HIMACHAL PRADESH NATIONAL LAW UNIVERSITY, SHIMLA

16 MILE, SHIMLA-MANDI NATIONAL HIGHWAY, GHANDAL

DISTRICT SHIMLA, HIMACHAL PRADESH-171014

Case Comment on M/s. Laxmi Continental Construction Co. v State of U.P.

& Anr.

Alternative Dispute Resolution

Course In-charge Submitted by

Dr. Pushpanjali Sood Ishu Dayal

Srivastava
Assistant Professor of Law B.A. LL.B. 9th Semester,
1020192026

Declaration

This is to certify that the research paper submitted by me is an outcome of my independent

and original work. I have duly acknowledged all the sources from which the ideas and
extracts have been taken.

I certify that the intellectual content of this research is the product of my own work and that
all the assistance received in preparing this research and sources have been acknowledged.
The format of citation being used is Bluebook, 20th Edition.

All work is my original content and has been rid of plagiarism to the greatest extent possible.
I am aware that the work may be electronically verified for plagiarism detection.

Ishu Dayal Srivastava

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 LIST OF ABBREVIATIONS

Abbreviations Expansions
AC Appeal Cases
AIR All India Reporter
All ER All England law Reports
ALR American Legal Review
Anr. Another
Bom Bombay
Co. Company
D&R Decisions and Reports
DE Delhi
Ed. Edition
FC Federal Court
I.A. Interlocutory Appeal
ILR Indian Law Report
L.R. Law Report
Ltd. Limited
MANU Manupatra
OCCP Online Curated Content Provider
Ori Orissa
Ors. Others
Para. Paragraph
PC Privy Council
SC Supreme Court
SCC Supreme Court Cases
TL Telangana
UOI Union of India
v. Versus

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Facts of the Case

 That a contract was entered into by the appellant and respondent on 06.02.1988.
Various dispute and conflicts arose between the parties during the course of
business. In pursuance of a contractual clause, the dispute was referred to
arbitration. A chief engineer was appointed as arbitrator during the year 1992.
Both parties initially participated in the arbitral proceeding. During the course of
the proceedings, the arbitrator attained superannuation age and retired.
 That the appellant filed another suit for extension of the proceedings for hearing
and award. The respondent contended that the arbitrator had retired and prayed
that the extension should not be granted.
 That the civil judge, by an order, extended the period for 30 days and directed that
the order should be passed within the 30 days. The arbitrator declared an award to
the appellant by directing the respondent to pay compensation with interest.
 That the Respondent appealed before the civil judge for setting aside the order
under Section 33 of the Act which was dismissed. Feeling aggrieved, the
respondent appealed before the High Court. The High Court, by an order, quashed
the order of civil judge and set aside the arbitral award. The High Court held that
after the retirement, the arbitrator is in misconduct of proceeding with the
arbitration proceedings. Feeling aggrieved, the present was preferred by the
appellant.
 That the counsel for appellant argued that parties to the arbitration are bound by
the agreement and the arbitral award passed by the arbitrator. The counsel for the
respondents contended that once the tenure of the arbitrator is over, he cannot
continue with proceedings, rather another arbitrator should be appointed in place
of him.
 That the counsel also brought notice to Section 4 of the Act where a state
amendment was made. It provided that once an arbitrator refuses to act or
becomes incapable to act, another arbitrator shall be appointed.

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Issues
 Whether once an officer of the department is appointed as an Arbitrator, whether
his decision to continue the arbitration proceedings on his retirement is invalid?
 Whether carrying on the arbitration proceedings by such an Arbitrator after his
retirement amounts to committing a misconduct?

Arguments Advanced by the Counsels and Responses from the Bench

Appellants

It was submitted that clause 52 does not provide that the arbitrator nominated and/or
appointed shall have a mandate to continue the arbitration proceedings till he remains in
service, and, thereafter, on his retirement his mandate is terminated. It is submitted that in
absence of such a provision in the clause 52, once an Arbitrator is appointed considering the
qualification mentioned in clause 52, thereafter, he continues as an Arbitrator till the
arbitration proceedings are concluded unless clause 52 provides other way round.

It was further submitted by learned Advocate appearing on behalf of the appellant that even
otherwise the High Court ought to have appreciated that throughout the respondents
participated in the arbitration proceedings even after the Sole Arbitrator, Shri S.S. Manocha
attained the age of superannuation.

It was submitted that High Court has also not appreciated that even thereafter by order dated
11.12.1997, the learned Civil Judge (Senior Division), Roorkee extended the time to
complete the arbitration proceedings after overruling the objections raised by the respondents
and that after the retirement, Shri S.S. Manocha, the learned Sole Arbitrator cannot continue
with the arbitration proceedings.

It was submitted that the order dated 11.12.1997 passed by the learned Civil Judge (Senior
Division), Roorkee remained unchallenged and attained the finality. It is submitted, therefore,
that thereafter it was not open for the respondents again to raise the same objection that after
the learned Sole Arbitrator, Shri S.S. Manocha attained the age of superannuation on

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30.11.1995, he cannot continue with the arbitration proceedings, the objection which as such
was overruled/rejected by the learned Civil Judge (Senior Division), Roorkee while passing
the order dated 11.12.1997.

Futher relying upon the decisions of this Court in Himalayan Construction Co. Vs. Executive
Engineer, Irrigation Division, J&K and Anr.,1, Prasun Roy Vs. Calcutta Metropolitan
Development Authority and Anr.,2 and N. Chellappan Vs. Secretary, Kerala State Electricity
Board and Anr.,3 learned Advocate appearing for the appellant prayed to allow the present
appeal and quash and set aside the impugned judgment and order passed by the High Court
and consequently to restore the award declared by the Sole Arbitrator and the order passed by
the learned Civil Judge (Senior Division), Roorkee making the award Rule of the Court.

Reponses from the bench

The bench concurred and accepted the arguments.

Respondents

Shri Raizada vehemently submitted, learned Senior Advocate appearing on behalf of the
respondents that it is not in dispute that the learned Sole Arbitrator was appointed as per
clause 52 and as he was the Chief Engineer. It was submitted, therefore, that once he retired
on attaining the age of superannuation and he did not continue as a Chief Engineer, his
mandate is terminated to continue with the arbitration proceedings and a new Arbitrator is to
be nominated and appointed afresh as per clause 52 of the agreement. It is further submitted
that right from the retirement of the Sole Arbitrator, the respondents raised an objection
against his continuing with the arbitration proceedings and despite the same, he continued
with the arbitration proceedings even after his retirement, as rightly observed by the High
Court, he has misconducted himself, and, therefore, the High Court has rightly quashed and
set aside the award declared by Shri S.S. Manocha, the learned Sole Arbitrator, who is held to
have been misconducted.

Shri Raizada, learned Senior Advocate has also heavily relied upon the State Amendment of
Section 4 of the Arbitration Act, 1940 by submitting that as per the State Amendment

1
(2001) 9 SCC 359
2
(1987) 4 SCC 217
3
(1975) 1 SCC 289
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applicable to the State of U.P., in every case, where any appointed arbitrator neglects or
refuses to act, or becomes incapable of acting or dies, the vacancy shall be supplied by the
person designated as mentioned in sub-section (1) of Section 4. Making the aforesaid
submissions, it is prayed to dismiss the present appeal.

Responses from the bench

Firstly, the said amendment was not applicable at all. It cannot be said that the Sole Arbitrator
had become incapable of acting on his retirement from service. The observations made by the
High Court in the impugned judgment and order that the Sole Arbitrator has misconducted
himself by continuing with the arbitration proceedings after his retirement is also not tenable
at law. The bench rejected the arguments.

Decision (Ratio & Obiter)

Upon examining the arbitration clause in the Agreement, the Apex Court held that the only
qualification for appointment as a sole arbitrator was that he should be the officer of the rank
of the superintending engineer or higher. Once such an officer was appointed as the sole
arbitrator, he continued to be an arbitrator until the proceedings were completed unless he
incurred any disqualification under the provisions of the Arbitration Act.

The Apex Court relied on a similarly situated case in Himalayan Construction Co. v.
Executive Engineer Irrigation Division, J&K and Anr.1 where it had overruled the objection
that the sole arbitrator appointed by designation could not continue arbitral proceedings and
pass an award upon his retirement. The Hon'ble Supreme Court then turned to the arbitration
clause in the Agreement. The Apex Court observed that it could not be said that the mandate
of the sole arbitrator would come to an end upon his retirement. Moreover, the Apex Court
took note that the respondents had raised the very same objections before the learned civil
judge. The learned civil judge had overruled such an objection and granted one month's
extension to the sole arbitrator to complete the proceedings. The said order of the learned
civil judge had attained finality. Therefore, it was not open for the respondents to again raise
the same objection.

The Apex Court then referred to the respondents' allegations that the sole arbitrator had
misconducted himself by continuing the arbitral proceedings post his retirement. The Hon'ble

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Supreme Court noted that the sole arbitrator passed an arbitral award within the extended
period of time granted by learned civil judge. Therefore, it could not be said that he had
misconducted himself.

In view of the above, the Hon'ble Supreme Court passed an order quashing and setting aside
the impugned judgment of the High Court. Accordingly, the instant appeal was allowed.

Significance/Contribution of the Case:

Party autonomy is the fountain head of arbitration jurisprudence in India. In the instant
matter, the parties had nowhere in their arbitration clause specified that the mandate of the
sole arbitrator appointed by designation would terminate upon his retirement from the
department. In such circumstances, the Apex Court rightly recognized the significance of
party autonomy in arbitral process and held that there was no reason to deviate from terms
and procedure of appointment of the sole arbitrator agreed upon by the parties.

Certainly! Party autonomy is a fundamental principle in arbitration that underscores the

ability of parties involved in a dispute to determine the terms, procedures, and rules
governing the resolution of their conflict. In the context you've mentioned, the absence of a
specific clause addressing the termination of the arbitrator's mandate upon retirement from a
particular department highlights the importance of parties' autonomy in arbitral proceedings.

The case you're referring to likely revolves around the interpretation of the arbitration clause
and the implications of an arbitrator's retirement from a department. The parties had
designated a sole arbitrator without explicitly detailing the circumstances under which the
arbitrator's mandate would end due to retirement.

In such a scenario, the Indian Apex Court likely emphasized the significance of honoring the
intentions and agreements made by the parties when selecting the arbitrator and crafting the
arbitration clause. Without a stipulation addressing the arbitrator's retirement from a
department, the Court might have upheld the principle of party autonomy, affirming that the
parties' chosen procedure and the terms of appointment should prevail.

This decision likely highlights the Court's commitment to respecting the autonomy of the
parties in determining the arbitration process. By upholding the agreement made by the

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parties, it ensures that their intentions govern the resolution of disputes, promoting the
effectiveness and integrity of the arbitral process.

The recognition of party autonomy in this context underscores the freedom of parties to tailor
arbitration proceedings according to their specific needs and preferences. It serves as a
reminder that the arbitration process should reflect the parties' intentions as closely as
possible, absent any compelling reasons or legal obligations to deviate from the agreed-upon
terms.

Ultimately, this decision likely strengthens the principle that in the absence of explicit
provisions addressing a specific circumstance such as an arbitrator's retirement, the Court
upholds the parties' autonomy and adheres to the terms they have mutually agreed upon.