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National Small Industries Corporation Ltd. Vs. National Metal Craft and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtDelhi High Court
Decided On
Case NumberOriginal Miscellaneous Petition No. 124 of 1980
Judge
Reported inAIR1981Delhi189; ILR1981Delhi1100; 1981RLR337
ActsArbitration Act, 1940 - Sections 3
AppellantNational Small Industries Corporation Ltd.
RespondentNational Metal Craft and ors.
Advocates: S.C. Dhanda,; Ravinder Nath and; K.P. Singh, Advs
Cases Referred(See Indian Hosiery Works v. Bharat Woollen Mills Ltd.
Excerpt:
.....of a reference being made to a single arbitrator unless a contrary intention appears from the arbitration agreement--procedure for appointment of single arbitrator--section 8.; in the instant case the parties entered into an agreement which contained an arbitration clause to the effect that any dispute which may arise would be referred to arbitration after giving notice to the other side. in accordance with the arbitration clause, the respondents served a notice on the petitioners whereby the petitioners were informed that there were certain disputes which had arisen and that the respondent no. 6 was being appointed as arbitrator to adjudicate upon the disputes. the respondent no. 6 then started the proceedings and served a notice upon the petitioners requiring them to appear before..........in accordance with the arbitration agreement for the settlement of the said disputes.'.(3) shri khullar then started the proceedings. he gave notice to the petitioners to appear before him.(4) the petitioners have brought this petition alleging that the appointment of shri khullar at all events is invalid and he cannot act as sole arbitrator. in my opinion, there is substance . in this contention.(5) on behalf of respondents i to 5 counsel relies on sections 8 and 9 of the arbitration act. obviously section 9 has no application. section 9 speaks of an arbitration agreement where the reference is to two arbitrators. part i of the first schedule read with section 3 raises a presumption in favor of a reference being made to a single arbitrator unless contrary intention appears from.....
Judgment:

Avadh Behari Rohatgi, J.

(1) ORAL. This is an application under sections 5, 11 and 33 of the Arbitration Act.

(2) The parties entered into an agreement dated 24th February, 1978. One of the terms of this agreement is as under :

'IF at any time any question, dispute or difference, whatsoever shall arise between the parties to this agreement, upon, in relation to, or in connection with this agreement, either of the parties may give to the other notice in writing of the existence of such question, dispute or difference and the same shall be referred to arbitration and such submission shall be deemed to be a submission under the relevant provisions of 'the Arbitration Act of 1940 or any statutory modification or re-enactment thereof. The award so given shall be final and binding on both the parties. The venue of arbitration shall be at Delhi.'

'THIS is an arbitration clause. Acting under this clause respondents 1 to 5 in their notice dated 10-4-1980 informed the petitioners that they have certain disputes with them which have remained unsettled. The notice then said that in terms of this clause they were appointing Shri K. K. Khullar, Respondent No. 6. as arbitrator in the above case to adjudicate upon the dispute. This notice ended by saying : 'You are hereby called upon to agree to the said reference in accordance with the arbitration agreement for the settlement of the said disputes.'.

(3) Shri Khullar then started the proceedings. He gave notice to the petitioners to appear before him.

(4) The petitioners have brought this petition alleging that the appointment of Shri Khullar at all events is invalid and he cannot act as sole arbitrator. In my opinion, there is substance . in this contention.

(5) On behalf of respondents I to 5 counsel relies on sections 8 and 9 of the Arbitration Act. Obviously section 9 has no application. Section 9 speaks of an arbitration agreement where the reference is to two arbitrators. Part I of the First Schedule read with section 3 raises a presumption in favor of a reference being made to a single arbitrator unless contrary intention appears from the arbitration agreement. If the agreement merely provides, as here, that the dispute shall be referred to arbitration, the-reference shall be made to a single arbitrator. If the agreement does not provide for the number of arbitrators and the mode of their appointment, it will be assumed to be one for reference to a single arbitrator by reason of para I of the First Schedule, and the mode of appointment taken necessarily to be by consent of parties, and if the parties do not concur in the appointment, as is the case here, the court will make the appointment. (See Indian Hosiery Works v. Bharat Woollen Mills Ltd., : AIR1953Cal488

(6) SUB-SECTION (2) of section 8 lays down the procedure. Any party to the arbitration agreement may serve a notice on the other to concur in the appointment of an arbitrator. If no appointment is made within 15' clear days after service of the notice, the court has to be moved. The party who gave the notice has to make an application to the court. The Court, after giving the other parties an opportunity of being heard, may appoint an arbitrator 'who shall have like power to act in the reference and to make an award as if he had been appointed by consent of both parties. This procedure has not been followed in this case. The respondents have acted, I think mistakenly. under section 9 which has no application to the present case. The appointment of Shri Khullar is invalid because it is unilateral and was made without any application to the court either under section 8 or section 20 of the Act. Section 20 is an alternative procedure. 'Instead of proceeding under chapter II' a party may proceed under section 20.

(7) I have, thereforee, come to the conclusion that the respondents themselves cannot appoint Shri Khullar as sole arbitrator. Nor does he become sole arbitrator because the petitioners did not concur in his appointment.' I am clearly of opinion that the. appointment of Shri Khullar is invalid and he has no power to act as sole arbitrator. He has no authority to decide the dispute.

(8) For these reasons, I accept the application and set aside the appointment of respondent No. 6, Shri Khullar. The parties are. however, left to bear their own costs.


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