JUDGMENT
M. Jagannadha Rao, CJ.
1. This as an appeal by Lucky Home Cooperative Group Housing Society Limited against the orders of the learned Single Judge dated 4th March, 1994 in OMP No. 64/92. The appellant before us was the petitioner in that application filed under Sections 5, 8, 11, 12 and 31 of the Arbitration Act, 1940. The 1st respondent was M/s. Shanti Developers and Promoters (India) Pvt. Ltd., M-4, Anupam Bhawan, Azadpur Commercial Complex, Azadpur, Delhi-110003 and the second respondent was Arbitrator Mr. A. Shankaran.
2. The appellant prayed in that application that the authority of the Arbitrator be revoked and another Arbitrator, preferably a retired Judge of the Court be appointed for adjudication of the claims and counter claims of the parties. IA 9548/92 was also filed by the appellant in the said OMP and there was an interim order on 31st July, 1992 in this appeal that the Arbitrator would not make and publish the award and that he could proceed with the matter and the appellant society was to participate in the proceedings.
3. The following are the facts : The first respondent-contractor was engaged in connection with the construction of 78 houses for the appellant Society. The contract was in the year 1988. Three years thereafter, disputes arose and the respondent-contractor moved a petition under Section 20 of the Arbitration Act for appointment of an Arbitrator, which was registered as Suit No. 479/91. This Court appointed the second respondent, Mr. A. Sankaran, as the Arbitrator on 18.2.91. He was Additional Director General, Central P.W.D. (Retired). The fee of the Arbitrator was fixed at Rs. 10,000/- to be paid by the parties. In another order in IA 1045/91 passed on the same date, the Court appointed Mr. S. P. Kapil, retired Chief Engineer of Delhi Development Authority as Local Commissioner for carrying out certain measurements at the site in the presence of the parties or their representatives.
4. The Arbitrator entered on the reference on 9th March, 1991. The contractor filed the statement of facts on 25th March, 1991 and the petitioner society filed its statement of facts on 3rd June, 1991. The preliminary hearing before the Arbitrator was held on 3rd July, 1991. The time for making the award was extended by mutual consent up to 26th December, 1991. Thereafter in IA 1520/91, further order were passed on 11th February, 1991 extending the time by four months for passing of the award from the date of fresh first hearing to be given by the Arbitrator. The first date of hearing was fixed as 20th April, 1992. The Local Commissioner who was appointed to carry out measurements of the construction made by the first respondent filed his report into Court on 20th April, 1992. The Arbitrator permitted the parties to file their objections on or before 15th May, 1992 and a the reply to the objections was to be filed before 25th May, 1992 and rejoinder to the reply before 5th June, 1992. The parties were also directed to pay Rs. 300/- each for getting photocopies of the measurement book and the case was adjourned to 13th July, 1992 to be continued on 14th and 15th July, 1992.
5. The first respondent filed objections against the Local Commissioner’s report on 26th May, 1992 but the appellant society did not file its objections till 5th June, 1992 as directed by the Arbitrator. Accordingly the Arbitrator by his letter dated 5th June, 1992 directed the appellant to file its objections as also reply to the objections to be filed before 19th June, 1992.
6. The present OMP was filed at that stage by the appellant-society on 16th July, 1992 praying that the authority of the Arbitrator be revoked and another Arbitrator be appointed to adjudicate the controversy preferably a retired Judge of this Court. Along with the said application several annexures were filed. According to the appellant, the Arbitrator had become disqualified on account of bias for the following reasons :
(1) That on the hearing held on 20th April, 1992 when the question of paying Rs. 300/- each for supply of photo copies of the detailed measurements was being discussed, the appellant society contended that they would pay Rs. 300/- only when the photo copies were actually supplied and they would not pay the amount initially. The contractor paid its Rs. 300/-. Thereupon the Arbitrator is alleged to have stated that Rs. 300/- could be paid by the respondent/contractor on behalf of the petitioner “as the respondent has to get award of several lacs of rupees.” Then the respondent immediately paid Rs. 300/- more. In view of the above observations said to have been made by the Arbitrator, the appellant fears that the Arbitrator has made up his mind to make the award in favor of the respondent.
(2) On 14.7.1992, appellant filed list of witnesses. On 15th July, 1992 it was represented by the respondent/contractor that they had nothing to argue except what was stated in the claims and that the matter be posted for arguments. The request of the appellant for adducing oral evidence was rejected by the Arbitrator and appellant’s counsel was asked to proceed with the further arguments. This conduct of the Arbitrator showed that the Arbitrator was inclined in favor of the contractor.
(3) That on 13th July, 1992 the Arbitrator had stated that in this case his prestige was involved and he was meeting all expenses from his own pocket for coming to Delhi from Madras and was incurring other expenses and that this fact was confirmed by the petitioner to the learned Arbitrator on 14th July, 1992 (Annexure ‘O’). This indicated the interest of the Arbitrator in the subject matter of the said case.
(4) It is stated that in some other case the same Arbitrator was Arbitrator and a learned Single Judge of this Court removed the Arbitrator (Suit No. 222/91). One other aspect regarding the schedule of fee was raised and we shall deal with it at the end of this order.
7. The above are the grounds for removal of the second respondent as Arbitrator.
8. The learned Single Judge rejected these contentions of the appellant. He held that on 11.2.1992, the time for the passing of the award was extended by consent of parties and hence the controversies prior to 11.2.1992 could not be permitted to be raised. So far as the observation allegedly made on 20.4.1992 by the Arbitrator that the contractor would get award of several lakhs of rupees and the contractor could pay Rs. 300/- on behalf of the society. The learned Judge held that the observation was denied by the arbitrator in his letter dated 5.6.1992, and by the Contractor. Further, no objection in this behalf was raised on or soon after 20.4.1992. Later the Society participated in the proceedings and filed this OMP on 16.7.1992 only after the request for summoning the witnesses was rejected on 15.7.1992.
9. The learned Judge directed a reasoned award should be passed and that the society be allowed to examine witnesses and there was no need to revoke the appointment of the Arbitrator. The application was accordingly dismissed. This appeal is preferred against the said order.
10. In this appeal, we have heard the learned counsel for the appellant Society and for the respondent-contractor.
11. The respondents’ counsel raised a preliminary objection that no appeal lies against the impugned order under Section 39 of the Act. But, in view of the order we propose to pass in this appeal, it is not necessary to decide the above objection.
12. The question whether an Arbitrator is liable to be removed on the ground of bias is to be decided on the basis of well-settled principles. They have been elaborated by the Supreme Court in International Airport Authority of India v. K. D. Bali . In that case, the allegation of bias was made on the ground that the Arbitrator was (a) not recording minutes of the meeting, (b) had not passed a reasoned order on a preliminary objection, (c) had not passed a reasoned order on a preliminary objection, (c) on his non-statement of case for opinion of Court, (d) on the arbitrary decision as to length of time of oral arguments, (e) the other party providing hotel accommodation and an ticket (on the petitioner refusal to contribute, and (f) non-consideration of counter-claims and (g) Change of venue. Even so, it was held that, on those facts, a reasonable apprehension of bias did not arise. Mere suspicion of bias was not sufficient. There must be a ‘real’ likelihood of bias. The Supreme Court said that the apprehension must be healthy and reasonable from an average point of view and not based on mere apprehension or vague suspicion of whimical, capricious and unreasonable people. In Jiwan Kumar Lohia v. Durga Dutt Lohia , it was again stated by the Supreme Court that the test of likelihood of bias as applied to a tribunal was whether a reasonable person, in possession of relevant information, would have thought that bias was likely and the tribunal was “likely to be disposed to decide the matter only in a particular way”. That was the position in the case of judicial tribunals. However, in the case of Arbitrators, the Court must further be satisfied that “substantial miscarriage” of justice would take place in the event of refusal of the application for removal of the arbitrator filed under Section 5 of the Arbitration Act, 1940. The Supreme Court also observed that the discretion to grant leave to revoke the arbitrator’s authority had to be exercised cautiously and sparingly. The Court must bear in mind that the Arbitrator could not be relieved of his duties merely because one party had a fear that the award might go against him.
13. In the light of the above principles, we shall examine each of the grounds on which the plea of bias is based :
(A) So far as the first ground is concerned, it is as follows. On 20.4.1992, when the Arbitrator wanted each party to pay Rs. 300/- for getting a copy of the measurements taken by the Local Commissioner, the appellant Society stated that it would pay Rs. 300/- only after photo copies were duly prepared. The respondent/contractor however deposited its share of Rs. 300/-. At that stage, it is the case of the appellant Society, that the Arbitrator observed that the Contractor could also pay Rs. 300/- on behalf of the petitioner “as the respondent (contractor) was to get award of several lacs of rupees and thereupon the respondent immediately paid Rs. 300/-.” It will be noticed that the contractor is claiming Rs. 1 crore and odd while the appellant Society was counter-claiming Rs. 2 crores. The attitude of the Society not to pay Rs. 300/- in advance would mean that the photo copies of measurements be prepared first by the Arbitrator at his expense and the Society would pay later. It looks to us that the expense involved was too small in the context of the huge claims. In any event, it is very important here to note that 2.4.1992 was the first hearing. The proceedings of the Arbitrator dated 4.5.1993 (p. 54 of paper book) show that both copies were collected by Shri Rajesh Aggarwal on 22.4.1992 and by consent of parties, the next hearing dates were fixed for 13.7.1992 etc. It is to be noticed that the appellant nowhere raised any objection on the above score but in fact participated in the proceedings and on 4.5.1992 consented to further hearing. The objection was raised only on 9.5.1992 by way of affidavits and petitions. If parties agree to continue the Arbitrator at a particular date of hearing of the case without raising any objection as regards any anterior action of the arbitrator, they must, in our view, be deemed to have waived their objections unless there be a proper explanation for not raising objection before further participating in the proceedings. In this case there is no such explanation. Hence the objection must be deemed to have been waived. Further the Arbitrator had, by his letter refuted the allegations in regard to the events dated 20.4.1992 and the respondent too had filed his objections denying the same by way of supporting affidavits of those present on 20.4.1992. In any event, when the stakes were in crores on each side and the appellant Society had refused to pay a partly sum of Rs. 300/- in advance towards copying expenses, the fact that the Arbitrator directed the Contractor to pay on behalf of the appellant Rs. 300/-, to be adjusted later, could not be treated as indication of any bias – having regard to the stringent tests laid down by the Supreme Court. The first ground for attributing bias therefore cannot be accepted.
(B) The second ground is that on 14.7.1992, the appellant filed a list of witnessed and the Arbitrator did not allow witnesses to be examined by the appellant. It may be that the contractor was satisfied by producing documentary material and written objections to the measurements but if the appellant wanted to examine witnesses and the said request was refused, the Arbitrator, it is argued, must be deemed to be guilty of bias against the appellant. The question is whether refusal to grant permission to examine witnesses amounted to bias.
14. This is not a case where the arbitrator has refused the appellants’ request summarily. He has passed a detailed speaking order (pp. 116-117 of the paper book). Therefore before going into the question, we must refer to the reasons given by the Arbitrator in his order dated 15.7.1992 for refusing the request of the appellant. It was stated in that order that the request was being considered’ ‘in connection with claimant’s (i.e. contractor’s) affirmations and other facts on record”. After referring to the rules of natural justice to be followed by any Arbitrator-which itself shows the awareness on the part of the Arbitrator to issues of natural justice – he observed that parties were allowed to file documents and appellant had not filed documents even though a long period of one year was over, that the Society had “failed to place on record the basic records like materials issued/Recovery Register, R.A. bills with recovery statements”, that in their “Statement of facts, the Counter statement of facts and the rejoinder of claimant dated 13.9.1991, the parties have exhaustively brought out their pleadings on exhibits and nothing more is required”. He further referred to the fact that the Contractor had substantially accepted the measurements made by the Local Commissioner (on whose report the Society was relying), that the case had to be completed as per the orders of the Delhi High Court within 4 months from 20.4.1992, that this aspect was clearly recorded in the order sheet of 13.7.1992, and there were no compelling reasons to summon the witnesses or the Local Commissioner. The question is whether this reveals any bias against the appellant.
15. The effect of the refusal of an Arbitrator to summon witnesses has come for scrutiny before Courts in several cases mostly in connection with issues of ‘misconduct’ under Section 30 of the Act. The arbitrator has normally to permit parties to adduce evidence where oral evidence is felt necessary. Arbitrary refusal to permit oral evidence will undoubtedly amount to misconduct. It has also been held that in order to entitle a party to impeach the award on the ground of the Arbitrator’s improper refusal to permit oral evidence, it must be shown that the witnesses were distinctly tendered to the Arbitrators. (Bihar State Co-op. Bank v. Phosphate Co. Ltd. . Manindra Nath Mandal v. Mohan Roy ((1912) 15 Cal. LJ 360), Commander, Bangalore Area v. Armugam Nagaratnam (AIR 1954 May 46). Where, however, there was nothing to show that the Arbitrator was not acting within his powers or where he in the exercise of a prudent and wise discretion had declined to summon the witnesses Rajendranath Dass v. Abdul Hakim Khan (AIR 1918 Cal. 399), or where the evidence was unnecessary and would not have in any way influenced the decision of the Arbitrators Keshrimal Pyar Chand v. Basantilal Pyarchand , there could be no misconduct. A decision to decline to receive evidence on any matter is, however, in ordinary circumstances, a delicate step to take, for the refusal to receive proof, if proof was necessary, would be fatal to the award (Russel on Arbitration (20th Ed. p. 395).
16. In Jugal Kishore Prabhatilal Sharma v. Vijayendera Prabhatilal Sharma , in the context of misconduct falling under Section 30, the Supreme Court was dealing with a contention that opportunity was denied to call and record the evidence of a witness because of rejection of an adjournment and there was also a shift in the venue of proceedings. The plea of misconduct was rejected by the Supreme Court on the ground that the refusal to permit evidence was justified because the period of limitation for passing the award was expiring and the application for examining the witnesses was made at a belated stage.
17. In other words, a refusal to examine witnesses at request of a party may therefore amount or not amount to misconduct depending upon various facts and circumstances. But misconduct and bias are different concepts. Bias would certainly amount to misconduct. Bias was only one particular form of misconduct. This is because misconduct could be on account of various other acts or omissions on the part of the Arbitrator. While refusal to permit oral evidence, where necessary, would be misconduct, the question is whether it would simultaneously also amount to bias. In our view, to draw an inference of bias from a refusal to permit oral evidence, something more must be shown. It must be alleged and proved that the refusal was mala fide and deliberate and that the Arbitrator wanted the case of the party whose request was rejected, to suffer. It may be argued that it is difficult to prove such a state of mind but, in our view, the party can always refer to direct or circumstantial evidence, to make good such an allegation. Whatever be the difficulties of proof, misconduct in refusal to permit oral evidence, cannot always lead to an inference of bias.
18. In the present case, the Arbitrator while refusing the request to examine witnesses, passed a detailed order wherein he referred to his duty to observe principles of natural justice and he then gave various reasons as to why he was not inclined to permit oral evidence. One of the reasons was that the appellant Society had not filed the documents that it was required to file during a period of one year, and the other was that the time for filing the award was expiring (as in the Supreme Court case). He also felt that the disputes could be decided on the pleadings and statement of facts filed by both sides. Let us assume that the order was erroneous and therefore amounted to violation of principles of natural justice. That may be a ground for finding misconduct but still, that by itself, does not prove bias. In fact, the Arbitrator did not keep his reasons secret, but he made them public by passing a reasoned order. On the facts stated above, we are unable to hold that any bias can be attributed to him. Further there is no proof that any witness was actually tendered before the Arbitrator for evidence. In fact, now the learned single Judge in the impugned order, has already allowed the appellant to examine its witnesses. We therefore reject the second ground for attributing bias.
19. The third ground of attack is that on 13.7.92, the Arbitrator stated that his prestige was involved and that he had been meeting all the expenses from his pocket for coming to Delhi from Madras and the Society wrote about this to the Arbitrator on 14.7.92. It is argued that this showed the personal interest that was being taken by the Arbitrator in the case.
20. Initially, we also felt that, if the Arbitrator was to come from Madras, the expense for the parties might become heavy. We also wanted to find out if he was charging more than one party for his trips from Madras to Delhi. We therefore called for information from the Arbitrator on 1.12.94. The Arbitrator sent a report dated 25.2.95, giving (a) a statement of chronological history of the hearings held and (b) claims bill regarding expenses for coming to Delhi. The hearing of the case were on six occasions as follows : (1) 3.7.91, (2) 13.9.91 and 14.9.91 and 27.9.91, (3) 5.12.91, (4) 20.4.92, (5) 13.7.92, 14.7.92, 15.7.92, 16.7.92, and (6) 1.8.92.
21. In the Billing statement for TA, he said : “Towards TA for journeys from Madras to Delhi. Availed 2nd AC sleeper only (though entitled to air fare by Executive Class). Nothing claimed for journeys performed in July 1991, September, 1991, December, 1991, April, 1991 and July 92 as they were adjusted prorata basis from the following arbitration cases held in Delhi, and a consultancy case : ARB/AS/91/DDA/I, ARB/AS/91/DDA/II, ARB/AS/91/DDA/III, ARB/AS/91/DDA/IV, International Tribunal Case.” He also said that presently he is dealing with three arbitration cases at Delhi of which one was an international work involving claim for 3 crores (approx.) along with Justice M. S. Gujral and Shri M. S. Telang (retd.) G.E. CPWD from Pune. In that case, they are paid (besides air fare) sitting fee (for sittings) Rs. 4,000/- plus Rs. 500/- incidentals, per sessions of 2 to 2 and a half hours.”
22. He further stated as follows, so far as the present case was concerned, “In this case we anticipate another 12 to 15 sittings. “So long as the case continues, he would take it along with the International Tribunal case, whenever he would come to Delhi. He was charging only Rs. 500/- per sitting and Rs. 75/- towards incidental expenses per sitting. In all, he said “Anticipated additional expenditures for 16/18 hearings with two trips to Delhi would be Rs. 18,000/- more. In one visit, I intend holding 6 to 8 sittings (FN). And, as we do in the International Tribunal case.”
23. From the above, it is clear that the Arbitrator had so far charged T.A. only for one hearing (i.e. 1.8.92) out of six hearings held during 3.7.91 to 1.8.92 and the TA for the rest of the five was charged to the International Tribunal case for which also he had been coming to Delhi. So far as the present case was concerned, the sitting charge rate is Rs. 500/-. Future expenses for 16/18 sittings were estimated by him at Rs. 18,000/-. He wants to finish the case during two visits to Delhi by taking up the matter day by day. Therefore, the allegation that his TA expenses for coming from Madras to Delhi will add to the load of expenses is not well founded. He has shifted the expense of 5 out of 6 sitting to another case. Then, a further contention was raised by the appellant that in his above Report he had not given any indication as to whether the other cases for which he was coming to Delhi were posted on the same dates on which the present case was posted to. We then passed another order on 24.7.95 calling for information and a further report dated 1.8.95 was filed by the Arbitrator, giving dates. We found that the other cases were also being posted during the same period. Further there is no specific contention before us that the opposite party i.e. the contractor was paying the air-fare. For the above reasons, the contention that the Arbitrator was taking special interest in this case and was therefore disqualified cannot be accepted. If the Arbitrator was coming to Delhi in more than one case and for five out of six such visits, he had shifted the expenses to some other cases, the appellants could not have any grievance much less a grievance that he was biased.
24. The last ground was that he was removed in another case by the High Court but this was based on consent. There is no substance in this contention.
25. A subsidiary contention was raised that the Arbitrator said in one of his orders that the fee to be charged by him would be indicated by him after the hearings were over, that the fee schedule was given to the appellant only on 9.7.91 long after the Arbitrator’s appointment on 9.3.91. This plea cannot be permitted because, after receiving the fee schedule on 9.7.91, the appellant participated in the case. On 11.2.92 it extended time by consent. Again the time was extended on 4.5.92. The Arbitrator has now stated that he is going to charge only 500 per sitting and for 16/18 sittings in two trips, the further expenses will come only to exceed 18,000 approximately.
The claims are on one side for one crore by the contractor and for 2 crores by the Society by way of counter-claim. The fee proposed to be charged for additional sitting of Rs. 500/- per sitting is therefore not prima facie disproportionate. If the appellants co-operate, the TA expenses will be obviously met from the International Tribunal case. Hence there is no extra burden on the appellant.
26. For all the above reasons, the appeal is liable to be dismissed and is accordingly dismissed.