International Airport Authority of India v. K.D. Bali & Another

').v· SABYASACHI MUKHARJI, J. After hearing the parties fully we had by our order dated 10th March, 1988 dismissed the special leave petition under Article 136 of the Constitution. We stated therein that we would indicate the reasons by a separate judgment later. We ~ F do so by this judgment. This is a petition for leave to appeal under Article 136 of tl)e Constitution from the judgment and order of the learned Judge of the High Court of Bombay dated 2nd February, 1988. By the impugned judgment the learned Judge has rejected the application for revocation G of the authority of respondent No. l, Shri K.D. Bali, sole arbitrator under sections 5 and 11 of the Arbitration Act, 1940 (hereinafter cal- ).... led 'the Act'). In order to appreciate the contentions raised, it may be stated that the International Airport Authority of India which was the petitioner in the High Court and is the petitioner herein had invited tenders for the work of construction of terminal building of new inter- H national passenger complex (Phase II) at the Bombay Airport at -~ ' - \ IN1ERNA TIONAL AIRPORT AUTIIORITY v_ K.D. BALI [MUKHARJI, J_] 375 Sahar, Bombay. Respondent No. 2, M/s. Mohinder Singh and Com­ pany, a partnership firm having registered office at Delhi and carrying on business in Bombay submitted a tender and it was accepted for the value of Rs.7,26,31,325. A formal agreement followed on 22nd January, 1982. It is not necessary to refer to the clauses of the agree­ ment for the present purposes. It may be reiterated, however, that there was provision in the agreement for settlement of disputes through appointment of sole arbitrator under clause 25 of the Condi­ tions of Contract by the competent authority. Certain disputes arose in which the petitioner sought claims amounting to Rs.85 lakhs. Respon­ dent No. 2 contractor approached the petitioner by letter dated 22nd February, 1985 to refer the disputes with regard to claims amounting to Rs.85 lakhs to the arbitration. One Shri K.K. Sud, the Chief Engineer of the petitioner by his letter appointed respondent No. 1 as the arbitrator and made the reference with regard to the claim of Rs. 85 lakhs on 23rd February, 1985. On 8th March, 1985, it appears from the narration of the events in the judgment impugned that the arbitrator gave directions to the parties regarding submission of plead­ ings. Respondent No. 2 filed pleadings within time, but the petitioner filed its pleadings after a delay of two and a half months. On 17th March, 1986 respondent No. 2 addressed a letter to the Chief Engineer asking for reference of further disputes to the arbitration and accord­ ingly on 16th May, 1986 a. second reference was made referring 11 further points of dispute. A third reference was sought by respondent No. 2 on 22nd May, 1986 in respect of seven more claims but the petitioner informed on June 12, 1986 that the third reference was premature. It appears that in respect of the second and third refer­ ences the assertion of the petitioner was that these disputes were not referable to the arbitrator. The arbitrator had directed the parties to submit their statements in respect of second reference and though respondent No. 2 submitted its claim within the stipulated period, the petitioner had again delayed doing so according to the learned Judge and according to the assertions of respondent No. 2 for a period of three months. On 16th May, 1986 the Chief Engineer made reference No. 2 with regard to claims amounting to Rs.1.17 crores to the arbitrator. On 23rd December, 1986 the Chief Engineer of the petitioner made another reference being reference No. 3 to the G arbitrator with regard to claims amounting to Rs.5.81 crore. The petitioner by its applications of 8th and 9th June, 1987 expressed its objections to the references Nos. 2 and 3 made by the Chief Engineer as according to the petitioner the said references were null and void as these were irregularly made. On 26th June, _1987 the petitioner by its written submissions took preliminary objection before the arbitrator H to the said arbitration proceedings, being Jack of jurisdiction of the arbitrator on account of the fact that he was not validly appointed as far as references Nos. 2 and 3 were concerned. The petitioner by its application dated 3rd August, 1985 noted that respondent No. 1 had not noted the minutes of the meeting dated 10th of June, 1985 cor- rectly. The petitioner by its application on 15th of June, 1987 requested respondent No. 1 not to proceed with the arbitration pro­ ceedings till its preliminary objections regarding jurisdictional aspects were decided and also made it clear that it was appearing under protest in the proceedings before him. The petitioner on 17th June, 1987 made oral submissions before respondent No. 1 with regard to its prelimi- nary objections. Respondent No. 1 directed the petitioner to submit the rest of its submission by way of written submissions. The petitioner by its appli~ations dated 22nd and 25th June, 1987, respectively objected to respondent No. 1 directing it to make submissions by way of written submissions and thus hurrying up the proceedings. On 26th June, 1987 the petitioner submitted written submissions to respondent 0 No. 1. Respondent No. 1 by his order dated 27th June, 1987 directed that further proceedings would be undertaken only after the extension of time. Respondent No. 2 applied for enlargement of time and the same was granted by the High Court. On 7th August, 1987 application under section 13{b) of the Act was made before the arbitrator with a request to state the matter before it as Special Case for the opinion of E the Court. The arbitrator by his order dated 3rd October, 1987 rejected the said application of the petitioner and also rejected the preliininary objections of the petitioner at the same time. On 14th October, 1987 the petitioner by its Jetter noted the fact that it has sent the minutes of F the meeting with regard to the proceedings held on 28th and 29th September, 1987 to the arbitrator as directed by him. In the said Jetter the petitioner also protested against the arbitrator's decision of chang­ ing the venue of the proceedings and also the inconvenient dates being fixed by him. The petitioner by its letter dated 11th October, 1987 conveyed its concern to the arbitrator that he has been rushing through G the proceedings. On 16th December, 1987 the petitioner alleging ap" prehension that respondent No. 1 had formed his own opinion regard­ ing the matters in issue. The petitioner approached the High Col!rt with the instant application. This application was rejected by the High Court. The learned Judge changed the date fixed for hearing of the application for extension of time by enlarging the time to make the H award by 15th February, 1988. w INTERNATIONAL AIRPORT AUTIIORTIY v. K.D. BALI [MUKHARJI, J.J 377 I The main contention for the revocation of the authority of the arbitrator was about the alleged apprehension in the mind of the A petitioner about bias of the sole arbitrator. The learned Judge of the High Court was unable to accept any ground for alleged apprehension. It is apparent as the learned Judge noted that respondent No. 2 had complied with the directions of the arbitrator about the conduct of the }.. proceedings but the petitioner went on seeking adjournments after B adjournments. Respondent No. 2 complained to the arbitrator on 4th May, 1987 about the delaying tactics adopted by the petitioner and thereupon the arbitrator directed that the hearing would take place on 8th and 9th June, 1987 and no further adjournment would be granted. After this direction was given by the arbitrator, the petitioner addres· ~- sed a letter dated 25th May, 1987 to the arbitrator objecting to the c . 'i jurisdiction in respect of the second and third references. The objec- I lions to the jurisdiction raised by the petitioner were, that the .claim ,, made in th<i second and third references were barred by principles analogous to Order II Rule 2 of the Code of Civil Procedure, the Chief Engineer had no authority to refer the disputes to the arbitration, the claims made by respondent No. 2 were beyond the stipulated period of D 90 days and therefore were not arbitrable and the time for declaring the award having expired, the Arbitrator could not continue with the arbitration proceedings. On 8th June, 1987 as mentioned hereinbefore the learned advocate for the petitioner orally made submissions on the ..;( issue of jurisdiction and thereafter sought adjournment till June 9, .1987 for filing written submissions. On 9th June, 1987 apart from filing E written submissions further oral arguments were advanced and there· - after an adjournment was sought beyond June 1987. This adjournment was sought because the time to declare the award was expiring by June, 1987. The hearing was adjourned till June 17, 1987 andagain the ' petitioner's advocate argued on preliminary objections about jurisdic· .( tion. The.arguments were advanced on the next adjourned dates, that F is, June 26 and June 27, 1987. It further appeared that as the time for making the award had expired and the petitioner did not consent to the extension of time, respondent No. 2 filed petition to the High Court of Bombay for extension of time on June 21, 1987. Thereafter the petitioner made an application before the arbitrator under section 13(b) of the Act calling upon the arbitrator to state special case for the G ~. opinion of the High Court on certain alleged legal objections. In the meanwhile the petition for extension of time filed in the Bombay High Court was granted and the time for declaring the award was extended till January 15, 1988. Thereafter the arbitrator fixed the hearing on September 28, 1987 and the advocate for the petitioner again reitera· ted the preliminary objections to the jurisdiction of the arbitrator and H 378 SUPREME COURT REPORTS [19881 3 S.C.R. A insisted upon the arbitrator, passing an order on the application under section 13(b) of the Act: The arbitrator rejected the preliminary objec­ tions by his order dated 3rd October, 1987 and also the application for stating special case to the High Court under section 13(b) of the Act. The. Petitioner's advocate thereupon sought adjournment of the hear- ing and accordingly hearing was adjourned on several dates. Ultima­ tely, the· arbitrator fixed the hearings on 30th October, 1987 and 31st October, 1987. The hearing was postponed to 2nd November, 1987 and on that day the petitioner's advocate remained absent. Thereafter the hearing proceeded on 6th November and 11th November, 1987 as well as on 13th, 18th and 19th November, 1987. Respondent No. 2 concluded arguments, while the arguments on behalf of the petitioner were advanced on December 3, 1987. The arguments further pro­ ceeded on December 8 and 9, 1987. Thereafter on December 17, 1987 the present petition was filed for revocation of the appointment of respondent No. 1 as the sole arbitrator. In our opinion, the above narration gives a glimpse how a party can try to prolong a proceeding. Several points were taken in support of the application for revo­ cation. It was sought to be urged that the petitioner had lost confi­ dence in the sole arbitrator and was apprehensive that the arbitrator was biased against the petitioner. It is necessary to reiterate before proceeding further what are the parameters by which an appointed arbitrator on the application of a party can be removed. It is well settled that there must be purity in the administration of justice as well as in administration of quasi-justice as are involved in the adjudicatory process before the arbitrators. It is well said that once the arbitrator enters in an arbitration, the arbitrator must not be guilty of any act which can possibly be construed as indicative of partiality or unfair­ ness. It is not a question of the effect which misconduct on bis part had in fact upon the result of the proceeding, but of what effect it might possibly have produced. It is not enough to show that, even if there was misconduct on his part, the award was unaffected by it, and was in reality just; arbitrator must not do anything which is not in itself fair and impartial. See Russell on Arbitration, 18th Edition page 378 and observations of Justice Boyd in Re Brien and Brien, [1910] 2 I.R. 83 at p. 89. Lord O'Brien in The King (De Vesci) v. The Justices of Queen's Country, [1908] 2 I.R. 285 observed as follows: "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 think that their - .>.--­r \ - INTERNATIONAL AIRPORT AUTHORITY v. K.D. BALI [MUKHARJI, J.J 379 vague suspicions of whimsical capricious and unreasonable people should be made a standard to regulate our action here. It might be a different matter if suspicion rested on reasonable grounds was reasonably generated and but cer­ tainly mere flimsy grounds elusively generated and .morbid suspicions should not be permitted to form a ground of decision." (Emphasis supplied) See The Queen v. Rand and others, {1866] 1 Q.B. 230; Ramnath v. Collector, Darbhanga, I.L.R. 34 Pat. 254; The Queen v. Meyer and others, [1875] 1 Q.B. 173 and Eckersley and others v. The Mersey Docks and Harbour Board, {1894] 2 Q.B. 667. In the words of Lord O'Brien, LCJ there must be a real likeli­ hood of bias. It is well settled 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 D disqualified by interest. See in this connection Gullapalli Nagesw(lra Rao v. The State of Andhra Pradesh, [1960] 1 SCR 580 and Mineral Development Ltd. v. State of Bihar, { 1960 I 2 SCR 609. Recently this Court in a slightly different context in Ranjit Thakur v. Union of India and Nhers, A.LR. 1987 S.C. 2386 had occasion. to consider the test of bias of the Judge. But there must be reasonableness of the apprehen- E sion of bias in the mind of the party. The purity of administration requires that the party to the proceedings should not have apprehen­ sion that the authority is biased .and is likely to decide against the party. But we agree with the learned Judge of the High Court that it is equally true that it is not every suspicion felt by a party which must lead to the conclusion that the authority hearing the proceedings is f biased. The apprehension must be judged from a healthy, reasonable and average pofut of view and not on mere apprehension of any whimsical person. While on this point we reiterate that learned counsel appearing for the petitioner in his submissions made a strong plea that his client was hurt and had apprehension because the arbitrator being the appointee of his client was not acceding to the G request of his client which the petitioner considered to be reasonable. We have heard this submission with certain amount of discomfiture because it cannot be and we hope it should never be in a judicial or a quasi-judicial proceeding a party who is a party to the appointment could seek the removal of an appointed authority or arbitrator on the ground that appointee being his nominee had not acceded to his H 380 SUPREME COURT REPORTS . I 1988] 3 S.C.R. prayer about the conduct of the proceeding. It will be a sad day in the administration of justice if such be the state of law. Fortunately, it is not so. Vague suspicions of whimsical, capricious and unreasonable people are not our standard to regulate our vision. It is the reasonable­ ness lllld the apprehension of an average honest man that must be taken note of. In the aforesaid light, if the alleged grounds of apprehension of bias are examined, we find no substance in them. It may be mentioned that the arbitrator was appointed by the Chief Engineer of the petitioner, who is in the service of the petitioner. The learned Judge bad examined the five. circumstances advanced before him. The first was that the arbitrator did not record t C the minutes of the meetings after September 29, 1987. The learned \---, Judge found that there was no merit in this complaint. After 29th r September, 1987 the petitioner's advocate orally made submissions \ that the arbitrator had no jurisdiction to entertain the dispute. The advocate for the petitioner also desired to file written arguments and 0 the arbitrator did not object to the same. In spite of it, the petitioner insisted that the arbitrator should record the minutes setting out the entire oral arguments advanced on behalf of the petitioner. This in our opinion was not a reasonable request to make and the arbitrator had rightly declined to do so. This is no basis of any reasonable apprehen­ sion of bias. The next circumstance urged was that the preliminary objec­ tions raised by the petitioner were rejected without a speaking order. It was not necessary for the arbitrator to record a long reasoned order on the preliminary objections and indeed the law does not demand .. writing such a Jong order. In any case, it will be open to the petitioner F to file any petition in the Court under section 33 of the Act, if the petitioner felt that the arbitrator had no jurisdiction to entertain the reference, but the petitioner did not choose to adopt that course and proceeded to argue for a considerable length of time, the issue of jurisdiction before the arbitrator. The arbitrator was not bound to give a reasoned order at every stage of the proceedings. The arbitration G proceedings would then never come to an end. It was not in dispute that the terms of reference required the arbitrator to give reasons for the award to be declared. It would be, therefore, always open for the petitioner to challenge the award to be declared by the arbitrator including on the ground of jurisdiction. The learned Single Judge of the High Court has so held and we are in agreement with him on this H point. ~·. -ii ,_ IN1ERNATIONAL AIRPORT AUTIIORITY v. K.D. BALI [MUKHARJI, J.[ 381 The third circumstances was that the petitioner had filed applica­ tion under section 13(b) of the Act calling upon the arbitrator to state a special case for the opinion of the Court on the question of law and the failure of the arbitrator to raise this question of law was indicative of the bias. We are unable to accept this argument. Section 13(b) confers power on the arbitrator to state special case but it does not make it obligatory on the part of the arbitrator to state a special case as soon as the party desires to do so. In the instant case the petitioner itself agitated issue of jurisdiction before the arbitrator and by its conduct submitted the question of jurisdiction and other questions of law for determination of the arbitrator. Once having done so, it was not proper for the petitioner to ask the arbitrator tci state a special case. This, in our opinion, is no ground for bias. The fourth ground was that the first reference, where the claim involved was Rs.85 lakhs, was heard for a considerable time, while the arguments in respect of second and third references, which covered the claim of Rs.1.17 crores and Rs.5.81 crores were concluded by respondent No. 2 within one and one fourth of a day. The length of the time taken is no indication either of speeding up or of any abuse of the proceedings. We agree with the learned Judge that there is no rule which requires that the length of argument should depend upon the magnitude of the claim made. The other point sought to be urged by the petitioner was that the E venue of the arbitration was changed from conference room at Santacruz Airport, Bombay, to the conference room at Indian Merchants Chambers at Churchgate, Bombay. It is the claim of the petitioner that this change of venue was without the consent of the petitioner. It appears from the affidavit filed before the High Court that the venue was changed because of disturbance at the conference F room at Santacruz and this fact was known to the petitioner all along. Change of venue in no manner would indicate that the arbitrator was prejudiced against the petitioner and no prayer was made to the arbitrator not to change the venue. This is solely a fallacious ground to make out a case of alleged bias. The other ground was that the petitioner and respondent No. 2 used to share the costs of the air ticket G of the arbitrator from Delhi to Bombay and back. It was submitted that since 9th June, 1987 the petitioner has not paid for the ticket and also not provided for residential accommodation at Santacruz Airport. It was further submitted that respondent No. 2 must be providing the air-ticket and also hotel accommodation to the arbitrator and the receipt of these facilities was enough, according to the petitioner, to H 382 SUPREME COURT REPORTS [ 1988) 3 S.C.R. A establish that the arbitration was likely to be biased. It is said that.the petitioner made these allegations because the petitioner declined to contribute for the costs of the air-ticket and providing for the accom­ modation. The petitioner obstructed at all stages of the proceedings of arbitration, what the arbitrator did he did openly to the knowledge of the respondents. As the learned Judge has rightly pointed out the B petitioner after 9th June, 1987 seems to have decided that the arbitrator should not proceed to hear the reference and in order to frustrate the arbitration proceedings started raising all sorts of frivol­ ous and unsnstainable contentions. Having failed and realised that respondent No. 1 was not willing to submit to the dictates of the petitioner, the petitioner declined to contribute for the air-ticket and C providing for accommodation. No party should be allowed to throw out the arbitration proceeding by such tactics and if the arbitrator has not surrendered to pressure in our opinion, the arbitrator cannot be faulted on that score nor the proceedings of the arbitrator be allowed to be defeated by such method, D There was another ground sought to be made before us that there was a loss of confidence. We find no reasonable ground for such loss of confidence. Every fancy of a party cannot be a ground for removal of the arbitrator. It was alleged that there were counter claims made by the respondents. These counter claims have not yet been dealt with by the arbitrator. Our attention 'was drawn to page 188 of E Volume .II of the paper book where a counter claim had been referred to. It appears that the petitioner has separately treated these counter claims. These counter claims have not yet been considered by the arbitrator. That is no ground for any apprehension of bias. An af­ fidavit was filed before us that on 6th March, 1988 a letter was served indicating the dates for hearing as 7th to 10th March, 1988. It appears that the matter was adjourned thereafter but by. merely making an application for adjournment and refusing to attend the arbitration proceeding, a party cannot forestall arbitration pro­ ceeding. G We are in agreement with the learned Judge of the High Court expressing unhappiness as to the manner in which attempts had been made to delay the proceeding. There is a great deal of legitimate protest at the delay in judicial and quasi-judicial proceeding. As a matter of fact delay in litigation in courts has reached such proportion that people are losing faith in the adjudicatory process. Having given H our anxious consideration to the grounds alleged in this application, - - .' -~. I. - - INTERNATIONAL AIRPORT AUTHORITY v. K.D. BALI [MUKHARJI, J.] 383 we find no .ground to conclude that there could be any ground for A reasonable apprehension in the mind of the petitioner for revocation of the authority of the arbitrator appointed by the petitioner itseH. While endorsing and fully maintaining the integrity of the principle 'justice should not only be done, but should manifestly be seen to be done', it is important to remember that the principle should not be Jed to the erroneous impression that justice should appear to be done that B it should in fact be done. See the observations of Slade, J. in R. v. Cambore Justices Ex pane Pearce, 11954) 2 All. E.R. 850 at 855. We are satisfied from the facts mentioned hereinbefore that there is no reasonable ground of any suspicion in the mind of the reasonable man of bias of the arbitrator. Instances of cases where bias can be found in Commercial Arbitration by Mustill and Boyd, 1982 Edn. The conduct of the present arbitrator does not fall within the examples given and the principles enunciated therein. The petition for leave to appeal, therefore, fails and it is accord­ ingly dismissed. S.L. Appeal dismissed.