IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arbitration Appeal No. 6 of 2002 Date of decision: 07.01.2009 _______________________________________________________ Union of India and another ..Appellants Versus H.K.Sareen ..Respondent Coram: The Hon’ble Mr. Justice R.B. Misra, J. The Hon’ble Mr. Justice Surjit Singh, J. Whether approved for reporting ? For the appellants: Mr. Sandeep Sharma, Assistant Solicitor General of India. For the respondent: Mr. Suneet Goel, Advocate. _______________________________________________________ Per Surjit Singh, J. (Oral) Appellants have filed the present appeal against the judgment of learned District Judge, Shimla, whereby application under Section 34 of the Arbitration and Conciliation Act, 1996, filed by respondent H.K.Sareen for setting aside award dated 23rd March, 2001, given by Shri K.Kaul, the sole Arbitrator, has been allowed and the award has been set aside. 2. Actual background, relevant for disposal of the appeal, is as follows. Respondent H.K.Sareen had been awarded some work by the appellants in the year 1995. Respondent not only 2 did not complete the work within the stipulated period, but he even did not commence it. So the contract was rescinded. Respondent felt aggrieved by the act of the appellants in rescinding the contract and, therefore, he invoked the clause of the contract, pertaining to arbitration. Matter was referred to Shri K. Kaul, an officer in the Ministry of communication (Telecom) for arbitration. The Arbitrator conducted the proceedings on 11.5.2000 at Shimla. During lunch break, respondent allegedly offered the sole Arbitrator as also the representatives of the appellants to accompany him for lunch. Offer was declined by the Arbitrator. However, in the evening, the Arbitrator was allegedly seen taking coffee with the representatives of the appellants in Hotel Ashiana on the Ridge and while taking coffee, they discussed merits of the case. On the very next day, i.e. 12.5.2000, respondent made an application to the Arbitrator that he may recuse himself from the job of adjudicating the matter as he apprehended that justice may not be done to him. The application was dismissed by the Arbitrator with the reasoning that the application was without foundation. Thereafter award was given by the Arbitrator. It was held that contract had rightly been rescinded and the security money deposited by the respondent had also rightly been forfeited. The Arbitrator also awarded a sum of 3 Rs. 3,490/- on account of cost of the material issued to him, which he had not accounted for. 3. Respondent made the aforesaid allegation that the Arbitrator enjoyed coffee in the company of appellants’ representatives and discussed merits of the case in the application under Section 34 of the Arbitration and Conciliation Act. Appellants were afforded an opportunity to file reply to that application. In their reply, they stated that on the evening of 11.5.2000 they saw the Arbitrator, through the window panes of the restaurant, taking coffee and that they went inside the restaurant to wish him and when they went inside, the Arbitrator offered them coffee and so, they sat beside him to take a cup of coffee. 4. Learned District Judge has set aside the award holding that the same is against public policy of India as it is procured by fraud and corruption. The learned District Judge has observed that the conduct of the Arbitrator in sitting in the company of the respondents, when seen in the light of self contradictory stand taken by the respondent in the reply to the application and the statement of one of the appellants on oath, suggests that award was contrary to the public policy of India. 5. We have heard the learned counsel for the parties and gone through the record. 4 6. It was not denied before the learned District Judge that the Arbitrator had been seen enjoying coffee in the company of the representatives of appellants in the evening of 11.5.2000. Admittedly the Arbitrator is an officer of the same Ministry, to which the appellants belong. Therefore, the mere fact of the Arbitrator enjoying coffee in the company of the officers of the appellants, who were pursuing the arbitration matter on behalf of the appellants, was not that serious a matter so as to vitiate the award on the ground of public policy of India. 7. However, in the present case, there was more than just enjoying a cup of coffee by the Arbitrator in the company of the officers of the appellants. The appellants, in their reply to the application under Section 34 of the Arbitration and Conciliation Act, filed by the respondent H.K.Sareen, stated that the officers of the respondent saw the Arbitrator sitting all alone in the restaurant, through the window panes, and so they went inside just to wish him, but the latter invited them to join him for a cup of coffee and so they sat beside him. However, Om Parkash, Executive Engineer, who was one of the representatives of the appellants, was seen enjoying coffee in the company of the Arbitrator, while in the witness box before the learned District Judge, stated that he and one more officer of appellant No. 1 saw the Arbitrator strolling on the Ridge and they took him to the restaurant and offered him coffee. This statement is in total 5 contradiction with the stand taken in the reply to the application, filed by respondent H.K.Sareen. The contradiction creates a very strong suspicion about the conduct of the Arbitrator. If it were a simple case of the Arbitrator and the representatives of the appellants sitting in a restaurant and enjoying coffee, on account of their being colleagues or officers from the same Ministry, the appellants, in their reply, should have stated the truth which Om Parkash, Executive Engineer, testified before the learned District Judge, instead of giving a false justification about the manner and the circumstances under which they happened to be in the company of the Arbitrator and taking coffee alongwith him. As a matter of fact, the Arbitrator himself should have recorded these facts, if it were a simple case of enjoying a cup of coffee in the company of his colleagues, in his order of rejecting the application moved by the respondent on 12.5.2000. But the reasoning given by him was that the application was without foundation, meaning thereby that what was stated by the respondent in the application was incorrect. 7. We may not agree with the observation of the learned District Judge that the award is procured by fraud or corruption, but we do agree with his finding that the award is against the public policy of India. One of the basic principles of our system of administration of justice is that justice should not only be 6 done, but it should also seem to have been done. Where a person entrusted the job of adjudicating a dispute is found in the company of one of the parties and taking tea or coffee or meals with him and upon having spotted in that situation by the other party and objection having been raised about such conduct, self contradictory explanations are put forward, that creates a reasonable apprehension in the mind of such other party that he may not get justice. In such a situation, the doctrine that justice should not only be done, but should also seem to have been done, would be contravened. 8. In view of the above stated position, we see no merit in the present appeal. The same is, therefore, dismissed. ( R. B. Misra ), J. January 7, 2009(K) ( Surjit Singh ), J.