Case: Saurabh Kalani Vs. Tata Finance Limited &amp; Another

Respondent No.1 had granted financial facility to a company by name Gilt Pack Ltd. (GPL). In so far as the Appellant is concerned, it is common ground that he had furnished a personal guarantee to secure the outstanding dues of the Respondent No.1. Respondent No.1 invoked the personal guarantee which was furnished by the Appellant upon default of the company in paying the outstanding dues payable under four Bills of Exchange in the total amount of Rs. 50 lacs, which were discounted by Respondent No.1. On 16th December, 1999, in pursuance of the provisions of arbitration contained in clause 23 of the Deed of Guarantee Respondent No. 1 referred the dispute which had arisen between the parties to the sole arbitration of Mr. Ashwin Ankhad, a practising advocate under the provisions of ArbitrationConciliation Act, 1996. In February, 2000, two applications came to be filed before the arbitrator. The first questioning the jurisdiction of the arbitrator under Section 16 of the Act and the second, under Section 12 on the ground that there was a justifiable doubt as regards the independence and impartiality of the arbitrator. In so far as the challenge to the jurisdiction of the arbitrator under Section 16 was concerned, it was contended that the company to which the Respondent No.1 granted financial facility has been declared sick industrial company under the provisions of Sick Industrial Companies (Special Provisions) Act, 1985 (SICA for short). The contention was that under Section 22 of the SICA arbitral proceedings were not maintainable and they could not be proceeded with. In so far as the second challenge under Section 12 of the Act was concerned, the independence and impartiality of the arbitrator was sought to be questioned alleging that the arbitrator appointed by the Respondent No.1 was in fact an advocate engaged by the Respondent No.1 and/or its sister concern in variouswas further averred that the Appellant was reliably informed that there exists very close relation between the arbitrator and the Respondent No.1. The arbitrator dealt with both the applications and by an order dated 28th April, 2000 rejected the challenge to his jurisdiction and alleged bias. The arbitrator in his order stated that he has not acted as Advocate for Respondent No.1 in any matter. The arbitrator further stated that he has acted as an Advocate in respect of only one company viz. Tata International Ltd. which has no connection with the Respondent No.1. The arbitrator recorded that he has only acted as an arbitrator in few matters of the Tata Finance Ltd. and that he had never acted as Advocate for the said company. The objection that he would not be independent and impartial was consequentially rejected. In so far as the challenge to his jurisdiction was concerned, the arbitrator held that Section 22 of the SICA is attracted to a suit for recovery of money and for enforcement of any security against the industrial company or any company in respect of any loan or advance granted to the industrial company. In the present case, the arbitrator held that there was no suit, therefore, bar under Section 22 was not attracted. The final award of the arbitrator was made on 25th August, 2001, by which the arbitrator has come to the conclusion that the Appellant was liable to pay to Respondent No.1 the principal amount of Rs.50,00,000/covered by the four Bills of Exchange, which have been discounted by the Respondent No.1 and overdue discounting charge in the amount of Rs.51,60,821.92 from the due date of the bill untilAccordingly claim was allowed in the total amount of Rs.1,01,60,821.92. The Appellant has been directed to pay interest at the rate of 18% p.a. on the principal amount of Rs.50,00,000/from 15th January, 2000 till payment or realisation. The award was challenged on various grounds, but only two grounds have been pressed before this Court. The first ground was that the arbitrator was disqualified from continuing to act as such, since within the meaning of(1) of Section 12 and(3) thereof, there were circumstances which existed to give rise to justifiable doubt as to his independence or impartiality. The second ground was that in view of the provisions of Section 22 of SICA the arbitral proceedings were not maintainable. The learned single Judge rejected both the grounds and dismissed the Petition.

Court's reasoning:
8.In the light of the decided cases, it is abundantly clear that in considering the question as to whether a Judge or an arbitrator, is liable to be disqualified in the fact of a given case on the ground of bias the test to be applied is whether the circumstances are such as would lead a fair minded and informed observer to conclude that there was a real possibility that the Judge or Tribunal was biased. In the application under Section 12, only allegations that are made against the arbitrator were that the arbitrator was an advocate engaged by the Respondent No.1 or his sister concern in various matters. Then, it is also alleged that the arbitrator has very close relations with the Claimants. The arbitrator has categorically stated that save and except acting as an arbitrator for few matters of Tata Finance Ltd. i.e. Respondent No.1. he had never acted as advocate for the Respondent No.1, in any matter or proceedings. During the course of hearing further affidavit was filed on behalf of the Appellant stating that upon inquiries he has been reliably informed that the arbitrator was originally practising as a Company Secretary to the Company known as Tata International Ltd. This allegation was not made at any stage before the arbitrator. It appears that the learned single Judge called upon the learned Counsel for the Respondent No.1 to take specific instructions and inform the Court whether as a matter of fact the arbitrator had served as a company Secretary of Tata International Ltd. The learned Counsel appearing for the arbitrator has stated before the Court that between the years 1981 to 1987 the arbitrator was the Head of the Legal Department of Tata International Ltd. However, the arbitrator ceased to be in the service of Tata International Ltd. in 1987 and thereafter he has been practising as an advocate before this Court. It is an admitted position that Tata International Ltd. is an independent entity and duly registered under the Companies Act, 1986. Before us the ground that the arbitrator was biased as he had appeared in some of the Tata Group of companies was not even pressed. It is, however, urged that the arbitrator failed in his duty in disclosing the crucial fact that he was in the employment of the Tata Group of companies during the period from 1981 to 1987. The question is whether any right thinking person knowing of the connection of the arbitrator with the Tata International Ltd. would feel that there was any real possibility of bias in his case. The fact that the Arbitrator ceased from the employment of the Tata International Ltd. nearly 15 years back would make an allegation of bias clearly untenable. In Locabails case the Court has observed that "The greater the passage of time between the event relied on a showing a danger of bias and the case in which the objection is raised, the weaker (other things being equal) the objection willlearned single Judge has summed up the position in followingam of the view in the present case, there were no justifiable doubts as regards the independence and impartiality of the Arbitrator. The apprehension of bias does not arise out of any alleged connection or interest of the Arbitrator in the affairs of the Claimant. The Arbitrator has had no such affiliation, contact or interest with the Claimant, least of all in the dispute with the Petitioner. The employment of the Arbitrator with Tata International Limited ended over twelve years prior to the reference. Employment in the distant past with another public company, albeit in the same group, was not such as would warrant the invocation of the circumstances spelt out in Section 12. The Arbitrator is a member of the Bar for over fifteen years now since he ceased to be in the service of Tata International Limited. A professional in the legal profession, who discharges the role of an Arbitrator is expected to bring to his task a sense of objectivity and a high degree of dispassionateness. No facts have been placed before the Court in these proceedings which would lead it to believe that this expectation has beenare entirely in agreement with the conclusion of the learned single Judge that no right thinking person knowing of the connection of the arbitrator, would feel that there was any possibility of bias in this case.In our opinion, the issue virtually stands concluded by the recent pronouncement of the Supreme Court in Kailash Nath Agarwalors. Vs. Pradeshiya IndustrialInvestment Corporation of U.P. Ltd.Anr., 2003 (2) SCALE 169. The question which fell for consideration of the Court was whether the word "suit" in Section 22(1) should be understood to include any proceedings including the proceedings under U.P. Public Demands (Recovery of Dues) Act, 1972. The Court noted the distinction between the expression "proceeding" and "suit" in paragraph 20 of theThere is an apparent distinction between the expression "proceeding" and "suit" used in Section 22(1). While it is true that two different words may be used in the same statute to convey the same meaning, that is the exception rather than the rule. The general rule is that when two different words are used by the same statute, prima facie one has to construe these different words as carrying different meanings. In Kanhaiyalal Vishnidas Gidwani (supra) this Court found that words subscribed and signed had been used in the Representation of People Act, 1951 interchangeably and, therefore, in that context the Court came to the conclusion that when the Legislature used the word subscribed it did not intend anything more than signing. The words suit and proceeding have not been used interchangeably in SICA. Therefore. the reasons which persuaded this Court to give the same meaning to two different words in a statute cannot be applied here." (emphasisIn the light of the decision in Kailash Nath Agarwal (supra), it would be totally impermissible to hold that even proceedings under the ArbitrationConciliation Act, 1996 would be covered by the provisions of SICA., however, placed heavy reliance on the decision of the Supreme Court in Patel Roadways (supra).That was the case where the Court was considering the question whether the well established principles of law incorporated in Section 9 of the Carriers Act are applicable in a proceedings before the Consumer Disputes Redressal Agency, particularly the National Commission. The Court noted from the conspectus of views taken in the decisions of different High Courts that the liability of a common carrier under the carriers Act is that of an insurer, and this position is further made clear by provisions of Section 9 in which it is specifically laid down that in a case of claim of damage for loss to or deterioration of goods entrusted to a carrier it is not necessary for the Plaintiff to establish negligence. The Court after noticing the definition of "suit" in P. Ramanatha Aiyars Law lexicon 1997 Edition observed in paragraph 49 asFrom the above it is clear that the term "suit" is a generic term taking within its sweep all proceedings initiated by a party for realisation of a right vested in him under law. The meaning of the term "suit" also depends on the context of its user which in turn. amongst other things, depends on the Act or the Rule in which it is used. No doubt the proceedings before a National Commission is ordinarily a summary proceeding and in an appropriate case where the Commission feels that the issues raised by the parties are too contentious to be decided in a summary proceeding it may refer the parties to a civil Court. That does not mean that the proceeding before the Commission is to be decided ignoring the express statutory provisions of the Carriers Act (S.9) in a proceedings in which a claim is made against a common carrier as defined in the said Act. Accepting such a contention would defeat the object and purpose for which the Consumer Protection Act was enacted. A proceeding before the National Commission, in our considered view, comes within the term "suit" Accordingly we reject the contention raised by Shri Ashok Desai in this regard." (emphasis supplied)The above observations of the Supreme Court make it clear that the meaning of the term "suit" depends on the context of its user which in turn amongst other things, depends on the Act or the Rule in which it is used. In the context of the provisions of Section 22 of SICA and also keeping in mind the intention of the legislature in amending the Section, it is not possible to accept the submission of Mr. Chinoy that the arbitration proceedings under the Arbitration Act, 1996 are covered by the term "suit" used in Section 22(1) of the SICA.