Judgment ( 1. ) THE contractor has assailed the judgment passed by Fifth additional District Judge, Bhopal in Arbitration Case No. 93/2002 setting aside the award dated 11. 2. 2002 passed by arbitrator Shri Chandar J. Lalchandani. ( 2. ) M/s CICON Environment Tech. Ltd. (hereinafter to be referred to as CICON Ltd.) awarded work of construction of waste to energy project at Bhandewadi, Nagpur to M/s MSK projects (India) Ltd as per LOI dated 16. 12. 1999. The contract value was Rs. 460 Lakhs. The work was required to be completed within ten months reckoned from the date of issuance of LOI, date of completion was 15. 10. 2000. The dispute arose between the parties, consequently Shri chandar J. Lalchandani came to be appointed as Arbitrator. The contractor claimed a sum of Rs. 1,98,80,629. 17/-along with pendente lite interest @ 24% from 30. 4. 2001 till realization. The Arbitrator passed an award on 11. 2. 2002 awarding a sum of Rs. 67,77,215/-along with interest @ 16% amounting to Rs. 25,51,353/-and cost of Arbitration Rs. One lakh. ( 3. ) AGGRIEVED by award passed, an application was filed by the respondent CICON Ltd. under section 34 of the arbitration and Conciliation Act, 1996 (hereinafter to be referred to as Act of 1996 ). It was submitted that the agreement entered into was item rate contract which specifically dealt with the mobilization and demoblization under clause 18, 18. 1 and 18. 2. The respondent demobilized the site in the month of August 2000 without written permission of site incharge of the petitioner and raised a dispute on 14. 8. 2000 that he has completed job to the extent of Rs. 28 Lakhs only and further claimed losses on account of overhead and profit due to abnormal delay, depreciation and interest on delayed payment, interest on security deposit, etc. , due to non availability of drawings or non payment of the bills by the petitioner etc. On 7. 9. 2000 the contractor terminated the contract and invoked the arbitration. A detailed reply was submitted before the Arbitrator as to the claim raised by the contractor. The claims raised by the contractor did not fall within the ambit of the item rate contract, consequently the Arbitrator had no jurisdiction to pass the orders on the claims put forward by the contractor as it was not provided in the agreement. A detailed reply was submitted before the Arbitrator as to the claim raised by the contractor. The claims raised by the contractor did not fall within the ambit of the item rate contract, consequently the Arbitrator had no jurisdiction to pass the orders on the claims put forward by the contractor as it was not provided in the agreement. The matter could have been settled as per clauses of the agreement, no breach was committed. The sole arbitrator did not act impartially, no opportunity of hearing was afforded. An application under section 12 of the Act of 1996 was moved, there was a prayer to the sole arbitrator for withdrawing from the said arbitration. The application was dismissed while passing the award passed in favour of contractor. The arbitrator has awarded the relief which was not even prayed by the contractor. The arbitrator has acted beyond the terms of the agreement while passing the award. Principles of natural justice were not adhered to, proper opportunity of hearing was not afforded. The arbitrator did not give proper and equal treatment to the parties. The arbitrator has also not followed mandate of law under section 12 of the Act of 1996 by not disclosing in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality to CICON Ltd. The entire conduct of the arbitrator has created reasonable doubt. The arbitrator has failed to consider that contractor has failed to prove the loss of overhead and profits by leading any evidence, certain disputes were not referable to the arbitration. The arbitrator has failed to give any finding on the objection, which demonstrate bias and malafide. ( 4. ) THE contractor filed two replies on 29. 7. 2002 and 26. 7. 2003 and an affidavit dated 13. 11. 2003 contending that he mobilised to the construction site heavy machinery and personnel and commenced the construction. The drawings regarding the construction were to be supplied by the petitioners to the contractor, hence contractor found it impossible to continue with the execution of the contract and terminated the same on 7. 9. 2000. The sole arbitrator was appointed by mutual consent, full opportunity was afforded by the arbitrator, rules of natural justice were followed. The drawings regarding the construction were to be supplied by the petitioners to the contractor, hence contractor found it impossible to continue with the execution of the contract and terminated the same on 7. 9. 2000. The sole arbitrator was appointed by mutual consent, full opportunity was afforded by the arbitrator, rules of natural justice were followed. As there was failure on the part of the contractor to perform the work assigned to him, hence he had terminated the contract, no case was made out to interfere in the award passed by the arbitrator. ( 5. ) THE Additional District Judge as per impugned judgment has found that the Arbitrator had failed to disclose the circumstances referred to in Section 12 of the Act of 1996, certain letters have been referred to indicating that the arbitrator had acted on behalf of the contractor in the same contract, otherwise also he has not acted fairly while conducting the proceedings. He has also failed to consider various clauses of the agreement which were necessary to be considered. Letter (D-1) dated 26. 11. 98 filed before the district Court has also been taken into consideration which indicated interest of the arbitrator in the contract. There was violation of section 12 of the Act of 1996. It was not shown that correspondence (D-1) was known to the CICON Ltd. Application dated 24. 11. 2001 should not have been returned by the arbitrator, it ought to have been taken on record, patent illegality was committed, thus the award is opposed to public policy and is required to be adjudged void. Appointment of independent arbitrator has been directed. The contractor has been required to appoint any independent arbitrator to resolve the dispute by mutual consent, against the aforesaid judgment rendered by the court below the appeal has been preferred by the contractor. ( 6. ) SHRI V. R. Rao, learned Sr. counsel appearing with Shri s. R. Singh for appellant has mainly submitted that the decision rendered by the court below as to bias of the arbitrator and he did not act independently, is bad in law. He has placed implicit reliance on proceedings dated 3. 11. ( 6. ) SHRI V. R. Rao, learned Sr. counsel appearing with Shri s. R. Singh for appellant has mainly submitted that the decision rendered by the court below as to bias of the arbitrator and he did not act independently, is bad in law. He has placed implicit reliance on proceedings dated 3. 11. 1999 in which arbitrator Shri Chandar J. Lalchandani had acted and participated on behalf of the contractor before issuance of even LOI he had participated on behalf of contractor, thus it was well known to the CICON Ltd. that Shri Chandar J. Lalchandani was acting on behalf of the contractor in the matter of grant of contract, knowing fully well the aforesaid fact his appointment was made as arbitrator by mutual consent of the parties, thus it was not necessary to disclose the aforesaid fact by the arbitrator, whatever interest arbitrator had in the contract, was already known to the cicon Ltd. as such no misconduct much less legal misconduct was committed. After application was moved under section 12 and 13 of the Act of 1996, further opportunity was given of hearing, thus Arbitrator had adopted fair procedure while passing the award, he has dealt with the application while passing the award also and has observed that false allegations were levelled against him, thus award could not have been set aside on the ground of bias. The award was otherwise valid and should not have been interfered with by the court below. ( 7. ) SHRI Naman Nagrath, learned counsel appearing with Shri sanjeev Mishra, for respondent while supporting the judgment setting aside the award submitted that it is apparent from communication (Ex. D-1) that the arbitrator was having interest in the contractor. A reading of letter (D-1)makes it clear that he was not a fit person to act as an arbitrator, this fact should have been disclosed in writing as per mandate 12 of the act of 1996. Even if there is proposal to appoint the arbitrator, there is a mandate to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Even if there is proposal to appoint the arbitrator, there is a mandate to disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality. Even when application was moved the arbitrator did not disclose any facts and did not decide the application, on the other hand ordered the arguments to be made further otherwise he was going to pass the award and in the award it was falsely suggested by the arbitrator that the allegations made against him were false, in fact he ought to have disclosed his interest in writing while passing the award and before entering into the arbitration. In the circumstances the conduct of the arbitrator of returning the objection dated 24. 11. 2001 and not taking it on record also indicates his unfairness in action. Various clauses which were necessary to be considered before passing the award whether the effect of delay was covered under the item rate contract, thereafter decision should have been rendered, whether any claim could have been awarded in view of the terms of the agreement, there was failure to consider the arbitrability of certain claims made as they were not within the realm of agreement entered into between the parties, the arbitrator has exceeded the jurisdiction while awarding the amount inclusive of five times of interest then claimed by the contractor. He has also referred decisions with respect to bias and when there was reasonable ground to infer, bias decision rendered by person acting with bias, is nullity, thus the judgment of the court below calls for no interference in the appeal. ( 8. ) THE main question agitated at bar is about the bias of the arbitrator. It is not in dispute that the arbitrator had acted as representative of the contractor in the meeting dated 3. 11. 1999, his presence is mentioned in the proceedings dated 3. 11. 1999. After passing of the award letter (Ex. D-1) dated 26. 11. 98 was filed before the court below, genuineness of which is also not in dispute. The letter (D-1) dated 26. 11. 1998 is quoted below. Khialdas constructions 26. 11. 1998 the MSK Projects baroda Kind Attn : Ashok Khurana please refer our discussion regarding Waste to Energy Project at nagpur. D-1) dated 26. 11. 98 was filed before the court below, genuineness of which is also not in dispute. The letter (D-1) dated 26. 11. 1998 is quoted below. Khialdas constructions 26. 11. 1998 the MSK Projects baroda Kind Attn : Ashok Khurana please refer our discussion regarding Waste to Energy Project at nagpur. We are leading construction company of the state working in the field of infrastructure developments like swwage treatment, water supply and building projects. Recently we met CICON Officials they are executing waste to Energy project for Enbee infrastructure in nagpur and are in lookout for reputed civil contractor. The total project cost as per their estimate is 11 to 12 crore for civil. If you are interested in doing the job we may jointly complete this job. Please confirm you interest so that we can purchase the bid document. Waiting for your reply regards sd/ (Chandar Lalchandani) (Proprietor) It is apparent from the aforesaid letter dated 26. 11. 1998 that the arbitrator had indicated his willingness to complete the job jointly with the contractor even before the bids were made the arbitrator had asked the CICON Ltd. options in order to complete the job on joint basis. The arbitrator had pointed out that he was having the leading construction company of the State. As a matter of fact in the aforesaid background the arbitrator ought not to have accepted the arbitration, but he not only accepted it but failed to carry out the obligation enjoined upon him under section 12 (1) of the act of 1996 which provides that 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". It was necessary for him to disclose his earlier participation as representative of contractor as well as writing of letter (D-1) and what had happened to the offer made by him in order to be styled as an independent or impartial arbitrator. The mandate cast to disclose in writing, cannot be ignored or overlooked by mere fact that he had participated as representative of the contractor in one of the meeting before issuance of LOI and it was known to the cicon Ltd. Letter (D-1) disclosed that arbitrator had proposed much more relation ship then being merely a representative of the contractor. The mandate cast to disclose in writing, cannot be ignored or overlooked by mere fact that he had participated as representative of the contractor in one of the meeting before issuance of LOI and it was known to the cicon Ltd. Letter (D-1) disclosed that arbitrator had proposed much more relation ship then being merely a representative of the contractor. It was necessary to make disclosure in writing of all the relevant facts by the arbitrator before he accepted the appointment. Subsection 2 of section 12 makes the statutory mandate further graphic and cast mandate that the arbitrator from the time of his appointment and through out 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, here the arbitrator did not disclose in writing but when application under section 12 read with section 13 of the act of 1996 was moved, he did not decide it by a reasoned order, his conduct was of avoidance to disclose in writing, he did not reject and rather asked by writing a letter on 15. 1. 2002 that further arguments should be made before him within seven days failing which he was going to pass an award. At this juncture also when he was specifically required to show his interest as there was serious allegations of bias cast on him he failed to carry out the mandate of even sub section 2 of section 12. Sub section 3 of section 12 makes it clear that the arbitrator may be challenged only if circumstances exist that give rise to justifiable doubts as to his independence or impartiality or he does not possess the qualifications agreed to by the parties. Parties may challenge an arbitrator appointed by him only for reasons of which he becomes aware after the appointment has been made. Ex. (D1)letter has come to the knowledge of the CICON Ltd. after the passing of the award. Section 12 of Arbitration and conciliation Act is quoted below : 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. Section 12 of Arbitration and conciliation Act is quoted below : 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. (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. (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 possess the qualifications agreed to by the parties. (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. ( 9. ) IT is apparent that there was violation of provisions of sub section 1 of section 12 as the arbitrator has failed to disclose in writing the circumstances likely to give rise to justifiable doubts as to his independence or impartiality, he ought to have disclosed his interest in the contractor and what was finalized pursuant to his proposal in the letter Ex. D-1, not only that when he was required to do so during the proceedings when the application was filed, it was mandatory under subsection 2 of section 12 for the arbitrator to disclose fairly in the proceedings that he had acted as representative of contractor and had earlier made correspondence in order to indicate that whether the contractor and he worked jointly in the work and his capacity in which he represented the contractor, whether he was having financial interest and to what extent as no person would act as representative simplicitor without having some pecuniary interest, disclosure of which was absolutely necessary. It is also not in dispute that arbitrator was also one of the bidder but his bid was not accepted, it was necessary to disclose all the facts of collaboration and nature of representation in order to make it clear that arbitrator was not acting hands in gloves with the contractor and also to clarify that he was not having any kind of financial interest in the work in question. The arbitrator has cursorily dealt with the application filed under section 12 read with section 13 of the act of 1996. He has gone to state that he was not having bias and allegation was false, but what he was expected to disclose under section 1 of section 12 before entering into the arbitration and later on during the course of arbitration as per mandate of subsection 2 of section 12, he failed to disclose. In all fairness it was expected of the arbitrator to disclose the facts but he has tried to conceal them for the reasons best known to him thus the arbitrator was clearly a guilty of suppressio veri and suggestio falsi inasmuch as he has stated that allegation made as to his interestingness in the contractor was false, the letter (D-1) and the conduct was sufficient to put reasonable apprehension in the mind of party as to bias entertained by the arbitrator. There was possibility of his decision being influenced by close association with the contractor, in all fairness the arbitrator ought to have disclosed all these facts and ought not to have drawn total curtain over it. The Apex Court in S. Parthasarathi Vs. State of Andhra Pradesh - AIR 1973 SC 2701 has laid down that question whether a real likelihood of bias existed is to be determined on the probabilities to be inferred from the circumstances by court objectively, or, upon the basis of the impressions that might reasonably be left on the minds of the party aggrieved or the public at large. The tests of "real likelihood" and "reasonable suspicion" are really inconsistent with each other. The court must look at the impression which other people have. The justice must not only be done but seem to be done. If right minded persons would think that there is real likelihood of bias on the part of an inquiring officer, he must not conduct the enquiry; nevertheless there must be a real likelihood of bias. Surmise or conjecture would not be enough. There must exist circumstances from which reasonable men would think it probable or likely that the inquiring officer will be prejudiced against the delinquent. In a. K. Kraipak and others Vs. Surmise or conjecture would not be enough. There must exist circumstances from which reasonable men would think it probable or likely that the inquiring officer will be prejudiced against the delinquent. In a. K. Kraipak and others Vs. Union of India and others AIR 1970 SC 150 the Apex Court has held that it is against all canons of justice to make a man judge in his own cause. There was participation by the member in the deliberation of the selection board, thus it was held that he was having conflict between his interest and duty. Under those circumstances it is difficult to believe that he could have been impartial. The real question is not whether he was biased. It is difficult to prove the state of mind of a person, therefore, what has to be seen is whether there is reasonable ground for believing that he was likely to have been biased, mere suspicion of bias is not sufficient, there must be a reasonable likelihood of bias. In deciding the question of bias, human probabilities and ordinary course of human conduct has to be taken into consideration. It was in the interest of naqishbund to keep out his rivals in order to secure his position from further challenge. Naturally he was also having interest in safeguarding his position while preparing the list of selected candidates. The final list prepared by the selection board was held to be vitiated. In Ranjit Thakur Vs. Union of India and others - AIR 1987 SC 2386 , it has been held by the Apex Court that it is the essence of judgment that it is made after due observance of the judicial process that the court or Tribunal passing it observes, at least the minimal requirements of natural justice is composed of impartial persons acting fairly and without bias and in good faith. A judgment which is the result of bias or want of impartiality is a nullity and the trial "coram non judice". Reliance was placed on the decision of Privy Council in Vassiliades Vs. Vassiliades, air 1945 PC 38. 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. Reliance was placed on the decision of Privy Council in Vassiliades Vs. Vassiliades, air 1945 PC 38. 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. Thus tested the conclusion becomes inescapable that, having regard to the antecedent events the participation of respondent 4 in the Court-Martial rendered the proceedings coram non judice. In Oil and Natural Gas corporation Ltd. Vs. SAW Pipes Ltd.- AIR 2003 SC 2629 the Apex Court has observed that the phrase public policy of india used in S. 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy conotes some matter which concerns public good and the public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. The award which is on the face of it patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Award can be set aside if it is contrary to fundamental policy of India law; or the interest of india or justice or morality or in addition if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award can be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void. ( 10. ) CONSIDERING the aforesaid decisions and facts of the instant case we are of the considered opinion that the arbitrator entertained bias, he failed to carry out the statutory obligation of disclosure as mandated under sections 12 (1) and 12 (2) of the Act of 1996. The award passed is against the justice, morality and fundamental policy of Indian law. ) CONSIDERING the aforesaid decisions and facts of the instant case we are of the considered opinion that the arbitrator entertained bias, he failed to carry out the statutory obligation of disclosure as mandated under sections 12 (1) and 12 (2) of the Act of 1996. The award passed is against the justice, morality and fundamental policy of Indian law. The arbitrator was not independent person and he ought to have disclosed all the facts which would have affected his appointment as arbitrator but he has failed to do so and rather, was interested in suppressing the material facts and when he was asked to do so by way of filing an application, he did not decide the application also and violated mandate of section 12 (1) and 12 (2), consequently we find that decision rendered by the court below of setting aside the award is proper. ( 11. ) SHRI V. R. Rao, learned Sr. Counsel appearing for appellant has also submitted that the issues framed by the court below were "whether the making of the impugned awards is induced or affected by fraud or corruption and whether the impugned award considered issues which were not raised by the non-applicants ?" thus on the question of bias, no specific issue was framed. In our opinion the parties were fully aware that there was serious allegations of bias against the arbitrator. Writing of letter by the arbitrator to the contractor (D-1) has not been disputed. In view of the aforesaid admitted fact and also considering the pleadings of the parties, there was no prejudice caused and the question of bias was covered within the ambit of issue No. 1, thus we are not able to accept the submission raised by Shri V. R. Rao, learned Sr. Counsel appearing for appellant. Consequently we affirm the the decision rendered by the court below. ( 12. ) WITH the consent of the counsel for the parties we appoint shri Justice S. C. Pandey, Retd. Judge of this Court to make arbitration in the matter. It would be open to him either to undertake case at Jabalpur or at Bhopal and fix his fees and expenses. Let record of arbitrator and copy of this order be sent to Justice S. C. Pandey. Let Justice Pandey make arbitration and pass an award as expeditiously as possible. ( 13. It would be open to him either to undertake case at Jabalpur or at Bhopal and fix his fees and expenses. Let record of arbitrator and copy of this order be sent to Justice S. C. Pandey. Let Justice Pandey make arbitration and pass an award as expeditiously as possible. ( 13. ) RESULTANTLY, we find the appeal to be without merit, same is dismissed. We leave the parties to bear their own costs as incurred of this appeal.