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Issues: Interpretation of arbitration clause, Jurisdiction to appoint arbitrator under Section 20(4) of the Arbitration Act, 1940
Interpretation of Arbitration Clause: The appeal questioned whether the lower court was correct in appointing an arbitrator based on an application made under Section 20 of the Arbitration Act, 1940. The agreement between the parties included an arbitration clause specifying the Vice Chairman of the Ghaziabad Development Authority (GDA) as the sole arbitrator. The appellant argued that as long as parties agree on an arbitrator, the court cannot appoint another unless the agreed arbitrator fails to act. On the other hand, the respondent contended that the clause allowed appointment only with the parties' consent. The High Court emphasized strict interpretation of agreements, highlighting that vague portions should not create agreements not intended by the parties. It concluded that the parties had agreed to the Vice Chairman as the arbitrator, and the phrase "parties can agree" should not be given undue weight. Jurisdiction to Appoint Arbitrator under Section 20(4): The Court referenced the case of S. Rajan v. State of Kerala, stating that when an agreement names an arbitrator, the Court must refer the dispute to that arbitrator unless they fail to act. The respondent argued that the GDA's inaction in referring the dispute to the Vice Chairman implied failure to act, justifying the Court's appointment of another arbitrator. However, the Court rejected this argument, emphasizing that the failure of the arbitrator, not the party, is crucial. The Court also cited Union of India v. Prafulla Kumar Sanyal, outlining the hierarchy of appointing arbitrators: first, the named arbitrator; second, an arbitrator agreed upon by the parties; and lastly, the Court's choice. In this case, the Court found that the lower court erred in appointing an arbitrator without exploring the first two options, thus allowing the appeal and remitting the matter to refer the dispute to the Vice Chairman as per the arbitration agreement. Conclusion: The High Court allowed the appeal, setting aside the lower court's order and instructing to refer the dispute to the Vice Chairman of the GDA as the sole arbitrator as per the arbitration agreement. The judgment clarified the importance of strict interpretation of arbitration clauses and the hierarchy of appointing arbitrators as outlined in relevant legal precedents.
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