JUDGMENT
V.K. Gupta. C.J.
1. In this petition filed under Articles 226 and 227 of the Constitution of India, the petitioner has prayed, inter alia for the issuance of an appropriate writ. direction or order holding that Sub-section (3) and (4) of Section 13 of the Arbitration & Conciliation Act. 1996 (‘impugned provisions’ for short) are ultra vires Article 14 of the Constitution of India, in that, the Arbitrator becomes a Judge of his own cause and has been vested with unguided, uncanalised and arbitrary powers and that there is no provision whereby any remedy has been given to an aggrieved party with respect to an adverse order passed by the Arbitrator under the aforesaid impugned provisions. The petitioner has also prayed for an appropriate writ, direction and order quashing the order dated 2.5.2001 passed by the Sole Arbitrator, respondent No. 3, whereby he has rejected the challenge as put forth by the petitioner against his appointment and continuing as the Sole Arbitrator and decided to continue with the proceedings in terms of Sub-section (4) of Section 13 of the Act.
2. During the course of arguments, learned counsel for the petitioner confined his submission only to the first prayer and did not submit any argument or made any submission with respect to the second prayer.
3. The brief facts leading to the filing of this petition are that the petitioner, a partnership firm, took up the work of design, construction and commissioning of 55 LPS water supply scheme on turn key basis at Bachara Township near Railway Station Ray, in the district of Hazaribagh, vide agreement dated 21.12.1991. The petitioner says that it duly completed the aforesaid contract work and was refunded 50% of the security deposit after handing over of the site and issuance of the completion certificate to the alleged satisfaction of Respondent Nos. 1 and 2. The petitioner complains that the balance security deposit as also the final bill along with interest and other claims as raised by the petitioner having not been paid to it. the petitioner requested that the disputes between the parties be referred to the arbitration of a Sole Arbitrator as per Clause 56 of the General Terms & Conditions of the Agreement between the parties and in pursuance of the aforesaid request of the petitioner, Respondent No. 3. who is a former Director (Technical) of Central Coal fields Ltd. was appointed as the Sole Arbitrator by the Chairman-cum-Managing Director of Central Coalfields Ltd., Ranchi. The aforesaid appointment took place in June. 1999. It is the undisputed case of the parties that thereafter the arbitration proceedings commenced but have not been concluded so far. The Arbitrator has so far admittedly not passed his award.
4. The petitioner complains that the delay in the completion of arbitration proceedings is owing to the acts of omission and commission on the part of the Arbitrator. The petitioner also alleges that the Arbitrator being an ex-official of the respondent-company is biased and has been deliberately delaying the proceedings.
5. A counter affidavit has been filed on behalf of respondent Nos. 1 and 2 by the Dy. Chief Engineer. A supplementary counter affidavit was also filed later on, on behalf of respondent Nos. 1 and 2 by the Superintendent Engineer (Civil). A combined reading of these two counter affidavits suggest that the respondents’ reaction to the petitioner’s aforesaid allegation is that it is because of the petitioner that the delay in the completion of the arbitration proceedings has occurred. It is also the case of the respondents that the petitioner has been participating in the arbitration proceedings for the past two years without any demur and did not raise any objection to the appointment of respondent No. 3 as the Sole Arbitrator at any appropriate stage and at only when the petitioner felt at a very advance stage of the proceedings that the proceedings may not be turning out to be in its favour that it adopted this tactic of challenging the appointment of respondent No. 3 as Arbitrator on the ground of alleged bias.
6. Since the only point raised by Mr. Jeratn, learned counsel for the petitioner, is with regard to the Constitutional validity and the vires of Sub-section (3) and (4) of Section 13 of the 1996 Act, let us deal with that contention because we feel that in the facts & circumstances of this case, the other points, as raised in the petition (but not urged before us during the course of hearing) need not detain us.
7. Section 13 of the 1996 Act reads thus:—
“13. Challenge procedure.–(1) Subject to Sub-section (4) the parties are free to agree on a procedure for challenging an arbitrator.
(2) Failing any agreement referred to in Sub-section (1), a party who intends to challenge an arbitrator shall, within fifteen days after becoming aware of the constitution of the arbitral tribunal or after becoming aware of any circumstances referred to in Sub-section (3) of Section 12, send a written statement of the reasons for the challenge to the arbitral tribunal.
(3) Unless the arbitrator challenged under Sub-section (2) withdraws from his office or the other party agrees to the challenge, the arbitral tribunal shall decide on the challenge.
(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 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 Subsection (5) the Court may decide as to whether the arbitrator who is challenged is entitled to any fees.
Section 5 of the Act which is also relevant for our purposes reads thus:–
“5. Extent of judicial intervention.–Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.”
Section 34 of the Act deals with the question of setting aside or arbitral awards and lays down procedure as well as provides for reasons and grounds on which an award can be set aside. Section 34 reads thus:–
“34. Application for setting aside arbitral award:–(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with Sub-section (2) and Sub-section (3).:
(2) An arbitral award may be set aside by the Court only if–
(a) the party making the application furnishes proof that–
(i) a party was under some incapacity: or
(ii) the arbitration agreement is not valid under the law to which the parties have subject it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on mat-ters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition, of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this part, or
(b) the Court finds that–
(i) the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation.–Without prejudice to the generality of Sub-clause (ii) of Clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under Section 33, from the date on which that request had been disposed of by the arbitral tribunal;
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under Sub-section (1) the Court may where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.”
8. The Arbitration and Conciliation Act, 1996 (1996 Act for short) replaced the Arbitration Act. 1940 because it was thought basically and primarily that 1940 Act had failed to meet the aspirations of the people at large, litigants in particular and the vast expanding and growing trends of commerce, trade and economy. Under the 1940 Act, the procedures were long and protracted and the very purpose of the parties being sent to arbitration to curtail the time-consuming adversarial litigation proceedings in the normal Civil Courts was not achieved. It was experienced that even by taking recourse to arbitration, the delays were not reduced. Actually in some cases, rather in majority of them, the recourse to arbitration under 1940 Act proved to be more time-consuming than filing of normal civil suits. The Model Law adopted by the United Nations on International Trade accordingly was made the basis of the framing of 1960 Act. Actually with the passage of time during last few years before 1996 Act came into being, it had been felt that the Model Law based on Uncitral Model had become the need of the hour. The United Nations’ General Assembly had actually recommended that Member States may give due consideration to Uncitral Model and adopt the same with local modifications. It is under these circumstances that 1996 Act came into being. The underlying purpose, therefore, as would be evident from the Scheme of 1996 Act. was to reduce and curtail delays as for as possible in the completion of arbitration proceedings.
9. In the aforesaid background, therefore, relevance of Section 5 of 1996 Act assumes importance, in the sense, that this Section clearly lays down that in matters covered by the Act, no Judicial Authority shall intervene except where it has been specifically provided in the Act itself. Also in the aforesaid background, Sub-section (4) of Section 13 should be read to indicate clear legislative intent that even if a challenge to an Arbitrator as raised under Sub-section (2) has failed, the arbitral Tribunal shall continue with the arbitration proceedings and make the arbitral award. A combined reading of Sub-section (4) of Section 13 and Section 5 of 1996 Act, therefore, clearly suggests an unequivocal legislative intent that neither the Judicial Authority can intervene with respect to any matter unless it has specifically been provided in the Act, nor should there be any occasion for the arbitration proceedings to be stayed or suspended even if challenge to an Arbitrator has failed. Thus the clear mandate of Legislature in matters like this was to bar judicial interference totally and absolutely. The purpose, as noticed above, was to ensure that arbitration proceedings are not obstructed in any manner, thus, also ensuring at the same time that delays do not occur and that the adjudication and resolution of disputes between the parties through the mechanism of arbitration is completed and without any delay. The Court’s interference, therefore, during the course of proceedings having been dispensed with, reading Section 13 in any manner so as to say that either the Courts have jurisdiction or the exclusion of jurisdiction is unwarranted would not be keeping in conformity with the Model of Uncitral, the Scheme of 1996 Act or the background in which it came to be enacted.
10. This now brings us to the grievance and the complaint of the petitioner that if the challenge as raised under Sub-section (2) of Section 13 has failed, the petitioner has no remedy in law. There is a very simple answer to this grievance, and complaint of the petitioner, Sub-section (5) of Section 13 clearly lays down that where an arbitral award is made, despite the challenge having failed, in terms of Sub-section (4), the party challenging the Arbitrator may make an application for setting aside such an arbitral award in accordance with Section 34, This now brings us to Section 34 of the Act.
11. First of all Clause (ii) of Sub-section (2) of Section 34, clearly lays down that an arbitral award may be set aside by the Court if the Court finds that the award is in conflict with the public policy of India. In the Explanation appended to Clause (ii) it has been amply clarified by means of a declaration that an award should be deemed to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or the same was in violation of Section 75 or Section 81. Shorn of all unnecessary details, it would suffice to say that the bias or the prejudice, if alleged against an Arbitrator can always be brought within the ambit and scope of the expressions ‘fraud’ or ‘corruption’. If a parry facing an award (passed under Sub-section (4) of Section 13) while taking recourse to the remedy of challenging the same under Sub-section (5) of Section 13 read with Section 34(2)(b)(ii) of the Act alleges and establishes that the Arbitrator was biased and prejudiced against him, the making of such an award undoubtedly can be vitiated on that ground (if proved or established) and such being against the public policy of India, the award would be liable to be set aside. The making of the award being induced or affected by ‘fraud’ or ‘corruption’ being a clear ground and the bias and the prejudice of the Arbitrator against the party challenging the award would squarely come within the aforesaid two expressions, thus, enabling the party to successfully challenge in the Court the making of the award and obtaining an order of having it set aside. The party therefore, cannot be said to be without any remedy.
12. In addition to the ground of ‘fraud’ and ‘corruption’ as occurring in Section 34(2)(b)(ii) of the Act, a reading of Sub-section (5) of Section 13 of the Act clearly suggests that independent of the aforesaid provision and grounds for setting aside the award, Subsection (5) itself enables a party to challenge the award on the ground that the Arbitrator’s appointment was illegal, wrong and void because the Arbitrator had not, in violation of Section 12 of the Act, disclosed in writing the existence of the circumstances likely to give rise to justifiable doubts as to his independence or impartiality. The doubts above the independence and impartiality of the Arbitrator or his not possessing the qualifications as agreed upon by and between the parties, or his being biased or prejudiced against a party are made the subject matter of a party’s right and entitlement to challenge the appointment or continuance of such an Arbitrator (as has been provided in Sub-section (2) of Section 13 of the Act). Even if Sub-section (4) says that if the challenge has failed, the arbitration proceedings may continue, making a provision in Sub-section (5) specifically (immediately after Sub-section (4) that on the aforesaid ground the party which had challenged the Arbitrator, but the challenge had failed, may make an application for setting aside the arbitral award in accordance with Section 34 of the Act, clearly suggests that independent of the aforesaid ground of ‘fraud’ and ‘corruption’, the party has a right to challenge the award on the ground explicitly and specifically occurring in Section 12 of the Act which speaks of disqualifications with respect to the appointment of the Arbitrator or his continuation as such. Whether the setting aside application is based on the ground of ‘fraud’ or ‘corruption’ simplicitor, or on the grounds as are covered by Section 12 of the Act, the remedy of the party is to challenge the award, as and when it is made. In contradistinction to 1940 Act, the legislative intent is loud and clear, it is that during the midst of proceedings for whatever reasons, the arbitration will not stop; it will go on. If there is any defect, any irregularity or any illegality, the same can form the subject matter of challenge after the award is made.
13. For the foregoing reasons, there
fore, we find that Sub-sections (3) and (4) of
Section 13 of that Act do not suffer from any
illegality, defect, or mischief nor are these
ultra vires Article 14 of the Constitution of
India. The petition, accordingly, is dismissed.
14. No order as to costs.
15. Petition dismissed.