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                          NON-REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.  9852-53  OF 2014 (Arising out of SLP(C) Nos.10158-59 of 2014)

M/s. Ashoka Tubewell & Engineering Corporation etc. etc. …...Appellant(s)

Versus

Union of India etc. etc. …..Respondent (s)

J U D G M E N T

ANIL R. DAVE, J.

1. Leave granted.

2. At the request of the learned counsel appearing for the parties, the appeals  

are  taken up for  hearing as only one legal  issue is  involved in  both the  

appeals.  

3. The  learned  counsel  appearing  for  the  appellant  has  submitted  that  the  

appellant is a contractor, who had entered into a contract with the respondent  

for certain construction works.  There were certain disputes and therefore, as  

per the agreement between the parties, the disputes had to be resolved by an  

Arbitrator.  The following clause was part of the agreement, which enabled

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the parties to refer the dispute to an Arbitrator:

“63.3(a)(iii).  It is a term of this contract that no person other   

than  a  Gazetted  Railway  Officer  should  act  as  an   

arbitrator/umpire and if for any reason, that is not possible,   

the matter is not to be referred to the arbitration at all.”  

4. As the respondent did not appoint an Arbitrator, an application under Section  

11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as  

‘the Act’)  had been filed  before  the  Chief  Justice  and ultimately  Justice  

Kalyanmoy Ganguly, a former High Court Judge had been appointed as a  

sole Arbitrator.

5. In  the  arbitration  proceedings,  the  objection  had  been  raised  by  the  

respondent with regard to validity of the appointment of an Arbitrator but  

the Arbitrator, after hearing the concerned parties held that his appointment  

was valid and thereafter he made an Award on 16th July, 2007.

6. The validity of the said Award had been challenged under Section 34 of the  

Act, but the Award had been upheld on 24th April, 2013.  The said order had  

been challenged by an appeal  before the Division Bench of  the Calcutta  

High Court and the High Court was pleased to set aside the Award on the  

ground that the Arbitrator had not been validly appointed, thus, the Award  

had been quashed and set aside by an order dated 24th December, 2013.

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7. The aforestated order has been challenged in these appeals.  

8. The learned counsel appearing for the appellant-contractor has raised only  

one submission to the effect that the Arbitrator had been appointed with the  

consent of both the parties.  He had referred to the order dated 27 th March,  

1988 whereby, under the provision of Section 11(6) of the Act, the Arbitrator  

had been appointed. The relevant portion of the said order reads as:

“Perused the order dated 19th February, 1998 of S.K. Sinha, J.  Both  

parties have agreed that Shri Kalyanmoy Ganguly, a retired Judge of  

this  Court  be appointed  as  the  sole  arbitrator  to  decide  all  claims,  

counter claims ……..”

9. It has been further submitted that after having given consent for appointment  

of a former High Court Judge as an Arbitrator, it would not be proper on the  

part of the respondent-Union of India to change its version and object to the  

said appointment.

10. It has been further submitted by him that the Award has been set aside only  

on the ground that the Arbitrator was not validly appointed.   

11. In the aforestated circumstances, the learned counsel has submitted that the  

impugned order passed by the High Court deserves to be quashed and set  

aside.

12. On the other hand, the learned counsel appearing for the Union of India has  

submitted that in view of clause 64.3(a)(iii) of the Arbitration Agreement,

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which pertains to arbitration clause, it is very clear that no person other than  

a Gazetted Railway Officer should be appointed as an arbitrator/umpire and  

if for any reason it is not possible to appoint such a person as an Arbitrator,  

the matter was not to be referred to an Arbitrator at all.  

13. It has been submitted by him that as a Gazetted Railway Officer had not  

been appointed as an Arbitrator, the only option available to the parties was  

to file a civil suit because as per the aforestated clause, dispute was not to be  

referred to an Arbitrator.

14. For the aforestated reasons, it has been submitted  by the learned counsel  

appearing for the respondent-Union of India that the Arbitrator had not been  

validly appointed and therefore, the Award made by him was not legal. He  

has,  therefore,  supported  the  order  passed  by  the  High  Court  and  has  

submitted that the appeals should be dismissed.

15. Upon hearing the learned counsel and upon perusal of the arbitration clause  

as  well  as  the  order  dated  27th March,  1998  passed  by  the  High  Court  

appointing a former Judge of Calcutta High Court as an Arbitrator, we are of  

the view that the High Court was not right in quashing and setting aside the  

Award on the ground that the Arbitrator had not been validly appointed.

16. It is true that as per the arbitration clause incorporated in the agreement, only  

a  Gazetted  Railway  Officer  could  have  been  appointed  as  an

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arbitrator/umpire and if such an officer was not appointed as an Arbitrator,  

the only option available to the parties was to approach a civil court by way  

of a suit.

17. It is pertinent to note in the instant case that when the Chief Justice of the  

High Court had appointed an Arbitrator under the provision of Section 11(6)  

of the Act on 27th March, 1988, both the parties i.e. the appellant-contractor  

as well as the respondent had agreed to appointment of Justice Kalyanmoy  

Ganguly, a former Judge of the Calcutta High Court, as an Arbitrator.

18. Once the respondent had given consent for appointment of a former Judge of  

the Calcutta High Court as an Arbitrator, one can presume that there was a  

new  contract  by  way  of  novatio, whereby  the  parties  had  agreed  to  

appointment of someone else – other than a Gazetted Railway Officer as an  

Arbitrator.

19. It  is  not  in  dispute  at  all  that  the  respondent  had  given  consent  for  

appointment of a former High Court Judge as an Arbitrator.  The said order  

dated  27th March,  1998  appointing  a  former  High  Court  Judge  as  an  

Arbitrator  had not  been challenged by the  respondent  and therefore,  the  

respondent  could  not  have  challenged  the  validity  of  the  Award  on  the  

ground that the Arbitrator was not validly appointed.

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20. In our opinion, after having given consent at the time when a former High  

Court Judge was being appointed as an Arbitrator, the respondent could not  

have challenged the validity of the Award on the ground that the Arbitrator  

was not validly appointed.

21. Except  appointment  of  an  Arbitrator,  no  other  issue  is  involved  in  the  

appeals and no other argument has been advanced.  In the circumstances, we  

quash and set aside the impugned order passed by the High Court and hold  

that the Award made by the Arbitrator is just, legal and proper.  

22. The appeals are, therefore, disposed of as allowed, but with no order as to  

costs.

….....................................J.          (ANIL R. DAVE)

…....................................J.          (UDAY UMESH LALIT)

NEW DELHI, SEPTEMBER 22, 2014.