National Highways Authority Of ... vs Mr K.K. Sarin & Ors
2009 Latest Caselaw 1271 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 ARB.A.No. 410/2008

%09.04.2009                   Date of decision: 9th April, 2009

NATIONAL HIGHWAYS AUTHORITY
OF INDIA                .......                           Petitioner
                        Through: Mr Parag Tripathi, A.S.G. and Mr
                                 Sandeep Sethi, Sr Advocates with Mr
                                 Krishan Kumar, Ms Padma Priya, Ms V
                                 Rao   and   Mr    Sumit   Gahlawat,
                                 Advocates.

                                Versus

MR K.K. SARIN & ORS                             ....... Respondents
                        Through: Mr Valmiki Mehta, Sr Advocate with Ms
                                 Kiran Suri, Mr Purvesh Buttan and Ms
                                 Aparna Bhat, Advocates for respondent
                                 No.4.


CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.     Whether reporters of Local papers may
       be allowed to see the judgment?       Yes

2.     To be referred to the reporter or not?   Yes

3.     Whether the judgment should be reported
       in the Digest?                        Yes


RAJIV SAHAI ENDLAW, J.

1. The petition is filed under Section 14 of the Arbitration and

Conciliation Act, 1996 for the relief of terminating the mandate of

the arbitral tribunal comprising of the nominees of the petitioner and

respondent No.4 and the presiding arbitrator appointed by the said

two nominees and for appointment of a sole arbitrator by this court.

The members of the arbitral tribunal are impleaded as the

respondents 1 to 3 and though served with the notice, did not

appear. The respondent No.4 contested the petition.

2. The petition has been preferred on two grounds. Firstly, that

the arbitral tribunal has failed to abide by the agreement between

the petitioner and the respondent No.4 of the fee to be paid to the

arbitral tribunal and ordered the parties to pay fee much in excess

thereto and Secondly on the ground of bias of the arbitral tribunal

against the petitioner, originating from the petitioner objecting to

the payment of fee at rates higher than agreed upon with the

respondent No.4; other instances of bias from certain interim orders

made by the tribunal have also been pleaded.

3. The petition contained a prayer for interim relief and, on a

prima facie view of the matter, vide ex parte order dated 21st

November, 2008 further proceedings before the arbitral tribunal

were stayed.

4. After completion of pleadings and during the course of hearing

it was disclosed that certain relevant documents had remained

unnoticed in the reply of the respondent No.4 and which were filed

alongwith supplementary affidavit and response thereto of the

petitioner elicited.

5. I will take up the aspect of fee of the arbitrator first. At the

time of granting the ex parte order, it was felt that the arbitrators,

being creatures of an agreement between the parties, would be

bound by the agreement between the parties as to the fee also and if

the fee, as per the said agreement, is not acceptable to the

arbitrators, the only option for the arbitrators is to recuse

themselves and the arbitrators cannot order the parties to pay fee in

excess of that provided in the agreement. Section 31(8) of the Act is

also subject to the agreement between the parties.

6. However, during the arguments, the documents, which are not

disputed, have been filed and which lead me to believe that

notwithstanding the agreement between the petitioner and the

respondent No.4 as to the fee, the petitioner and the respondent

No.4 had, for the purposes of the arbitration subject matter of this

petition, agreed to the fee schedule ordered by the Tribunal.

7. It is not disputed that the petitioner and the respondent No.4

are, since prior to the commencement of the arbitration subject

matter of the present petition, engaged in another arbitration also,

which hereafter is referred to as Arbitration-I. The arbitral tribunal

in the other arbitration is also the same as in the arbitration subject

matter of this petition, which hereafter is referred to as Arbitration-

II.

8. The respondent No.4 vide its letter dated 5th June, 2006 to all

the three arbitrators informed that certain more disputes (than

subject matter of Arbitration-I) had arisen and with respect whereto

the respondent No.4 had issued notice of intention to commence

arbitration and had requested to refer the additional disputes to the

existing arbitral tribunal and further that the petitioner had also

decided to refer the said additional disputes before the existing

arbitral tribunal - and requesting the arbitral tribunal that additional

disputes may be adjudicated upon "on the existing terms and

conditions". It is the contention of the respondent No.4 that the

"existing terms and conditions" qua the fee in Arbitration-I were the

same as the fee demanded by the tribunal in the Arbitration-II. It is

further urged that the petitioner having agreed to pay fee to the

Tribunal at a rate higher than that provided in the agreement

between the petitioner and the respondent No.4, what was

understood from the aforesaid communication of the petitioner was

that the petitioner was willing to pay the same fee for the

Arbitration-II also.

9. Per contra, the senior counsel for the petitioner has drawn

attention to a supplementary agreement dated 19th August, 2005

between the petitioner and the respondent No.4 wherein a fee

structure of the arbitrators was agreed and to its policy circular

dated 2nd August, 2006 whereby the fee of the arbitrators, as earlier

agreed, was revised. From the supplementary agreement it is not

borne out that Arbitration-I was already underway at that time. It

further provides in clause 7 thereof that in exceptional cases such as

involving major legal ramifications/higher financial stakes etc., a

special fee structure could be fixed with specific approval of

chairman of the petitioner, before appointment of arbitrator and in

consultation with respondent No.4. I have not found in the

supplementary agreement dated 19th August, 2005 any clause

entitling the petitioner to unilaterally bring out such a policy circular

revising the arbitration fee.

10. The first meeting of Arbitration-I was held on 23rd November,

2005. Minutes thereof show that the petitioner herein had submitted

the supplementary agreement dated 19th August, 2005 before the

tribunal then also. However, the tribunal considered the fee

structure provided in supplementary agreement to be unreasonable

and laid down the fee structure as per the Indian Council of

Arbitration as reasonable. It has not been contended by the

petitioner that such fee which was not in terms of supplementary

agreement has not been paid by petitioner in Arbitration-I which is

informed to have culminated against the petitioner. The Minutes of

Meeting held on 15th/16th May, 2006 of Arbitration-I further

downwardly revised the fee but the same was still in excess of fee

provided in the supplementary agreement dated 19th August, 2005.

11. A preliminary meeting of the arbitral tribunal in Arbitration-II

was held on 6th June, 2006 wherein the fee structure and expenses of

the arbitration were also laid down with the consent of parties. The

same was not in accordance with the agreement or the policy

circular aforesaid. It was the same as in Arbitration-I. Several

officers and counsels of the petitioner were present in the said

meeting and the minutes whereof do not show any protest having

been made to the fee structure laid down by the Tribunal. The

second meeting of the arbitral tribunal was scheduled for 23rd and

24th August, 2006. However, it appears that the second meeting of

the arbitral tribunal did not take place as scheduled and a letter

dated 5th January, 2007 was written by the petitioner to the arbitral

tribunal intimating the arbitral tribunal of the supplementary

agreement dated 19th August, 2005 on fee structure and as revised

by the policy circular dated 2nd August, 2006 (supra). However, in

the said letter also, neither any protest was made of the fee schedule

laid down by the Tribunal in the preliminary meeting nor was any

review thereof sought.

12. The minutes of the second meeting of the tribunal ultimately

held on 29/30th January, 2007 in Arbitration-II show that the arbitral

tribunal took notice of the letter dated 5th January, 2007 of the

petitioner and further observed that the fee structure was agreed to

by the parties as stated in para 1.06 of the minutes of the

preliminary meeting held on 6th June, 2006 after taking into

consideration the representation of the petitioner in its letter dated

5th June, 2006 (supra) requesting the tribunal to adjudicate the

additional disputes "on the existing terms and conditions". The

arbitral tribunal therefore held that the fee structure laid down on 6th

June, 2006 was reasonable and decided to continue with the same.

Directions were issued for each party making initial deposit of Rs

50,000/- to each of the three arbitrators and a further deposit of Rs

75,000/- to be made by each party to two of the arbitrators.

13. The petitioner, vide its letter dated 18th June, 2007, with

reference to the minutes of the meeting held on 29th/30th January,

2007 of the second arbitration, forwarded to two of the arbitrators

advance of Rs 1,25,000/- each and to the third arbitrator advance of

Rs 50,000/-. This payment is in consonance with the directions

contained in the minutes of the first meeting held on 6th January,

2006 and the second meeting held on 29th / 30th January, 2007 of the

second arbitration.

14. The petitioner submitted an application dated 7th July, 2007 to

the arbitral tribunal under Section 31(8) of the Act requesting the

tribunal to consider the fee as per the supplementary agreement

dated 19th August, 2005 (supra). The said application was disposed

of vide order dated 26th July, 2007 of the arbitral tribunal. The

petitioner in its application contended that it had never agreed to

pay the fee as recorded in the minutes of 6th June, 2006. The arbitral

tribunal, inter alia, held that the parties could not fix the fee of the

arbitrator and the arbitrators were not bound by the fee fixed by the

parties which was not notified at the time of reference. It was

further held by the arbitral tribunal that the representatives of the

petitioner present in the meeting of 6th June, 2006 had appended

their signatures thereto after reading the same. The tribunal

therefore dismissed the application of the petitioner. At this stage it

may also be noticed that on 19th August, 2005, besides the

agreement aforesaid, qua fee of arbitration, another agreement was

also executed between the parties to modify the dispute resolution

mechanism under the main agreement. This agreement provides for

the arbitrators to fix their own fee.

15. The arbitral tribunal in the minutes of the meeting held on 1st,

2nd and 3rd October, 2007 directed each party to make further deposit

of Rs 2 lacs each to the presiding arbitrator and another arbitrator

and of Rs 1 lac to the third arbitrator.

16. The petitioner under cover of its letter dated 13th October,

2007 to the three arbitrators and in reference to the minutes of the

meeting held on 1st, 2nd and 3rd October, 2007 made payment of Rs 2

lacs each to two and of Rs 1 lac to the third arbitrator respectively.

17. The arbitral tribunal, vide minutes of the meeting held on 10th

January, 2008 and 11th January, 2008, directed the parties to deposit

further sums of Rs 2 lacs to two of the arbitrators and Rs 1.60 lacs to

the third arbitrator. The petitioner has filed its internal

communication of September, 2008 wherein reference is made to the

fee due as per the policy circulars of the petitioner from time to time

regarding arbitrators fee and to the payments made to the

arbitrators. On the basis of the said communication, it is contended

by the senior counsel for the petitioner that whatever payments have

been made by the petitioner to the arbitrator are in terms of its

circular and not in terms of the orders/directions of the arbitrators

and the petitioner cannot thus be said to have consented in any way

to any schedule of fee other than as provided in its policy circulars.

18. That since the petitioner failed to make the payment, as

directed on 10th and 11th January, 2008, the arbitral tribunal vide

minutes of the meeting held on 8th September, 2008 directed the

respondent No.4 to make the deposit in terms of Section 38(2) of the

Act. However, the petitioner under cover of its letter dated 12th

September, 2008 forwarded a sum of Rs 2 lacs each to two of the

arbitrators as advance, with reference to the direction in the minutes

of 10th and 11th January, 2008. Vide another letter dated 18th

September, 2008, the petitioner forwarded advance of Rs 51,000/- to

the third arbitrator who in terms of the order dated 10th and 11th

January, 2008 was to be paid a sum of Rs 1,60 lacs. This payment

was thus not in accordance with the directions on 10 th and 11th

January, 2008.

19. In the aforesaid state of facts the question to be determined is

as to whether the petitioner had agreed to pay fee at rate other than

as per the supplementary agreement dated 19th August, 2005 and/or

its policy circulars regarding arbitrators fees.

20. In my view the following factors show that the petitioner had

agreed to the payment of fee at rate other than in terms of the

supplementary agreement dated 19th August, 2005 and the policy

circulars of the petitioner.

i. The petitioner notwithstanding the said supplementary agreement and policy circular had agreed to pay the fee, first in terms of the Rules of the Indian Council of Arbitration and which was subsequently revised to the tribunal qua arbitration-I.

ii. It is not the case of the petitioner that it did not pay the said fee to the tribunal.

iii. It is the petitioner who approached the arbitral tribunal constituted for arbitration-I, for the purposes of adjudication of additional disputes which became subject matter of the arbitration-II. The petitioner while so approaching the arbitrator, by its unilateral letter, did record that the reference was on the existing terms and which would indicate the terms on which the Arbitration -I was being conducted. The petitioner on that date also did not refer to the supplementary agreement dated 9th August, 2005 or to the policy circulars.

iv. Thereafter, in the preliminary meeting in arbitration-II on 6th June, 2006 also the supplementary agreement or the policy circulars were not brought up. The minutes do record the agreement/consent of the representatives

of the petitioner to the arbitration fee and expenses as being paid in arbitration-I.

v. It was only after more than six months of the preliminary meeting aforesaid that for the first time in letter dated 5th January, 2007 the question of fee as per the supplementary agreement dated 19th August, 2005 and the policy circulars was raised.

vi After the arbitral tribunal in the second meeting on 29/30th January, 2007 negatived the contention of the petitioner in the letter dated 5th January, 2007, the petitioner forwarded the fee as demanded by the arbitrators. The petitioner, while forwarding the cheques stated the same to be in terms of the directions of the arbitral tribunal and did not state that the same was as advance or that the fee, in fact, would be payable in terms of the supplementary agreement read with the policy circulars.

vii The petitioner again after making the said payment, filed an application dated 7th July, 2007. However, after the said application was dismissed in the meeting held on 1st to 3rd October, 2007, the petitioner again complied with the direction of the arbitrator for payment of further amounts.

viii It was only after the direction in the meeting on 10/11th January, 2008 for payment of further fee that the petitioner stopped paying the same. Even thereafter, the petitioner filed the present petition after nearly 10- 11 months therefrom.

21. The arbitration has thus been going on for nearly two and a

half years prior to the filing of this petition. It is not in dispute

that the arbitration was at the stage of final hearing and the

respondent/claimant had already concluded its submissions and

the submissions of the petitioner were part heard. Had the

petitioner not agreed to the fee schedule as directed by the

tribunal, or had the petitioner refused to make the payment or yet

still had the petitioner, notwithstanding the orders of the tribunal,

made it known that it was willing to pay only the amounts in terms

of its policy circulars, the arbitration would not have proceeded so

far. The petitioner having allowed the arbitration to reach the

culmination point cannot belatedly be permitted to contest the fee

aspect.

22. Therefore, even though I agree with the senior counsel for the

petitioner that the arbitrators are bound by the agreement between

the parties as to the payment of fee and if the said fee is not

acceptable to them, are free not to accept the office as an arbitrator

and/or to recuse themselves and cannot demand fee in supersession

of the said agreement but in the facts of the present case I find the

petitioner to have agreed to the fee schedule. The agreement

between the petitioner and the respondent as to the fee schedule

could always be novated and in this case is found to have been

novated. Even otherwise there is no justification whatsoever for the

petitioner to have agreed to pay and paid fee higher than agreed

and/or as per its circular in arbitration-I and to make a grievance

with respect thereto at the fag end of the proceedings in arbitration-

II. The ASG had handed over a compilation of judgments on waiver

but in view of above, it is not felt necessary to cite the same. The

first challenge of the petitioner thus fails.

23. As far as the second challenge i.e., of bias is concerned, the

elements of bias pleaded / argued are as under:

i. Directions/orders from time to time of the arbitral tribunal qua fee and the prejudice of the arbitral tribunal against the petitioner for non-payment of fee ordered.

ii. The action of the arbitrator of deciding the application of the respondent for interim measures under Section 17 of the Act without even meeting and after telephonic conversation only and passing of an order with respect thereto.

iii. The action of the arbitral tribunal of allowing the additional claims made by the respondent No.4 to be included in the arbitration proceedings, without the same going through the procedure in terms of the agreement between the parties i.e., of the Dispute Review Board.

iv. Interim order of tribunal staying encashment of Bank Guarantees.

24. During the course of hearing, the following questions were

formulated with respect to bias:

A. Whether the appointment of the arbitrator on the ground of bias can be challenged under Section 14 of the Act or the grievance, if any, with respect thereto is to be made only at the stage of Section 34 of the Act.

B. If grievance of bias can be made under Section 14, then whether the grievance can be made directly before the court or the complaining party is required to first pursue the measures under Sections 12 and 13 of the Act.

C. Whether in the present case any case of bias has been made out.

25. As far as the first of the aforesaid questions is concerned,

Section 14 permits a party to approach the court to return a finding

if "a controversy remains" as to whether the arbitrator has

become de jure or de facto unable to perform his functions.

The 1996 Act in Section 5 thereof otherwise prohibits judicial

intervention except where so provided by the Act itself. Thus unless

Section 14 permits judicial intervention in the case of a bias being

made out against the arbitrator, the petition on the said ground shall

not lie.

26. This court in Shyam Telecom Ltd v ARM Ltd 113(2004) DLT

778 has held that de jure impossibility referred to in Section 14 is

the impossibility which occurs due to factors personal to the

arbitrator. It was held that non conclusion of arbitral proceedings

within the agreed time rendered the arbitrator de jure unable to

continue with the proceedings.

27. Under the 1940 Arbitration Act, Section 5 thereof permitted

revocation of the authority of an arbitrator by the court. The Apex

Court in Panchu Gopal Bose Vs Board of Trustees for Port of

Calcutta AIR 1994 SC 1615 was concerned with the said provisions

of the 1940 Act. It was held that the court had been given power in

the given circumstances to grant leave to a contracting party to have

the arbitrator or umpire removed and the arbitration agreement

revoked. It was further held that the said discretion has to be

exercised cautiously and sparingly considering that the parties

should not be relieved from a tribunal they have chosen because they

fear that the arbitrator's decision may go against them. The grounds

on which the power could be exercised were to put under five heads

as under:

(1) Excess or refusal of jurisdiction by arbitrator; (2) Misconduct of

arbitrator; (3) Disqualification of arbitrator; (4) Charges of fraud

and; (5) Exceptional cases.

28. I have already in Sharma Enterprises Vs National Building

Constructions Corporation Ltd MANU/DE/1238/2008 held that

Section 5 of the 1940 Act as interpreted in Panchu Gopal Bose

(supra) finds place in the form of Section 14 of the 1996 Act. There

can be no other interpretation of the power given to the court to

terminate the mandate of the arbitrator when the arbitrator de jure

is unable to perform this function. The de jure impossibility can be

nothing but impossibility in law. Bias vitiates the entire judicial /

arbitration process and renders the entire proceedings nugatory.

Reference in this regard may also be made to state of West Bengal

Vs Shivananda Pathak (1998) 5 SCC 513 cited by the ASG, though

in a different context, holding that all judicial functionaries have

necessarily to decide a case with an unbiased mind; an essential

requirement of a judicial adjudication is that judge is impartial and

neutral and in a position to apply his mind objectively - if he is

predisposed or suffers from prejudices or has a biased mind he

disqualifies himself from acting as a judge. This equally applies to

arbitrators, as statutorily provided in Sections 12 and 13. In my

opinion, if the arbitrator is biased, he is de jure unable to perform his

functions within the meaning of Section 14. Thus if the court

without any detailed enquiry is able to reach a conclusion of

arbitrator for the reason of bias is unable to perform his functions,

the court is empowered to, without requiring the parties to inspite of

so finding go through lengthy costly arbitration, hold that the

mandate of arbitrator stands terminated. However, the said power

under Section 14 has to be exercised sparingly with great caution

and on the same parameters as laid down by Apex Court in SBP &

Company v Patel Engineering Limited 2005 8 SCC 618 in relation

to Section 11(6). Only when from the facts there is no doubt that a

clear case of bias is made out, would the court be entitled to

interfere. Else it would be best to leave it to be adjudicated at the

stage of Section 34.

29. The next question is whether the party alleging bias can move

a petition under Section 14 without following the procedure in

Sections 12 and 13 of the Act. Section 12(3) of the Act permits

challenge by a party to the arbitrator if circumstance exists that give

rise to the justifiable doubt as to his independence or impartiality.

Sub-section (4) permits a party who has participated in the

appointment of the arbitrator to challenge the authority of the said

arbitrator also. Section 13 provides the procedure for such

challenge in the absence of any agreed procedure. No agreed

procedure has been cited in the present case and in the absence

thereof, the petitioner who is challenging the arbitrator was required

to within 15 days of becoming aware of the circumstances giving rise

to justifiable doubts as to the independence of the arbitrator was

required to send a written statement of the reasons for the challenge

to the arbitral tribunal. No such thing has been done in the present

case. Of course, sub-section (4) provides that if the challenge is not

successful, the arbitral tribunal will proceed with the arbitration and

sub-section (5) provides that the remedy of the aggrieved party

would then be only under Section 34 of the Act.

30. The ASG draw attention to Alcove Industries Ltd Vs

Oriental Structural Engineers Ltd 2008 (1) Arb. LR 393 (Del.)

wherein a Single Judge of this court after holding that a petition

under Section 14 of the Act lies on the ground of bias and that

Sections 13 and 14 are to some extent overlapping, held that in

appropriate cases remedy under Section 14 can be invoked without

following the procedure in Section 13.

31. I had, during the course of hearing, drawn the attention of the

counsels to the judgment of the Division Bench of this court in S.N.

Malhotra & Sons Vs Airport Authority of India & Others 149

(2008) DLT 757 (DB) holding that the award cannot be challenged

under Section 34 on the ground of arbitral tribunal not having the

jurisdiction, without following the procedure provided under Section

16 of the Act. The Division Bench of this court thus held that unless

the party has made an application in accordance with the Section 16

to the Arbitral tribunal to the effect that it does not have jurisdiction,

that party would, in the event of the award going against him, would

not be entitled to raise such a ground in an application under Section

34. I had also drawn the attention of the parties to the judgment of

the Division Bench of this court in Court of its Own Motion Vs

State MANU/DE/9073/2007 holding that where an application for

recusal of a judge from hearing the matter is made, the same has to

be heard by the same judge and cannot be heard by another

judge/bench and the consequent amendment to the Delhi High Court

Rules. I had put to the ASG/senior counsels that in the light of the

aforesaid judgment would it not be better/advisable, even if the

legislature had not so intended that an application for recusal of the

arbitral tribunal on the ground of bias be made and heard first by the

arbitral tribunal itself and only thereafter if the controversy remains,

the court is approached to decide on the termination of the mandate.

That appears to be the intention also from the use of the words "if

controversy remains....." in Section 14(2) of the Act.

32. The ASG had, at the outset, submitted that the provisions of

Section 16 are not para meteria to that of Section 13. It was argued

that while Section 16(2) provides a limitation for a plea of

jurisdiction to be raised as "not later than the submission of the

statement of defence" there was no such prohibition in Section 13.

It was argued that it was for the reason of the said provision only

that it has been held that unless application under Section 16 has

been made to the arbitral tribunal, the grounds which are to be

urged thereunder, cannot be urged in an application under Section

34. It was argued that per contra, Section 13 merely provides a

period of 15 days after becoming aware of the circumstance to

challenge the arbitral tribunal and thus the challenge in this case

could be made for the first time in a petition under Section 14 of the

Act also. It was further contended that remedies under Sections 13

and 14 were independent of each other. While in Section 13 the

arbitrator to decide himself the challenge and to continue with

arbitration, if negating the challenge, in Section 14 the mandate

terminates. With respect to the second judgment (supra), it was

answered that there was a difference in the plea of bias being raised

before the arbitrator and before the court - when the plea is before

court, the other judges do not sit in review or supervisory

jurisdiction over the judge who is alleged to be biased, while the

court has such power over arbitrators; though it was agreed that the

principle in the second judgment (supra) may have persuasive value.

The senior counsel for the petitioner supplemented that Section 12

from language thereof was applicable only to cases of bias owing to

connection of arbitrator with one of the parties and not to cases of

bias arising from conduct of proceedings.

33. I am however not convinced with any of the said arguments.

Section 16(2) uses the words "not later than........" for the reason of

nature of plea therein. The court in such proceedings has a limited

role after the award. A plea required by law to be raised before the

arbitrator, if not raised, cannot be raised for the first time in

challenge to the award before the court. Without the same being

raised before the arbitrator, the court will have no way of satisfying

itself of correctness of adjudication thereof by the arbitrator.

Similarly, the mandate of arbitrators does not terminate immediately

on bias being alleged. Section 13 requires such plea of bias to be

raised before the arbitrator. Section 14 as interpreted above also

permits court to be approached where the controversy of arbitrator

being biased remains, inspite of decision under Section 13 by the

arbitrator and if such plea can be adjudicated in a summary manner.

Else the remedy is only under Section 34 as provided in Section

13(5). In view of Section 13 requiring challenge to be made before

the arbitrator and the law as laid down in Court of its Own Motion,

(supra) I also do not find any difference in the plea of bias being

raised before the judge of a court and before the arbitrator. The

Division Bench in Court of its Own Motion (supra) relied on dicta

of Apex Court in Election Commission of India Vs Dr

Subramaniam Swamy MANU/SC/0459/1996 laying down the

procedure that ought to be followed in a situation concerning

recusal; that case related not to judges of court, but to Election

Commissioner. I also do not find any reason to take out pleas of bias

arising from conduct of proceedings by arbitrators, outside the ambit

of Section 13. Section 12(3) is wide enough to cover circumstances

of all nature giving rise to justifiable grounds as to impartiality of

arbitrator. The judgment of the Division Bench in Court of its Own

Motion (supra) was not available to the Single Judge in Alcove

Industries. In view of the latter pronouncement, I am taking a view

different from that of coordinate bench in Alcove Industries

(supra).

34. I have also wondered as to whether Section 13(5) leads to an

inference that upon the challenge to the arbitrator under Section

13(1) being unsuccessful, the only remedy is under Section 34 of the

Act inasmuch as Section 13(5) does not make any reference to

Section 14. However, if we are to hold so then we would be

rendering the de jure inability of the arbitrator to perform his

functions otiose. To me, the scheme of the Act appears to be that the

challenge has to be first made before the arbitrator in accordance

with the Section 13 of the Act and upon such challenge being

unsuccessful the challenging party has a remedy of either waiting for

the award and if against him to apply under Section 34 of the Act or

to immediately after the challenge being unsuccessful approach the

court under Section 14 of the Act. The court when so approached

under Section 14 of the Act will have to decide whether the case can

be decided in a summary fashion. If so, and if the court finds that

the case of de jure inability owing to bias is established, the court

will terminate the mandate. On the contrary, if the court finds the

challenge to be frivolous and vexatious, the petition will be

dismissed. But in cases where the court is unable to decide the

question summarily, the court would still dismiss the petition

reserving the right of the petitioner to take the requisite plea under

Section 34 of the Act. This is for the reason of the difference in

language in Section 14 and in Section 34 of the Act. While Section

14 provides only for the court deciding on the termination of the

mandate of the arbitrator, Section 34 permits the party alleging bias

to furnish proof in support thereof to the court. Section 34(2)(a) is

identically worded as Section 48. The Apex Court in relation to

Section 48 has in Shin-Etsu Chemicals Co. Ltd Vs Aksh Optifibre

Ltd. AIR 2005 SC 3766 held that leading of evidence is permissible.

Per contra, Section 14 does not permit any opportunity to the

petitioner to furnish proof. Thus all complicated questions requiring

may be trial or appreciation of evidence in support of a plea of bias

are to be left open to decision under Section 34 of the Act.

35. I therefore conclude that a party alleging bias is required to

first follow the procedure in Sections 12 and 13 and if unsuccessful

has choice of either waiting till the stage of Section 34 or if he feels

that bias can be summarily established or shown to the court,

approach the court immediately under Section 14, after the

challenge being unsuccessful, for the court to render a decision.

36. The petitioner, in the present case, has not approached the

arbitral tribunal with the plea of bias and has straightaway

approached this court. The same is not permissible. The petitioner

ought to make an application before the arbitral tribunal which will

return its findings thereon. This court, whether exercising

jurisdiction under Section 14 or under Section 34 of the Act would

then have the benefit of the version of the arbitrators and would help

the court in arriving at a decision.

37. That leaves the third question to be decided. However, since I

have held that the petitioner ought to approach the arbitral tribunal

first, I am refraining from returning any findings on the pleas of the

petitioner of bias, to avoid prejudicing any of the parties in any

manner whatsoever and so as not to influence the decision of

arbitrator thereon. However, I must deal with one of the

submissions of ASG/Senior counsel for the petitioner. It was argued

that why should the Arbitral Tribunal, in view of apprehensions

expressed by the petitioner not recuse itself or why should the

respondent No.4 insist upon the same tribunal, when any

apprehensions of causing delay can be allayed by providing for

arbitration proceedings to continue from where left by the present

tribunal. Reliance was placed on Ranjit Thakur Vs UOI AIR 1987

SC 386. However, that would tantamount to stating that whenever

bias is alleged, the adjudicating authority without adjudicating plea

of bias should recuse itself. That cannot be permitted. It would

bring the entire adjudicating machinery to a naught and give a tool

in hands of unscrupulous litigants. The delays on change in tribunal

are inherent.

38. Both the challenges of the petitioner noticed above having

failed, the petition is dismissed. The senior counsel for the

respondent has vehemently argued that the present petition is an

abuse of the process of the court; the petitioner suppressed facts and

documents from this court and by such suppression managed to

obtain an ex parte order of stay of arbitration proceedings which

have been stalled for the last about 4 months. It is further argued

that in fact in arbitration -I the award is against the petitioner and

which led the petitioner to institute the present petition.

Undoubtedly, the petitioner did not place the order in arbitration-I

consenting to the costs and also did not place on record the

documents showing payment to the arbitrators in accordance with

the first two directions. The hearing has spanned over 5 days. The

senior counsel has represented the respondent on each of these

days. In the circumstances, in an endeavour to compensate with

actual costs, the petitioner is burdened with costs of Rs 5,00,000/-.

RAJIV SAHAI ENDLAW (JUDGE) April 09, 2009 M