Union of India vs Bharat Flour Mills

Two extreme views as to what is meant by 'Public policy', would be found propounded by the British Courts. Burrough, J. in Richardson v.

Mellish, (1824) 2 Bing 229, described public policy as ""a very unruly horse and when once you get astride it you never know where it will carry

you"". The answer to this was given by Lord Denning MR in Enderby Town Football Club Ltd. v. Football Association Ltd., (1971) Ch 591, when

he said 'with a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions

and come down on the side of justice.

It is the case of Union of India that the arbitral award given by the arbitrator is in conflict with the public policy of India, and therefore, it is liable

to be set aside.

With a view to examine this aspect of the matter, the facts be noticed as under :

The petitioner in this case invited tenders from millers for grinding of wheat and transportation of flour (atta) to various destinations. This tender

was valid for a period from Ist Aug., '97 to 31st July, '99. RespondentBharat Flour Mills (hereinafter referred to as respondent mill), quoted the

rates. The tender was accepted. The memorandum of understanding was regarding a composite contract for a period from 1st Aug., '97 to 31st

July, '99. Out of the overall value of contract, the transportation of atta was one element. The value of this transportation component in the entire

contract for twenty one months was to the extent of Rs. 2,58,74,417/.

Even though, the outer limit was indicated as 31st July, '99, the respondent mill extended the validity of the offer vide letter dt. 17th Oct., '97. As

the facts are being noted, one fact which is projected by the petitioner is that respondent mill with a mala fide intention and with a view to secure

the contract by unsetting other firms had quoted low rates for transportation of Atta, be also taken note of. There was a clause in the contract that

the transportation rates are revisable after every six months. Clause 2(g) dealt with this aspect of the matter. There was another clause in the shape

of Clause 34, which enabled the parties to get the dispute, if any arising between the parties to be settled through an arbitrator. A dispute did arise.

This was with regard to the fixation of transportation charges after initial six months. As indicated above, it is Clause 2(g), which provided that the

transportation rates are subject to revision and refixation by the Tender Purchase Committee after every six months. It was regarding this revision

and refixation, a dispute arose and was referred to the sole arbitrator namly Lt. Col. Shiv Dayal, 5121 ASC Bn (MT). As Clause 2(g) is relevant,

it is being quoted below :

In case contractor fails to transport Atta in the CHT as per the requirement of defence, the contract operating officer will be at liberty to hire civil

transport or transport atta in DD vehs at the risk and expense of the contractor. Any extra expenditure incurred by the defence will be recovered

from the contractor. The transportation rates are subject to revision and refixation by Tender Purchase Committee every six months.

There was a dispute with another mill namely M/s. Kashmir Roller Flour Mills. This dispute was also referred to the same arbitrator. However,

this latter dispute has no relevance so far as the present case is concerned. This objection petition deals with the award given between the Union of

India and the respondent mill only.

The chronological events, relevant for the purposes of this litigation be noticed :

(i) On 25th Aug., '98, a request was made by the respondent mill for referring the dispute to the arbitrator in terms of Clause 34 of the contract;

(ii) On 26th Oct., '98, the dispute was referred to the arbitrator namely Lt. Col. Shiv Dayal i.e. the date on which the aforesaid Lt. Col. Shiv

Dayala was appointed as arbitrator;

(iii) On 12th Nov., '98, the arbitrator entered upon the reference;

(iv) On 23rd Nov., '98, first sitting was held;

(v) On 30th Nov., '98, second sitting was held;

(vi) On 19th Dec., '98, third sitting was held;

(vii) On 28th Dec., '98, fourth sitting was held;

(viii) On 12th Jan., '99, the award was published by the arbitrator.

The Union of India was called upon to pay an amount of Rs. 2,16,84,312/, together with interest amounting to Rs. 18,60,692.20, till the date of

award. This award is for the period 5th May, '98 to 25th Oct., '98. An amount of Rs. 2,369,82 has been allowed in favour of the petitioner. It is

this award, which is challenged as being opposed to public policy as prevalent in India.

At this stage, it would be apt to notice, the contents of letter dt. 12th Nov., '98, by which the Union of India was given an information to appear

before the arbitrator on 23rd Nov., '98. This letter reads as under :

. . . . . . . Refer to Army HQ letter No. 66319/N280/Q/ST26/Q1(B), dt. 26th Oct., 98 vide which the undersignd has been appoined Arbitrator

to arbitrate the above case.

You are requested to furnish statement of claim/complaint in triplicate along with necessary documents by 22nd Nov., 98 and also appear in

person or your representative to attend the initial meeting along with necessary claim documents at 1000 hrs. on 23nd Nov. '98 in the office of the

unersigned at Pathankot. . . . .

The main ground of attack on behalf of Union of India is that they were not afforded any proper opportunity to file a reply. It is also urged that

the arbitrator, in fact, did not inform them about the dates. Copy of the claim filed by the respondent mill was not made available. It is in these

circumstances urged that no adequate opportunity was given. It is this nongrant of opportunity which is said to be against the public policy.

After the objections were preferred and respondent mill filed its reply, this Court framed issues on 15th Nov., '99. For facility of reference,

these issues are noticed below:

(i) Whether the Union of India was incapacitated in pursuance of its case before the Arbitrator on account of lack of proper opportunity having

been given by the Arbitrator ?

(ii) Whether the award given by the arbitrator is beyond the scope of reference ?

On 15th Nov., '99, this Court directed the registry to summon the record of the arbitrator. This record has since been received. The objector

as also the respondent mill led their evidence. Affidavit was filed by Lt. Col. A. K. Sharma on behalf of Union of India. Sh. Lalit Mohan Aggarwal,

has filed affidavit on behalf of respondent mill. Both the parties had the opportunity to crossexamine the other side's deponent. The basic argument

remains the same i.e., as to whether the arbitral award is against the public policy as prevalent in India.

Section 34 of the Jammu and Kashmir Arbitration and Conciliation Act of 1977, deals with the subject of setting aside an arbitral award. This

statutory provision is being noticed below :

(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection

(2) and subsection (3).

(2) An arbitral award may be set aside by the Court only if :

(a) the party making the application furnishes proof that

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the

time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise

unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains

decisions on matters beyond the scope of the submission to arbitration :

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award

which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement

was in conflict with a provision of this Part from which the parties cannot derogate, or failing such agreement, was not in accordance with this Part;

or

(b) the Court finds that

(i) the subjectmatter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India;

Explanation : Without prejudice to the generality of subclause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict

with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or

Section 81.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had

received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the

arbitral tribunal;

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of

three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under subsection (1), the Court may, where it is appropriate and it is so request by a party, adjourn the

proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take

such action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

The proceedings which took place on 23rd Nov. '98 i.e. the date on which the first meeting was there are apparent from the letter written by

the arbitrator to the Headquarter Northern Command (ST). A copy of this was sent to respondent mill. This is Annexure 'G' with the file of the

Court. For facility of reference this is being reproduced below :

. . . . . . .

The undermentioned representatives of the firms and HQ Northern Command (ST) as mentioned against each attended the arbitration held in

this office on 23rd Nov., 98:

(c) Lt. Col. A. K. SharmaRepresentative of HQ Northern Command (ST)

The representatives of M/s. Bharat Flour Mills and . . . . . . . . . . have submitted applications for granting them 7 days time to produce the

claim/complaint to this office/undersigned. Considering their applications and granting them 7 days time the next date to produce the claim by the

above two firms is fixed for 30th Nov., 98. Both the firms are hereby instructed to put up their claims to the undersigned at 10.30 hrs on 30th

Nov., 98 in this office. The officer, representative of HQ Northern Command (ST) has handed over the relevant documents. The claims of the

firms will be studied on producing by them and HQ Northern Command (ST) will be informed about the next date on which the officer will be

required.

Sd/

(Shiv Dayal)

Lt. Col.

Arbitrator

(Emphasis supplied)

What transpired on the next date i.e. 30th Nov., '98, is again reflected from letter dt. 3rd Dec. '98. This has been placed on the record as

Annexure H. This is also being reproduced below :

. . . . . . . . .

The Arbitrator proceedings for the above cases was held in the office of the undersigned on 30th Nov., '98. The reps. of M/s. Bharat Flour

Mills . . . . . . . . . attended the hearing.

M/s. Bharat Flour Mills have submitted their claim/complaint in detail for study and. . . . . . . .

Next date of hearing has been fixed as under :

(a) M/s. Bharat Flour Mills 19th Dec., '98 at 11.00 hrs for framing the issues.

. . . . . .

(4) HQ Northern Command (ST) will be informed about next date of hearing wherein their rep. will be required for arguments.

What transpired on 19th Dec., '98, is again apparent from the letter annexure p. 443 of the file of the arbitrator. This is also being reproduced

below :

. . . . . . .

The Arbitration proceedings were held in the office of the undersigned on 19th Dec., 98 for Bharat Flour Mills . . . . . . . Issues have been

framed for M/s. Bharat Flour Mills on 19th Dec., 98. . . . . . . Next date of hearing has been fixed on 28th Dec., 98 at 15.00 hrs for argument. HQ

Northern Command (ST) is requested to send their rep. on 20th Dec. '98 for argument and put up their claim if any. . . . . . .

Emphasis supplied

Thereafter the proceedings took place on 28th Dec., '98. As to what transpired on this date, is again apparent from letter dt. 29th Dec., '98,

written to Headquarter Northern Command (ST) with a copy to the respondent mills. This letter is also being reproducd below :

. . . . . . . .

The Arbitration proceedings were held in the office of the undersigned on 28th Dec., 98. The following attended :

(a) Mr. Lalit Aggarwal, representative of M/s. Bharat Flour Mills with their Advocate/Counsel.

(b) Lt. Col. A. K. Sharma, representative of HQ Northern Command (ST).

The issues for M/s. Bharat Flour Mills were discussed and argued in detail by both the parties before the Arbitrator. The award for M/s. Bharat

Floor Mills will be given in due course of time. . . . . .

Thereafter, the award was given on 12th Jan., '99. Another letter on which reliance is being placed by the petitioner is dated 4th Dec., '98. By

this the petitioner was called upon to give information regarding the rates of hiring. Reply to this was given. This is apparent from letter dt. 10th

Dec., '98 written by Major J. Bhakar on behalf of Union of India.

This is also being reproduced below :

. . . . . . .

Refer to your letter No. 5121/Arbtr/20/98/Q, dt. 4th Dec., 98.

Rates of CHT hired on R and E from 1st Apr., 98 to till dates as asked for vide your letter under ref is fwd herewith as per Appx. 'A' att as

desired please. . . . .

The contention put across by the learned counsel for the petitioner is that if the aforementioned communications are taken note of, then, it

becomes apparent that even though, the representative of the petitioner appeared and attended the proceedings before the arbitrator on 23rd

Nov., '98, the arbitrator categorically stated that the claims of the firms will be studied on producing the claims by them and Headquarter Northern

Command (ST) would be informed about the next date on which the officer will be required. It is accordingly urged that on 23rd Nov., 98, the

arbitrator in categoric terms stated that the presence of representative of Union of India is not required. Only the representative of respondent mill

was called upon to produce its claims. The respondent mill filed its claims. These are at page 71 of the file of the arbitrator.

There is nothing on the record to indicate that the claim submitted by the respondent mill was ever transmitted to the Union of India or the

copies of this were ever made available to the objector petitioner. The Union of India was not required to put in appearance on 30th Nov., 98, on

the other hand, the arbitrator sought for the rates vide its letter dated 4th Dec., '98. The requisite information was sent vide letter dt. 10th Dec.,

'98. Both these letters have been noticed above. Proceedings were held on 19th Dec., '98. regarding this, no information was given to the

petitioner. It was on this date, issues were framed. Information was given to the petitioner that the case is fixed for 28th Dec., '98 for arguments.

The arguments appears to have been heard and thereafter, as indicated above, the award was given on 12th Jan., '99. It is in these circumstances,

the learned counsel for the petitioner has contended that the objector Union of India was not given any proper opportunity to put across its point of

view. It is stated that the copy of the claim petition was not made available to it. The petitioner was specifically told that as and when the presence

of representative of Union of India is required, the information would be given to them. This non grant of opportunity and non association of Union

of India in the proceedings which took place on 23rd Nov., '98, 30th Nov., 98 and 19th Dec., '98, is said to be in breach of the known canons of

jurisprudence. It is also stated that this is in total breach of the rules of natural justice. It is this aspect of the matter which is sought to be the one to

be described as contrary to 'public policy' as prevalent in India. The public policy, as per Union of India is not to condemn a person without

providing him with the material which is going to be used against him. It is this salutary principle which was not kept in view by the arbitrator, and

therefore, the award, as per the Union of India is liable to be set aside.

The respondent Mill submitted that the record of the arbitrator should normally not be disbelieved and if the ratio of decision given in Bijendra

Nath Srivastav (Dead) through LRs. v. Mayank Srivastava, (1994) 6 SCC 117 : (AIR 1994 SC 2562), is taken note of, then the stand of Union

of India is liable to be rejected. The plea of the objector that the arbitrator did not record the minutes correctly, is again said to be a matter which

has not been substantiated. Reliance for this is being placed on a decision reported as Construction India v. Secretary, Works Department, Govt.

of Orissa, (1998) 2 SCC 89 : (AIR 1998 SC 717). So far as the breach of principles of natural justice is concerned, reliance is being placed on a

decision of the Supreme Court in Ganges Waterproof Works (P.) Ltd. v. Union of India, AIR 1999 SC 1102. It is urged that the best person to

depose as to what had actually transpired at the hearing and whether the same was a real hearing or an eyewash merely was the counsel who

actually made submissions on behalf of the petitioner before the arbitrator. As in the above case, the person had not put in appearance, the view

expressed was that a finding cannot be recorded that there was a breach of principles of natural justice. Had it been established that there was no

real hearing and that there was breach of principles of natural justice, then the situation might have been different. Another decision on which

reliance is being placed is reported as M/s. Kundal and Associates v. M/s. Konkan Hotels (P.) Ltd., (1999) 3 SCC 533 : (AIR 1999 SC 2010).

In the above case, the arbitrator had stated that he had carefully considered the claims and counter claims. He had gone through the oral and

documentary evidence and thereafter he had rendered his award. It was in these circumstances held that award could not be set aside. What is

sought to be urged is that the issue No. 1 i.e. 'whether the Union of India was incapacitated in pursuance of its case before the arbitrator on

account of lack of proper opportunity having been given by the Arbitrator', has necessarily to be answered against the petitioner. With regard to

the second issue 'whether the award given by the arbitrator is beyond the scope of reference, it is submitted that such a plea should have been

raised before the arbitrator and as it was not raised, therefore, the petitioner is estopped from raising this plea at this stage. Reliance for this is

being placed on the decisions of Supreme Court reported as Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khaitan, (1999) 5 SCC 651 :

(AIR 1999 SC 2102) and Himachal Pradesh State Electricity Board v. R. J. Shah and Company, (1999) 4 SCC 214.

There can be no dispute with the proposition that if the arbitral award is in conflict with the public policy of India, then it can always be set

aside. Neither the Contract Act of 1872, nor the Arbitration and Conciliation Act of 1966 (Central Act) or the Jammu and Kashmir Arbitration

and Conciliation Act of 1977, defines the expression ""public policy"" or ""opposed to public policy"". From the very nature of things, the expressions

'public policy', 'opposed to public policy' or 'contrary to public policy' are incapable of precise definition. The Rajasthan High Court in the case of

Associated Cement Companies Ltd. v. State of Rajasthan, AIR 1981 Raj 133, observed that 'the public policy does not remain static in any given

community. It may vary from generation to generation and even in the same generation. Public Policy would be almost useless if it were to remain

in fixed moulds for all time to come. The difficulty of discovering what public policy is at any given moment certainly does not absolve the Court

from the duty of doing so. In conducting an enquiry, the Court are not hidebound by precedent. The Court must look beyond the narrow field of

past precedents, though this still leaves open the question, in which direction they must cast their gaze.' The Calcutta High Court in the case of AIR

1957 Cal 336, Mofizuddin Khan Choudhury v. Habibuddin Sheikh, emphasised that the rules of public policy did not belong to a fixed or

customary law, they are capable on proper occasions of expansion and modification. In saying so, it referred to the decision in the case of Janson

v. Driefontein Consolidated Mines Ltd., (1902) AC 8 and Evanturel v. Evanturel, (1874) 6 PC 1. The quotation from this decision was quoted

and is being quoted again :

. . . . . . determination of what is contrary to so called policy of the law necessarily varies from time to time. Many transactions are upheld now by

our own Courts which a former generation would have avoided as being contrary to the supposed policy of the law. The rule remains, but its

application varies with the principles which for the time being guide public opinion.

A Full Bench of Madhya Pradesh High Court in the case of Gulabchand Gambhirmal v. Kudilal Govindram, AIR 1959 MP 151, had also an

occasion to consider as to what would be oppose to public policy. An agreement, the effect of which was to prevent the course of justice or which

would tend to abuse the legal process, was held to be contrary to public policy.

The Supreme Court of India in the case of Gherulal Parakh v. Mahadeodas Maiya, AIR 1959 SC 781, also considered this question. The

Supreme Court took note of the view expressed by a Division Bench of Bombay High Court in case of Shrinivas Das Lakshminarayan v. Ram

Chandra Ramrattandas, AIR 1920 Bom 251, wherein the view expressed by Lord Halsbury in the case of Janson v. Driefontein Consolidated

Mines Ltd., 1902 AC 484, was quoted. Lord Halsbury had stated that 'no Court can invent a new head of public policy."" The High Court of

Bombay also quoted dictum of Lord Davey in the same case that ""public policy is always an unsafe and treacherous ground for legal decision."" The

reference was also made to another decision of Bombay High Court in Bhagwant Genuji v. Gangabisan Ramgopal, AIR 1940 Bom 369 and a

decision of Orissa High Court in the case of Gopi Tihadi v. Gokhej Panda, AIR 1954 Orissa 17. It was then observed (at p. 795 AIR SC):

The doctrine of public policy may be submarised thus : Public policy or the policy of the law is an illusive concept, it has been described as

untrustworthy guide"", ""variable quality"", ""uncertain one"", ""unruly horse"", etc., the primary duty of a Court of Law is to enforce a promise which the

parties have made and to uphold the sanctity of contracts which form the basis of society, but in certain cases, the Court may relieve them of their

duty on a rule founded on what is called the public policy, for want of better words Lord Atkin describes that somthing done contrary to public

policy is a harmful thing, but the doctrine is extended not only to harmful cases but also to harmful tendencies, this doctrine of public policy is only a

branch of common law and, just like any other branch of common law, it is governed by precedents, the principles have been crystallized under

different heads and though it is permissible for Courts to expound and apply them to different situations, it should only be invoked in clear and

incontestable cases of harm to the public, though the heads are not closed and though theoretically it may be permissible to evolve a new head

under exceptional circumstances of a changing world, it is advisable in the interest of stability of society not to make any attempt to discover new

heads in these days.

The Andhra Pradesh High Court in the case reported as AIR 1964 Andh Pra 465, Kolaparti Venkatareddi v. Kolaparti Peda Venkatachalam,

observed that ""whatever tends to injustice of operation, restraint of liberty, commerce and natural or legal rights, whatever tends to the obstruction

of justice or to the violation of a statute and whatever is against the good morals when made the object of a contract, is against public policy and

therefore, void and not susceptiber to enforcement.

From the perusal of the judicial pronouncements quoted above and also from the decisions on which reliance has been placed by the petitioner

on Ganges Waterproof (P.) Ltd. (supra), it becomes apparent that violation of principles of natural justice and nongrant of proper opportunity of

hearing would definitely be contrary to the Public Policy as prevalent in India. As observed by Darling, J. in British Oil and Cake Mills Ltd. v.

Horace Battin and Co. Ltd., (1922) 13 LT L Rep 443, in each case, the arbitrator must balance the legitimate interests of each party against the

general purpose of arbitration, which is to provide a speedy method of resolving disputes. The arbitrator's duty goes no further than to ensure that

a party has an opportunity to attend the hearing if he wishes. If despite notice i.e. a proper notice, a party chooses not to attend, then the arbitral

proceedings may be continued in the absence of such party. Since each party has a right to remain present throughout the hearing, the arbitrator is

not exclude either party even from a portion of hearing without the consent of such party. However, the arbitrator should play safe with patience

and dignity and give proper opportunity to both parties to present their respective cases and evidence in support thereof before it. Each party must

be given an opportunity to address arguments on the facts and on the law. However, the arbitrator is not expected to do more than what is

reasonable. Within certain limits, the arbitrator should receive all evidence tendered by the parties. The shutting out of evidence which should have

been admitted may result in the arbitral award being set aside. In Faure, Fairdough Ltd. v. Premier Oil and Cake Mills Ltd., (1968) 1 Llyod's Rep

237, where there were pleadings which definded the scope of the evidence which was to be adduced, it was held that if an issue had ceased to be

in dispute, the arbitrator should not allow time to be wasted by receiving evidence in relation thereto. No doubt, the obligation to receive evidence

tendered by the parties involve the arbitrator in a duty to consider the evidence so received, the arbitrator is not obliged to accept it as accurate.

See Lewis Emanuel and Son Ltd. v. Sammat, (1959) 2 Lloyd's Rep 629, Faghirzadeh v. Rudolf Wolff (SA) (Pty) Ltd., (1977) 1 Llod's Rep 630,

Fox v. PG Wellfair Ltd., (1981) 2 Lloyd's Rep 514. Arriving at an opposite conclusion, even if mistaken, from one indicated by the evidence is not

a matter which vitiates the arbitral award. Each party must have a reasonable opportunity to challenge the case put forward by his opponent. See

Peter Cassidy Seed v. Osuustukkukanppa, (1954) 2 Lloyd's Rep 586. The arbitrator is neither to hear evidence nor arguments of one party in the

absence of other party unless despite opportunity, the other party choose to remain absent. So also, the arbitrator is not to hear evidence in the

absence of both the parties unless both parties choose to remain absent despite proper notice. From the decisions quoted above, the minimum

requirements of a proper hearing are as follows :

(i) Each party must have notice that the hearing is to take place and of the date, time and place for holding such hearing;

(ii) Each party must have a reasonable opportunity to be present at the hearing along with his witnesses and legal advisers, if any;

(iii) Each party must have the opportunity to be present throughout the hearing;

(iv) Each party must have a reasonable opportunity to present statements, documents, evidence and arguments in support of his own case;

(v) Each party must have a reasonable opportunity to crossexamine his opponent's witnesses and reply to the arguments advanced in support of

opponent's case.

Reverting to the facts of this case, the parties did appear before the arbitrator on 23rd Nov., '98 on that date, the Union of India's

representative was clearly informed that his presence is not necessary on the next date of hearing and that an information regarding this would be

given to the Union of India. The respondent mill was instructed to appear on 30th Nov., '98. It was categorically mentioned in the letter that the

Headquarter Northern Command (ST) would be informed about the next date on which the representative of Union of India would be required.

The last lines of the letter addressed to Headquarter Northern Command (ST) makes mention of the fact that the arbitrator was of the view that

presence of representative of petitioner is not necessary on 30th Nov., '98. On this date, the respondent mill submitted its claim. The next date was

fixed as 19th Dec., '98. Information was given to Headquarter Northern Command (ST) that the next date of hearing when their representative will

be required for arguments would be given. In the meanwhile, as is apparent from the letters already noticed, the respondent mill submitted its claim

on 30th Nov., '98. The only information which was given to the Union of India was that it should indicate the rates. A letter was addressed to it on

4th Dec., '98. This letter has already been noticed above. A perusal of this letter would show that no information was given to the petitioner that

details of claim have been furnished by the respondent mill. Again on 19th Dec., 98 issues were framed. The presence of representative of

petitioner was not thought necessary. It was on 22nd Dec., '98, the Union of India was informed that the arguments are going to be heard on 28th

Dec., 98. It is for the above date when the Headquarter Northern Command (ST) was informed for the first time that the presence of its

representative is required for 28th Dec., 98 for arguments and put up their claims, if any. The decisions noticed above, do indicate that it was

incumbent upon the arbitrator to associate both the parties on all hearings. The arbitrator is not to exclude either party even from a portion of

hearing. The arbitrator is supposed to receive all evidence in presence of both the parties. In this case, the claims of the respondent mill were

received in the absence of Union of India and the copy of the same was not made available to the representative of Union of India. At least this is

not apparent from the file of arbitrator. This is again not apparent from the perusal of correspondence noticed above. Even when the issues were

framed, the representative of Union of India was not present because the arbitrator did not choose to cause his presence. It was only at the last

stage when the arguments were to be heard, the presence of representative of Union of India was thought essential. This is apparent from the letter

which was addressed to Union of India. This, in my opinion, has led to nonobservance of the rules of natural justice. This definitely is against the

public policy of India. Public policy is, no doubt, an unruly horse, but it is ultimately to be kept on the side of justice. In this effort, I am unable to

hold that the arbitral award is in line with the public policy as prevalent in India. The issue No. 1 is accordingly decided in favour of Union of India.

In this situation, the other question 'as to whether the arbitrator has gone beyond the scope of reference', is not being answered. This objection

petition is allowed and the award passed by the arbitrator dt. 12th Jan., '99 is set aside. The arbitrator shall make a fresh award after giving proper

opportunity to both the sides.

Disposed of as such.