PETITIONER:
CHANDER BHAN HARBHAJAN LAL
Vs.
RESPONDENT:
STATE OF PUNJAB
DATE OF JUDGMENT22/02/1977
BENCH:
KAILASAM, P.S.
BEG, M. HAMEEDULLAH (CJ)
CITATION:
1977 AIR 1210 1977 SCR (3) 38
1977 SCC (2) 715
ACT
Arbitration Act, s. 8, whether applicable when arbitra-
tion agreement stipulates appointment of Settlement Commit-
tee by one of the parties--On unilateral abolition of Set-
tlement Committee. whether s. 8 applicable.
HEADNOTE
The parties entered into an agreement for the execution
of some construction work. An arbitration clause in the
agreement stipulated that if disputes arose, the matter
would be referred to a Settlement Committee to be appointed
by the State Government. A dispute arose, and a Settlement
Committee was duly constituted, but was unilaterally abol-
ished by the respondent before it concluded its work,
Subsequently the respondent appointed another Settlement
Committee whose award was set aside by the Civil Court on
the ground that it was made even before the expiry of the
time given by the Committee to the appellant. The Commit-
tee thereafter ceased to exist, and the respondent applied
to the trial court for appointing an arbitrator u/s. 8(2) of
the Arbitration Act. The appellant opposed the same on two
grounds. Firstly that by unilaterally abolishing the first
Settlement Committee, the State Government had put an end to
the arbitration clause, and no other committee could be
appointed and secondly, that s. 8 was not applicable. The
appellants’ objections were rejected by the trial court, and
later by the High Court in revision.
In appeal before this Court, the respondent also argued
that s.8 would not apply when one party could appoint a
Settlement Committee without reference to the other party.
Dismissing the appeal, the Court,
HELD: (1) The wording of s. 8, that any party may serve
the other parties with a written notice to concur in the
appointment or appointments, or in supplying the vacancy,
will include not serving other parties in cases in which the
service on the other party is not contemplated. The section
cannot be read as not being applicable where the agreement
provides or the nomination of the Committee by one of the
parties, for the section itself says that the party may
serve the other parties. [41F-G]
(2) The Government could have appointed a Committee by
itself without coming to court. There is no indication in
the clause that when once the Committee was unilaterally
dissolved no new Committee could be formed. When the second
Committee ceased to function, it became "incapable of act-
ing" and, therefore,’ it was within the competency of the
Court to proceed to appoint a new Committee. [41E, F]
JUDGMENT
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2070/68.
Appeal by Special Leave from the Judgment and Order dated
16-2-1968 of the Punjab & Haryana High Court in Civil Revi-
sion Case No. 107/66 and
Civil Appeal No. 1784/69.
Appeal by Special Leave from the. Judgment and Order
dated 25-11-2968 of the Punjab & Haryana High Court in Civil
Revision No. 2.39 of 1967.
G.L. Sanghi and K. J. John for the Appellants.
S.N. Anand and R.N. Sachthey for the Respondents.
39
The Judgment of the Court was delivered by
KAILASAM, J.--Civil Appeal No. 2070 of 1963 is by spe-
cial leave by the appellants against the judgment of the
Punjab and Haryana High Court dismissing the appellant’s
petition for revising an order passed by the Subordinate
Judge, Ambala City, allowing an application by the State,
respondent, and appointing the Arbitration Committee. The
appellants entered into an agreement with the’. Public Works
Department, Punjab State, for execution of certain construc-
tion works in August, 1952. They entered into an agreement,
Ex. A-I. The agreement provided an arbitration clause in
the following terms :--
"In the matter of dispute, the case shall be
referred to the Settlement Committee consist-
ing of a Superintending Engineer, an officer
of the. Finance Department of the rank of at
least Deputy Secretary and an Accounts Offi-
cer, all to
be nominated by the Government for arbitration
whose decision will be final."
Disputes arose between the parties and the State of Punjab
appointed a Settlement Committee by notification dated 31st
January, 1958. The Settlement Committee, entered upon the
arbitration but before the Arbitration Committee concluded
its work the State Government unilaterally abolished the
Committee by an order dated 27th March, 1962. Subsequent-
ly by a notification dated 18th May, 1962, the State Gov-
ernment constituted a Committee giving the names of three
officers with headquarters at Nangal. The new Committee
took up the dispute as well as a claim made by the Govern-
ment and issued notice to the parties. The new Settlement
Committee passed an award on 25th July, 1962. The appel-
lants challenged the validity of the award in the Civil
Court. The Civil Court set aside the second Settlement
Committee’s award on the ground that it was made by the
Committee even before the expiry of the time given by it to
the appellants. There after, the second Settlement Commit-
tee also ceased to function.
The State Government gave notice to the appellant under
section 8(1) of the Arbitration Act to. concur in the,
appointment of a fresh Settlement Committee to arbitrate the
matter between the parties. The appellants did not respond
to the notice. The State Government made an application to
the trial court for appointment of an arbitrator under
section 3(2) of the Arbitration Act. The appellants
raised two objections, namely that section 8 was not ap-
plicable to the case and that by abolition of the first
Settlement Committee the State Government had put an end to
the arbitration clause agreed to between the parties by the
agreement at Ex. A-1. The learned JUdge rejected both the
grounds and held that after the State Government withdrew
the personnel of the first Settlement Committee they became
incapable of acting and therefore the court Was entitled to
act under section 8(1)(b) of the Act. On the second point
it held that the terms of the arbitration clause in the
agreement Ex. A-1 did not justify reading into it the condi-
tion that the intention of the parties was that the vacan-
cies in the Settlement Committee for arbitration were not to
be filled.
4--240SCI/77
40
In the Revision Application before the High Court the
appellants in effect raised the same contentions though in a
slightly different form. The High Court agreed with the
view of the trial Judge that when once the Government abol-
ished the first Settlement Committee it became incapable of
acting and section 8(1)(b) became applicable. It also agreed
with the trial court and found that there was nothing in the
terms of the arbitration clause in Ex. A-1 to justify the
contention that when once a Settlement Committee was ap-
pointed the power under the clause is exhausted. The
High Court held that the trial court was justified in
proceeding under sub-section (1) of section 8 in .asking the
appellant to give the names for consideration of the court
for the reconstitution of the Committee and as the appel-
lants did not give the names the trial court was Justified
in accepting the names given by the State Government.
In the appeal before us the same conten-
tions were raised. It was submitted that
when one of the parties to the arbitration
agreement unilaterally disabled the Settlement
Committee from functioning the court will not
assist that party by holding that the Commit-
tee became incapable of acting. It was
contended that the provisions of section 8 of
the Arbitration Act will not be applicable
when one of the parties could appoint a Set-
tlement Committee by itself without reference
to the other party. The learned counsel for
the appellant also contended that when the
first Settlement Committee ceased to exist
by the government unilaterally putting an end
to it, the arbitration clause worked itself
out and no other committee could be appointed
The relevant clause in the agreement though
given earlier is again
"In the matter of dispute, the case shall be
referred to the Settlement Committee consist-
ing of a Superintending Engineer, an officer
of the Finance Department of the rank of at
least Deputy Secretary and an Accounts offi-
cer, all to be nominated by the Government for
arbitration whose decision will be final."
The clause is an amendment to the original condition No. 5.
The clause further provided that the agreement is supplemen-
tal to the original agreement and save as varied as herein-
before provided the said agreement and all the terms and
conditions thereof shall continue to be binding and in full
force and effect. The submission of the learned counsel
for the appellant is that the clause referred only to the
matter already in dispute and to a settlement committee
which had been already appointed. Reliance was placed on
the words underlined in the clause "In the matter of dis-
pute", and "referred to the Settlement Committee". This
plea cannot be accepted for in the later part of the condi-
tion it is made clear by the words "all to be nominated by
the Government for arbitration whose decision will b final."
"To be nominated" contemplates a future appointment. But we
do not think that this makes any difference for there could
be no doubt mat the condition enables the Government to
appoint three persons holding the ranks specified in the
condition as the Settlement
41
Committee. There is no indication at all that when once
the Committee was dissolved no new committee could be ap-
pointed. In fact it has to be noted that after the first
Settlement Committee was dissolved by the unilateral act of
the Government a second Committee came into existence and
gave an award which was set aside by the Civil Court. After
the award was set aside the second Committee also ceased to
function. There is no material on record to show that the
appellants objected to the constitution of the second
Committee on the ground that the condition did not provide
for the appointment of a second Settlement Committee. There
is no reason alleged as to why the second Settlement Com-
mittee ceased to function. If the second Committee was
also not terminated by the action of the Government the
contention of the appellants that a unilateral act would put
the case outside the purview of section 8 of the Arbitration
Act would not be available.
On a careful reading of the condition relating to arbi-
tration, we agree with the High Court as well as the trial
court that there is no bar to the Government appointing a
fresh Committee for going into the dispute consisting of
three officers as stipulated in the condition. As the
appellant would not reply to the letter of the Government
seeking to nominate a Settlement Committee the Government
moved the court for appointment of the Committee. The
trial court gave an option to the appellant to furnish
names but as he did not furnish the names trial court ac-
cepted the names suggested by the Government. On our
finding that the Government was entitled to appoint a Com-
mittee under the new agreement the Government could have
very well appointed a committee by itself without coming to
court. But may be by way of abundant caution the Government
came to court and the court has appointed a committee as
suggested by the State. We are equally clear that under
section 8, the Court is entitled to act and appoint a com-
mittee. As already found by us when the second Settlement
Committee ceased to function the Committee became "incapa-
ble of acting" and therefore it was within the competency of
the court to proceed to appoint a new committee. Equally
untenable is the contention that section 8 is not applicable
to cases where the condition stipulates the appointment of
a Settlement Committee by one of the parties. This submis-
sion was made relying on the wording of the section that any
party may serve the other parties or the arbitrators, as the
case may be, with a written notice to concur in the appoint-
ment or appointments or in supplying the vacancy. This
part of the section no doubt contemplates two parties but
the section cannot be read as not being applicable where the
agreement provides for the nomination of the committee by
one of the parties for the section itself says that the
party may serve the other parties "May serve the other
parties" will include not serving other parties in cases in
which the service on the other party is not contemplated.
In the circumstances we are satisfied that the order of
the High Court is proper and cannot be interfered with.
The appeal is dismissed. The parties will bear their own
costs.
42
Civil Appeal No. 1734 of 1969
This appeal is similar to the one which we have just now
disposed of i.e.C.A.No. 2070 of 1968. The High Court also
dismissed the petition under appeal on the ground that the
facts of the case are similar to the one in Civil Revision
Petition No. 107 of 1966 out of which C.A. No. 2070 of 1968
arose and dismissed the petition on the same grounds. In
this appeal before, us the learned counsel for the appellant
adopted the arguments advanced by the counsel in C.A. No.
2070 of 1968 and did not wish to add anything further.
For the reasons stated in C.A.No. 2070 of 1968 we dismiss
this appeal also. No order as to costs.
P.H.P. Appeals
dismissed.
43