1. Appellants are the defendants in O.S. (Arb.) 137 of 1978 of the Sub Court, Trivandrum. The respondent (plaintiff) was entrusted with the work of handling and transporting food grains under a contract, dated 8th July 1976 by the appellants. The respondent undertook to complete the work at 373 per cent above the scheduled rates. Respondent claimed remuneration at the rate of 650 per cent. He moved the Sub-Court for appointment of an arbitrator under S.20 of the Arbitration Act. The Court below appointed an arbitrator. Appellants challenged the order of appointment by filing MFA 364 of 1980. That appeal was dismissed as time barred. The arbitrator entered on the reference and passed the award. The respondent moved the sub court to make the award into a decree. The appellants filed application under S.16 and 30 of the Arbitration Act (for short the Act) to set aside the award. The Sub-Court negatived the contention of the appellants and made the award into a decree. This is challenged in the above MFA.

2. Contention of the appellants is that under Clause.19 of the contract only a person appointed by the appellants could function as arbitrator and that being the position the court had no jurisdiction to appoint any one else as arbitrator. Clause.19 of the agreement reads:

"All disputes and differences arising out of or in any way touching or concerning this agreement whatsoever (except as to any matter the decision of which is expressly provided for in the contract) shall be referred to the sole arbitration of any person appointed by the FCI ............................ It is also a term of this contract that no person other than a person appointed by the FCI as aforesaid should act as arbitrator and if for any reason that is not possible the matter is not to be referred to arbitration at all."

From the above clause it is clear that whenever disputes and differences arise out of or in any way touching or concerning the agreement it shall be referred to the sole arbitration of any person appointed by the Food Corporation of India. It also states that no person other than a person appointed by the FCI should act as arbitrator and if for any reason that is not possible the matter is riot to be referred to arbitration at all. In P. G. Agencies v. Union of India (AIR 1971 SC 2298 [LQ/SC/1970/407] ) the Supreme Court has held in para 4 as follows:

"S.20 is merely a machinery provision. The substantive rights of the parties are found in S.8(1)(b). Before S.8(1)(b) can come into operation it must be shown that (1) there is an agreement between the parties to refer the dispute to arbitration; (2) that they must have appointed an arbitrator or arbitrators or umpire to resolve their dispute; (3) anyone or more of those arbitrators or umpire must have neglected or refused to act or is incapable of acting or has died; (4) the arbitration agreement must not show that it was intended that the vacancy should not be filled and (5) the parties or the arbitrators as the case may be had not supplied the vacancy."

The agreement would show that the parties had agreed that the matter in dispute shall be referred to the sole arbitration of any person appointed by the FCI. It also shows that no person other than a person appointed by the FCI should act as arbitrator and if for any reason that is not possible the matter is not to be referred to arbitration at all. In view of the clear recitals in Clause.19 of the agreement it is apparent that the parties never intended to supply the vacancy if an arbitrator for some reasons could not be appointed.

3. S.30 of the Arbitration Act postulates the grounds for setting aside an award. Under S.30(c) of the Act it is always open to a party to challenge the award if it is established that it has been improperly procured or is otherwise invalid. In Union v. Om Prakash (AIR 1976 SC 745) it has been held that the words "or is otherwise invalid" in clause (c) in S.30 of the Act are wide enough to cover all forms of invalidity including invalidity of the reference. Thus it has to be held that the words "or is otherwise invalid" in S.30(c) of the Act are of greater amplitude to embrace all forms of invalidity including invalidity of the reference. Whenever it is established that an award has been improperly procured or is otherwise invalid the party who challenges it can get it set aside under S.30 of the Act.

4. As the appellants and the respondent had agreed that in the event of disputes arising between them it should be referred to an arbitrator appointed by the former the latter cannot circumvent it by approaching the Court for appointing an arbitrator unilaterally by the Court. When the agreement is silent as regards supplying the vacancy the law presumes that the parties intended to supply the vacancy. Construing S.8(1)(b) of the Act Supreme Court in AIR 1971 SC 2298 [LQ/SC/1970/407] (P. G. Agencies v. Union of India) held as follows:

The language of the provision is not that the parties intended to supply the vacancy but on the other hand it is that the parties did not intend to supply the vacancy. in other words, if the agreement is silent as regards supplying the vacancy the law presumes that the parties intended to supply the vacancy. To take the case out of S.8(1)(b) what is required is not the intention of the parties to supply the vacancy but their intention not to supply the vacancy."

As Clause.19 of the agreement is plain and unambiguous that the parties did not intend so supply the vacancy, it is apparent that on the failure on the part of the appellants to appoint any arbitrator the Court has no authority to fill up the vacancy.

5. Under S.20(4) of the Arbitration Act reference can be made to an arbitrator appointed by the parties and in the alternative to an arbitrator appointed by the Court in a case where they cannot agree on the choice of the arbitrator. As admittedly no arbitrator has been appointed by the FCI the court cannot enter into the fray and impose its arbitrator. The indubitable position is that the Court cannot appoint an arbitrator if the agreement excludes such a power to the Court. Any such appointment in derogation of the agreement will be without jurisdiction. Award passed by the arbitrator appointed by a Court lacking jurisdiction cannot have any binding force. It is always open to the aggrieved party to take the stand that the award is not legally and properly obtained. Merely because the appellants failed in their attempt to challenge the very appointment of the arbitrator as the appeal filed by them was dismissed as barred by limitation they are not precluded from challenging the award under S.30(c) of the Act especially in view of the fact that the Court lacked jurisdiction in appointing the arbitrator as exclusive discretion in the matter of appointment was given to the FCI. Under similar circumstances in a case reported in AIR 1979 Delhi 220 (Basakha Singh and Sons v. Indian Dand P. Ltd.) it was held that in view of the refusal by the Managing Director of the respondent to appoint an arbitrator the court cannot appoint an arbitrator and refer the matter to arbitration.

6. If an arbitrator enters upon consideration of a matter when he has no jurisdiction to do so the award passed by him cannot have any validity. Entering appearance of a party before the arbitrator cannot enable him to pass the award if the agreement does not contain the necessary arbitration clause. In Chetandas Daga v. Radhakisser Ramchandra (AIR 1927 Bombay 553) it is held as follows:

"If arbitrators enter upon the consideration of a matter when they have no jurisdiction to do so by the arbitration clause or submission between the parties, then they cannot be given jurisdiction under that submission by a mere appearance of the parties before them at a preliminary meeting followed by a protest against their jurisdiction before they have entered upon a consideration of the matters upon which they subsequently purport to make an award.

Even if a party under protest continues to attend before arbitrators and cross examines witnesses, he does not thereby waive his objection, nor is he estopped from saying that the arbitrators have exceeded their authority by awarding on the matter."

7. The authority of the arbitrator is confined to the matters lawfully submitted to him. If there is no lawful submission the award by the arbitrator would consequently suffer. Invalidity of the award can be urged under S.30(c) of the Arbitration Act and when such a challenge is made it is no answer to contend that the appointment of the arbitrator even if it lacked jurisdiction was not successfully challenged at the appropriate time. The question is not one of waiver but of the authority and a party continuing to attend the arbitration proceedings after protest does not confer authority on the arbitrator. Once parties appearing before the arbitrator object to his jurisdiction, they do not waive their right merely by participating in the arbitration. As protest was made by the appellants regarding the very jurisdiction of the Court in appointing the arbitrator their right to challenge the award under S.30(c) of the Act cannot be said to be lost. The argument that appellants have waived their objection by participating in the arbitration proceedings is without any merit. It is apposite to refer to Rambaksh Lachamandas v. Bombay Cotton Company (AIR 1931 Bombay 81 at 82) wherein it is stated as follows:

"I think it is well established by authority that once parties appearing before arbitrators object to the jurisdiction they do not waive their rights by proceeding with the case before the arbitrators and defending themselves as best they may: see Russell on Arbitration and Award, Edn. 11, at pp.431 and 432, and the authorities there collected. In particular I would refer to the remarks of Lord Selborne L.C. in Hamlyn v. Bettley where he said:

...... in arbitrations where a protest is made against jurisdiction the party protesting is not bound to retire; he may go through the whole case subject to the protest he has made .

8. As objection has been filed by the appellants questioning the very jurisdiction of the Court in appointing the arbitrator it is not possible to hold that the appellants took part in the proceedings before the arbitrator on the assumption that proceedings were before a competent authority. That would not be the position if the appellants did not raise objection to the jurisdiction of the Court in appointing the arbitrator. It is settled position that if a party takes part in the proceedings before the arbitrator on the assumption that the proceedings were before a competent authority he cannot later turn around and contend that the whole of the proceedings were Coram non judice. In AIR 1965 Calcutta 42 (New India Assurance Company Ltd. v. Dalmia Iron and Steel Ltd.) it is held as follows:

"If a party allowed an arbitrator to proceed with the reference without objecting to his jurisdiction or competence, it would not be subsequently heard to say that the award should be set aside on the ground that the arbitrator was not competent to decide the dispute in question."

It is useful to quote the following passage at page 174 of Russell on Arbitration (17th Edition):

"In cases where an arbitrator enters into consideration of matters which are not referred to him, or which he has no jurisdiction to try, the question is not one of waiver or estoppel, but of authority and a party continuing to attend the reference after objection taken and protest made does not give arbitrator authority to make an award."

Thus the position is that if the dispute is with regard to the very appointment of arbitrator and yet the arbitrator had proceeded to make the award, the court can still intervene when the award is sought to be enforced.

9. In AIR 1962 SC 1810 [LQ/SC/1962/238] (Khardah Company Ltd. v. Raymon and Co. P. Ltd.) it has been held that what confers jurisdiction on the arbitrators to hear and decide a dispute is the arbitration agreement as defined in S.2(a) of the Arbitration Act and where there is no such agreement there is initial want of jurisdiction which cannot be cured by mere acquiescence. S.2(a) of the Act defines arbitration agreement as a written agreement to submit present or future differences to arbitration whether an arbitrator is named therein or not. When the agreement stipulates that so and so alone can be the arbitrator, one of the contracting parties cannot ignore it and seek arbitration by another person. Therefore the contention of the respondent that the appellants are estopped by their conduct from questioning the validity of the award at a later stage cannot be accepted.

10. As the court could not have appointed arbitrator it can never be said that there was any proper appointment. It necessarily follows that there is no estoppel by conduct in such a case. In Jagannath v. P.C. and I. Corporation (AIR 1973 Allahabad 49) it has been held that objection as to the lack of jurisdiction in the arbitrator can be allowed to be raised at any stage and the mere fact that the party objecting had appeared before the arbitrator at earlier stages of the proceedings and had even filed objections against the claim of the opposite party would not operate as estoppel against them in challenging the jurisdiction to give the award. As the Court lacked jurisdiction to appoint the arbitrator overlooking the affirmative clause that arbitrator can only be appointed by the appellants, the arbitrator appointed by the Court cannot get any jurisdiction to make the award and consequently it is always open to the appellants to challenge the award on the ground that it has been improperly procured or is otherwise invalid.

11. Counsel for the respondent relying on Vulson v. Kelukutty (AIR 1959 Kerala 174) contended that the Court should not interfere in a case where a party did not object to the appointment of the arbitrator at the first instance. In the above decision it was held that the Court would not assist any party who with full knowledge of the circumstances allowed an arbitrator to proceed and take part in it and sought to evade it later by raising objections. This was not a case where there was any challenge against the jurisdiction of the court in appointing the arbitrator. The above decision has no application to the facts of the case in hand. Counsel for the respondent relying on Madipalli Venkatachallam v. Madeppully Swaya Narayana Murthy (AIR 1941 Madras 129) contended that Courts would be loath to assist a party who, with full knowledge of the circumstances allows an arbitrator to proceed and takes part in it and later raises objections which never occurred to him before. That would be true in a case where the matter has proceeded without objection by anybody until after the award. The decision reported in AIR 1941 Madras 129 has no application to the case in hand as it can never be said that the objection raised against the award was as a result of after-thought.

12. Contention of the respondent that as the order appointing the arbitrator has become final it is no longer available to the appellants to challenge the award is without merit as the Court lacked jurisdiction in appointing the arbitrator. The learned Sub Judge went wrong in holding that as the appellants had acquiesced by its subsequent conduct in the appointment of the arbitrator it cannot challenge the award. We hold that the said finding is not sustainable. The appellants have made out a case to set aside the award under S.30(c) of the Arbitration Act.

The judgment of the learned Sub Judge accepting the award and passing the decree in terms of it is hereby set aside. The appeal stands allowed. There is no order as to costs.

After pronouncing the judgment counsel for the respondent makes an oral request for leave to Appeal to the Supreme Court of India. As we do not find any substantial question of law of general importance involved in this case which needs to be decided by the Supreme Court we declined to grant leave as prayed for.