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1979 DIGILAW 49 (ORI)

JURINATH SAHU v. RAMABALLAVA BRAHMA

1979-04-18

S.ACHARYA

body1979
JUDGMENT : S. Acharya, J. - The Plaintiff, opposite party No. 1 in this revision, filed T.S. No. 136/75 in the trial Court for rendition of accounts of the partnership firm of which the Plaintiff and the Defendants were partners, and for dissolution of the said partnership firm. After the Defendants filed their written statement in the suit, both the parties agreed to refer their disputes to the Arbitrator, and on their joint petition to that effect the Court referred the disputes between the parties, which were the subject matter of the suit, to Sri Bhimsen Bisoi to arbitrate the said disputes. The arbitrator signed the award on 24-1-1975 and filed the same in the Court on 25-1-1975. Both the parties filed their respective objections to the said award. We are not concerned with the objection filed by the Plaintiff against the award. 2. The objection filed by the Defendants is u/s 30 read with Section 35 of the Arbitration Act, 1940 (hereinafter referred to as the Act). They challenge the award mainly on the ground that there was no notice to Defendant No. 1 about the making of the award or the date fixed for its pronouncement; the arbitrator violated the principles of natural justice as he did not afford any opportunity to the Defendants to cross-examine the Plaintiff and all his witnesses in this case; the arbitrator misconducted himself by misleading the Defendants by giving different dates in the notices served on them; the arbitrator did not maintain true and correct record of the proceedings; the arbitrator proceeded to give his award without giving adequate opportunity to the Defendants to have their say in the matter; he exceeded the terms of reference as be allowed his personal knowledge to influence his decision in the matter; he received oral and documentary evidence tram the Plaintiff behind the back of the Defendants and proceeded to give his award without supplying a copy of their evidence to the Defendants or allowing the Defendants to have their say on those evidence; and that the award of the arbitrator suffers from bias and partisan attitude against the Defendants. 3. Both the Courts below have rejected the objections of the Defendants and have confirmed the award and have made the a ward the rule of the Court. 3. Both the Courts below have rejected the objections of the Defendants and have confirmed the award and have made the a ward the rule of the Court. This revision has been filed by Defendant No. 1 against the decision of the Court below rejecting the aforesaid objections of the Defendants. 4. I will at first take up the allegation of the Defendants that the arbitrator recorded the statement of the Plaintiff and examined three of his witnesses behind the back of the Defendants, and did not even supply copies of their statements to the Defendants enabling the latter an opportunity to meet the effect of the same. 4A. The order dated 16-12-1973 passed by the arbitrator, which is attached to the award, indicates that the hearing of the case was not taken up on that date as the parties did net produce their witnesses for examination. But from the arbitrator's letter dated 25-1-1975. attached to his award and forwarding his award to the Court, it appears that on 16-12-1973 the arbitrator examined 3 witnesses, namely Gobinda Patra, Krushna Kumar Panda and Brundaban Patra. If the case was not taken up on that date, it is not known how, when and why the arbitrator examined those 3 witnesses on that date. There is also nothing in that letter or in the award to show that these three witnesses were examined in the presence of any of the Defendants; rather the order dated 16-12-1973 indicates that no witness was examined on that date till that order of the date was written and the hearing of the case was closed for the day. From the above facts and allegations of the Petitioner that the evidence of the above-named witnesses was recorded behind his back and without notice to him appear to be correct. As that was so, the Petitioner did not have the opportunity to know the effect of their evidence or to cross-examine the said witnesses to rebut the effect at the said evidence. As that was so, the Petitioner did not have the opportunity to know the effect of their evidence or to cross-examine the said witnesses to rebut the effect at the said evidence. Though the law of procedure followed in the regular Courts does not strictly apply to the arbitration proceedings, the arbitrator has to follow the principles of natural justice, and be must hear or examine each party and his witnesses in the presence of the other party, and opportunity should be given to both the parties to challenge the evidence adduced by each other and to rebut the effect of the same. The observations of Lord Langdale M.R. in Horvey v. Shelton 7 Beav. 455 at p. 462, quoted with approval III paragraph 8 of the decision reported in Payyavula Vengamma Vs. Payyavula Kesanna and Others are as follows: It is so ordinary a principle in the administration of justice, that no party to a cause can be allowed to use any means whatsoever to influence the mind of the judge, which means are not known to and capable of being met and resisted by the other party, that it is Impossible, for a moment, not to see that this was an extremely indiscreet mode of proceeding to say the very least of it. It is contrary to every principle to allow of such a thing, and I wholly deny the difference which is alleged to exist between mercantile arbitrations and legal arbitrations. The first principles of justice must be equally applied in every case. Except in the few cases where exceptions are unavoidable, both sides must be heard, and each in the presence of theother. In every case in which matters are litigated, you must attend to the representations made on both sides, and you must not, in the administration of justice, in whatever form, whether in the regularly constituted Courts or in arbitrations, whether before lawyers or merchants, permit one side to use means of influencing the conduct and the decisions of the Judge, which means are not known to the other side. That case, as observed by the Supreme Court, is the leading decision on the point and it has been followed not only in England but also in India. That case, as observed by the Supreme Court, is the leading decision on the point and it has been followed not only in England but also in India. From the facts stated in the preceding paragraph it appears that the above-named witnesses were examined behind the back of the Petitioner, and so the course of proceeding adopted by the arbitrator was obviously contrary to the principles of natural justice. 5. Mr. Misra, the learned Counsel for the opposite parties, submits that the award and the aforesaid letter of the arbitrator do not indicate that the arbitrator, while drawing up the award, took into consideration the depositions of the above-named 3 witnesses or that the same any way influenced his mind for the purpose of giving the award. So, the mere acceptance of the depositions did not any way affect the arbitration proceedings or influenced the award, and no prejudice was caused to the Plaintiff on that account. Such a contention was also held to be unsound in the above-mentioned decision of the Supreme Court. In dealing with such a point their Lordships of the Supreme Court accepted with approval the observations of Lord Eldon and Lord Chancellor in 6 Ves Jun. 70 at page 72 that A judge must not take upon himself to say whether evidence improperly admitted had or had not an effect upon his mind. The award may have done perfect justice; but upon general principles it cannot be supported. To the same effect are the following observations of Lord Justice Knight Bruce in Haigh v. Haigh 6 Ves Jun. 70. It is true that he states in his affidavit that he did not allow those explanations to influence him in his report upon the accounts, and I have no doubt he honestly intended this to be the case; but it is impossible to gauge the influence which such statements have upon the mind. So, merely because it is not stated in the award or in the aforesaid letter forwarding the award to the Court that the deposition of the above-named witnesses bad been utilised by the arbitrator for the purpose of arriving at his conclusion, it cannot be said that the arbitrator did not commit a legal misconduct. So, merely because it is not stated in the award or in the aforesaid letter forwarding the award to the Court that the deposition of the above-named witnesses bad been utilised by the arbitrator for the purpose of arriving at his conclusion, it cannot be said that the arbitrator did not commit a legal misconduct. Their Lordships of the Supreme Court have held that merely on the proof of the fact that the arbitrator accepted the evidence behind the back of one of the parties that by itself was sufficient to vitiate the award, and it must be held that the arbitrator was guilty of legal misconduct. 6. In paragraph 12 of the award it is mentioned that the arbitrator has personal knowledge about the mill and the lorry business (in respect of which disputes in question arose between the parties and were referred to the arbitrator for arbitration.) From paragraph 12 it is evident that the arbitrator in giving his award was influenced by his personal knowledge about the matters and affairs of the subject matter of dispute, and he did not take into consideration the documents and papers filed before him. The agreement to refer the disputes to the arbitrator does not either specifically or by necessary implication empower the arbitrator to decide the disputes on the basis of his personal knowledge. So he was certainly not justified in applying his personal knowledge in deciding the disputes. Proceedings before the arbitrators are quasi-judicial proceedings. That being so, it is implied that the arbitrator must decide the dispute in accordance with the general law. The decision of a matter given on personal knowledge is not in accordance with the principles of natural justice, and so long decision on personal knowledge is not specifically provided in the arbitration agreement, the arbitrator must conduct himself in all respects as far as possible, in a manner expected of a Judge performing his solemn duty of deciding a case. The law on this point has been succinctly laid down in paragraph 9 of the decision reported in Dewan Singh Vs. Champat Singh and Others. Their Lordships in that paragraph have held that even when by the agreement the arbitrator is left to decide the disputes referred to him in "whatever manner" he thinks, it does not mean that he can decide those disputes on the basis of A his personal knowledge. Champat Singh and Others. Their Lordships in that paragraph have held that even when by the agreement the arbitrator is left to decide the disputes referred to him in "whatever manner" he thinks, it does not mean that he can decide those disputes on the basis of A his personal knowledge. In that connection their Lordships 'C' have hold that- The proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result. xx xx xx xx xx Arbitration is a reference of a dispute for hearing in a judicial manner. It is true that parties to an agreement of reference may include in it such clauses as they think fit unless prohibited by law. It is normally an implied term of an arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law; see Chandris v. Isbrandtsen Moller Company 1951-1 KB 240, that rule can be departed from only if specifically provided for in the submission. As the arbitrator had personal knowledge about the subject matter of dispute, he may be entertaining misconceptions or may be having wrong assumptions in his mind about relevant aspects of the disputes in question. From the award it is evident that the arbitrator did nut allow the parties to know that impressions or assumptions he had drawn from his personal knowledge about the subject matter of dispute, and there is nothing in the award to show that the arbitrator gave any opportunity for both the parties or at least to the Petitioner to correct his conceptions and assumptions about the relevant matters. As the parties were in the dark as regards the personal knowledge of the arbitrator and his assumptions and conceptions regarding the subject matter of dispute and as they did not have any opportunity to correct those impressions and assumptions, the award given under the said premises and context cannot be allowed to be sustained. 7. As the parties were in the dark as regards the personal knowledge of the arbitrator and his assumptions and conceptions regarding the subject matter of dispute and as they did not have any opportunity to correct those impressions and assumptions, the award given under the said premises and context cannot be allowed to be sustained. 7. From the facts that the arbitrator had personal knowledge about the subject matter of dispute; he accepted evidence behind the back of one of the parties without giving that party an opportunity to rebut that evidence; he did not consider evidence adduced by one of the parties; and allowed his own impressions and assumptions to influence the award without specific provisions to that effect in the agreement and without even allowing the parties to know the same, it is quite evident that the arbitrator did not decide the matter in the manner expected of him and in accordance with the ordinary law. That being so, the arbitrator misconduct himself, and apprehension of partiality or bias on the part of the arbitrator in the mind of the Petitioner cannot be ruled out in this case. The authority of an arbitrator can be revoked on the ground that he has actually misconducted himself or failed to act impartially or has a bias against a party or some interest in the result of the proceedings. The test for bias is whether a reasonably intelligent man, fully appraised of all the circumstances, could feel a serious apprehension of bias from the conduct of a person. From the facts stated above it can be said that the Petitioner had reasons to entertain apprehension in his mind that the arbitrator was not acting impartially and that he had some bias against the Petitioner. In the decision of this Court reported in State of Orissa and Another Vs. Modern Construction Co. it has been observed: It is not for the Court when moved for the removal of an arbitrator on grounds of bias to find out whether there has been actual bias already expressed in some overt act of the arbitrator. The possibility of bias must be taken as sufficient. 8. In view of the above findings and conclusions the impugned award cannot be allowed to stand. 9. The possibility of bias must be taken as sufficient. 8. In view of the above findings and conclusions the impugned award cannot be allowed to stand. 9. On the above conclusion it is not necessary for me to advert to the other objections and grounds put forward by the Petitioner to revoke the award. 10. It was submitted by Me. Misra, the learned Counsel for the Petitioner, that this Court would not interfere with the concurrent finding of the Court below as those findings are essentially findings of fact, and no jurisdictional error, within the narrow limits of Section 115, CPC has been pointed out for the interference of this Court. It must at first be stated that the facts on which findings and conclusions have been arrived at in this judgment are patent on the face of the record, and consideration of the questions involved in this revision did not require probe into the correctness of the findings of fact recorded by the Court below. Apart from that, this Court has been vested with the discretionary power u/s 115, CPC to advance the cause of justice. This revisional power is invoked In cases in which no appeal lies to the High Courts and to see where the requirements of the law have been duly and properly obeyed by the Court whose order is the subject of revision. The High Court's power of interference with the order of a subordinate. Court arises, apart from other requirements mentioned in Section 115, Code of Civil Procedure, in the 3 cases mentioned under the first paragraph of that section. If the subordinate Court failed to take into account a material fact on record or misdirected itself regal ding the effect of an admitted fact or misunderstood the effect of a document or a piece of evidence or material on record or misconstrued the effect of the same, that would amount to failure of exercising a jurisdiction not vested in it by law, or to have acted in exercise of jurisdiction illegally or with material irregularity, and in such a case, if other requirements are fulfilled, the High Court can justly exercise its revisional jurisdiction to advance the cause of justice. Admittedly, the arbitrator in this case examined some witnesses on behalf of the Plaintiff behind the back of the Defendants. Admittedly, the arbitrator in this case examined some witnesses on behalf of the Plaintiff behind the back of the Defendants. It is also evident from the records that he did not allow the Defendants to cross-examine the said witnesses or to lead rebuttal evidence to repel the effect of the evidence so adduced by the Plaintiff before him. Moreover, the arbitrator applied his personal knowledge in deciding the dispute and never allowed the parties to know what impressions or assumptions he had drawn from his personal knowledge about the subject matter of the dispute, and never afforded an opportunity to the parties to correct his personal impressions, conceptions and assumptions about the relevant matters. The Court below has misconstrued the effect of the said material facts, misdirected itself by slighting the same, and has failed to take into account the cumulative effect of all that on the award passed in this case. The manner in which the arbitrator has exercised his jurisdiction and the Courts below have disposed of the matter occasion a failure of justice causing injury to the party against whom the award and the decisions are given. So this is a fit case which requires interference of this Court u/s 115, Code of Civil Procedure. On the above considerations I do not find any merit in he submission of Mr. Misra questioning the jurisdiction of this Court to interfere with the impugned order. 11. For reasons stated above, the orders of the Courts below are set aside. As the arbitrator has legally misconducted himself in giving his award the same has to be and is hereby set aside. The arbitrator has indicated bias against the Petitioner, and the latter's apprehension against the impartiality of the arbitrator cannot be ruled out. So the arbitrator has to be and is hereby discharged. The Petitioner, neither in this Court nor in the Courts below, urged for the revocation of the arbitration agreement. Accordingly, the trial Court before whom the suit was pending should appoint another arbitrator asking him to submit his award in respect of the disputes in question within as short a time as possible. 12. The L.C.R. be sent back to the trial Court who shall deal with the matter in accordance with law and the directions given above. The Civil Revision is allowed. Each party to bear his own costs of this Court. Final Result : Allowed