IN THE HIGH COURT OF KERALA AT ERNAKULAM
AR.No. 25 of 2007()
1. R.GEORGE PEREIRA,
... Petitioner
Vs
1. ST.JOSEPH'S INTERNATIONAL ACADEMY,
... Respondent
For Petitioner :SRI.K.L.VARGHESE
For Respondent :FR.JOHNY THOTTAM
The Hon'ble MR. Justice PIUS C.KURIAKOSE
Dated :08/05/2009
O R D E R
PIUS C. KURIAKOSE, J.
-----------------------------------------------
A.R. No. 25 OF 2007
-----------------------------------------------
Dated this the 8th day of May, 2009
O R D E R
This is an application under section 11(6) of the
Arbitration and Conciliation Act, 1996 and the Scheme for
Appointment of an Arbitrator by the Chief Justice of the
Kerala High Court. The application seeks appointment of an
independent and impartial arbitrator for adjudicating upon
the various claims of the applicant against the respondent
The applicant was contractor of the respondent for the
construction of an school building at Kumbalam in Kollam
under the name and style “St. Joseph International
Academy”. It is alleged that disputes and differences arose
between the parties on account of what is described as the
recalcitrant attitude of the respondent to allow the applicant
to complete the work which had neared completion. It is
claimed that the applicant has carried out works worth
Rs.68,57,616/- in seven part bills whereas the respondent
A.R. N0. 25/07
-2-
has paid only Rs.45,68,712/-. The balance amount due
under the part bill is Rs.22,88,904/-. Since the balance
amount remained unpaid, the windows which had been
supplied by the applicant to the respondent had to be taken
back and deducting the value of those windows, the balance
amount due to the applicant is Rs.22,12,087/-. According
to the applicant, in order to avoid payment of the above
amount the respondent sought to terminate the contract.
The disputes and differences which was thus arisen are to
be settled by resorting to arbitration proceedings.
Annexure A8 is copy of the agreement between the
applicant and the respondent for construction of St. Joseph
International Academy and clause 17 thereof is quoted as
follows:
“(17) If there is any dispute relating to any matter
regarding the construction of the building or any matter
related to this contract, the Manager, St.Joseph’s
International Academy, Kollam will be the sole
Arbitrator for this purpose and his decision shall be
final, and the second party will have no right toA.R. N0. 25/07
-3-challenge this decision in the court of law”.
It is submitted that as per clause 17, the Manager of the
respondent is to be the sole arbitrator. But since disputes
have arisen on account of the actions and inactions of the
Manager, he is not entitled to function as arbitrator since
the same will be against the fundamental principle of
natural justice, nemo debet esse judex in propria causa (no
one shall be a judge in his own cause). It was under such
circumstances that the applicant sent Annexure A4 letter
indicating a panel of three names for selection of one among
them as arbitrator by the respondent. To Annexure A4, the
respondent’s Advocate sent Annexure A5 reply without
selecting any of the nominee arbitrators but suggesting for
appointment of two Civil Engineers, one to be appointed by
each party who could jointly verify the records and files and
assess the quantity and quality of the work done in order to
avoid a litigation and to come to a fair settlement. The
A.R. N0. 25/07
-4-
applicant obliged and appointed his nominee under
Annexure A6. The respondent also appointed its Engineer.
By Annexure A7, the applicant requested both the Engineers
to take up the assignment and pave way for a settlement.
Though the applicant called for nominee Engineer of the
respondent and furnished all measurement books and
connected records and made necessary follow up, nothing
materialized. In the meanwhile, the applicant’s nominee
Engineer met with an accident and passed away. Hence no
useful purpose will be served by waiting further and that is
the circumstances under which the applicant has filed this
application under section 11(6) of the Arbitration and
Conciliation Act, 1996 invoking the statutory appointment
procedure of arbitrators.
2. On the basis that no counter affidavit was filed the
A.R. was allowed by order dated 11-10-2007. Later R.P. No.
233 of 2008 was filed and the above order was recalled.
A.R. N0. 25/07
-5-
3. The contentions of the respondent as discernible
from the RP. 233/08 filed by him and also the reply affidavit
filed by him in the said RP are as follows: The arbitrator
who has been appointed by this court under the order dated
11-10-07 (Sri.E.K.Muraleedharan, Retired District and
Sessions Judge) is incapable of acting as arbitrator between
the parties in the light of the legal bar under the provisions
of the Arbitration and Conciliation Act, 1996. It is submitted
that contrary to what has been projected in the A.R. the
Manager envisaged under clause 17 of the arbitration clause
who is to act as the sole arbitrator in the event of disputes
and the signatory to the agreement are one and the same
person. In order to convince this court that the Manager of
St.Joseph ‘s International Academy and the executant to the
agreement are one and the same, the applicant has
produced Annexure A8, but Annexure A8 does not contain
the last page of the agreement. The last page of the
A.R. N0. 25/07
-6-
agreement will disclose that the Manager was not the
executant of the agreement. On the contrary the executant
of the agreement was the General Manager. Annexure B1
full text of the agreement is produced. It is pointed out that
it will be seen from Annexure B1 last page that there was a
typing mistake where the 1st party was indicated and
instead of General Manager the word Manager was
mistakenly used. Since the party noticed the mistake at
the time of execution of the agreement, the first party to
the agreement, the General Manager, St.Joseph’s
International Academy did not sign and instead he signed as
the General Manager only where the first party was
indicated. This was deliberately and intentionally done in
order to avoid confusion as the Manager, St.Joseph’s
International Academy was appointed as the arbitrator
under clause 17 of the agreement. It is submitted that
there is absolute consensus with regard to the arbitrator by
A.R. N0. 25/07
-7-
both parties to the agreement. It is then contended that
the General Manager and the Manager of St.Joseph’s
International Academy are two different persons. Annexure
B2 certificate issued by Mr.Joseph J. who was the Manager
of St.Joseph Academy during the period from 1st June 2002
to May 31, 2007 is produced. The present Manager of
St.Joseph Academy is one S.Sundaresan and Annexure B3
certificate issued by him is produced.
4. Annexure – B4 dated 22-11-2004 was caused to the
applicant by the respondent claiming Rs.39,43,330/- from
the applicant on various counts and requested that if the
claim was disputed the matter be referred to the Manager,
St, Joseph’s International Academy who alone is the
arbitrator. Again Annexure B5 dated 30-8-2005 was issued
on behalf of the respondent by way of reply to a lawyer
notice dated 16-10-2005 sent at the instance of the
applicant. Once again by Annexure B6 lawyer notice dated
A.R. N0. 25/07
-8-
1st December 2005 the respondent’s lawyer informed the
applicant’s lawyer in reply to applicant’s notice dated 19-11-
2005 that the Manager of the St. Joseph’s International
Academy is to be appointed as arbitrator and that it was not
the Manager of the St. Joseph’s International Academy who
had signed the agreement. In the reply affidavit filed by the
respondent to the counter filed by the applicant to
RP.233/08, it is submitted that the respondent has never
acted in a capacity as the Manager of St. Joseph’s
International Academy at any stage. The respondent has
been styled as General Manager or as Managing Director or
Director. This is on account of the fact that at the time of
construction of the school, the organization was at a very
nascent stage and therefore the respondent was styled as
General Manager and later as Managing Director/Director.
Similarly the then Manager Joseph John was styled as
Manager and subsequently he continued as Manager who
A.R. N0. 25/07
-9-
was also styled as Administrator. He continued to be the
Manager as well as Administrator. It is submitted that the
respondent in the RP (applicant) is trying to take advantage
of a typing mistake made in the agreement wherein the
word Manager was used in the last page instead of General
Manager. However, it is submitted that there is no scope
for such confusion as in the last page, it is the General
Manager who had signed at the portion where the first party
is indicated. In the agreement the first party is described as
General Manager. Hence there is no scope for confusion.
Referring to the correspondence produced by the
respondent it is submitted that the Manager Mr.Joseph John
had signed on behalf of the General Manager and not in his
capacity as the Manager of the school. It is pointed out that
Ext.A9 is not addressed to the General Manager or to the
institution. A10 is not addressed to the General Manager
but to Joseph John, the Manager. It is reported that Joseph
A.R. N0. 25/07
-10-
John has functioned only as Manager and that the
respondent has never styled or functioned as Manager. It
is further pointed out that the present Manager is not
Joseph John but is Mr. S. Sundareswaran and therefore
there is no question of any prejudice being caused to the
respondent.
6. I have heard the submissions of Sri. K.L. Varghese,
learned counsel for the applicant and those Sri. Madhu
Radhakrishnan, learned counsel for the respondent.
Mr.K.L.Varghese submitted that the non-production of the
last page of Annexure A8 is not fatal. The Arbitration
Scheme and the Kerala Arbitration Rules require production
of the arbitration agreement only along with the arbitration
request and not the whole contract agreement. Reference
was made to Section 7(2) of the Arbitration and
Conciliation Act in this context. According to the counsel,
this was why the applicant produced only clause 17 of
A.R. N0. 25/07
-11-
Annexure-A, which is the arbitration clause. Counsel
submitted that a reading of Annexures A4 and A5 will show
that this is not the first time that issue has cropped up. It is
submitted that on behalf of the applicant it has been made
clear that it was Sri.George Fernandez who signed the
agreement in the capacity of the Manager, first party and
disputes have arisen on account of actions and inactions on
the part of Sri.George Fernandez, the signatory which were
denied. Respondent maintained that the agreement was
signed by the Managing Director and that the arbitrator was
Manager. In Annexure A5 signatory is referred to as
Managing Director and not as General Manager which is
very significant. According to Mr.Varghese, last page of
Annexure A8 would only strengthen the applicant’s case.
He pointed out that the last page shows that the first party
is styled as Manager. The expression first party is repeated
twice. It shows that the statement that the respondent
A.R. N0. 25/07
-12-
deliberately and intentionally did not sign the first line but
only the second line is incorrect. If the signatory found that
the first party is not Manager he should have definitely
scored it off. If the Manager had signed as witness he
should have scored off the word Manager as first party when
he signed as witness, instead against the expression witness
he should have styled himself as Manager. Annexures 1
and 2 produced along with the counter to the RP will show
that there was a manager for the school and never a
General Manager. A reading of Annexures 2 and 3 together
shows that Sri. Joseph Fernandez himself was the Manager
though while issuing Annexure 3 he is styled as Director.
Mr. Varghese emphasized the words “I am happy to award”
in Annexure 3. Mr.Varghese submitted that the witness
Joseph.J. Was only the Administrator and his full name
Joseph John is indicated in Annexures A5 and A6.
Mr.Varghese highlighted that in the reply affidavit it is
A.R. N0. 25/07
-13-
admitted that Joseph. J. alias Joseph John turned to be the
administrator. The letter pad in Annexures 3 and 5 to 11
shows that he was only “administrator” and not “Manager”.
If so, his successor, the signatory to Annexure B4 also can
be only an administrator and not the Manager. If under
section 21, the commencement of arbitration proceedings is
on the date of request to refer the disputes to arbitration
then it should be deemed to be commenced after 22-11-
2004, the date of Ext.B4. B2 will show that Joseph J. /
Joseph John was working for the petitioner at that time as
administrator which means that there was no Manager to
function as arbitrator. This according to Mr. Varghese is
precisely the reason why in Annexures B4 and B5 though
repeatedly the respondent said that the matter / all
relevant papers would be placed before the arbitrator and
the matter will be decided by him. He did not do so
because there was no manager at that time. According to
A.R. N0. 25/07
-14-
Mr.Varghese it is unbelievable that certificates like B2 and
B3 could be issued by men of average intelligence and
common sense. He submitted that those documents are
fabricated and cooked up. He pointed out that the title “to
whom it may concern” (sic) is conspicuous. He submitted
that the same mistake is repeated in B2 and B3, though
created and signed on different dates. He pointed out that
the first para of both these annexures is identical. Para 2 of
Annexure B2 and Paras 2 and 3 of B3 are identical. Para 4
of B2 and para 3 of B3 are identical. He asserted that B2
and B3 are dictated by one and the same person. Though
B2 is dated 8-2-08 and B3 is 11-2-08 they are apparently
made on the same date. The reason why the signatories on
B2 and B3 had to issue such certificates is obscure,
according to Mr.Varghese . Obviously the reason is only to
help the respondent. By issuing such certificates both the
signatories to B2 and B3prove their allegiance to the
A.R. N0. 25/07
-15-
respondent, making themselves disqualified to be
independent and impartial arbitrator which is required under
section 11(8)(b) of the Act even assuming that any one of
them can be considered as arbitrator. Mr.Varghese would
fortify his submissions on the authority of a catena of
judicial precedents. He relied on paragraphs 4.030 and
4.031 of Russel on Arbitration 22nd Edition for the
commentaries on apparent bias and real possibility test. He
argued that actual bias is not necessary to be proved and
that the knowledge at the time of appointment does not
debar from applying on the ground that the arbitrator to be
appointed in terms of the agreement may not be impartial.
For this proposition he relied on page 215 of the Law of
Practice of Commercial Arbitration by Mustill and Byod. To
expatiate his argument regarding the concept of
independence and impartiality of arbitrator he relied on
commentaries contained in Comparative International
A.R. N0. 25/07
-16-
Commercial Arbitration by Julian D M Lew QC and others.
He relied on the judgments of the Supreme Court in ACE
Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd.
(2007) 5 SCC 304, Bihar State Mineral Development Corpn.
and others. v. Encon Builders (I) (P) Ltd. ((2003) 7 SCC
418 and in Tata Cellular v. UOI (1994) 6 SCC 651 in support
of various propositions canvassed by him.
7. Sri. MadhuRadhakrishnan, learned counsel for the
respondent also did not lag behind in citing authorities. The
learned counsel relied on the judgment of the Calcutta High
Court in Pragati Engineering (P) Ltd. v. T.N.Water Supply &
Drainage Board, AIR 1992 Calcutta 139 to argue that where
the parties entered into a contract with their eyes open and
knew that the nominated arbitrator is an employee of one of
the parties, none of the parties to the agreement should be
allowed to allege that such nominated arbitrator being an
officer of one of the parties to the contract, would be biased
A.R. N0. 25/07
-17-
or is likely to be biased. Mr. Madhu Radhakrishnan relied
on the judgment of the Supreme Court in International
Airport Authority of India v . K.D.Bali, (AIR 1988 SC 1099)
to argue that the apprehension of bias must be judged from
a healthy, reasonable and average point of view and the
request for removal of the appointed arbitrator is not to be
granted lightly. Mr.Madhu Radhakrishnan placed reliance on
the judgment of the Supreme Court in Jain Studios Ltd. v.
Shin Satellite Public Co. Ltd., (2006) 5 SCC 501 also.
8. The provisions contained in sections 12 and 13 of
the Arbitration and Conciliation Act incorporate grounds for
challenge and the challenge procedure against and in
respect of arbitrators will reveal that partiality and bias or
circumstances giving rise to justifiable doubts regarding the
impartiality and independence can be valid grounds for
challenging the appointment given to a certain persons as
arbitrator. At the same time, a party should not be allowed
A.R. N0. 25/07
-18-
to wriggle easily out of agreements entered into by them
with open eyes. In the instant case it is seen that the
applicant had agreed to the appointment of a person in the
service of the opposite party as an arbitrator in the event of
disputes. That being the position I would have been
ordinarily reluctant to accept the opposition of the applicant
to the appointment of the nominated arbitrator on ground
of bias and partiality. After all, it is a quasi judicial function
which is being discharged by the arbitrator whose
proceedings will be regulated by the provisions of the
Arbitration and Conciliation Act. His award will be subjected
to judicial scrutiny though on limited grounds and to a
limited extent. But in the instant case I am not inclined to
dismiss the arbitration request and to appoint the
nominated arbitrator as the arbitrator for resolving the
disputes which have admittedly arisen between the parties
because it is seen from Annexures A4 and A5 that the
A.R. N0. 25/07
-19-
respondent also became agreeable to the idea of the
disputes between the parties being resolved by persons
other than the arbitrator nominated under the agreement.
Annexures A6 and A7 will show that the parties had
nominated an Engineer each and were willing to have the
disputes between them resolved by a joint perusal of the
relevant records by these two Engineers. To this extent, in
my opinion the respondent has waived his right to insist
that the arbitrator to be appointed has to be the arbitrator
nominated under the agreement. Moreover, in my opinion
no prejudice whatsoever will be occasioned to the
respondent by appointing a Retired Judicial Officer known
for his learning and integrity as the arbitrator for resolving
the disputes which admittedly subsist. Therefore without
deciding the issue whether appointment of the nominated
arbitrator will be vitiated due to reasons of bias and
partiality I allow the arbitration request and appoint
A.R. N0. 25/07
-20-
Sri.E.K.Muraleedharan, Retired District and Sessions Judge,
presently at Ernakulam as arbitrator for settling all the
claims and counter claims raised by the applicant and the
respondent respondent as detailed in Annexures A1 to A4 as
well as in the arbitration request. The arbitrator will enter
on arbitration and make and publish his award without
undue delay.
(PIUS C.KURIAKOSE, JUDGE)
ksv/