The petitioner’s contention in the present case is that Clause 68 of the Contract executed between petitioner and respondent provides for appointment of an arbitrator. In the present case petitioner has legally Invoked Clause 68 and issued notice to the respondent. So the respondent was duty bound to appoint an arbitrator. The respondent fails and therefore it is open to him to approach the Court for appropriate remedy under S. 8 of the Act for appointment of an arbitrator. He further contented that Section 5 has no application to the facts of this case.
The question before Supreme Court for consideration is whether the High Court was justified in permitting the respondent to rescind the contract of arbitration provided in Clause 68 of the Contract. Undoubtedly, Clause 68 provides reference to arbitration of all or any of the disputes or differences between the parties, at the instance of either party to the contract. It empowers either party to issue notice calling upon the Engineer to refer the dispute or difference for arbitration. In this case, claim was made however the petitioner had not taken follow up action thereafter for 10 years. It was open to him to avail Clause 68 of the Contract seek the reference to the arbitration. No such action was taken for past 10 years. Immediately on receipt of the notice, the respondent approached court.
As per Ss. 5 and 12(2)(b) of Arbitration Act it is clear that the court has been given power for appointment of the arbitrator or umpire removed and the arbitration agreement entered into can be revoked. Where the Court passes such order arbitration agreement shall cease to have effect with respect to the difference or dispute. It flows therefrom that there exists implied power vested in the court permitting a party to avail the remedy under Ss.5 and 12 to rescind the arbitration agreement. In all cases it is not a condition precedent that there should in the first instance be an order appointing an arbitrator or he should enter upon reference for adjudication. In given circumstances and the factual background the court may be justified to exercise the power under Ss. 5 and 12.
The question then is under what circumstances such power would be exercised. It could be seen that the court has the power and jurisdiction under Ss. 5 and 12 to grant leave to the applicant in exceptional circumstances to revoke the contract of arbitration. The instant case is clearly, and undoubtedly hopelessly barred claim as the petitioner by his conduct slept over his right for more than 10 years. In these circumstances it is an exceptional case and the courts below have justifiably exercised their discretionary power and jurisdiction under Sections 5 and 12 (2)(b) to permit the respondent to rescind the arbitration agreement and declared that the arbitration agreement shall cease to have effect with respect to the difference or dispute referred to in the notice of the petitioner and relieved the parties from the arbitration agreement.
Panchu Gopal Bose, Spl. Leave Petition, 4304-06 of 1993