Bombay High Court

Mohan Govind Chitale vs Nirmala Anand Deodhar on 5 December, 2008

Bench: S.A. Bobde

                              :1:



            IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                   CIVIL APPELLATE JURISDICTION

                   ARBITRATION APPEAL NO. 10 OF 2008
                                 WITH




                                                                            
                   CIVIL APPLICATION NO. 11 OF 2008




                                                    
    Mohan Govind Chitale                     ]
    Age 60 years, Occ: Business              ]
    Residing At & Post Chiplun               ]
    Taluka Chiplun, Dist : Raigad            ]..Appellant
           versus




                                                   
    Nirmala Anand Deodhar                    ]
    Age 60 years, Occ: Household             ]
    Residing At & Post Chiplun               ]
    Taluka Chiplun, Dist: Raigad             ]..Respondent




                                     
    Mr. Saurabh M. Railkar for the Appellant.
    Mr.   Sanskar Marathe i/b.      Devan Dwarkadas                         &
                           
    Partners for the Respondent.


                               CORAM :     S. A. BOBDE, J.

                               DATE :      5TH DECEMBER, 2008.


    ORAL JUDGMENT :
      


    .         Heard learned counsel for the parties.
   



    2         This    is   an Appeal under Section 37 of                 the





    Arbitration      and Conciliation Act, 1996, against the

    Order    dated 6.12.2007 passed by the District Judge,

    Ratnagiri.       The   learned   Judge    has      rejected          the





    Appellant's       application    for     setting        aside        the

Arbitration Award dated 2.5.2003.

3. In Chiplun there is a Hotel by name Manisha

Lunch Home. Under an Agreement dated 6.7.1992, the

respondent Smt. Nirmala Anand Deodhar who owns it,

granted a Licence to the appellant Mohan Govind

Chitale to run the business of Manisha Lunch Home

for a period of ten years from 1.8.1992 to

31.7.2002. After the expiry of this period, the

appellant did not hand over possession. Hence a

dispute arose between the parties. The respondent

requested the Sole Arbitrator Mr. Shrikant

Pandurang Vaidya, already appointed under the

agreement to adjudicate this matter. The Arbitrator

called

upon both the parties to remain present for

the first meeting of arbitration on 25.9.2002.

4. At the first meeting on 25.9.2002 the

appellant objected to the appointment of Mr.

Shrikant Pandurang Vaidya on the ground of bias.

The objection was the Arbitrator and his father

Pandurang Vaidya were Tax Consultants for the

respondent Smt. Nirmala Anand Deodhar and

appellant's father Pandurang Vaidya had purchased a

plot of land from the respondent and constructed a

building on it. The appellant further pointed out

the very close relationship between the Arbitrator's

family and the respondent. The respondent replied

and submitted that it was the appellant who had

suggested the name of the Arbitrator at the time of

the agreement in 1992. The Arbitrator considered

the objection and rejected it with the observation

in the Award that no event has occurred during the

period of agreement that could be considered to be

an impediment for the Arbitrator to work in

impartial and unbiased manner. On merits, the

Arbitrator directed the appellant to hand over

possession of the business to the respondent.

5. The appellant applied to the District Judge,

Ratnagiri,

under Section 34 of the Arbitration and

Conciliation Act, 1996, for having the Award set

aside. In support of his objection that the

Arbitrator was biased, because his father had

purchased property from the respondent, the

appellant produced copy of a Gift Deed dated

11.5.1999 whereby the respondent had gifted property

to the father of the Arbitrator. There is no

dispute about the existence of the Gift Deed. The

learned counsel for the appellant also accepts that

there is no sale deed of any property to the

Arbitrator by the respondent as originally alleged.

This Gift Deed was produced by the appellant as

evidence of the possible bias of the Arbitrator in

favour of the respondent. The learned District

Judge ignored the existence of the Gift Deed and

observed that the appellant has only made arbitrary

and vague statement regarding the impartiality of

the Arbitrator without producing any evidence which

shows transactions of immovable property between the

respondent and the Arbitrator that there was no

substance in the objection regarding the

impartiality of the Arbitrator. With these

observations the contentions of the appellant were

rejected.

6. In

rejecting the contentions, the learned

District Judge completely lost sight of Section 12

of the Arbitration and Conciliation Act, 1996, which

reads 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 likely to give rise to justifiable doubts as to his independence or impartiality.

(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."

This Section, which is an inviolable safeguard for

maintaining the purity of arbitration clearly

requires an arbitrator to disclose any circumstances

likely to give rise to doubts as to his independence

or impartiality. Now, in this case I have no doubt

that a gift of property to the Arbitrator's father

from

a party to the arbitration, particularly when

the father is residing with the Arbitrator, is a

circumstance which is likely to give rise to a

justifiable doubt as to the Arbitrator's

independence and impartiality. The question that is

raised is : whether the Arbitrator was bound to

disclose the circumstance even though it arose after

his appointment? It is clear that the Gift Deed

dated 11.5.1999, was not in existence when the

Arbitrator was approached in 1992 for being

appointed as such, and therefore it cannot be said

that he ought to have disclosed in writing the

circumstance of his father having received a gift of

property from the respondent when he was approached

in connection with his possible appointment as an

Arbitrator. However the Arbitrator ought to have

done so after the circumstance arose.

7. This was clearly required by sub section (2)

of section 12 which requires the Arbitrator to

disclose to the parties in writing any circumstance

likely to give rise to justifiable doubts as to his

independence or impartiality "from the time of his

appointment and throughout the arbitral

proceedings".

8. In

the present case an objection was indeed

raised by the appellant on the ground that the

Arbitrator's father had purchased a plot of land

from the respondent and constructed a building on

it. In the first meeting on 25.9.2002 apparently

the objection was inaccurate in the sense that the

father had not purchased a plot of land but had

received the gift on 11.5.1999. The Arbitrator

could not have rejected the objection in the

following words :

"No event has occurred during the period of agreement that will be an impediment for the Arbitrator to work in an impartial and unbiased manner. Therefore, objections are rejected and the Arbitration proceedings are continued."

This gift was clearly a circumstance likely to give

rise to justifiable doubt as to his independence or

impartiality within the meaning of Section 12 and

the Arbitrator was bound to disclose it.

9. Learned counsel for the respondent argued

that the decision of the Arbitrator contained in the

Award is a correct decision in accordance with law

and the agreement between the parties and cannot be

said to

agreement has

be vitiated by the so-called

no merit in view of bias.

the This

settled

position in law.



    .        In    Union of India vs.      Tolani Bulk Carriers
      


    Limited      [2002 (20 Bom.C.R.     256],
                                        256] Justice          Deshmukh
   



    observed as follows:

"....Section 12 casts a solemn duty on an

arbitrator, who is put in position of a Judge to disclose to the parties his interest which is likely to give rise to a reasonable doubt about his independence in the mind of the parties. So far as the question of justifiable doubts as to

independence or impartiality is concerned the basis is whether the party to the dispute would have reasonable apprehension in his mind about the independence of the arbitrator and not whether the arbitrator thinks that he is capable of being impartial. The following observations from

para 17 of the judgment of the Supreme Court in the case of Ranjit Thakur in my opinion are pertinent. The said paragraph 17 reads thus:

17. 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.

. In such a situation, in my opinion, the Court has to look at the impression, which would be given to the other people. In the present case the son of arbitrator

Shri Patel was a member of the firm of Advocates which represented the respondents before him. In my opinion, it was the duty

of Shri Patel, the arbitrator, to disclose to the parties the said fact in writing as contemplated by the said section."

Having regard to the above position in law, I am of

view that the circumstance that there was a gift of

immovable property in favour of the Arbitrator's

father by the respondent herself was a circumstance

which was likely to give rise to a justifiable doubt

as to the independence or impartiality of the

Arbitrator. The Arbitrator was therefore bound

under Section 12 of the Arbitration and Conciliation

Act, 1996, to disclose the circumstance as and when

it occurred and in any case not to proceed with the