Gujarat High Court
Chandrakant Dayalji Patel & vs Jayant Sanghvi & on 14 August, 2014
Author: Sonia Gokani
Bench: Sonia Gokani
O/OJMCA/112/2014 CAV JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
MISC. CIVIL APPLICATION No. 112 of 2014
In
PETN. UNDER ARBITRATION ACT No. 74 of 2012
FOR APPROVAL AND SIGNATURE:
HONOURABLE Ms. JUSTICE SONIA GOKANI
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1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the
Constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the Civil Judge ?
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CHANDRAKANT DAYALJI PATEL & 1....Applicant(s)
Versus
JAYANT SANGHVI & 1....Respondent(s)
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Appearance:
Mr UMESH A TRIVEDI, ADVOCATE for the Applicant(s) No. 1 - 2
Mr SAMIR J DAVE, ADVOCATE for the Respondent(s) No. 1 - 2
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CORAM: HONOURABLE Ms. JUSTICE SONIA GOKANI
14th August 2014
CAV JUDGMENT
Present application seeks modification of the order of this Court dated 27th September 2013 appointing the sole arbitrator to adjudicate upon the disputes arisen between the applicants Page 1 of 24 O/OJMCA/112/2014 CAV JUDGMENT and opponents herein in respect of an agreement dated 24 th April 2010, as per the provisions of the Arbitration & Conciliation Act, 1996 {"the Act" for short}, in the following background :
An agreement was executed by and between the parties in respect of the land situated at village Ognaj, Taluka Daskroi, District Ahmedabad on 24th April 2010. Since a dispute between the parties needed to be adjudicated upon, as per the terms and conditions stipulated, a petition was moved seeking appointment of an Arbitrator for resolving the same.
This Court, after due consideration of the contentions raised by both the sides, appointed a former Judge of this Court - Mr. Justice P.B Majmudar as a sole arbitrator. It is, at the outset, to be noted that both the sides were given an opportunity to suggest names of arbitrators, after arriving at a consensus. However, both the sides had given separate list.
For want of any agreement on a particular name of the arbitrator, Mr. Justice P.B Majmudar, a former Judge of this Court was appointed as the sole arbitrator.
The parties appeared before the sole arbitrator on 15 th March 2013 and the modalities for proceedings were worked out. The next scheduled date was fixed on 12th April 2014.
The applicants-original petitioners are accused in a case Page 2 of 24 O/OJMCA/112/2014 CAV JUDGMENT filed by the respondents under the provisions of Negotiable Instruments Act {"NI Act" for short} arising out of the very same contract. The learned advocate defending the applicants in the said NI Act cases was also made aware of the name of the sole arbitrator and the applicants came to know that the advocate who filed complaint under the NI Act for and on behalf of the respondents was, at one point of time, working as a junior to the brother of the sole arbitrator. Moreover, it also came to the notice of the applicants that the sons of the former Judge were being briefed by the advocate of the complainant in some of the matters. The respondents since have their base at Vadodara, they also have considerably wide social contacts and the native of the sole arbitrator is also at Vadodara. In this background, an application was moved on 12th April 2014 before the sole arbitrator to point out that the applicants were desirous of invoking the provisions of the Act, being sub-section (4) of Section 12 and sub-section (2) of Section 13. It is also the say of the applicants that these facts were made known to the respondents. Despite there being no reply on the part of the respondents, consecutively dates were fixed for proceedings. It is, therefore, urged that considering the high stake involved in the matter, when an apprehension exists that there may not be independent adjudication or Page 3 of 24 O/OJMCA/112/2014 CAV JUDGMENT impartiality; for the reasons stated above, a need has arisen to change the sole arbitrator. It is further averred that with a view to avoid any unpleasant situation on either side, the Court may modify the order and appoint some one else to act as a sole arbitrator. It is stated that there is nothing personal against the sole arbitrator, however, it will be desirous that justifiable doubts when exists in the minds of common men in respect of independence of the sole arbitrator, such a request needs to be acceded to.
Affidavit-in-reply has been filed by the opponent no.1 denying all the averments. It is urged that the parties appeared before the sole arbitrator on 15 th March 2014 to work out the proceedings. The applicants were to submit their respective claims before the next date scheduled ie., on 10th May 2014. However, prior to such next date, an application under Section 12 (4) & Section 13 (2) of the Act for changing the arbitrator came to be filed and due to shortage of time, the respondents never came to respond to the same before 10 th May 2014. On 10th May 2014, the applicants did not remain present before the learned Arbitrator, and therefore, the next date of hearing was scheduled on 20 th May 2014 when the respondents filed reply with a list of documents opposing such application and also completed their part of submissions on Page 4 of 24 O/OJMCA/112/2014 CAV JUDGMENT 10th June 2014.
It is urged by the respondents that the learned advocate Shri Avadhoot Sumant appearing for the respondents in the matters under the NI Act was a junior to Mr. Rohit B. Majmudar, a practicing lawyer in the Vadodara Courts, who is incidentally the brother of the sole arbitrator. Moreover, on the ground that he is a briefing lawyer to the sons of the present arbitrator and the complaint filed under the NI Act since are arising from the very same contract, apprehension has been shown. According to the respondents, the complaint filed is for the different transactions and had no relation with the memorandum of understanding [MOU]. Moreover, Mr. Sumant, who represents the respondents is an independently practicing advocate since 1995 and he was working with the brother of the sole arbitrator nearly twenty years before, therefore, the alleged influence or bias according to the respondents is nothing but a visible presumption. Moreover, according to the respondents, Mr. Sumant has been briefing various lawyers, solicitors and senior counsels practicing in the High Court because he himself has a very good practice. These allegations are nothing but frivolous and vexatious. It is also further denied that any social contacts and the native of the sole arbitrator being at Vadodara is being projected as a ground for possible influence Page 5 of 24 O/OJMCA/112/2014 CAV JUDGMENT which is nothing but an attempt to fabricate the false and dishonest way of presumption. The respondent is a distinguished and reputed firm in the business of infrastructure and development. There is no likelihood of its engaging in any activity which would give rise to any such remotest possibility of influencing the adjudicating authority.
It is further contended that similar such application is also pending before the Arbitrator where the arguments have been completed and therefore also, this petition need not be entertained. It is nothing but an attempt to delay further proceedings.
Both the sides have been heard at length, who have fervently made submissions to support their respective versions.
According to learned advocate Shri Umesh Trivedi appearing for the applicants, apprehension of bias must be judged from a healthy and reasonable point of view. He further urged that it is not necessary to show any kind of misconduct on the part of the Arbitrator who is in session of the proceedings. There should not be any apprehension that the authority is biased and is likely to decide against the party.
Considering all the averments made in the application, learned counsel submits that the apprehension which had arisen in the Page 6 of 24 O/OJMCA/112/2014 CAV JUDGMENT mind of the applicants-original petitioners are reasonable. He did agree to the fact that parties at the relevant point of time could not agree on any name consensually, however, he made fervent request that the order needs to be modified invoking the provisions of Sections 12 (4) and 13 (2) of the Act.
As against that learned advocate Shri Dave appearing for the respondents has forcefully submitted that in absence of any circumstances to point out bias; personal or otherwise, the Court may not entertain any fanciful apprehension. He further urged that the applicants have filed various proceedings to take undue advantage of the very system by preferring the quashing petitions, being Cr. MA No. 2593/2014 to 2601/2014 to quash the criminal cases. They have also filed quashing petitions, being Criminal Misc. Application No. 1598 to 1600 of 2014 to quash the criminal cases. They have also filed application before the learned Addl. Chief Judicial Magistrate, Vadodara for staying the proceedings in criminal cases preferred under Section 138 of the NI Act. All these proceedings have been initiated essentially to see that the proceeding before the sole arbitrator do not proceed further.
He urged that no interference is desirable at all and the applicants may not have to fulfill their legal obligation.
Before adverting to the facts, the law on the subject Page 7 of 24 O/OJMCA/112/2014 CAV JUDGMENT requires consideration :-
Section 12 and 13 of the Arbitration & Conciliation Act, 1996 which are pertinent, reads thus -
"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 likely to give rise to justifiable doubts as to his independence or impartiality.
(2) Any 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.
13. Challenge procedure : - (1) Subject to sub- section (4), the parties are free to agree on a procedure for challenging an arbitrator. (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 become 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 challenge, the arbitral tribunal shall decide on the challenge.
Page 8 of 24 O/OJMCA/112/2014 CAV JUDGMENT (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."
Apex Court in case of Manak Lal v. Dr. Prem Chand Singhvi & Ors., reported in AIR 1957 SC 425 has held and observed that, "..every member of a Tribunal that is called upon to try issues is judicial or quasi-judicial proceedings must be able to act judicially and it is of the essence of judicial decisions and judicial administration that judges should be able to act impartially, objectively and without any bias. In such cases, the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the Tribunal might have operated against him in the final decision of the Tribunal. It is in this sense that it is often said that justice must not only be done but must also appear to be done."
Page 9 of 24 O/OJMCA/112/2014 CAV JUDGMENT
In case of Ranjit Thakur v. Union of India & Ors., reported in AIR 1987 SC 286, the Supreme Court has laid down the tests which would indicate the bias. The Court held that reasonableness of the apprehension in the mind of the party is one of the test of likelihood of bias. The Court also held and observed as under :-
"6. The second limb of the contention is as to the effect of the alleged bias on the part of respondent
4. The test of real likelihood of bias is whether a reasonable person, in possession of relevant information, would have thought that bias was likely and is whether respondent 4 was likely to be disposed to decide the matter only in a particular way. It is the essence of a judgment that it is made after due observance of the judicial process; that the Court or Tribunal passing it observes, at least the minimal requirements of natural justice, is composed of impartial persons acting fairly and without bias and in good faith. A judgment which is the result of bias or want of impartiality is a nullity and the trial "coram non-judice". (See Vassiliadas v. Vassiliades- AIR 1945 PC 38).
7. As to the tests of the likelihood of bias what is relevant is the reasonableness of the apprehension in that regard in the mind of the party. The proper approach for the judge is not to look at his own mind and ask himself, however, honestly. "Am I biased? "but to look at the mind of the party before him. Lord Esher in Allinson v. General Council of Medical Education and Registration, l 1894] 1 Q.B. 750 at 758 said:
"The question is not, whether in fact he was or was not biased. The Court cannot inquire into that .......... ............. In the administration of justice, whether by a recognised legal court or by persons who, although not a legal public court, are acting in a similar capacity, public policy requires that, in order that there should be no doubt about the purity of the Page 10 of 24 O/OJMCA/112/2014 CAV JUDGMENT administration any person who is to A take part in it should not be in such a position that he might be suspected of being biased."
In Metropolitan Properties Co. (F.G.C.) Ltd. v. Lannon, [1969] 1 Q.B. 577, at 599, Lord Denning M.R. Observed:
". .. in considering whether there was a real likelihood of bias, the court does not look at the mind of the justice himself or at the mind of the chairman of the tribunal, or whoever it may be, who sits in a judicial capacity. It does not look to see if there was a real likelihood that he would, or did, in fact favour one side at the expense of the other. The court looks at the impression which would be given to other people. Even if he was as impartial as could be nevertheless if right minded persons would think that in the circumstances there was a real likelihood of bias on his part, then he should not sit....... ".
Frankfurter J in Public Utilities Commission of the District of Columbia v. Pollack (343 US 451 at 466) said:
"The judicial process demands that a judge move within the frame work of relevant legal rules and the court covenanted modes of thought for ascertaining them. He must think dispassionately and submerge private feeling on every aspect of a case. There is a good deal of shallow talk that the judicial robe does not change the man within it. It does. The fact is that on the whole judges do lay aside private views in discharging their judicial functions. This is achieved through training, professional habits, self- discipline and that fortunate alchemy by which men are loyal to the obligation with which they are interested. But it is also true that reason cannot control the subconscious influence of feelings of which it is unaware. When there is ground Page 11 of 24 O/OJMCA/112/2014 CAV JUDGMENT for believing that such unconscious feelings may operate in the ultimate judgment or may not unfairly lead others to believe they are operating, judges refuse themselves. They do not sit in judgment .. ".
Referring to the proper test, Ackner LJ in Regina v. Liverpool City Justices, Ex-parte Topping [1983] I WLR 119 said:
"Assuming therefore, that the justices had applied the test advised by Mr. Pearson-Do I feel prejudiced? then they would have applied the wrong test, exercised their discretion on the wrong principle and the same result, namely, the quashing of the conviction would follow."
Thus tested the conclusion becomes inescapable that, having regard to the antecedent events, the participation of Respondent 4 in the Courts-Martial rendered the proceedings coram non-judice.
7. Re: contention (b): The mere circumstance that the appellant was, at the relevant point of time, serving a sentence of imprisonment and could not therefore, be said to be in 'active service' does not detract from the fact that he was still "a person subject to this Act." This is clear from the second clause of Section 41(2) which refers to offences committed when not in 'active service'. The difference is in the lesser punishment contemplated. We are, therefore, unable to appreciate the appositeness of this contention of Shri Sinha." In case of International Airport Authority of India v. K.D Bali & Anr., reported in AIR 1988 SC 1099, according to the Apex Court, the Arbitrator must not be guilty of any kind of any act which can possibly be construed as indicative of partiality or unfairness. It would be apt to reproduce the Page 12 of 24 O/OJMCA/112/2014 CAV JUDGMENT relevant observations, which read thus -
"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 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 Russell on Arbitration, 18th Edition page 378 and observations of Justice Boyd in Re Brien and Brien, [1910] 2 I.R. 83 at p. 89. Lord O'Brien in The King (De Vesci) v. The Justices of Queen's Country, [1908] 2 I.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 and but certainly mere flimsy grounds elusively generated and morbid suspicions should not be permitted to form a ground of decision."
(Emphasis supplied) See The Queen v. Rand and others, [1866] 1 Q.B. 230; Ramnath v. Collector, Darbhanga, I.L.R. 34 Pat. 254; The Queen v. Meyer and others, [1875] 1 Q.B. Page 13 of 24 O/OJMCA/112/2014 CAV JUDGMENT 173 and Eckersley and others v. The Mersey Docks and Harbour Board, [1894] 2 Q.B. 667.
6. In the words of Lord O'Brien, LCJ 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. The State of Andhra Pradesh, [1960] 1 SCR 580 and Mineral Development Ltd. v. State of Bihar, [1960] 2 SCR
609. Recently this Court in a slightly different context in Ranjit Thakur v. Union of India and others, A.I.R. 1987 S.C. 2386 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 should never be 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 Page 14 of 24 O/OJMCA/112/2014 CAV JUDGMENT 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." In case of The Secretary to the Government, Transport Department, Madras v. Munaswamy Mudaliar & Ors., reported in AIR 1988 SC 2232, the Apex Court has held that unless there is allegation against the named arbitrator either against his honesty or capacity or mala fide or interest in the subject matter or reasonable apprehension of the bias, a named and agreed arbitrator cannot and should not be removed in exercise of a discretion vested in the Court under Section 5.
"This is a case of removal of a named arbitrator under Section 5 of the Act which gives jurisdiction to the Court to revoke the authority of the arbitrator. When the parties entered into the contract, the parties knew the terms of the contract including arbitration clause. The parties knew the scheme and the fact that the Chief Engineer is superior and the Superintending Engineer is subordinate to the Chief Engineer of the particular Circle. lnspite of that the parties agreed and entered into arbitration and indeed submitted to the jurisdiction of the Superintending Engineer at that time to begin with, who, however, could not complete the arbitration because he was transferred and succeeded by a successor. In those circumstances on the facts stated no bias can reasonably be apprehended and made a ground for removal of a named arbitrator. ln our opinion this cannot be, at all, a good or valid legal ground. Unless there IS allegation against the named arbitrator either against his honesty or capacity or mala fide or interest in the subject matter or reasonable apprehension of the bias, a name and agreed arbitrator cannot and should not be removed in exercise of a discretion vested in the Court under section 5 of the Act.Page 15 of 24 O/OJMCA/112/2014 CAV JUDGMENT
Reasonable apprehension of bias in the mind of a reasonable man can be a ground for removal of the arbitrator. A predisposition to decide for or against one party, without proper regard to the true merits of the dispute is bias. There must be reasonable apprehension of that predisposition. The reasonable apprehension must be based on cogent materials. See the observations of Mustill and Boyd, Commercial Arbitration, 1982 Edition, page 214. Halsbury's Laws of England, Fourth Edition, Volume 2, para 551, page 282 describe that the test for bias is whether a reasonable intelligent man, fully appraised of all the circumstances, would feel a serious apprehension of bias."
Apex Court in case of A.K Kraipak & Ors. v. Union of India & Ors., reported in AIR 1970 SC 150 has held that to prevent the abuse of that power and to see that it does not become a new despostsm, Courts are gradually evolving the principles to be observed while exercising such powers. This judgment is predominantly divides the line between administrative power and quasi judicial power and emphasizes on the requirement of acting judicially, which according to the Apex Court, is in essence is nothing but a requirement to act justly and fairly and not arbitrarily or capriciously.
The Supreme Court in case of Siddhivinayak Realities Private Limited v. Tulip Hospitality Services Limited & Ors., reported in AIR 2007 SC 1457 was dealing with an issue which pertains to escrow arrangement in a case of agreement to purchase the hotel property where there was a question of Page 16 of 24 O/OJMCA/112/2014 CAV JUDGMENT default triggering arrangement to be decided by Escrow Agents jointly, except on the ground of bias of Escrow Agent. In a situation of possibility of extensive cross examination of Escrow Agent on very question of default, the Court held that he cannot be called to decide the dispute as he cannot be Judge in his own cause. Here various decisions have been discussed to indicate that the principles of justice must not only be done but also seem to be done.
In case of Narinder Singh Arora v. State [Govt. of NCT of Delhi] & Ors., reported in AIR 2012 SC 1642, the Apex Court was dealing with a case which was directed against the judgment and order of the High Court of Delhi in a Criminal Revision application, whereby, the High Court has dismissed the revision petition preferred by the appellant against the order passed by the learned Addl. Sessions Judge. While setting aside the impugned judgment of the High Court, the Apex Court held and observed as under :-
"4. It is apparent that the fact of earlier recusal of the case at the trial by learned Shri Justice S.N Dhingra himself, was not brought to his notice in the revision petition before the High Court by either of the parties to the case. Therefore, Shri Justice S.N Dhingra, owing to inadvertence regarding his earlier recusal, has dismissed the revision petition by the impugned judgment. In our opinion, the impugned judgment passed by Shri Justice S.N Dhingra subsequent to his recusal at trial stage for Page 17 of 24 O/OJMCA/112/2014 CAV JUDGMENT personal reasons, is against the principles of natural justice and fair trial.
5. It is well settled law that a person who tries a cause should be able to deal with the matter placed before him objectively, fairly and impartially. No one can act in a judicial capacity if his previous conduct gives ground for believing that he cannot act with an open mind or impartially. The broad principle evolved by this Court is that a person trying a cause must only act fairly but must be able to act above suspicion of unfairness and bias."
In case of M/s. Ladli Construction Private Limited v. Punjab Police Housing Corporation Limited & Ors. [Civil Appeal No. 947 of 2006 :: Decided 23 rd February 2012], a dispute arose between the appellant-Ladli Construction (P) Limited and the respondent-Corporation & its Executive Engineer (Civil) in respect of construction of 240 units of Type II-A at Urban Estate, Ludhiana where the time was essence of the contract. The contractor, since could not adhered to the time-schedule, the Corporation resorted to action against the contractor under clause provided in the contract and rescinded the same also handed over un-executed work to another contractor. The appellant-contractor in such circumstances had moved the Court for appointment of an arbitrator in terms of one of the clauses of the contract. The Chief Engineer of the Corporation was appointed as an arbitrator, as provided under one of the clauses of the contract. The contractor did not chose Page 18 of 24 O/OJMCA/112/2014 CAV JUDGMENT to appear before the Arbitrator and instead sent a letter that such appointment was not acceptable to it as he did not accept any justice and fair play from him. In an application made under Section 5, 11 & 12 of the Arbitration Act, 1940 for removal of the arbitrator by the contractor, the arbitrator continued proceedings ex parte and passed an award.
Two applications were heard simultaneously - one for removal of the arbitrator; and second, for making award the rule of the Court, where, the application of the contractor was rejected and the award was made the rule of the Court. When challenged before the District Court, the appeal was dismissed. A Civil Revision application preferred before the High Court against such dismissal also came to be rejected, and therefore, Special Leave to appeal was granted by the Apex Court. In such circumstances, the Court held that the authority empowered to decide the dispute must be without bias which is fundamental principle of natural justice. However, the party questioning the appointment of arbitrator should be able to establish that the arbitrator was biased against it. Bias could be found in variety of situations and the same has to be seen in the context of its own facts, however, a fanciful apprehension of bias is not enough. Apt would be, to quote the relevant observations made by the Apex Court in this respect Page 19 of 24 O/OJMCA/112/2014 CAV JUDGMENT in paragraph 25 of its judgment, which reads thus -
"25. In so far as the facts of the present case are concerned, the Contractor moved the Court for appointment of the Chief Engineer as arbitrator and then chose not to appear before him. What was the intervening event after the arbitrator was appointed at his instance that prompted him to ask the arbitrator to recuse is not stated by the contractor. The Contractor was not successful in getting any final or interim order in the proceedings initiated by it for removal of the arbitrator. The award passed by the arbitrator also does not show that he misconducted in any manner in the proceedings. He gave full opportunity to the Contractor to appear and put forth its case but the Contractor failed to avail of that opportunity."
The Apex Court also held, quoting from other decided case laws that a reasonable apprehension of bias in the mind of a reasonable man can be a ground for removal of the arbitrator. A predisposition to decide for or against one party, without proper regard to the true merits of the disputes is bias. There must be reasonable apprehension of that predisposition. The reasonable apprehension must be based on cogent materials. Reference is made to the decision rendered in case of Secretary to the Government, Transport Department, Madras {Supra} where the Fourth Edition of Halsbury's Laws of England [Vol. II] page 282 is quoted, which describes that the test for bias is whether a reasonable intelligent man, fully apprised of all the circumstances, would feel a serious apprehension of bias. Eventually, the Apex Court held that Page 20 of 24 O/OJMCA/112/2014 CAV JUDGMENT except raising vague and general objections that the Arbitrator was biased and had predisposition to decide against the contractor, no material much less cogent materials, have been placed by the contractor to show bias of the arbitrator.
Reverting to the factual matrix, in light of the ratio laid down by various judicial pronouncements, the applicants herein are expected to adduce reasonable evidence of real likelihood of bias. It should be a serious apprehension of bias of a reasonably intelligent man who is aware of all the circumstances. The same need not be based on any whimsical or capricious vague suspicion.
As noted hereinabove, the applicants have raised contention of bias on the ground of the learned advocate Mr. Avdhoot Sumant appearing for the opponents in a criminal proceedings pending between the parties before the Criminal Court at Vadodara being the junior of advocate brother of the learned Arbitrator some twenty years back. Moreover, the concerned lawyer having established himself fairly well in the practice from the year 1995 chose to brief various counsels in the matters preferred before the High Court. Incidentally, sons of the learned Arbitrator practice in this Court are also briefed by him sometimes. There is no material to indicate the exclusivity of briefing to them. Affidavit-in-reply of the Page 21 of 24 O/OJMCA/112/2014 CAV JUDGMENT opponent-respondents indicate that the advocate concerned continue to brief many other advocates. It is also the say in the said affidavit that the complaints filed under the Negotiable Instruments Act have no relation with the MoU.
Without even entering into that dispute as to whether the criminal proceedings are the result of such memorandum of understanding. Suffice to note that in a criminal complaint, if an independent practicing professional lawyer represents the opponent-respondent who incidentally was assistant to the brother of the learned Arbitrator twenty years back, that hardly could be said to be a cogent and valid ground for any reasonable person to apprehend any bias. It also does not give rise to justifiable doubt as to independence or impartiality of the Arbitrator. Again, the averments made of possible bias since the respondent/opponents are based at Vadodara and the native of the learned Arbitrator being Vadodara, wide social network may result into Arbitrator tilting towards the opponents also has no substance. At a native place of any person relatives and friends of acquaintance are bound to be more than anywhere else, but that ipso facto is hardly a ground to point a finger or nurture any doubt. In absence of any factual materials or details leading to such doubts being termed as doubts of a reasonable person, this ground deserves Page 22 of 24 O/OJMCA/112/2014 CAV JUDGMENT no substance as well.
Sub-section (3) of Section 12 provides that appointment of arbitrator may be challenged only if - (a) circumstances exist which may give rise to justifiable doubt as to his independence or impartiality, and (b) if he does not possess the qualifications agreed to by the parties. Clause (b) of sub- section (3) of Section 12 would not come into picture and no such dispute could have been raised nor has been raised. However, with regard to the existence of circumstances giving rise to justifiable doubt as to independence or impartiality, the test of bias laid down by various judicial pronouncements speak of a real likelihood of bias. A fanciful or whimsical apprehension in the minds of the parties cannot be made the basis for sustaining the challenge to the appointment of an Arbitrator. It is, of course, necessary for the administration that the parties do not nourish any apprehension that the authority is biased and it has predisposition towards otherside. However, every suspicion of the party cannot culminate into entertaining the theory of bias, when such apprehensions are bereft of healthy and reasonable view points.
Resultantly, this application fails. Notice discharged.
{Ms. Sonia Gokani, J.} Page 23 of 24 O/OJMCA/112/2014 CAV JUDGMENT Prakash* Page 24 of 24