Malanpur Steel Ltd. vs Dodsal Ltd.
2002 Latest Caselaw 1692 Del

JUDGMENT

Khan, J.

1. Petitioner is challenging order dated 5.4.2002 passed by the designated authority in AA No. 141/2001 appointing third Arbitrator in the matter.

2. Petitioner and R-2 entered into an agreement/contract containing the Arbitration clause on 25.5.1989. Disputes arose between them which were referred to two Arbitrators under the Old Arbitration Act, 1940. The Arbitrators failed to come out with an award and later appointed Justice R.N. Sahai (Rtd.) as umpire subject to his consent. Meanwhile, one of the Arbitrators, Dr. Gupta, nominated by R-2 resigned and was replaced by Justice G.C. Jain who on his death was succeeded by Justice P.N. Bhagwati (Retd.). The two arbitrators met on 15.2.1999 and appointed Justice R.N. Mishra (Retd.) as the umpire. While this remained in limbo, parties grappled on the issue of applicability of the old and new Arbitration Acts. Petitioner offered to go by the New Act by his communication dated 23.1.2000 to which R-2 failed to convey his response by the agreed time frame (8.3.2000) but which he ultimately did on 12.9.2000. Petitioner says he backed out of his offer on this. He, however, addressed communication on 17.4.2001 to the two Arbitrations informing that they could not decide the matter/issue in the absence of third arbitrator. The two arbitrators then explored the appointment of a third Arbitrator on 15.5.2001 and expressed their inability to do so and required parties to seek his appointment by filing an application under Section 11(4) of the New Act. Pursuant thereto R-2 filed requisite application culminating in appointment of Justice Dr. A.S. Anand (Retd.) as third Arbitrator.

3. Petitioner is assailing this appointment primarily on two grounds (1) that new appointment had terminated the mandate of Justice Mishra replacing him in the process which could not be done under Old Act of New Act (2) the designated authority had proceeded on the wrong premise that Justice Mishra's appointment as umpire had not taken effect in the absence of his consent. L/C for petitioner, Mr. Sharma submitted that impugned order was not sustainable on both counts because no consent of umpire/third arbitrator was required to validate his appointment under either Act and that the order passed by the designated authority was contrary to the law laid down by Supreme Court in K.D. Kaparia v. Indian Engineering Co. . He also urged that the authority was incompetent to replace the already appointed umpire by the new Arbitrator in exercise of arbitration powers under Section 11(4) of the New Act.

4. There is no dispute with the proposition that where an unconditional appointment of umpire was made it was valid even without obtaining consent of that umpire as so held by the Supreme Court judgment (supra) in the factual matrix of that case. But that would not be applicable to the present case which is distinguishable on the factual front. Here, there is nothing on record to show whether Justice Mishra even knew about his appointment, least of all acting upon it in some way. His appointment/nomination was not conveyed to him. This is evident from petitioner's own conduct informing the two Arbitrators that they could not decide any matter or issue in the absence of the third arbitrator by communication dated 17.4.2001. It was in this context that these arbitrators had expressed their inability to appoint the third arbitrator and had asked the parties to seek his appointment under Section 11(4)of the New Act. All this shows that nomination/appointment of Justice Mishra on 15.2.1999 had remained on paper only and had not taken effect at any stage. Therefore, even if it was assumed that the designated authority had proceeded on alleged wrong premise of Justice Mishra's absence of consent, the fact remained that his appointment as umpire had not fructified or crystallised at any stage to bar any further appointment of the third arbitrator. The question of terminating his mandate or replacing him in exercise of administrative power under Section 11(4) of the new Act did not arise.

5. We accordingly find nothing wrong in the orders passed by the designated authority appointing the third arbitrator. This petition accordingly fails on preliminary hearing and is dismissed.