Full Judgment Text
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
APPEAL NO.15 OF 2007 APPEAL NO.15 OF 2007 APPEAL NO.15 OF 2007
IN IN IN
ARBITRATION PETITION NO.75 OF 2004 ARBITRATION PETITION NO.75 OF 2004 ARBITRATION PETITION NO.75 OF 2004
1. M/s.Everready Investments )
Pvt.Ltd., )
2. M/s.Diana Watches & Ancillaries )
Pvt. Ltd., having office earlier)
at 3, Babulnath Road behind )
Central Bank of India, )
Mumbai - 400 007 and now at )
G-1, Court Chambers, )
35, New Marine Lines, )
Mumbai - 400 020. )..Appellants
(Org.Respondent No.1)
Vs.
1. M/s.Suresh Enterprises, )
A partnership Firm duly )
Registered under the Partnership)
Act, having their office at )
309, Gundecha Chambers, )
N.M.Road, Fort, Mumbai 400 023. )
Through their Partner )
Shri Ramesh S. Seth. )
2. Mr.Amarnath Sarda, )
M/s.SMG Securities Ltd., )
220, Kalinadas Udyog Bhavan, )
Near Century Bazar, Worli, )
Mumbai - 400 025. )..Respondents
(No.1-Org.Petitioner
& No.2 Org.Respondent
No.2)
--
S/Shri Uday Warunjikar, Advocate, along with Tushar
Kale, Advocate, for the Appellants.
S/Shri Ravi Kadam, Senior Counsel, along with Birendra
Saraf, Advocate, i/by Ranjit & Co. for the
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Respondents.
--
WITH
WITH WITH
APPEAL NO.24 OF 2007 APPEAL NO.24 OF 2007 APPEAL NO.24 OF 2007
IN IN IN
ARBITRATION PETITION NO.74 OF 2004 ARBITRATION PETITION NO.74 OF 2004 ARBITRATION PETITION NO.74 OF 2004
1. M/s.Mantri Crecdit & Capital )
Ltd. and Anr., )
having office earlier )
at 3, Babulnath Road behind )
Central Bank of India, )
Mumbai - 400 007 and now at )
G-1, Court Chambers, )
35, New Marine Lines, )
Mumbai - 400 020. )..Appellants
(Org.Respondent No.1)
Vs.
1. Shri Samarthmal P. Seth, )
having their office at )
309, Gundecha Chambers, )
N.M.Road, Fort, Mumbai 400 023. )
Through His Constituted Attorney)
Shri Ramesh S. Seth. )
2. Mr.Amarnath Sarda, )
M/s.SMG Securities Ltd., )
220, Kalinadas Udyog Bhavan, )
Near Century Bazar, Worli, )
Mumbai - 400 025. )..Respondents
(No.1-Org.Petitioner
& No.2 Org.Respondent
No.2)
--
S/Shri Uday Warunjikar, Advocate, along with Tushar
Kale, Advocate, for the Appellants.
S/Shri Ravi Kadam, Senior Counsel, along with Birendra
Saraf, Advocate, i/by Ranjit & Co. for the
Respondents.
--
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WITH WITH WITH
APPEAL NO.25 OF 2007 APPEAL NO.25 OF 2007 APPEAL NO.25 OF 2007
IN IN IN
ARBITRATION PETITION NO.76 OF 2004 ARBITRATION PETITION NO.76 OF 2004 ARBITRATION PETITION NO.76 OF 2004
1. M/s.Anjir Properties Pvt.Ltd., )
(Now known as Mantri Real )
Estate Pvt. Ltd.), )
having office earlier )
at 3, Babulnath Road behind )
Central Bank of India, )
Mumbai - 400 007 and now at )
G-1, Court Chambers, )
35, New Marine Lines, )
Mumbai - 400 020. )..Appellant
(Org.Respondent No.1)
Vs.
1. M/s.S.P.Builders, )
having their office at )
309, Gundecha Chambers, )
N.M.Road, Fort, Mumbai 400 023. )
Through His Constituted Attorney)
Shri Ramesh S. Seth. )
2. Mr.Amarnath Sarda, )
M/s.SMG Securities Ltd., )
220, Kalinadas Udyog Bhavan, )
Near Century Bazar, Worli, )
Mumbai - 400 025. )..Respondents
(No.1-Org.Petitioner
& No.2 Org.Respondent
No.2)
--
S/Shri Uday Warunjikar, Advocate, along with Tushar
Kale, Advocate, for the Appellants.
S/Shri Ravi Kadam, Senior Counsel, along with Birendra
Saraf, Advocate, i/by Ranjit & Co. for the
Respondents.
--
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CORAM : SRI R.M.S.KHANDEPARKAR & CORAM : SRI R.M.S.KHANDEPARKAR & CORAM : SRI R.M.S.KHANDEPARKAR &
SRI P.B.MAJMUDAR, JJ
SRI P.B.MAJMUDAR, JJ SRI P.B.MAJMUDAR, JJ
DATED : 11TH JUNE, 2008 DATED : 11TH JUNE, 2008 DATED : 11TH JUNE, 2008
ORAL JUDGMENT : ( PER R.M.S.KHANDEPARKAR, J ) ORAL JUDGMENT : ( PER R.M.S.KHANDEPARKAR, J ) ORAL JUDGMENT : ( PER R.M.S.KHANDEPARKAR, J )
1. Admit. The learned advocates for the
respondents waive service. By consent, heard
forthwith.
2. Since the common question of law and facts
arise in all these three appeals, they were heard
together and are being disposed of by this common
order.
3. All these appeals arise from the orders dated
4th August, 2005 passed by the learned Single Judge in
exercise of the powers under Section 34 of the
Arbitration and Conciliation Act, 1996 ( for short
"the said Act") in relation to the award passed by the
learned Arbitrator on 21st October, 2003.
4. The challenge to the impugned orders is on the
ground that the grounds on which the petitions were
filed were not available under Section 34 of the said
Act and that therefore, the learned Single Judge erred
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in allowing the petitions and setting aside the award
passed by the learned Arbitrator.
5. According to the learned advocate appearing
for the appellants, the award was sought to be
challenged on the ground that the arbitrator was
disqualified to entertain the arbitration proceedings
on the ground that he was a witness to the arbitration
agreement. It is the contention on behalf of the
appellants that the award could not have been
interfered by the Court in exercise of powers under
Section 34 of the said Act of such ground. Without
prejudice to this contention, it was also sought to be
contended that the materials on record nowhere
disclose any bias against the appellants being
entertained by the arbitrator and merely because the
arbitrator was the witness to the arbitration
agreement, that would not be a ground to disqualify
him from acting as the arbitrator, once the parties
choose the person, knowing well about his antecedents,
to be the arbitrator to deal with the dispute between
the parties.
6. The learned senior counsel appearing for the
respondents, on the other hand, submitted that the
award was essentially challenged on the ground that
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the statement of defences which was filed by the
appellants was not at all taken into consideration by
the arbitrator nor any reason was disclosed in the
award for rejecting the said statement of defence,
besides the bias as entertained by the arbitrator
against the appellants is apparent on the face of
record and further established by the affidavit filed
by the arbitrator himself in the proceedings before
the learned Single Judge.
7. Bare perusal of the impugned orders discloses
that the learned Single Judge has entertained the
petitions under Section 34 of the said Act essentially
on the ground that the learned arbitrator had failed
to take into consideration the statement of defences
filed on behalf of the respondents and further that
not even the reasons have been disclosed for not
entertaining the said statement of defences which was
otherwise obligatory for the arbitrator in terms of
the provisions of law comprised under Section 19 of
the said Act. Indeed, perusal of the award nowhere
discloses that the arbitrator has entertained the
statement of defences which was undisputedly filed by
the respondents on 16th August, 2003 nearly three
months prior to the declaration of the award. The
award also does not disclose any reason for rejecting
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the said statement of defences. Strangely, however,
the learned arbitrator in the affidavit filed before
the learned Single Judge has claimed that the said
statement of defences was nothing different from the
contents of the letter dated 28th August, 2002. At
the same time, it is also disclosed in the affidavit
that the arbitrator neither accepted the statement of
defences nor had any occasion to peruse the contents
thereof. Inspite of the fact that the arbitrator had
no opportunity to peruse the contents of the said
statement of defences, one fails to understand, as
rightly observed by the learned Single Judge, as to
how the arbitrator would know the contents of the said
statement of defences which was sent by the
respondents. It has been confirmed by the arbitrator
in his affidavit that he had not even opened the
envelope which contained the statement of defences
filed by the respondents. In other words, apart from
the absence of any reference to the said statement of
defences in the award, the fact that the statement of
defences which was filed much prior to the declaration
of the award was not at all considered by the
arbitrator has been clearly admitted by the arbitrator
in his affidavit filed before the learned Single
Judge. This itself is sufficient ground, in our
considered opinion, to entertain the petitions under
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Section 34 of the said Act and to set aside the award.
The learned Single Judge having accordingly
entertained the petitions and having set aside the
award on the said ground, we find no illegality is
committed nor any case is made out for interference in
the impugned orders.
8. As regards the second ground of challenge,
undoubtedly, when a party knowing well the involvement
of the person in the transaction which is the subject
matter of the agreement choses him to be an arbitrator
for settlement of a dispute, it would not be
appropriate for any of the parties to the agreement
thereafter to allege bias against such person being
entertained by the arbitrator, without placing on
record the facts which could reveal any such bias
having been entertained by the arbitrator against the
person. Nevertheless, when it is to the knowledge of
the arbitrator that he had been present at the time of
settling the terms of agreement between the parties,
in those circumstances, if one of the parties has
reservation for such a person being continued to be
the arbitrator, he should recuse himself from being
continued as an arbitrator. In fact, Section 12(1) of
the said Act clearly provides that when a person is
approached in connection with his possible appointment
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as an arbitrator, he shall disclose in writing any
circumstances likely to give rise to justifiable
doubts as to his independence or impartiality. In
other words, the person before being appointed to be
an arbitrator or continuing to be an arbitrator for
the parties, he should make it known to both the
parties that if there are circumstances which could
likely to give rise to the reasonable doubts as
regards his integrity or impartiality and when the
facts which are known to the arbitrator are of such a
nature that the same could give rise to the reasonable
doubts as to his integrity or impartiality in relation
to the matter, certainly it would be for the
arbitrator, of his own, to recuse himself from
continuing to be the arbitrator.
9. In the case in hand, right from the beginning
of the proceedings, it was brought to the notice of
the learned arbitrator that he was a witness to the
agreement between the parties and, therefore, he
should recuse himself from continuing to be an
arbitrator. The fact that he was party to such
agreement was sought to be disputed by the learned
arbitrator in the award by observing as under:-
"I do not agree with the contention of the
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Respondent that by witnessing the said
Agreement dated 23rd July 2001 I have incurred
any disqualification. The parties named me as
a their sole arbitrator in the said agreement
which after executing it called upon me to
witness the execution. Acknowledging that the
signature on the said agreement is that of the
party cannot bring disqualification to act as
an arbitrator."
Thus, though in the award, it was observed by the
learned arbitrator that he had merely signed the
agreement after it was executed to confirm the
execution of that agreement by the parties and nothing
beyond that, his affidavit before the learned Single
Judge speaks something totally different. In the
paragraph 3 of the affidavit, it has been stated by
the arbitrator as under:-
"The allegation that I had promised the task
of de-reservation and obtaining IOD/OC for the
Carmicheal property is absolutely incorrect.
I was approached by the petitioners to do the
de-reservation work of the Carmicheal Road
property. But, since I was not equipped or
competent to carry out the work I had written
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to Respondent No.1 to do the de-reservation
work for the Petitioners as they had
experience in such work. The request was made
at the behest of the Petitioners, the
petitioners strongly recommending the same.
Annexed hereto and marked as Exhibit -- is the
letter written by me to Respondent No.1 to do
the de-reservation work of the Carmicheal
Property along with the letter written by the
Petitioners to me."
It is not in dispute that the agreement was
essentially for obtaining de-reservation work of the
Carmicheal Road Property. In other words, the entire
agreement between the appellants and the respondents
was pursuant to the request in that regard made by the
learned arbitrator to the appellants at the behest of
the respondents. It was the same agreement which was
witnessed by the learned arbitrator. In such
circumstances, can it be said that the learned
arbitrator was totally a stranger to the said
agreement ? In such circumstances, if one of the
parties expresses reservation against the learned
arbitrator continuing to be so, it would be in all
fairness to the parties that the learned arbitrator
should recuse himself from continuing to be the
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arbitrator. When the arbitrator fails to recuse
himself gracefully, the Court is left with no option
than to pass appropriate order in the interest of
justice. The challenge on the second ground also is,
therefore, devoid of substances.
10. As no other ground is canvassed, the appeals
fail and are hereby dismissed with costs.
(P.B.MAJMUDAR, J) ( R.M.S.KHANDEPARKAR, J )
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