IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 5605 OF 2008

(Arising out of SLP©No.8195 of 2007)

Union of India & Ors.       …Appellants.

Versus

M/s. Talson Builders      …Respondent

O R D E R

1. Delay  of  264  days  in  filing  the  special  leave

petition is condoned.

2. Leave granted.

3. This appeal  is directed against the judgment

and final order dated 24th of February, 2006 passed

by  the  High  Court  of  Judicature  at  Allahabad  in

Original  Arbitration  Petition  No.117  of  2003

whereby  the Chief  Justice  of  the High Court  had

appointed  a  retired  Judge  of  the  Allahabad  High

Court as Arbitrator to decide the dispute raised by

the  parties.  The  order  passed  by  the  High  Court

runs as under:

“For the purpose of acting as Arbitrator in this  matter,  Hon’ble  R.K.Gulati  of  11,

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Taskhand  Marg,  Allahabad,  a  retired Judge  of  this  Hon’ble  Court  is  hereby nominated and appointed.”

4. It is not in dispute that the respondents filed

an  application  for  appointment  of  an  Arbitrator

under  Section  11(6)  of  the  Arbitration  and

Conciliation Act, 1996. The respondent was granted

certain  contracts  for  Military  Engineering  service

out of which, we are only concerned relating to CA

NO.CWE/KAN/22  of  1996-97.  After  completion  of

contract  work,  the  respondent  submitted  its  final

bill wherein it was specifically certified that the final

bill included all claims raised by it from time to time

irrespective of the fact whether they were admitted

by the department or not and that there were no

more  claims  in  respect  of  the  contract  and  the

amount so claimed must be held to be full and final

settlement of the claim of the respondent under the

contract  agreement.   According  to  the  appellants,

the respondent submitted its final bill and received

full payment without any protest. However, on 14th

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of August, 2000, the respondent sent a letter to the

appellants for appointment of an Arbitrator which

was not agreed to by them with the observation that

the final bill in respect of the subject work had been

signed and the amount  had already been paid in

full and final settlement and therefore, there was no

dispute to be referred to the Arbitrator as prayed for

by  the  respondent.  By  the  aforesaid  order  and

without going into the question whether there was

any dispute pending between the parties, the High

Court, by the impugned order, appointed a retired

Judge of the High Court as an Arbitrator to decide

the dispute between the parties. Now, the question

is -  when such objections were raised against the

appointment of an arbitrator on the ground that the

claim  could  not  be  referred  to  the  Arbitrator

because of full and final settlement and the claim

stood liquidated, the High Court ought not to have

referred  such dispute  by appointing  an Arbitrator

without  deciding  the  objections  so  raised,  or  it

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would be left open to the Arbitrator to go into this

question after the parties had entered appearance

before him. This question has already been decided

by a three-Judge Bench of this Court in  Northern

Railway  Administration,  Ministry  of  Railway,

New Delhi vs. Patel Engineering Company Ltd.

dated 18th of August, 2008.  This Court after giving

due  consideration  of  the  expression  “due  regard”

has observed in paragraph 13 as follows:  

“In all these cases at hand the High Court does not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other  considerations  necessary  to  secure the  appointment  of  an  independent  and impartial arbitrator. It needs no reiteration that  appointment  of  the  arbitrator  or arbitrators  named  in  the  arbitration agreement is not a must, but while making the appointment the twin requirements of sub-section  (8)  of  Section 11  have  to be kept  in  view,  considered  and  taken  into account. If  it is not done, the appointment becomes vulnerable. In the circumstances, we  set  aside  the  appointment  made  in each case,  remit the matters to the High Court to make fresh appointments keeping in view the parameters indicated above. “

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5. In view of the aforesaid decision, we have no

other alternative but to set  aside the order of the

High Court and request the High Court to go into

the dispute and then dispose of the application for

appointment of an Arbitrator under Section 11(6) of

the Act in accordance with law. It is expected that

the High Court shall decide the said application as

early  as  possible  preferably  within  three  months

from the date of supply of a copy of this order to it.

The impugned order is thus set side. The appeal is

allowed to the extent indicated above. There will be

no order as to costs.    

………………………J. [Tarun Chatterjee]

New Delhi;           ………………… …….J. September 11, 2008.       [Aftab Alam]

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