Arbitral proceedings pre-1996 Act governed by 1940 Act; no Section 12 disclosure duty; party-nominated arbitrator's known prior ties do not vitiate unanimous three-member award absent proven bias.

JUDGMENT :

SUMAN SHYAM, J.

1.This Appeal preferred by the State of Goa, under Section 37 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as ‘the Act of 1996’), is directed against the Judgment and Order dated 22.02.2016, passed by the learned Principal District Judge (PDJ), North Goa, in Arbitration and Conciliation Petition No. 2 of 2012, rejecting the objection filed by the Appellant under Section 34 of the Act of 1996. This case has a chequered history. Therefore, in order to appreciate the legal issues involved in the matter, it would be necessary to briefly narrate the facts and circumstances giving rise to the filing of the Appeal.

(i) It appears from the record that the State of Goa had floated a tender inviting bids for construction of the new Mandovi Bridge on NH-17. On evaluation of the bids, the contract was awarded to the Respondent-Corporation pursuant where to, a contract was signed by and in between the parties. Although copy of the contract Agreement is not available on record, yet, it appears from the material on record that the Contract Agreement was signed on 21.02.1987. The bridge was eventually opened for the public on 23.07.1992. However, Span 11 of the bridge had collapsed on 14.10.1990 when the same was still under construction. During the execution of the contract, sudden disputes and differences arose by and between the parties. Therefore, in view of Clause 67 of the Agreement dated 21.02.1987 containing the Arbitration Clause, the disputes were referred to Arbitration.

(ii) As per the Arbitration Agreement, the Arbitral Tribunal was required to be constituted by a Committee of three Members of Arbitrators out of which, one Arbitrator each, was required to be nominated by each of the contracting parties, whereas the Chairman was to be nominated by the Director General (Road Development), Ministry of Surface and Transport, Government of India. Accordingly, the claimant-contractor i.e. the Respondent herein, had nominated Shri Shitala Sharan, as its nominee in the Arbitral Tribunal, whereas the Appellant had nominated Shri N. N. Shrikhande. Shri H. R. Bapu Satyanarayana was nominated on 21.07.1993 as the Chairman of the three Member Panel. In this manner, the three Member Arbitral Tribunal was constituted.

(iii) On 09.01.1996, an objection was filed before the Arbitral Tribunal by the Appellant raising question pertaining to appointment of Shri Shitala Sharan as an Arbitrator nominated by the Respondent, on the ground that his neutrality and independence was under cloud. Although there is no order of the Tribunal on the said objection available on record, yet, it is the admitted position of fact that the Arbitral Tribunal had rejected the objection on 16.01.1996, where- after, the Arbitration proceedings had proceeded. Eventually, on 08.08.1997, an Arbitral Award was passed by the Tribunal. The operative part of the Arbitral Award dated 08.08.1997 is re-produced herein below for ready reference :

“i) a) We award that the Respondent i.e. the State of Goa represented by the Executive Engineer, Works Division VII (NH), Panaji, Goa to pay to the Claimant M/s. U.P. State Bridge Corporation Ltd. the amount of

• Rs.1,31,73,200/- (Rupees One Crore Th