Hon'ble Judges/Coram:
N.V. Ramana, Surya Kant and Hrishikesh Roy

JUDGMENT

N.V. Ramana, J.

1. This Civil Appeal raises an important question of law concerning arbitration law in India and special enactments enacted by States concerning public works contract.

2. A brief reference to facts in this case is necessary for the disposal of the case. On 13.02.1991, Respondent No. 1 entered into a contract with the Appellant to manufacture and supply bricks. The aforesaid contract had an arbitration clause. As some dispute arose regarding payment in furtherance of manufacturing and supplying of bricks, the Appellant issued a notice dated 13.11.1998, seeking appointment of sole arbitrator in terms of the agreement. Clause 38 of the agreement provide for arbitration as under:

Clause 38 - Arbitration

All disputes or differences in respect of which the decision has not been settled, shall be referred for arbitration to a sole arbitrator appointed as follows:

Within thirty days of receipt of notice from the Contractor of his intention to refer the dispute to arbitration the Chief Engineer shall send to the Contractor a list of three officers from the list of arbitrator appointment by the Government. The Contractor shall within fifteen days of receipt of this list select and communicate to the Chief Engineer the name of the person from the list who shall then be appointed as the sole arbitrator. If Contractor fails to communicate his selection of name, within the stipulated period, the Chief Engineer, shall without delay select one officer from the list and appoint him as the sole arbitrator. If the Chief Engineer fails to send such a list within thirty days, as stipulated, the contractor shall send a similar list to the Chief Engineer within fifteen days. The Chief Engineer shall then select one officer form the list and appoint him as the sole arbitrator within fifteen days. If the Chief Engineer fails to do so the contractor shall communicate to the Chief Engineer the name of one Officer from the list, who shall then be the sole arbitrator.

The arbitration shall be conducted in accordance with the provision of the Indian Arbitration Act, 1940 or any statutory modification thereof. The decision of the sole arbitrator shall be final and binding on the parties thereto. The Arbitrator shall determine the amount of costs of arbitration to be awarded to either parties.

Performance under the contract shall continue during the arbitration proceedings and payments due to the contractor by the owner shall not be withheld, unless they are the subject matter of the arbitration proceedings.

All awards shall be in writing and in case of awards amounting to Rs. 1.00 lakh and above, such awards, shall state reasons for the amounts awards.

Neither party is entitled to bring a claim to arbitration if the Arbitrator has not been appointed befo........