Karnataka High Court
M/S. Prasad And Company (Project Works) ... vs Bharat Heavy Electricals Limited on 16 November, 2021
Author: M.Nagaprasanna
Bench: M. Nagaprasanna
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF NOVEMBER, 2021
R
BEFORE
THE HON'BLE MR. JUSTICE M. NAGAPRASANNA
CIVIL MISCELLANEOUS PETITION NO.44/2021
C/W.
CIVIL MISCELLANEOUS PETITION NO.229/2020
IN CMP NO.44/2021
BETWEEN
M/S.PRASAD AND COMPANY (PROJECT WORKS) LIMITED
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956,
HAVING ITS REGISTERED OFFICE
AT 6-3-871/3, 'SNEHALATA', GREENLANDS ROAD,
BEGUMPET, HYDERABAD-500 016
TELANGANA
REPRESENTED BY ITS MANAGING DIRECTOR.
... PETITIONER
[BY SRI ADITYA SONDHI, SR. ADV., A/W.
SRI JAYANTH DEV KUMAR, ADV.]
AND
1. BHARAT HEAVY ELECTRICALS LIMITED
A GOVERNMENT OF INDIA UNDERTAKING,
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING ITS OFFICE AT NO.1249
PROF. CNR RAO CIRCLE, IISC POST,
MALESHWARAM
BENGALURU - 560 012.
2
2. NATIONAL MINERAL DEVELOPMENT CORPORATION LTD.
A GOVERNMENT OF INDIA ENTERPRISE
A COMPANY INCORPORATED UNDER
THE COMPANIES ACT, 1956
HAVING ITS REGISTERED OFFICE AT KHANIJ BHAVAN,
CASTLE HILLS, MASAB TANK, HYDERABAD - 500 028
REPRESENTED BY ITS CHAIRMAN CUM
MANAGING DIRECTOR.
....RESPONDENTS
[BY SRI GANAPATHI HEGDE, ADV., FOR R-1(PHYSICAL HEARING) SRI MOHAMMED RIZWAN AHMED, ADV., FOR R-2 (VIDEO CONFERENCING)] THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING THIS HON'BLE COURT TO;
A. APPOINT AN ARBITRATOR TO ADJUDICATE THE DISPUTES AND CLAIMS THAT HAVE ARISEN BETWEEN THE PETITIONER AND RESPONDENT NO.1, IN THE MATTER OF CONTRACT AGREEMENT DATED 03.09.2011 (UNDER ANNEXURE-A TO THE PETITIONER) AND GENERAL CONDITIONS OF CONTRACT ALONG WITH WORK ORDER SPECIFICATION (UNDER ANNEXURE-C TO THE PETITIONER) IN CONNECTION WITH THE TERMINATION OF WORK ORDER NO.88/11/0032/PS DATED 14/10/2011 (UNDER ANNEXURE-B1 TO THE PETITION) AND WORK ORDER NO.88/11/0033/PS DATED 14/10/2011 (UNDER ANNEXURE-B2 TO THE PETITION), IN THE PRESENCE OF THE RESPONDENT NO.2, EXERCISING POWERS UNDER SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996, IN THE INTEREST OF JUSTICE AND EQUITY AND ETC., IN CMP NO.229/2020 BETWEEN BHARAT HEAVY ELECTRICALS LIMITED HAVING ITS REGISTERED OFFICE AT BHEL HOUSE, SIRI FORT, NEW DELHI-110 049, AND ITS INDUSTRIAL SYSTEMS GROUP AT P.B. NO.1249, 3 PROF.C N R RAO CIRCLE, IISC POST, MALLESHWARAM, BENGALURU - 560 012 REPRESENTED BY MR.R.BABU, AGM(MM) ...PETITIONER (BY SRI GANAPATHI HEGDE, ADV. (PHYSICAL HEARING)) AND M/S.PRASAD AND COMPANY (PROJECT WORKS) LTD., 6-3-871, 'SNEHALATHA', GREEN LANDS ROAD, BEGUMPET, HYDERABAD - 500 016 REPRESENTED BY ITS MANAGING DIRECTOR.
... RESPONDENT [BY SRI ADITYA SONDHI, SR. ADV., A/W. SRI JAYANTH DEV KUMAR, ADV. (PHYSICAL HEARING)] THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER SECTION 11(5) AND 11(6) OF THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING THIS HON'BLE COURT TO;
1. PASS AN ORDER APPOINTING ANY ONE OF THE HON'BLE JUDGES UNDER THE AEGIS OF THE ARBITRATION CENTRE- KARNATAKA (DOMESTIC AND INTERNATIONAL) BENGALURU, AS THE SOLE ARBITRATOR FOR ADJUDICATION OF THE CLAIMS OF THE PETITIONER ARISING OUT OF THE WORK ORDERS DATED:
14/10/2011 (ANNEXURE A AND ANNEXURE A-1) AND THE GENERAL CONDITIONS OF CONTRACT (ANNEXURE B) AND ETC., THESE CIVIL MISCELLANEOUS PETITIONS COMING ON FOR 'HEARING ON INTERLOCUTORY APPLICATION', THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER ON I.A.NO.I/2021 IN C.M.P.NO.229/2020 AND I.A.NO.2/2021 IN C.M.P.NO.44/2021 These applications are filed by the Bharath Heavy Electricals Limited (for short 'BHEL'), seeking recall of the order 4 dated 24.09.2021, insofar as it pertains to the appointment of arbitrator.
2. This Court by an order dated 24.09.2021, after hearing the learned counsel appearing for the parties observed that the dispute between the parties was arbitrable and appointed Sri Justice V.Gopala Gowda as a sole Arbitrator, to enter reference to the dispute between the parties, conduct proceedings and arbitrate the dispute between them. Operative observation relevant to be noticed is as follows:-
"19. Therefore, for all the manifold reasons, I deem it appropriate to refer the dispute between the BHEL and the Company in both these petitions to a sole Arbitrator, a retired Judge of the Hon'ble Supreme Court of India, Sri Justice V.Gopala Gowda, Office at No.4, 3rd Floor, Apollo White Dental Clinic Building, 80 Feet Main Road, near Police Station, R.T.Nagar, Ganganagar, Bengaluru-560 032 (Mobile No: 8826334009)."
After the disposal of the petitions and they being released and uploaded, a memo was moved by the learned counsel who represented BHEL 'for being spoken to'. The memo 'for being spoken to' reads as follows:5
"MEMO FOR BEING SPOKEN TO The undersigned counsel for the petitioner seeks the leave of this Hon'ble Court for being spoken to, regarding the order dated 24.09.2021 in the instant case. The appointed Arbitrator has been engaged previously as an advisor and counsel in matters against the petitioner, representing the petitioner's employees in unions.
Wherefore, it is prayed that this Hon'ble Court may post the matter for being spoken to in the interest of justice and equity."
This Court on the memo filed by BHEL, by its order dated 10.11.2021, reserving liberty, directed the BHEL to take such steps as are available in law. In that light, BHEL has now filed the aforesaid applications, seeking recall of the order in respect of the appointment of Arbitrator.
3. While disposing of the petitions, all the three protagonists i.e., the petitioner - M/s Prasad and Company, BHEL - the petitioner in the companion petition (both of them were respondents in each other petitions) and NMDC, a common respondent in these petitions were heard and out of the choice as was notified by M/s Prasad and Company or BHEL, 6 Sri Justice V.Gopala Gowda, retired Judge of the Supreme Court of India was appointed as an Arbitrator. The present applications are filed by BHEL on the following premise:
"7. I state that the appointed Arbitrator, while practicing as an Advocate in Bengaluru, Karnataka was an advisor to BHEL Employees Union and had also represented the BHEL Employees Union against the BHEL management (Petitioner) in several matters before the Hon'ble High Court of Karnataka and other Courts. As an Advocate representing the BHEL Employees Union, the appointed Arbitrator has fiercely opposed several of the BHEL management's decisions and actions. Copies of few such orders passed by this Hon'ble Court wherein the BHEL Employees Union was represented by the appointed Arbitrator are annexed hereto for the kind consideration of this Hon'ble Court.
8. I am advised to state that, under entry 21 of the fifth Schedule of the Act an Arbitrator who has acted as a counsel against the parties in an unrelated matter may give rise to justifiable doubts as to independence or impartiality. In any event, the alternate dispute resolution mechanism through arbitration is essentially a private tribunal and the parties must have confidence in such tribunal to enter upon reference and adjudicate the referred dispute. If at the outset one of the parties for justifiable reasons expresses reservations about the ability of the Arbitrator appointed by the 7 Hon'ble Court to act without any bias, it is desirable that the Hon'ble Court considers such a request. The very substratum or foundation of the constitution of the Arbitral Tribunal is the 'confidence' of the parties repose in the tribunal so constituted. Therefore, neither party to the arbitration should harbor any justifiable doubt about the tribunal's ability to act unbiased. In the instant case, the petitioner has valid reasons to raise such a doubt inasmuch as the appointed Arbitrator has, representing the employees' Union of BHEL, appeared against the petitioner-BHEL in several matters.
9. I state that the appointed Arbitrator, due to his involvement in matters against the petitioner in the past, gives rise to justifiable doubts as regards his independence and impartiality. I state that the petitioner has a genuine and bona fide apprehension that the appointed Arbitrator in adjudicating the disputes between the parties and reaching a conclusion would be influenced by factors in the previous matters in which he acted on behalf of his erstwhile clients against the petitioner. I am further advised to state that even under the scheme of Arbitration and Conciliation Act, 1996 the parties are entitled to seek fresh appointment if there are circumstances exist that give rise to justifiable doubt as to the independence or impartiality of the appointed Arbitrator."
(Emphasis added) 8 The aforesaid premise on which the applications are preferred by BHEL is that, while practicing as an Advocate in Bangalore, the Hon'ble Judge was an advisor to BHEL Employees Union, had represented BHEL Employees Union against BHEL management in several matters before this Court and as an Advocate represented BHEL Employees Union. The Hon'ble Judge had fiercely opposed several of BHEL management's decisions and actions. A judgment rendered by this Court in which the Hon'ble Judge had represented employees of BHEL against BHEL is appended to the application. On this premise averring that it does not have confidence of independence or impartiality on the part of the Hon'ble Judge, the applications are preferred.
4. The applications also mention that it is filed invoking Entry 21 of the Fifth Schedule of the Arbitration and Conciliation Act, 1996 ('the Act' for short) and it further notes that since the very substratum or foundation of the constitution of the arbitral Tribunal is confidence of parties, the 9 apprehension being rational, there should be a change of Arbitrator at the hands of this Court.
5. The other player in these petitions i.e., M/s Prasad and Company, though have not filed objections on record, have entered appearance and vehemently opposed the applications that are filed on the ground that the apprehension of BHEL is unfounded and as such, the applications should not be considered. They have placed reliance upon the judgment of the Apex Court in the case of HRD CORPORATION (MARCUS OIL AND CHEMICAL DIVISION) v. GAIL (INDIA) LIMITED1.
6. I have given my anxious consideration to the submissions made by the respective learned counsel.
7. The contents of the applications are extracted hereinabove. The learned Arbitrator who is now appointed is yet to enter upon the reference of the dispute. Even before commencement of arbitration, the present applications are filed 1 (2018) 12 SCC 471 10 notwithstanding the fact that the Act itself provides a mechanism for redressal of the grievance of the kind that the BHEL seeks to vent out in the applications in terms of Section 12 of the Act, procedure for which is stipulated in Section 13 of the Act. Sections 12 and 13 of the Act read as follows:
"12. Grounds for challenge.--(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances,--
(a) such as the existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to the subject matter in dispute, whether financial, business, professional or other kind, which is likely to give rise to justifiable doubts as to his independence or impartiality; and
(b) which are likely to affect his ability to devote sufficient time to the arbitration and in particular his ability to complete the entire arbitration within a period of twelve months.
Explanation 1.--The grounds stated in the Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator.
11Explanation 2.--The disclosure shall be made by such person in the form specified in the Sixth Schedule.] (2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if--
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality; or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.
(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
13. Challenge procedure.--(1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.
12(2) Failing any agreement referred to in sub- section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.
(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34.
(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees."
Section 12 deals with grounds for challenge. When a person is approached in connection with his possible appointment as an Arbitrator, he shall disclose in writing any of the circumstances narrated in sub-clauses (a) and (b) of sub-section (1) of 13 Section 12. Explanation-1 mandates that the grounds stated in Fifth Schedule shall guide in determining whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an Arbitrator. Sub-section (3) of Section 12 mandates the circumstances under which it can be challenged. Section 13 deals with challenge procedure. Clause 21 of Fifth Schedule taking recourse to which the present applications are filed, reads as follows:
"21. The arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter."
Clause 21 of Fifth Schedule mandates that if the Arbitrator has within the past three years served as counsel against one of the parties or an affiliate of one of the parties in an unrelated matter it will give rise to justifiable doubts as to the independence or impartiality of the Arbitrator. Therefore, the limitation that Clause 21 of the Fifth Schedule mandates is 3 years in the past.
There is no provision which debars appointment of a particular Arbitrator beyond the said period."
148. It is now germane to notice the apprehension of BHEL.
The Hon'ble Judge who is appointed as an Arbitrator was elevated in the year 1997 to this Court. Therefore, perhaps the Hon'ble Judge would have represented the employees or their Union upto 1997, which event was over 25 years ago. An event that has happened 25 years ago is pressed into service at this juncture on the plea that the Hon'ble Judge was at one point in time appearing against BHEL. If such a plea is accepted for change of the appointed Arbitrator, it would have a chilling effect on all the appointments, of arbitrators under the Act, as an Hon'ble Judge prior to the elevation to a constitutional Court will have been a counsel for any of the managements or any of the employees or sometimes parties to the dispute. Expressing no confidence on the specious plea that the Hon'ble Judge has appeared against BHEL 25 years ago, cannot be imagined to be a ground to change the Arbitrator, who is yet to enter upon the reference and arbitrate the dispute.
159. Once the proceedings commence, remedy is available under the Act as extracted hereinabove. The remedy as available under the Act in terms of Sections 12 and 13 of the Act, is also interpreted by the Apex Court in the case of HRD CORPORATION (supra), wherein it is held as follows:
"12. After the 2016 Amendment Act, a dichotomy is made by the Act between persons who become "ineligible" to be appointed as arbitrators, and persons about whom justifiable doubts exist as to their independence or impartiality. Since ineligibility goes to the root of the appointment, Section 12(5) read with the Seventh Schedule makes it clear that if the arbitrator falls in any one of the categories specified in the Seventh Schedule, he becomes "ineligible" to act as arbitrator. Once he becomes ineligible, it is clear that, under Section 14(1)(a), he then becomes de jure unable to perform his functions inasmuch as, in law, he is regarded as "ineligible". In order to determine whether an arbitrator is de jure unable to perform his functions, it is not necessary to go to the Arbitral Tribunal under Section 13. Since such a person would lack inherent jurisdiction to proceed any further, an application may be filed under Section 14(2) to the Court to decide on the termination of his/her mandate on this ground. As opposed to this, in a challenge where grounds stated in the Fifth Schedule are disclosed, which give rise to justifiable doubts as to the arbitrator's independence or impartiality, such doubts as to independence or impartiality have to be determined 16 as a matter of fact in the facts of the particular challenge by the Arbitral Tribunal under Section 13. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the independence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral proceedings under Section 13(4) and make an award. It is only after such award is made, that the party challenging the arbitrator's appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with Section 34 on the aforesaid grounds. It is clear, therefore, that any challenge contained in the Fifth Schedule against the appointment of Justice Doabia and Justice Lahoti cannot be gone into at this stage, but will be gone into only after the Arbitral Tribunal has given an award. Therefore, we express no opinion on items contained in the Fifth Schedule under which the appellant may challenge the appointment of either arbitrator. They will be free to do so only after an award is rendered by the Tribunal.
... ... ... ...
14. The enumeration of grounds given in the Fifth and Seventh Schedules have been taken from the IBA Guidelines, particularly from the Red and Orange Lists thereof. The aforesaid guidelines consist of three lists. The Red List, consisting of non-waivable and waivable guidelines, covers situations which are "more serious" and "serious", the "more serious" objections being non-waivable. The Orange List, on the other hand, is a list of situations that may give rise to doubts as to the arbitrator's impartiality or independence, 17 as a consequence of which the arbitrator has a duty to disclose such situations. The Green List is a list of situations where no actual conflict of interest exists from an objective point of view, as a result of which the arbitrator has no duty of disclosure. These Guidelines were first introduced in the year 2004 and have thereafter been amended, after seeing the experience of arbitration worldwide. In Part 1 thereof, general standards regarding impartiality, independence and disclosure are set out.
... ... ... ...
20. However, to accede to Shri Divan's submission that because the grounds for challenge have been narrowed as aforesaid, we must construe the items in the Fifth and Seventh Schedules in the most expansive manner, so that the remotest likelihood of bias gets removed, is not an acceptable way of interpreting the Schedules. As has been pointed out by us hereinabove, the items contained in the Schedules owe their origin to the IBA Guidelines, which are to be construed in the light of the general principles contained therein-- that every arbitrator shall be impartial and independent of the parties at the time of accepting his/her appointment. Doubts as to the above are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case in reaching his or her decision. This test requires taking a broad commonsensical approach to the items stated in the Fifth and Seventh Schedules. This approach would, therefore, require a fair construction of the words 18 used therein, neither tending to enlarge or restrict them unduly. It is with these prefatory remarks that we proceed to deal with the arguments of both sides in construing the language of the Seventh Schedule.
21. Coming to the challenge in the present case, Justice Lahoti's appointment is challenged on the ground that the arbitrator has been an advisor to GAIL in another unconnected matter and, therefore, Justice Lahoti should be removed. In his disclosure statement made on 24-11-2016, Lahoti, J. had said:
"That on a legal issue between GAIL and another public sector undertaking, an opinion was given by me to GAIL, in the year 2014, but it has no concern with respect to the present matter. I am an arbitrator in a pending matter between M/s Pioneer Power Ltd. and GAIL (India) Limited."
22. Shri Divan has pressed before us that since on a legal issue between GAIL and another public sector undertaking an opinion had been given by Justice Lahoti to GAIL in the year 2014, which had no concern with respect to the present matter, he would stand disqualified under Item 1 of the Seventh Schedule. Items 8 and 15 were also faintly argued as interdicting Justice Lahoti's appointment. Item 8 would have no application as it is nobody's case that Justice Lahoti "regularly" advises the respondent. And Item 15 cannot apply as no legal opinion 19 qua the dispute at hand was ever given. On reading Item 1 of the Seventh Schedule, it is clear that the item deals with "business relationships". The words "any other" show that the first part of Item 1 also confines "advisor" to a "business relationship". The arbitrator must, therefore, be an "advisor" insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2, 8, 14 and 15, the last item specifically dealing with "legal advice". Under Items 2, 8 and 14, advice given need not be advice relating to business but can be advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under Items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word "regularly" is missing from Items 1 and 2, it is clear that the arbitrator, if he is an "advisor", in the sense of being a person who has a business relationship in Item 1, or is a person who "currently" advises a party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm's length. Something more is required, which is the element of being connected in an advisory capacity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the 20 present dispute, he is clearly not disqualified under Item 1."
(Emphasis supplied) In a subsequent judgment, the Apex Court in the case of STATE OF HARYANA v. G.F. TOLL ROAD (P) LTD.2, has held as follows:-
"21. The 1996 Act does not disqualify a former employee from acting as an arbitrator, provided that there are no justifiable doubts as to his independence and impartiality. The fact that the arbitrator was in the employment of the State of Haryana over 10 years ago, would make the allegation of bias clearly untenable.
22. The present case is governed by the pre- amended 1996 Act. Even as per the 2015 Amendment Act which has inserted the Fifth Schedule to the 1996 Act which contains grounds to determine whether circumstances exist which give rise to justifiable doubts as to the independence or impartiality of an arbitrator. The first entry to the Fifth Schedule reads as under:
"Arbitrator's relationship with the parties or counsel
1. The arbitrator is an employee, consultant, advisor or has any other past or present business relationship with a party."
(Emphasis supplied) 2 (2019) 3 SCC 505 21 Entry 1 of the Fifth Schedule and the Seventh Schedule are identical. The entry indicates that a person, who is related to a party as an employee, consultant, or an advisor, is disqualified to act as an arbitrator. The words "is an" indicate that the person so nominated is only disqualified if he/she is a present/current employee, consultant, or advisor of one of the parties.
23. An arbitrator who has "any other" past or present "business relationship" with the party is also disqualified. The word "other" used in Entry 1, would indicate a relationship other than an employee, consultant or an advisor. The word "other" cannot be used to widen the scope of the entry to include past/former employees.
24. ICA made only a bald assertion that the nominee arbitrator Mr M.K. Aggarwal would not be independent and impartial. The objection of reasonable apprehension of bias raised was wholly unjustified and unsubstantiated, particularly since the nominee arbitrator was a former employee of the State over 10 years ago. This would not disqualify him from acting as an arbitrator. Mere allegations of bias are not a ground for removal of an arbitrator. It is also relevant to state that the appointment had been made prior to the 2015 Amendment Act when the Fifth Schedule was not inserted. Hence, the objection raised by ICA was untenable on that ground also.
22In the light of the judgments of the Apex Court (supra), the Act being a complete code, it takes within its sweep the issue of independence or impartiality on the part of the Arbitrator and the remedy for such grievance of the parties against the learned Arbitrator. It is apposite to refer to the judgment of the Apex Court in the case of INTERNATIONAL AIRPORTS AUTHORITY OF INDIA v. K.D. BALI3, wherein the Apex Court has delineated the issue of reasonable apprehension of bias. The Apex Court holds that apprehension must be reasonable and not a mere whimsical suspicion, what the Apex Court holds is as follows:-
"5. Several points were taken in support of the application for revocation. It was sought to be urged that the petitioner had lost confidence in the sole arbitrator and was apprehensive that the arbitrator was biased against the petitioner. It is necessary to reiterate before proceeding further what are the parameters by which an appointed arbitrator on the application of a party can be removed. It is well settled that there must be purity in the administration of justice as well as in administration of quasi-justice as are involved in the adjudicatory process before the arbitrators. It is well said that once the arbitrator enters in an arbitration, the arbitrator must not be guilty of any act which can possibly be construed as 3 (1988) 2 SCC 360 23 indicative of partiality or unfairness. It is not a question of the effect which misconduct on his part had in fact upon the result of the proceeding, but of what effect it might possibly have produced. It is not enough to show that, even if there was misconduct on his part, the award was unaffected by it, and was in reality just; arbitrator must not do anything which is not in itself fair and impartial. See Russel on Arbitration, 18th Edn., p.
378, and observations of Justice Boyd in Re Brien and Brien [(1910) 2 Ir R 83, 89] . Lord O'Brien in King (De Vosci) v. Justice of Queen's Country [(1908) 2 Ir R 285] observed as follows:
"By bias I understand a real likelihood of an operative prejudice, whether conscious or unconscious. There must in my opinion be reasonable evidence to satisfy us that there was a real likelihood of bias. I do not think that their vague suspicions of whimsical, capricious and unreasonable people should be made a standard to regulate our action here. It might be a different matter if suspicion rested on reasonable grounds -- was reasonably generated -- but certainly mere flimsy, elusive, morbid suspicions should not be permitted to form a ground of decision."
(emphasis supplied) See Queen v. Rand [(1866) 1 QB 230:35 LJMC 157];Ramnath v. Collector, Darbhanga [AIR 1955 Pat 345: ILR 34 Pat 254], Queen v. Meyer [(1875) 1 QBD 173] and Eckersley v. Mersey Docks and Harbour Board [(1894) 2 QB 667].
246. In the words of Lord O' Brien, L.C.J. there must be a real likelihood of bias. It is well settled that there must be a real likelihood of bias and not mere suspicion of bias before the proceedings can be quashed on the ground that the person conducting the proceedings is disqualified by interest. See in this connection Gullapalli Nageswara Rao v. State of Andhra Pradesh [AIR 1959 SC 1376: (1960) 1 SCR 580] and Mineral Development Ltd. v. State of Bihar [AIR 1960 SC 468: (1960) 2 SCR 609]. Recently this Court in a slightly different context in Ranjit Thakur v. Union of India [(1987) 4 SCC 611: 1988 SCC (L&S) 1: AIR 1987 SC 2386: (1987) 5 ATC 113] had occasion to consider the test of bias of the Judge. But there must be reasonableness of the apprehension of bias in the mind of the party. The purity of administration requires that the party to the proceedings should not have apprehension that the authority is biased and is likely to decide against the party. But we agree with the learned Judge of the High Court that it is equally true that it is not every suspicion felt by a party which must lead to the conclusion that the authority hearing the proceedings is biased. The apprehension must be judged from a healthy, reasonable and average point of view and not on mere apprehension of any whimsical person. While on this point we reiterate that learned counsel appearing for the petitioner in his submissions made a strong plea that his client was hurt and had apprehension because the arbitrator being the appointee of his client was not acceding to the request of his client which the petitioner considered to be reasonable. We have heard this submission with certain amount of discomfiture because it cannot be and we hope it 25 should never be (that) in a judicial or a quasi- judicial proceeding a party who is a party to the appointment could seek the removal of an appointed authority or arbitrator on the ground that appointee being his nominee had not acceded to his prayer about the conduct of the proceeding. It will be a sad day in the administration of justice if such be the state of law. Fortunately, it is not so. Vague suspicions of whimsical, capricious and unreasonable people are not our standard to regulate our vision. It is the reasonableness and the apprehension of an average honest man that must be taken note of. In the aforesaid light, if the alleged grounds of apprehension of bias are examined, we find no substance in them. It may be mentioned that the arbitrator was appointed by the Chief Engineer of the petitioner, who is in the service of the petitioner."
(Emphasis supplied)
10. If the application filed is considered on the touchstone of the principles laid down in the judgment of the Apex Court in K.D.BALI (supra), it cannot but be held that the application is shrouded with vague suspicion, whim, caprice of BHEL, as it is an irrational apprehension of bias against the Hon'ble Judge, as the dispute does not even concern the Employees of BHEL or the Employees Union of BHEL. It is a dispute arising out of a commercial transaction between the protagonists in the subject 26 conundrum. Mere suspicion cannot be the ground to interfere with the appointment on any of the imaginary apprehension of BHEL.
Therefore, in the light of the judgments of the Apex Court in the cases of HRD CORPORATION, G.F.TOLL ROAD (P) LTD., and K.D. BALI (supra) and for the reasons aforementioned, I do not find any merit in the applications, seeking change in the Arbitrator. Accordingly, the applications are rejected.
Sd/-
JUDGE bkp CT:MJ