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Laxmi Continental Construction Co. vs. State of U.P. and Ors. - (Supreme Court) (20 Sep 2021)

Sole Arbitrator, who was appointed by designation, can continue the arbitration proceedings even after his retirement and can pass the award



A contract was entered into between the parties regarding the earthwork vide agreement dated 06.02.1988. During the contract work, various disputes and differences arose between the parties. All disputes and differences between the parties were required to be resolved through arbitration in pursuance of agreement. The Chief Engineer appointed one Shri S.S. Manocha, who at the relevant time was also a Chief Engineer, as an Arbitrator. During the period, the learned Arbitrator superannuated on completion of superannuation age. The Appellant filed Arbitration Suit before the Civil Judge (Senior Division), Roorkee praying for extension of time for making the award and for hearing and conducting the arbitration. The Respondents took their objections that the arbitrator has got retired and, therefore, the arbitration proceedings should not be proceeded by the Sole Arbitrator, who has retired. The Respondents also filed Misc. Suit with a prayer for declaring reference sent to the Sole Arbitrator as inoperative and illegal.

Both the suits were heard together and Civil Judge extended the period of arbitration for 30 days and directed the Sole Arbitrator, Shri S.S. Manocha to decide the same within the extended period of time. The Sole Arbitrator declared the award on 08.01.1998 and ordered the Respondents to pay a total sum of Rs. 10,97,024.00 with interest on the said sum from 01.10.1990 to 07.01.1998. The Respondents filed their objections under Sections 30 and 33 of the Arbitration Act, 1940. Having found that arbitration clause of the agreement does not provide for terminating the mandate of the Arbitrator on his retirement, the learned Civil Judge overruled the objections raised by the Respondents herein and made the award dated 08.01.1998 Rule of the Court.

Feeling aggrieved, the Respondents preferred appeal before the High Court. By impugned judgment and order the High Court has allowed the said appeal and has quashed and set aside the award made by Shri S.S. Manocha, solely and mainly on the ground that after the retirement of the Sole Arbitrator has misconducted himself by proceeding further with the arbitration proceedings. Feeling aggrieved and dissatisfied by the impugned judgment and order passed by the High Court, the Appellant has preferred the present appeal. The short question which is posed for consideration before this Court is whether once an officer of the department is appointed as an Arbitrator considering the arbitration clause, whether his mandate to continue the arbitration proceedings shall come to an end on his retirement?

The court after considering he relevant arbitration clause found that the only qualification for appointment as an arbitrator is that he should be the officer of the rank of the Superintending Engineer or higher. Once such an officer is appointed as an Arbitrator, he continues to be the Sole Arbitrator till the arbitration proceedings are concluded unless he incurs the disqualification under the provisions of the Indian Arbitration Act, 1940. Even after his retirement, the arbitration proceedings have to be continued by the same Arbitrator. Arbitration Clause of the agreement does not provide at all that on the retirement of such an officer, who is appointed as a Sole Arbitrator, he shall not continue as a Sole Arbitrator and/or the mandate to continue with the arbitration proceedings will come to an end.

The Court also considered the case of Himalayan Construction Co. wherein this Court has overruled the objection that after the retirement of the Sole Arbitrator, who was appointed by designation cannot continue arbitration proceedings after his retirement and cannot pass the award.

In the present case also the Sole Arbitrator, who at the relevant time was the Chief Engineer and was qualified to become the Sole Arbitrator was even nominated and/or appointed by the Chief Engineer as per Arbitration Clause. Therefore, it cannot be said that his mandate to continue with the arbitration proceedings would come to an end on his retirement. Also, once the learned Sole Arbitrator continued with the arbitration proceedings and passed the award within the extended period of time, it cannot be said that he has misconducted himself as he continued with the arbitration proceedings.

In view of the above and for the reasons stated above, the impugned judgment and order passed by the High Court quashing and setting aside the award as well as the order passed by the learned Civil Judge (Senior Division), Roorkee making the impugned award Rule of the Court deserves to be quashed and set aside. Accordingly, the present appeal is allowed.


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