Mohinder Pal Mohindra vs Delhi Administration And Anr.
1988 Latest Caselaw 44 Del

JUDGMENT

P.K. Bahri, J.

(1) These two petitions are being disposed of by this order. Facts, in brief, are that a contract was entered into between Delhi Administration and Mohinder Pal by virtue of the which the work for increasing the capacity of Nazafgarh Drain was awarded to Mohinder Pal. There arose certain disputes with regard to the said contract and Mohinder Pal invoked Clause 25 of the Agreement which provided for reference of disputes to the arbitrator to be nominated by Chief Engineer concered. Admittedly the Chief Engineer had nominated Shri Kishan Chand then Director (TE), , Water Commission, R.K. Puarm, New Delhi as sole arbitrator. It it an admitted fact that Shri Kishan Chand had reached the age of superannuation on April 30, 1986 but he continued to conduct the arbitration proceedings even after retirement and it is also not disputed that both the parties had given a consent in writing to the said arbitrator extending the period for making the award from time to time. However, later on the Government had refused to agree to the extension of time and thus the contractor Mohinder Pal filed the petition which is O.M.P. 23 of 1987 under Section 28 of the Arbitrator Act seeking that Court may extend the period for making the award as almost the arbitration proceedings are at a concluding-stage. It may be mentioned here that it is only on December 7, 1986 that the Chief Engineer concerned had required the arbitrator not to proceed with the arbitration case as he had since retired and he wanted the arbitrator to return all the papers including the arbitra.tion proceedings to the Chief Engineer to enable him to nominate another arbitrator.

(2) The Delhi Administration has filed the petition O.M P. No. 9 of 1988 seeking the leave of this Court to revoke the authority of the said arbitrator on the sole ground that he is seized to be arbitrator on his vacating his office on reaching the age of superannuation.

(3) The short question which arises for decision in the present petitions is whether this Court should revoke the authority of the arbitrator and appoint a new arbitrator for continuing the arbitration proceedings. Clause 25 of the contract between the parties as re-produced in Para4 of O.M.P. No. 9 of 1988, as is relevant to controversy in question is to the following effect. "THE Arbitrator to whom the matter is originally referred being transferred or vacate 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 of office or inability to act, shall appoint another person to act as Arbitrator, in accordance with the terms of the Contract".

Reference is also made to Section 36, Paras 6 and 10 of C.P.W.D. Manual Volume Ii which contemplates that if the arbitrator to whom the matter is originally referred for arbitration is transferred or vacates his office due to death or retirement or due to any other reason or is unable to act as an arbitrator for any reason, another arbitrator may be appointed to proceed with the case from the stage at which it was left by his predecessor. The counsel for Delhi Administration has vehemently argued that in view of the aforesaid provisions of the contract as well as of the C.P.W.D. Manual, Shri Kishan Chand on reaching the age of superannuation has seized to be arbitrator and thus the Chief Engineer is competent now to appoint another arbitrator in his place and that arbitrator has to continue the proceedings from the stage it has been left by the previous arbitrator.

(4) The learned counsel for the contractor, however, has urged that the authority of the arbitrator to continue with the proceedings in the arbitration does not terminate on his mere retirement and thus Shri Kishan Chand is entitled to continue arbitration proceedings and in the alternative he has argued that even if it is held that on the retirement from office Shri Kishan Chand was to seize to act as arbitrator still as the opposite party had continued to participate in the arbitration proceedings without any objection and had also joined the Contractor in the written consent to the arbitrator extending the period for making of the award even after the retirement of Shri Kishan Chand from office would amount to both parties agreeing to the continuation of the same arbitrator to deal with the arbitration matter. He has argued that the Delhi Administration is now estopped from raising any objection to the continuation of the said arbitrator. At any rate, the right if any of the Chief Engineer to nominate a new arbitrator stands waived under the circumstances.

(5) The counsel for the petitioner has cited Waverly Jute Mills Co. Ltd. v. Raymon & Co., in support of his contention that if there is want of initial jurisdiction in arbitrator, the defect cannot be cured by appearance of the parties in the proceedings. I have gone through this judgment and find that in the cited case the arbitration agreement was illegal and thus it was held that mere participation before the arbitrator would not mean conferring any jurisdiction on the arbitrator. In the present case the arbitration agreement between the parties is not challenged. The same is legal and is continuing to be valid as it is the case of the Delhi Administration that Chief Engineer is now proposing to appoint a new arbitrator under the said agreement itself. So, there was no lack of jurisdiction in the named arbitrator to deal with the arbitration proceedings. There is no legal bar also in Chief Engineer agreeing to the continuation of the arbitration proceedings of the same arbitrator even though the said arbitrator has seized to remain arbitrator on his retirement. Then he has made reference to Hiralal Pannalal. v. Dalhousie Jute Co. Ltd. . This judgment has also laid down the same principle of law that if the contract containing the arbitration clause is illegal then the mere fact that parties have participated in arbitration proceedings would not make the arbitration agreement valid. There is no dispute about this proposition of law which is enunciated by the Supreme Court in the case of Waverly Jute Mills Co. Ltd. (supra). It is not the case set up before me that there is any illegality in the contract between the parties containing the arbitration clause. The counsel for the contractor has made reference to Union of India v. Manipur Builders' Association', A.I R. 1977 Gauhati 5. It was held that a reference may be invalid if there is some defect in the contract containing the arbitration clause or in the arbitration agreement itself. In such a case the defect cannot be cured by waiver. It was observed that where there is no such defect in the contract or in the arbitration clause but there is some irregularity in exercise of the jurisdiction, a party cannot be allowed to turn round and take an objection afterwards as to the jurisdiction of the arbitrator if he once submitted to the arbitration proceedings filed his claim and took part in the proceeding without any objection. It was held that if a party allowed an arbitrator to proceed with the reference without objecting to his jurisdiction or competence it would not be subsequently heard to say that the awards should be set aside on the ground that the arbitrator cannot decide the dispute in question. The learned Judge distinguished the said case of Waverly Jute Mills Co Ltd. (supra) and some other cases on the point mentioning that the arbitration agreements in the said cases were found to be illegal and that is why it was held that mere participation in the arbitration proceedings would not make the agreements valid which are void ab-initio. Counsel for the Contractor has also made reference to N. Chellappan v. Secretary, Kerala State Electricity Board, . In the said case it was found that although Schedule I, Rule 4 of the Arbitration Act authorises the Umpire, forthwith to enter upon the reference in lieu of the arbitrators if arbitrator failed to make the award within specified time. The parties had submitted to the jurisdiction of the Umpire although there was an order of the Court for extending the period for making the award by the arbitrators, it was held that the jurisdiction of the Umpire is not vitiated as the parties participated in the proceedings before the Umpire without any demur and thus are precluded from challenging the award for lack of jurisdiction of the Umpire. In National Research Development Corporation of India v. Britelile Carbons Lid, the facts were that on the basis of the arbitration clause the disputes were referred for arbitration of a Managing Director of the petitioner-company. The Managing Director continued with the arbitration proceedings even after his retirement. The question which arose for decision was whether the proceedings being done by the Managing Director after his retirement stood vitiated or not. A Single Bench of this Court held that it is well settled that if the parties to the reference either agreed before hand to the method of appointment or afterwards acquiesced in the appointment made with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. In the said case it was also held that even though the arbitrator had seized to be Managing Director, still the parties had agreed with the continuation of the proceedings and parties had also agreed in writing to extend the time for making the award and it was held that the parties had acquiesced and it is not open for any party to challenge the continuation of the proceedings by the said arbitrator. This judgment applies on all fours to the facts of the present case. The counsel for the Delhi Administration has made reference to Kishan Lal v. State of Haryana-, but this judgment was not followed on a particular point by this Court in the case of National Research Development Corporation (supra). At any rate, I have gone through the said judgment and find that it is of no help in deciding the controversy arising in the present case. I do not agree with the learned counsel for the Contractor with regard to the fact of the arbitrator retiring from the service. The word that the arbitrator would 349 seize to have jurisdiction over the arbitration matter on his vacating the office obviously means that on his vacating the official i.e.on his attaining the age of retirement or superannuation as far as his service is concerned. However in view of the fact that the arbitration agreement between the parties continued to be legal and valid, the Delhi Administration is now topped from challenging jurisdiction of Shri Kishan Chand to act as arbitrate in as much as Delhi Administration had participated in the arbitration proceedings without demur and had also given consent in writing extending the period for making the award by the said arbitrator even thought said arbitrator had retired from service much earlier There are a number of judgments on the point as to the implication of non-compliance with the prov'sions of Article 299 of the Constitution of India. They are State of Bihar v. Km am Chund & Bros Ltd., A I R. 1962 S C.11 Union of India v. B.M. Sen, Karamshi Jethabhai Somayya v. State of Bombay- Mon of India and ors. v. N.K. Private Ltd. & another . In all these judgments it is laid down that if constitutional or statutory provision are not complied with in executing the contract, the contacts are not valid but that is not the case here. I may refer to flu-State of Bihar v.R.B ojha Brothers, . In the said case of contract has completed by provisions of Article 299 of the Constitution of India was held to have come into existence and a particular arbitrator was nominated but later on by agreement a new arbitrate was substituted in his place The company raised an argument that as the new agreement did not comply with the provisions of Article 299 of the Constitution of India the said agreement is regal and void. Repelling this contention it was observed that from the definition of the arbitration agreement it is clear that arbitration agreement is not dependant on naming the arbitrator; an arbitrator may be named or may not be named. In a case where M arbitrator been named, by consent of the parties an arbitrator has to be nominated or in absence thereof, the Court has to appoint an arbitrator in accordance with the provisions of the Arbitration Act. From Sections 8(l)(b) 11, 12 and 20(4) of the Arbitration Act, it appears that under certain circumstances the parties by mutual consent may substitute an arbitrator failing which the court has power to appoint any arbitrator other one who had been appointed by the parties concerned earlier. If the substitution of one arbitrator for another arbitrator by consent of the parties was an integral part of the arbitration agreement, then Court could not have been invited with power to substitute a contract for a contract which had been originally entered into between the parties No doubt. by statutory intervention even some contracts, which have been entered into between the parties can be altered or modified, but that is not the situation under the Arbitration Act. Once it is established that parties had agreed to Substitute the originally named arbitrator by another then the document which is executed in pursuance thereof will amount only to carrying out the terms of the contract which was never substituted or altered within the meaning of Section 62 of the Contract Act.

(6) So in the present case for parity uf reasons the mere fact that the parties had acquiesced in the continuation of the said arbitrator does not mean .that such an agreement arrived at in writing between the parties that the same arbitrator should continue amounts to any contract which required to be executed in the manner contemplated by Article 299 of the Constitution of India. Hence, I hold that the authority of the said arbitrator cannot be revoked. There is no allegation of any mala fide against the arbitrator. The mere fact that the arbitrator is continuing with the arbitration proceeds although he is no longer in Government service would not mean that he has any vested interest in continuation with the arbitration proceedings . I dismiss 0.M P. 9 of 1988 while I allow O.M.P. 23 of 1987 and extend the period by four months for making the award.