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PETITIONER: HARBANS SINGH TULI AND SONS BUILDERS PVT. LTD.

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT11/02/1992

BENCH: MOHAN, S. (J) BENCH: MOHAN, S. (J) THOMMEN, T.K. (J)

CITATION:  1992 AIR 1124            1992 SCR  (1) 602  1992 SCC  (2) 225        JT 1992 (1)   517  1992 SCALE  (1)307

ACT:      Arbitration  Act, 1940: Sections 5  and  20-Arbitrator- Appointment   of-Contract   containing   clauses   regarding appointment-Whether  and  when could  be  relied  upon-Court appointing  arbitrator-In place of arbitrator  appointed  as per contract-Validity of.

HEADNOTE:      The  respondent entrusted certain construction work  to the  petitioner, and the petitioner executed  the  contract. During  the  course  of the  contract,  the  petitioner  was required to do some extra work for which a claim for payment was made and on that account, a dispute arose.  Since clause 70 of the contract provided for arbitration, the  petitioner asked  for the appointment of arbitrator.   Accordingly,  an arbitrator was appointed.  The petitioner protested  against the  appointment  of  the  arbitrator  and  the  proceedings dragged   on.   On  his  retirement  from  the   Army,   the appointment of the arbitrator came to an end.  The same  was the  case  with  the two  successive  arbitrators  appointed thereafter.   Subsequently another arbitrator was  appointed and he too relinquished the charge as the petitioner did not cooperate with him for more than 4 years.  Thus, the  matter was pending adjudication for about nine years, and a  notice under  Section  8 of the Arbitration Act was issued  by  the petitioner  calling  upon  the  Respondent  to  appoint   an arbitrator.   But no such appointment was made.   Thereafter the  petitioner filed an application before the trial  court for  appointment  of  an  arbitrator  by  the  Court.    The respondent  contested  the suit on merits and  also  on  the ground of lack of territorial jurisdiction.  The trial court allowed  the  application and appointed an  arbitrator.   It also  revoked the appointment of the arbitrator made by  the respondent during the pendency of the application before the trial court.      Aggrieved  against  the  said  order,  the   respondent approached  the High Court by way of a Civil Revision.   The High  Court  gave  its  finding  that  there  was  want   of jurisdiction  on  the  part of the  trial  court;  and  that Section 8(1) (b) of the Arbitration Act did not apply  since there was no

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                                                      603 negligence  or  refusal  by the  respondent  to  appoint  an arbitrator.  Accordingly, the High Court set aside the order of the trial court appointing an arbitrator, who later  made an ex-parte award without affording adequate opportunity  to the respondent.      Against   the  High  Court’s  order,   the   petitioner preferred the present special leave petition.      On behalf of the petitioner, it was contended that  the appointment of the arbitrator made by the trial court should not have been interfered; that where a notice was issued  by the  petitioner  calling upon the respondent to  appoint  an arbitrator, after the expiry of 15 days of that notice,  the right  to appoint arbitrator is forfeited; and since a  part of  the cause of action has arisen, within the territory  as payment  was  made  there by cheque, there was  no  lack  of territorial jurisdiction.      On  behalf  of the respondent, it  was  contended  that Section 8 (1) (a) of the Arbitration Act had no  application to a case in which the agreement provided for appointment of an arbitrator by one of the parties or by nominated persons; that  where the parties have consented to a named person  to be  appointed  as arbitrator, there was  no  application  of Section 8 of the Act; and that merely because the arbitrator had hurried, that would not constitute failure of justice.      Dismissing the special leave petition, this Court,      HELD: (Per Mohan, J.) 1. Sub-section (1) (a) of Section 8  of the Arbitration Act would apply to a case  of  initial appointment   of   an  arbitrator   or   arbitrators.    The implication  is  in  the  arbitration  agreement  that   the arbitrator or arbitrators must not have been named.   Where, therefore,  they  are  named,  this  section  will  have  no application.   Similarly, the arbitrator or arbitrators  are required  to  be appointed by all parties to  the  reference with consent.  On the contrary, if there is some other  mode of  appointment,  say Section 4, where the  parties  to  the agreement agree that the arbitrator has to be appointed by a person  designated in the agreement either by name or  held, for  the time being in office, certainly, the  section  will not apply.  [611C-F]      Prabhat  General Agencies etc. v. Union of  India  Anr. etc.,  [1971]  2 SCR 564’ Union of India and  Anr.  v.  M/s. Amarnath Aggarwal Construction Pvt.                                                        604 Ltd.,  1988 (2) Punjab Law Report 678;  Executive  Engineer, Prachi  Division, Bhubaneswar v. Gangaram Chhapolia &  Anr., AIR  1980 Orissa 51; A.B.C. Laminart Pvt. Ltd. and  Anr.  v. A.P.  Agenceies, Salem, AIR 1989 SC 1239; Union of India  v. Om  Prakash,  [1976] 3 SCR 998; Ved Prakash  Mithal  v.  The Union  of  India  and  Ors., AIR  1984  Delhi  325;  General Manager,  South Eastern Railway, Calcutta v.  S.V.  Krishna Rao, AIR 1970 Madhya Pradesh 48, referred to.      2.  In view of clause 70 of the General  Conditions  of the Contract it would be clear that the arbitrator is to  be appointed  by  the  Engineer-in-Chief.  Of  course,  if  the arbitrator  resigns  or vacates his office or is  unable  or unwilling  for  some reason or other, then  he  may  appoint another   arbitrator.    The  Engineer-in-Chief   acted   in accordance with clause 70 and appointed an arbitrator.  Even the vacancy arising from time to time was actually  supplied by  him.   It cannot therefore be said that  the  respondent forfeited the right to appoint an arbitrator.  There was  no refusal or negligence on the part of the  Engineer-in-Chief. As such the question of applicability of Sub-section (1) (b) of Section 8 of the Arbitration Act did not arise.  [612E-H;

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613B]      Union of India v. M/s. Ajit Mehta and Associates,  Pune and  Ors., 1990 (Bombay) 45; Chander Bhan Harbhajan  Lal  v. The  State  of  Punjab,  AIR 1977  (2)  SC  1210;  Executive Engineer, Prachi Division Bhubaneswar v. Gangaram  Chhapolia and Anr, AIR 1980 Orissa 51, referred to.      3.  The  trial  court  ought  not  have  appointed  the arbitrator.  The appointment of arbitrator by the court, has caused  immense  prejudice  to the  respondent.   First  and foremost there was not even an application on behalf of  the petitioner   under   Section  12  for  revocation   of   the appointment of the arbitrator made by the respondent.  Then, again,  the  arbitrator appointed by the  trial  court  took charge on 1.9.90 and issued a direction to the respondent to submit  its defence on or before 20.9.90.  The hearing  date was  fixed between 4th and 7th of October, 1990.  A  request was  made though a telegram from the Chief Engineer  not  to proceed with the arbitration.  However, the arbitration  not finding  the  statement of defence forthcoming  before  20th September, directed the same be filed before 1st of October. Even  then no statement was filed.  The Union of  India  had not  entered  appearance.   An ex-parte award  was  made  on 8.10.1990  for  a huge sum of Rs. 90.67  lakhs.   While  the petitioner could not give details of the                                                        605 four  claims  before the arbitrator  earlier  appointed,  he filed  as many as 29 claims before this arbitrator and  they are  all  accepted.   The  arbitrator  had  given  335%   as escalation  with regard to claims No. 1 to 24.   Apart  from the  haste  with  which the arbitrator  had  proceeded,  the matter  has  not been considered in its  proper  perspective through a process of reasoning.                                                     [615B-E]      PER  THOMMEN,  J.  In view of the  peculiar  facts  and circumstances  of  the  present  case,  the  challenge  made against the  High Court judgment is unsustainable. [605E-F]

JUDGMENT:      CIVIL  APPELLATE JURISDICTION : Special Leave  Petition (Civil) No. 13530 of 1991.      From  the  Judgment and Order dated  14.5.1991  of  the Punjab and Haryana High Court in Civil Revision No. 2934  of 1990.      Rajinder  Sachar, E.C. Agrawala, Ms. Purnima Bhat  Kak, A.V. Palli and Atul Sharma for the Petitioner.      V.R.  Reddy, Addl. Solicitor General, Ms. Sushma  Suri, Ms.   Kitty  Kumaramangalam  and  P.S.  Narasimha  for   the Respondents.      The Judgments of the Court were delivered by      THOMMEN,   J.  In  view  of  the  peculiar  facts   and circumstances  of the case I agree with my learned  brother, Mohan, J., that the challenge against the impugned  judgment is unsustainable.  Accordingly the Special Leave Petition is dismissed.      MOHAN,  J.  The  facts  relating to  the  case  are  as follows:-      The  petitioner herein offered his tender for  entering into  a contract for provision of officer’s mess and  single officer’s  quarters.  On 13.3.1970, the tender was  accepted and the acceptance was communicated.  Thereafter, a contract was signed at Lucknow.  In 1973, the petitioner executed the contract.  During the course of contract, he was required to do  some  extra work for which he made a claim.   A  dispute

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arose  concerning this.  Clause 70 of the  contract  enabled the parties to go by way of arbitration.  He applied to  the Engineer-in-Chief,   Army   Headquarters,  New   Delhi   for appointment of arbitrator.  Accordingly, Brig. EMA Da Costa, Chief En-                                                        606 gineer,  Pune  and  Rajasthan  zone  was  appointed  as   an arbitrator  on  23.11.73.  The petitioner  vide  his  letter dated 2.12.73, protested against the appointment of Brig. Da Costa.  It appears that the proceedings were dragged on  and nothing useful turned out.  In February 1976, when Brig.  Da Costa  was  relieved  from  the  Army,  his  appointment  as arbitrator  came  to an end.  Thereafter by an  order  dated 27.4.76,  Brig.  SDL Jaini was appointed as  an  arbitrator. Even then no progress took place in the arbitration, he also retired  on 18.3.76.  On 29.4.78, one Mr.  G.R.  Mirchandani was  appointed  as  an  arbitrator.   He  relinquished   the appointment  on 11.4.80 since he was to retire  on  31.7.80. The  next  appointment was that of Mr.  V.  Badrinath  dated 12.6.80.   He also relinquished the charge on 14.9.84  since the  petitioner did not cooperate with him for more  than  4 years.   In the meanwhile, the question arose as to who  had the   competence   to  represent  the  contractor   in   the arbitration  proceedings.   The petitioner was  required  to obtain the succession certificate from the Collector,  since the original contractor died in June, 1982.  Thereafter, the matter  was pending without any adjudication.  Therefore,  a notice was issued under section 8 of the Arbitration Act, on 28.3.83;   Calling  upon  the  respondent  to   appoint   an arbitrator but no such appointment was made.  Therefore,  he filed  an application for the appointment of  an  arbitrator before  the learned Sub-ordinate Judge, Chandigarh.  One  of the  contentions raised was after the filing of  application under  Section 8 since the respondent had not  appointed  an arbitrator, as required under Section 8 (1) (b) of the  Act, the  right to make such an appointment had  been  forfeited. Therefore,  the  only course left open to the court  was  to appoint  an  arbitrator as required under Section 8  of  the Act.      The   application  was  contested  on  behalf  of   the respondent not only on merits but also on the ground of want of  territorial jurisdiction of the court.  It is seen  that the  appointment of Mr. YNR Rao and Mr. Gopal Krishnan  took place  during  the  pendency  of  the  application  of   the petitioner  under Section 8 before the  learned  Subordinate Judge, Chandigarh.      The following 5 issues were set down for trial:      (i)  Whether  there  are sufficient  grounds  for  the           appointment  of  an Arbitrator for  referring  the           matter in dispute?      (ii) Whether the petition is within time?                                                        607      (iii)Whether the present petition is not maintainable?      (iv) Whether  this court does not have the  territorial           jurisdiction to try the present suit.      (v)  Relief.      On  issue number 1, the learned Subordinate Judge  came to  the conclusion that there exists a dispute  between  the parties and hence there was need to appoint an arbitrator.      Issue   number   2  was  answered  in  favour   of  the petitioner,  while  issue  number 3  was  not  pressed.   As regards  issue  number  4, the court was of  the  view  that having  regard to clause 26 and in view of the  case  A.B.C. Laminart  Pvt.  Ltd.  & Another  v.  A.P.  Agencies,  Salem, A.I.R.  1989  SC  1239, the Civil Court  at  Chandigarh  had

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jurisdiction, as part of cause of action arose at Chandigarh. This   order  was  pronounced  on  30th  July,   1990.    In continuation  of that judgment by order dated  20th  August, 1990,  Mr. Puranjit Singh, Superintending Engineer,  Capital Project, Chandigarh was appointed as arbitrator with  effect from  1.9.90.  It was specifically mentioned that the  order revoked  the appointment of Mr. A.V. Gopal Krishnan who  was appointed  as  arbitrator  on 25.7.90 for  the  second  time during the pendency of the petition.      Aggrieved  by  this, the matter was taken up  in  Civil Revision No. 2934 of 1990 by the Union of India to the  High Court.  The Division Bench consisting of the learned  Acting Chief Justice and Justice Bedi heard the matter.  On the two points  argued  before  the  Bench,  viz.  (1)   territorial jurisdiction  and  (2)  the matter did not  fall  under  the purview of Section 8 of the Arbitration Act, it came to  the conclusion  that in so far as the objection to  jurisdiction had  been  taken at the earliest, and no part  of  cause  of action  had  arisen within the  jurisdiction  of  Chandigarh court, there was want jurisdiction.      On the second point, it found that Section 8 (1) (b) of the   Act  would  not  apply  to  the  instant  case.    The reasonings of the Bench were:-          (i) There was no negligence or refusal by the Engineer-          in-Chief  in  fact,  but the  arbitrator  had  been          appointed.          (ii)  Having regard to the terms of clause 70,  the          vacancy was                                                        608          to  be filled.  In fact, on 20.8.90, an  arbitrator          had been appointed.           (iii) Where the arbitration clause in the contract          provides  for an appointment of an arbitrator by  a          named authority and not by consent of parties,  the          provisions  of Section 8 could not be invoked.   It          relieved on the ruling of the Bombay High Court  in          Union of India v. Ajit Mehta and Associates, Pune &          Others,   A.I.R.  1990  Bombay  45.  Thus  it   was          concluded that the appointment made by the  learned          Subordinate  Judge was non est, and therefore,  the          award rendered by him was liable to be set aside.      It  was  under these circumstances, the  Special  Leave Petition  has  come to be preferred.  Mr.  Rajinder  Sachar, learned  counsel  for  the petitioners  submitted  that  the appointment of the arbitrator made by the Trial Court should not have been interfered with by the High Court.  Section  8 occurs  under  Chapter  II  which deals  with  the  case  of arbitration without intervention of court, while Section  20 occurs under Chapter III through the intervention of  court. It  is  incorrect  to say that if the  contract  contains  a clause that a named party is to appoint an arbitrator and if the appointment of arbitrator is not by consent of  parties, Section 8(2) will not apply.  The scope of Sections 8 and 20 has  been succinctly dealt with in Prabhat General  Agencies etc.  v.  Union of India and Anr, [1971] 2  S.C.R.  564  and Union  of  India  and  another  v.  M/S.  Amarnath  Aggarwal construction Pvt. Ltd., 1988 (2) Punjab Law Report 678.      Then again, where a notice was issued by the petitioner calling  upon the respondent to appoint an arbitrator  after the  expiry of 15 days of that notice, the right to  appoint is  forefeited, as laid down in Executive  Engineer,  Prachi Division, Bhubansewar v. Gangaram Chhapolia  & Another,  AIR 1980 Orissa 51 & 52.      On  the question of territorial jurisdiction,  since  a part of cause of action had arisen, within the territory  of

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Chandigarh,  namely,  the payment by cheque  at  Chandigarh, there  was  no lack of territorial jurisdiction.   For  this argument reliance is placed on A.B.C. Laminart Pvt. Ltd. and another  v.  A.P. Agencies, Salem, AIR 1989 SC 1239  @  1243 (para 15).      Lastly,  it is submitted that prejudice or  failure  of justice should be with                                                        609 reference  to  trial.   Merely because  the  arbitrator  has hurried  that would not constitute failure of justice  under Section  21 of the Code of Civil Procedure.  This  important aspect of a matter had not been borne in mind by the Court.      The  learned Additional Solicitor General,  Mr.  Reddy, after  taking us elaborately through the various  provisions of  Arbitration  Act would submit that Section 8  (1)(a)  is attracted  unless the agreement provides for  arbitrator  by consent  of parties or where there is no concurrence in  the appointment.  In other words, two ingredients are  necessary to apply Section 8 which are as follows :-          (i)  There  must  be an  agreement  to  appoint  an               arbitrator.          (ii) The parties do not concur in the appointment.      Therefore, the said sub-section has no application to a case  in which the agreement provides for appointment of  an arbitrator by one of the parties or by nominated person.      Reliance  is  also  placed  on Union  of  India  v.  Om Prakash, 1976 (3) S.C.R. 998, 1002-3 in support of the  sub- section.      In contract, Section 20 confers power-          (i) to order the agreement to be filed; and          (ii)   to  make  an  order  of  reference  to   the          arbitrator  appointed by the parties or  where  the          parties  cannot  agree  to the  appointment  of  an          arbitrator appointed by court.      Where, therefore, the clause in the agreement  provided arbitrator  to  be  appointed by  Engineer-in-Chief,  if  he refuses, recourse to Section 8 (1) (a) or (1) (b) cannot  be had.  It must be under Section 20 (4).  The case directly on point  is  Ved  Prakash Mithal v. The  Union  of  India  and others, AIR 1984 Delhi, 325 (Full Bench) and Prabhat General Agencies  etc. v. Union of India and Anr, [1971] 2 SCR  564. It  is  further  submitted that  these  two  sections,  i.e. Sections 8 and 20 operate in different fields, as laid  down in  Union  of India through General Manager,  South  Eastern Railway,  Calcutta  v.  S.V. Krishna  Rao  AIR  1970  Madhya Pradesh  48.   Even under Section 6 the  appointment  of  an arbitrator  is  not  automatic.   The  court  will  have  to exercise its discretion.                                                        610      Finally,  it is submitted, the authorities are  uniform in  that  Section 8 will not apply where  the  parties  have consented  to  a named person to appoint an  arbitrator,  as seen from Union of India v. M/s. Ajit Mehta and  Associates, Pune  and  others,  1990 (Bombay) 45, which  case  has  been relied upon by the High Court.  Hence no exception could  be taken to the judgment of the High Court.      Clause  70  of the General Conditions of  the  Contract reads as follows:-          "70.  All  disputes  between the  parties  to  the          contract  (other than those for which the  decision          of  the CWE or any other person is by the  contract          expressed  to  be  final and binding)  shall  after          written  notice by either party to the contract  to          the  either  of  them  be  referred  to  the   sole          arbitration of an Engineer Officer to be  appointed

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        by the authority mentioned in the tender documents.          Unless  the parties otherwise agree such  reference          shall  not take place until after  the  completion,          alleged  completion or abandonment of the works  or          the determination of the contract.          If   the  Arbitrator  so  appointed  resigns   his          appointment  or vacates his office or is unable  or          unwilling to act due to any reason whatsoever,  the          authority   appointing  him  may  appoint   a   new          arbitrator to act in his place.          The arbitrator shall be deemed to have entered  on          the  reference on the date he issue notice to  both          the parties, fixing the date of hearing.          The  arbitrator may, from time to time,  with  the          consent  of  the  parties, enlarge  the  time,  for          making and publishing the award.          The arbitrator shall give his award on all matters          referred  to him and shall indicate  his  findings,          alongwith  the  sums awarded,  separately  on  each          individual item  of dispute.          The venue of the arbitration shall be such place or          places  as  may be fixed by the arbitrator  in  his          sole discretion.          The  award  of the arbitrator shall  be  final  and          binding on both the parties to the contract."                                                        611          Therefore, it would be clear that the arbitrator is          to  be  appointed  by  the  Engineer-in-Chief.   Of          course,  if that arbitrator resigns or vacates  his          office or is unable or unwilling for some reason or          other, then he may appoint another arbitrator.      Section  8 of the Arbitration Act occurs under  Chapter II  which  deals with arbitration  without  intervention  of court, while Section 20 falls under Chapter III which  deals with arbitration with intervention of court.      In our view, Section 8 provides a simple machinery  for appointment  of an arbitrator, initially, as seen from  Sub- section  (1) (a) or for supplying the vacancy as  seen  from Sub-section  (1) (b) if the said vacancy occurs  during  the period of arbitration.      Sub-Section  (1) (a) would apply to a case  of  initial appointment   of   an  arbitrator   or   arbitrators.    The implication is in the arbitration agreement, the  arbitrator or arbitrators must not have been named.  Where,  therefore, they are named, this section will have no application.      Similarly,  the arbitrator or arbitrators are  required to  be  appointed  by  all parties  to  the  reference  with consent.   On the contrary, if there is some other  mode  of appointment,  for example, Section 4, where the  parties  to the agreement agree that the arbitrator has to be  appointed by  a person designated in the agreement either by  name  or hold, for the time being in office, certainly, this  section will  not  apply.  It has also been held by  this  Court  in Chander  Bhan Harbhajan Lal v. The State of Punjab AIR  1977 (2)  S.C.R.  1210  that even in  cases  where  by  agreement between  the  parties, one of them alone is given  power  to make  the appointment without consulting others,  this  Sub- Section would apply.      Now, we come to sub-Section (1) clause (b).  This  Sub- Section covers such of those cases where the arbitration  is pending.   However, a vacancy has arisen in any one  of  the following contingencies:-          (i)  Death          (ii) Incapacity          (iii) Refusal

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        (iv)  Neglect to act                                                        612      It also requires to be noted that two other  conditions are required to be satisfied before the vacancy is sought to be filled up-          (i) The arbitration agreement did not indicate  the          vacancy was not intended to be filled up.          (ii) The parties could not concur in the choice.      Therefore,  without  going  into  the  question  as  to whether   Section 20(4) would have been resorted to or  not, we  find that the conditions under Section 8(1)  (b)  listed above, are not satisfied in this case.      It  has already been seen that  successive  arbitrators had been appointed and they are De Costa, Jaini, Mirchandani and  Baorinath,  who ultimately came to resign  on  14.9.84. The  contractor  AB Tuli died on 16.6.82.  The  legal  heirs were   required  to  submit  and  prove   their   succession certificate.    There  was  an  inordinate  delay   in   the production  of  such certificate.   Thereafter,  during  the pendency  of the proceedings, YNR Rao was  appointed.   Even after  his relinquishment on 23.4.90, AV Gopal Krishnan  was appointed  on 25.7.90.  Thus, it would be clear  that  there was no refusal or neglect to act (the question of dealth  or incapacity not arising here).      From  the above, it will follow that even  the  vacancy was  actually supplied by the Engineer-in-Chief.   The  last condition  about the concurrence in relation to  the  choice also does not arise here.  It is somewhat strange that  when it  was brought to the notice of the trial court  about  the appointment  of  YNR  Rao,  the  Court  did  not  even  take congnizance  of the same.  As a matter of fact, para 4.5  of the Counter Affidavit of Union of India specifically  states as follows:          "That vide application dated 8.1.1990, the Union of          India  brought it to the notice of the  court  that          as  per Clause 70 of the Contract  Agreement,  Shri          YNR  Rao, Chief Engineer, a member of the  combined          panel of Arbitrators had been appointed  arbitrator          in this case vide letter dated 4.12.1989"      Even   thereafter,  on  25.7.90,  Gopal  Krishnan   was appointed.   That  is taken cognizance of and by  the  order dated 20.8.90, the said appointment was revoked and Puranjit Singh was appointed arbitrator.  The court apparently was of the view that since notice had been given by the  petitioner for  the appointment of the arbitrator, on the expiry of  15 days of the notice,                                                        613 the respondent forfeited the right to appoint an arbitrator. As  an abstract proposition of law, Mr. Sachar is  right  in relying on Executive Engineer, Prachi Division  Bhubaneshwar v.  Gangaram  Chhapolia and another,  AIR  1960(Orissa)  51. Having  regard  to the facts of the case, as  stated  above, such a situation does not arise at all.      The  relevant  facts as to what  happened  during  this period can be gathered from the following averments made  in the counter affidavit filed on behalf of Union of India-          "That  Shri Harbans Singh Tuli, Sole proprietor  of          the  firm died on 15.6.82. Till 26 July,  1983,  no          steps  were  taken  by anybody  on  behalf  of  the          contractor  in  connection  with  the   Arbitration          proceedings.  On 26 July 1983, Shri Harkishan Singh          Tuli, son of late Shri Harbans Singh Tuli submitted          to  the  Arbitrator an affidavit stating  that  all          legal heirs (six in numbers) have authorised him to          represent this case on their behalf.

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        That on 12.7.84, the Arbitrator wrote to the Union          of  India  that Shri Har Kishan Singh Tuli  son  of          late Shri Harbans Singh Tuli has informed that  the          sole  proprietor  of the firm  M/s.  Harbans  Singh          Tuli  and  sons  had expired on  16.6.1982  and  is          survived  by six legal heirs.  It may be  confirmed          that the legal heirs have been brought on record of          enlistment  and  they  can represent  the  case  on          behalf   of  the  firm  and  Arbitration   can   be          continued. On 8.8.1984, the Union of India wrote to          the Arbitrator that the legal heirs of the firm may          please  be  asked to produce  necessary  succession          certificate.          That  on  4.9.1984,  Shri  Har  Kishan  Singh  Tuli          without submitting the succession certificate wrote          to   the   Arbitrator  that  the  firm   has   been          reconstituted and it has the approval of the  Chief          Engineer Western Command, Shimla.           That  on  14.9.1984, the Arbitrator wrote  to  the          Engineer-in-Chief   on  the  lines  that   "I   was          appointed  as Arbitrator to adjudicate the  Dispute          that  has arisen between the parties to  the  above          mentioned contract.  That more than four years have          elapsed,  but the Contractor has still  to  collect          the   information   from  the  Govt.  Due  to   the          preoccupation with the other work,                                                        614          it may not be possible for me to finalise the case.          I   am,   therefore,   resigning   appointment   as          arbitrator in the above case."          "That  on  19  Nov. 1984,  Har  Kishan  Singh  Tuli          purporting  to act on behalf of  Tuli  Construction          Company  Private  Ltd.  Chandigarh,  wrote  to  the          Engineer-in-Chief  to appoint  another  arbitrator.          Again  on  20.12.1984, Shri Har Kishan  Singh  Tuli          purporting  to act on behalf of  Tuli  Construction          Company Ltd., Chandigarh again wrote to the  E-in-C          that  since the contract for the subject  work  was          entered  into with M/s Harbans Singh Tuli and  Sons          with  late  Sardar  Harbans  Singh  Tuli  as   Sole          Proprietor  all  the legal heirs  have  decided  to          incorporate  their Sole Proprietorship into a  Pvt.          Ltd. Company under the name and style M/s.  Harbans          Singh  Tuli  & Sons Builders Pvt.  Ltd.,  and  this          company   is   under   incorporation.    Till   the          incorporation is completed, please suspend all  the          action  with the firm for  the first  being.   This          aspect is worth-noting to account for delay on  the          part of the petitioner Contractor.           That   for  two  years,  nothing  was   heard   in          connection  with the Arbitration  proceedings  from          the  claimant  and  then  on  05.7.1986,  Shri  Har          Kishan  Singh Tuli, purporting to act on behalf  of          Harbans Singh Tuli & Sons Builders Pvt. Ltd.  wrote          to E-in-C’s to appoint another Arbitrator.           That  on  29.7.1986, the  Engineer-in-Chief,  Army          Headquarters,  New Delhi wrote to Shri  Har  Kishan          Singh Tuli, 359, Sector 9-D, Chandigarh that as per          their records S. Harbans Singh Tuli & Sons  expired          long  time  ago,  and were  requested  to  intimate          direct to Chief Engineer Bareilly zone, Bareilly as          to what was his status with the Sole proprietorship          firm  with  whom the contract under  reference  was          entered  into  with the Chief  Engineer,  alongwith          succession certificate and their legal documents so

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        that further action can be taken in the matter.          That  instead  of supplying  necessary  information          Shri Har Kishan Singh Tuli & Sons sent to E-in-C, a          copy  of memorandum and Articles of Association  of          M/s, Harbans Singh Tuli & Sons and claimed that the          new Company is the successor of                                                        615          the Sole Proprietorship firm.  Union of India asked          Shri   Har  Kishan  Singh  Tuli  to  submit   legal          certificate issued by the competent Civil Court."      Therefore, the trial court ought not have appointed the arbitrator.   The  appointment of arbitrator by  the  court, namely,  Puranjit Singh has caused immense prejudice to  the respondent.   First  and  foremost there  was  not  even  an application on behalf of the petitioner under Section 12 for revocation  of the appointment of AV Gopal Krishnan.   Then, again,  Puranjit  Singh  took  charge  on  1.9.90  issued  a direction to the Union of India to submit its defence on  or before  20.9.90 The hearing date was fixed between  4th  and 7th  of  October, 1990, at Chandigarh.  A request  was  made through  a telegram from the Chief Engineer not  to  proceed with  the arbitration.  However, the arbitrator not  finding the statement of defence forthcoming before 20th  September, directed the same be filed before 1st of October.  Even then no statement was filed.  The Union of India had not  entered appearance.   An ex-parte award was made on 8.10.1990 for  a huge sum of Rs. 90.67 lakhs.  While the petitioner could not give detail of the four claims before the arbitrator earlier appointed,  he would file as many as 29 claims  before  this arbitrator and they were accepted.  The arbitrator had given 335% as escalation with regard to claims  No. 1 to 24. Apart from the haste with which the arbitrator had proceeded,  the matter  has  not been considered in its  proper  perspective through a process of reasoning.  Therefore, we conclude that the  High  Court is right in its  conclusion.   The  learned Additional   Solicitor   General’s   submission   that   the appointment  of Puranjit Singh  had caused prejudice to  the Union of India is fully justified.  Therefore, without going into  the other legal aspects, we dismiss the Special  Leave Petition.                            ORDER      In   view  of  our  concurring  judgments  dated   11th February, 1992, the Special Leave Petition is dismissed. G.N.                                     Petition dismissed.                                                        616