M/S. S.B.P. & CO. versus M/S. PATEL ENGINEERING LTD. & ANR.

Citation: [2009] 15 S.C.R. 340 · Decided: 21-10-2009 · Supreme Court of India · Bench: G.S. SINGHVI · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

[2009] 15 (ADDL.) S.C.R. 340 
A 
MIS. S.B.P. & CO. 
~ 
v. 
MIS. PATEL ENGINEERING LTD. & ANR. 
(Civil Appeal No. 4168 of 2003 etc.) 
J. 
B 
OCTOBER 21, 2009 
[G.S. SINGHVI AND DR. B.S. CHAUHAN, JJ.] 
~-
Arbitration and Conciliation Act, 1996 -
s. 15(2) -
Appointment of arbitrators by the respective parties to the 
c dispute - Arbitrator appointed by one party refusing to act as 
such - Party appointing substitute arbitrator in his place u/ 
s. 15(2) - Other party denying applicability of s. 15(2) and 
claiming the case to be qecided by sole arbitrator -
~
Designate Judge appointing third arbitrator- On appeal, held,: 
f ~ 
D Designated Judge was not correct in appointing third arbitrator 
- Appointment of the substitute arbitrator was not in 
accordance with law -
s. 15(2) is not applicable as the 
arbitrator 'refused' to act as arbitrator and had not 'withdrawn' 
from the office of arbitrator - The arbitrator appointed by one 
E of the parties, is entitled to act as sole arbitrator. 
Words and Phrases: 
~ ~ 
'Rules' - Meaning of 
F 
'Refuse' and 'Withdraw' - Meaning of and distinction 
between. 
State Government awarded a contract to respondent 
No. 1 in respect of a project. Respondent No. 1 sub-
G 
contracted a portion of that work to the appellant. The 
parties entered into sub-contract agreement and piece 
~ 
work agreement. 
After dispute between the parties to the main 
contract, in arbitration proceedings, State Government 
H 
340 
M/S. S.B.P. & CO. v. MIS. PATEL ENGINEERING 
341 
LTD. & ANR. 
was directed to pay an amount to respondent No. 1 and 
A 
-
f 
the same was paid by the Government. 
Appellant demanded respondent No. 1, to pay the 
amount allegedly due to them, but the same was not 
complied with by respondent No.1. Appellants invoked 8 
arbitration clause and appointed respondent No. 2 as an 
arbitrator on their behalf. Respondent No. 1 appointed 'H' 
as an arbitrator on its behalf. 'H' denied to arbitrate in the 
matter. Thereafter respondent No. 1 appointed another 
-I' 
person 'J' as an arbitrator and informed respondent No. 
2 that a substitute arbitrator in place of 'H' was appointed c 
in terms of s. 15(2) of Arbitration and Conciliation Act, 
1996. Appellant informed respondent No. 1 that 
appointment of substitute arbitrator was contrary to the 
terms of sub-contract agreement and piece work 
D 
agreement. 'J' sent letter to respondent No. 2 suggesting 
~ 
names, for appointment of Presiding (third) Arbitrator. 
Respondent No. 2 claimed that s. 15(2) having no 
application to the case, he was entitled to work as sole 
arbitrator. 
E 
Respondent No. 1 filed application uls. 11 of the Act 
for appointment of third arbitrator. High Court appointed 
the third arbitrator. Writ petitions were filed challenging 
. 
..,_ 
the order of Designate Judge. Division Bench of High 
Court, relying on Constitution Bench Judgment in Konkan 
F 
-
Railway case, held that writ petitions challenging order of 
Designate Judge were not maintainable, the order being 
administrative in nature. Hence the present appeals. 
The appeals were referred to Seven Judges Bench 
G 
of this Court for reconsidering the Constitution Bench 
judgment in Konkan Railway case. Seven Judges Bench, 
by majority, overruled the judgment in Konkar Railway 
case, holding that the power exercised by the Chief 
Justice of High Court or the Chief Justice of India u/s. 
11 (6) is a judicial power and is not administrative in H 
342 
SUPREME COURT REPORTS [2009] 15 (ADDL.) S.C.R. 
A 
nature; and that such order can be challenged onl.y 
under Article 136 of the Constitution of India. 
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The question for consideration in the present 
appeals, after the judgment of Seven Judges Bench was, 
B whether the orders by Designate Judge appointing third 
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Arbitrator was legally correct. 
~llowing the appeals, the Court 
HELD: 1. The legislature has repeatedly laid 
'I-
c emphasis on the necessity of adherence to the terms of 
agreement between the parties in the matter of 
appointment of arbitrators and procedure· to be followed 
for such appointment. Even Section 15(2) of Arbitration 
and Conciliation Act, 1996, which regulates appointment 
of a substitute arbitrator, requires that such an 
.. 
0 
appointment she1ll be made according to the rules which 
+... 
were applicable to the appointment of an original 
arbitrator. The term 'rules' used in this sub-section is not 
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confined to statutory rules or the rules framed by the 
E competent authority 

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