Vinod Bhaiyalal Jain v Wadhwani Parmeshwari Cold Storage Pty Ltd
CITATION – CIVIL APPEAL NO. 6960 OF 2011
JUDGE – A.S BOPANNA
- The respondents here were the owner of cold storage which was managed by Mr Suresh Wadhwani.
- The appellants, in this case, were the sons of Mr Bhaiyalal Jain, who were into business relates to agricultural products. In the year 2004, the appellants had used the services of cold storage for storing 50bags of ‘singada’ (a type of fruit).
- It was alleged by the appellants that the bags of fruit which were stored in the respondent’s cold storage was not stored in a proper manner which led to the damage of the fruits.
- Thereafter, the appellants claimed compensation, to which the respondents denied and a dispute arose between the parties.
- According to the respondents, all the disputes were to be governed by arbitration by the Arbitrator, Mr S.T. Madnani who was an advocate.
- The clause of arbitration was mentioned in the receipt that was issued regarding the storage of singada bags.
- In this background, the appellants issued a notice that disputed the presence of any arbitration clause and more emphasis was given on the fact that Sri S.T. Madnani, who is appointed as the arbitrator had been the counsel of the respondent (no. 1) previously and hence cannot be appointed as an arbitrator.
- Despite these objections, the matter proceeded in arbitration and award was passed directing the appellants to pay an amount of Rupees 43,000.
- Hence the aggrieved appellants, under section 34 of the 1996 Arbitration Act filed a petition before the District Judge.
- The District Judge set aside the arbitral award noting that, inter alia, the arbitrator acted as the counsel for the Respondent in a previous case which was not disclosed by him as required under s.12 of the A&C Act.
- The Respondent appealed the decision of the District Judge before the Bombay High Court. The Bombay High Court recorded that the objections and legal notices to the appointment of the arbitrator were not raised by the Respondent, rather, they were raised by the Respondent’s father.
- Thus, technically, this could not be considered an objection within the meaning of s.13 of the A&C Act.2 The Bombay High Court further held that “Even assuming that the objection raised by Bhaiyalalji Jain was an objection raised by a ‘party’, the objection/notice issued by Bhaiyalalji Jain to the arbitrator was extremely vague and the apprehension expressed therein could not have made any reasonable man believe that there was a likelihood of bias.”
- The Bombay High Court further added that it was not the case of the Appellants that they were unaware of arbitrator’s engagement as a counsel of the Respondent in the case of a mesne profit before signing the arbitration agreement.
- The Court concluded that the “question whether non-disclosure of these circumstances was likely to give rise to a justifiable doubt about the integrity and impartiality of the respondent no.4, does not arise for consideration in the facts and circumstances of the case
ISSUE – Whether the challenge under Section 13 was appropriately raised.
- On the question of whether a challenge under s.13 of the A&C Act had been appropriately raised by the Appellants, the Supreme Court held that although the notice to the arbitrator was issued by the Appellants’ father, he is not a “a rank outsider” and further, the Appellants have not disowned the notice.
- The Supreme Court further held one of the Appellants had also addressed a communication to the arbitrator requesting him to stop the proceedings since a petition had been filed in the High Court for the appointment of an independent arbitrator.
- Considering this, the Supreme Court held that the Bombay High Court’s finding that these objections would not fall within the requirements of s.13 of the A&C Act was not justified.
- The Supreme Court noted that the arbitrator had acted as a counsel for the Respondent in another dispute. Section 12(1) of the A&C Act, 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”.
- The Supreme Court held that this provision imposes an obligation of disclosure on the arbitrator.
- The Supreme Court concluded that: “What is to be seen is whether there is a reasonable basis for the Appellants to make a claim that … the arbitrator would not be fair, even if not biased …”.
- The Supreme Court emphasised that no room should be given for such apprehension in the minds of the parties, particularly in arbitration, as the parties get to choose an arbitrator in whom they have trust and faith, unlike in litigation where they have no choice in this regard.