### Former employee’s nomination as arbitrator does not presume bias in a balanced three-member panel.

The State of Goa awarded a contract to the Respondent for the construction of the Mandovi Bridge in 1987.

Following disputes, an Arbitral Tribunal was constituted in 1993 consisting of three members: one nominee from each party and a Chairman nominated by the Central Government.

The Appellant objected to the Respondent’s nominee, Shri Shitala Sharan, alleging bias as he was a former Managing Director and consultant for the Respondent.

The Tribunal rejected the objection in 1996 and passed an unanimous award in 1997 in favor of the Respondent.

Procedural delays occurred due to uncertainty over whether the Arbitration Act of 1940 or 1996 applied.

Eventually, the Principal District Judge, North Goa, dismissed the Appellant’s Section 34 challenge on February 22, 2016.

The Appellant approached the High Court, pressing only the ground of "bias" regarding the arbitrator.

1. Whether the Arbitration and Conciliation Act, 1996, applies to arbitral proceedings that commenced prior to its enforcement.

2. Whether the Arbitral Award was vitiated by bias due to the Respondent's arbitrator being a former employee and for failing to make a disclosure under Section 12 of the 1996 Act.

The court applied Section 85(2)(a) of the Arbitration and Conciliation Act, 1996, which stipulates that the 1940 Act continues to apply to proceedings commenced before the 1996 Act unless otherwise agreed by parties.

It relied on *Shetty’s Constructions Co. Pvt. Ltd. v. Konkan Railway Construction* to affirm that the old Act governs such "pendente lite" proceedings.

It relied on *Thyssen Stahlunion GMBH v. Steel Authority of India* to affirm that the old Act governs such "pendente lite" proceedings.

Regarding bias, it applied the "test of likelihood of bias" from *Ranjit Thakur v. Union of India*.

It applied the principle from *S. P. Singla Constructions v. State of Himachal Pradesh* that a former employee acting as a nominated arbitrator is not ipso facto proof of bias.

It also noted the "counter-balancing" theory for three-member tribunals from *Perkins Eastman Architects v. HSCC (India) Ltd.*.

The Court reasoned that since the arbitration commenced in 1993, the 1940 Act applied, and therefore the strict disclosure requirements of Section 12 of the 1996 Act were not applicable.

Even if evaluated for bias, the Court found that the Appellant had full knowledge of the arbitrator's background at the time of nomination and raised no timely objection.

Crucially, the Court observed that the award was unanimous; any perceived bias of one nominee was neutralized by the presence of the Appellant’s own nominee and an independent Chairman.

The Court emphasized that for a State-owned corporation, the mere nomination of a former employee does not establish justifiable doubts of impartiality without specific evidence of financial or personal interest.

On the second issue, it held that there was no demonstrable bias to vitiate the award.

The Court dismissed the appeal, confirming the Judgment of the Principal District Judge and upholding the Arbitral Award dated August 8, 1997.

The Court concluded its jurisdiction under Section 37 is highly circumscribed and found no perversity in the lower court's refusal to set aside the award.