http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 3  

CASE NO.: Special Leave Petition (civil)  11279 of 2006

PETITIONER: YASHWITH CONSTRUCTION P. LTD.      

RESPONDENT: SIMPLEX CONCRETE PILES INDIA LTD. & ANR.                         

DATE OF JUDGMENT: 03/07/2006

BENCH: P.K. BALASUBRAMANYAN & R.V. RAVEENDRAN

JUDGMENT: JUDGMENT O R D E R  (CC 3801/2006)

P.K. BALASUBRAMANYAN, J.

                1.              Delay condoned.

2.              On a dispute having arisen, the Managing  Director of the respondent company appointed an  arbitrator in terms of the arbitration clause.  The  arbitrator resigned.  Thereupon the Managing Director of  the respondent company, in view of the mandate in the  arbitration agreement promptly appointed another  arbitrator.  At that stage, the petitioner approached the  Chief Justice of the High Court under Section 11 sub- Section 5 read with Section 15(2) of the Arbitration &  Conciliation Act, 1996 (for short "the Act"), praying that  the Chief Justice may appoint a substitute arbitrator to  resolve the disputes between the parties.  The Chief  Justice found that the appointment of the second  arbitrator by the Managing Director, after the resignation  of the first arbitrator, was valid in law since it was  permissible under the contract and the right to make such  an appointment was saved by Section 15(2) of the Act.   The argument that Section 15(2) of the Act referred to  statutory rules providing for appointment of Arbitrators  and not to a contractual provision for such appointment  was rejected by the learned Chief Justice.  It was held by  him that no occasion arose for him to appoint an  arbitrator under Section 11(6) of the Act in the case.   Thus, the application was dismissed leaving the parties to  pursue their claims before the arbitrator appointed by the  Managing Director in terms of arbitration agreement  between the parties.   

3.              The petitioner challenged the decision of the  learned Chief Justice by way of a Writ Petition in the High  Court.  The Division Bench noticed the decision of this  Court in SBP & Co. Vs. Patel Engineering Ltd. &  Another [(2005) 8 SCC 618] holding that the order passed  by the Chief Justice is a judicial order and no Writ Petition  would lie in the High Court challenging such an order and  only an appeal could be filed in the Supreme Court  invoking Article 136 of the Constitution of India.  But the  Division Bench thought that since that decision saved  appointments made on or before the date that decision

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 3  

was rendered by this Court, the Writ Petition filed by the  petitioner would also be saved and the Writ Petition could be  decided on merits.  The Division Bench held that the position  obtaining under Section 8(1) of the Arbitration Act of 1940  differed from that available under the present Act especially in  the context of Section 15 thereof and that in terms of Section  15(2) of the Act, the Managing Director could, on the basis of  the arbitration agreement, appoint another arbitrator when  the originally appointed arbitrator resigned, thus attracting  Section 15(1)(a) of the Act.  It further held that Section 15(2)  covered not only cases of appointments under statutory rules  or rules framed under the Act, but it would also take in the  terms of the agreement between the parties for appointment of  an arbitrator and in that view, the Managing Director, in the  case on hand and on the terms of the arbitration agreement,  would have the right to appoint a substitute arbitrator. Thus,  it was held that the learned Chief Justice was right in rejecting  the application made by the petitioner.  Thus, the Writ Petition  was dismissed.  It is this decision of the Division Bench that is  sought to be challenged in this petition for special leave to  appeal.

4.              In our view, the learned Chief Justice and the  Division Bench have rightly understood the scope of  Section 15 of the Act.  When the arbitrator originally  appointed in terms of the arbitration agreement withdrew  for health reasons, the Managing Director, as authorized  originally by the arbitration agreement, promptly  appointed a substitute arbitrator.  It 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 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 3  

at the initial stage.  We are not in a position to agree with  the contrary view taken by some of the High Courts.  

5.              Since here, the power of the Managing Director  of the respondent is saved by Section 15(2) of the Act and  he has exercised that power on the terms of the  arbitration agreement, we see no infirmity either in the  decision of the learned Chief Justice or in that of the  Division Bench.  We do not think it necessary in this case to  go into the question whether the Writ Petition before the High  Court was maintainable on the basis that it challenged an  order of the Chief Justice rendered on 4.3.2005, prior to the  date of the decision in SBP & Co. Vs. Patel Engineering  Ltd. & Another(supra) rendered on 26.10.2005.

6.              In this view of the matter, we see no reason to  grant leave to appeal or issue notice on this petition for  special leave to appeal.  The petition is dismissed.