1. The Bharat Construction Co. Ltd., now in liquidation, have appealed against an order of S. R. Das Gupta J., dated 16-2-1953, by which the learned Judge stayed a suit brought by them in exercise of his powers under Section 34, Arbitration Act. The stay was resisted on the ground that the arbitration agreement upon which the respondent was relying had become infructuous, inasmuch as no arbitrator, answering the description given in the agreement, was or could any longer be available. That argument did not appeal to the learned Judge who rejected it and ordered a stay of the suit.
2. The facts are simple. It appears that in 1944, the then Government of India called for tenders for the construction of certain structures intended for military purposes and a tender was submitted by the appellants on 26-4-1944, and accepted on the 12th of May following. The work was to be carried out in accordance with the terms and conditions of Contract Form No. I.A.F.W-2159 and the amendments thereto, including the schedules, specifications and plans contained in and attached to the form. Clause 35 of the contract provided for the decision of disputes and it was divided into two paragraphs. The first paragraph was concerned with questions relating to the meaning of specifications, drawings and instructions contained in the contract and to the quality of workmanship or materials used on the work. As regards such questions, the 'C. R. E. U. S. Works' were to be the sole deciding authority. The second paragraph, which has given rise to the question involved in this appeal, was in the following terms: 'All other disputes and differences the settlement of which is not provided for under any other clause of this Contract and which shall arise either during the progress of the work or after completion thereof concerning the work or the execution or maintenance thereof or the construction or meaning of these conditions of contract or as to any other matter arising out of or relating to the contract or the work to be executed or payments to be made in pursuance thereof shall be referred to the sole arbitration of Major General I/C, Administration, Eastern Command whose decision shall be final, conclusive and binding on all parties to the contract.'
3. It should be noted here that the standard form does not name the deciding authority in paragraph 1 or the arbitrator in paragraph 2, but contains blank spaces for the insertion of relevant names in accordance with certain instructions given in the margin. The names inserted in the present case were 'the C. R. E. U. S. Works' and 'Major General I/C, Administration, Eastern Command' respectively, which does not appear to have been in accordance with the instructions contained in the printed form.
4. It is not disputed that work under the contract was done. According to the respondent, upon whom the rights and liabilities of the old Government of India under the contract have admittedly devolved, the appellants were fully paid off. According to the appellants, some of the bills are still outstanding.
5. On 16-5-1952, the appellants brought a suit on the Original Side of this Court for the recovery of a sum of Rs. 52,665-7-0 said to be still due to them on account of work done under the contract. They alleged that they had received payment from the old Government of India against their bills from time to time, but a sum of Rs. 39,156-11-0 had remained unpaid, which, together with interest, had mounted up to Rs. 59,665-7-0. Accordingly, they asked for a decree for that sum, either as a contractual debt or as compensation for work done under the contract, of which the old Government of India had enjoyed the benefit.
6. Thereafter, on 4-8-1952, the respondent made an application under Section 34, Arbitration Act, for a stay of the suit on the ground that the subject-matter of the suit was covered by the arbitration agreement. The reply of the appellants was that the arbitration agreement had become infructuous and inoperative, inasmuch as the parties had agreed and intended to refer matters in dispute between them to the sole arbitration of 'Major General I/C, Administration, Eastern Command' and to no other person. 'The Post and/or Office of the Major General I/C, Administration, Eastern Command', they pleaded, 'has been abolished and there is no such Officer at present in existence and there has been no such Officer since about 1947.' They added that it was not the intention of the parties that any vacancy in the office of the Administrator was to be filed up by either the parties or the Court and that, therefore, the arbitration clause had become infructuous and inoperative.
The respondent's rejoinder was that the parties had agreed and intended to refer matters in dispute between them to the arbitration of the Officer in Charge of the Administration, Eastern Command, and that it was wholly immaterial whether the said Officer held the rank of a Major General or not. 'The Officer in Charge of Administration of Eastern Command', the respondent pleaded, 'is a Brigadier in rank', and further, 'instead of a Major General the post is being held by a Brigadier.' On the above basis, it was denied that the arbitration clause had become infructuous or inoperative, but then followed a somewhat curious averment in the following terms:
'I deny that it was not the intention of the parties that the vacancy, even if it had occurred in the office of the arbitrator, was not to be filled up or that it was ever the intention that the arbitrator should be any person other than a Major General.'
7. If the above averment be taken to mean what it says, it is clearly a complete negation of the case which the respondent wanted the Court to consider. The first part of the averment denies that it was not the intention of the parties that a vacancy in the office of the arbitrator was not to be filled up and, therefore, it asserts that the filling up of a vacancy was never intended. Similarly, the second part of the averment denies that it was ever the intention of the parties that the arbitrator should be anyone other than a Major General and, therefore, it asserts that only a Major Generaland no person holding any other rank was intended by the parties to be the arbitrator. It was, however, stated before us that the sentence I have extracted above did not convey the real meaning of the respondent and that confusion had been caused by an error of draftsmanship. It is not very usual to come across draftsmanship of that character in a pleading filed on behalf of the State, but I am prepared to accept the respondent's contention and hold that the sentence concerned only represents the inability of the draftsman to cope with double or rather treble negative.
8. The main question to be decided, therefore, was what the arbitration agreement really contemplated whether it meant that the arbitrator would have to possess the twin qualifications of being the Officer in Charge of the Administration Eastern Command, and holding the rank of a Major General or whether the only essential requisite was that he should be the Officer in charge of the Administration, Eastern Command. S. R. Das Gupta J., held that the arbitration clause attached to the office and not to the particular person who held it. According to him, it was the Officer in charge of the Administration, Eastern Command, who was intended to be the arbitrator, whether he was a Major General or a Brigadier and he consequently held that there was an effective arbitration still subsisting. In the result, an order for stay was made and, as I have already stated, the present appeal is directed against that order.
9. On behalf of the appellants, Mr. Roy wanted to canvass before us two points. He contended, in the first place, that the application of the respondent was liable to be thrown out at sight, inasmuch as it was not a proper application under Section 34 at all and did not make out any case for a stay. In the second place, he contended that the only arbitrator contemplated by the arbitration clause was a Major General in charge of the Administration. Eastern Command, and that the learned Judge had erred in taking the view that any Officer holding the charge of the Administration, Eastern Command, would be a competent arbitrator under the agreement, irrespective of the rank he held in the army.
10. In my view, it is not open to Mr. Roy's clients to raise the first question for the first time in appeal. There is no trace of it in their affidavit-in-opposition and the point was not even mentioned in the trial Court. I am prepared to concede that if the appellants could be allowed to raise the question, the respondent would have had a difficult point to meet, because the purported application under S, 34 does not make out that a dispute, as understood in the law of arbitration, had arisen before the institution of the suit or before the filing of the application, that such dispute was the subject-matter of the suit and that the dispute was within the second paragraph of clause 35 of the contract, It is, however, unnecessary for me to enlarge on the defects of the application, inasmuch as the pleadings have got to be scanned with extreme rigour in cases under the Arbitration Act and no party can be allowed to raise a point, if he has not given sufficient notice of it, in hisaffidavits. If the respondent did not make appropriate averments, required for supporting an application under Section 34, with sufficient particularity, so did the appellants not raise any objection in their affidavit-in-opposition. In the circumstances, the first point sought to be raised by Mr. Roy cannot be entertained.
11. On the true construction of the arbitration clause, however, I feel constrained, with great respect to the learned trial Judge, to express my dissent from him. If all that the parties intended was that the arbitrator would have to be the Officer in charge of the Administration, Eastern Command, the use of that description or designation would be sufficient to convey their meaning and it would not have been necessary to add the expression 'Major General.' Mr. Kar, who appeared on behalf of the respondent, contended that the expression 'Major General' was a surplusage and had come to occur in the contract probably for the reason that the Officer, actually in charge of the Administration, Eastern Command, at the time of the contract, happened to be a Major General. There is no evidence that a Major General was then in charge of the Administration; but one may presume that it was so, since otherwise the position would be that the parties entered into an arbitration agreement which was ineffective at its very inception.
Even so, however, I am unable to agree that the use of the expression, 'Major General', was a mere surplusage. As I have pointed out already, the contract was in accordance with a standard form. Any adaptations made of it, for the purposes of a particular contract, must have been deliberate-ly made and if a good and intelligible reason can be found for the use of a certain expression, it will not be right to discard that expression as a surplusage, instead of giving it the meaning which it may appropriately bear in the context of the facts. In my view, a good and intelligible reason can be seen for the insertion of the words, 'Major General'. It is to be noticed that the arbitrator was to be an employee of the respondent and it is not making a violent presumption to think that the parties must have intended that the arbitrator should be a person of a status, sufficient to enable him to give a decision against his employer, if necessary, and a person possessed of a sufficient sense of responsibility and maturity of judgment.
If the construction contended for by the respondent be accepted, the result would be that if in course of time the duties of the Officer in charge of the Administration, Eastern Command, came to be of relatively small importance, for example, if they were reduced to mere supervision of the disposal of surplus war materials or some such duty or duties, and if a raw subaltern was placed in charge of the office, even he would be a competent arbitrator within the meaning of an arbitration clause. I am entirely unable to hold that such could have been the intention of the parties. To my mind, they must have attached and did attach some importance to the status of the arbitrator and they chose a Major General, because a person holding that rank in the army would necessarilybe a man of a mature age, a developed judgment and a status sufficient to enable him to decide rightly without hesitation, even if he were to decide against his employer. I cannot, therefore, agree that the arbitrator contemplated by the arbitration clause was merely the Officer in charge of the Administration, Eastern Command, irrespective of whether he was a Major General or not.
12. It would appear that the respondent itself took that view at the stage of the correspondence which preceded the institution of the suit. On the 23rd November, an Officer of the Eastern Command, apparently speaking on behalf of the Government, stated as follows:
'In view of the fact that the Arbitrator originally mentioned in the contract is a high ranking Military Officer, the Department is prepared to refer the matter to the Arbitration of his successor, i.e., Brig. I/C Administration, or another high ranking Military Officer.'
It is perfectly clear that, in the above passage, the writer was not taking the view that the old arbitration clause was still subsisting and that according to its terms, whoever was the Officer in charge of the Administration, Eastern Command, would be entitled to function as the arbitrator. On the other hand, the writer was saying that the Department was prepared to refer the matter to the arbitration of the successor of the Major General or 'another high ranking Military Officer', which means that the Department was prepared to enter into a fresh agreement for a reference to another arbitrator, freshly chosen. There would be no question of making a reference to 'another high ranking Military Officer' under the original arbitration clause.
It is also noticeable that the reason why the Department was proposing to make a reference to a Brigadier or to another high ranking Military Officer was that the arbitrator originally mentioned in the contract was a high ranking Military Officer. In my view, the respondent or those who were speaking on its behalf were there admitting that the use of the expression, 'Major General', in the arbitration agreement was not purposeless and that it was really intended to particularise an arbitrator by reference to a particular rank held by him. They were also admitting that when a Major General was no longer available, as had in fact happened, a case would arise for a reference to a Brigadier or another high ranking Military Officer and, therefore, they were not insisting that no question of making a reference under any fresh agreement could arise, inasmuch as the original agreement was subsisting and under its provisions the arbitrator would now be the Brigadier, in charge of the Administration, who had succeeded the Major General,
13. I may also point out that the expression, 'Major General', is not the designation for an office like 'Commandant' or 'Quarter-Master General' or 'Superintendent.' It is a designation not describing the holder of a post, but describing the per-sonal rank ,of the Officer to whom it is applied. The instructions given in the margin of the standard form say that in the case of contracts accepted bythe Garrison Engineer, the space left blank for the insertion of the name of arbitrator should be filled in by entering the expression, 'Assistant Adjutant and Quarter-Master General' and that in the case of contracts accepted by the Commander, Royal Engineers, or the Chief Engineer, the entry should be, 'Deputy Adjutant and Quarter-Master General of the Command.' Those are designations of offices and not of the personal rank held by particular Officers.
To my mind, the fact that in the face of those instructions, the entry made in the arbitration clause in the present case was not the designation of any office, but the designation of a personal rank, makes it abundantly clear that the individuality, the personality and the special qualifications of a particular Officer of a particular rank were determining factors in the choice of the arbitrator. This is another circumstance which points to the true meaning of the arbitration clause.
14. The respondent might, if it had wished, give the Court adequate information as to what the expression 'Major General I/C, Administration, Eastern Command' really meant in military terminology, It was not suggested to us that the whole expression was the designation of a particular office, irrespective of the rank of the holder and in those circumstances, we must accept what appears to us to be the natural meaning of the expression. If that meaning be taken, it must be held that the expression, 'Major General', cannot be ignored and that what the parties intended was that the arbitrator should not only be the Officer in charge of the Administration, Eastern Command, but should also be a Major General in rank.
15. On behalf of the respondent, Mr. Kar drew our attention to an unreported decision of S. B. Sinha J., in the case of -- 'Ramayan Singh v. Dominion of India', Suit No. 3611 of 1948, D/-11-7-1949 (Cal) (A). It is true that an arbitration clause, expressed in identical terms, fell to be construed in that case, but I am unable to see that decision throws any light on the question now before us. What appears to have been pleaded in that case was that the Eastern Command itself had been abolished and Sinha J., held that the Command had not been abolished but was 'very much in existence' and that, therefore, the post of 'Major General in charge, Administration, Eastern Command', had also not ceased to exist. The question that although the Eastern Command itself had not ceased to exist, the Officer in charge of its Administration branch was no longer a Major General but a Brigadier and therefore the arbitration clause had become infructuous, was neither raised before the learned Judge, nor decided by him. The case, therefore, is of no assistance on the present question of construction.
16. As I have already stated, the contention of the appellants was that since there was no operative arbitration clause existing, there could be no question of any reference to arbitration and, therefore, no question of a stay of the suit. Mr. Kar, however, contended that even assuming that the construction put by him upon the arbitration clause was erroneous and that the arbitrator contemplatedby the agreement was no longer available, the agreement had still not become infructuous, inasmuch as the parties could choose another arbitrator under the procedure laid down in Section 8, Arbitration Act, or in default of an appointment by them, the Court could appoint an arbitrator under the provisions of the same section. In my opinion, this contention also cannot be accepted.
17. The only relevant clause of Section 8 of the Act is Clause (b) which reads as follows: '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 section goes on to say that in such a contingency and certain other contingencies, 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 in supplying the vacancy, and that if no appointment is made within fifteen days after the service of such notice, the Court may, on the application of the party who gave the notice, appoint an arbitrator or arbitrators.
18. It is at least doubtful whether Clause (b) of Section 8(1), Arbitration Act, at all applies to a case where a named arbitrator, obviously chosen for the possession of qualifications special to him, has become unavailable or refuses to act. It would seem that, normally, the parties would in such a ease desire and agree to have the matters in dispute between them settled by arbitration, only if the arbitrator was the particular person chosen by them. It was, however, pointed out by Mr. Kar that the section spoke of 'any appointed arbitrator' and that that expression obviously included an arbitrator specified by his personal name. Mr. Kar's contention was that if the section applied to a case where the arbitrator originally chosen by the parties was a particular individual, there was no reason why it should not apply to a case where the arbitrator originally chosen was a person possessed of and specified by certain qualifications.
It must be conceded that there is great force in that argument and it appears to me that whether or not the section would apply in a particular case, must be determined by the test laid down in the section itself. The test is that the arbitration agreement must not show that it was intended that the vacancy should not be supplied. In other words, however individual the original choice may appear to be, if the agreement itself contains sufficient indication that the parties nevertheless intended that, in default of their original nominee, they would be prepared to fill up the vacancy by choosing another arbitrator, the section will apply and a new appointment may be made either by the parties or by the Court, as the case may he. It must, therefore, be seen whether there is any indication in the present case that the parties intended that the vacancy should be supplied, if the arbitrator, originally named by them, ceased to be available for one or another of the reasons mentioned in the section or, to put it in the language of the section itself, whether the agreement doesnot show that it was intended that the vacancy should not be supplied.
19. I do not find any indication in the agreement in the present case of any intention that a vacancy arising in the office of the arbitrator should be supplied by the appointment of another person. It should be remembered, however, that under the provisions of the agreement, no vacancy would arise, simply because the particular Major General who was holding the office at the time of the contract ceased to hold that office, if he was succeeded by a successor who was also a Major General. So long as the Major General was succeeded by a Major General in the particular office and so long as the course of such succession was not broken by the introduction of an Officer holding a different rank, 110 vacancy in the office of the arbitrator would arise at all. A vacancy would arise only when the Officer in charge of the Administration, Eastern Command, was no longer a person, holding the rank of a Major General.
Does the agreement contain any indication that even in such an event, the agreement would continue to subsist and that the office of arbitrator could be filled by the appointment of either the successor of the Major General or any other Officer. I can find no sucli indication. Originally, when an arbitrator is chosen by name and some reference is made to his office, it is usual to find a provision to the effect that in the event of the particular arbitrator dying or ceasing to hold the particular office, another arbitrator would be appointed. It the arbitration agreement in the present case contained a provision to the effect that in the event of the office ceasing to be held by a Major General, the parties would choose another arbitrator, it might be said that there was an intention that a vacancy occurring in the office would be supplied. As the agreement stands, however, there is only a single provision of an absolute character with no indication or suggestion of any alternative, either express or implied. I am, therefore, of opinion that the present agreement is one which does show that it was intended that the vacancy, if any occurred, should not be supplied.
20. But assuming that I am wrong in that construction of the arbitration clause and that the agreement does contain an indication that the parties intended vacancies in the office to be supplied, the provisions of Section 8(1) of the Act seem to me to be still inapplicable to the case. It is now well settled that the Court has no inherent or absolute power to appoint arbitrators and that its powers are only those which are expressly specified in the Act. (See the case of -- 'In re Smith and Service and Nelson and Sons', (1890) 25 QBD 545 (B)). On a reference to the opening words of Clause (b) of Section 8(1), it will be found that the section contemplates a number of contingencies, none of which is present in the instant case. The first contingency is: 'If any appointed arbitrator neglects or refuses to act.' No Major General in charge of the Administration, Eastern Command, has neglected or refused to act in the present case, The next contingency is: 'or is incapable of acting.' No appointed arbitrator, that is to say, no MajorGeneral in charge of the Administration, Eastern Command, has become incapable of acting, while still holding the post. There is no such Major General holding such post now at all.
The third alternative is: 'or dies'. Happily, no Major General in charge of administration, Eastern Command, das died. These three contingencies exhaust the list contained in Clause (b) of Section 8(1) and since the present case does not come under any of them, it is clear that the section is not applicable, although the arbitration agreement may not exclude an intention to fill up a vacancy, if one should arise. Mr. Kar was not slow to see the difficulty in his way and was constrained to contend that the present case must be taken to be a case of a death of the appointed arbitrator. His submission was that the last Major General who was in charge of the Administration, Eastern Command, must be taken to have suffered a figurative death when he relinquished the office and therefore, since he was not succeeded by a Major General, a vacancy had arisen which the Court might step in to fill under the provisions of Section 8(1)(b) and under the authority of the phrase 'or dies'. To my mind, the suggestion made by Mr. Kar is plainly a fanciful one and should not be accepted.
21. The unreported decision of Sinha, J., was cited by the respondent in support of its case on this point as well. After holding that the Eastern Command had not, in fact, been abolished and therefore the post of 'Major General in Charge, Administration, Eastern Command', was still subsisting, Sinha, J., proceeded to say that even if he held that a vacancy had arisen, he would have held that the vacancy could be supplied. 'If therefore,' observed the learned Judge, 'there is no arbitrator available, the Court, I think, is entitled to appoint an arbitrator under Section 8, Arbitration Act.' With great respect to the learned Judge, I am unable to agree with him for the reason which I have already given.
22. Assuming further that not only am I wrong in my construction of the arbitration clause, but I am also wrong in my construction of Section 8(1)(b) in its application to the present case, I would still not be prepared to uphold the order for stay in view of the circumstances of the case. At best, the power of the Court under Section 8(1)(b) is only discretionary. It used to be thought at one time that the decision in -- 'In re Eyre and Leicester Corporation', (1892) 1 QB 136 (C), had laid down that the word 'may' in the corresponding section of the English Act meant 'must', but the true effect of the decision has since been explained in the subsequent case of -- 'In re Bjornstad Ouse Ship Building Co., Ltd.', (1924) 2 KB 673 (D). There it has been held, what in fact the section itself says in plain terms, that in the matter of making an appointment in a vacancy created by the failure of the parties to appoint an arbitrator, the Court has always a discretion.
Will it be right in the present case to order a stay of the suit in the expectation that the parties may, by exchanging nominations between themselves, yet appoint an agreed arbitrator or that in default of their doing so, the Court may appointone? I am not prepared to say that it will be right to adopt that course. The correspondence which has been exhibited in the case makes it plain beyond doubt that there is no chance whatever of the parties coming to any kind of agreement. What remains therefore is the uncertain prospect of the Court making an appointment at some date or other. I do not think that in view of the nature of the arbitration clause and the situation which has arisen, it will be right to prevent the Court from exercising its normal jurisdiction and consign the dispute to the decision of an arbitrator who may or may not be appointed and, if appointed, may not be appointed within a reasonable time.
On behalf of the respondent, our attention was drawn to a decision of S. R. Das, J., when a Judge of this Court, given in case of -- 'Subal Chandra v. Khan Bahadur Md. Ibrahim', AIR 1943 Cal 4S4 (E). The case was cited by Mr. Kar as if it supported him. In fact, however, the opinion expressed by that very eminent Judge points to an opposite direction. Section 8 of the Act did not apply in the case before him, because there was no agreement to refer disputes to a single arbitrator 'simpliciter', but only an agreement for a reference to a single arbitrator with an alternative for a reference to two. Section 8 being thus out of the way, the learned Judge still applied his mind to the question as to whether the fact that an arbitration might prove infructuous should influence his decision against directing a stay. The difficulty in that case was that, according to the arbitration agreement, if the parties could not agree to the appointment of a single arbitrator, there would be two arbitrators, one to be appointed by each party to the difference. The parties were partners of a firm who were three in number and, quite obviously, the arbitration agreement provided for the choice of two arbitrators by three parties, each choosing one. The agreement was thus plainly unworkable or would almost certainly prove to be so, unless two of the partners combined to nominate the same arbitrator. S. R. Das, J., recalled that the possibility of the arbitration proving infructuous had not prevented the Bombay High Court from directing a stay in the case of -- 'In re Babaldas Khemchand', AIR 1921 Bom 185 (F) but he considered it necessary to say that such a possibility should not be altogether overlooked in determining whether there was any sufficient reason why the matters in dispute should not be referred to arbitration. The inclination of his opinion is therefore obvious. Earlier in the judgment, his Lordship observed that he had doubts whether, in such circumstances and in the exercise of his discretion, he should stay the suit and drive the parties to an arbitration which would inevitably be infructuous. The case, therefore, is a strong authority for holding that where an arbitration is beset with difficulties and might never be possible, the Court should incline in favour of allowing the suit to continue and against staying it.
23. In all the circumstances of the case, it appears to me that the present case is not one where an order under Section 34 can be made or, in any event, the case is not one where the Court ought,in the right exercise of its discretion under Section 34, direct the suit to be stayed.
24. In the result, this appeal is allowed, the order of the learned Judge directing stay of the suit is set aside and parties are directed to proceed with the suit. In view of the difficulty and the comparative novelty of the point, there will be no order for costs, either before us or in the Court below.
25. I agree.