Judgment

SABYASACHI MUKHARJI, J. :- Leave granted and the appeal is disposed of by the following judgment.

2. This appeal arises out of an order of the High Court of Madras, dated 21st September, 1984. The appellant is the Secretary to the Government, Transport Dept., Madras, and the respondent No. 1 is the managing partner of M/s. National Company, which was the successful tenderer of the work of construction of a bridge across the river Coovum at Koyambedu within the corporation limit of the city of Madras and accordingly the necessary contract was executed between the respondent No. 2 - the Superintending Engineer (Highways) World Bank Project Circle, Madras, and the said Company on 28th April, 1979.

3. According to the conditions of the contract between the parties, the work should have been completed on or before 5th November, 1980. The said National Company, however, according to the appellant, did not even commence the work till 21-9-1981 and despite extension of time until 31-10-1981 the said firm failed and neglected even to commence the job. Consequently, the contract in favour of the said firm was determined absolutely at their risk and cost, according to the appellant. The respondent herein, in his individual capacity as managing partner of the said Company filed a suit in the City Civil Court, Madras, being O.S. No. 3996/82 claiming damages alleged to have been caused as a result of the said determination of the said contract and for refund of earnest money deposit etc.

4. In view of the Arbitration Clause under the agreement between the parties, the appellant filed a petition for referring the dispute to the arbitrator for further proceedings and the City Civil Court, Madras, accepting the appellants prayer, passed orders directing both the parties to refer the disputes to the arbitrator, and stayed the suit. As per the order of the City Civil Court, Madras, the respondent filed claim petition before the arbitrator, namely, Superintending Engineer (Highways and Rural Works), Rural Roads Circle, Tiruchirapalli, being the second respondent herein.

5. During the pendency of the claim before the said arbitrator, the respondent filed another application seeking to change the arbitrator on the ground that the arbitrator being an employee of the State Government, an Engineer from any sector other than the sector of Tamil Nadu or a retired Engineer of the State Government might be appointed as arbitrator.

6. The contract between the parties, inter alia, contained the following Arbitration Clause:

"(3) The arbitrator for fulfilling the duties set forth in the arbitration clause of the Standard Preliminary Specification shall be Superintending Engineer (H) Rural Roads Tiruchira Palli Circle."

7. Pursuant to this the Superintending Engineer of that Circle, at the relevant time, was previously appointed as arbitrator. There was succession to that office by another incumbent and the succeeding Superintending Engineer wanted to continue the arbitration proceedings but before that an application was made under S. 5 of the Arbitration Act, 1940 (hereinafter called the Act) for removal of the arbitrator, before the learned Judge of the City Civil Court, Madras.

8. The learned Judge by his order sought to revoke the authority of the named arbitrator. The learned Judge in his order dated 6th March, 1984, inter alia, observed as follows:

"The apprehension of bias on the part of the Arbitrator is made to rest on the ground that the first respondent in the counter filed before the Arbitrator to the claim made by the petitioner referred to G.O.Ms. 409/ Transport dated 7-4-83 which in turn made a reference to a letter No. 114879/D2/81, dated 30-10-82 of the Chief Engineer, H & R W."

9. In the order of the learned Judge, City Civil Court, he stated that the Chief Engineer of the Circle concerned was in favour of the cancellation of the contract in question and the contract entrusted to the petitioner came to be terminated and the construction was s