2009 (4) TMI 898 - SC - Companies Law

Appointment of arbitrator - whether any dispute exists between the parties? - Held that - The Court without considering that whether any dispute exists between the parties, could not have appointed an Arbitrator. Therefore, the Court was not justified in appointing a Retired High Court Judge as the sole Arbitrator in the present case. Appeal allowed.

Summary

Issues:
Appointment of Arbitrator based on arbitration clause and conditions of the contract.

Analysis:
The appeal challenged the appointment of a Retired High Court Judge as the sole Arbitrator by the Punjab and Haryana High Court based on an arbitration clause. The appellant, Engineer-in-Chief, had a contract with the respondent/contractor, which was completed, and a final bill was settled. The respondent later submitted additional claims, leading to a dispute. The High Court appointed the retired Chief Justice as the Arbitrator, citing the forfeiture of the appellant's right due to the absence of an affidavit within the stipulated period. The appellant argued that the respondent waived their right to further claims by signing the final bill without protest, as per the contract's conditions. The appellant contended that the appointment of a Retired High Court Judge as an Arbitrator was not in line with the agreement's provisions, citing relevant legal precedents.

The appellant relied on legal precedents to support their argument that the respondent's acceptance of the final bill without protest constituted accord and satisfaction, barring further claims. Additionally, the appellant highlighted the conditions in the contract, specifically condition 65, which waived any additional claims after the final bill submission. The appellant emphasized the requirement for an Arbitrator with an engineering background as per the contract terms, challenging the appointment of a Retired High Court Judge. The appellant argued that the appointment was unjustified as there was no existing dispute between the parties, as the respondent's actions were deemed a waiver under the contract terms.

The Supreme Court emphasized the importance of a valid dispute and the appointment of an Arbitrator based on agreement terms and the nature of the dispute. The Court noted that the respondent's actions, including signing the final bill without protest, constituted a waiver under the contract conditions. The Court held that the appointment of a Retired High Court Judge as the Arbitrator was not in line with the contract's requirement for an Arbitrator with an engineering background. Ultimately, the Court allowed the appeal, setting aside the High Court's order and emphasizing the need for appointing an Arbitrator based on the agreement's terms and the presence of a valid dispute.