeram Naranji
DispositionAppeal allowed
Excerpt:
..... - because arbitrator 3 in the case supposed in (c) and (d) is in a special category like an umpire appointed jointly by the parties or by arbitrators 1 and 2 each of whom is appointed by one of the parties independently of the other. in short, section 8 only applies to certain cases of failure to appoint jointly. ..where one of two arbitrators fails for the like causes, unless the party appointing him appoints a fresh arbitrator, the remaining arbitrator may be appointed to act alone. 11. the authority given for this statement is until 1889 the common law procedure act, 1854, sections 12 and 13, and after that date the arbitration act, sections 5 and 6 (sections 8 and 9 of the indian act) which reproduced sections 12 and 13 of the act of 1854. this, as the pronouncement of the..........not; because arbitrator 3 in the case supposed in (c) and (d) is in a special category like an umpire appointed jointly by the parties or by arbitrators 1 and 2 each of whom is appointed by one of the parties independently of the other. section 8(1)(b) does not apply to the case of independent appointments of two arbitrators. in such case when a vacancy occurs it would ordinarily be filled by the original appointer as contemplated in section 9. section 8(1)(b) only applies in terms to a single vacancy to be supplied by the parties. section 8 nowhere seems to contemplate the case of two original arbitrators appointed jointly by the parties plus a third of the same class appointed by the two already jointly appointed or by the parties. in short, section 8 only applies to certain cases.....
Judgment:

Basil Scott, C.J.

1. The petitioner Morarji Jairam Naranji petitions under the Indian Arbitration Act as follows :--

1. That by a writing in the Gujarati language and character made in Bombay on the 21st day of March 1918 between the 1st respondent of the 1st part, the petitioner of the second part, and the second respondent Pitamber Vithalji of the third part, certain disputes between the said parties in respect of contracts for sales and purchases of piece goods of ready and forward delivery were referred to the joint arbitration of Messrs. Lalji Govindji, Morarji Mathurdas Kamdar (a solicitor of this Hon'ble Court and solicitor for the 1st respondent) and Mansukhlal Oghadlal upon and subject to the terms and conditions mentioned in the said writing. By the said writing it was provided that the said arbitrators should publish their award within two months, and power was given to the said arbitrators to further extend the said time by one or two months. A copy of the said writing is hereto annexed and marked A.

2. The said arbitrators entered upon the said references and, after partly proceeding with the reference, they, by their letter of the 12th April 19181 addressed to the aforesaid parties to the said reference, informed them that they declined to continue to act further as arbitrators. A copy of the said letter is hereto annexed and marked B.

3. Thereupon the petitioner by his attorneys' letter, dated the 24th April 1918, addressed to the respondents informed them that under the events that had happened the petitioner was entitled to have three arbitrators appointed in place of the said three originally appointed arbitrators under the provisions of Section 8 of the above Act and suggested the name of the said Mr. Mansukhlal Oghadlal (whom he had induced to act again as arbitrator) as one of the said newly to be appointed arbitrators and called upon them to concur in his appointment and to suggest the names of two other persons as arbitrators within seven clear days after the service of the said letter. A copy of the said letter is hereto annexed and marked C and the office translation of the consent in writing of the said Mr. Mansukhlnl Oghadlal to again act as arbitrator, dated the 15th day of May 1918, is hereto annexed and marked D.

4. In reply to the said letter the second respondent Pitamber Vithalji by his attorneys' letter dated the 14th day of May 1918, addressed to the petitioner's attorneys, informed them that their client had again appointed the said Mr. Lalji Goviudji as one of the arbitrators and that the said, arbitrator Mr. Lalji Govindji had no objection to continue as arbitrator. Copy of correspondence between the petitioner's attorneys and the attorneys of the said Pitamber Vithalji is hereto annexed and marked E.

5. The first respondent has in his attorneys' letter, dated 25th April 1918, addressed to the attorneys of the petitioner, stated that all the three arbitrators having refused to not the petitioner was not entitled to make any fresh appointment and to call upon the first respondent to concur in such appointment and to suggest the names of two other arbitrators and the first respondent declined to do so. A copy of the said letter is hereto annexed and marked F.

2. The prayer is to the Court (1) to confirm the appointment of Mansukhlal Oghadlal and Lalji Govindji as arbitrators and appoint a third arbitrator and to make an order directing such three arbitrators or only the two above-named to proceed with the reference from the stage where the originally appointed arbitrators left it; or (2) alternatively to appoint three arbitrators to proceed with the reference.

3. It was objected by Gopalji Kuverji that the Indian Arbitration Act did not confer upon the Court jurisdiction to make any such order in the circumstances of the case.

4. Mr. Justice Marten, before whom the case came in Chambers, held that Section 8 of the Act did give him jurisdiction and acting upon a subsequent consent of the parties he appointed a single and entirely new arbitrator to dispose of the reference.

5. The reasoning by which the learned Judge arrived at his decision was as follows :--

Section 8 (c) contemplates the case of two arbitrators plus an umpire or third arbitrator. As power is given to supply a vacancy caused by the death of the third arbitrator one would expect a provision to supply a vacancy or vacancies caused by the death of the two first arbitrators. Sub-section (b) if read liberally would furnish such provision and if so it would equally apply to the supply of vacancies caused by the death, refusal, etc, of three arbitrators.

6. But is it correct to hold that Clause (b) is meant to cover the case of arbitrators 1 and 2 where the appointment of arbitrator 3 falls under Clauses (c) and (d)?

7. I think not; because arbitrator 3 in the case supposed in (c) and (d) is in a special category like an umpire appointed jointly by the parties or by arbitrators 1 and 2 each of whom is appointed by one of the parties independently of the other. Section 8(1)(b) does not apply to the case of independent appointments of two arbitrators. In such case when a vacancy occurs it would ordinarily be filled by the original appointer as contemplated in Section 9. Section 8(1)(b) only applies in terms to a single vacancy to be supplied by the parties. Section 8 nowhere seems to contemplate the case of two original arbitrators appointed jointly by the parties plus a third of the same class appointed by the two already jointly appointed or by the parties. In short, Section 8 only applies to certain cases of failure to appoint jointly. Where choosers should but do not concur, the Court is enabled to assist them by the selection and appointment of an individual falling in one of the following categories--an ( i. e. one ) arbitrator; an umpire; a third arbitrator in the special sense in which the term is used. It follows that in my opinion Clause. (b) must be read with Clause (a) and Clause (d) with Clause (c)of Section 8. The Court is not at liberty to take upon itself to select an individual where the selection is by the submission reserved for one of two disputing parties.

8. The Act does not attempt to provide for every case. It only gives assistance in the commoner cases where joint appointment cannot be arrived at.

9. It is said that the present case is one of joint appointment of three arbitrators. That is probably correct but it is not one of the common cases of joint appointment contemplated by the section. It is unusual, except perhaps in references in the course of a suit, to have a triangular submission and the joint appointment of three.

10. In Russell on Awards, Part II, Chap. III, Section 3, in the Editions of 1870, 1882 and 1906 it is said :

In case of death, refusal to act, or incapacity, of a single arbitrator,...a Judge may appoint a new one if the parties do not; and...where one of two arbitrators fails for the like causes, unless the party appointing him appoints a fresh arbitrator, the remaining arbitrator may be appointed to act alone.

11. The authority given for this statement is until 1889 the Common Law Procedure Act, 1854, Sections 12 and 13, and after that date the Arbitration Act, Sections 5 and 6 (Sections 8 and 9 of the Indian Act) which reproduced Sections 12 and 13 of the Act of 1854. This, as the pronouncement of the standard text-book on Arbitration unaltered through a period of thirty-five years, is a good indication of the understanding of the profession as to the scope of these sections. The dicta of Lord Justice Lindley and Lord Justice A. L. Smith in In re Smith & Service and Nelson & Sons (1890) 25 Q.B.D. 545 and Manchester Ship Canal Company v. S. Pearson and Son, Limited [1900] 2 Q.B. 606 respectively show that those learned Judges understood the provisions in question in the same sense.

12. In my opinion, therefore, the Court had no jurisdiction to make the order that it did, and the appeal must, therefore succeed upon that ground. The appeal is allowed, and the decree is set aside and the petition dismissed with costs through out upon the petitioner.

Hayward, J.

13. The appeal involves a point of importance. The Indian Arbitration Act applies to the appointment o a single arbitrator and in certain cases to the appointment of two arbitrators. Does it apply in any case to the appointment of three arbitrators? It is important to remember in resolving this point that the Act is an Act to amend the law relating to arbitration. It does not deal with the whole law of arbitration and it must be construed strictly in that it confers special powers of interference not otherwise inherent in the Court.

14. It appears to me, with this in mind, that it applies primarily to the ordinary commercial contracts in which the reference is to a single arbitrator or else to two arbitrators, one appointed by each party, with power to call in a third arbitrator or leave the decision to an umpire. Such are the references treated in Sections I and II and at page 202 in Section III of Chap. IV of Russell on Arbitration, 4th Edn., 1870. This application is indicated by Section 6 which provides that a submission shall be deemed ordinarily to be to a single arbitrator and that if the reference is to two arbitrators, they shall have power to appoint an umpire while Section 8(1)(a) and (b) proceeds to provide for the failure of the parties to nominate the single arbitrator or the failure of the nominated arbitrator to proceed with the arbitration and Section 9 for the failure of either of the parties to nominate either of the two arbitrators or the failure of either of the nominated arbitrators to proceed with the arbitration; and while provision has already been made in Section 8(1)(c) and (d) for the failure of the parties or the two arbitrators to nominate the third arbitrator or the umpire. It has been provided that the arbitration shall in all these cases be made effective if necessary by the special interference of the Court. These provisions of the Indian Arbitration Act reproduce verbatim the English Statute, 1889.

15. It is not, in my opinion, open to us to extend this special jurisdiction to special contracts not clearly contemplated and expressly mentioned by the Act. Thus it is not open to us to interfere where the reference is to two arbitrators to be appointed not one by each party but the two jointly by the two parties. There is no provision in Section 8 for interference on the failure of the parties jointly to nominate the two arbitrators. Nor do Clauses (a) and (b) read together provide for interference on the failure of two arbitrators so nominated to proceed with the arbitration. These two clauses must, in ray opinion, be read together and the words 'the appointment of an arbitrator' at the end of Clause (a) read as repeated in the words 'if an appointed arbitrator' at the opening of Clause (b) ; just as the two Clauses (c) and (d) have also plainly to be read together. It would, in my opinion, be repugnant to the arrangement and plain meaning of Section 8 of the Indian Arbitration Act to give effect to the general provisions of Section 13 of the General Clauses Act.

16. It is similarly, in my opinion, not open to us to interfere where the reference is to more than two arbitrators and the parties fail to nominate the arbitrator or the arbitrators fail to proceed with the arbitration. There is no provision in Section 8 Clauses (c) and (d) providing for a difference of opinion between two arbitrators and settlement by a third arbitrator or by an Umpire. Such references are thus treated at page 203 of Section III of Chap. IV of Russell on Arbitration, 4th Edn., 1870: 'The arbitrators selected, one by each side, ought not to consider themselves the agents or advocates of the party who appoints them...In order to ensure a decision in case of difference of opinion, the submission frequently goes on to prescribe that the two arbitrators shall name a third and that an award made by any two, if they cannot all agree, shall be sufficient. If the two arbitrators do not appoint a third arbitrator or an umpire, when at liberty to do so, a Judge... may appoint...'. Russell proceeds to distinguish the duty of a third arbitrator from that of an umpire: 'The arbitrators named by the parties often seem to think that they are to represent their respective no minors and act rather as advocates than judges, while the third arbitrator frequently supposes he is an umpire and that his active interference is not to commence until the others have differed finally...'. And at page 211 of Section IV : 'Where two arbitrators are appointed, the submission often provides that in case of their not agreeing in an award, the matters shall be decided by a third person, who is styled an umpire'. Clauses (c) and (d) of Section 8 do not, in my opinion, provide for interference, where tha reference is not to two arbitrators with power to settle differences of opinion by summoning a third arbitrator or referring the matters to an umpire, but is, as here,. directly to three arbitrators. Such references would appear not to have been included within the particular provisions of Sections 8 and 9 though they might fall within the provisions of the other sections including Section 19 of the Indian Arbitration Act. This would appear to have been the view held in In Re Smith & Service and Nelson & Sons (1890) 25 Q.B.D. 515 and in Manchester Ship Canal Company v. S. Pearson & Son, Limited [1800] 2 Q.B. 606 under the English Statute relied on in para 96 A of Vol. I of Halsbury's Laws of England. The appeal should, therefore, in my opinion, be allowed as the appellant and two respondents referred their disputes direct to three arbitrators and Mr. Justice Marten had no jurisdiction on their refusal to proceed with the arbitration to appoint fresh arbitrators under the Indian Arbitration Act. It would not be necessary in this view of the matter to decide whether the special powers conferred by the Act were discretionary with the Court. It would appear to me, however, that Mr. Justice Marten placed the right interpretation upon the decision in In re Eyre and Corporation of Leicester [1892] 1Q.B. 136 and that the word 'may' never can mean 'must' so long as the English language retains its meaning though the exercise of a discretionary power conferred by the word 'may' might in certain circumstances being established become imperative on the Judge as observed by Cotton L. J. in In re Baker (1890) 44 Ch. D, 262. It would further appear to me that it would not have been proper for us to interfere with the exercise of the discretion vested in Mr. Justice Marten merely upon our own views of the desirability or otherwise of leaving the parties in this particular matter to their ordinary remedies in the Court.


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