# KESHAVSINH DWARKADAS KAPADIA ETC v. M/S. INDIAN ENGINEERING COMPANY

- **Citation:** [1972] 1 S.C.R. 695
- **Court:** Supreme Court of India
- **Decided:** 1971-09-10
- **Case number:** Civil Appeals Nos. 2441 and 2442 of 1968
- **Bench:** S. M. Sikri, A. N. Ray, D. G. Palekar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/keshavsinh-dwarkadas-kapadia-etc-v-m-s-indian-engineering-company-5432
- **Pages:** 12

## Headnote

Arbitration Act (10 of 1940), Sch. I, para. ~Appointment of
umpire by arbitrators-Whether consent of umpire necessary-Disagreement between arbitrators what i's.
Disputes having arisen between the appellant and the respondent, they
were -referred to arbitration in accordance with an arbitration agreement.
The arbitrators entered upon the reference and also appointed an umpire.
After the time for making the award had expired the appellant took the
stand that one df the arbitrators would be biased in favour of the respondents.
The respondents therefore called upon the arbitrators to refer the
matter to the umpire and also wrote to the umpire and the umpi-re entered upon the reference. Thereafter, the appellants filed applications under
s. 33 of the Arbitration Act, 1940. The High Court held that the umpire
rightly entered upon the reference, and extended the time to enable the
umpire to make an award.
In appeal to this Court it was contended that : ( 1) the appointment
of the umpire was not valid because the consent of the appointee was not
obtained: and (2) under cl. 6 of the Arbitration agreement the operation
of para 4' Sch. I of the Arbitration Act was excluded, and the umpire
, could ente·r upon the reference only in the event of a difference arising
between the arbitrators and the arbitrators referred the matter to the
E
umpire.
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Dismissing the appeal,
HELD : (I) There is a distinction between appointment and acceptance of an office. The question of effectiveness or perfection is ordi~
narily subsequent to appointment. The scheme of arbitration proceedings
indicates tha.t the appointment of an umpire and the acceptance of office
are two separate matters arising at different stages in the proceedings.
[699 H; 700 A; 704 El
When the arbitrators are required to appoint an umpire it only means
that the arbitrators are to concur in appointing the umpire.
There iS no
particular method of appointment of an umpire though the usual method
is by writing.
Arbitrators who are required to appoint an um.pire are
under no obligation to obtain the approval of the choice of the person by
the parties who appointed the arbitrators. If any party is dissatisfied with
the choice it will not affect the validity of the appointment; nor is the
appointment conditional upon
the acceptance
of appointment
by the
umpire.
The necessity for communication of appointment to the partieS
as well as to the appointee depends on the language of the arbitratien
clause. The Arbitration Act does not say that the appointment of umpire
by the arbitrators is to be made only after obtaining the consent of the
appointee. [700 D-E; 70 I D-F; 704 D-E]
When the umpire assumes his office he accepts
the appointment.
Acceptance may be express or implied. It need not be in writing; it may
be evidenced by conduct. It may also be evidenced by proceeding with
696
SUPREME COURT REPORTS
(1972}1 S.C.R
the arbitration. When the umpire is called upon to proceed in terms of
the appointment he will either assent expressly or by conduct to act, or he
will decline lo act. fi704 A-B, D, E-F]
Mirza Sadik Husain v. Mussamat Kaniz Zohra Begc.m, L.R. 38 I.A.
181, applied.
Ringland v. Lowndes, (1863) 15 C.B. (N.S.) 173; 143 E.R. 749 and
Tradax Export S.A. v.
Vo~wagenwerk A.G. [1970] I All E.R. 420, ex•
plained and distinguished.
(2) (a) Paragraph 4 df the first schedule provides that if the arbitra·
tors have allowed the time to expire without making an award, or have
delivered to any party to the arbitration agreement or to the umpire
a
notice in writing slating that they cannot agree, the umpire shall forthwith
enter on the reference in lieu of the arbitrators.
There
is no intention
in cl. 6 of the agreement, to exclude, the operation of this paragraph.
On
the contrary the agreement shows that the intention of the parties
was
that when the arbitrators allowed time to expire without
making
the
a\vard the umpir~ should enter on the reference in lieu of the arbitrators.
[704 H; 705 A.CJ
(b

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KESHAVSINH DWARKADAS KAPADIA ETC.
v.
M/S. INDIAN ENGINEERING COMPANY
September 10, 1971
695
[S. M. SIKRI, C.J., A. N. RAY AND D. G. PALEKAR, JJ.]
Arbitration Act (10 of 1940), Sch. I, para. ~Appointment of
umpire by arbitrators-Whether consent of umpire necessary-Disagreement between arbitrators what i's.
Disputes having arisen between the appellant and the respondent, they
were -referred to arbitration in accordance with an arbitration agreement.
The arbitrators entered upon the reference and also appointed an umpire.
After the time for making the award had expired the appellant took the
stand that one df the arbitrators would be biased in favour of the respondents.
The respondents therefore called upon the arbitrators to refer the
matter to the umpire and also wrote to the umpire and the umpi-re entered upon the reference. Thereafter, the appellants filed applications under
s. 33 of the Arbitration Act, 1940. The High Court held that the umpire
rightly entered upon the reference, and extended the time to enable the
umpire to make an award.
In appeal to this Court it was contended that : ( 1) the appointment
of the umpire was not valid because the consent of the appointee was not
obtained: and (2) under cl. 6 of the Arbitration agreement the operation
of para 4' Sch. I of the Arbitration Act was excluded, and the umpire
, could ente·r upon the reference only in the event of a difference arising
between the arbitrators and the arbitrators referred the matter to the
E
umpire.
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Dismissing the appeal,
HELD : (I) There is a distinction between appointment and acceptance of an office. The question of effectiveness or perfection is ordi~
narily subsequent to appointment. The scheme of arbitration proceedings
indicates tha.t the appointment of an umpire and the acceptance of office
are two separate matters arising at different stages in the proceedings.
[699 H; 700 A; 704 El
When the arbitrators are required to appoint an umpire it only means
that the arbitrators are to concur in appointing the umpire.
There iS no
particular method of appointment of an umpire though the usual method
is by writing.
Arbitrators who are required to appoint an um.pire are
under no obligation to obtain the approval of the choice of the person by
the parties who appointed the arbitrators. If any party is dissatisfied with
the choice it will not affect the validity of the appointment; nor is the
appointment conditional upon
the acceptance
of appointment
by the
umpire.
The necessity for communication of appointment to the partieS
as well as to the appointee depends on the language of the arbitratien
clause. The Arbitration Act does not say that the appointment of umpire
by the arbitrators is to be made only after obtaining the consent of the
appointee. [700 D-E; 70 I D-F; 704 D-E]
When the umpire assumes his office he accepts
the appointment.
Acceptance may be express or implied. It need not be in writing; it may
be evidenced by conduct. It may also be evidenced by proceeding with
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SUPREME COURT REPORTS
(1972}1 S.C.R
the arbitration. When the umpire is called upon to proceed in terms of
the appointment he will either assent expressly or by conduct to act, or he
will decline lo act. fi704 A-B, D, E-F]
Mirza Sadik Husain v. Mussamat Kaniz Zohra Begc.m, L.R. 38 I.A.
181, applied.
Ringland v. Lowndes, (1863) 15 C.B. (N.S.) 173; 143 E.R. 749 and
Tradax Export S.A. v.
Vo~wagenwerk A.G. [1970] I All E.R. 420, ex•
plained and distinguished.
(2) (a) Paragraph 4 df the first schedule provides that if the arbitra·
tors have allowed the time to expire without making an award, or have
delivered to any party to the arbitration agreement or to the umpire
a
notice in writing slating that they cannot agree, the umpire shall forthwith
enter on the reference in lieu of the arbitrators.
There
is no intention
in cl. 6 of the agreement, to exclude, the operation of this paragraph.
On
the contrary the agreement shows that the intention of the parties
was
that when the arbitrators allowed time to expire without
making
the
a\vard the umpir~ should enter on the reference in lieu of the arbitrators.
[704 H; 705 A.CJ
(b) In the present case, the arbitrators, by reason of the attitude of
one of the parties could not agree to proceed with the matter. Where one
of the arbitrators declines to act and the other is left alone, in a case of
tbis type, it will amount to disagreement between the arbitrators. [705
F-G]
(c) Failure to make an award in time where the agreement prescribed time does in certain circumstances, amount to disagreement. [705 D-E]
Io.isifoglu v. Counmantaros, (1941] I K.B. 496 and Russel on Arbitration, 18th Ed. pp. 205, 208, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 2441
and 2442 of 1968.
Appeals by special leave from the judgment and order dated
October 17, 1968 of the Bombay High Court in Arbitration Petiti~ns. Nos. 49 and 50 of 1968.
I. N. Shroff, for the appellant (in C.A. No. 2441/1968).
V. M. Tarkunde and/. N. Shroff, for the appellant (in C.As.
Nos. 2442 of 1968).
S. V. Gupte, B. R. Agarwa/a, for the respondent (in both the
appeals).
The Judgment of the Court was delivered to
Ray, J,
These
two appeals are by special leave againsi
the judgment dated 17 October, 1968 of the High Court at Bombay determining under section 33 of the Arbitration Act that the
umpire rightly entered upon the reference and further extending
the time till 31 December, 1968 for making an award thereof
by the umpire.
Two questions iirise for consideration in these appeals. First,
Whether there can be any valid appointment of umpire by arbitrators without obtaining consent of the appointee to be an um•
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KESHAVSINH v. INDIAN ENGG. CO. (Ray, J.)
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pire.
Second, on the construction of the arbitration agreement
in the presen\ case was the operation of paragraph 4 of Schedule
I of the Arbitration Act excluded with the result that the umpire
could enter upon the reference only in the event of a difference
arising between the arbitrators.
On 26 April, 1967 there was an arbitration agreement between the partnership firm of Indian Engineering Company and
Keshavsinh Dwarkadas Kapadia.
Kapadia had appointed M/s.
Chelan Trading Company as the sole selling agent of Kapadia~&
several products including aluminium and copper wire by an
agreement dated 16 September, 1965. Chetan Trading Company
in their tum appointed Indian Engineering Company as their sole
selling agent in respect of aluminium and copper wires. Chetan
Trading Company terminated their agreement with Indian Engineering Company.
Kapadia also terminated the sole
selling
agency with Chetan Trading Company Indian Engineering Company contended that on the termination of the sole selling agency
between themselves and Chelan Trading Company Indian Engineering Company became the sole selling agent of Kapadia in
terms of the agreement dated 16 September, 1965.
Indian
Engineering Company claimed damages against Kapadia for
breach of the agreement.
Kapadia claimed damages a;nd moneys
from Indian ·Engineering Company.
Disputes arose between the
parties.
These disputes were referred to arbitration in accordance
with the agreement dated 26 April, 1967.
There was a similar arbitration agreement between Cheta.n
Trading Company and Indian Engineering Company on 5 June,
1967 in respect of their disputes and claims against each other.
The arbitration agreement and the arbitrators were identical in
both the cases.
Clauses 1, 2, 5 and 6 of the arbitration agreement which are
relevant for the purposes of the present appeals are as follows:-
Clause ( 1) : All the disputes and differences arising out of
or in relation to the said Sole Selling Agency
Agreement be and they are hereby referred .to
the arbitration of the said Shri H. G. Advani
and Shri J. N. Gandhi.
Clause ( 2) : That the arbitration shall be governed by the
provisions of the Arbitration Act, 1940.
Clause ( 5) : The arbitrators shall make and publish their
award within four months from the date of
their entering upon the reference and they are
hereby authorised to extend the said tinre fl'Ollll
time to time as may be required with the pr.evious written consent of both the parties hereto-
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SUPREME COURT REPORTS
(1972) I S.C.R.
Clause ( 6) : The said arbitrators shall before proceeding
With the arbitration appoint an umpire and in
the event of any difference
arising
between
them, they shall refer the matter to the umpire
for his decision and award.
The arbitrators Messrs. Advani and Gandhi held their first
meeting on 12 September, 1967. At the said meeting . before
entering upon the reference the arbitrators appointed an umpire in
the following terms:
"Mr. Porus Mehta failing him .Mr. Murzban Mistry
appointed umpire".
On 11 January, 1968 the time laid down by clause (5) of
the agreement for making the award expired.
On 14 January,
1968 the respondents wrote to the appellants to obtain the necessary extension of time for making the award. The appellants did
not comply with the request and on 6 March, 1968 wrote to
the arbitrators that Mr. Advani one of the arbitrators would be
biased in favour of the respondents.
Thereafter, the respondents
through their solicitors called upon the arbitrators to refer the
matter to the umpire and also by a separate letter cailed upon
the umpire Mr. Porus A. Mehta to enter on the reference as
umpire appointed by the arbitrators. Mr. Mehta fixed a meeting
on 27 May, 1968. The appellants raised certain objections. The
meeting was adjourned. Another meeting was fixed on 17 June,
1968. At the meeting held on 17th June, 1968 Mr. Mehta gave
certain directions in regard to the proceedings and instructions
thereof and fixed 12 July, 1968 for hearing. The appeilants by
letter dated 12 July, 1968 addressed to Mr. Mehta contended
that the consent of the umpire was Jnon obtaine<I l>efore his
,appointment and therefore there was no valid appointment of
the umpire. Mr. Mehta fixed the meeting on 13 July, 1968 and
decided to proceed with the arbitration and adjourned the meeting
to 20 July, 1968. The appellants obtained an adjournment on
the ground that the appellants wanted to file a petition challenging
the appointment of Mr. Mehta as an umpire. Mr. Mehta adjourned the matter till 30 July, 1968.
In this context of events the
appellants filed
applications
under section 33 of the Arbitration Act which resulted in the
order appealed against.
Tlm:e contentions wh\ch had been advanced ~n the High
Court were repeated here.
First, that the arbitrators before pro-
<*ding with the reference did not obtliin consent of the umpire
1- his appointment .as umpire, and, therefore, there WI.IS no app)intrnent of umpire. Secondly, uμder clause (6) of th.e arbitratiOn agreement operation of paragraph 4 of Schedule l of !be
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KESHAVSINH V. INDIAN ENGG. CO. (Ray, /.)
,699
Arbitration Act was excluded and the umpire could enter upon
the reference only in the event of a difference arising between
the arbitrators on their disagreement.
No difference arose between the arbitrators in the present case but only time for making
the award expired. Therefore, the umpire had no right to enter
upon the reference. Thirdly, under clause ( 6) of the arbitration
agreement, the umpire had no right to enter upon the reference
unless the arbitrators referred the matter to the umpire. The High
Court relied on the decision of the Judicial Committee in Mirza
Sadik Husain v. Mussanmat Kaniz Zohra Begam and Anr.(1)
( 38 I.A. 181) and held that the umpire signified the consent by
taking up the office and the umpir0 rightly entered on the reference.
The High Court held that the contingency provided for
in paragraph 4 of Schedule I to the Arbitration Act was not
excluded. The High Court. however said that if the High Court
was wrong in the view that paragraph 4 of Schedule I to the
Arbitration Act was not excluded, expiry of time to make an award
could not be regarded as a disagreement between the arbitrators.
The third contention of the ap\)ellants was also rejected
by the High Court on the ground that clause ( 6) of the arbitration agreement in the present case did not apply when the arbitrators did not make an award within time.
Counsel for the appellants contended that the words 'if any
appointed arbitrator or umpire neglects or refuses to get' occurring in section 8 (I) of the Arbitration Act, 1940 mean that one
can refuse to act only after one has accepted the appointment.
This contention was supported by relying on the following observation in Russell on Arbitration, 18th Edition, at page 212:
"Acceptance of offices:-Acceptance of the office
by the arbitrator appears to be necessary to perfect his
appointment. It has been so decided in the case of an
umpire, and it would seem to be. only reasonable that an
appointment should not be considered effective until the
person appointed has agreed either expressly or tacitly
to exercise the function of the office".
Two decisions are cited in Russell in support of the view expressed by the author.
These decisions
are:
Ringland v.
Lowndes(') (1863) 15 C.B.(N.S.) 173==143 E.R. 749 and
Tradax Export S. A. v. Vo/kawagenwerk" A.G,, (1969) 2 Q.B.
599. The decision in Tradax Export case (supra) has been
affirmed by the Court of Appeal as will appear in ( 1970) I
A.E.R. 420.
It is importllllt to notice the distinction between appointment
and acceptance of office.
The present appeals concern the appointment of an umpire. The questions of effectiveness or per-
700
SUPREME COURT REPORTS
[1972) 1 S.C.R.
fcction of appoinunent are by the nature of things subsequent
to appointment unless the agreement or the statute provides
otherwise. Arbitrators and umpire too are often appointed by the
parties.
Sometimes an umpire is appointed by arbitrator.
The
constitution of the arbitral body and the manner in which the
appointments are made are primarily dealt with in the arbitration
agreement or else the Arbitration Act will apply.
In some cases,
the appointment of arbitrator may mquire special consideration.
If, for instance, two arbitrators. are required to be appointed one
by each party an appointment of arbitrator by a party is not complete without communication thereof to the other party.
The
reason in the words of Lord Denman is this : 'Neither pal'ty can
be said to have chosen an arbitrator until he lets the other party
know the object of his choice" (See Thomas v. Fredricks) ( 1847)
10 Q.B. 775). Where each party was to appoint a valuer by 31
May, 1847 and one of th·~ parties nominated a referee late on 31
May and sent by that night's post a notice thereof to the defendant
who received it on 1 June, it was held that the plaintiff had not
nominated a referee by 31 May.
(Sec Tew v. Harris (1848) 11
Q.B. 7).
The necessity for communication of appointment of arbitra:or
to the parties as also to ·the appointee depends often on the language
of the arbitration clause. In the Tradax Export case (supra) the
arbitration clause was as follows :-
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" ........ Any claim must be made in writing and
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claimant's arbitrator appointed within three months' of
final discharge and where this provision is not complied
with the claim shall be de·~med to be waived and absolutely barred".
This is described as the usual Centrocon arbitration clause in
charterparty agreement.
It is noticeable that in the Centrocon
arbitration clause the claimant is required to appoint an arbitrator
within three months of final discharge of cargo or else the claim
is barred.
An effoctive appointment of an arbitrator in such a
clause is necessary to constitute arbitral authority within the stipulated time to prevent the claim from being barred. Therefore, in
such a clause not only communication to the appointee but also
the acceP'!ance of office by th·~ appointee is essential for effective
appointment of arbitrator· within the meaning of the clause. A
mere nomination or appointment unknown 10 the appointee was
held not to be an appointment far less an effective appointment of
arbitrator within the meaning of that clause. The appointment will
be effective only when the appointed arbitrator accepts office and
is. anned with the duty and authority of an arbitrator. · Even in
such a clause the stage of effective appointment will be when be
has. indicated his willingness to act in that matter.
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KESHAVS!NH v. INDIAN ENGG. CO. (Ray, J.)
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In the Tradax Export case
(supra)
the charterers
~ave
notice of appointment to .the arbitrator. Three .months expire:ct·
The other side contended that there was no appomtment of arb1t·
rator w$in the stipulated ~e. The arbitrator was not set in
motion. Neither was the arbitrator clothed with the manda-te of
arbitration nor was the machinery of arbitration invoked by the
charterers. The appointment of an arbitrator there bad to be perfected and implemented by calling upon the appointee to act. In
the Tradax Export case (supra) the Court of Appeal observed
that if an application under section 27 of the English Arbitration
Act 1950 had been made, the coun would have granted relief as
expiained in Liberian Shipping Corporation 'Pegasus' v. A. King
& Sons Ltd. ( 1967) 2 Q.B. 86. Section 27 of the English Arbitration Act is a SiPecial provision conferring power upon the court
to extend the time for commencement of arbitration proceedings
where in the circumstances of the case undue hardship would otherwise be caused. This aspect indicates that in the Centrocon clause
commencement of proceedings by effective appointment is vital
and that is why relief against rigour of time clauses is granted under
section 27 of the English Arbitration Act, 1950.
In the present appeals, the reference was to arbitrators and they
were required to appoint an umpire.
The appointment of an
umpire by two arbrtrators means that the arbitrators are to concur
in appointing an umpire. There is no particular method of appointE
ment of an umpire prescribed by the Act. The usual method of
appointment of an umpire by the arbitrators is in writing. Arbitra·
tors who are required to appoint an umpire are 11nder no obligation
to obtain the approval of the choice of the personnel by the parties
who appointed the arbitrators. If any party is dissatisfied with the
choice that will not affect the validity of the appointment
(See
Oliver v. Collings (1809) 11 East 367=103 E.R. (1045).
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The appointment by arbitrators of an umpire should be the
ad of the will and judgment of the two. Such an appointment is
to be one of the choice and not of chance. [See Re. Cassell ( 1829)
9 B & C 624= 109 E.R. 232). If an umpire declines the' office
the appointment is ineffectual. The arbitrators in such a case can
G m!k'l another appointment of an umpire if the arbitration agreement empowers them to do so or the court can appoint an umpire
in lieu of an appointed umpire who refuses to act. Declining the
office will be refusal to act.
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It is, therefore, apparent that appointment of umpire is somet~g different fr?m the aceep!ance of office by the umpire. The
arbitrator or u~p1re assumes his office when he accepts the appoint•
mebt. 1:ftere ~s no a?thority for the proposition that consent of
the. appomtee 1s required. before an umpire is appointed by the
arbitrators. The observattons in Russell on Arbitration, fBth Ed.
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SUPREME COURT REPORTS
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at page 212 do not support that submission.
The decision in
Ringland v. Lowndes supra) which is referred to in Russell
had very special fea1ures.
Under the Public Health Act'. 184.8 a
disputed claim to compensauon was to be set~ed by arlntration.
Arbitrators wer.~ required to make an award w1thm 21 days after
the appointment or wi1hin ex~~nded time, if any. If arbitrators
nej!;lected or refused to appoint an umpire for seven days after being
requested so to do by any party the court of quarter sessions would
on the application of such party appoint an umpire. In that case
arbitrators were appointed in January, 1861. The arbitrators refused to appoint an umpire. The plaintiff applied at the Easter sessions
to appoint an umpire bu1 failed in con&~uence of want of a notice
of his intention to make such application. The plaintiff thereafter
gave the required notice and the second application was made at
the Midsummer sessions. One Johnson was named as umpire. But
as his consent had not been obtained no formal appointment was
made. A third application was made at the Michaelmas sessions
and Johnson was on 14 October appointed umpire and accepted
the appointment. The question for con~ider~tion was whether the
appointment of the umpire was at the Midsummer sessions or at the·
Michaelmas sessions. Under the statute the award was to be made
within three months from the umpire's appointment. The umpire
made an award on 30 December, 1861. If the appointment was
in the Midsummer sessions the Award would be bad.
It will appear from the report ( 15 C.B. (N.S.) 173 at pp. 178,
179 and 196=143 E.R. 749 at pp. 752 and 759) that it was the
duty and practice of the clerk of the peace to make an entry of the
acts and proceedings of the cqurt from which the orders of the
court were subsequently formally drawn up and no order would in
the course of practice be formally drawn up unless the assent of
•he umpire to act had been previously obtained.
Couns~l for the
board in Ring/and's case did not strongly press the objection
that an order was made at the Midsummer sessions, because th.ere
was no formal order of the Court in Midsummer sessions.
The
decision in Ringland v. Lowndes (supra) went up on appeal
as will appear from 17 C.B. (N.S.) 514=144 E.R. 207.
The
appeal, however, was on actual decision
in
Ring/and's •case
(supra) as to whether a party who attended before an arbitrator
under protest, crosscexamined adversary's witnesses and
called
witnesses did not preclude himself from afterwards objecting that
the arbitrator was proceeding without authority.
It will appear
at p. 516 of 17 C.B. (N.S.) and p. 208 of 144 E.R. that it was
conecded that the appointment of Johnson as an umpire took
pllice at the October sessions.
The special provisions of the
stlittite, ihe mode of making an application to the court of quarter
sessions, rne practice of the court in regard to drawing up
of
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IU!SHAVSINH v. INPW{ BNGG. CQ. (~, /.)
703
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ordersfot appointmi:nt of umpire and !he, speciUc requimn.ent
of consent of the appointee to an orQC{ for 11{>,EK>intml;Dt of um,
pire are all special and peculiar features in Ringland v. Lowndes
(sup(a) to support tht: view that accqitapce of umpirage is
tijielssaey for the appointment of the 11mpi.re.
B
The decision ·of the Judicial Conunittee in Mirza Sadiq
Husain v. Musanitnat Kaniz Zohm Begatn (supra) was on the
meaning of the wor(js 'refuses to act' o<:<:urririg in section 51 o·
of the Code of Civil Procedure, 1882. That section conferred
power on the court to appoint a new arbitrator or umpire "if the
arbitrator ·or ...•.•... the umpire ...•. "' .refuses., ......... to
c act".
The Judicial (',ommittee did not accept the construction
put upon the words 'refuses to act'. by the High Courts in India
that the pow~r of the court under section 510 to appoint a new
arbitrator in place of another arises only when that other had
first consented to act and thereafter refused or became incapable.
The Judicial Conunittee said "it appears to their Lordships that
D when an arbitrator is nominated by parties, his refusal to act is
signified as clearly by his refusal to accept nomination as by any
other course he could pursue.
His refusal . to act necessarily
follows, for he has not perfonned the !irst action of all, namtily,
to take up thti office by signifying his assent to his appointment.
Their Lordships do not enter at length into the matter
as
it
appears that any other construction would open the way to an
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easy defeat of the provisions of the statute".
Under section 8 of the Arbitration Act,. 1940 if any umpire
refuses to act and the arbitration agreement does not show that
it was intended that the vacancy should not be supplied, and the
parties or the arbitrators as the case may be, do not supply the
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vacancy any party inay take recourse to the provisions of the
statute for appointment of umpire. The construc_tion which the
Judicial Committee put upon the words 'refuses.to act' in Mirza
Sadik Husain's case (supra) applies to the provisions· contain'
ed in the Arbitration Act, 1940. Where the arbitrators appoint
an umpire upon the condition of the umpire's acceptance of office.
G the arbitrators will have power to reappoint an umpire if the post
is refused.
Where, again, the arbitrators appoint
an
umpire
without any such condition of acceptance of · office
and the
appointee declines the office, the arbitrators in accordance with
their powers under the arbitratiOn ·agreement can appoint an umpire again. The court has also power to appoint in lieu of an
H
appointed umpire who refuses to act, as stated in section 8 of the
Arbitration Act, 1940. In !ill these cases the appointment of an
Umpire becomes effective by acceptance_ <>f the office. Thereupon
the power of appointment is exhausted.
Jf the appointed person
SUPREME COORT REPORTS
[1972] 1 S.C.R.
after acceptance of office refuses to act or will not act the parties
have to. take recourse to the court.
A
When the umpire assumes his office he accepts the appointment.
The acceptance may be express or implied.
The
acceptance need not be in writing. It may be evidenced by conduct.
It may be also by proceeding with the arbitration.
In
B
Mirza Sadik Husain's case (supra) both the parties by agreement appointed arbitrators to settle their respective rights. One
of the arbitrators refused to act.
The respondents in that case
declined to nominate another arbitrator in their behalf.
The
Judicial Committee said that this declinature was within their
rights, the reason being that the arbitrator refused to accept office c
or to act after he had been 11ppointed.
The arbitrators in the
present case completed their appointment of umpire before
entering on the reference.
Thereafter, it remained for the umpire to act or to refuse to act.
The question of acceptance of appointment of umpire arises
with reference to the stage when he is called upon to act. The
Arbitration Act, 1940 does not say that appointment of umpire
by arbitrators is to be made only after obtaining consent of the
appointee.
The arbitrators here appointed an umpire
before
entering on the reference. The appointment was not conditional
upon t)l.e acceptance of appointment by the umpire. The scheme
of arbitration proceedings indicates that the
appointment
of
umpire and the acceptanee of office are two separate matters
arising at different stages in the proceedings.
When the umpire
is called upon to proceed fu terms of the appointment he will
either assent expressly or by conduct to act or he will decline to
act.
The High Court was correct in holding that there was a
valid appointment of the umpire and the umpire rightly entered
upon the reference. The umpire's authority commenced when he
entered upon the reference on being asked to proceed with the
reference.
The other contention on behalf of the appellants that paragraph 4 of the First Schedule to the Arbitration Act, 1940 was
excluded by clause ( 6) of the . arbitration agreement in
the
present case is unsound. Section 3 of the Arbitration Act provides that an arbitration agreement, unless a different intention
is expressed therein, shall be deemed to include the provisions
set out in the First Schedule in so far as they are applicable to
the reference. Paragraph 4 of the First Schedule provides that
if the arbitrators have allowed their time to expire without making an award or have delivered to any party to the arbitration
D
E
F
G
H
A
XESHAVSINH v. INDIAN ENGG. CO. (Ray, I.)
70S
agreement or to the umpire a notice in writing stating that they
cannot agree, the umpire shall forthwith enter on the reference in·
lieu of the arbitrators. Clause ( 6) of the arbitration agreement
does not state that only in .the event of a difference arising between the arbi.trators there shall be a reference io the umpfre.
There is no intention in the agreement to exclude the operation
B . of paragraph 4 of the First Schedule to the Arbitration Act. In
the present case the agreement provided for appointment of
umpire.
The agreement lilso provided for making of the award
by the arbitrators. It is, therefore, apparent that the intention of
the parties was that when arbitrators would allow their time to
expire without making the award the umpire would enter on the
c reference in lieu of the arbitrators.
The High Court expressed the view that if the arbitrators
allowed the time to expire that by itseH would not amount to
disagreement between the arbitrators.
As to what
constitutes
disagreement cannot be laid down in abstract or inflexible pron positions. It will depend upon the facts of the case as to whether
there was a disagreement. The High Court did not ·agree with
the view expressed in Russel on Arbitration, 18th Ed. at pages
205 and 208, that failure to make an award in time where the
agreement prescribed time in which the arbitrators award is to
be made would amount to disagreement. In Lossifoglu v. Cqunmantaro [1941] 1 K.B. 396 the arbitration clause provided
E "in case the arbitrators so appointed disagree they shall appoints
an umpire".
One of the arbitrators repeatedly endeavoured to·
arrange a meeting with the other, but failed to arrange such a
meeting. The arbitrator then unsuccessfully attempted to obtain
consent of the latter to the appointment of umpire.
Thereafter,
application was made to the court for the appointment of umF pire.
Disagreement between the arbitrators may take
various
shapes and forms.
In the present case the arbitrators by reason
of attitude of a party iin correspondence addressed to the arbitrators could not agree to proceed with the matter.
Where one
of the arbitrators decline to act and the other is left alone it
will in a case of this type amount to disagreement between the
G
two arbitrators.
In the present case, there was
disagreement
between the arbitrators. Time to make the award also expired.
Therefore, from both points of view the umpire had authority to
enter upon the reference.
For these reasons, we are of opinion ihat the High Court was
correct in making the order. The appeals are dismissed. The
H order of ihe High Court is upheld. In view of the fact that the
time granted by the High Court till 31 December, 1968 for m~
ing the award cannot apply, the umpire Porns A. Mehta
1s
ll-LlSup.Cl/72
706
SUPREME COURT REPORTS
(1972] 1 S.C.R.
granted time for three months to make the award. Three months
will run from the date of service of this order by any party to these
appeals. The appellants will pay one set of hearing fee to the
respondents.
V.P,S.
Appeals dismissed.
',
A
B