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M/s Canara Bank, Abids, Hyderabad v. Shri C. Pandit Rao & Anr - C.R.P.NO.361 OF 1998 AND C.M.A.NO.220 OF 1998 [2001] INAPHC 160 (21 August 2001)

The Civil Revision Petition and the Civil Miscellaneous Appeal arises out of the Common Judgment dated 18.7.1997 passed by the learned III Additional Judge, City Civil Court, Secunderabad in O.S.No.12 of 1994 and O.P.No.5 of 1994 respectively.

O.S.No.12 of 1994 out of which CRP.No.361 of 1998 arose was filed by one Sri C. Pandit Rao against the Canara Bank under Section 14(1)(2) of the Indian Arbitration Act to make the award dated 26.11.1993 rule of the Court and for future interest on the sums awarded by the Arbitrator from the date of suit till final realization and for costs of the suit.

O.P.No.5 of 1994 out of which CMA.No.220 of 1998 arose was filed by Canara Bank against the petitioner in CRP.No.361 of 1998 and another for setting aside the award dated 26.11.1993 declaring the same as illegal and void. By the impugned judgment, the learned Judge dismissed the O.P. filed by the Bank and decreed the suit filed by Sri Pandit Rao.Being aggrieved, the bank has filed the above revision and appeal.

For convenience sake, the parties will be referred to by their status in the appeal.

The parties had entered into two separate agreements on 21.1.1980 and 29.5.1980 respectively for demolition of existing structure of the appellant bank premises and for construction of a new building. Disputes and differences arose between the parties. It is not in dispute that there existed an arbitration clause in the agreement.One Sri P.V. Amarnath Prasad was appointed as an arbitrator. The arbitrator adjudicated the dispute and adduced both oral and documentary evidence and when he was abut to pass an award, the 1st respondent herein raised an objection to the effect that the arbitrator was one of the official valuers of the appellant-bank and he should not be permitted to pass an award. Accordingly, he filed an application for removal of the arbitrator.Thereafter, one Sri K.C.S. Rao was appointed as an arbitrator. According to the appellant, the said arbitrator, instead of starting the process of adjudication afresh, proceeded from the point where the earlier arbitrator left the adjudication and directed both the parties to advance arguments based on the oral and documentary evidence already adduced before his predecessor. Allegedly, the appellant's earlier counsel expressed his inability to continue with the matter and a new counsel was appointed and he filled his vakalat on 5.11.1993. On 6.11.1993, a prayer for adjournment was made on the ground that the counsel for the bank had to leave for Madras on 5.11.1993 and as the matter is of ten years old, he could not prepare and argue the same within a day's time. However, no adjournment was granted and an award was passed.

An application under section 14 of the Arbitration Act was filed by the 1st respondent for making the award as rule of the Court, whereas the bank filed the Original Petition under sections 30 and 33 thereof for setting aside the award. Both the matters were heard together and by reason of the impugned judgment, the learned court below rejected the objections filed by the appellant and made the award rule of the Court.

Mr. Bhattacharya, learned counsel appearing on behalf of the appellant has raised two contentions.

Firstly, the learned counsel would submit that the impugned award suffers from violation of the principles of natural justice, bias and misconduct in the proceedings on the ground that although the record in the earlier arbitration proceedings were not produced, the learned arbitrator had proceeded to consider the matter on the basis of the documents produced by the 1st respondent- plaintiff. The learned counsel would submit that only on 5.11.1993 a new counsel was appointed in the matter and he had to go to Madras on that day itself and that only four days' adjournment was sought for and in such circumstances, the refusal on the part of the arbitrator to grant such short adjournment would be violative of the principles of natural justice.The learned counsel would contend that the case was heard on Saturday and Sunday which being not full working days for the bank, the junior counsel even could not get all the records and despite the same, orders were reserved.

Learned counsel, in support of his contention, has relied upon two Divisin Bench decisions of the Calcutta High Court viz., HINDUSTAN PAPER CORPORATION LTD. v ABAN CONSTRUCTION1 and INDIAN IRON & STEEL CO. LTD. v THE SUTNA STONE & LIME CO. LTD2.

Secondly, the learned counsel would contend that the award was passed in undue haste which itself prove malice on the part of the arbitrator. Attention of the Court has also been drawn to a Division Bench Judgment of this Court in W.A.No.1123 of 1984 wherein the appeal filed by the 1st respondent in respect of a connected proceeding was dismissed on 24.4.1989. Attention in this connection has been drawn to a letter-dated 20.7.1993 wherein the arbitrator recorded: All the documents in possession of Shri P.V. Amarnath Prasad, former Arbitrator have now been received by me. Before proceeding to finalize the case based on documents received, I would like hear from both the parties, with a view to get myself completely updated.

The learned counsel would submit that however on 7.11.1993 a direction was issued although all documents were not produced before him. The learned counsel would contend that some suits are pending between the parties and as such the learned arbitrator could not have proceeded in the matter. In support of the above contention, reliance has been placed on the decisions of the Apex Court in THE SECRETARY TO THE GOVERNMENT, TRANSPORT DEPARTMENT, MADRAS v MUNUSWAMY MUDALIAR AND OTHERS3 and in S.S. JATLEY v COLLEGE OF VOCATINA STUDIES, SHEIKH SARAI, NEW DELHI4 and the decision of Gauhati High Court in SHRI BABULAL GARODIA v UNION OF INDIA5. Learned counsel appearing on behalf of the 1st respondent, on the other, would submit that the conduct of the appellant-bank will show that it had all along tried to prolong the proceedings. He would further submit that an application filed for the removal of the arbitrator on the ground of bias on his part had been dismissed by this Court.Learned counsel would contend that Sri Amarnath Prasad was the second arbitrator and Sri K.C.S. Rao was the third arbitrator. Having failed in its attempts on earlier occasion, the selfsame allegations are being attributed against all the arbitrators. In this connection, my attention has been drawn to the following findings of the learned trial Judge: Because, earlier proceedings were conducted by the learned arbitrator Sri Amarnath Prasad before whom the parties appeared and placed their claims and adducing evidence both oral and documentary and advance the arguments, the record was called for by respondent No.2 herein which took some time to proceed with the matter. Thereafter, the respondent No.2 herein fixed the dates for hearing by making correspondence from time to time all the correspondence received by him from the earlier arbitrator Sri P.V. Amarnath Prasad and the correspondence entered between himself and the parties to the petition has been marked in the suit which is clubbed with the O.P. It is nt as though the parties were not given any opportunity by respondent No.2 herein. He was specifically directed the parties and also indicated that he should adjourn the matter and he fixed the final hearing date as 6th November, 1993. On that day, as seen from the record the petitioner/defendant changed his advocate who has also not appeared before the learned arbitrator except filing the vakalath through some of his junior counsel.When the matter was posted to 7.11.1993, with a specific direction that the matter will be closed even on that day also the learned counsel for the petitioner/defendant who filed the vakalath did not appear before the learned arbitrator except representing the matter through his junior counsel whose presence is noted by the learned arbitrator. It is also noted by the learned arbitrator that he heard the learned counsel for the petitioner and the respondents.

It was submitted that had the arbitrator been biased in favour of the respondent, he would have upheld all the claims. It was pointed out that two claims of the 1st respondent had been rejected. The learned counsel would further contend that full opportunity was granted to the parties who represented their respective versions and their respective counsel represented the parties. The learned trial Judge formulated the following two questions for consideration:

In the suit O.S.12 of 1994 the point that arise for consideration is whether the plaintiff in O.S.No.12 of 1994 is entitled for the relief of making the award dated 26.11.1993 a rule of the Court.

In the O.P.5 of 1994 the point for consideration is: Whether the petitioner is entitled for the relief to set aside the award passed by the learned arbitrator dated 26.11.1993 declaring it as illegal null land void, untenable and non- executable.

The learned trial Judge in the impugned judgment has dealt with the points raised elaborately.It has been found as of fact that the entire correspondence and the documents were received and marked by the erstwhile arbitrator Sri P. Amarnath Prasad while he was conducting the proceedings. It was found that except making oral submissions, no material evidence was adduced to make out a case for bias on the part of the arbitrator.

It is not in dispute that agreements were entered into in the year 1980 and the disputes between the parties are pending since 1981.Such disputes were first referred to one Sri Rangadas appointed by the Court as per condition No.2 of the agreement-dated 29.5.1980. However, subsequently, as noticed hereinbefore, Sri Amarnath Prasad was appointed as an arbitrator by the Court in O.S.No.257 of 1981 on 29.12.1989. Time was also extended for passing the award, but he could not pass the same having regard to the fact that voluminous evidence both oral and documentary had been produced before him. He had also heard the arguments of the parties and fixed 4.8.1991 for further hearing. As there was delay in publishing the award, the same was attributed as the reason for his removal and appointment of Sri K.C. Rao as the new arbitrator. In that view of the matter, the effort on the part of the learned arbitrator to expedite the matter and to make and publish the award within the specified period cannot be found fault with. In terms of the order of appointment, he was to make and publish the award within a period of four months from the date of reference. He entered into correspondence for obtaining the records and he had received all the records. He had specifically directed the parties to appear before him on 6.11.1993 and also indicated that he would not adjourn the matter any further. At that time, the bank has changed it's advocate. The matter was posted on 7.11.1993 with a specific direction that the matter would be closed on that day. But, even on that day also, the learned counsel who filed the vakalat did not appear.

But, however, it appears from the proceedings dated 19.11.1993 that on 7.11.1993 on behalf of the respondent-bank Sri G. Sudharshan and Sri M. Sreedhara Murthy, advocates had appeared. It was recorded:

It was clearly informed by theundersigned that this hearing was final in view of the abnormally long time elapsed since the dispute had arisen. It was made very clear that no further adjournment would be allowed but the proceedings started on 6.11.1993 could be continued for the next day 7.11.1993 also. Shri J. Radha Krishna Murthy had once again brought out the issues under dispute. Sri G. Sudharshan had pleaded for adjournment and accordingly the proceedings were continued on 7.11.1993 when his senior colleague Shri M. Sreedhara Murthy was present. Shri M. Sreedhara Murthy having heard the issues under dispute pleaded his case.

After hearing both the sides the undersigned concluded the hearing. . . . The submission of Sri Bhattacharya to the effect that the statement made in paragraph 2 of the above proceedings of the arbitrator is not correct cannot be accepted as no affidavit of the counsel contrary thereto had been filed. From the letter-dated 20.7.1993 of the arbitrator, it appears that the said arbitrator had received all the documents in possession of the former arbitrator. He had, therefore, directed the parties to appear before him with a view to get himself completely updated. Further, from the letter dated 15.4.1993 addressed by Sri Amarnath Prasad to Sri K.C.S. Rao, it appears that as per the order of the III Additional Judge, City Civil Court, Hyderabad, he was returning all the documents which were in his possession. From the order sheet dated 7.8.1993 of the arbitrator, it appears that Sri J. Radhakrishna Murthy who had all along appeared in the case had stated that all the documents filed before the erstwhile arbitrator were not available.In the aforesaid situation, the parties were asked to file their respective papers/exhibits so as to reach the arbitrator on or before 23.8.1993 and the next date of hearing was fixed as 28.8.1993.The 1st respondent herein filed all the documents in their possession by letter dated 17.8.1993 stating:

As per the directions given during the above preliminary hearing, the following documents are filed duly indexed in three separate files by the claimant. As noticed hereinbefore, the purported bias on the part of the arbitrator was the subject matter of an application filed by the appellant herein, which came to be dismissed by this Court on 26.4.1993. From the order sheet dated 5.10.1993, it appears that the learned arbitrator noticed: As Canara Bank, one of the parties have filed a review petition and interim stay petition the hearing fixed on 28.8.1993 could not be held. It is now intimated to me on 1.10.1993 that the review petition as well as the interim stay were dismissed by the High Court on 28.9.1993.

Accordingly I propose to continue the arbitration proceedings and the date of hearing is hereby fixed on 16.10.1993 at 10.30 hours in the Conference Room of Chief Engineer (P) (R&D), Picket opposite Jubilee Bus Stand, Secunderabad. It may also be noted that in case it is necessary to continue the proceedings the same will be done on 17.10.1993.

Canara Bank was requested during the hearing held on 23.8.1993 to fie papers and exhibits by 23.8.19983 which was not done till date. The Bank is once again directed to furnish the relevant documents to the undersigned on r before 13.10.1993.

It, therefore, appears that the appellant-bank had all along been trying to delay the matter on one pretext or the other. In a situation of this nature, if the learned arbitrator had made an attempt to proceed with the case in order to make and publish the award within the stipulated time of four months, can it be said that he was biased or failed to comply with the principles of natural justice? The answer to the same must be held in negative. In Hindustan Paper Corporation Ltd. v. Aban Construction (supra), a Division Bench of the Calcutta High Court observed:

We have carefully considered the submissions of the learned Advocates appearing for both the parties and also the relevant papers and the judgment and ordered passed by the learned single Judge of this Court. It appears that the Joint Arbitrators met at Calcutta on 19.2.1990 and the said fact was known to both the parties. One of the arbitrators was the General Manager, who is now working with the appellant. The parties never raised any point nor approached the Arbitrators that they wanted to argue the matter, but as a matter of fact the appellant in their notes have made written submissions about the merits and prayed that the claim should be rejected. Therefore, we are of the opinion that the parties took the full opportunity to place their case and never wanted a further hearing and, as such, it cannot be said that the Joint Arbitrators hastily closed the proceeding and has acted beyond the principles of natural justice and/or misconducted themselves in the proceeding in any way whatsoever. The said decision of is of no help to the appellant. In Indian Iron & Steel Co., Ltd. v. The Sutna Stone & Co. Ltd. (supra) the Calcutta High Court held that when the absence of party on the first date of effective hearing was not intentional the ex parte award passed by the arbitrator even before the expiry of time to make award is arbitrary and violative of the principles of natural justice. In the instant case, it was found that time was running out and the arbitrator fixed a date for hearing finally. In fact, the learned advocate appearing for the party appeared on the date of hearing.

The submission of Mr. Bhattacharya to the effect that the arbitrator had shown undue haste in making the award, in the facts and circumstances of this case, cannot be accepted.

In FRAZER LTD. V MAZDOOR CONGRESS6 dealing with the aspect of undue haste, the Apex Court observed:

It would depend upon the facts of each case whether an employer has acted with undue haste while discharging or dismissing an employee. It is neither possible nor desirable to lay down or spell out any general principles in this regard. Each case will have to be judged on its own facts. In Shri Babulal Garodia v. Union of India (supra), the Gauhati High Court held that where the arbitrator did not allow any party to adduce evidence, it would amount to violation of principles of natural justice and the award is liable to be set aside on the ground of misconduct. In the facts and circumstances of the case on hand, the said decision has no application. In spite of opportunity given by the arbitrator to adduce the evidence, the appellant herein had failed to avail the same and, therefore, the arbitrator cannot be said to have misconducted.

In COAL MINES v UNION OF INDIA7 the Calcutta High Court noticed that having regard to the decision of the Court of Appeal in REGINA v GOUGH8 thus: That test was applied in Reg vs Mulvihill (199) 1 WLR 438 when a Judge tried a robbery case where the loser was a bank in which he held shares, the court distinguishing between the role of the Judge and the jury. The Topping test, if one can use that abbreviation, was also applied in reg vs Morris (orse. Williams) (1990) 93 Cr App R. 102 by this court. During a trial on indictment for theft from Marks and Spencer Plc. It emerged that one of the jurors was an employee of that organization though working at a different branch. In quashing the conviction the court held that the Judge when asked to discharge the juror had not gone into the question of the appearance of bias. It is difficult to discover any basis on which these two lines of authority can live together.Mr Moran has submitted that a distinction can be drawn between the test to be applied in jury cases and that which is appropriate for magistrates' courts or other inferior tribunals entrusted with fact finding responsibilities. We feel we must accept this distinction because there is no other way of reconciling most of the authorities, though it is difficult to understand why the test of bias should be any different in considering the position of a magistrate compared with that of juror. The only case which cannot be fitted into this dichotomy is the one last cited, namely Reg vs Morris (orse William), in which giving the judgment of the court 1 applied the Topping test (1983) 1 WLR 119 to the position of a juror.The decision in reg. Vs Morris (orse. Williams), 93 Cr.App. R. 102 cannot stand with that of the five judge court in Reg vs Box, (1964) 1 O.B. 430; and, having regard to the decision of the House of Lords in Reg. Spencer [1987] UKHL 2; (1987) A.C. 128, Reg vs Morris (orse Williams) should not be followed to the extent that it applies the Topping test to trials on indictment.

Accordingly, the appeal fails on this point because of the application of the real danger test to jury trials in cases of bias. It is, therefore, not necessary to decide whether (a) the application of the Topping test would have caused a different result, or (b) whether there was in fact any bias. This aspect of the matter has also been considered by the Apex Court in KUMAON MANDAL VIKAS NIGAM LTD. V. GIRIJA SHANKAR PANT9 wherein it was held: The word 'Bias' in popular English parlance stands included within the tributes and broader purview of the word 'malice', which in common acceptation mean and imply 'site' or 'ill-will' (stroud's Judicial Dictionary (5th Ed.) Volume 3) and it is now well-settled that mere general statements will not be sufficient for the purposes of indication of ill-will.There must be cogent evidence avialble on record to come to the conclusion as to whether in fact there was existing a bias which resulted in the miscarriage of justice.

In Secretary to the Government Transport Department Madras v. Munuswamy Mudaliar and others (supra) the Apex Court held that for the purpose of removal of an arbitrator there must be a reasonable apprehension of bias and pre-disposition of mind, which in turn must be made on cogent materials. It was held: Reasonable apprehension of bias in the mind of a reasonable man can be a ground for removal of the arbitrator.A predisposition to decide for or against one party, without proper regard to the true merits of the dispute is bias. There must be reasonable apprehension of that predisposition. The reasonable apprehension must be based on cogent materials. See the observations of Mustill and Boyd, Commercial Arbitration, 19982 Edition, page 214, Halsbury's Laws of England, Fourth Edition, Volume 2, Para 551, page 282 describe that the test for bias is whether a reasonably intelligent man, fully appraised of all the circumstances, would feel a serious apprehension of bias. In the instant case, the appellant has failed to prove any malice or bias on the part of the arbitrator. The appellant, in a situation of this nature, cannot be permitted to take advantage of it's own wrong.

In BHARAT CKING COAL LTD v L.K. AHUJA10, it has been held that ordinarily an award cannot be challenged unless it is shown that the arbitrator has wholly traveled outside the contract, which gives him the jurisdiction. In the result, the revision petition and the appeal are dismissed as devoid of any merit. There shall be no order as to costs. ?1 1994 (2) ARB. L.R 7

2 AIR 1991 CAL. 3

3 1988(2) Current Civil Cases 601

4 1994 SUPP (2) SCC 402

5 1988(2) Current Civil Cases 560

6 1996 SCC (L &S) 1286

7 1995 (2) CHN 258 : AIR 1996 Cal 28

8 (1993) AC 646

9 2001 SC 24

10 2001(4) SCC 86