Allowed

Mohan Govind Chitale v. Nirmala Anand Deodhar

Bombay HC5 Dec 2008ARA/10/2008

Case brief

AI extract

What is this about?

This appeal concerns the validity of an Arbitration Award where the Arbitrator failed to disclose a gift of property to his father from a party. The court held the award void for violation of Section 12 of the Arbitration Act due to potential bias. The appeal was allowed, the award quashed, and re-arbitration ordered.

What did the court decide?

The Arbitration Award dated 2.5.2003 is set aside. Parties directed to appoint a new Arbitrator within twelve weeks.

Mohan Govind Chitale Vs Nirmala Anand Deodhar — Arbitration | Bombay HC (2008)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
 CIVIL APPELLATE JURISDICTION

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ARBITRATION APPEAL NO. 10 OF 2008
WITH
CIVIL APPLICATION NO. 11 OF 2008

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 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

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 Mr. Saurabh M. Railkar for the Appellant.
 Mr. Sanskar Marathe i/b. Devan Dwarkadas &
 Partners for the Respondent.

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CORAM : S. A. BOBDE, J.
DATE : 5TH DECEMBER, 2008.

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ORAL JUDGMENT :

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 . Heard learned counsel for the parties.

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 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.

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 3. In Chiplun there is a Hotel by name Manisha

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 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.

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 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

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 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.

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 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

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 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.

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 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 :-

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"12. Grounds for challenge.- (1)When a
person is approached in connection with his
possible appointment as an arbitrator, he
shall disclose in writing any circumstances
likely to give rise to justifiable doubts as
to his independence or impartiality.

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(2) An arbitrator, from the time of his
appointment and throughout the arbitral
proceedings, shall, without delay, disclose
to the parties in writing any circumstances
referred to in sub-section (1) unless they
have already been informed of them by him.

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(3) An arbitrator may be challenged only if-

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

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

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(4) A party may challenge an arbitrator
appointed by him, or in whose appointment he
has participated, only for reasons of which
he becomes aware after the appointment has
been made."

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 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

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 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

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 Arbitrator. However the Arbitrator ought to have
 done so after the circumstance arose.

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 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".

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 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 :

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 "No event has occurred during the period of
 agreement that will be an impediment for the
 Arbitrator to work in an impartial and
 unbiased manner. Therefore, objections are
 rejected and the Arbitration proceedings are
 continued."

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 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.

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 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.

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 . In Union of India vs. Tolani Bulk Carriers

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Limited [2002 (20 Bom.C.R. 256], Justice Deshmukh
 observed as follows:

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"....Section 12 casts a solemn duty on an
arbitrator, who is put in position of a
Judge to disclose to the parties his
interest which is likely to give rise to a
reasonable doubt about his independence in
the mind of the parties. So far as the
question of justifiable doubts as to
independence or impartiality is concerned
the basis is whether the party to the
dispute would have reasonable apprehension
in his mind about the independence of the
arbitrator and not whether the arbitrator
thinks that he is capable of being
impartial. The following observations from

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para 17 of the judgment of the Supreme Court
in the case of Ranjit Thakur in my opinion
are pertinent. The said paragraph 17 reads
thus:

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17. As to the tests of the likelihood of
bias what is relevant is the reasonableness
of the apprehension in that regard in the
mind of the party. The proper approach for
the Judge is not to look at his own mind and
ask himself, however, honestly. Am I
biased?; but to look at the mind of the
party before him.

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. In such a situation, in my opinion,
the Court has to look at the impression,
which would be given to the other people.
In the present case the son of arbitrator
Shri Patel was a member of the firm of
Advocates which represented the respondents
before him. In my opinion, it was the duty
of Shri Patel, the arbitrator, to disclose
to the parties the said fact in writing as
contemplated by the said section."

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 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

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 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.

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 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.

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 (S. A. BOBDE, J.)

Mohan Govind Chitale v. Nirmala Anand Deodhar

Case brief

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Mohan Govind Chitale v. Nirmala Anand Deodhar

Case brief

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