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Rasal Dilip Damodar v/s Srei Infrastructure Finance Limited & Another

    AP No. 4 of 2010 & AP No. 158 of 2010
    Decided On, 14 May 2010
    At, High Court of Judicature at Calcutta
    By, THE HONOURABLE MR. JUSTICE SANJIB BANERJEE
    For the Hirer: Jishnu Chowdhury, D. Sen, Advocates. For the Guarantor: Dhruba Ghosh, Ms. Sharmistha Dhur, Advocates. For the Financier: Swatarup Banerjee, Ms. Archana Chowdhury, Biplab Majumdar, Advocates.


Judgment Text
SANJIB BANERJEE, J: –

The same award obtained by a finance company has been challenged in the two petitions; the first in point of time by the guarantor and the other by the hirer. Some of the grounds urged are common. The primary challenge in both petitions is that the award is in utter derogation of the principles of natural justice. The hirer adds that the award has been rendered by a machine programmed to routinely churn out mindless awards completely in favour of this and other finance companies.

Under an agreement of November 14, 2000 the respondent financier made available substantial funds for the hirer acquiring a tractor with trailer manufactured by Volvo India Ltd. The agreement recorded that the acquisition cost of the asset was Rs.39,75,000/-. The tenure of the agreement was for 55 months beginning January, 2001 and ending July, 2005. The monthly payments, as would appear from the first schedule to the agreement, were to be made on staggered basis: Rs.1,20,000/- every month in the year 2001; Rs.1,16,000/- every month in the year 2002; Rs.1,10,000/- every month in the year 2003; Rs.1,06,000/- every month in the year 2004; and, Rs.1,00,000/- per month for the seven months in the year 2005. Clause 10(a) of the agreement provided that the hirer would have the asset insured at his cost for an amount equal to its full insurable value in the name of the finance company. Clause 10(b) required the hirer to hand over the policies of insurance to the finance company. The agreement regarded the finance company to be the owner of the vehicle and clause 10(j) thereof recorded that if the vehicle was destroyed or damaged 'to such an extent as to be in the opinion of the Owner (finance company) incapable of economic repair then at the Owner’s sole discretion the Insurance monies payable under the said Insurance shall, at the option of the Owner be applied so far as possible in replacing the Equipment with another Equipment of similar type quality in which event the fresh Equipment shall be deemed to have been hired by the Owner under this Agreement and the hirer shall hold the same on hire purchase subject to the terms and conditions' of the agreement. Clause 11 of the agreement contemplated that the hirer would bear the entire risk of loss and damage to the vehicle for any cause whatsoever and that the obligations of the hirer under the agreement would not be affected by any loss or damage to the vehicle. Clause 18 of the agreement detailed the events of default and termination and clause 19 provided the remedies available to the financier upon any default. Clause 43 of the agreement recorded as follows:

'Any notice, letter or other communication sent to the Hirer or the guarantor whether by post or by messenger or by telegram at the respective last know (sic, known) addresses of the Hirer or the Guarantor shall be deemed to have been delivered and/or duly served on them or either of them as the case may be.'

The arbitration clause found at article 46 of the agreement contemplated the reference to the sole arbitration of a named arbitrator (the name having been filled in hand). The arbitration clause gave the arbitrator summary powers and recorded that no objection shall be taken 'on the ground that the Arbitrator so appointed is an employee of the owner or is in any way associated with the owner ….'

The clause recorded an agreement between the parties that the arbitrator 'need not give reasons in award.' The following sentence in article 46 appears to have escaped the attention of the challengers:

'The award shall be made in writing within four months after entering upon the reference or within such extended time as agreed upon by parties.'

It is the common case of the parties that the tractor-trailer met with an accident on November 18, 2000 near the Volvo workshop at Bhiwandi. The hirer says that the repair estimate for making good the tractor was assessed at over Rs.36 lakh which exceeded the price thereof of Rs.30.8 lakh. According to the parties the trailer suffered minor damage and could be used after repairs. The insurance claim for the tractor was processed. The finance company says that the trailer was repaired, subsequently sold and the sale proceeds appropriated by the finance company against its dues under the agreement. The guarantor appears to have received subsequent notice of the arbitration proceedings. The guarantor filed a written response to the statement of claim which he described as his 'say.' Apart from denying the contents of the statement of claim, the guarantor claimed that he had furnished a collateral security in the sum of Rs.5 lakh which was to earn interest. According to the guarantor, it was only when the guarantor sought repayment of the security together with interest thereon that the finance company refused to release the same. The guarantor, in such circumstances, instituted proceedings before the Nashik District Consumer Forum in the year 2007 which allowed the claim. The parties say that an appeal from the order of the District Forum resulted in the matter being remanded. The guarantor’s appeal is now pending before the National Commission. The guarantor claimed in his 'say' that the agreement was signed at Nashik and that no copy of the executed agreement had ever been issued to him prior to the appeal being filed from the order of the District Consumer Forum. The guarantor asserted that the agreement had been entered into with one Srei International Finance Ltd and the guarantor had not been informed as to the change of name of the finance company. The guarantor, a doctor by profession, says that he received the award dated September 9, 2009 from the arbitrator on October 22, 2009. At paragraph 4 of his petition the guarantor says that he received a copy of the statement of claim on or about January 25, 2009 and filed his counter-statement on or about February 5, 2009. The guarantor admits to having received intimation that a meeting in the reference had been fixed on July 31, 2009. The guarantor claims to have sent a telegraphic message on July 29, 2009, a copy whereof appears at page 110 of his petition. In the words of the telegraphic message, the guarantor claimed:

'Not received rejoinder copy. Hence, please send the same. Received your notice for attendance on 22/7/09. Unable to attend on 31st due to unavailability of train reservation. Please inform next date well in advance.'

The guarantor says that he did not receive any further intimation from the arbitrator before he was finally forwarded the award in October, 2009. The case of the hirer is slightly different. The hirer claims that on January 21, 2010 he was served with a copy of the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 by the guarantor, where the hirer is the second respondent. It is the hirer’s positive case that prior to receipt of the guarantor’s petition, the hirer had no inkling of any arbitration reference or of an award having been made against him therein. The hirer asserts that no copy of the award was forwarded to him and the copy of the award that he has appended to his petition has been prepared from the copy of the award appended to the guarantor’s petition.

It must be made clear here that the finance company has not questioned the maintainability of the guarantor’s petition on the ground of it being filed beyond the extended period as contemplated by Section 34(3) of the Act of 1996 read with the proviso thereto. At the hearing, the finance company has not questioned the authority of the court to receive the hirer’s petition for setting aside the award on the ground of delay, though the finance company’s underlying submission is that the hirer was aware of the arbitration reference and has mischievously feigned ignorance thereof.

After narrating the circumstances leading up to the execution of the agreement, the hirer has set out in his petition the events relating to the accident and the insurance claim. A copy of a letter dated January 8, 2001 issued by the finance company appears as part of Annexure 'E' at page 60 of the hirer’s petition. By such letter the finance company demanded information from the hirer relating to the processing of the insurance claim. The hirer has also relied on a letter dated January 7, 2003, a copy whereof appears as part of Annexure 'I' at page 67 of his petition, to demonstrate that such letter was issued on the letter-head of the hirer’s proprietorship concern that revealed that the address of such concern was not as indicated in the agreement. By such letter the hirer required the financier to take steps for the full and final settlement of the insurance claim and called upon the financier to intimate the hirer upon receipt of payment from the insurance company 'so that I can send a notice for getting overdue interest as well as shortage of claim amount if any …' The letter signed off by recording that the hirer had unconditionally accepted the voucher for discharge as the finance company had advised the hirer that the insurance company would not release the amount offered otherwise. The hirer, however, has admitted receipt of a letter of February 18, 2006 issued to his old address by which the hirer was informed that the insurance company had settled the claim at Rs.21,10,600/- which was well short of the total amount due to the finance company under the agreement even after appropriating the security deposit furnished by the guarantor, at Rs.9,21,250/-. Such letter detailed the claim of the finance company. The net amount financed was said to be the cost of the asset at Rs.39,75,000/-. The finance company claimed in such letter that it was entitled to Rs.61,24,000/- under the agreement. The calculations in the letter of February 18, 2006 gave credit to the payment of Rs.21,10,600/- received from the insurance company in May, 2003; an amount of Rs.8 lakh received by way of salvage value from Volvo India Ltd; the sum of Rs.4,25,000/- recovered from sale of the trailer; and, the security deposit of the guarantor that had swelled to Rs.9,21,250/-. The letter specified that the trailer had been sold in March, 2004. The net amount claimed was Rs.18,67,150/- plus delayed payment charges at the rate of Rs.1 per Rs. 1000/- per day of delay in payment. In the last two paragraphs of the letter, the financier invited both the hirer and the guarantor for an amicable settlement and reminded them that if the settlement failed the finance company would invoke the arbitration clause. The guarantor responded to the letter of February 18, 2006 by a writing of March 16, 2006. The guarantor claimed that prior to the receipt of the letter dated February 18, 2006, neither the hirer nor the guarantor had been intimated of the value of salvage received from Volvo India Ltd. The guarantor complained that the hirer and the guarantor had not been furnished copies of the agreement and that they were also unaware of the circumstances in which the trailer had been sold off for a meagre value of Rs.4.25 lakh.

The hirer claims that the arbitration proceedings were conducted behind his back; that no notice of the arbitration proceedings had been served upon him; and, that he did not receive a copy of the statement of claim or the copies of the documents allegedly adduced in evidence by the financier. At paragraph 35 of his petition, the hirer has claimed that by the time the hirer had executed the discharge voucher in connection with the insurance claim he had shifted from his old address. At paragraph 37 of the petition the hirer has contended that if notices of hearings had been issued by the arbitrator to the hirer’s old address it would have amounted to naught since the financier was fully aware of the changed address. The averments at paragraphs 35 and 37 of the petition have been dealt with at paragraphs 13 and 14 of the finance company’s affidavit to the hirer’s petition. There is no denial, at paragraph 13 of the affidavit, to the averment in the petition that prior to the hirer executing the discharge voucher on January 7, 2003 the hirer had shifted to his new address. At paragraph 14 of the affidavit, however, the finance company has denied that it was aware of the changed address of the hirer. Paragraphs 41, 42 and 43 of the hirer’s petition need to be especially noticed:

'41. It is clear from a perusal of the impugned award that the same has been made mechanically and is wholly bias in favour of SREI. The said impugned award is perverse, contrary to law and has been made at the behest of SREI with the sole intention of unjustly enriching SREI to the detriment of the petitioner and the intended guarantor.

'42. There is no arbitration agreement between the parties and the parties never intended any arbitration in any event. The Arbitrator had no jurisdiction whatsoever to entertain the purported claim of the respondent no. 1 inherently and lacked jurisdiction. Upon making enquiries, the petitioner has come to learn that the Arbitrator is a practicing Advocate in Calcutta who acts regularly as an arbitrator for various financial companies including the respondent no. 1 and has been recently passing awards in favour of the respondent no. 1 in a mechanical and unjust manner.

'43. The said Arbitrator is apparently completely bias and under the control of the respondent no. 1 and has not disclosed his connection with the respondent no. 1 before passing the alleged award. The said Arbitrator is thus not qualified to act as an arbitrator and the award is void, without jurisdiction and contrary to public policy.'

Paragraphs 41 to 45 of the hirer’s petition have been dealt with at 15 of the finance company’s affidavit. The said paragraph, just like the rest of the affidavit, is littered with bald denial of the relevant averments in the petition. Two sentences from paragraph 15 of the affidavit dealing with specific charges against the arbitrator and the likelihood of bias on the part of the arbitrator are set out:

'15. … I state that the allegation made by the petitioner against the Learned Arbitrator without any basis whatsoever and derogatory in nature, as such, this Hon’ble Court may be pleased to take note of the same. I deny and dispute that the Learned Arbitrator is biased or under the control of the respondent No. 1 or has not disclosed his connection with the respondent No. 1 before passing the award as alleged or at all. …'

There is, therefore, no denial by the finance company that the arbitrator in this case regularly acts as an arbitrator for various financial companies including this finance company. There is no denial to the assertion by the hirer that the arbitrator had been making awards in favour of this finance company in a mechanical and unjust manner. The second sentence of paragraph 15 of the finance company’s affidavit quoted above implies first that the arbitrator is not biased; secondly, that the arbitrator is not under the control of the finance company; and, that the arbitrator had disclosed his connection with the finance company before passing the award. Implicit in such statement is the admission of the arbitrator’s connection with the finance company. Taking a cue from the apparent admission on pleadings that the arbitrator acts regularly as arbitrator for various financial companies including this finance company, the hirer has called attention to what appears to be a reference number in several of the arbitrator’s documents pertaining to the reference. The hirer suggests that the reference number, AC – 555A, which is either scribbled in pencil in some documents or appears in the acknowledgement due cards and atop the minutes of the meetings that form part of the arbitrator’s records, may imply that it was the five hundred and fifty-fifth reference taken up by the arbitrator, whether or not it also implies that it was the five hundred and fifty-fifth reference pertaining to this finance company or its present advocate-on-record.

On the second day that the petitions were taken up, the finance company was called upon by court to produce copies of all the records and minutes relating to the reference that were in its possession. Copies of the minutes pertaining to meetings held on April 21, 2008, November 21, 2008, December 19, 2008, February 12, 2009, March 20, 2009 and July 31, 2009 have been produced. Only the minutes of the meeting held on December 19, 2008 and March 20, 2009 spill overleaf; the rest are single-page minutes. The minutes of all meetings save the meeting of July 31, 2009 are typewritten. The recording of the minutes of the meeting held on July 31, 2009 is by way of a computer printout. All the minutes bear the reference number AC-555A. There are two sets of minutes dated November 21, 2008, both claiming to be of the same meeting that appears to have commenced at 4.15 pm.

On the third day that these matters were taken up, the finance company was asked by court to request the arbitrator to make over the entirety of the records relating to the reference to court. An emissary carried the arbitrator’s records to court. The parties were permitted to go through the arbitrator’s records and prepare an inventory of the documents. The inventory reveals 18 sets of documents and four sealed envelopes as follows:

1. January 25, 2007 Letter of advocate representing the claimant referring disputes to arbitration. The statement of claim and copies thereof were forwarded. No copy of the letter was marked to the respondents.

2. January 29, 2007 Letter of the arbitrator forwarding a copy of the statement of claim to either respondent. Direction to file counter statement by April 26, 2007 also given. First meeting convened to be held on April 27, 2007.

3. April 27, 2007 Letter of arbitrator to the parties recording that no party attended the arbitration meeting held on that day. Reference adjourned till September 20, 2007.

4. + 4A September 20, 2007 Minutes of arbitration meeting. Reference adjourned till April 21, 2008. Two copies of minutes in the records.

5. April 21, 2008 Minutes of arbitration meeting. Reference adjourned to November 21, 2008.

6. +6A November 21, 2008 Two different sets of minutes of arbitration meeting. One set of minutes shows reference adjourned to February 12, 2009. The other set shows reference adjourned to December 19, 2008.

7. December 19, 2008 Minutes of arbitration meeting. Reference adjourned to February 21, 2009. February 5, 2009 ‘Say’ filed by the guarantor.

9. February 12, 2009 A three-paragraph statement verified by an affidavit seeking to amend paragraph 6 of the statement of claim.

10. February 12, 2009 Minutes of arbitration meeting. Reference adjourned to March 20, 2009.

11. 20th March 2009 Minutes of arbitration meeting. Reference adjourned to July 31, 2009.

12. July 3, 2009 Letter by advocate representing the claimant forwarding a copy of the rejoinder to the guarantor.

13. July 14, 2009 Letter by advocate representing the claimant forwarding a copy of the rejoinder to the guarantor.

14. July 16, 2009 Affidavit of service of Gautam Kumar Chakraborty affirmed on July 16, 2009 stating that on July 11, 2009 'a copy of the minutes of the meeting held by the Arbitrator' along with a copy of the statement of claim had been served personally at the address of the hirer. The affidavit claims that the hirer refused to accept service whereupon service was effected by affixing the copy of the minutes on the outer door of the premises.

15. July 27, 2009 Petition apparently filed by guarantor for adjourning the meeting scheduled on July 31, 2009. There is an endorsement that it was received on August 3, 2009. The petition is dated July 27, 2009, claims to have been prepared in Nashik and bears in print the reference no. AC-555A.

16. July 31, 2009 Minutes of arbitration meeting. Reference is closed.

17. September 9, 2009 Award in original.

18. September 9, 2009 Letter of the arbitrator forwarding the award to the respondents.

November 1, 2008 Sealed letter

February 27, 2009 Sealed letter

July 15, 2009 Sealed letter

October 12, 2009 Sealed letter

It appears from the arbitrator’s records that the first meeting in the reference was apparently held on September 20, 2007. The copy of the minutes relating to this meeting was, however, not produced by the finance company. The third paragraph of the minutes pertaining to such first meeting recorded that the next date fixed in the reference was April 21, 2008 and that the claimant was to serve a copy of the minutes of that meeting on the respondents to the reference 'by Regd. Post with A/D and to file Postal Receipt thereof.' The arbitrator fixed his remuneration. The claimant and the first respondent were to pay Rs.2000/- each to the arbitrator per sitting. The minutes of the meeting next shown to have been held in the reference on April 21, 2008 recorded in its opening paragraph that the minutes of the previous meeting had not been served on the respondents to the reference by the claimant through inadvertence. At the second paragraph it recorded the adjourned date of November 21, 2008 and a direction on the claimant to serve a copy of the minutes of the meeting held on April 21, 2008 on the respondents to the reference. The second paragraph can be understood to contain a direction on the financier to serve copies of the statement of claim on the respondents. The third paragraph recorded that '(n)o further or separate notice will be issued and it is made clear that if no one appears on behalf of the respondents the said meeting will be proceeded exparte without any further reference and the meeting will be closed.' The same refrain is repeated in the minutes of all further meetings save the last on July 31, 2009 when the reference was closed.

Before moving to the minutes relating to the further meetings in the reference, the minutes of the meeting held on April 21, 2008 need to be analysed in the context of the principal ground urged by both challengers that the entire reference was conducted with scant regard to the principles of natural justice. It is evident from the minutes of the meeting said to have been held on April 21, 2008 that the minutes of the previous meeting said to have been held on September 20, 2007 had not been served on the respondents. It is also apparent that rather than the arbitrator forward the minutes to the other parties, the arbitrator delegated the function of giving notice to another party in the adversarial proceedings. To boot, the minutes recorded that no further or other notice for the next meeting would be issued and that the arbitrator would proceed ex parte and close the reference. The recording that the arbitrator would proceed ex parte clearly apprehended that the respondents may not attend the meeting convened next and betrayed the state of the mind of the arbitrator since there was no corresponding warning to the claimant that the reference would stand dismissed upon the claimant’s absence on the next date. The question that naturally arises is as to whether the respondents to the reference were given any chance to attend the next meeting or the recording of the minutes foretold something sinister. The minutes of the meeting said to have been held on April 21, 2008 did not require the minutes of the previous meeting to be served on the respondents. After all, the previous minutes had ostensibly stipulated the remuneration of the arbitrator, though it was without consultation with the respondents and did not require the second respondent to the reference (the guarantor) to pay any part of the remuneration. It is also of some significance that by a letter of January 29, 2007 the arbitrator claims to have forwarded copies of the statement of claim to the respondents to the reference and directed them to file their counter-statements and, upon the respondents seemingly failing to appear on the date fixed for the first hearing on April 27, 2007, another letter was apparently addressed to the respondents on the same day fixing September 20, 2007 as the next date in the reference without reminding the respondents to the reference to file their counter-statements. It is of further significance that though the second paragraph of the minutes of the meeting said to have been held on September 20, 2007 recorded that the arbitrator felt that it would not be proper to proceed on such day 'without giving another notice upon the respondents either to file their counter statement or to make their submission', no notice to such effect was, in fact, issued. There is no indication as to why the reference was adjourned for a period of seven months at the meeting said to have been held on April 21, 2008. There had been no indication as to why the reference had also been adjourned for seven months after September 20, 2007. Finance companies have no interest in dragging any arbitral reference where they are the claimants. Finance companies do not generally allow defaulting hirers much breathing space. The minutes of the meetings said to have been held on September 20, 2007 and April 21, 2008 did not give any reason for such unusual hiatus in either case. There is nothing in the records of the arbitrator to show any attempt at service of any notice relating to the reference on the respondents to the reference prior to November 1, 2008. The last instalment payment in terms of the agreement, it must be remembered, fell due in July, 2005. If there was no commencement of arbitral proceedings prior to the relevant date in July, 2008, there may have been a possible argument that the claim was barred by the laws of limitation. Curiously, not only is no copy of the claimant’s letter of January 25, 2007 invoking the arbitration agreement not issued to the respondents to the reference, there are no postal receipts relating to the letters dated January 29, 2007 and April 27, 2007 said to have been issued by the arbitrator to the hirer and the guarantor. Again, the original copy of the minutes, in the arbitrator’s records, of the meeting shown to have been held on April 21, 2008 contains an endorsement at the top thereof that it had been received on behalf of advocate representing the claimant on October 31, 2008. It is only subsequent to October 31, 2008 that the postal records, whether of despatch or of service, are almost meticulously maintained. Coincidentally, it is the guarantor’s case that he received a copy of the statement of claim in January, 2009.

The records of the arbitrator as produced in court do not rule out that there was nothing at all done prior to November, 2008 or even thereafter. There is substance in the challengers’ insinuation that the documents relating to the reference produced by the arbitrator and the finance company may have been fabricated or brought into existence or ante-dated to present a show of the reference having commenced long prior to it actually did. Section 21 of the 1996 Act provides that unless otherwise agreed by the parties 'the arbitral proceedings … commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.' Usually, such request is made by a party to the agreement to another. Ordinarily, it is expected that if the arbitration agreement names an arbitrator, the reference would be commenced by a party requesting the arbitrator to enter upon reference, with a copy of such letter served on the other party or parties to the arbitration agreement. Such timetested and salutary practice was abandoned in this case. It may be assumed for the moment, that the arbitrator’s jurisdiction is invoked ex parte by a party to the agreement and the arbitrator may thereafter inform such fact to the other party or parties to the agreement. Based on such assumption, the arbitral proceedings would commence only upon the other party or parties to the reference being made aware of the reference by the arbitrator. There is no evidence in the arbitrator’s records that the arbitrator’s letters said to have been issued on January 29, 2007 and April 27, 2007 were served on the respondents to the reference. The copies of either of these letters bearing the arbitrator’s signature in original are part of the arbitrator’s records. On the face of such letters there is nothing indicated as to the manner of service thereof. In the award the arbitrator has recorded at the fourth paragraph that he had issued notice of the proceedings 'to the respondents by Registered Post with Acknowledgement Due.' Such recording in the award is belied by the lack of postal receipts relating to the service or attempted service of either of the letters said to be dated January 29, 2007 and April 27, 2007. Indeed, there is nothing in the arbitrator’s records to show the service or attempted service on the respondents to the reference of any document relating to the reference prior to November 1, 2008. It is no coincidence, in the circumstances, that the opening paragraph of the minutes of the meeting said to have been held on April 21, 2008 recorded that the minutes of the previous meeting (shown to have been held on September 20, 2007) had not been sent by the claimant to the respondents through inadvertence. Neither the arbitrator’s records nor anything that the finance company has brought to this court would show even the attempted despatch of any letter or notice or document relating to the reference for any period prior to November 1, 2008. It is thus obvious that the financier’s ruse of having failed to forward copies of the minutes relating to the previous alleged meeting, as recorded in the minutes of the meeting shown to have been held on April 21, 2008, was a recording of convenience to set up a charade of the reference having commenced prior to November 1, 2008 with the obvious motive of seeking to preclude a stand that by November, 2008 there was no live claim to go to arbitration.

In view of Section 21 of the 1996 Act, the arbitral proceedings could not commence before the date on which a request for the reference was received by either the hirer or the guarantor. At the very least, the reference could not have commenced before the hirer or the guarantor had been made aware by the arbitrator or by the financier that the financier had referred the disputes to arbitration. Other than the bald denial all over its affidavits in response to the challengers’ charge that they had no notice of the commencement of the arbitration proceedings, the finance company has produced nothing to demonstrate that the hirer had any notice of the commencement of the arbitral proceedings or that the guarantor knew of the reference prior to January, 2009. If a party asserts that it did not receive a notice that it ought to have received and another party disputes such assertion, it is incumbent on the second party to adduce evidence as to service of the notice for its denial to be worthy of any credence. The finance company has altogether failed to discharge such onus. To repeat, neither affidavit of the finance company in response to the two petitions included a copy of any document, whether relating to the reference or otherwise. It was only in a subsequent supplementary affidavit that a copy of a letter dated February 18, 2006 was disclosed. As noticed above, such letter had already been disclosed in the present proceedings by one of the challengers. The threat contained in the closing paragraph of such letter, by which the finance company attempted to induce the hirer and the guarantor to amicably settle the matter, cannot be missed:

'However if you choose to ignore the invitation for an amicable settlement, then the only option that would survive the failure of the parties to the contract would be to invoke the provisions of the sole arbitration clause which stipulates Kolkata to be the place for conducting the arbitration proceedings on the disputes and differences that would deemed to have erupted'

That letter was certainly not a notice invoking the arbitration agreement, but it merely reminded the hirer and the guarantor that the finance company could in future invoke the arbitration clause. A notice of invocation of an arbitration agreement is quite distinct from the assertion of a right to invoke the arbitration agreement at a future date upon the happening of an event. After April 21, 2008 the next meeting in the reference was shown to have been held on November 21, 2008 for which two rival sets of minutes have been produced by the finance company and appear to exist in the arbitrator’s records that have been forwarded to court. In the first of the minutes there was no mention of the notice of the previous minutes of the meetings having been forwarded to the respondents to the reference. The first set of minutes recorded in the opening paragraph that the respondents to the reference were not represented and no counter-statement had been filed on their behalf. The second paragraph recorded that the reference stood adjourned till December 19, 2008 and that the time to file the counter-statement stood enlarged till December 18, 2008. The third paragraph was the rubber-stamp recording that no further or separate notice would be served and if the respondents were not represented on the next date the reference would be conducted ex parte and closed. The last paragraph contained a direction on the first respondent to the reference (the hirer) to pay the arbitrator’s remuneration for the sittings said to have been held on September 20, 2007, April 21, 2008 and November 21, 2008. The first set of minutes of the meeting shown to have been held on November 21, 2008 is conspicuous in its failure to record how a notice relating to the adjourned date would be issued to the respondents to the reference. Unlike the previous occasions, the claimant was not directed to serve a copy of the minutes of the meeting shown to have been held on November 21, 2008 on the respondents to the reference and there is nothing in the arbitrator’s records to suggest that the arbitrator issued any notice for the next meeting on the respondents to the reference.

In the rival set of minutes relating to the meeting shown to have been held on November 21, 2008, the first paragraph recorded the submission on behalf of the claimant that 'the envelopes containing the Notices of the meeting' sent to the respondents to the reference had been returned unserved. The second paragraph recorded that the reference stood adjourned to February 12, 2009 and a direction on the claimant to serve a copy of the minutes 'of today’s meeting along with copy statement of claim upon the respondents personally and to file an Affidavit of Service to that effect.' What is evident from the second set of minutes relating to the same meeting of November 21, 2008 is that there was no direction to serve the minutes relating to the previous meetings for the respondents to the reference to be made aware of what transpired thereat. It is also evident that the second set of minutes required personal service to be effected.

The following meeting in the reference was shown to have been held on December 19, 2008 which was the adjourned date specified in the first set of minutes relating to the meeting shown to have been held on November 21, 2008. That would imply that the second set of minutes relating to the meeting held on November 21, 2008, which fixed the next meeting on February 12, 2009, has to be disregarded. That would entail that there was no element of any intimation given to the respondents to the reference of the next meeting seemingly convened to be held on December 19, 2008. That the second set of meetings has to be dismissed out of hand is also apparent from the fact that nothing in the arbitrator’s records reveals that personal service as directed by the second set of minutes had been effected or that an affidavit of service in such regard had been filed by the claimant.

The rival sets of minutes of a meeting in a reference reflecting varying contents would indicate something amiss or, in the present context and given the state of the records, the existence of the rival sets of minutes pertaining to the same meeting would suggest something sinister. The first set of minutes shows that the next meeting had been convened to be held on December 19, 2008. The other set of minutes recorded the adjourned date to be February 12, 2009. It is a matter of absurd coincidence that the next two meetings in the reference after November 21, 2008 were shown to have been held on December 19, 2008 and February 12, 2009. It is reasonable in the circumstances to infer that the alternative sets of the minutes of the meeting shown to have been held on November 21, 2008 had been prepared for use of either according to the choice of the finance company or, worse still, according to the exigencies of the situation. It is also possible to deduce that a sudden direction by the court on the finance company to immediately produce the records relating to the reference that were in its possession, precluded the sifting of the records or the discarding of the unnecessary set of minutes.

The direction of the court to promptly produce the records on either occasion meant that the finance company and the arbitrator had to produce the full records relating to the reference at short notice even while the matter continued in court. The finance company produced whatever records it had relating to the reference within an hour or so. The arbitrator’s records were also brought within a few hours after they were sought. Though the arbitrator’s records were sought and produced on a subsequent day, the 'mistake' had already taken place in the finance company’s bunch of papers having already been handed over to court with two rival sets of minutes for the meeting said to have been held on November 21, 2008.

The minutes relating to the meeting shown to have been held on December 19, 2008 recorded that 'it appears from the records' that the envelopes containing the notice of the meeting and the copy of the statement of claim sent to the hirer had been returned unserved. It cannot be appreciated as to how such fact could appear from the records since there was nothing recorded in the minutes to show that the claimant had filed the envelopes to make it part of the records. The first paragraph also records that the claimant sought a month’s adjournment to serve the minutes the meeting held on December 19, 2008 on the respondents personally and to file an affidavit of service. The second paragraph recorded the direction in terms of the claimant’s prayer and the reference was adjourned till February 12, 2009. The third paragraph recorded the usual line that no further or other notice would be issued. The fourth paragraph recorded the direction for the arrears remuneration of the arbitrator to be paid. The minutes of the meeting held on February 12, 2009 recorded that a counter-statement had been filed by post by the guarantor. The minutes did not record as to whether the previous minutes had been served on the respondents, personally or otherwise. No affidavit of service was recorded to have been filed. The claimant was permitted to take a copy of the guarantor’s counter-statement. The minutes closed with the usual observation that no further or separate notice would be issued and the consequence of the failure of the respondents to be represented on the next date. The minutes did not record any direction for service of a copy thereof on the respondents. It does not appear from the arbitrator’s records that a copy of the minutes was forwarded to the either respondent to the reference. The next meeting was fixed on March 20, 2009. The minutes of the meeting held on March 20, 2009 recorded that the claimant’s rejoinder to the counter-statement of the guarantor had been filed and a copy thereof had been forwarded to the guarantor. The minutes also noted a submission of the claimant that envelopes containing the notices of the meetings sent to the hirer had neither returned unserved nor had the acknowledgement due card in respect thereof been received. It is of significance that the minutes of the previous meeting held on February 12, 2009 recorded no direction on the claimant to effect service of the minutes of such meeting on the respondents. It is also of relevance that the minutes of the meeting dated March 20, 2009 did not refer to notice of such meeting having been issued to the guarantor. The minutes contained a direction on the claimant to serve a copy of the minutes thereof on the hirer personally along with the statement of claim and for an affidavit of service in that regard to be filed. There was neither any direction for serving the minutes on the guarantor nor is it evident from the arbitrator’s records that any other notice was issued to the guarantor.

However, the guarantor admits having received notice of the meeting convened to be held on July 31, 2009. The guarantor claims to have sent the telegraphic message, of which there is no existence in the arbitrator’s records. At the next meeting held on July 31, 2009 the reference was closed. The minutes of the final meeting in the reference recorded as follows:

'Mr. Majumder states that today the meeting has been fixed peremptorily for hearing but no one is appearing on behalf of the respondent No. 2 who has fled (sic, filed) his counter statement and the matter is pending for a long time. He also files an Affidavit of Service as per direction given by the Ld. Arbitrator. He further states that though the respondent No.2 has fled (sic, filed) his counter statement but the respondents have no defence to the claim of the claimant and accordingly requests the Ld. Arbitrator to proceed with the matter today and also as against the respondent No. 1 exparte and to allow Smt. Ghosh to adduce evidence and to allow him to argue the case on behalf of the claimant.

The prayer of Mr. Majumder is allowed. Accordingly Smt. Ghosh adduces oral evidence and proves the agreement in question and the claim of the claimant. Mr. Majumder also starts his argument and concludes the same. The Arbitrator states that the meeting is hereby closed and he will make his award in due course after considering all the papers and documents filed before him and the evidence adduced on behalf of the claimant.' The second sentence of the minutes recorded that an affidavit of service had been filed. The relevant affidavit is one affirmed by Gautam Kumar Chakraborty which claimed that the deponent along with the representative of the claimant went to Nashik on July 11, 2009 to serve 'a copy of the minutes of the meeting' together with a copy of the statement of claim. The affidavit alleged that the first respondent (hirer) was identified by the finance company’s representative whereupon the deponent 'requested the Respondent to accept the service by putting his signatures on the minutes but the Respondent No. 1 refused to do so.' The deponent claimed to have then affixed a copy of the minutes on the outer door of the premises. There is also an assertion in the affidavit that a copy of the statement of claim was served personally on the first respondent on July 11, 2009.

The affidavit-in-opposition used by the financier to either petition does not disclose any document. Almost the entirety of either affidavit is strewn with bald and unsubstantiated denials of the contents of the relevant petition. In the guarantor’s matter, a supplementary affidavit has been filed by the finance company disclosing a letter dated February 18, 2006 that already formed a part of the documents before court as a copy thereof is appended to the hirer’s petition. The finance company’s affidavits are conspicuous in their failure to disclose documents pertaining to the reference or even the letter initiating the arbitral reference.

The affidavit of service of Gautam Kumar Chakraborty that appears in the arbitrator’s records strikes a jarring note. It is inconceivable that there would be such an affidavit evidencing personal service of the statement of claim and the service of a certain notice of meeting on the hirer but the finance company would forget to refer to the same in its affidavit to the hirer’s petition. There were several occasions, in the context of the averments in the affidavit, that demanded positive evidence to be adduced by the financier. After all, the hirer has alleged over and over again in his petition that he was not aware of the arbitral proceedings and that no copy of the statement of claim had ever been served on him. In its affidavit, the finance company has denied, in the fourth sentence of paragraph 13, that the statement of claim or copies of documents were not served on the hirer. Such denial is capable of being read as a positive assertion that copies of the statement of claim and the documents adduced by the financier in evidence were served on the petitioner. It was then incumbent on the financier to demonstrate that a copy of the statement of claim and copies of the documents adduced by it in evidence were served on the hirer. In its affidavit, the financier did not even refer to the affidavit of service of Gautam Kumar Chakraborty said to have been affirmed on July 16, 2009. The denial is repeated in the financier’s affidavit later at paragraph 13 (page 21), at paragraph 15 (page 24) and at paragraph 16 (page 25). If the affidavit of service was the only piece of evidence to rebut the hirer’s charge that no copy of the statement of claim had been served on him, conventional wisdom would dictate that a copy of such affidavit of service would have been appended to the financier’s affidavit or, at the very least, it would have been referred to therein; particularly inasmuch as the deponent of the affidavit of service claimed to have made over a statement of claim personally to the hirer.

There are other statements in the financier’s affidavit to the hirer’s petition that cannot be missed. At paragraph 12 of its affidavit (page 17) in one of the rare positive assertions in such affidavit, the financier alleges that the financier 'made enquiries with the Learned Arbitrator and was informed that the said award was duly sent to the petitioner (hirer) by registered post.' Nothing in the arbitrator’s records reveal that such an enquiry was made. If it is the financier’s suggestion that the enquiry was made other than in writing, it would lead to the inescapable inference that the hirer had private access to the arbitrator and the arbitrator engaged in ex parte oral communication with the financier.

In the third sentence at paragraph 13 of the financier’s affidavit, there is a denial to the hirer’s allegation that no copy of the notice of demand or notice of arbitration was ever served upon the hirer. Such denial can be taken to imply that a copy of the notice of demand for arbitration was served on the hirer. The finance company does not disclose anything to substantiate the impression that it obviously intends to convey that it gave notice of the commencement of the arbitral proceedings to the respondents to the reference. The first document in the arbitrator’s records is a letter addressed to the arbitrator on January 25, 2007 referring the disputes to the arbitrator and forwarding the statement of claim to the arbitrator. Nothing in such letter indicates that copies of such letter were marked to the hirer or the guarantor. In the classical view, no party may engage in ex parte communication with the arbitrator. Even if such hallowed test is not applied, it is evident that the notice of arbitration was neither sent nor intended to be sent by the financier to the hirer or the guarantor; that is if the arbitral proceedings commenced at all when the finance company wants everyone to believe that it did. Despite repeated queries put to the finance company at the hearing, such aspect of the matter was completely glossed over.

The fifth sentence of paragraph 13 of the financier’s affidavit to the hirer’s petition asserts that notices of arbitration proceedings 'were duly served on the petitioner (hirer) and the respondent no. 2 (guarantor) but they choose (sic, chose) not to appear before the arbitral tribunal and time and again sought for adjournments …' There is nothing in the arbitrator’s records to show notices of arbitration proceedings were ever issued, far less served, on the respondents to the reference. If copies of the minutes of the meetings are taken to be notices for the future meetings, most of the minutes were not served. Again, the allegation in the relevant sentence of the financier’s affidavit that the respondents to the reference sought adjournments is unsubstantiated by the arbitrator’s records. Save the one petition for adjournment dated July 27, 2009 that appears to have been filed by the guarantor, there is no other record of any adjournment being sought; and none at all by the hirer. The relevant sentence in the financier’s affidavit is a demonstrably false allegation made on oath with scant regard for the seriousness that has to be attached to proceedings of the present nature. Later in paragraph 13 of the financier’s affidavit to the hirer’s petition (page 21) there is another positive statement to the effect that the hirer 'on several occasions was intimated by the Learned Arbitral Tribunal about the initiation of the arbitral proceedings but the petitioner (hirer) himself choose (sic, chose) not to appear …'

There is nothing in the arbitrator’s records in support of such allegation. It is one thing for a party seeking to sustain an award to make statements that detract from the challenge launched to the award; but it is quite another for the awardholder to attribute acts to the arbitrator in an attempt to ward off the challenge. This is of particular significance in the context of the charge of bias levelled against the arbitrator and it being the admitted position on pleadings that this arbitrator has conducted several references sent by this finance company. Nothing in the arbitrator’s records or the minutes relating to the meetings in the reference or in the affidavits filed by the financier refers to the document which appears in the arbitrator’s records that was apparently filed by the financier on February 12, 2009 correcting and clarifying certain statements in the statement of claim. There is not even the faintest whisper anywhere that such corrigendum was, or was attempted to be, served on either the hirer or the guarantor.

The two petitioners say that misconduct and bias on the arbitrator’s part is writ large on every page of the award. It must also be remembered that there is a serious charge that the arbitrator routinely and mechanically makes awards in favour of this finance company. In the first paragraph of the award the arbitrator has recorded the receipt of the claimant’s letter of January 25, 2007, the statement of claim and copies thereof. In the second paragraph the award records that by his letter of January 29, 2007 the arbitrator 'called upon the parties to file their pleadings.' Such recording is contrary to the arbitrator’s letter of January 29, 2007 since such letter only called upon the respondents to the reference to file their counter-statements and further since there was no occasion for the arbitrator to call upon the claimant to file its pleadings as its statement of claim had already been received. The letter did not give directions to the claimant to file any rejoinder to the counter-statements that were to be filed by the respondents. There is, thus, the first indication of a routine recording in the award that has apparently been made mechanically.

The opening sentence of the third paragraph of the award says that inspite of notices 'which were duly received by and/or on behalf of the said respondents,' the hirer failed to enter appearance or file his pleadings. The records do not reveal that the arbitrator had issued notices of individual meetings which the arbitrator was bound to do unless, in the presence of the parties, the minutes recorded the date of the future meetings. The arbitrator does not mention the nature of the notices that were sent or as to whether the notices were sent by him. The records do not show that the minutes of every meeting had been served or had been attempted to be served on the respondents to the reference.

The fourth paragraph of the award records that notices of 'the Arbitration Proceedings were sent by me to the respondents by Registered Post with Acknowledgement Due.' It is possible that the four sealed letters that remain unopened in the arbitrator’s records may be such notices. But these are only four in number with the fourth dated October 12, 2009 which would suggest that it was a copy of the award or some other post-reference material since the award is dated September 9, 2009. The three others are dated November 1, 2008 and later. In the complete records of the arbitrator transmitted to court, there is no returned sealed envelope with the arbitrator as the addressor thereof that is dated prior to November 1, 2008. The reference, it must not be missed, is said to have commenced in January, 2007 or shortly thereafter. There is an adjournment petition in the arbitrator’s records which the guarantor appears to have filed and which the arbitrator seems to have received on August 3, 2009, three days after the reference was closed on July 31, 2009. There is no mention of such petition in the award, far less any reason as to why it was disregarded. In the fifth paragraph of the award the arbitrator has parroted the principle recognised in Section 25(b) of the Arbitration and Conciliation Act, 1996 that he did not treat the default on the hirer’s part as an admission of the allegations by the claimant. The award thereafter proceeds to deal with the merits of the matter, including the 'say' filed by the guarantor. The claimant’s version of things is recorded in paragraph 7 of the award, the 'say' is referred to at the eighth paragraph and it is noticed in the following paragraph that the claimant had filed a rejoinder to the 'say.' There is no reference to the corrigendum filed on behalf of the claimant on February 12, 2009 that appears in the arbitrator’s records. Paragraph 12 records that the claimant’s witness had proved the hire purchase agreement, a declaration given by the guarantor on November 14, 2000, the letter of the claimant dated February 18, 2006, the letter of termination dated January 17, 2007 and certain unspecified books of accounts. Contrast this to the minutes of the concluding meeting in the reference where the arbitrator recorded that the claimant’s witness 'adduces oral evidence and proves the agreement in question and the claim of the claimant.' It makes one wonder how the other documents referred to in the twelfth paragraph mysteriously opened up for the arbitrator to gaze into them and subsequently evaporated just as furtively as they had come in.

There is no discussion in the award as to the merits of the matter. In effect, there are no reasons furnished in support of the award that the 1996 Act commands an arbitrator to supply. Paragraph 15 of the award begins with a sentence that upon consideration of the facts and circumstances of the case and upon examination of the pleadings and evidence 'I am satisfied that the respondents have failed and neglected to make payment of the instalments as stipulated in the said contract of hire and have committed breach of contract.' There is no reference to any material. There is no indication as to how the mind was applied to any fact to reach the conclusion. Reasons are the links between the facts and the conclusion that indicate as to how the mind was applied to the matters in hand. There is no analysis of any evidence. After all, this was no run of the mill default by the hirer in paying instalments; there was an accident to the asset almost at the factory gates of the dealer that resulted in the complete loss of the tractor and some damage to the appendage that was the trailer which was subsequently possessed by the financier after it was repaired and sold off. Earlier in the award the arbitrator has noticed that the insurance claim of Rs.21,10,600/-, the proceeds from the sale of the trailer of Rs.4,25,000/- and the guarantor’s security deposit that had grown to Rs.9,21,250/- were adjusted by the financier. The arbitrator did not notice the dates of the adjustments and the award does not reveal that it occurred to the arbitrator that the dates were important for assessing the financier’s money claim. The award does not reveal that it dawned on the arbitrator that the hirer did not have any opportunity to enjoy the asset as it met with an accident within four days of the execution of the agreement, whether or not the accident occurred when the vehicle was in the constructive possession of the hirer. The award does not show that the arbitrator thought it fit to consider whether the terms of the agreement warranted the respondents to be foisted with the liability on account of the entire complement of instalments payable thereunder notwithstanding the said accident. After paragraph 15, the award peters out with the specifics as to the quantum of the award which is justified by the expression 'after due consideration' that appears at paragraph 18 thereof. The reasons that the statute mandates an arbitrator to furnish are what would reveal whether the claim had been duly considered and the statutory obligation cannot be cast aside by making a statement that the matter had been duly considered. There is no reference to the material that resulted in the 'due consideration' or the assessment of such material to arrive at the conclusion.

The arbitrator’s records do not include the original copies of the documents referred to at paragraph 12 of the award. The records do not contain any letter by which the claimant in the reference may have sought the return of the documents or even a letter by the arbitrator to show that such documents were returned. It is not without sufficient cause that the challengers say that the level of informality that is generally associated with arbitration proceedings was carried to such an absurd limit by this arbitrator that would suggest that the arbitrator and the claimant were, possibly, extensions of each other.

The award does not refer to the relevant paragraph contained in the arbitration clause to the effect that the award was to be made within four months after entering upon the reference or within such extended time as agreed upon by the parties. The minutes of the meetings do not record even a unilateral extension of time by the claimant in the reference, far less an observation that the time stood extended by the conduct of the parties or by concurrence. Once it is evident that there was no intimation to the hirer or the guarantor of the alleged commencement of the reference for a period of nearly 22 months after it allegedly commenced, there is no need to look any further. But there was even more ghastly mischief afoot in the reference. There does not appear to have been any reference prior to October 31, 2008; the records were concocted to give them an appearance of authenticity. To sustain this award by any quirk of law or the strained application of any legal principle would do violence to the rudimentary concept of justice, be opposed to public policy and a slur on the process of adjudication that an arbitral reference connotes.

Even it is accepted that the reference commenced and progressed as recorded in the minutes, on the state of evidence on affidavits and the records of the reference produced by the arbitrator and the finance company, it is apparent that the petitioners here were not given any notice of the appointment of the arbitrator or contemporaneously made aware by the arbitrator of the initiation of the reference. There is a general duty cast on an arbitrator to act fairly and impartially as between the parties. In weighing the evidence as to this arbitrator’s partiality, it has to be assessed whether the circumstances bearing on the allegation of partiality, or as things appear from the records, would lead a fair-minded and informed observer to conclude that there was a real possibility that the arbitrator was biased. The fact that the arbitrator has taken up many a previous reference relating to this finance company may not, by itself, amount to lack of independence which would have rendered him incapable of conducting the reference. The circumstances here reveal a fundamental abuse of his position by the arbitrator. A reference to arbitration is ordinarily an alternative to an action in court. Even though an arbitral reference is shorn of the technicalities and the level of formality that are associated with a court, the basic elements of fairness, impartiality and disconnect cannot be compromised for expedience or efficacy or some evil design. The misconduct on the part of this arbitrator involves personal turpitude on the part of the arbitrator amounting to subversion of the process of adjudication that has resulted in complete miscarriage of justice. The right to a fair adjudication is a natural right and inheres in every individual and juristic entity. The records of the arbitrator unmistakably point to the sabotage of the process of adjudication. The award is not only abhorrently bad and liable to be set aside, but it appears to be a vicious merchandise of criminal conduct reeking of collusion.

The manner in which the finance company and the arbitrator went about the business of this reference, as is evident from the arbitrator’s records, was calculated to cause prejudice to the hirer and the guarantor and left them no room to defend themselves as the finance company procured its award from a pliant merchant who reduced the process of adjudication to a farce. The petitioners have referred to several authorities and to the provisions of clause 34(2)(a) of the 1996 Act. A judgment reported at AIR 2005 Kant 313 (Rudramuni Devaru v. Shrimad Maharaj Niranjan Jagadguru) and another reported at 2008 (4) Arb LR 341 (Delhi) (Union of India v. The Kohinoor Tarpaulin Industries) have been placed by the guarantor for the proposition that if an arbitrator wished to proceed ex parte upon a party to the reference failing to be represented, a specific notice to such effect had to be issued. As would appear from the arbitrator’s records here, notices were shown to have been issued by way of alleged or attempted service of the minutes of the meetings with the standard line in every set of minutes that the arbitrator would proceed ex parte if the respondents were not represented on the next date.

The hirer has first placed a judgment reported at AIR 1955 Cal 354 (Juggilal Kamlapat v. General Fibre Dealers) for the same principle that specific notice must be issued before the arbitrator proceeds ex parte or concludes the reference to the prejudice to a party. A judgment reported at AIR 1978 Cal 454 (Dipti Bikash Sen v. India Automobiles (1960) Ltd.) has been placed t

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o assert that the exercise of the discretion by the arbitrator to not issue a notice to proceed ex parte had to be made on proper basis. The judgment reported at AIR 1924 Bom 149 (Tyebbhai Essubhai Thanawalla v. Abdul Husein Tyebally) has been cited for the proposition that if a party to a reference is not given notice of any meeting that would clearly amount to misconduct on the part of the arbitrator. The judgment reported at (1991) 1 SCC 588 (Union of India v. Mohd. Ramzan Khan) and another reported at (1993) 1 SCC 13 (SBI v. D.C. Aggarwal) pertaining to disciplinary proceedings have been placed by the hirer for the principle that documents relied upon in any proceedings have to be made available to the person against whom the documents are sought to be used. The hirer says that the award is based on no evidence at all and relies on a judgment reported at 2007 (3) Cal LT 634 (Union of India v. Ajabul Biswas). A passage from Russel on Arbitration (21 Ed.) at paragraph 4.033 has been placed for the principle that bias may be imputed from conduct during the arbitration. P.P. Craig on Administrative Law (4th Ed.) has been brought in support of the contention that any pecuniary interest disqualifies the decision-maker. The hirer contends that it was obligatory on the part of this arbitrator to make a disclosure under Section 12 of the 1996 Act that he was a regular appointee as an arbitrator in arbitral references involving this finance company. The hirer says the arbitrator ought to have disclosed such fact since it gave rise to justifiable doubts as to his independence and impartiality. The hirer places a House of Lords decision reported at 1999 (1) All ER 577 (R v Bow Street Metropolitan Stipendiary Magistrate and others, ex parte Pinochet Ugarte (No 2)) to suggest that the appearance of bias would be enough to disqualify a decision-maker and the mere fact of the decision-maker’s interest in or connection with a party is sufficient to disqualify him unless he discloses his interest or connection. The hirer says that if there is any doubt raised as to the impartiality of a decision-maker, such doubt should be resolved in favour of disqualification. As to what constitutes actual bias in the context of an arbitral reference, the hirer has relied on a judgment reported at (2003) 7 SCC 418 (Bihar State Mineral Development Corpn. v. Encon Builders (I) (P) Ltd.). Paragraph 18 of the report is relevant: '18. Actual bias would lead to an automatic disqualification where the decision-maker is shown to have an interest in the outcome of the case. Actual bias denotes an arbitrator who allows a decision to be influenced by partiality or prejudice and thereby deprives the litigant of the fundamental right to a fair trial by an impartial tribunal.' The finance company has referred to Sections 3 and 4 of the 1996 Act. The finance company says that the notices were sent to the addresses of the petitioners as indicated in the agreement and by virtue of Section 3 of the Act such notices should be deemed to have been received by the petitioners. The finance company has relied on a judgment reported at 2009 (4) RAJ 369 (Cal) (Bhairab Karmakar and Construction Co. v. Sarbari Biswas) to suggest that the notice sent to the address of a party as disclosed in the agreement would amount to good service. Assuming for the moment, that some notices were sent to the addresses of the petitioners as indicated in the agreement, but it is evident that the notices relating to the reference were sent only on or after November 1, 2008. The financier has placed a judgment reported at 2003 (3) RAJ 617 (All) (Vipul Agarwal v. Atul Kanodia & Co.) for the proposition that there had to be a factual foundation in support of a plea of bias. However, at paragraph 29 of the report, a Division Bench of the Allahabad High Court held that in that case there was no evidence which could lead to any inference that the arbitrators were biased or were interested in the matter. Given the state of the evidence as would appear from the arbitrator’s records here, it is apparent that the arbitrator was biased and, in conjunction with the claimant in the reference, represented as to a state of things that did not exist. In the judgment reported at 2000 (2) RAJ 534 (MP) (Pushpendra Motilal Singh v. Commercial Automobiles) that the finance company has relied on, the court found on facts that there were attempts to serve notice by registered post with acknowledgement due and that the relevant agreement provided for such manner of service and created a fiction that a notice sent by the arbitrator by registered post to the address mentioned in the agreement was sufficient service. In the judgment next placed by the finance company, reported at 2005 (1) RAJ 251 (P&H) (State of Punjab v. Satluj Construction Ltd.), the court found that there was neither any allegation nor any evidence of misconduct on the part of the arbitrator. In the final judgment carried by the finance company, reported at 2002 (2) RAJ 547 (Del) (J.K. Kashyap v. M.G. Capital Services), the court concluded on facts that the party assailing the award had knowledge of the proceedings and had appeared before the arbitrator but subsequently chose to remain absent. The court found on facts, as is recorded at paragraph 6 of the report, that the party challenging the award was duly notified of the hearings and that he appeared only on one day and absented himself on the subsequent dates. None of the authorities cited by the finance company can wish away the colossal violation of every cannon of propriety and the abject surrender of the minimal vestige of decorum by the arbitrator. The respondents to the reference had no contemporaneous notice of the commencement of the arbitral proceedings. There is nothing to show that they were even sought to be made aware of the reference at any time prior to November, 2008. It appears from the records that the minutes and other material relating to the reference prior to October 31, 2008 have been brought into existence. There is not even the slightest shred of corroboration of such events and acts attributed to any time prior to October 31, 2008. The award dated September 9, 2009 is set aside. AP No. 4 of 2010 and AP No. 158 of 2010 are allowed. The finance company will pay costs of Rs.2 lakh each to the hirer and the guarantor. It will be open to the hirer and the guarantor to institute appropriate proceedings against the finance company, the arbitrator and others concerned, both civil and criminal. The records produced by the arbitrator have been placed in a plastic folder, sealed in an envelope and send to the Registrar, Original Side. A separate sealed envelope containing copies of the minutes of the meetings as furnished by the finance company has also been sent to the Registrar, Original Side. The Registrar, Original Side, will retain such records subject to orders of the appropriate forum. Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
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