1992 (7) TMI 295 - SC - Companies Law

Arbitration application - Held that - Appeal dismissed. As only in cases where the agreement does not specify the arbitrator and the parties cannot also agree upon an arbitrator, does the court get the jurisdiction to appointment an arbitrator. It must, accordingly, be said that in the present case, there was no occasion or warrant for the learned Subordinate Judge to call upon the parties to submit panels of arbitrators. He was bound to refer the dispute only to the arbitrator named and specified in the agreement. This aspect, however, has become academic now in view of the fact that the very application under Section 20 has been held by us to be barred by limitation.

Summary

Issues:
1. Application under Section 20 of the Arbitration Act barred by limitation.
2. Justification of the direction to submit panels of arbitrators by the learned Subordinate Judge.

Analysis:
1. The Civil Appeal was filed against the Kerala High Court's decision to set aside the appointment of an arbitrator by the learned Subordinate Judge. The appellant entered into an agreement with the State of Kerala in 1966, failed to complete the work, and the contract was terminated in 1968. The State initiated proceedings for recovery of losses, and a notice of demand was served in 1974. The appellant applied for arbitration in 1985, which the High Court held as barred by limitation under Articles 137 and 113 of the Limitation Act, 1963. The Supreme Court upheld this decision citing precedents like Inder Singh Rekhi v. Delhi Development Authority and Kerala State Electricity Board v. Amsom, which established that Article 137 applies to applications under Section 20 of the Arbitration Act. The Court concluded that the right to apply under Section 20 accrues when the differences arise between the parties, which in this case, was when the demand notice was served in 1974, making the 1985 application time-barred.

2. The learned Subordinate Judge had directed both parties to submit panels of arbitrators for appointment, despite the agreement specifying the Superintending Engineer as the arbitrator. The Supreme Court clarified that in cases where the agreement designates a specific arbitrator, the court must refer the dispute to that arbitrator unless the designated arbitrator is unable to act. The Court emphasized that the Subordinate Judge should have referred the dispute to the Superintending Engineer as per the agreement and not called for panels of arbitrators. Although this issue became academic due to the limitation bar on the application, the Court highlighted the importance of adhering to the designated arbitrator in agreements to avoid unnecessary deviations in the arbitration process.

In conclusion, the Supreme Court dismissed the appeal, upholding the Kerala High Court's decision that the application under Section 20 was time-barred. The Court also emphasized the significance of honoring designated arbitrators in agreements to maintain the integrity of the arbitration process.