1. The short point for decision in the present case is whether the Director General of Supply was at liberty to nominate an arbitrator when the original arbitrator nominated by him had neglected or refused to act.
2. When the Second World war was in progress the Government of India decided to inaugurate a scheme in pursuance of which certain buying agents were appointed with the object of purchasing wool for certain manufacturers employed by Government. The price of these goods was primarily to be paid to the vendors by the vendees themselves but in order to safeguard the interests of the parties the Government of India accepted responsibility for the commitments which had been entered into by any of the parties on its behalf. One of the clauses in the agreements which were executed with the buying agents under the Central Wool Purchase Scheme was in the following terms:
'In the event of a dispute arising between the Buying Agents and the Mills, or other consumers, in connection with the Central Purchase Scheme the dispute, if it cannot be settled amicably, shall be referred to the Director General of Supply or his nominee whose decision shall be final and binding on both parties.'
3. In pursuance of this scheme Messrs. Shamji Mal, a joint Hindu family firm carrying on business at Delhi, supplied a quantity of wool to Messrs. E. Sefton and Company Limited, Mirzapur. Certain disputes arose between the parlies concerning the prices of the goods supplied and the matters in controversy were referred to the arbitration of one Mr. K. B. Rao, a nominee of the Director General of Supply. Mr. Rao entered upon the arbitration, issued notices to the parties and proceeded with the case but owing to certain reasons which do not appear on the file he had to leave for the United States before the award could be announced.
On 31-7-1950 the Director General nominated one Bakhshi Shiv Charan Singh, another officer of the Supply Department, as arbitrator. The latter gave his award on 31-8-1951. Messrs. Shamji Mal filed the award in Court on 28-9-1951 & on 27-11-1951 Messrs. E. Sefton and Company raised a number of objections. They questioned the validity of the award on the ground that the power conferred upon the Director General having once been exercised was exhausted, that he had no power to nominate Bakhshi Shiv Charan Singh, and consequently that Bakhshi Shiv Charan Singh had no power to make the award. The commercial Sub-Judge of Delhi upheld the objection and Messrs. Shamji Mal have come to this Court in revision.
4. The learned counsel for the respondents raises a preliminary objection that this application under Section 115, Civil P. C., is not competent as the petitioner who had a right to prefer an appeal to the District Judge has not chosen to do so and has come to this Court in revision. This objection cannot bear a moment's scrutiny. Section 115 empowers the High Court to entertain a petition 'when no appeal lies thereto' and it is within the competence of this Court to entertain a petition in this case as neither a first appeal nor a second appeal lies to this Court from an order of this kind (vide--'Sashikanta Acharya Bahadur v. Nasirabad Loan Office Co. Ltd.', AIR 1936 Cal 786 (A); -- 'Tipan Prasad Singh v. Secy. of State', AIR 1935 Pat 86 (B); -- 'Mahadeo Prasad v. Khubi Ram', AIR 1929 All 793 (C)).
5. The only point of importance which has arisen in the present case is whether it was open to the Director General of Supply, after having nominated an arbitrator on one occasion, to revise his decision and to nominate another arbitrator.
6. An arbitration agreement is a contractual proceeding by which the parties to a dispute voluntarily agree to refer the matters in controversy to-persons selected by themselves or in the manner provided by law or by the terms of the agreement. As it is a contract, all the necessary elements thereof must exist including an agreement as to the manner in which the arbitrators are to be selected. The agreement in the present case was that if any dispute should arise between the parties, it should be referred to the Director General of Supply or his nominee whose decision shall be binding on both the parties.
7. Mr. Bhagwat Dial, who appears for the petitioner, contends that although Mr. K. B. Rao was nominated an arbitrator by the Director General of Supply in pursuance of the powers conferred upon him, he declined or refused to act and consequently that it was within the power of the Director General to nominate another person. In support of this proposition he has invited my attention to the decision in -- 'In Be an arbitration between Wilson & Son, & the Eastern Countries. Navigation and Transport Co.', (1892) 1 Q. B. 81 (D). In this case, it was provided that in certain events a person to be named by the President of the Institute of Civil Engineers was to be arbitrator. Mathew, J. observed as follows:
'I cannot agree with the view that he refused, but even if he had done so, the proper course. would have been to apply again to the President of the Institute of Civil Engineers & obtain the appointment of some other person.'
The point in that case was whether the arbitrator had refused to act and not whether the President of the Institute had power to appoint or name another arbitrator. This ruling cannot, therefore, be said to have a bearing on the decision of the present case.
8. Again, my attention has been invited to Clause (b) of Section 8, Arbi. Act, 1940, which provides that; if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbitration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitrators, as the case may be, do not supply the vacancy, the Legislature must be deemed to have intended that the parties should be able to choose another arbitrator.
While there can be no manner of doubt that parties are at liberty by mutual consent to choose another arbitrator, I am of the opinion that it is completely contrary to the scheme of arbitration that it should be within the power of one party by its unilateral act to supersede an arbitrator and to appoint another arbitrator in his place. Moreover, the provisions of Section 8 are not applicable to the facts of the present case. In the first place, Mr. Rao who was appointed arbitrator by the Director General, did not neglect or refuse to act, he did not become incapable of acting and he did not die.
Secondly, the parties to the agreement did not decline to supply the vacancy. Indeed, the respondent was never asked to propose the name of another arbitrator. Thirdly, the power of appointing an arbitrator under Section 8 has been vested exclusively in the Court and not in any of the parties. It is a fundamental principle that unless a contrary intention appears, a power conferred upon a person cannot be exercised from time to time. The Director General having exercised the power of nomination vested in him by appointing Mr. Rao exhausted his power and had no power to appoint Bakhshi Shiv Charan Singh or any other arbitrator. At p. 135 of Banerji's Law of Arbitration in British India the learned author observes as follows:
'Where the agreement to refer provides that the arbitrator is to be appointed by a specified third person, his power to appoint a second arbitrator on the refusal of the first one depends on the words of the agreement. If he is to nominate his power is exhausted after the first appointment, if ho is to appoint, that may mean only nominate or appoint a person who is willing to act, Russell, p. 127; '(1892) 1 QB 81 (D)'.'
9. It may perhaps be mentioned in passing that as one arbitrator had already been appointed in this case, another arbitrator could be appointed only after the first arbitator had been superseded. No order of supersession appears to have been passed in the present case. That order could have been passed only by a Court and not by any one of the two parties to the agreement. In any case, it could not be passed by the Director General of Supply who was merely vested with authority to nominate an arbitrator.
10. For these reasons, I would uphold the orderof the Court below and dismiss the petition withcosts.