JUDGMENT R.C. Lahoti, J.
(1) This is an appeal directed against an order passed by a learned Single Judge of this Court disposing of an application under Sections 8(1)(b) and 20 of the Arbitration Act, 1940, and directing appointment of a retired learned Judge of this Court to act as an arbitrator and to adjudicate upon the disputes between the parties.
(2) The arbitration clause between the parties reads as under :-
"EXCEPT where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, Incharge of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the said Pwd Delhi at the time of such appointment. It will be no objection any such appointment that the arbitrator so appointed is a Government servant, that he had to deal with the matters to which the contract relates and that in the course of his duties as government servant he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or administrative head as aforesaid at the time of such transfer vacation office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such persons shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Chief Engineer or administrative head of the Public Witness .D. Delhi as aforesaid should act as arbitrator and if for any reason that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim in dispute is Rs.50,000.00 (Rupees Fifty thousand) and above, the arbitrator shall give reasons for the award.
SUBJECT as aforesaid the provisions of the Arbitration Act, 1940, or any statutory modification or re-enhancement thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceedings under this clause."
(3) The dispute was referred to the arbitration one Mr. Ravinder Lal. However, he failed to make an award within the time appointed. As there was a failure on the part of the arbitrator to enter upon and adjudicate upon the reference, the respondents filed the present application leading to the passing of the impugned order.
(4) It was submitted by the learned counsel for the appellant that the underlined passage in the arbitration clause is clearly suggestive of the intention of the parties not to supply vacancy in the event of an attempted arbitration failing, the order of the learned Single Judge appointing an arbitrator is without jurisdiction. This contention need not detain us any longer inasmuch as the same is squarely answered by a Full Bench of this Court in Ved Prakash Mittal v. The Union of India & Ors. - . This very arbitration clause had come up for consideration of their Lordships. It was held -
"IF the Chief Engineer does not appoint the arbitrator he must justify his refusal and support it with reasons. If the refusal is arbitrary the Court will correct the Chief Engineer and tell him where his duty lay. He is given the duty to appoint the arbitrator and not to destroy the clause. It is a misreading of the clause to say that if the Chief Engineer refuses to appoint the arbitrator the Court is powerless. Such a view as the Judges of the Division Bench took belittles the effectiveness of the provisions of Section 20(4) on the ground that it does not provide for a case as had arisen before the Division Bench and before us in this Full Bench. The legislature foresaw that such a case can arise and, therefore, Sections 20 provides that the Court shall follow this course. In the first place, the Court shall ask the person designated to appoint the arbitrator. Secondly, if he does not appoint, the Court shall appoint the arbitrator. Where the parties cannot agree upon an arbitrator the Court at once comes in and appoints the arbitrator. This is the course the Supreme Court followed in Prafulla Kumar's case . And this is the course we are inclined to follow in this case.
AS we have said above the Chief Engineer will certainly appoint an arbitrator when the Court directs him to do so, after listening to the objections of the Union of India, who resist the appointment on one ground or the other. The Chief Engineer must mention a reason for his refusal. If the Chief Engineer gives reasons that are quite satisfactory the Court may agree with him and refuse to appoint the arbitrator and in that case refuse to file the arbitration agreement. But reason he must give. There must be a good reason to act. And there must be a good reason not to act. The Chief Engineer must take a sane and a sound view. The party has the right to know the reason why he is not appointing the arbitrator. The Court will then rule upon his reason. If the reason is bad the Court will direct him to appoint the arbitrator. This is as simple as that. We have no doubt that he will obey the Court and discharge his duty under the clause."
(5) We are, therefore, clearly of the opinion that the part of the arbitration clause relied on by the learned counsel for the appellants does not take away the jurisdiction of the court to appoint an arbitrator in an appropriate case. However, the question arises whether the court should have straight away proceeded to make an appointment without looking into the fact whether any of the parties had called upon the Chief Engineer - the chosen appointer - to make an appointment on failure of Mr. Ravinder Lal to act as an arbitrator or to make an award. The Full Bench has clearly laid down that in the first place the court shall ask the person designated to appoint the arbitrator and if he does not appoint then the court shall appoint the arbitrator.
(6) In the case at hand, it is not the case of either party that the Chief Engineer was approached but he neglected or refused to appoint an arbitrator. The appointment straightway made by the court cannot be sustained in the light of the law laid down by the Full Bench.
(7) For the foregoing reasons, the appeal is partly allowed. The application filed by the respondents is held to be maintainable. However, the appointment of arbitrator as made by the learned Single Judge is set aside. Instead, the Chief Engineer Incharge of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the Pwd (DA) is directed to appoint an arbitrator consistently with the arbitration clause within a period of six weeks from today, failing which either party shall be at liberty to approach the court seeking appointment of an arbitrator.
(8) No order as to costs.