Union Of India & Ors vs M/S Talson Builders

Union of India & Ors. ...Appellants.

Versus

M/s. Talson Builders ...Respondent

ORDER

1. Delay of 264 days in filing the special leave

petition is condoned.

2. Leave granted.

3. This appeal is directed against the judgment

and final order dated 24th of February, 2006 passed

by the High Court of Judicature at Allahabad in

Original Arbitration Petition No.117 of 2003

whereby the Chief Justice of the High Court had

appointed a retired Judge of the Allahabad High

Court as Arbitrator to decide the dispute raised by

the parties. The order passed by the High Court

runs as under:

2

"For the purpose of acting as Arbitrator in this matter, Hon'ble R.K.Gulati of 11, Taskhand Marg, Allahabad, a retired Judge of this Hon'ble Court is hereby nominated and appointed."

4. It is not in dispute that the respondents filed

an application for appointment of an Arbitrator

under Section 11(6) of the Arbitration and

Conciliation Act, 1996. The respondent was granted

certain contracts for Military Engineering service

out of which, we are only concerned relating to CA

NO.CWE/KAN/22 of 1996-97. After completion of

contract work, the respondent submitted its final

bill wherein it was specifically certified that the final

bill included all claims raised by it from time to time

irrespective of the fact whether they were admitted

by the department or not and that there were no

more claims in respect of the contract and the

amount so claimed must be held to be full and final

settlement of the claim of the respondent under the 3

contract agreement. According to the appellants,

the respondent submitted its final bill and received

full payment without any protest. However, on 14th

of August, 2000, the respondent sent a letter to the

appellants for appointment of an Arbitrator which

was not agreed to by them with the observation that

the final bill in respect of the subject work had been

signed and the amount had already been paid in

full and final settlement and therefore, there was no

dispute to be referred to the Arbitrator as prayed for

by the respondent. By the aforesaid order and

without going into the question whether there was

any dispute pending between the parties, the High

Court, by the impugned order, appointed a retired

Judge of the High Court as an Arbitrator to decide

the dispute between the parties. Now, the question

is - when such objections were raised against the

appointment of an arbitrator on the ground that the

claim could not be referred to the Arbitrator

because of full and final settlement and the claim 4

stood liquidated, the High Court ought not to have

referred such dispute by appointing an Arbitrator

without deciding the objections so raised, or it

would be left open to the Arbitrator to go into this

question after the parties had entered appearance

before him. This question has already been decided

by a three-Judge Bench of this Court in Northern

Railway Administration, Ministry of Railway,

New Delhi vs. Patel Engineering Company Ltd.

dated 18th of August, 2008. This Court after giving

due consideration of the expression "due regard"

has observed in paragraph 13 as follows:

"In all these cases at hand the High Court does not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not a must, but while making the appointment the twin requirements of sub-section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. In the circumstances, 5

we set aside the appointment made in each case, remit the matters to the High Court to make fresh appointments keeping in view the parameters indicated above. "

5. In view of the aforesaid decision, we have no

other alternative but to set aside the order of the

High Court and request the High Court to go into

the dispute and then dispose of the application for

appointment of an Arbitrator under Section 11(6) of

the Act in accordance with law. It is expected that

the High Court shall decide the said application as

early as possible preferably within three months

from the date of supply of a copy of this order to it.

The impugned order is thus set side. The appeal is

allowed to the extent indicated above. There will be

no order as to costs.

...........................J. [Tarun Chatterjee]

New Delhi; ............................J. September 11, 2008. [Aftab Alam]