M/s. Hindustan Vehicles Ltd. vs Girilal and Co. and others

J.L. Nain, J.—The Next contention of the petitioners is that Prakash Chand Jain was disqualified from acting as an arbitrator by reason of his relationship with one of the partners of respondents No. 1 firm. Now, it is an admitted fact that respondents No. 1 firm consists of a father and his two sons as partners, and the wife of the arbitrator and the wife of one of the sons are sisters. In my opinion, this relationship was likely to cause an apprehension in the mind of the petitioners that the arbitrator would not be free from bias. Prakash Chand Jain was a sole arbitrator unilaterally appointed. An arbitrator should be above reproach. The petitioners would be justified if they apprehended that there was a strong probability that the arbitrator would be biased to such an extent as to be incapable of fairly and honestly giving a decision. It has been held in the case of In Re: Hasima Latifi and Others, : (1951) 64 Bom. L R 37, in the judgment of Chagla C J- that (p. 38):

There can be no doubt that an arbitrator must show vberrima fides to the parties whose disputes he is going to arbitrate and who have constituted him their domestic forum. In a sense the position of an arbitrator is different from that of a Judge. If a party goes to a Court, he has got to submit to a decision of the Judge. Ha has no choice in the appointment of the Judge. But when parties go to a domestic forum and want their matters to be determined by arbitration, they have every choice as to the person whom they should select as their arbitrator, and therefore it is clear that highest faith should be shown by the arbitrator. It also follows that the arbitrator must disclose to the parties all facts which are likely or calculated to bias him in any way in favour of one or the other party. A circumstance or a fact may in fact not bias the decision of the arbitrator. The arbitrator may have too strong a character, too deep & sense of justice to be influenced by any consideration extraneous to or foreign to the evidence which he has got to consider. But the question is not what is likely in fact to happen, but what is likely to tend or is calculated to tend to a particular result. Therefore, if the Court comes to the conclusion that there are any facts or any circumstances which are likely to affect the decision of the arbitrator, which are likely to bias him, it would be incumbent upon the arbitrator to disclose those facts to the parties. If he fails to disclose those facts, then his award would be liable to be successfully challenged.

In this case, although the fact of relationship was disclosed by respondents No. 1 to the petitioners, as the petitioners were not submitting to the jurisdiction of the arbitrator on the ground that the dispute was not covered by the arbitration agreement (which contention I have not upheld), there was no occasion for them to protest against the choice of the arbitrator. I hold that on account of the relationship of the arbitrator with one of the partners of respondents No. 1, there was a probability and reasonable prospect and a reasonable apprehension of bias in the mind of the petitioners. A perfectly even and unbiased mind is essential to the validity of every judicial proceeding and if there is a circumstance in the situation of an arbitrator which tended to produce a bias in his mind, the existence of that circumstance will justify the interference of the Court, whether in fact the circumstance had any operation in the mind of the arbitrator or not. It is important that parties get adjudication of their dispute in an impartial tribunal and no circumstances must exist which would tend to produce a bias in the mind of an arbitrator. In this case such circumstances existed. Prakash Chand Jain was, therefore, disqualified from acting as an arbitrator.

It has been contended by Dr. Naik on behalf of respondents No. 1 that the petitioners were barred from urging that the sole arbitrator was disqualified by reason of his relationship on account of estoppel, waiver or acquiescence. In this case as the petitioners were disputing the jurisdiction of the arbitrator on the ground that the disputes between the parties were not covered by the arbitration agreement, they neither submitted to the arbitration, nor attended before the arbitrator, nor took any part in the arbitration proceedings. If as a result of the notice of relationship contained in the undated letter the Petitioners had agreed to go to the arbitration of Prakash Chand Jain or had submitted to his jurisdiction or taken any part in the arbitration proceedings without any protest on the ground of relationship disclosed to them, the question of estoppel, waiver or acquiescence may have arisen. In my opinion, there can be no question of estoppel, waiver or acquiescence in the relationship of an arbitrator to one of the parties to arbitration in a case where the party seeking to disqualify the arbitrator, has neither agreed to the nomination of the said arbitrator, nor submitted to his arbitration, nor appeared before him and taken any part in the arbitration proceedings before him without protest. Something more active than mere abstention from attending before an arbitrator and taking part in proceedings before him is required to preclude a party from challenging the appointment of an arbitrator on the ground that he was related to the other party.

[The rest of the judgment is not material to this report.]

Award set aside.

Solicitors for petitioners-Bhaishankar Kanga, and Girdharlal.