IMPORTANT POINT
Mere allegation of bias is not enough. It has to be sustained by evidence and pleadings.

Headnote:(a) Arbitral Bias – Clause 25A of the contract providing for the Chief Engineer to be the arbitrator – Contractor knowing fully well and beforehand that the Chief Engineer was overall in charge of the work – Inspection of the work as routine duty does not disqualify the Chief Engineer to act as an arbitrator – Contractor himself requesting court for appointment of arbitrator in terms of clause 25A – No objection raised or ground of bias pleaded before court – Allegation not tenable. (Paras 15 and 16)
        AIR 1988 SC 2232; AIR 1992 SC 1918 – Relied upon
        [1959] Supp. (1) SCR 319; [1911-13] All E.R. 1076 – Distinguished impliedly
        (b) Arbitration Act, 1940 – Section 2(b) – Mere absence of copy of agreement from record of the arbitral proceedings, cannot lead to inference that the same was not placed for consideration before the arbitrator. (Para 18)
       Facts of the case:
        This case involves questions of appointment, removal and award of the arbitrator under the 1940 Act.
       Finding of the Court:
        The impugned order does not suffer from any infirmity.

JUDMENT

R.M. Lodha, J.

This Appeal, by special leave, arises from the judgment and order dated November 25, 2002 passed by the Punjab & Haryana High Court.

2. The controversy arises in this way. A contract was entered into between the appellant - M/s Ladli Construction Co. (P) Ltd. (hereinafter referred to as ‘the Contractor’), and the respondent Nos. 1 and 2, namely, Punjab Police Housing Corporation Limited and Executive Engineer (Civil), Punjab Police Housing Corporation Limited (hereinafter referred to as ‘the Corporation’) for construction of 240 houses Type II-A at Urban Estate, Ludhiana at an estimated cost of Rs. 273.84 Lakhs. The contract provided in Clause 2 that time was essence of the contract and the time allowed for carrying out work as entered in the tender shall be strictly observed by Contractor. The Contractor could not maintain the time schedule and the progress of the work was not observed. The Contractor was directed to push up the progress of work but that also it failed to do. The Contractor was notified that if it failed to take any action to show requisite progress by 30th of April, 1991, action against it under Clause 3 of the agreement would be taken. Still there was no requisite progress in execution of the work by the Contractor. On May 8, 1991, the Corporation resorted to action under Clause 3 of the contract, rescinded the contract and adopted further course by giving unexecuted work to another contractor. The disputes, thus, having arisen between the parties, the Contractor moved the court of Sub Judge, First Class, Chandigarh, for appointment of the arbitrator in terms of Clause 25A of the contract.

3. On the application made by the Contractor for appointment of the arbitrator, the Sub Judge, on May 13, 1992, ordered that matter in dispute may be referred for arbitration as per Clause 25A of the agreement and, accordingly, as per the agreement and the statement of parties, the Sub Judge ordered the Chief Engineer of the Corporation to act as an arbitrator as provided under Clause 25A of the agreement. Both the parties were permitted to file claim and counter claim before the arbitrator.

4. In pursuance of the order dated May 13, 1992, the Corporation lodged its claim against the Contractor on June 15, 1992. The arbitrator - Chief Engineer of the Corporation - called upon the Contractor to appear before him on June 25, 1992. Thereafter also the arbitrator called upon the Contractor to appear before him. The Contractor, however, did not appear before the arbitrator and instead sent a letter on June 29, 1992 intimating him that his appointment as arbitrator was not acceptable to it; it did not expect any justice and fair play from him and he must refrain from acting as an arbitrator in the case.

5. Thereafter, on July 24, 1992, the Contractor made an application before the Sub Judge, Chandigarh under Sections 5, 11 and 12 of the Arbitration Act, 1940 (for short, ‘the 1940 Act’) for removal of the arbitrator. The Contractor did not appear before the arbitrator. Consequently, the arbitrator proceeded with the arbitration ex parte and passed the award on August 18, 1992.

6. After filing of the award, the Contractor submitted objections under Section 30 of the 1940 Act alleging misconduct on the part of the arbitrator and also objected to the award being made rule of the court.

7. The Sub Judge heard the two applications together - (i) application made by the Contractor for removal of the arbitrator and objections under Section 30, and (ii) application for making the award rule of the court - and by a common order dated May 8, 1995 dismissed the application made by the Contractor for removal of the arbitrator and made the award dated August 18, 1992 rule of the court and passed decree in terms thereof.

8. The Contractor challenged the common order dated May 8, 1995 passed by the Sub Judge, Chandigarh in appeal before the District Judge, Chandigarh. The District Judge dismissed the appeal on September

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2012 Supreme(SC) 167

2012 (2) Supreme 307SUPREME COURT OF INDIAR.M. Lodha and H.L. Gokhale, JJ. M/s. Ladli Construction Co. (P) Ltd. — Appellant(s)versusPunjab Police Housing Corpn. Ltd. & Ors. — Respondent(s)Civil Appeal No(s). 947 of 2006Decided on : 23-2-2012

IMPORTANT POINT Mere allegation of bias is not enough. It has to be sustained by evidence and pleadings.

Cases Referred (3)

2012 (2) Supreme 307
SUPREME COURT OF INDIA
R.M. Lodha and H.L. Gokhale, JJ.
M/s. Ladli Construction Co. (P) Ltd. — Appellant(s)
versus
Punjab Police Housing Corpn. Ltd. & Ors. — Respondent(s)
Civil Appeal No(s). 947 of 2006
Decided on : 23-2-2012

IMPORTANT POINT
Mere allegation of bias is not enough. It has to be sustained by evidence and pleadings.