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Calcutta High Court
Narendra Kumar Anchalia vs Krishna Kumar Mundhra on 14 August, 2002
Equivalent citations: 2003 42 SCL 40 Cal
Author: S Talukdar
Bench: T K Chatterjee, S Talukdar

JUDGMENT S.P. Talukdar, J.

1. An 'award' dated 18th September, 1998, passed by the Arbitral Tribunal was challenged by the present appellant, as petitioner, by filing an application under the Arbitration and Conciliation Act, 1996.

The Backdrop of the case may briefly be stated as follows :

2. The petitioner and the respondents agreed to enter into a joint venture business and for this, an agreement was executed on 12th May, 1997. They agreed to share the profit and loss in respect of the said business equally. It was further agreed that they would be entitled to withdraw their investments along with the profits after adjustments and settlement of accounts between themselves.

3. Disputes and differences cropped up and following the Arbitration Clause in the agreement, the matter was referred to the Arbitrators named in the said agreement. On completion of the Arbitration proceeding, 'award' was published on 18th September, 1998.

4. The said 'award' was challenged on various grounds which included participation of Sri S.K. Poddar as an Arbitrator though he acted on behalf of the respondent. Petitioner alleged that he was denied fair and proper opportunity in taking part in the arbitration proceeding and this was in violation of the principle of natural justice. It had been further alleged that rejection of the petition under Section 33 of the Arbitration and Conciliation Act, hereinafter referred to as "Act" and rejection of the application under Section 12(3) of the Act by the Arbitral Tribunal clearly reflected "misconduct". Petitioner also claimed that the award in question was bad and illegal on the ground that one of the Arbitrators Sri S.K. Poddar did not participate at the time of hearing of the application in accordance with the decision of the Arbitral Tribunal in response to an application under Section 13 of the Act challenging his appointment.

5. The said application challenging the "award" was registered as T1287/ 1998 (S.P. No. 465/1998) and it was dismissed by the Hon'ble Justice Pinaki Chandra Ghosh by the judgment dated 17-5-2000. Being aggrieved by and dissatisfied with the said judgment, the petitioner has preferred the instant appeal.

6. It has been pointed out on behalf of the appellant that the learned Trial Judge failed to appreciate the matter in its proper perspective. Learned Counsel for the appellant has first drawn our attention to Section 12 of the Arbitration and Conciliation Act, 1996 while submitting that it was for Mr. S.K. Poddar to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence and impartiality. Referring to Section 12(4) of the said Act, it was urged that a party may challenge an Arbitrator appointed by him, or in whose appointment he had participated only for reasons of which he became aware after the appointment had been made.

7. In response to this, it was submitted on behalf of the respondent that appointment of Shri Parimal Sarkar as one of the Arbitrators was initially challenged but without success. It was also stated that para 7 of the agreement between the parties clearly reflects confidence of both sides on Mr. Parimal Sarkar. The said para 7 reads as follows :--

"Parties herein authorise and/or empower Mr. Parimal Sarkar of 60, Bentink Street, Calcutta - 700 069, to look into the interest of the parties and entire affairs shall be under supervision and control of Mr. Parimal Sarkar so far the obligations of the parties in the agreement are not fulfilled."

8. Minutes of the meeting held on 17-4-1998 brought the dispute in this regard to an end.

9. Continuation of Mr. S.K. Poddar as one of the Arbitrators was challenged on the ground that he acted on behalf of the respondent and as such, could not be one of the members of the Arbitral Tribunal. It had been alleged that during and in course of the examination in-chief of the respondent on 7-8-1998 and 11-8-1998, it was revealed that Mr. S.K. Poddar, Advocate, had prepared the document and his typist, Lakshmi Kar, had typed the document as per the dictation of Mr. S.K. Poddar under the instruction of Sri K.K. Mundhra, the claimant/respondent. This was never disclosed earlier. Appellant on or about 18th August, 1998, challenged the mandate of Mr. S.K. Poddar, Advocate, by filing an application before the Arbitral Tribunal. Both parties were heard at length on the said date i.e., 18th August, 1998 and time was granted to the parties who were directed to place authority on the issues involved for the purpose of disposal of the said petition. The matter was next fixed on 26th August, 1998.

10. Due to absence of the learned Arbitrator Mr. Subrata Banerjee, the matter was adjourned to 8-9-1998. Both parties made further submission on 8-9-1998. Mr. S.K. Poddar did not participate in the meeting. The next date was fixed on 14-9-1998 for further proceeding (order). On the said date, the petition dated 18-8-1998 was disposed of by passing a reasoned order in a separate sheet. Arbitration award thereafter was passed on 18-9-1998.

11. Now, Section 12 and Section 13 of the Act lay down a set of provisions about the disqualifications of an Arbitrator and the procedure for challenge. Section 12(3) of the Act reads as follows :--

"(3) An Arbitrator may be challenged only if:

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or

(b) he does not posses the qualifications agreed to by the parties."

12. Section 13(2) of the Act gives 15 days time from the date of becoming aware of the constitution of the Tribunal or after becoming aware of any circumstances referred to in Sub-section (3) of Section 12 to challenge an Arbitrator.

13. According to the learned counsel for the appellant, doubt as regards independence and impartiality of Mr. S.K. Poddar arose for the first time during examination of Sri K.K. Mundhra on 7-8-1998 and 11-8-1998 and petition challenging the mandate of Sri S.K. Poddar was filed on 18-8-1998, that is well within a period of 15 days which is the time prescribed by the statute. This significant aspect, that is, the appellant's filing of an application challenging the mandate of Mr. S.K. Poddar on 18-8-1998 which is well within a period of 15 days, as prescribed by the statute, from the date of becoming aware of the lack of independence and impartiality, cannot just be brushed aside.

14. It is further clear that the dismissal of the application challenging the mandate of the Arbitrator cannot be taken in an application for setting aside the award in accordance with Section 34 of the Act and this plea can be taken within a period of three months from the date of receipt of the award, as laid down in Section 34(3) of the Act. After careful consideration of relevant facts and materials, we do not think the grievance, as ventilated on behalf of the respondent regarding limitation, does not seem to have any sound basis and precisely for that reason, we find if difficult to share the views of the learned Judge in this regard. Much has been said about participation of Mr. S.K. Poddar in the arbitral proceeding which, according to the learned counsel for the appellant, inevitably resulted in miscarriage of justice. True, the evidence before the Arbitrators left little scope for doubt as to the involvement of Mr. S.K. Poddar in preparation of the agreements. But having regard to the fact that Mr. S.K. Poddar is a legal practitioner, his role in preparation of the agreement by itself cannot raise an accusing finger nor can it be said to be sufficient or justifiable reasons for doubting his independence and impartiality. It has quite rightly been pointed out by the learned counsel for the respondent that the agreement in question being not under challenge and interpretation of the same being actually not under consideration, there could be no rational basis for any doubt as to independence and impartiality of Mr. S.K. Poddar.

15. This is all the more significant in the backdrop of the fact that Arbitrators were appointed on consent of and as agreed to by both parties. Learned Counsel for the appellant has categorically stated that it was the duty of Mr. Parimal Sarkar and Mr. S.K. Poddar, Arbitrators, to disclose their connection with the subject-matter of the arbitration which was the agreement dated 12th May, 1993 as well as with the parties. Much has been submitted by the learned counsel for the parties regarding role of Arbitrators and their functioning in the context of the Act.

16. It is stated that Mr. S.K. Poddar was under the statutory obligation to disclose his role in drafting the Arbitration Agreement on behalf of the respondent-irrespective of earlier act as a lawyer for the appellant or, independent of the reaction of the appellant. Appellant's grievance also includes non-service of notice upon him before closing proceeding and this, according to the appellant, is in total defiance of Section 18 of the Act.

17. Learned counsel for the appellant asserted that there cannot be a right without a remedy. And, principles of natural justice must come into play. It was submitted that if the Act is mandatory, disobedience entails legal consequences, which may take the shape of a public or private law remedy obtainable in a court of justice [Ref : Crais on Statute Law. 7th Edn. Page 229].

18. It is further stated on behalf of the appellant that 'jus' signifies : "the legal authority to do or to demand something" and 'remedium' may be defined to be the right of action, or the means given by law, for the recovery or assertion of a right (UBI JUS IBI REMEDIUM). It is submitted that according to the elementary maxim, whenever the common law gives a right and prohibits an injury, it also gives a remedy. [Ref: Broom's Legal Maxim, 10th Edn. Page 118]. When a statute gives a right without prescribing a remedy, the common law affords the remedy and any suitable form of action may be adopted. [Ref : Construction of Statutes by Crawford, 1940 Page 529].

19. The Hon'ble Supreme Court in the case of Sangram Singh v. Election Tribunal has held that "there must be ever present to the mind the fact that our laws of procedure are grounded on a principle of natural justice which requires that men should not be condemned unheard, that decision should not be reached behind their back, the proceedings that affect their lives and property should not continue in their absence and they should not be precluded from participating in them" and that "our laws of procedure should be construed, wherever that is reasonably possible, in the light of that principle."

20. The aforesaid principle has also been relied upon by the Hon'ble Justice A.M. Bhattacherjee (As His Lordship their was) in the case of Ram Chandra Verma v. Manmal Singhi AIR 1983 Sikkim 1.

21. On behalf of the respondents, it was, however, urged that it was not that there was right without remedy. Referring to Section 34(2)(m) of the Act it was stated that there was clear provision indicating remedy. Section 8 of the Act relates to equal treatment of parties i.e., 'the parties shall be treated with equality and each party shall be given a full opportunity to present his case.'

22. On this aspect, Russell 'On Arbitration' opines as follows :

"The right to present his case does not mean that the party has an unfettered right to make submissions or present evidences as and when he wishes."

23. Section 33(1)(c) of the Act, 1996 refers to a reasonable opportunity and it is not an opportunity without limit. Mr. Jayanta Mitra, learned Senior Counsel appearing for the respondents, referring to the decision in the case of Indian Iron & Steel Co. Ltd. v. Sutna Stone & Lime Co. Ltd. , has submitted that if the Arbitrator is of the opinion that the absence of a party is deliberate with the intention to avoid or delay the proceedings, the Arbitrator is certainly entitled to proceed ex parte. The fact which is to be taken into consideration by the Arbitrator is the attitude or conduct of the party concerned. If the Arbitrator comes to a conclusion taking into consideration the records of the proceedings before him that the party concerned has no intention to allow the arbitration proceedings to continue in a proper and regular manner or that they are intentionally delaying the matter, only in such a case he can proceed ex parte and can pass the award ex parte. It is further submitted that it is well settled that the Arbitrators are not bound to give notice if they are satisfied that a particular party does not intend to appear and is deliberately keeping away. In this context reference has been made to the decision in the case of Prem Chand Manik Chand v. Fort Gloster Jute Manufacturing Co. Ltd. .

24. Mr. Mitra, has also drawn our attention to the decision in the case of Juggilal Kamlapat v. General Fibre Dealers Ltd. . It was his categorical assertion that if it appeared from the circumstances of the case that a particular party is determined not to appear before the Arbitrators in any event, as and when he has openly repudiated either the reference itself or the particular arbitrators and has shown no desire to recant, the Arbitrators are not required to issue a notice of an intention to proceed ex parte.

25. On the other hand, learned counsel appearing for the appellant has stated that it does not really matter that the Arbitrators namely, Mr. P. Sarkar and Mr. S.P. Poddar are named Arbitrators. This does not take away the right of the party to challenge the Arbitrator or to challenge the procedure adopted by the Arbitrators. In this context reference has been made to the decision in the case of Konkan Railway Corpn. Ltd. v. Rani Construction (P.) Ltd. . Mr. Bachawat, learned Senior Counsel appearing for the appellant has submitted that the term "public policy" does not admit of any definition. It is a variable quantity, which must vary and does vary, with the habits, capacities and opportunities of the public. What is the policy of the public at one time may not be a sound public policy at another time. It is equivalent to the "policy of the law." It is applicable to the spirit as well as the letter. Referring to the decision in the case of Kolapatri Venkatareddi v. Kolaparti Peda Venkatachalam , he has also submitted that "whatever tends to injustice of operation, restraint of liberty, commerce and natural or legal right; 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 a public policy and therefore void and not susceptible of enforcement." The facts and materials of the present case may be analysed in the context of the aforesaid legal position. It cannot be denied that both Mr. Sarkar and Mr. S.K. Poddar are named Arbitrators and their involvement in the proceedings is in accordance with the agreement between the parties. True, this by itself cannot or does not take away their statutory obligation to disclose any circumstances which may reasonably lead to justifiable doubt as to their independence or integrity. So far as Mr. P. Sarkar is concerned, grievance initially ventilated in his contention in the proceedings as Arbitrator was dealt with and it was not further raised.

26. Mr. S.K. Poddar as revealed from the supplementary affidavit dated 8th December, 1998, also acted for the appellant in previous legal matters and proceedings. Having regard to the expertise, both the parties consented to his appointment as one of the Arbitrators and it can only be seen as to whether his conduct could ever fail to inspire confidence of the parties. It is not a question of losing confidence for the sake of it, but whether there are sufficient reasons to lose that confidence. The arbitration proceedings would clearly reveal that repeated opportunities have been given to the parties to place their respective cases. Learned Trial Judge has observed that "Arbitral Tribunal took all necessary steps for the matter of serving notice"; "time was granted almost on each and every occasion and the refusal on the part of the learned counsel not to cross-examine and/ or is not ready to go on can only give authority to the Arbitrators to close the cross-examination - nothing else". It is further observed that if a party by his conduct expresses his inability to co-operate with the Arbitrators or attend any event then the formality of giving peremptory notice need not necessarily be followed. We find it difficult to disagree with the views of the learned Trial Judge that the attitude of the appellant and the steps taken by him leave very little scope of doubt as the appellant has been consistently trying to delay the arbitral proceedings. The facts and materials before us do not allow us to share the views of the learned counsel for the appellant that there has been any violation of natural justice in the conduct of the Arbitrators and particularly of Mr. S.K. Poddar. It was submitted on behalf of the respondents that the appellant prayed for time on repeated occasions to file counter-statement and was granted such time by the Tribunal. Learned Senior counsel for the respondents Mr. Mitra further pointed out that the appellant failed to pay the fees of the Arbitrators compelling the Tribunal to direct that if the fees were not paid before 20th July, 1998, the matter would be heard ex. pane on the said date. Accordingly, it was submitted that notice of ex pane hearing had already been given. Mr. Mitra has gone a step further by pointing out that in view of Mr. Poddar's acting for the appellant on earlier occasion, the ground of challenge of the mandate was frivolous and/or rightly rejected by the Tribunal. Our attention has also been drawn to the fact that the appellant left the meeting held on 16th September, 1998 without leave of the Arbitrators and this amounted to the abandonment of the proceedings by the appellant.

27. According to Mr. Bachawat right to cross-examine and examination of one of the parties' own witness is a statutory right under Section 138 of the Indian Evidence Act and denial of the said right amounts to denial of natural justice. No doubt Section 18 of the Act cast upon the Arbitrators two mandatory duties i.e., (i) to treat the parties equally and (ii) to give full opportunity to each party to present his case. It is a fact that apart from these two basic principles there is also the principle of natural justice. It is for the Tribunal to act fairly and impartially giving each party a reasonable opportunity of putting his case and dealing with that and adopt procedures suitable to the circumstances of the particular case, avoiding delay for expense, so as to provide a fair means for the resolution of the matters falling to be determined. It is clearly laid down that the Tribunal shall comply with that general duty in conducting the arbitral proceedings, in its decision of the matters of procedure and evidence and in the exercise of all other powers conferred on it.

28. It is clear that the procedures to be adopted will depend upon the circumstances of the particular cases. There is no prescribed procedure that will be suitable in all cases and the Tribunal will be expected to adopt a flexible approach as the needs of the case dictate. No doubt, the statute demands that the party must be given a reasonable opportunity to present his case. This means, he must be given an opportunity to explain his argument to the Tribunal and to adduce evidence in support of his case. But no attempt should be made to read more than what meets the eyes. The word "reasonable" cannot be so stretched that it amounts to unfettered opportunity. Tribunal is certainly required to act impartially and it must also appear to be impartial. At the same time, the party is required to comply with the procedural orders and directions from the Tribunal, including those imposing limit as to time and content of submissions and evidence.

29. Mr. Bachawat, learned Sr. Counsel submits that assuming that there has been some needless delay, an Arbitrator does not give the party, who has caused it, proper opportunity to go into the case but makes his award too hastily, without giving due notice of his intention to do so, the Court will set aside the award. In the present case, on perusal of the relevant facts and materials and close scrutiny of the proceedings before the Tribunal, it cannot be said that the case was closed too hastily or that intention to close the case and pass the award was not disclosed. There is statutory rule that the Arbitrator cannot proceed ex parte without giving any notice to the parties but if he proceeds in that manner the award made by him may be set aside if the party complaining has been prejudiced by such omission. Referring to the views of Sir Ashutosh Mookherjee, J, in the case of Udaichand v. Debibux AIR 1920 Cal. 853 that before the Arbitrator proceeds ex parte, he should give notice in writing to each of the parties; otherwise, the award might be liable to be set aside. Sabyasachi Mukharji, J., in the case of Dipti Bikash Sen v. India Automobiles Ltd., , observed that the rule requiring the Arbitrator to give notice is a rule of prudence and convenience.

30. There is no such material on record before us which can even remotely suggest that there had been any act on the part of Mr. S.K. Poddar which could reflect his lack of independence or integrity. There is nothing even remotely suggesting any misconduct on his part. Mere fact that he did not disclose earlier that he drafted the agreement under consideration about the respondents, in our opinion, in the facts and circumstances of the present case could at best be a technical failure or, bona fide lapse and there is no reason to hold that it has been done with any ulterior motive or for causing any prejudice to the present appellant.

31. The Trial Judge has observed that the appellant had been given all possible co-operation during the continuation of the arbitral proceedings. The facts and materials placed before us do not permit us to disagree.

32. It is perhaps worth mentioning that arbitration is an alternative dispute resolution forum. Its object, apart from many others, is to ensure expeditious solution of problems and/or disputes. It cannot afford to remain a passive onlooker to one party's determined non-co-operation or wilful and conscious absence. Law does not always necessarily demand dotting of every 'i' and cutting of every 't' - more so, in the context of an arbitral proceeding.

33. In the present case, appellant's grievance regarding independence and integrity of Mr. S.K. Poddar does not seem to have any rational basis. And, by no stretch of imagination it can be said that there has been any violation of the principle of natural justice.

34. As such, we share the views of the Learned Trial Judge and accordingly, the appeal is dismissed.

35. Interim order, if any, stands vacated. There will be no order as to costs.

36. All parties are to act on a xerox certified copy of this Judgment/Order on the usual undertaking.