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Letters Patent Appeal No. 181 of 1970, decided on 28th November 1970.

S. 8‑Interpretation and application‑Provisions attracted only where agreement provides for appointment of arbitrator or arbitrators with consent of "all parties"‑Section 8 not attracted where arbitrator whose vacancy required to be filled up was appointed by one party alone and was arbitrator of one side only‑Whether provisions of S. 3 have refer ence to a sole arbitrator or cover also cases where more than one arbitrator to be appointed [Quaere]‑[Taj Din and another v. Muhammad Sharif and another P L D 1970 Lah. 840 dissented from].

A perusal of section 8 of the Arbitration Act, 1940, will show that it applies to such cases where the arbitrator or arbitrators are to be appointed by consent of all parties and not to those where each party is to appoint his own arbitrator. Clause (a) of subsection (1) of section 8, deals with cases of omission to make initial appointments, whereas clause (b) covers cases where appointed arbitrator neglects or refuses to act or is incapable of acting or dies. But the common feature of both these sub‑clauses is that the nature of the agreement should be such where the concerned arbitrator or arbitrators are to be appointed with consent of all parties. This is more clear from subsection (2), where it is written that, " . . . . . the Court may, . . . . . appoint an arbitrator or arbitrators, . . . . as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties". This shows that in cases where any arbitrator was to be appointed by the parties collectively, then on their failure to do so, when Court itself makes an appointment, it is to be considered that the appointee has been appointed by consent of all parties. There is difference of opinion on the point as to whether clause (b) of subsection (1) of section 8, or as a matter of fact the whole of section 8, referred to the case of a single arbitrator or also covered cases where more than one arbitrators were to be appointed. That section 8 covered cases of a single arbitrator may now be correct but the position that the arbitrator whose vacancy is to be filled up shall be such who was or was to be appointed by all parties (and not by one party alone), remains the same.

Taj Din and another v. Muhammad Sharif and another P L D 1970 Lah. 840 dissented from.

Gupalji Kuverji v. Morarji Jeram Naranji and another I L R 43 Born. 809; Uttamchand Brijlal v. Balmukand S. L. A I R 1929 Sind 55; Ramji Purshotam v. Hari Shamla A I R 1939 Sind 81; General Electric Trading Co. v. Siemens (Ind.) Ltd. I L R 56 Cal. 848 and N. D. Basu's "The Arbitration Act" (Third), 1955 Edition, p. 141 ref.

S. 30‑Award, setting aside of‑Agreement providing for reference of dispute to arbitrators one to be appointed by each party and matter to be referred to umpire only in case of difference of opinion between them Arbitrator, appointed by one of the parties, refusing to act‑Court, in circumstance, to fill up vacancy of such arbitrator and could not refer case directly to umpire.

Manzoor Hussain Sial for Appellant No. 1.

Date of hearing: 13th November 1970.

‑In a suit filed by Muhammad Sharif (hereinafter called the plaintiff) against (i) Taj Din son of Khair Din ; (ii) Meraj Din son of Muhammad Din and (iii) Taj Din son of Siraj Din (hereinafter called the defendants), for dissolution of partnership and rendition of accounts of firm "Taj Din & Company Amritsari", the parties agreed to refer their disputes to arbitration in this way that one arbitrator was appointed by the plaintiff and defendant No. 3 jointly and one jointly by defendants Nos. 1 and 2 who alone contested the suit. Defendant No. 3 had actually earlier supported the claim of the plaintiff and then joined in arbitration. There was a stipulation in the arbitration agreement that in case of difference between the two arbitrators so appointed, the matter was to be referred to an umpire. It is not necessary to enter into the chequered stages through which the case had been passing and it will suffice for the purpose of the present appeal to state that the arbitrator appointed by defendants Nos. 1 and 2, namely Ch. Muhammad Hussain, on 26‑3‑1964, apprised the Court that he had examined the accounts etc., but was not in a position to arbitrate and come to any conclusion on the

points referred to him. Instead of filling up the vacancy of the said arbitrator, who had failed or refused to arbitrate, the Court referred the matter to the umpire who gave his awards Tai Exhs. R. W. 1/1 and R. W. 1/2 and filed them in Court. The defendants filed objections against the said awards and prayed that the same may be set aside. The learned Civil Judge 6a rejected that application and refusing to set aside the awards made them rule of the Court. Against the order refusing to set aside the awards, the defendants filed an appeal being F. A. O. No. 108/68 which has been accepted by a learned Single Judge of this Court and holding that in the circumstances, herein before explained, the matter could not have been entrusted to the umpire, he has set aside the awards. The plaintiff and defendant No. 3 have come up in Letters Patent Appeal against the judgment and order of the learned Single Judge which is also reported in P L D 1970 Lah. 840.

2. It is an admitted fact that the basic agreement provided for reference of the dispute to the arbitrators and the case was to go to the umpire only in case of difference of opinion between them. What had happened in this case was that the arbitrator nominated by the contesting defendants refused to act or was incapable to act because he could not come to any decision one way or the other on the points of dispute referred to him and in this way refused to arbitrate. In these circumstances, as rightly held by the learned Single Judge,‑ the stage for referring the case to the umpire had not yet arisen. In the judgment and order of our learned brother, there are indications to the effect that the case was to be handled under section 8(1) (b) of the Arbitration Act X of 1940. This section reads as follows: --

"8. Power of Court to appoint arbitrator or umpire. In any of the following cases:

(a) Where an arbitration agreement provides that the refer ence shall be to one or more arbitrators to be appointed by consent of the parties, and all the parties do not, after differ ences have arisen, concur in the appointment or appointments; or

(b) if any appointed arbitrator or umpire neglects or refuses to act, or is incapable of acting, or dies, and the arbi tration agreement does not show that it was intended that the vacancy should not be supplied, and the parties or the arbitra tors, as the case may be, do not supply the vacancy ; or

(e) where the parties or the arbitrators are required to appoint an umpire and do not appoint him;

any party may serve the other parties or the arbitrators, as the case may be with a written notice to concur in the appointment or appointments or in supplying the vacancy.

(2) If the appointment is not made within fifteen clear days after the service of the said notice, the Court may, on the application of the party who gave the notice and after giving the other parties an opportunity of being heard, appoint an arbitrator or arbitrators or umpire, as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties."

It is to be read with section 9, which reads as follows :‑

"9. Power to party to appoint new arbitrator or, in certain cases, a sole arbitrator.‑Where an arbitration agreement provides that a reference shall be to two arbitrators, one to be appointed by each party, then, unless a different intention is expressed in the agreement . . . . .

(a) if either of the appointed arbitrators neglects or refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place ;

(b) if one party fails to appoint an arbitrator, either origi nally or by way of substitution as aforesaid, for fifteen clear days after the service by the other party of a notice in writing to make the appointment, such other party having appointed his arbitrator before giving the notice, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference, and his award shall be binding on both parties as if he had been appointed by consent:

Provided that the Court may set aside any appointment as sole arbitrator made under clause (b) and either, on sufficient cause being shown, allow further time to the defaulting party to appoint an arbitrator or pass such other order as it thinks fit.

The fact that an arbitrator or umpire, after a request by either party to enter on and proceed with the reference, does not within one month comply with the request may constitute a neglect or refusal to act within the meaning of section 8 and this section."

Both these sections are to be further read along with section 25, which falls in Chapter IV of the Act and reads that, "the provisions of the other Chapters shall, so far, as they can be made applicable apply or arbitrations under this Chapter", which deals with arbitrations in suit (as is the case here) and goes on to say, "provided that the Court may, in any of the circumstances mentioned in sections 8, 10, 11 and 12, instead of filling up the vacancies or making the appointments, make an order superseding the arbitration and proceed with the suit, and where the Court makes an order superseding the arbitration under section 19, it shall proceed with the suit."

4. A perusal of section 3 will show that it applies to such cases where the arbitrator or arbitrators are to be appointed by consent of all parties and not to those where each party is to appoint his own arbitrator. Clause (a) of subsection (1) of section 8, deals with cases of omission to make initial appoint ments, whereas clause (b) covers cases where appointed arbi trator neglects or refuses to act or is incapable of acting or dies. But the common feature of both these sub‑clauses is that the nature of the agreement should be such where the concerned arbitrator or arbitrators are to be appointed with consent of all parties. This is more clear from subsection (2), where it is written that, " . . . . . . the Court may, . . . . . appoint an arbitrator or arbitrators, . . . . as the case may be, who shall have like power to act in the reference and to make an award as if he or they had been appointed by consent of all parties". This shows that in cases where any arbitrator was to be appointed by the parties collectively, then on their failure to do so, when Court itself makes an appointment, it is to be considered that the appointee has been appointed by consent of all parties, there was difference of opinion in some case‑law, rendered with reference to the earlier Arbitration Act on the point as to whether clause (b) of subsection (1) of section 8, or as a matter of fact the whole of section 8, referred to the case of a single arbitrator or also covered cases where more than one arbitrators were to be appointed. In Gopaljl Kuverji v. Murarji Jeram Naranji and another (I L R 43 Born. 809), Uttamchand Brijlal v. Balmokand S. L. (A I R 1929 Sind 55) and Ramji Purshotam v. Hari Shamla (A I R 1939 Sind 81), it was held that it covered cases of agreement pertaining to a single arbitrator, while in General Electric Trading Co. v. Siemens (Ind.) Ltd. (I L R 56 Cal. 848), it was held to the contrary N. D. Basu in his Book "The Arbitration Act" (Third), 1955‑Edition while taking note of this controversy at p. 141, write as follows :‑

" . . . . . . . To avoid that interpretation‑--

(namely, it applies to cases of agreement pertaining to a single arbitrator) (the bracket is mine)‑the word any' has been substituted for the word an. It now means that if one of two arbitrators neglects, refuses to act etc., this clause is applicable."

5. In the report of the Select Committee concerned with the vetting of the relevant Bill of the Act of 1940, it is written as follows :‑

"We have removed an obscurity from clause 8(1)(a) where it was not clear whether a failure to concur in any one of the appointments or failure to concur in all the appointments was contemplated. We have omitted the words or is removed from clause 8(1)(b) and also from clause 9(a) to remove the inconsistency which would otherwise exist between these clauses and clause 12, which gives to the Court and not to the parties power to appoint arbitrators in place of arbitrators removed by the Court. In sub‑clause (2) we have extended the time for making an appointment to fifteen days from the service of notice under sub‑clause (1)."

This shows that the view that section 8 covered cases of a single arbitrator may not now be correct but the position that the arbitrator whose vacancy is to be filled up shall be such who was or was to be appointed by all parties (and not by one party alone), remains the same. From that point of view, on the facts of this case, it can safely be held, that since Ch. Muhammad Hussain was an arbitrator of one side only (and not of all parties) therefore, section 8 was not attracted here.

6. Though we have differed on the legal plane from the view of the learned Single Judge vis‑a‑vis the applicability of section 8 of the Act, the net result remains the same, namely, that the awards have rightly been set aside and there is no justification to admit this Letters Patent Appeal which is not likely to yield any fruit to the appellants. Learned counsel for the appel lants submitted that we should give a direction‑ to the learned trial Court for proceeding further in the matter because accord ing to him, in the absence of any such direction, in the order of the learned Single Judge, the learned trial Court may not be prepared to take up the case or proceed further with it. The apprehension of the learned counsel is unfounded because the reference to arbitrators was in a pending suit under Chapter IV of the Arbitration Act and the case shall have to be concluded either through arbitration (if so warranted) or through Court in accordance with the relevant law on the subject. No express direction In this respect is called for on our part and even the parties shall be at liberty to invoke the Court's jurisdiction for adopting whatever course they wish to be adopted, and if any applications are made in that behalf, the same shall be dealt with by the trial Court in accordance with law. The appeal is dismissed in limine. .

K. B. A.

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