Delhi High Court
M/S Spentex Industries Ltd. vs M/S Indo Ram Synthetics (I) Ltd. & ... on 20 July, 2009
Author: Mukul Mudgal
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ FAO(OS) NO. 257/2009 and CM No. 8725/2009 (stay)
Date of Decision : July 20, 2009
M/s. Spentex Industries Ltd. .....Appellant
Through : Mr. Ashok Chhabra, Advocates.
versus
M/s. Indo Ram Synthetics (I) Ltd. & Ors. .....Respondents
Through : Mr.Anoop Bagai, Sr. Advocate,
with Mr.Devendra Nautiyal and
Mr. Rohan Bagai, Advocates.
CORAM:
HON'BLE MR. JUSTICE MUKUL MUDGAL
HON'BLE MR. JUSTICE NEERAJ KISHAN KAUL
1. Whether the Reporters of local papers
may be allowed to see the judgment? NO
2. To be referred to the Reporter or not? YES
3. Whether the judgment should be
reported in the Digest? YES
% JUDGMENT (ORAL)
20-07-2009
MUKUL MUDGAL,J.
1. This appeal challenges the judgment of the learned Single Judge dated
25th May, 2009. Clause 6 of the Arbitration Clause, pursuant to which the
appointment of the Arbitrator was made, reads as follows: -
"6 Arbitration.
That in case of any dispute or differences arising out of this
Agreement, unless settled amicably, the same shall be referred to
the sole Arbitrator. Mr. O.P.Lohia or any person nominated by
him whose decision shall be final and binding on both the parties
and the parties will not raise any objections with regard to the
appointment of an arbitrator at any stage."
2. The case of the appellant is founded on the fact that the respondent
no.1 and the appellant were earlier companies of the same group and a
demerger took place and the appellant-company separated from the
respondent no.1 group, pursuant to the scheme approved by the orders of the
Madhya Pradesh High Court dated 24th March, 2003 and this Court dated
25th February, 2003. The plea raised by the appellant was that the above
arbitration clause which was contained in the MOU was entered into when
the companies were under the same group and since after the demerger the
interest of the companies had become different, in such case, Mr. O.P. Lohia,
who was appointed as an Arbitrator in the arbitration clause could not act in
a fair and unbiased manner. In the present case, Mr. O.P. Lohia himself did
not arbitrate but appointed an advocate of this Court, Sh. Virender Mehta as
an Arbitrator.
3. The OMP under Section 14 was filed by the appellant at the initial
stage of the proceeding, before any effective order came to be passed by the
Arbitrator. The learned Single Judge had dismissed the application as not
maintainable. The findings of the learned Single Judge, both on facts and
law, is challenged before us.
4. During the course of hearing, we asked Mr. Chhabra, learned counsel
for the appellant, to proceed on the basis that this court does have power to
remove Arbitrator in appropriate cases on the ground of bias and, therefore,
address us on facts to show that the bias can be inferred.
5. In proof of his submission, the learned counsel relied on the paragraph
33 of the judgment of the Hon'ble Supreme Court in the case of State of
West Bengal and Ors. Vs. Shivananda Pathak and Ors. (1998) 5 Supreme
Court Cases 513 wherein it has been held as under: -
"33. Bias, as pointed out earlier, is a condition of mind and,
therefore, it may not always be possible to furnish actual proof of
bias. But the courts, for this reason, cannot be said to be in a
crippled state. There are many ways to discover bias; for
example, by evaluating the facts and circumstances of the case or
applying the tests of "real likelihood of bias" or "reasonable
suspicion of bias". De Smith in Judicial Review of
Administrative Action, 1980 Edn. Pp. 262, 264, has explained
that "reasonable suspicion" test looks mainly to outward
appearances while "real likelihood" test focuses on the court's
own evaluation of the probabilities."
6. In our view, the paragraph extracted above, far from supporting the
case of the appellant, is in fact, against him because it clearly states that the
test is the real likelihood of bias or reasonable suspicion of bias.
7. Mr. Chhabra, the learned counsel for the appellant, has also relied
upon a judgment in the case of National Highways Authority of India vs.
K.K. Sarin and Ors. 159 (2009) Delhi Law Times 314.
8. In the present case, the Arbitrator having not passed any effective
order in the matter, could not be said to be biased in any circumstance. It
was pleaded by the appellant in the OMP and represented before us that the
Arbitrator was a regular lawyer engaged or an advocate appearing on behalf
of the respondents. However, the appellant has been unable to point out a
single instance of the said advocate functioning as an Arbitrator. On the
contrary, Mr. Bagai, the learned Senior counsel appearing on behalf of the
respondents state and we record his plea that Mr. Mehta has not appeared on
behalf of the respondent even in a single matter nor has he advised them.
Mr. Bagai, during the course of hearing, has handed over an e-mail dated 3rd
March, 2009, where the following statement by the appellant was made: -
"Both the Companies in terms of aforesaid MOU had decided to
resolve the dispute through the arbitration of Sh.O.P. Lohia ji,
and it remains."
9. However, we are not ruling on the efficacy or indeed the admissibility
of the said e-mail, as such a document has not been filed before us. In this
view of the matter, we dismiss the appeal. However, we make it very clear
that we are not expressing any view, one way or the other, on the finding of
the learned Single Judge, as to whether a question of bias under Section 14
can be gone into or not.
10. Consequently, we make it clear that the dismissal of the appeal does
not tantamount to the affirmation of the view taken by the learned Single
Judge qua Section 14. However, we make it clear that if an when any
justifiable apprehension of bias arises, it will be open to the appellant to
redress it in accordance with law.
11. Accordingly, the appeal stands disposed of. All the pending
applications also stand disposed of.
(MUKUL MUDGAL)
JUDGE
(NEERAJ KISHAN KAUL)
JUDGE
July 20, 2009
Sk/RS
