G H VINOD BHAIYALAL JAIN & ORS. versus WADHWANI PARMESHWARI COLD STORAGE PVT. LTD.THROUGH ITS DIRECTOR & ANR.

Citation: [2019] 9 S.C.R. 1080 · Decided: 24-07-2019 · Supreme Court of India · Bench: R. BANUMATHI · Disposal: Appeal(s) allowed

Judgment (excerpt)

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SUPREME COURT REPORTS
[2019] 9 S.C.R.
VINOD BHAIYALAL JAIN & ORS.
v.
WADHWANI PARMESHWARI COLD STORAGE PVT.
LTD.THROUGH ITS DIRECTOR & ANR.
(Civil Appeal No.6960 of 2011)
JULY 24, 2019
[R. BANUMATHI AND A.S. BOPANNA, JJ.]
Arbitration and Conciliation Act, 1996 – ss.34, 37(1)(b) –
Appellant utilized the services of respondent No.1 for keeping an
agricultural product – According to appellants, the respondent no.1
caused damage to the product – Appellant issued notice for
compensation, but in return respondent no.1 made a counter claim
– Dispute arose between the parties – Respondent no.1 invoked the
arbitration clause contained in the receipt of the storage of goods
– Pursuant thereto, respondent no.1 referred the dispute to the
Arbitrator ‘STM’, an advocate – Appointment of Arbitrator was
objected on the ground that the said advocate was the counsel for
respondent no.1 and its partners in other cases – However, Arbitrator
proceeded with the matter and passed an award against the
appellants – Aggrieved, appellant filed petition u/s.34 of the Act
before the District Court – District Court found the objections
justified and set aside the award – Respondent filed appeal
u/s.37(1)(b) before the High Court – High Court restored the award
passed by the Arbitrator – On appeal, held: The provision contained
in s.12 of the Act, 1996 cast an obligation on the person, who is
approached for appointment as an arbitrator, to disclose any
circumstance likely to give rise to justifiable doubts as to his
independence or impartiality – In the instant case, though technically
as on 27.02.2004 when the storage receipt was drawn out and the
Arbitration clause came into existence there was no circumstance
for disclosure – However ‘STM’ had filed immediately thereafter,
on 29.03.2004 vakalat for one of the parties (partner of respondent
no.1) – Thus, as on 03.06.2006 when the claim was lodged before
the Arbitrator both the events of, he being appointed as an Arbitrator
and also as a counsel in another case had existed, which was well
within the knowledge of ‘STM’ and in that circumstance it was the
[2019]  9 S.C.R. 1080
1080
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appropriate stage when he ought to have disclosed the same and
refrained from entertaining the claim – In the background, there is
a reasonable basis for the appellants to make a claim that in the
present circumstance the Arbitrator would not be fair to them even
if not biased – In that view, an award passed by the arbitrator was
not sustainable – District Court was justified in entertaining petition
u/s.34 of the Act, 1996 to set aside the award.
Allowing the appeal, the Court
HELD: 1. With regard to the contention that ‘STM’,
Advocate ought not to have acted as the Arbitrator since he was
also the counsel for the respondent No.1 in another case, the
same requires consideration.  Not only from the observations
contained in the order of the High Court it is noticed that the
said Arbitrator had appeared as a counsel for the respondent, it
is also seen from the records that as per the vakalatnama dated
29.03.2004 the Arbitrator has filed the vakalat in Mesne Profit
Case to which ‘P’, one of the partners of the respondent No.1
herein was a party.  Though it is sought to be made out that the
said  ‘P’ has nothing to do with respondent No.1, as pointed out
by the counsel for the appellants, the supporting affidavit for
making the solemn affirmation in respect of the First Appeal
No.180 of 2007 filed under Section 37(1)(b) of the Arbitration
and Conciliation Act, 1996 relating to this very proceeding is
made by the said ‘P’.  Thus, it is clear that ‘STM’,  Arbitrator had
acted as a counsel in another case for one of the parties to the
dispute in the instant case.  In that circumstance it is also not a
case where the Arbitrator had proceeded in the matter by
oversight or without having knowledge of such conflict of interest.
As noticed, a legal notice had been secured to be issued on behalf
of the appellants herein raising objection in that regard.  Though
such notice was issued on the instructions given by the father of
the appellants,  it is not by a rank outsider nor have the appellants
disowned it to be ignored.  In addition, one of the appellants had
also addressed a communication dated 07.08.2006 requesting the
learned Arbitrator to stop the proceedings since they had filed a
petition in the High Court for appointing an independent
Arbitrator which was also for the reason that pre

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