Orissa High Court

M/S Nalina Kumar Ray vs M/S Steel Authority Of India on 12 April, 2022

                 IN THE HIGH COURT OF ORISSA AT CUTTACK

                                 ARBA No.8 Of 2009
                               (Through hybrid mode)

            M/S Nalina Kumar Ray                  ....                  Appellant

                                             Ms. Deepali Mohapatra, Advocate
                                         -versus-

            M/S Steel Authority of India          ....               Respondents
            Limited, Rourkela and another
                                               Mr. Niroj Kumar Sahu, Advocate

                     CORAM: JUSTICE ARINDAM SINHA
                                     ORDER

12.04.2022

Order No.

19. 1. Ms. Mohapatra, learned advocate appears on behalf of

applicant and submits, her client was claimant in the reference. Upon

adjudication on merits of the claims made, there was award dated 7th

February, 2004. It will appear from the award, paragraph 23 that by

additional note on argument dated 10th December, 2003 filed on behalf

of respondents, in the reference and herein, there was allegation that

the arbitrator was related to her client. The arbitrator rejected the

allegation. Respondents carried the award in challenge made to the

Court below. By order dated 17th January, 2009 said Court, after

finding in favour of her client on the merits, set aside the award on

erroneous appreciation of compliance of procedural safeguards

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provided by section 12 in Arbitration and Conciliation Act, 1996

(before amendment). She submits, her client is not related to the

arbitrator. Her client filed an affidavit to that effect before the tribunal.

2. Mr. Sahu, learned advocate appears on behalf of respondents

and submits, on his client becoming aware from a reliable source that

there was relation between the arbitrator and claimant, it was brought

to notice of the tribunal. There was no disclosure made by the

arbitrator as mandated by section 12. On the information conveyed to

the tribunal, it purported to act on the affidavit filed by claimant and

rejected the contention out of hand. It was a clear case of violating the

procedural safeguards, which are mandatory for purpose of fair

adjudication by chosen forum. Impugned order bears these reasons. As

such, the award was liable to be and correctly set aside by the Court

below. There should not be interference.

3. He relies on several judgments.

i) Nihal Chand vs. Shanti Lal reported in AIR 1935 Oudh 349,

wherein a Division Bench took the view that a party on becoming

aware of the relationship, though did not refuse to have the arbitration

carried out, the objection could not be seen as waiver on his part. He

submits, his client is better placed inasmuch as the relationship was

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discovered after closure of arguments and conveyed to the tribunal by

the additional note on argument filed by his client.

ii) Satyendra Kumar Vs. Hind Constructions Ltd. reported in

AIR 1952 Bombay 227, paragraph 4, wherein a Division Bench took

the view that position of arbitrator is different from that of a Judge. If

a party goes to a Court, he has got to submit to decision of the judge.

He has no choice in the appointment of the Judge. But when parties go

to a domestic forum and want their matters to be determined by

arbitration, they have every choice as to the person whom they should

select as their arbitrator and, therefore, it is clear that highest faith

should be shown by the arbitrator. It also follows that the arbitrator

must disclose to the parties all facts, which are likely or calculated to

bias him in any way in favour of one or the other party.

iii ) Union of India Vs. Tolani Bulk Carriers Limited available at

(2001) SCC On Line Bom 1027, wherein a learned single Judge

quoted paragraphs 11 to 14 from judgment of the Supreme Court in

Ranjit Thakur Vs. Union of India, reported in (1987) 4 SCC 611.

4. Mr. Sahu submits, the Supreme Court declared that procedural

safeguards require mandatory compliance. Section 12, before

amendment, also required mandatory compliance of the procedural

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requirement provision. He submits further, though his client has not

filed cross objection, the award on the claims is otherwise against

public policy and thereby also liable to be set aside.

5. Court ascertained that the allegation of relationship was

asserted by respondents on additional note on argument dated 10th

December, 2003. The arbitrator, in the award (paragraph 23) said that

on the complaint found to be vague, as not disclosing identity of the

source/sources nor when the information was obtained, required a

hearing and directed respondents to appear on 21st December, 2003, to

clarify and substantiate the point raised. This was directed by order

dated 16th December, 2003, duly served on respondents' learned

advocate. Respondents were not represented by the learned advocate

on 21st December, 2003. On these facts there is no dispute raised in

this Court.

6. Perusal of paragraph 23 in the award makes two things clear.

They will appear from last two sentences of said paragraph.

"The allegation about my relationship with claimant is a

blatant lie. The claimant has filed an affidavit to show

that he is not in any way related to me. I reject this

allegation as baseless."

First is that the arbitrator says that the allegation of relationship is a

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blatant lie. Second is claimant had filed affidavit to show that he is not

in any way related to the arbitrator. The allegation being relationship

between the arbitrator and claimant, by those two sentences in

paragraph 23 of the award, both parties to the alleged relationship,

denied it. This, in backdrop of respondents' omission to give

particulars regarding, at least the source, to establish the relationship,

if from paternal or maternal side as could not be gone into by the

tribunal for there being some light thrown on the aspect in the award.

7. So far as procedural safeguards requiring mandatory

compliance is concerned, section 12 stood before amendment as

reproduced below.

"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


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              the parties.
              (4)     A party may challenge an arbitrator appointed by