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2020 Supreme(AP) 117
IN THE HIGH COURT OF ANDHRA PRADESH, AMARAVATI
C. PRAVEEN KUMAR, BATTU DEVANAND, JJ.
Rashtriya Ispat Nigam Ltd. – Petitioner
Versus
Space Tech Equipments and Structurals Private Limited – Respondent
C.R.P. No. 1884 of 2019
Decided On : 01-05-2020
Advocate Appeared:
For the Petitioner: W.B. Srinivas.
For the Respondent: S. Rajan.
Point of Law: It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi-judicial proceedings must be able to act judicially and it is of the essence of judicial decisions and judicial administration that Judges should be able to act impartially, objectively and without any bias
Headnote:
Constitution of India - Article 227 - Arbitration and Conciliation Act, 1996 - Section 14 – present CRP is filed under Article 227 of the Constitution of India, challenging the order passed in C.A.O.P. wherein the application filed by the Revision Petitioner herein under section 14 of the Arbitration and Conciliation Act, 1996 was rejected – Held, application under Sections 12 and 13 of the Act was moved, but the issue raised was not decided on merits holding that Tribunal cannot go into the said issue. Thereafter, an application was moved before the Court under Section 14 of the Act. The de jure impossibility in our view, and as held in the judgments referred to above would be “impossibility in law” or “incapable either in law or on facts.” The word de jure as defined in Black’s Law Dictionary is descriptive of a condition in which there has been total compliance with all the requirements of law. It is also well established that bias vitiates the entire proceedings including arbitral proceedings making it nugatory. The objective of the judicial or quasi judicial proceedings is to render justice or decide a case with an unbiased mind and be impartial. This principal of one getting disqualified if he is biased or suffers from prejudices, applies to all adjudicating authorities and arbitrators are no exception. Therefore, our view that if the arbitrator acts in a biased manner, he is de jure incapacitated/ unable to perform his function under Section 14 of Act gets support from the view expressed in National Highways Authority of India’s case. We are also aware that such a power is to be exercised sparingly and with caution. As the material on record amply establish that the fourth respondent acted in a biased manner, we feel that in the facts of the case the petitioners were justified in invoking Section 14 of the Act seeking termination of the Arbitrator
Facts of the Case:
Petitioner herein awarded three contracts to the respondent no. 1 for design, engineering, supply of indigenous plant, machinery and equipment, including erection, commissioning and PG tests of plant and equipment including supervision of all services, insurance and training of propane/LPG storage installation for SMS 1 and SMS. As the respondent no. 1 failed to execute the work as per the terms of the agreement, the same was terminated. On 17-11-2012, the respondent no. 1 invoked the arbitration clause and appointed the respondent no. 4 (Sri Dr. K. Karunakar Rao former Engineer in MES) as its nominee to arbitration. The petitioner herein appointed the respondent no. 3 (Sri T. Bhasker Rao, retired District Judge) as its nominee arbitrator. Both the arbitrators in turn appointed Justice T. Ch. Surya Rao as Presiding Arbitrator on 25.1.2013
Finding of the Court:
application under Sections 12 and 13 of the Act was moved, but the issue raised was not decided on merits holding that Tribunal cannot go into the said issue. Thereafter, an application was moved before the Court under Section 14 of the Act. The de jure impossibility in our view, and as held in the judgments referred to above would be “impossibility in law” or “incapable either in law or on facts.” The word de jure as defined in Black’s Law Dictionary is descriptive of a condition in which there has been total compliance with all the requirements of law. It is also well established that bias vitiates the entire proceedings including arbitral proceedings making it nugatory. The objective of the judicial or quasi judicial proceedings is to render justice or decide a case with an unbiased mind and be impartial. This principal of one getting disqualified if he is biased or suffers from prejudices, applies to all adjudicating authorities and arbitrators are no exception. Therefore, our view that if the arbitrator acts in a biased manner, he is de jure incapacitated/ unable to perform his function under Section 14 of Act gets support from the view expressed in National Highways Authority of India’s case. We are also aware that such a power is to be exercised sparingly and with caution. As the material on record amply establish that the fourth respondent acted in a biased manner, we feel that in the facts of the case the petitioners were justified in invoking Section 14 of the Act seeking termination of the Arbitrator.
Result: C.R.P. is allowed
ORDER :
1. The present CRP is filed under Article 227 of the Constitution of India, challenging the order passed in C.A.O.P. No. 25 of 2017, dated 31.01.2019, wherein the application filed by the Revision Petitioner herein under section 14 of the Arbitration and Conciliation Act, 1996 (for short “the act”) was rejected.
2. The facts which lead to filing of the present Civil Revision Petition are as under:
The petitioner herein awarded three contracts to the respondent no. 1 for design, engineering, supply of indigenous plant, machinery and equipment, including erection, commissioning and PG tests of plant and equipment including supervision of all services, insurance and training of propane/LPG storage installation for SMS 1 and SMS. As the respondent no. 1 failed to execute the work as per the terms of the agreement, the same was terminated. On 17-11-2012, the respondent no. 1 invoked the arbitration clause and appointed the respondent no. 4 (Sri Dr. K. Karunakar Rao former Engineer in MES) as its nominee to arbitration. The petitioner herein appointed the respondent no. 3 (Sri T. Bhasker Rao, retired District Judge) as its nominee arbitrator. Both the arbitrators in turn appointed Justice T. Ch. Surya Rao as Presiding Arbitrator on 25.1.2013. Thereafter, the proceedings commenced. In the course of arbitration proceedings, the case was posted to different dates for examination and cross-examination of RW-1 (witness on behalf of the petitioner).
3. While things stood thus on 01.02.2016, Sri Justice T. Ch. Surya Rao expired due to ill-health. On 11.03.2016 both the nominee arbitrators, appointed Sri Justice D. Appa Rao, Retired Judge of the High Court as the presiding arbitrator. The material on record show that on 22.12.2016, Justice Sri D. Appa Rao, expressed his inability to act as presiding arbitrator. Therefore, on 01.01.2017, Sri A. Gangaiah, retired Chief Engineer, HSCL was appointed as a principal arbitrator. Records show that on 01.02.2017, Sri Justice D. Appa Rao returned all the documents to Sri A. Gangaiah on a request made by him and obtained an endorsement of receipt of same by e-mail, dated 01.02.2017. He informed all the parties as well as the co-arbitrators about handing over of the records to Sri A. Gangaiah. The following records were handed over - (i) an unopened parcel/record received from Vinod Abrahim, Advocate, Mumbai, (ii) registered post letter, dated 22.03.2016 from 22.03.2016 from Dr. P. Karunakar Rao enclosing notes in respect of subject dispute (33 pages). The presiding arbitrator A. Gangaiah after re-constituting the tribunal vide proceedings dated 26.01.2017, fixed 6th, 7th and 8th March, 2017 for cross-examination of the RW-1. On a Memo filed by the petitioner on 06.03.2017, the tribunal heard the matter on the said memo and allowed the same, pursuant to which, copy of the letter, dated 22.03.2016 along with 33 page note was served on the petitioner as well as on the co-arbitrator Sri T. Bhasker Rao and the claimant. Being surprised with the contents of the 33 page note prepared by one of the arbitrator, which is almost in the form of an award, the petitioner herein filed an application under Section 12(3)(a) read with Section 13(2) of the Act, 1996 seeking termination of the mandate of the respondent no. 4 co-arbitrator Dr. P. Karunakar Rao. This application was said to have been made on 21.06.2017. After hearing all concerned, the respondent no. 3 herein namely Sri P. Bhasker Rao (co-arbitrator), allowed the application filed by the petitioners holding that the mandate of the respondent no. 4 shall stand terminated. While on the next day, the principal arbitrator, as well as the co-arbitrator (respondent no. 4) separately passed an order holding that the arbitral tribunal cannot decide the issue and the power to terminate the mandate of the co-arbitrator is not vested with the arbitral tribunal. It is to be noted here that this application before the arbitral tribunal was filed under section 12(3)
