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1998 Supreme(Mad) 1347
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE C. SHIVAPPA & THE HONOURABLE MR. JUSTICE K. NATARAJAN
M/s. Tribol Engineering Private Limited, rep. by its Managing Director Mr. K. Venkat, Bangalore
Versus
Indian Oil Corporation Ltd., rep. by its deputy General Manger (Engineering), Indian Oil Bhavan, Chennai 34 and another
CMP. Nos. 10631 and 10632 of 1998
Decided On : 12-10-1998
Mr. V.S. Subramanyan, Advocate for Petitioner. Mr. G. Subramanian, Senior Counsel for R1 Advocate for Respondents
A man cannot be a judge in his own cause, and an arbitrator who has a pecuniary interest in one of the parties to the arbitration proceedings is disqualified from acting as an arbitrator.
Headnote:
ARBITRATION - Removal of Arbitrator - Grounds - Reasonable apprehension of bias - Pecuniary interest - Conduct - Venue - Appointment of third-party arbitrator.
Fact of the Case:
Petitioner filed a petition for removal of respondent No. 2 Arbitrator on the ground of reasonable apprehension of bias and to appoint an independent Arbitrator in his place. The petitioner alleged that the respondent No. 2 had a pecuniary interest in the Respondent No. 1 organisation, that he had not fixed his remuneration, that the arbitration meetings were held in the Chambers of Law Officer of respondent No. 1, that the Law Officer dictated the minutes, and that the respondent No. 2 aided and corrected the mistakes of respondent No. 1.
Finding of the Court:
The court held that the conduct of respondent No. 2 while conducting the arbitration proceedings, having regard to his pecuniary interest, amounted to misconduct and bias warranting removal. The court also held that the respondent No. 2 had not disclosed his pecuniary interest to the petitioner, that he had not fixed his remuneration, that the arbitration meetings were held in the chambers of the Law Officer of respondent No. 1, that the Law Officer dictated the minutes, and that the respondent No. 2 aided and corrected the mistakes of respondent No. 1. The court further held that the venue of the arbitration was not conducive for fair hearing of the matter and that the respondent No. 2 had not provided a fair hearing to the parties.
Issues: 1. Whether the conduct of respondent No. 2 while conducting the arbitration proceedings, having regard to his pecuniary interest, amounted to misconduct and bias warranting removal? 2. Whether the respondent No. 2 had disclosed his pecuniary interest to the petitioner? 3. Whether the respondent No. 2 had fixed his remuneration? 4. Whether the arbitration meetings were held in the chambers of the Law Officer of respondent No. 1? 5. Whether the Law Officer dictated the minutes? 6. Whether the respondent No. 2 aided and corrected the mistakes of respondent No. 1? 7. Whether the venue of the arbitration was conducive for fair hearing of the matter? 8. Whether the respondent No. 2 had provided a fair hearing to the parties?
Ratio Decidendi: 1. The court held that a man cannot be a judge in his own cause, and that the respondent No. 2 had a pecuniary interest in the Respondent No. 1 organisation, which created a reasonable apprehension of bias. 2. The court held that the respondent No. 2 had not disclosed his pecuniary interest to the petitioner, which was a breach of the principles of natural justice. 3. The court held that the respondent No. 2 had not fixed his remuneration, which was a violation of the Arbitration Act. 4. The court held that the arbitration meetings were held in the chambers of the Law Officer of respondent No. 1, which was not a conducive venue for fair hearing of the matter. 5. The court held that the Law Officer dictated the minutes, which was a violation of the principles of natural justice. 6. The court held that the respondent No. 2 aided and corrected the mistakes of respondent No. 1, which was a violation of the principles of natural justice. 7. The court held that the venue of the arbitration was not conducive for fair hearing of the matter. 8. The court held that the respondent No. 2 had not provided a fair hearing to the parties.
Final Decision: The court allowed the petition and revoked the authority of respondent No. 2 as arbitrator. The court also appointed Mr. Justice A. Abdul Hadi, a former Judge of this Court, as arbitrator and directed him to consider all objections that may be put forth by either of the parties with reference to the dispute referred and then to decide the matter in accordance with law, within six months, from the date of the order.
Shivappa, J.
1. The C.M.P. No. 10631 of 1998 has been filed for removal of respondent No. 2 Arbitrator on the ground of reasonable apprehension of bias and to appoint an independent Arbitrator in his place.
2. In order to determine whether or not to revoke the authority of respondent No. 2, it is appropriate to set out certain facts and circumstances pertaining to his appointment, conduct during the arbitral proceedings and the pecuniary interest in the Respondent No. 1 organisation. They are stated as under:- Respondent. No. 1 invited tenders on March 24,1988 for the construction of L.S.H.S. (Low Sulphur Heavy Stock) Project for Neyveli Lignite Corporation. The petitioners tender was accepted by respondent No. 1 who issued a letter of intent dated june 27,1988, for execution of the said project and the petitioner had completed the job which was awarded to it. One of the conditions stipulated therein was that disputes, if any, that would arise in relation to the contract, are to be settled through arbitration. The petitioner by his letter dated April 9, 1992, requested respondent No. 1 herein, to refer the disputes to arbitration, since some disputes had arisen between him and respondent No. 1. But no positive action was taken to appoint the Arbitrator to resolve the disputes as per tender conditions. The inaction on the part of the respondent No. 1, led the petitioner to file C.S. No. 1140 of 1994 on the file of this Court for reference to arbitration and to pray for the appointment of a third party arbitrator.
3. The list of disputes that had arisen between the petitioner and respondent No. 1 which are to be referred to arbitration, are furnished as an annexure to the affidavit filed in support of the said suit. The suit was contested on the ground that there was no contract or agreement existed between the parties which contained arbitration clause. Though counter was filed during October, 1994, no counter-claim was made at that time. Ultimately, the suit was dismissed in January 1995.
4. Aggrieved against the said judgment, O.S.A. 20 of 1995 was preferred and a Division Bench of this Court had directed the appointment of respondent No. 2 as the sole Arbitrator who was the then Chief Plant Manager, Lube Blending Plant of the respondent No. 1 herein. A review petition was filed against the order of the division Bench which was also ended in dismissal. This Court directed that the arbitrator should complete the arbitration proceedings within six months from October 31, 1996, i.e., on or before April 30,1997. The respondent No. 2 in pursuance of the order of this Court in O.S.A. No. 20 of 1995, directed the petitioner to file the claim statement and the respondent No. 1 to file a counter statement.
5. The claim statement was filed by the petitioner on June 30,1997 and the respondent No. 1 filed the counter statement on September 17, 1997. Including the time extended, finally the written statement was filed on November 7, 1997. The respondent No. 2 directed both the parties to file draft issues on November 27, 1997. The counter-claim was made on December 8, 1997. The petitioner contended that respondent No. 1 would not be entitled to file any counter-claim since the matters in dispute had come to the stage of framing the issues. The counter-claim was resisted on the ground that it is belated and barred by limitation and also stating that the counter-claim was not the subject matter of reference by this Court and requested for rejection of the counterclaim. The respondent No. 1 contended that the counter-claim was not barred by limitation and it was also not beyond the scope of reference. Since the respondent No. 2 entertained the counter-claim without assigning any reasons, a request was made before respondent No. 2 on March 26,1998 to suspend the further proceedings and to take action against the reception of the counter claim.
6. In this petition several allegations have been made touching the conduct of r
