LexNANDYAL CO-OP. SPINNING MILLS LTD .. versus K.V. MOHAN RAO
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A NANDYAL CO-OP. SPINNING MILLS LTD .. v. K.V. MOHAN RAO MARCH 5, 1993 B · [K. RAMASWAMY AND R.M. SAHAI, JJ.] . ArbitratiiJnAct, 1940 : · Section 8' Contract-Arbitration covenant~Agreement authorising a C · party to nominlue,Arbitratoi-Nomination of Arbitrator-Right of other paity . to. ·challenge .. nomination on the ground of bias-Held by the convenant of .arbitration in the agreement bias is not waived. Power of Cowt to appoint Arbitrator-Agreement providing appoint- ~ men/ of Arbitrator by a party-Notice by other party to appoint Arbitrator- D Authorised party not appointing ·Arbitrator within 15 days-Appointment of Arbitrator by Court held valirJ-Conditions for applicability of Section 8--Dis- E cussed. The respondent entered into a building-contract with the appellant- mill, Clause 65.1 of the. contract provided "except where otherwise provided in the contract all disputes or questions relating to ...... shall be referred to the s.ole Arbitration of the person appointed by the Ad- ministrative Head of owner. There will be no objection to any such ap- pointment that.the Arbitrator so appointed is the owner'.s representative, thai he had to deal with the matters to which the contract relates and that · · .·F in the ·course.of.his duties as owner's representative he had had expressed vie.ws on ~II or. any of.the' matters in dispute or differences". .C Differen.ces having arisen during the execution of the contract the respondeni gave notice twice requesting the appellant to nominate an ~bitraior wi!hin · 15 days iime but no action thereunder was taken except .replying 'that the matter was under consideration. Thereafter the respon- dent filed a petition under Section 8 of the Arbitration Act, 1940 in the Court to appoint an Arbftrator. In tlie'meantime, the appellant informed ·the i:,;sp9~dent that a. Superintending Engineer of B.H.E.L. Hyderabad · ··was appointed.as sole ·Arbitrator to which the respondent objected on the H ground of bias. The Civil Court appointed a retired Judge of th!o High 280 \ NANDYAL SPINNING MILLS v. K. V. MOHAN 281 '· Court as Arbitrator. The appellant's revision petition was dismissed by A the High Court. In appeal to this Court it was contended on behalf of the appellant that (1) by the covenant or arbitration in the agreement the respondent had waived bias; (2) under the terms of the contract the respondent was to abide by the appointment of Arbitrator by the Administrative Head of B the appellant and, therefore, the Civil Court lacked jurisdiction to appoint Arbitrator under Section S(a) of the Act. Dismissing the appeal, this Court, HELD: 1. The appointment of the Arbitrator by the trial court as upheld by the High Court is perfectly legal and valid. [290A] ·" ; 2. Under the contract all questions and disputes relating to the contract were to be referred to the sole arbitration of the person appointed c by the Administrative Head of the appellant. The right to suit available D under Section 9 of the Code of Civil Procedure has been contracted out. The waiver expressly engratled was only of the Arbitrator appointed by the Administrative Head of the appellant one who was its representative who had had occasion to express views on all or any of the matters in dispute _ or difference on which he had had earlier dealt with to which the contract related to. But there was no contract to ~rbiter by a named Arbitrator the E dispute or differences that had arisen under the contract. [28411, 285A-B] · 3. Justice must not only be done but seemingly appears to have beeil done. The Arbitrator must not only be impartial but also be objective, circumspect and honest in rende.ring his decision. l\'lany a time the 3'\\'ard is not a speaking award which would inspire confidence for acceptance only when the above perspectives are present. Its invalidity would be iested on grounds available in law. Admittedly the Arbitrator nominated by the appellant acted on earlier occasions as appellant's Arbitrator. Therefore, the respondent rightly objected to the nomination of Arbitrator. Such nomination, therefore, does not bind him. [286D-E] Manak Lal v. Dr. Prem Ownd, (1957] S.C.R. 575; G. Sama v. Univer- .,-. sity of Lucknow & Ors., (1977] 1 S.C.R. 64 and V. Rafizgunadha Rao v. State of A.P., 1988 (I} A.L.T. 461, held inapplicable: F G Judicial Review of Administrative Action by S.A. ~esmith, 3rd Edn. H • 282 SUPREME COURT REPORTS [1
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