:1: IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION CIVIL APPELLATE JURISDICTION ARBITRATION APPEAL NO. 10 OF 2008 ARBITRATION APPEAL NO. 10 OF 2008 ARBITRATION APPEAL NO. 10 OF 2008 WITH WITH WITH CIVIL APPLICATION NO. 11 OF 2008 CIVIL APPLICATION NO. 11 OF 2008 CIVIL APPLICATION NO. 11 OF 2008 Mohan Govind Chitale ] Age 60 years, Occ: Business ] Residing At & Post Chiplun ] Taluka Chiplun, Dist : Raigad ]..Appellant versus Nirmala Anand Deodhar ] Age 60 years, Occ: Household ] Residing At & Post Chiplun ] Taluka Chiplun, Dist: Raigad ]..Respondent Mr. Saurabh M. Railkar for the Appellant. Mr. Sanskar Marathe i/b. Devan Dwarkadas & Partners for the Respondent. CORAM : S. A. BOBDE, J. CORAM : S. A. BOBDE, J. CORAM : S. A. BOBDE, J. DATE : 5TH DECEMBER, 2008. DATE : 5TH DECEMBER, 2008. DATE : 5TH DECEMBER, 2008. ORAL JUDGMENT : ORAL JUDGMENT : ORAL JUDGMENT : . Heard learned counsel for the parties. 2 This is an Appeal under Section 37 of the Arbitration and Conciliation Act, 1996, against the Order dated 6.12.2007 passed by the District Judge, Ratnagiri. The learned Judge has rejected the Appellant’s application for setting aside the Arbitration Award dated 2.5.2003. 3. In Chiplun there is a Hotel by name Manisha :2: Lunch Home. Under an Agreement dated 6.7.1992, the respondent Smt. Nirmala Anand Deodhar who owns it, granted a Licence to the appellant Mohan Govind Chitale to run the business of Manisha Lunch Home for a period of ten years from 1.8.1992 to 31.7.2002. After the expiry of this period, the appellant did not hand over possession. Hence a dispute arose between the parties. The respondent requested the Sole Arbitrator Mr. Shrikant Pandurang Vaidya, already appointed under the agreement to adjudicate this matter. The Arbitrator called upon both the parties to remain present for the first meeting of arbitration on 25.9.2002. 4. At the first meeting on 25.9.2002 the appellant objected to the appointment of Mr. Shrikant Pandurang Vaidya on the ground of bias. The objection was the Arbitrator and his father Pandurang Vaidya were Tax Consultants for the respondent Smt. Nirmala Anand Deodhar and appellant’s father Pandurang Vaidya had purchased a plot of land from the respondent and constructed a building on it. The appellant further pointed out the very close relationship between the Arbitrator’s family and the respondent. The respondent replied and submitted that it was the appellant who had :3: suggested the name of the Arbitrator at the time of the agreement in 1992. The Arbitrator considered the objection and rejected it with the observation in the Award that no event has occurred during the period of agreement that could be considered to be an impediment for the Arbitrator to work in impartial and unbiased manner. On merits, the Arbitrator directed the appellant to hand over possession of the business to the respondent. 5. The appellant applied to the District Judge, Ratnagiri, under Section 34 of the Arbitration and Conciliation Act, 1996, for having the Award set aside. In support of his objection that the Arbitrator was biased, because his father had purchased property from the respondent, the appellant produced copy of a Gift Deed dated 11.5.1999 whereby the respondent had gifted property to the father of the Arbitrator. There is no dispute about the existence of the Gift Deed. The learned counsel for the appellant also accepts that there is no sale deed of any property to the Arbitrator by the respondent as originally alleged. This Gift Deed was produced by the appellant as evidence of the possible bias of the Arbitrator in favour of the respondent. The learned District :4: Judge ignored the existence of the Gift Deed and observed that the appellant has only made arbitrary and vague statement regarding the impartiality of the Arbitrator without producing any evidence which shows transactions of immovable property between the respondent and the Arbitrator that there was no substance in the objection regarding the impartiality of the Arbitrator. With these observations the contentions of the appellant were rejected. 6. In rejecting the contentions, the learned District Judge completely lost sight of Section 12 of the Arbitration and Conciliation Act, 1996, which reads as follows :- "12. Grounds for challenge.- (1) "12. Grounds for challenge.- (1) "12. Grounds for challenge.- (1) When a When a When a person is approached in connection with his person is approached in connection with his person is approached in connection with his possible appointment as an arbitrator, he possible appointment as an arbitrator, he possible appointment as an arbitrator, he shall disclose in writing any circumstances shall disclose in writing any circumstances shall disclose in writing any circumstances likely to give rise to justifiable doubts as likely to give rise to justifiable doubts as likely to give rise to justifiable doubts as to his independence or impartiality. to his independence or impartiality. to his independence or impartiality. (2) An arbitrator, from the time of his (2) An arbitrator, from the time of his (2) An arbitrator, from the time of his appointment and throughout the arbitral appointment and throughout the arbitral appointment and throughout the arbitral proceedings, shall, without delay, disclose proceedings, shall, without delay, disclose proceedings, shall, without delay, disclose to the parties in writing any circumstances to the parties in writing any circumstances to the parties in writing any circumstances referred to in sub-section (1) unless they referred to in sub-section (1) unless they referred to in sub-section (1) unless they have already been informed of them by him. have already been informed of them by him. have already been informed of them by him. (3) An arbitrator may be challenged only if- (3) An arbitrator may be challenged only if- (3) An arbitrator may be challenged only if- (a) circumstances exist that give rise to (a) circumstances exist that give rise to (a) circumstances exist that give rise to justifiable doubts as to his independence or justifiable doubts as to his independence or justifiable doubts as to his independence or impartiality, or impartiality, or impartiality, or :5: (b) he does not possess the qualifications (b) he does not possess the qualifications (b) he does not possess the qualifications agreed to by the parties. agreed to by the parties. agreed to by the parties. (4) A party may challenge an arbitrator (4) A party may challenge an arbitrator (4) A party may challenge an arbitrator appointed by him, or in whose appointment he appointed by him, or in whose appointment he appointed by him, or in whose appointment he has participated, only for reasons of which has participated, only for reasons of which has participated, only for reasons of which he becomes aware after the appointment has he becomes aware after the appointment has he becomes aware after the appointment has been made." been made." been made." This Section, which is an inviolable safeguard for maintaining the purity of arbitration clearly requires an arbitrator to disclose any circumstances likely to give rise to doubts as to his independence or impartiality. Now, in this case I have no doubt that a gift of property to the Arbitrator’s father from a party to the arbitration, particularly when the father is residing with the Arbitrator, is a circumstance which is likely to give rise to a justifiable doubt as to the Arbitrator’s independence and impartiality. The question that is raised is : whether the Arbitrator was bound to disclose the circumstance even though it arose after his appointment? It is clear that the Gift Deed dated 11.5.1999, was not in existence when the Arbitrator was approached in 1992 for being appointed as such, and therefore it cannot be said that he ought to have disclosed in writing the circumstance of his father having received a gift of property from the respondent when he was approached in connection with his possible appointment as an :6: Arbitrator. However the Arbitrator ought to have done so after the circumstance arose. 7. This was clearly required by sub section (2) of section 12 which requires the Arbitrator to disclose to the parties in writing any circumstance likely to give rise to justifiable doubts as to his independence or impartiality "from the time of his appointment and throughout the arbitral proceedings". 8. In the present case an objection was indeed raised by the appellant on the ground that the Arbitrator’s father had purchased a plot of land from the respondent and constructed a building on it. In the first meeting on 25.9.2002 apparently the objection was inaccurate in the sense that the father had not purchased a plot of land but had received the gift on 11.5.1999. The Arbitrator could not have rejected the objection in the following words : "No event has occurred during the period of "No event has occurred during the period of "No event has occurred during the period of agreement that will be an impediment for the agreement that will be an impediment for the agreement that will be an impediment for the Arbitrator to work in an impartial and Arbitrator to work in an impartial and Arbitrator to work in an impartial and unbiased manner. Therefore, objections are unbiased manner. Therefore, objections are unbiased manner. Therefore, objections are rejected and the Arbitration proceedings are rejected and the Arbitration proceedings are rejected and the Arbitration proceedings are continued." continued." continued." :7: This gift was clearly a circumstance likely to give rise to justifiable doubt as to his independence or impartiality within the meaning of Section 12 and the Arbitrator was bound to disclose it. 9. Learned counsel for the respondent argued that the decision of the Arbitrator contained in the Award is a correct decision in accordance with law and the agreement between the parties and cannot be said to be vitiated by the so-called bias. This agreement has no merit in view of the settled position in law. . In Union of India vs. Tolani Bulk Carriers Union of India vs. Tolani Bulk Carriers Union of India vs. Tolani Bulk Carriers Limited [2002 (20 Bom.C.R. 256] Limited [2002 (20 Bom.C.R. 256] Limited [2002 (20 Bom.C.R. 256], Justice Deshmukh observed as follows: "....Section 12 casts a solemn duty on an "....Section 12 casts a solemn duty on an "....Section 12 casts a solemn duty on an arbitrator, who is put in position of a arbitrator, who is put in position of a arbitrator, who is put in position of a Judge to disclose to the parties his Judge to disclose to the parties his Judge to disclose to the parties his interest which is likely to give rise to a interest which is likely to give rise to a interest which is likely to give rise to a reasonable doubt about his independence in reasonable doubt about his independence in reasonable doubt about his independence in the mind of the parties. So far as the the mind of the parties. So far as the the mind of the parties. So far as the question of justifiable doubts as to question of justifiable doubts as to question of justifiable doubts as to independence or impartiality is concerned independence or impartiality is concerned independence or impartiality is concerned the basis is whether the party to the the basis is whether the party to the the basis is whether the party to the dispute would have reasonable apprehension dispute would have reasonable apprehension dispute would have reasonable apprehension in his mind about the independence of the in his mind about the independence of the in his mind about the independence of the arbitrator and not whether the arbitrator arbitrator and not whether the arbitrator arbitrator and not whether the arbitrator thinks that he is capable of being thinks that he is capable of being thinks that he is capable of being impartial. The following observations from impartial. The following observations from impartial. The following observations from :8: para 17 of the judgment of the Supreme Court para 17 of the judgment of the Supreme Court para 17 of the judgment of the Supreme Court in the case of Ranjit Thakur in my opinion in the case of Ranjit Thakur in my opinion in the case of Ranjit Thakur in my opinion are pertinent. The said paragraph 17 reads are pertinent. The said paragraph 17 reads are pertinent. The said paragraph 17 reads thus: thus: thus: 17. As to the tests of the likelihood of 17. As to the tests of the likelihood of 17. As to the tests of the likelihood of bias what is relevant is the reasonableness bias what is relevant is the reasonableness bias what is relevant is the reasonableness of the apprehension in that regard in the of the apprehension in that regard in the of the apprehension in that regard in the mind of the party. The proper approach for mind of the party. The proper approach for mind of the party. The proper approach for the Judge is not to look at his own mind and the Judge is not to look at his own mind and the Judge is not to look at his own mind and ask himself, however, honestly. Am I ask himself, however, honestly. Am I ask himself, however, honestly. Am I biased?; but to look at the mind of the biased?; but to look at the mind of the biased?; but to look at the mind of the party before him. party before him. party before him. . In such a situation, in my opinion, . In such a situation, in my opinion, . In such a situation, in my opinion, the Court has to look at the impression, the Court has to look at the impression, the Court has to look at the impression, which would be given to the other people. which would be given to the other people. which would be given to the other people. In the present case the son of arbitrator In the present case the son of arbitrator In the present case the son of arbitrator Shri Patel was a member of the firm of Shri Patel was a member of the firm of Shri Patel was a member of the firm of Advocates which represented the respondents Advocates which represented the respondents Advocates which represented the respondents before him. In my opinion, it was the duty before him. In my opinion, it was the duty before him. In my opinion, it was the duty of Shri Patel, the arbitrator, to disclose of Shri Patel, the arbitrator, to disclose of Shri Patel, the arbitrator, to disclose to the parties the said fact in writing as to the parties the said fact in writing as to the parties the said fact in writing as contemplated by the said section." contemplated by the said section." contemplated by the said section." Having regard to the above position in law, I am of view that the circumstance that there was a gift of immovable property in favour of the Arbitrator’s father by the respondent herself was a circumstance which was likely to give rise to a justifiable doubt as to the independence or impartiality of the Arbitrator. The Arbitrator was therefore bound under Section 12 of the Arbitration and Conciliation Act, 1996, to disclose the circumstance as and when it occurred and in any case not to proceed with the arbitration when an objection was taken to that effect on 25.9.2002. Not having done so, the Award must be held to be vitiated as being in violation of :9: Section 12 of the Arbitration and Conciliation Act. The order of the learned District Judge is therefore set aside. Having regard to the age of the respondent, the parties are directed to take steps for appointment of an Arbitrator under the Agreement dated 6.7.1992 within a period of twelve weeks from today. 10. Appeal is allowed and disposed of. In view of this, Civil Application No. 11 of 2008, does not survive, the same also stands disposed of. (S. A. BOBDE, J.) (S. A. BOBDE, J.) (S. A. BOBDE, J.)