Indian Farmers & Fertilizer ... vs Duggal Construction Co. (I) Ltd.
1997 Latest Caselaw 165 Del

JUDGMENT

J.B. Goel, J.

(1) This is petition (OMP No. 68/96 filed by the petitioner under sections 5 & 11 of the Indian Arbitration Act, 1940 for the revocation of the authority of and for removal of respondents No. 2 & 3 who are the Arbitrators in the case.

(2) Briefly, the facts are that two contracts for civil works being Contract No. 117 and 117-A were awarded to the respondent No. 1 Contractor by the petitioner for construction of 257 and 128 Type B quarters for the petitioner's Fertilizer.

(3) Township at Aonla, District Bareilly (U.P.). Both the contracts contained arbitration clause providing that each of the parties will be entitled to nominate their own Arbitrator.

(4) The disputes having arisen between the parties in relation to the said contracts respondent No. 1 nominated Mr. Justice M.S. Gujral (Retired Chief Justice) (respondent No. 2) whereas the petitioner had nominated late Mr. Justice V.D. Mishra (retired Chief Justice). Both the arbitrators had entered upon reference and called upon the parties to file their claims and Counter Claims which were done. However, during the course of the proceedings Mr. Justice V.D. Mishra expired and thereafter the petitioner nominated respondent No. 3 as their Arbitrator who accepted the same and arbitration proceedings continued.

(5) The petitioner have alleged that the learned Arbitrator are biased and apprehensions have been expressed that the petitioner would not receive just and fair hearing from these arbitrators.

(6) The instances of bias comprise of (1) that the arguments of respondent No. 1 were concluded on 1.8.1995 and as soon as the petitioner's counsel opened the arguments the arbitrators remarked that the respondent No. 1 had to be compensated in a big way. (2) The authorities of the Supreme Court cited on behalf of the petitioners were being looked down upon with indifference and adversely commented upon. The wisdom of the Judges who decided and the Lawyers appearing in those cases were doubted. Whereas the judgments of the High Courts cited on behalf of respondents were appreciated, thus showing bias on the part of Mr. Justice M.S. Gujral. That the respondent No. 3, the other Arbitrator had no legal background and was a silent spectator during the proceedings and Mr. Justice M.S. Gujral would try to over awe him. (3) The Arbitrator had on several occasions fixed a large number of dates in a row without break especially on 19th October, 1995, 10-11-1995, 5-12-1995, 9.1.1996 and 16.1.1996. (4) That the arbitrators charged their fee from the parties when no hearings took place on various dates and presence of the parties or their counsel was being insisted upon to make it a case of hearing to charge fees and for that purpose even the presence of Mr. Sundriyal and Mr. Sahu who used to appear on behalf of the petitioner was not recognized. On 5th December, 1995 a request for adjournment on behalf of the petitioner due to the death of father of Mr. K.S. Srivastava, Senior Manager, Law services of the petitioner who used to appear for the petitioner in arbitration proceedings, intimation of which was given to the Arbitrators on telephone by Mr. Manoj Verma, Advocate but still the Arbitrators insisted on the presence of the authorised representative of the petitioner and for not so appearing they subsequently reprimanded the petitioner's counsel Mr. Manoj Verma that he should have been present to pursue the litigation. This was done only to extract their fee. (5) on 2.12.1991, 6.7.1992, 10.11.1992 and 19.4.1993, one of the Arbitrators was not present and even for those dates the other Arbitrator had charged his fee when no Arbitral Tribunal were sitting and so no hearing took place. (6) In the month of March, 1995 Arbitrators wanted to visit Aonla the site of the work. The parties had no choice but to agree to their desire. For this purpose the arbitrators had charged fee at the rate of RS. 11,000.00 each per day for three days for their visit besides expenses on boarding and lodging borne by the petitioner which was extracting heavy fee which otherwise is unreasonable. (7) During their visits of the site on 24.3. 1995 the petitioner had pointed out that the defects existed in all the flats and desired that each and every flat be inspected but it was not accepted and only sample inspection was made. (8) That the arbitrators had made not of their inspection report in writing but they did not allow the petitioner to use the same in arguments on the ground that they did not wish to become witnesses to the case and wished to ignore their report. If the report was not to be considered, there was no purpose for the arbitrators in visiting the site except to make fee for themselves and to make a holiday trip for three days.

(7) This petition was filed on 2.7.1996. Before this another petition Omp No. 38/96 was filed by respondent No. 1 under section 28 of the Arbitration Act for extension of the time for making the Award and notice of this application was already served on the petitioner on 20.5. 1996.

(8) Respondent No. 1 has filed reply and has contested this petition. It is alleged that the petition is not bonafide and is only in reaction to the respondent's petition under section 28 of the Arbitration Act with a view to delay the final outcome of the case which is at the concluding stage and already more than 100 hearings in more than 7 years have taken place; the alleged apprehension of the petitioners are nothing but imagination of their whimsical mind; the petitioner had been always hindering the smooth conduct of the proceedings on one reason or the other so as to avoid final outcome of the adjudication. It is denied that the Arbitrators are biased or have made any derogatory remarks against the petitioners counsel, or ridiculed any case law cited on behalf of the petitioner or made any remarks as alleged. The allegations of bias are not justified because the Arbitrators have given fair chance to the parties during the conduct of the proceedings, dates were being fixed taking into consideration the convenience of the parties inspite of the fact that delay was being caused by the petitioner; The charging of the fee by the Arbitrator in the absence of one of the Arbitrator is also justified as sittings, were held so as to fix a date convenient to the parties. The adjournment sought by the petitioner on 5.12.1995 due to death of father of Mr. Srivastave was not justified as ;Mr. Srivastava was not actively associated in the hearing of the proceedings and even in his absence proceedings had taken place, Mr. Sahu and Mr. Sundriyal were not authorised representatives of the petitioners and the arbitrators were justified in not recognising their attendance. It is denied that the Arbitrators had at any time reprimanded Mr. Manoj Verma, Advocate of the petitioner which it is alleged is a bi-product of imagination, an afterthought and without basis. The Arbitrators had given adjournments whenever wanted by the parties even at the cost of delay being caused in the proceedings. The petitioner have frequently been coming with one or the other excuse to avoid and delay the conclusion of the proceedings inspite of the fact that more than 7 years are over and more than 100 hearings have taken place, all due to dilatory tactics of the petitioner which in no way is cause for imputing bias or misconduct. The fee charged by the Arbitrators was justified and parties had never raised any objection, or grievance in this regard. Dates on consecutive dates were fixed by the Arbitrators with the consent of the parties and considering the time required for hearing. Visit of the Arbitrators at Aonla was at the instance of both the parties and it was not a choice of the Arbitrators and the fee for that trip was also fixed with the consent of the parties which was not unreasonable or unjustified because arbitrators were otherwise charging fee at the rate of Rs. 5,500.00 per hearing and for sparing 3 days exclusively for this work they had charged at the rate of Rs. 11,000 per day for three days which is not unreasonable in the circumstances. The arbitrators had made sample inspection of the flats as suggested by the petitioner and they were not expected to inspect each of the 384 flats in dispute and grievance in this respect is not justified. It is denied that the petitioner wanted that all of the flats should be inspected.

(9) It is also denied that the petitioner were not allowed to look into their inspection report or the arbitrators wanted to ignore it as alleged. Even at Aonla the petitioner did not cooperate as the list of the items they wished to show to the Arbitrators were not given in advance as notified and were supplied after wasting 3 hours on the day of inspection. The allegations made are malafide, based on distortion of facts and not bonafide.

(10) Rejoinder has been filed on behalf of the petitioner reiterating their averments in the petition.

(11) Learned counsel for the petitioner has contended that various acts of the bias and misconduct mentioned in the petition on the part of the Arbitrators remain unrebutted as the Arbitrators have not filed any reply inspite of service of notice on them. These circumstances are sufficient to remove and revoke the authority of the Arbitrators. He has also contended that the circumstances mentioned ;in the petition have also been stated in the reply to the respondent's application under section 28 of the Arbitration Act for extension of time and these circumstances could also be urged while deciding that application and the objection that this petition has been filed by way of reaction has no force. For this reliance has been placed on Anand Dass Vs. Ram Bhushan Air 1933 Patna 566. Whereas learned counsel for the respondent has contended that the various allegations made are neither bonafide nor justified nor are borne out from the material on record. Petitioner have throughout been trying to delay disposal of the case and their conduct shows that they wanted to create one or the other obstacles in the disposal of the case and this present petition is a step to achieve that objective and the same is not bonafide. The apprehensions have to be judged from a healthy, reasonable and average point of view and not on mere apprehensions of any whimsical person. The allegations are not bonafide, but malafide. Reliance has been placed on International Airport Authority of India Vs. K.D. Bali & Anr. .

(12) In the case of International Airport Authority of India it was laid down 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. There must be reasonableness of the apprehension of bias in the mind of the party. 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. The principle is that justice should not only be done but should manifestly be shown to be done. Once the Arbitrator enters in an arbitration, the arbitrator must not be guilty of any act which could possibly be construed as indicative of partiality or unfairness. In this connection following observations of Lord O'Brien in King (De Vesci) Vs. Justices of Queen's Country. (1908) 2 Ir 285 were referred with approval in this case: "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 whimsical capricious and unreasonable people should be made a standard to regulate out action here. It might be a different matter if suspicion rested on reasonable grounds was reasonably generated and but certainly mere flimsy ground elusively generated and morbid suspicions should not be permitted to form a ground of decision."

(13) The question thus is whether the various allegations of bias and mis-conduct are bonafide and justified and based on the material on record.

(14) One of the objections is that the Arbitrators have conducted themselves unreasonably by charging fee either when they were not entitled to or for creating situations to charge fee for themselves.

(15) The Arbitrators were appointed one each by the parties without the intervention of the Court. Thus the Arbitrators are of their own choice of the parties. The fee of the Arbitrators could be fixed by the Arbitrators with the consent and approval of the parties. Both the Arbitrators had accepted and entered upon the reference and on 5.5.1989 they called upon the parties to file their claims and Counter claims. After pleadings of the parties were complete issues were framed on 8.11.1989. Subsequently, also some dates for hearing had taken place. On 3rd May, 1991 when the counsel for the parties were present the question of fee to be paid to the Arbitrators was considered when it was decided that for non effective hearing the fee of Rs. 2200 and for effective hearing Rs. 3,300.00 will be paid to each of the Arbitrators to be contributed equally by the parties. Proceedings continued thereafter without any objection from both the parties. No fees for the Secretarial Staff were initially fixed. However on 29.9.1994 in the presence of counsel for parties it was noticed that Stenographer/Typist had attended 41 hearings and record was being maintained by a Clerk and so a fee of Rs. 250.00 per hearing to cover the past expenses of Stenographer and Secretarial expenses till then were fixed and for subsequent dates their fee was fixed at Rs. 350.00 per hearing to be contributed equally. To this also no objection has been raised. On 27.9.1974 in the presence of counsel for the parties it was noticed that the fee of the Arbitrators was fixed many years back and their fee was much below the fee charged by other Arbitrators and so they decided to charge fee at the rate of Rs. 5,500.00 per hearing for each of the Arbitrators for effective hearing and Rs. 3,300.00 for non effective hearing. No grievance has been made in the petition about fixing of these fee of the Arbitrators and/or the Secretarial Staff of Arbitrators.

(15) It is alleged that the fee by one Arbitrator has been charges on the dates when the other Arbitrator was not present and as such there was no hearing by an Arbitral Tribunal and for that date the fee of the Arbitrator ought not to have been charged. The instances are of 2nd December, 1991, 6th July, 1992, 10th November, 1992 and 19th April, 1993. On three dates one of the Arbitrator (Shri B.S. Gathwala), was not present. Both the Arbitrators were present on 10th November, 1992 when the counsel for both the parties were present and on their request case was adjourned, and so fee charged was not unjustified for that date. On the remaining three dates the proceedings had been recorded by one of the Arbitrator (Mr. Justice M.S. Gujral) and dates for next hearing were fixed. If the parties had any objection as to whether such dates were not non-effective hearings then they would have raised objection or obtained clarification from the Arbitrators. The expression "Non-effective" hearing is not defined during the proceedings. No objection was raised by the parties and obviously it was understood by the parties that the fee of the Arbitrators was to be charged even for such dates. The objection is afterthought, belated and in my view not bonafide.

(16) It is them contended that the site inspection at Aonla in March, 1995 was devised to enjoy holiday at the cost of the parties for which heavy fee was charged. In the proceedings on 6.3.1995 in the presence of the counsel for the parties it is recorded as under : "On the request of the parties it has been decided to visit the site on 25.3.1995. For this purpose we will leave for the site on 24.3.1995 and return on 26th March, 1995. The Claimant shall make arrangement for the transport of both the sides including the learned Arbitrators and the respondents will provide for boarding/lodging etc. The parties will pay Rs. 11,000.00 per day to each of the Arbitrator for these three days................"

(17) It is seen that the Arbitrators on normal working used to work for about 2/3 hours in the evening from 3/3.30/4.00 P.M. and perhaps on holidays the proceedings used to start at 11 A.M. till 27.9.1994 the fee of the Arbitrator for effective hearing was Rs. 3,300.00 each and thereafter fee was fixed at 5,500.00 each per hearing. They have charged Rs. 11,000.00 for three days. These three days were utilised exclusively for the arbitration work. It was not disputed during arguments that one side journey was of about 9 hours. Obviously two days were taken in performing to and fro journey by the Arbitrators and the arbitrators visited the site on 25.3.1995. For three exclusive days they had charged Rs. 11,000.00 per day. This is not the case of the learned counsel that they had not desired or had objected either to the arbitrator's visiting the site or their fixing their fee. In the circumstances, it cannot be said that the fee charged by the Arbitrators was unjustified or was charged against the wishes of the parties.

(18) Then it is contended that the inspection report prepared by the Arbitrators was not allowed to be read and used at the time of arguments and if it was not to be used, the inspection by the Arbitrators was unnecessary and was arranged as a holiday trip at the cost of the parties.

(19) The powers of an Arbitrator is analogous to those of a Civil Court. Order 18 Rule 18 of the Code of Civil Procedure empowers a Court to inspect any property or thing concerning which any question may arise. The object of this provision is to enable the Tribunal to understand questions that are being raised and to follow and apply the evidence. The object is not to collect evidence for the case by the Court or the Arbitrator and the Judge does not perform the functions of a Local Commissioner under Order 26 Rule 9 while purporting to act under this provision.

(20) Such inspection is not substitute for the evidence in the case and a judgment cannot be based solely on the basis of personal local inspection. Local inspection is made by the Court to appreciate evidence and the circumstances of the case. The parties thus cannot use such inspection report as a substitute for evidence to build their case. To what extent the inspection report would be used by the Arbitrators cannot be prejudged. This objection has no merits.

(21) Then it is alleged that as soon as arguments of the petitioner were started the Arbitrators made it clear that the respondent No. 1 had to be compensated in a big way. It is denied as misconceived.

(22) The averment is sought to be supported by the affidavit of Shri K.S. Srivastava who is a Chief Legal Officer of the petitioner. Arguments on behalf of the petitioner before the Arbitrators had started on 27.9.1995. Shri K.S. Srivastava had not attended the proceedings before the Arbitrator on that date or on previous dates or on subsequent several dates and as such his affidavit has no value and no notice can be taken of this plea.

(23) Then it is contended that during arguments the case law of Supreme Court cited on behalf of the Petitioner was ridiculed whereas the decision of High Court cited on behalf of the respondent was appreciated. Again in support affidavit of Shri K.S. Srivastava has been relied. This has been denied on behalf of the respondent.

(24) Arguments on behalf of the respondent had started on 25.5.1995 and were addressed on 26.5.1995, 27.5.1995, 29.5.1995, 26.7.1995, 27.2.1995, 31.7.1995 and 1.8.1995 and arguments on behalf of the petitioner were addressed on 27.9.96, 17.10.1995, 18.10.1995, 19.10.1995 and on none of these dates shri K.S. Srivastave had attended the proceedings. His affidavit on this aspect also has no value.

(25) Then it is contended that presence of Mr. Sahu and Mr. Sundriyal who had been attending the proceedings were not recognised in the absence of their counsel on 5.12.1995 whereas they had been attending the arbitration proceedings on behalf of the petitioner and Shri Manoj Verma, Advocate for the petitioner was reprimanded for not appearing on that date as the adjournment was necessitated on that date because of the death of the father of Shri K.S. Srivastava who was involved during the arbitration proceedings on behalf of the petitioner. This is denied.

(26) On 5.12.1995 none of the counsel of the petitioner had appeared before the Arbitrator and Mr. Sahu and Mr. Sundriyal had appeared on behalf of the petitioner and had made an application for adjournment on the ground that Shri Srivastava who is Incharge of the case was unable to come due to death of his father. It was noticed by the Ld. Arbitrators that the application had not been properly signed by authorised person nor authorised person or counsel was present to argue the application and even copy of the application had not been given to the opposite party. It is further observed that "It was appropriate that Mr. Verma, who has been representing the Iffco from the very beginning, should have been present to pursue this application." When evidence of the petitioner was recorded on 19.11.1994, 15.12.1994, 19.1.1995, 21.1.1995, 20.2.1995, 29.2.1995, 6.3.1995, 23.3.1995 and 24.4.1995, on none of these dates Shri K.S. Srivastava had appeared. Evidence of the respondent was recorded on more than 30 dated and on 28 such dated Shri K. S. Srivastava had not appeared but D.C. Kulshreshta had appeared on behalf of the petitioner, Shri K.S. Srivastava had appeared on very few dates. Even during arguments he had not appeared on 25.5.1995, 26.5.1995, 27.5.1995, 29.5.1995, 26.7.1995, 27.7.1995, 31.7.1995, 1.8.1995, 29.9.1995, 17.12.1995, 18.10.1995 and 19.10.1995. However, he had appeared on the next date, i.e., on November 10,1995 for seeking an adjournment as the Counsel of the petitioner was not to attend. It is alleged that on 5.12.1995 the adjournment was sought as the father of Shri K.S. Srivastava had expired and Mr. Srivastava was Incharge of the case. This in the circumstances is not a correct statement. When Shri Srivastava had not been appearing in the case on most of the dates of evidence and arguments, his presence would not have been necessary on December 5, 1995. In these circumstances. It cannot be said that the learned Arbitrators were not justified in expressing disgust and anguish and not approving the conduct of the persons involved on behalf of the petitioner before them. What was the nature of the reprimand has not been explained in the petition or by Shri K.S. Srivastava in his affidavit. This objection also cannot be said to be bonafide and in the circumstances, it cannot be said that the Arbitrators were unjustified in disapproving such conduct on the part of the petitioner which apparently seemed to be an attempt to delay the disposal of the case.

(27) It is then contended that a number of dates of hearings were given in a row, i.e., on consecutive dates. In my view there ought not to have been any occasion for objection on this ground as the arbitration proceedings had started in the year 1989 and remained undecided till February, 1996 when only one witness on behalf of the respondent and 3 witnesses were examined on behalf of the petitioner which took 6 months. Hearing of arguments which started on 25.5.1995 was not concluded after next 9 months.

(28) Order 17 Rule 1 Civil Procedure Code . provides that when the hearing of the suit has commenced, it shall be continued from day to day until all the witnesses in attendance have been examined unless for exceptional reasons to be recorded the adjournment of the hearing beyond the following day is necessary. It further provides that no adjournment shall be granted at the request of a party, except where the circumstances are beyond the control of that party. Even the fact that the counsel is engaged in another Court is not a ground for adjournment. Fixing of dates of hearing on consecutive dates by the Arbitrators and that too in the afternoons or evenings in my view cannot be said to be unreasonable or an act of bias or misconduct. The purpose of resolving disputes by arbitration is to cut cost and save time involved in the courts in litigation but even after 7 years the Arbitration Proceedings remain undecided in this case. It had taken over 30 hearings and over 3 years in recording cross-examination of one witness of the respondent and over 6 months for recording cross-examination of three witnesses of the petitioner when their evidence was not very much in volume. Arguments remain unconcluded for over 9 months after the evidence was concluded. It is not the case of the petitioner that the delay was caused for any act or conduct attributable to the arbitrators or to the respondent. Arbitration relates to the claim made by the respondent which would not be in the interest of the respondent to delay the proceedings. The delay apparently suited the petitioner and they had full say and play in achieving this object and in the process only sufferer is the respondent whereas everybody else is benefited for the delay. The appointment of the Arbitrators could have been revoked due to such inordinate delay. However, taking into consideration the fact that the parties have spent huge amounts in the arbitration, the matter is already delayed and is at the final stage. I do not think it a fit case and in the interest of the parties who have no grievance on account of delay to revoke the appointment of the arbitrators for this reason. As held in Jiwan Kumar Lohia and Another Vs. Durga Dutt Lohia & Ors. Air 1990 Sc 188 the discretion to grant leave to revoke an, arbitrator's authority has to be exercised cautiously and sparingly and while doing so the Court must bear in mind that arbitration is a particular method for the settlement of disputes and parties should not be relieved from a tribunal they have chosen because they fear that the arbitrator's decision may go against them. After the arguments were concluded and the case was reserved for judgment learned counsel for the petitioner has supplied the following case law: "(1)M/S M.N. Chetty & Co. Vs. P.S. Subramania Aiyar Air 1924 Madras 274 (2) M/S Dutton Massey & Co. Vs. M/S Jamnadas Harparshad Air 1924 Sind 51; (3) State of Orissa Vs. D.C. Routray ; State of Orissa Vs. Niranjan Swain in support of the contention that as allegation of bias and conduct have been imputed to the arbitrators, the Arbitrators have not filed any reply, they may be summoned and examined. In view of the circumstances notice above no ground is made out for summoning the Arbitrators for being examined in deciding this petition. This petition has no merits and the same is hereby dismissed with costs. Costa Rs. 2500.00 . The Records of Arbitration be remitted back to the Arbitrators."

(29) Omp No. 38/96 This is a petition (filed by the respondent) under section 28 of the Arbitration Act for extension of time for making and publishing the award. The arbitration proceedings had started in the year 1989 and thereafter time for making the award has been extended periodically with the consent of both the parties and extended time had expired on 12th March, 1996 and thereafter it appears that the respondent in this Omp (who is petitioner in Omp No. 68/96) have not agreed for extension of time and the arbitration proceedings were adjourned sine die on March 15, 1996.

(30) As noticed while deciding Omp No. 68/96 above there has been inordinate delay in decision of the arbitration proceedings. It cannot be said from the material on record that it is the petitioner-contractor who is responsible for this delay. Evidence of the parties has been concluded and argument have also been addressed on a number of occasions and the case is at a very advanced stage. Huge amounts perhaps over Rs. 5 Lacs each have been incurred by both the parties. In the circumstances it is fit and proper that time for making the award is extended for 2 months.

(31) This Application is allowed. Time for making the award is extended for two months from the date of service of this order on the Arbitrators. It is hoped that the Id. Arbitrators will make it convenient to make and publish their award within 2 months of the receipt of this order. The petitioner in this petition shall take a copy of this order and serve the same on the arbitrators. A copy of this order be placed in the file of Omp 38/96.