Beg To Differ - The Judgement Of Allahabad High Court In Vipul Agrawal Vs. Atul Kanodia & Co

By Author: Narendra Sharma
Total Articles: 10
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Introduction :

1. In a recent judgement a Division Bench of Allahabad High Court in Vipul Agrawal Vs. Atul Kanodia & Co. (2003) 9 CLA-BL Suppl. (Snr.) 22 (All) ; AIR 2003 (All) 280; 2003 Arb. WLJ 765 (All) held (in para 34) that the legislative intent underlying the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter “the Act”) is that the decision of the Arbitrator against whom allegations have been made attracting the challenge of the nature as indicated in Section 12(3) of the Act if negatived by the Arbitrators has to be taken to be final and not open to challenge in the proceedings under Section 34. It is respectfully submitted that the point of law decided in the judgement does not appear to be correct for the following reasons.

2. Para Nos. 33 & 34 of the captioned judgment are reproduced below for ready reference.

“33. It is, therefore, obvious that the decision of the Arbitrator contemplated under Section 13(3) of the Act or a decision of the Arbitrators about the competence of the Arbitral Tribunal upholding its jurisdiction as contemplated under Section 16 ...
... (5) of the Act has to be taken to be final which can not be re-opened in the proceedings under Section 34 of the Act except on limited grounds as envisaged thereunder.

34. This indicates that the legislative intent underlying the provisions of the Act is that the decision of the Arbitrator against whom allegations have been made attracting the challenge of the nature as indicated in Section 12(3) of the Act if negatived by the Arbitrators has to be taken to be final and not open to challenge in the proceedings under Section 34.” (emphasis supplied)

3. An extract of section 13 of the Act is reproduced below for ready reference :

“Section 13. Challenge procedure (1) Subject to sub-section (4), the parties are free to agree on a procedure for challenging an arbitrator.

(2) ……………………………………………………………………………………………

(3) ……………………………………………………………………………………………

(4) If a challenge under any procedure agreed upon by the parties or under the procedure under sub-section (2) is not successful, the arbitral tribunal shall continue the arbitral proceedings and make an arbitral award.

(5) Where an arbitral award is made under sub-section (4), the party challenging the arbitrator may make an application for setting aside such an arbitral award in accordance with section 34.

(6) Where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.”

My views regarding the part of the judgement given in para 34 :

4. It is respectfully submitted that the point of law decided in para 34 of the judgement does not appear to be correct for the following reasons :

(i) Section 13 (5) gives a right to the party challenging the arbitrator to make an application for setting aside such an arbitral award in accordance with section 34.

(ii) Section 13 (6) provides that where an arbitral award is set aside on an application made under sub-section (5), the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. (emphasis supplied)

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4.1 A combined reading of sub-section (5) & (6) of section 13 reveals that where a party challenges the impartiality of an arbitrator pursuant to section 12(3), if that challenge is rejected by the arbitrator and an award is made, an application can be made by the party to set aside such an award, and where such an award is set aside the Court may decide as to whether the arbitrator who is challenged is entitled to any fees. In other words, under section 13(5) a right has been created in favour of a party to make an application to get an arbitral award set aside, by following the procedure under section 34, which has been made by an arbitrator whose impartiality was challenged by the party. And if the award is set aside the Court may decide whether the challenged arbitrator is entitled to any fees.

4.2 Therefore, in my view an application can be made to set aside such an award under section 34(2)(b)(ii) i.e. the arbitral award is in conflict with the public policy of India. The Supreme Court in a recent judgement in Oil & Natural Gas Corporation Ltd. V. Saw Pipes Ltd. [2003] 8 cla-bl Supp 14 (sc) held that the Court would have jurisdiction under section 34 of the Act to set aside an award which, inter alia, is contrary to `fundamental policy of Indian law’.

4.3 It is well settled that Nemo debet essee judex in causa propria sua which means “No one should be a judge in his own cause”. This principle precludes a justice, who is interested in the subject matter of a dispute, from acting as a justice therein. The Supreme Court in Manak Lal v. Dr. Prem Chand Singhvi , AIR 1957 SC 425 at page 429 held that this principle applies to all tribunals and bodies which are given jurisdiction to determine judicially the rights of parties; para (4) reads thus :

“It is well settled that every member of a tribunal that is called upon to try issues in judicial or quasi-judicial proceedings must be able to act judicially; and it is of the essence of judicial decisions and judicial administration that judges should be able to act impartially, objectively and without any bias. In such cases the test is not whether in fact a bias has affected the judgment; the test always is and must be whether a litigant could reasonably apprehend that a bias attributable to a member of the tribunal might have operated against him in the final decision of the tribunal. It is in this sense that it is often said that justice must not only be done but must also appear to be done (emphasis supplied). As Viscount Cave, L.C. has observed in Frome United Breweries Co. v. Bath Justices, 1926 App Cas 586 at p 590 (A) :

“This rule has been asserted, not only in the case of Courts of Justice and other judicial tribunals, but in the case of authorities which, though in no sense to be called Courts, have to act as judges of the rights of others.”

4.4 The Supreme Court further held that “in dealing with cases of bias attributed to members constituting tribunals, it is necessary to make a distinction between pecuniary interest and prejudice so attributed. It is obvious that pecuniary interest, however small it may be in a subject-matter of the proceedings, would wholly disqualify a member from acting as a judge. But where pecuniary interest is not attributed but instead a bias is suggested, it often becomes necessary to consider whether there is a reasonable ground for assuming the possibility of a bias and whether it is likely to produce in the minds of the litigant or the public at large a reasonable doubt about the fairness of the administration of justice. It would always be a question of fact to be decided in each case. “The principle”, says Halsbury, “nemo debet esse judex in cause propria sua precludes a justice, who is interested in the subject-matter of a dispute, from acting as a justice therein.” (Halsbury’s Laws of England, vol. xxi, p. 535, para 952). In our opinion, there is and can be no doubt about the validity of this principle and we are prepared to assume that this principle applies not only to the justices as mentioned by Halsbury but to all tribunals and bodies which are given jurisdiction to determine judicially the rights of parties.”

Contd…3..

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4.5 The maxim Nemo debet essee judex in causa propria sua is the underlying principle in Section 479 of the Code of Criminal Procedure, 1973 which reads thus :

“479. Case in which Judge or Magistrate is personally interested – No Judge or Magistrate shall, except with the permission of the Court to which an appeal lies form his Court, try or commit for trial any case to or in which he is a party, or personally interested, and no Judge or Magistrate shall hear an appeal from any judgment or order passed or made by himself.”

Conclusion :

5. The principle “no one should be a judge in his own cause” was declared by the Supreme Court in 1957 in Manak Lal v. Dr. Prem Chand Singhvi (supra) and thereafter became the basis of devising section 479 of the Code of Criminal Procedure, 1973. Hence it stands concluded that the maxim is one of the constituents of `fundamental policy of Indian law’. Therefore, it follows that an arbitrator whose impartiality is doubtful can not be a judge in the dispute before him. If the judgement of Allahabad High Court, given in para 34, is followed then sub-section (6) of section 13 of the Act would become redundant, which could not have been the legislative intent.