Holding

The appellant waived its right to object to the arbitrator’s appointment by consenting through its counsel, making the High Court’s appointment valid.

Summary

The appellant B.S.N.L. entered into a works contract containing an arbitration clause that designated the Chief Engineer (or administrative head) of the Telecommunication/Postal Department to appoint the arbitrator. After the appellant’s Managing Director failed to respond to the respondent’s notice, the respondent filed an application under Section 11 of the Arbitration and Conciliation Act, 1996. The High Court appointed Shri B.C. Bhattacharya as arbitrator, recording the consent of the appellant’s counsel. The appellant later challenged this appointment, claiming its counsel had no authority to consent and that the High Court had no jurisdiction to appoint anyone other than the person named in the contract. The Supreme Court held that the appellant, by virtue of its counsel’s consent, had waived its right under the arbitration clause; a concession made by an advocate under Order III Rule 1 of the CPC binds the party, and the High Court’s appointment was therefore valid. The appeal was dismissed.

Issues considered

The validity of the High Court’s appointment of an arbitrator contrary to the specific appointment mechanism in the contract.
Whether a concession made by an advocate on behalf of a party binds the party under Order III Rule 1 of the CPC.
Whether the appellant waived its right to object to the appointment by consenting through its counsel.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 15(2)
Code of Civil Procedure, 1908s. Order III Rule 1, s. Section 151

Subjects

ArbitrationWaiverAppointment of arbitratorSection 11 Arbitration ActOrder III Rule 1 CPCWorks contractArbitration clause

Judgment

B.S.N.L. AND ORS . A
.v.
MIS. SUBASH CHANDRA KANCHAN AND ANR.

SEPTEMBER 13, 2006

[S.B. SINHA AND DAL VEER BHANDARI, JJ.] B

Arbitration and Co11ci1iation Act, 1996-,Section I I-Appointment of
arbitrator-Disputes out of works contract-Contract contained arbitration
clause-lnspite of notice by Respondent, Appeilant did not appoint Arbitrator C
in terms of the arbitration clause-Respondent filed application u/S. I I on
which High Court appointed arbitrator with consent ofAppellant's Advocate--
Appointment challenged by Appellant-Held: Challenge not maintainable--
Consent ofAppellant's Advocate is binding on Appellant~Appellant evidently
waived its right under the arbitration clause by consenting to appointment
by High Court~incelegal right was waived, enforcement thereof cannot be D
insisted-Code of Civil Procedure, 1908-0rder. Ill, Rule I-Concession!
consent by advocate-Effect on party.

Certain disputes arose out of a works contract. The contract contained
an arbitration clause in terms of which the arbitrator appointed by Managing
Director of the Appellant was to act as the arbitral tribunal Respondent issued E
notice to Appellant in terms of the arbitration clause. But the Managing
Director of Appellant did not respond to the same. Consequently, Respondent ·
filed application under Sectilin 11 ·of the Arbitration and Conciliation Act,
..J
· · 1996 on which _the High Court appointed an arbitrator with the consent of
Appellant's counsel. Appellant challenged the appointment but High Court F
refused to recall the 11ppointment order. H~nce.the present appeal.

Dismissing the appeal, the Court

HELD: I. Although in terms of the arbitration agreell'ent contained i.n
Clause 23 of the contract, ordinarily the arbitrator appointed by the Managing G
Director should act as arbitral tribunal in respect of the disputes and
differences between the parties to the contract; in this case, the Appellants
must be held to have waived their right as they consen.ted to the appointment
ofShri Bhattacharya as an arbitral tribunal. Apart from failure on the part
of the Managing Director of the Appellant to appoint an arbitrator within the
93 H
94 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A specified time, the Appellants waived their right under the arbitration
agreement The High Court having appointed the arbitral tribunal on consent,
it is not open t~ the Appellants now to contend that no such c~ncession was
made. f99-C; DI

3. Furthermore, in terms of Order Ill, Rule I CPC, a litigant is
E represented by an advocate. A concession made by such an advocate is binding
on the party whom he represents. If it is binding on the parties, again subject
to just exceptions, they cannot at a later stage resile therefrom. The matter
may, however, tie different if a concession is made on a question of law. A
wrong concession on legal question may not be binding ·upon his client. Here,
howeh.r, despite the stand taken by the Appellant in its written statement
F before the High Court the Advocate consented to appointment of a person as
an arbitrator by the High Court in exercise of its jurisdiction under Section
I I of the I996 Act, in the considered view of this Court, the same should not
be permitted to be resiled. from. A person may have a leg;tl right but if the
same is waived, enforcement thereof cannot be insisted. Furthermore, it is
G not a case where this Court should exercise its discretionary jurisdiction.
1100-G-H; IOI-A-8; 102-CJ

Ramdev Food Products Pvt. Ltd v. Arvindbhai Rambhai Patel and Ors.,
(2006) 8 SCALE 63I, relied on.

H . CIVIL APPELLATE JURISDICTION: Civil Appeal No, 4109 of2006.
B.S.N.L. v. SUBASH CHANDRA KANCHAN [S.B. SINHA, J.] 95

From the Judgment and Order dated 20.1.2006 and 3.3.2006 of the High A
Court of Orissa at Cuttack in M.J.C.P. No. 31/2002 and M.C. No. 4/2006.

Chetan Sharma and Somitra G. Chaudhary (for B.K. Satija) for the
Appellants.

Jasmshed Bey and Parmanand Gaur for the Respondents. B
The Judgment of the Court was delivered by

S.B. SINHA, J. Leave granted.

The parties herein entered into a contract pursuant to a notice inviting C
tender by Appellant No. I for the work of construction of 9 Nos. Type· V
quarters at Jayadev Vihar, Bhubaneshwar. The said contract contained an
arbitration clause in terms whereof the Chief Engineer, Telecommunication/
Postal Department in charge of the work at the time of dispute or if there be
no Chief Engineer the administrative head of the said Telecommunication/
Postal Department was to be appointed as an arbitrator. The said provision D
envisaged that in terms thereof no person other than the one appointed by
such Chief Engineer or administrative head of the Telecommunication/ Postal
Department as aforesaid should act as arbitrator.

A notice in terms of arbitration agreement contained in clause 25 of the
contract was issued by the Respondents on 7.1.2002. A letter appointing one E
Shri Gurbax Singh, Principal Chief Engineer (Arb.), New Delhi as the sole
arbitrator was said to have been drafted on 4.2.2002. It, however, was
dispatched on 7.02.2002. On the same day, having regard to the fact that
allegedly the Managing Director of the Appellant did not respond to the
notice issued to him, an application was filed by Respondent herein before F
the High Court of Orissa purported to be under Section 11 of the Arbitration
and Conciliation Act, 1996 (for short "the 1996 Act").

It is stated that the said Shri Gurbax Singh submitted his resignation
whereupon the Chief Engineer appointed one Shri A.K. Naik as the sole
arbitrator on 7.07.2002. He is also said to have resigned and in his place Shri G
Gurbax Singh was again appointed as arbitrator on 17.03.2003. The
appointments were made ·during pendency of the said proceedings before the
High Court under the I996 Act. When the matter came up for hearing before
a Division Bench of the High Court, in its order dated 20th January, 2006, it
was recorded:
H
96 SUPREME COURT REPORTS [2006) SUPP. 6 S.C'.R.

A ·'Learned counsel for the petitioners placed before me a list of names
of six persons to appoint one of them as Arbitrator and to refer to him
the dispute between the parties for adjudication in terms of the
arbitration clause. On being asked, learned counsel for the opposite
parties submits that he has no objection if Shri B.C. Bhattacharya.
Chartered Engineer, Former Chief Engineer, W.B. P. W.D., FD-216/4,
B Salt Lake City. Kolkata - 700 091 is appointed as Arbitrator and the
dispute between the parties in terms of arbitration clause is referred
to him for adjudication. In view of the aforesaid, said Shri B.C.
Bhattacharya is appointed as Arbitrator and the dispute between the
parties in terms of the arbitration clause is referred to him for '
C adjudication."

The learned arbitrator appointed by the High Court thereafter entered
into reference. The parties hereto appeared before him on 18.03.2006 and
participated in the proceedings. Respondent also filed his statement of claim.
The learned arbitrator has called upon the Appellants to file their written
D statement.
However, on 27th January, 2006, an application was filed by Appellant
herein purported to be under Section 151 of the Code of Civil Procedure for
modification of the said order dated 20.1.2006 contending:

E "2. That after dictation of orders when the counsel of the op. party
went out, a Junior Lawyer informed him that Your Lordship had
dictated that the counsel for the opp. Party has no objection if Shri
B.C. Bhattacharya, Chartered Engineer, and former C.E.W.B. PWD
Kolkata is appointed as the Arbitrator, which due to inadvertence, had
escaped notice/ audibility of the opp. Party counsel.
...
F
3. That then the counsel for the opposite party promptly rushed to
the court and with due permission of your Lordship, apprised about
such dictation with a rest for omission of the ''No Objection" portion
which occurred due to some communication lapses. And Your Lordship
was considerable and gracious enough to ask the Stenographer on
G
duty at that time to take down the sought for change after confirming
from me whether it was about Mr. Bhattacharya of KOL KAT A."

The prayer made in the said application reads as under:

"Under the circumstances stated above. the opposite party, therefore,
H
B.S.N.L. v. SUBASH CHANDRA KANCHAN (S.B. SINHA. J.] 97

earnestly pray that your Lordship may graciously be pleased in the A
ends of justice to direct appropriately for proper reflection of your
Lordship's subsequent instruction in the order."

By an order dated 3rd March, 2006, the High Court refused to recall its
order dated 20th January, 2006 stating:
B
"Now, learned counsel for opposite parties appears and submits that
the aforesaid rec.ording that he had no objection against the
appointment of Shri B.C. Bhattacharya is not correct and in fact he
had objection. He wants this to be recorded in the order. But, I do
not find any reason to change the appointment of Shri B.C.
Bhattacharya as the Arbitrator, as I am told that Shri B.C. Bhattacharya C
has already started functioning as Arbitrator by issuing notice to the
concerned parties. Further, the learned counsel for opp. parties could
not give any reason as to why he has objection against the
appointment of Shri B.C. Bhattacharya as Arbitrator. In this view of
the matter, no further order is required to be passed." D
Mr. Chetan Sharma, learned senior counsel appearing on behalf of the
Appellants submitted that keeping in view the arbitration agreement contained
in Clause 25 of the contract, the High Court had no jurisdiction to appoint
any person other than the one nominated by the Chief Engineer as appointment
of person other than the nominee of the Chief Engineer was invalid. E
On the other hand, Mr. Parmanand Gaur, learned counsel appearing on
behalf of the Respondents, submitted that the High Court having exercised
its discretionary jurisdiction under Section 11 of the 1996 Act, this Court
should not interfere therewith.
F
The relevant portions of Section 11 of the 1996 Act read as under:

"11. Appointment of arbitrators. (I) A person of any nationality may
be an arbitrator, unless otherwise agreed by the parties.

(2) Subject to sub-section (6), the parties are free to agree on a G
procedure for appointing _the arbitrator or arbitrators.

*** *** ***
(5) Failing any agreement referred to in sub-section (2), in an arbitration
with a sole arbitrator, ifthe parties fail to agree on the arbitrator within
thirty days from receipt of a request by one party from the other party H
98 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A to so agree the appointment shall be made, upon request of a party,
by the Chief Justice or any person or institution designated by him.
(6) Where, under an appointment procedure agreed upon by the
parties,-
,..
(a) a party fails to act as required under that procedure; or
B
(b) the parties, or the two appointed arbitrators, fail to reach an
agreement expected of them under that procedure; or
(c) a person, including an institution, fails to perform any function
entrusted to him or under that procedure, a party may request the
c Chief Justice or any person or institution designated by him to
take the necessary measure, unless the agreement on the
appointment procedure provides other means for securing the
appointment.
(7) A decision on a matter entrusted by sub-section (4) or sub-section
D (5) or sub-section (6) to the Chief Justice or the person or institution
designated by him is final.
(8) The Chief Justice o;· the person or institution designated by him,
in appointing an arbitrator, shall have due regard to-
(a) any qualifications required of the arbitrator by the agreement
E of the parties; and
(b) other considerations as are likely to secure the appointment
of an independent and impartial arbitrator... "
Evidently, the Managing Director of the Appellant was served with a
F notice ·On 7th January, 2002. The letter appointing the arbitrator was
communicated to Respondent on 7th February, 2002. By that time, 30-days
period contef1!plated under the Act lapsed. The Managing Director of the
Appellant was required to communicate his decision in terms of Clause 25 of
the contract.
G What would be the meaning of the term 'communicate' came up for
consideration before this Court in State ofPunjab v. Amar Singh flarika, AIR
( 1966) SC 1313, wherein it. was held:

".. .It is plain that the mere passing of an order of dismissal would not
be effective unless it is published and communicated to the officer
H concerned. If the appointing authority passed an order of dismissal,
U.S.N.L. v. SUBASH CHANDRA KANCHAN [S.B. SINHA, J.] 99

but does not communicate it to the officer concerned, theoretically it A
is possible that unlike in the case of a judicial order pronounced in
Court, the authority may change its mind and decide to modify ~ts
order..... "

[See also Sultan Sadik v: Sw1;ay Raj Subba and Ors., [2004j 2 SCC
377] B
The contract entered into by. and between the parties was subject to the
provisions contained in the 1996 Act.

Although in terms of the arbitration agreement contained in Clause 25
of the contract, ordinarily the arbitrator appointed by the Managing Director C
should act as arbitral tribµnal iri respect of the disputes and differences between
the parties to the contract; in this case, the Appellants must be held to have
waived iheir right as they consented to the appointment of Shri Bhattacharya
as an arbitral tribunal. The High Court having appointed the arbitral tribunal
on consent, it is, in our opinion, not open to the Appellants now to contend D
that no such concession was made.

We are not oblivious of the recent decision of this Court in Yashwith
Constructions (Pi Ltd. v. Simplex Concrete Piles India Ltd. and Anr., (2006]
6 SCC 204, wherein Balasubramanyan, J. stated the law in the following
terms: E
" ... It is true· that in the arbitration agreement there is no specific
provision authorizing the Managing Director to appoint .a substitute
arhitrator if the original appointment terminates or if the originally
appointed arbitrator withdraws from the arbitration. But, this so called
omission in the arbitration agreement is made up by the specific F
provision contained in Section 15(2) of the Act. The withdrawal of
an arbitrator from the office for any reason is within the purview of
Section 15(1)(a) of the Act. Obv.iously, therefore Section 15(2) would
be attracted and a substitute arbitrator has to be appointed according
to the rules that are applicable for the appointment of the arbitrator G
to be replaced. Therefore, what Section 15(2) contemplates is an
appointment of the substituted arbitrator or the replacing of the
arbitrator by another according to the rules that were applicable to the
appointment of the original arbitrator who was being replaced. The
term "rules" in Section 15(2) obviously referred to the provision for
appointment, contained in the arbitration agreement or any Rules of H
100 SUPREME COURT REPORTS [2006] SUPP. 6 S.C.R.

A any Institution under which the disputes were referred to arbitration.
There was no failure on the part of the concerned party as per the
arbitration agreement, to fulfil his obligation in terms of Section 11
of the Act so as to attract the jurisdiction of the Chief Justice under
Section 11(6) of the Act for appointing a substitute arbitrator. ,. .
Obviously, Section 11 (6) of the Act has application only when a
B party or the concerned person had failed to act in terms of the
arbitration agreement. When Section 15(2) says that a substitute
arbitrator can be appointtd according to the rules that were applicable
for the appointment of the arbitrator originally, it is not confined to
an appointment under any statutory rule or rule framed under the Act
c or under the Scheme. It only means that the appointment of the
substitute arbitrator must be done according to the original agreement
or provision applicable to the appointment of the arbitrator at the
initial stage. We are not in a position to agree with the contrary view
taken by some of the High Courts."

D But, herein the issue is entirely different. Apart from failure on the part
of the Managing Director of the Appellant to appoint an arbitrator within the
specified time, the Appellants evidently waived their right under the arbitration
agreement.

Mr. Sharma's submission to the effect that the learned counsel who
E consented to the appointment of Shri .Bhattacharya was a junior counsel and
he had no instructions in this behalf cannot be accepted. No such statement
was made before the High Court. It had never been contended before the
High Court that the counsel had no authority to make such concession.

Moreover, the application filed under Section 151 of the Code of Civil
F Procedure by the Appellant did not contain such statements. The High Court,
thus, did not commit any error in recording that such a concession had in fact
been made by the learned counsel. In a matter of this nature again, the High
Court's decision subject to just exception must be held to be final.

G Furthermore, in terms of Order Ill, Rule I of the Code of Civil Procedure,
a litigant is represented by an advocate. A concession made by such an
advocate is bindi.ng on the party whom he .represents. If it is binding on thP.
parties, again subject to just exceptions, they cannot at a later stage resile
therefrom. The matter may, however, be different if a concession is made on
a question of law. A wrong concession on legal question may not be binding
H
B.S.N.L. v. SUBASH CHANDRA KANCHAN [S.B. SINHA, J.] 101

upon his Client. Here, fiowever, despite the stand taken by the Appellant in A
its written statement before the High Court the learned Advocate consented
to appointment of a person as an arbitrator by the High Court in exercise of
its jurisdiction under Section 11 of the 1996 Act, in our considered view, the
same should not be permitted to be resiled from. A person may have a legal
right but if the same is waived, enforcement thereof cannot be insisted.
B
In Ramdev Food Products Pvt. Ltd v. Arvindbhai Rambhai Patel and
Ors., (2006) 8 SCALE 631, this Court observed:

"The matter may be considered from another angle. If the first
respondent has expressly waived his right on the trade mark registered
in the name of the appellant-Company, could he claim the said right C
indirectly? The answer to the said question must be rendered in the
negative. It is well-settled that what cannot be done directly cannot
be done indirectly. The term 'Waiver' has been described in the
fol.owing words: "Waiver is the abandonment of a right in such a
way that the other party is entitled to plead the abandonment by way D
of confession and avoidance if the right is thereafter asserted, and is
either express or implied from conduct. A person who is entitled to
rely on a stipulation, existing for his benefit alone, in a contract or of
a statutory provision may waive it, and allow the contract or transaction
to proceed as though the stipulation or provis!on did not exist. Waiver
of this kind depends upon consent, and the fact that the other party E
has acted upon it is sufficient consideration. It seems that, in general,

I where one party has, by his words or conduct, made to the other a
promise or assurance which was intended to affect the legal relations
between them and to be acted on accordingly, then, once the other
party has taken him at his word and acted on it, so as to alter his F
position, the party who gave the promise or assurance cannot
afterwards be allowed to revert to the previous legal relationship as
if no such promise or assurance had been made by him, but he must
accept their legal relations subject to the qualification which he has
himself so introduced, even though it is not supported in point of law
by any consideration. [See 16 Halsbury's Laws (4th edn) para 1471] G

Waiver may sometimes resemble a form of election, and sometimes
be based on ordinary principles of estoppel. [See 45 Hals bury 's Laws
(4th edn.) para 1269]

H
102 SUPREME COURT REPORTS (2006) SUPP. 6 S.C.R.

A In /ndu Shekhar Singh and Ors. v. State of U.P. and Ors.. (2006) 5
SCALE 107, this Court held: "They, therefore, exercised their right
of option. Once they obtained entry on the basis of election. thoy
cannot be allowed to turn round and contend that the conditions are
illegal" •·

B Prima facie also it does not appear that the allegations contained in the
said application were supported by an affidavit. In that view of the matter.
no credence io the averments contained therein cannot be given. ·

furthermore, it is not a case where this Ccurt should exercise its
~iscretionary jurisdiction. For the reasons aforementioned, this appeal is
C dismissed. No costs~

B.B.B. Appeal dismissed.