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CASE NO.: Appeal (civil)  4109 of 2006

PETITIONER: B.S.N.L. & Ors.                                                  

RESPONDENT: M/s. Subash Chandra Kanchan & Anr.                       

DATE OF JUDGMENT: 13/09/2006

BENCH: S.B. Sinha & Dalveer Bhandari

JUDGMENT: J U D G M E N T [Arising out of SLP (Civil) No. 9242 of 2006]

S.B. SINHA, J :

       Leave granted.                  The parties herein entered into a contract pursuant to a notice inviting  tender by Appellant No. 1 for the work of construction of 9 Nos. Type-V  quarters at Jayadev Vihar, Bhubaneshwar.  The said contract contained an  arbitration clause in terms whereof the Chief Engineer, Telecommunication/  Postal Department in charge of the work at the time of dispute or if there be  no Chief Engineer the administrative head of the said Telecommunication/  Postal Department was to be appointed as an arbitrator.  The said provision  envisaged that in terms thereof no person other than the one appointed by  such Chief Engineer or administrative head of the Telecommunication/  Postal as aforesaid should act as arbitrator.   

       A notice in terms of arbitration agreement contained in clause 25 of  the contract was issued by the Respondents on 7.1.2002.  A letter appointing  one Shri Gurbax Singh, Principal Chief Engineer (Arb.), New Delhi as the  sole arbitrator was said to have been drafted on 4.2.2002.  It, however, was  dispatched on 7.02.2002.  On the same day, having regard to the fact that  allegedly the Managing Director of the Appellant did not respond to the  notice issued to him, an application was filed by Respondent herein before  the High Court of Orissa purported to be under Section 11 of the Arbitration  and Conciliation Act, 1996 (for short "the 1996 Act").   

       It is stated that the said Shri Gurbax Singh submitted his resignation  whereupon the Chief Engineer appointed one Shri A.K. Naik as the sole  arbitrator on 7.07.2002.  He is also said to have resigned and in his place  Shri Gurbax Singh was again appointed as arbitrator on 17.03.2003.  The  appointments were made during pendency of the said proceedings before the  High Court under the 1996 Act.  When the matter came up for hearing  before a Division Bench of the High Court, in its order dated 20th January,  2006, it was recorded:

"Learned counsel for the petitioners placed before  me a list of names of six persons to appoint one of  them as Arbitrator and to refer to him the dispute  between the parties for adjudication in terms of the  arbitration clause.  On being asked, learned  counsel for the opposite parties submits that he has  no objection if Shri B.C. Bhattacharya, Chartered  Engineer, Former Chief Engineer, W.B. P.W.D.,  FD-216/4, Salt Lake City, Kolkata \026 700 091 is  appointed as Arbitrator and the dispute between  the parties in terms of arbitration clause is referred

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to him for adjudication.  In view of the aforesaid,  said Shri B.C. Bhattacharya is appointed as  Arbitrator and the dispute between the parties in  terms of the arbitration clause is referred to him for  adjudication."

       The learned arbitrator appointed by the High Court thereafter entered  into reference.  The parties hereto appeared before him on 18.03.2006 and  participated in the proceedings.  Respondent also filed his statement of  claim.  The learned arbitrator has called upon the Appellants to file their  written statement.   

       However, on 27th January, 2006, an application was filed by Appellant  herein purported to be under Section 151 of the Code of Civil Procedure for  modification of the said order dated 20.1.2006 contending:

"2.     That after dictation of orders when the  counsel of the op. party went out, a Junior Lawyer  informed him that Your Lordship had dictated that  the counsel for the opp. Party has no objection if  Shri B.C. Bhattacharya, Chartered Engineer, and  former C.E.W.B. PWD Kolkata is appointed as the  Arbitrator, which due to inadvertence, had escaped  notice/ audibility of the opp. Party counsel.

3.      That then the counsel for the opposite party  promptly rushed to the court and with due  permission of your Lordship, apprised about such  dictation with a rest for omission of the "No  Objection" portion which occurred due to some  communication lapses.  And Your Lordship was  considerable and gracious enough to ask the  Stenographer on duty at that time to take down the  sought for change after confirming from me  whether it was about Mr. Bhattacharya of  KOLKATA."

       The prayer made in the said application reads as under:

"Under the circumstances stated above, the  opposite party, therefore, earnestly pray that your  Lordship may graciously be pleased in the ends of  justice to direct appropriately for proper reflection  of your Lordship’s subsequent instruction in the  order."

       By an order dated 3rd March, 2006, the High Court refused to recall its  order dated 20th January, 2006 stating:

"Now, learned counsel for opposite parties appears  and submits that the aforesaid recording that he  had no objection against the appointment of Shri  B.C. Bhattacharya is not correct and in fact he had  objection.  He wants this to be recorded in the  order.  But, I do not find any reason to change the  appointment of Shri B.C. Bhattacharya as the  Arbitrator, as I am told that Shri B.C. Bhattacharya  has already started functioning as Arbitrator by  issuing notice to the concerned parties.  Further,  the learned counsel for opp. Parties could not give  any reason as to why he has objection against the  appointment of Shri B.C. Bhattacharya as  Arbitrator.  In this view of the matter, no further  order is required to be passed."

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       Mr. Chetan Sharma, learned senior counsel appearing on behalf of the  Appellants submitted that keeping in view the arbitration agreement  contained in Clause 25 of the contract, the High Court had no jurisdiction to  appoint any person other than the one nominated by the Chief Engineer as  appointment of person other than the nominee of the Chief Engineer was  invalid.

       On the other hand, Mr. Parmanand Gaur, learned counsel appearing  on behalf of the Respondents, submitted that the High Court having  exercised its discretionary jurisdiction under Section 11 of the 1996 Act, this  Court should not interfere therewith.

       The relevant portions of Section 11 of the 1996 Act read as under:

"11. Appointment of arbitrators.\027 (1) A person of  any nationality may be an arbitrator, unless  otherwise agreed by the parties.   (2) Subject to sub-section (6), the parties are free  to agree on a procedure for appointing the  arbitrator or arbitrators.   ***                     ***                     ***  (5) Failing any agreement referred to in sub- section (2), in an arbitration with a sole arbitrator,  if the parties fail to agree on the arbitrator within  thirty days from receipt of a request by one party  from the other party to so agree the appointment  shall be made, upon request of a party, by the  Chief Justice or any person or institution  designated by him.   (6) Where, under an appointment procedure agreed  upon by the parties,-   (a)  a party fails to act as required under that  procedure; or   (b)  the parties, or the two appointed arbitrators,  fail to reach an agreement expected of them under  that procedure; or   (c)   a person, including an institution, fails to  perform any function entrusted to him or it under  that procedure, a party may request the Chief  Justice or any person or institution designated by  him to take the necessary measure, unless the  agreement on the appointment procedure provides  other means for securing the appointment.   (7) A decision on a matter entrusted by sub-section  (4) or sub-section (5) or sub-section (6) to the  Chief Justice or the person or institution  designated by him is final.   (8) The Chief Justice or the person or institution  designated by him, in appointing an arbitrator,  shall have due regard to-   (a)  any qualifications required of the arbitrator by  the agreement of the parties; and   (b)  other considerations as are likely to secure the  appointment of an independent and impartial

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arbitrator..."

       Evidently, the Managing Director of the Appellant was served with a  notice on 7th January, 2002.  The letter appointing the arbitrator was  communicated to Respondent on 7th February, 2002.  By that time, 30-days  period contemplated under the Act lapsed.  The Managing Director of the  Appellant was required to communicate his decision in terms of Clause 25  of the contract.

       What would be the meaning of the term ’communicate’ came up for  consideration before this Court in State of Punjab v. Amar Singh Harika  [AIR 1966 SC 1313], wherein it was held:

"\005It is plain that the mere passing of an order of  dismissal would not be effective unless it is  published and communicated to the officer  concerned.  If the appointing authority passed an  order of dismissal, but does not communicate it to  the officer concerned, theoretically it is possible  that unlike in the case of a judicial order  pronounced in Court, the authority may change its  mind and decide to modify its order\005"

       [See also Sultan Sadik v. Sanjay Raj Subba and Others, (2004) 2 SCC  377]

       The contract entered into by and between the parties was subject to  the provisions contained in the 1996 Act.   

       Although in terms of the arbitration agreement contained in Clause 25  of the contract, ordinarily the arbitrator appointed by the Managing Director  should act as arbitral tribunal in respect of the disputes and differences  between the parties to the contract; in this case, the Appellants must be held  to have waived their right as they consented to the appointment of Shri  Bhattacharya as an arbitral tribunal.  The High Court having appointed the  arbitral tribunal on consent, it is, in our opinion, not open to the Appellants  now to contend that no such concession was made.

       We are not oblivious of the recent decision of this Court in Yashwith  Constructions (P) Ltd. v. Simplex Concrete Piles India Ltd. and Another  [(2006) 6 SCC 204], wherein Balasubramanyan, J. stated the law in the  following terms:

"\005It is true that in the arbitration agreement there  is no specific provision authorizing the Managing  Director to appoint a substitute arbitrator if the  original appointment terminates or if the originally  appointed arbitrator withdraws from the  arbitration. But, this so called omission in the  arbitration agreement is made up by the specific  provision contained in Section 15(2) of the Act.  The withdrawal of an arbitrator from the office for  any reason is within the purview of Section  15(1)(a) of the Act. Obviously, therefore Section  15(2) would be attracted and a substitute arbitrator  has to be appointed according to the rules that are  applicable for the appointment of the arbitrator to  be replaced. Therefore, what Section 15(2)  contemplates is an appointment of the substituted  arbitrator or the replacing of the arbitrator by  another according to the rules that were applicable  to the appointment of the original arbitrator who  was being replaced. The term "rules" in Section  15(2) obviously referred to the provision for

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appointment, contained in the arbitration  agreement or any Rules of any Institution under  which the disputes were referred to arbitration.  There was no failure on the part of the concerned  party as per the arbitration agreement, to fulfil his  obligation in terms of Section 11 of the Act so as  to attract the jurisdiction of the Chief Justice under  Section 11(6) of the Act for appointing a substitute  arbitrator. Obviously, Section 11(6) of the Act has  application only when a party or the concerned  person had failed to act in terms of the arbitration  agreement. When Section 15(2) says that a  substitute arbitrator can be appointed according to  the rules that were applicable for the appointment  of the arbitrator originally, it is not confined to an  appointment under any statutory rule or rule  framed under the Act or under the Scheme. It only  means that the appointment of the substitute  arbitrator must be done according to the original  agreement or provision applicable to the  appointment of the arbitrator at the initial stage.  We are not in a position to agree with the contrary  view taken by some of the High Courts."

       But, herein the issue is entirely different.  Apart from failure on the  part of the Managing Director of the Appellant to appoint an arbitrator  within the specified time, the Appellants evidently waived their right under  the arbitration agreement.

       Mr. Sharma’s submission to the effect that the learned counsel who  consented to the appointment of Shri Bhattacharya was a junior counsel and  he had no instructions in this behalf cannot be accepted.  No such statement  was made before the High Court.  It had never been contended before the  High Court that the counsel had no authority to make such concession.

       Moreover, the application filed under Section 151 of the Code of Civil  Procedure by the Appellant did not contain such statements.  The High  Court, thus, did not commit any error in recording that such a concession  had in fact been made by the learned counsel.  In a matter of this nature  again, the High Court’s decision subject to just exception must be held to be  final.  

       Furthermore, in terms of Order III, Rule 1 of the Code of Civil  Procedure, a litigant is represented by an advocate.  A concession made by  such an advocate is binding on the party whom he represents.  If it is binding  on the parties, again subject to just exceptions, they cannot at a later stage  resile therefrom.  The matter may, however, be different if a concession is  made on a question of law.  A wrong concession on legal question may not  be binding upon his client.  Here, however, despite the stand taken by the  Appellant in its written statement before the High Court the learned  Advocate consented to appointment of a person as an arbitrator by the High  Court in exercise of its jurisdiction under Section 11 of the 1996 Act, in our  considered view, the same should not be permitted to be resiled from.  A  person may have a legal right but if the same is waived, enforcement thereof  cannot be insisted.   

       In Ramdev Food Products Pvt. Ltd. v. Arvindbhai Rambhai Patel and  Ors. [2006 (8) SCALE 631], this Court observed: "The matter may be considered from another  angle. If the first respondent has expressly waived  his right on the trade mark registered in the name  of the appellant-Company, could he claim the said  right indirectly? The answer to the said question  must be rendered in the negative. It is well-settled  that what cannot be done directly cannot be done

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indirectly. The term ’Waiver’ has been described in  the following words: "Waiver is the abandonment  of a right in such a way that the other party is  entitled to plead the abandonment by way of  confession and avoidance if the right is thereafter  asserted, and is either express or implied from  conduct. A person who is entitled to rely on a  stipulation, existing for his benefit alone, in a  contract or of a statutory provision may waive it,  and allow the contract or transaction to proceed as  though the stipulation or provision did not exist.  Waiver of this kind depends upon consent, and the  fact that the other party has acted upon it is  sufficient consideration It seems that, in general,  where one party has, by his words or conduct,  made to the other a promise or assurance which  was intended to affect the legal relations between  them and to be acted on accordingly, then, once  the other party has taken him at his word and acted  on it, so as to alter his position, the party who gave  the promise or assurance cannot afterwards be  allowed to revert to the previous legal relationship  as if no such promise or assurance had been made  by him, but he must accept their legal relations  subject to the qualification which he has himself so  introduced, even though it is not supported in point  of law by any consideration. [See 16 Halsbury’s  Laws (4th edn) para 1471]  Waiver may sometimes resemble a form of  election, and sometimes be based on ordinary  principles of estoppel. [See 45 Halsbury’s Laws  (4th edn.) para 1269]  In Indu Shekhar Singh and Ors. v. State of U.P.  and Ors. 2006 (5) SCALE 107, this Court held:  "They, therefore, exercised their right of option.  Once they obtained entry on the basis of election,  they cannot be allowed to turn round and contend  that the conditions are illegal""

       Prima facie also it does not appear that the allegations contained in the  said application were supported by an affidavit.  In that view of the matter,  no credence to the averments contained therein cannot be given.

       Furthermore, it is not a case where this Court should exercise its  discretionary jurisdiction.  For the reasons aforementioned, this appeal is  dismissed.  No costs.