- 1 - 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 - 2 - 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. -- - 3 - 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. -- - 4 - 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 - 5 - 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 - 6 - 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 - 7 - 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 - 8 - 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 - 9 - 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 - 10 - 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 - 11 - 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 - 12 - 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 )