INTERNATIONAL AIRPORT AUTHORITY OF INDIA versus K.D. BALI & ANOTHER

Citation: [1988] 3 S.C.R. 370 · Decided: 29-03-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 3 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

INTERNATIONAL AIRPORT AUTHORITY OF INDIA 
'1· 
A 
v. 
K.D. BALI & ANOTHER 
MARCH 29, 1988 
B 
ISABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.] 
"" 
Arbitration Act, 1940-Whether a party to arbitration proceedings 
can seek revocation of authority of the arbitrator appointed under sec-
tions 5 and 11-0f-on apprehension in the mind of such a party about 
bias of the arbitrator-Determination of the question. 
c 
This petition for special leave was against the judgment and order 
'y 
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of the High Court of Bombay, rejecting the application for revocation of 
the authority of the respondent No. 1, the sole arbitrator under sections 
., 
S and 11 of the Arbitration Act, 1940 ('The Act'). 
D 
The petitioner invited tenders for the construction of the terminal 
building of a new international passenger complex (Phase II) at the 
v 
Bombay Airport. The respondent No. 2, a partnership firm, submitted 
a tender which was accepted and a formal agreement followed, with a 
provision in the agreement for settlement of disputes through a sole 
arbitrator appointed under clause 25 of the conditions of contract by 
).. 
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the competent authority. 
Certain disputes arose in which the petitioner sought claims 
amounting to Rs.SS lakhs. The respondent No. 2-the contractor-
approached the petitioner to refer the disputes to arbitration. The Chief 
Engineer of the petitioner appointed respondent No. 1 as the arbitrator .:} 
F 
and made a reference with regard to the. claim of Rs.SS lakhs. The 
respondent No. 2 asked the Chief Engineer to refer further disputes to 
the arbitrator and, accordingly, on 16th May, 19S6, a second reference 
was made with regard to 11 further points of dispute with claims 
amounting to Rs.t.17 crores. On 23rd December, 19S6, the Chief 
Engineer made reference No. 3 to the Arbitrqtor with regard to claim 
G amounting to Rs.S.Sl crore. Thereafter, by applications of 8th and 9th 
June, 1987, the petitioner expressed objections to the references Nos. 2 
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and 3 made by the Chief Engineer contending that the references were 
null and void, being irregularly made, and took preliminary objections 
before the arbitrator to the arbitration proceedings, being lack of 
jurisdiction of the arbitrator on the ground that he was not validly 
H appointed so far as references Nos. 2 and 3 were concerned. On 7th 
370 
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INTERNATIONAL AIRPORT AUTHORITY v. K.D. BALI 
371 
August, 1987, the petitioner made an application before the arbitrator 
A 
under section 13(b) of the Act with the request to state the matter before 
him for the opinion of the Court as special case. 
The arbitrator by his order dt. 3rd October, 1987, rejected the 
said application and the preliminary objections of the petitioner. There-
after, the petitioner alleging that th.e arbitrator had formed his own 
opinion regarding the matters in issue, filed an appliction before the 
High Court for the revocation of the authority of the arbitrator on the 
ground of apprehension in the petitioner's mind aboot bias of the 
arbitrator. The High Court by its judgment and order dt. 2Ld 
February, 1988, rejected the application of the petitioner. The 
petitioner then moved this Court for relief by special leave. 
Dismissing the petitionfor special leave, the Court, 
HELD: It was necessary to reiterate first what are the paramet-
ers by which an appointed arbitrator can be removed on the appliction 
B 
c 
of a party. It is well-settled that there must be purity in the administra-
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lion of justice as well as quasi-justice involved in the adjudicatory pro-
cess before the arbitrator. Once the arbitrator enters on an arbitration, 
he must not be guilty of any act which can possibly be construed as 
indicative of partiality or unfairness. It is not a question of the effect 
which a misconduct on his part had in fact upon the result of the 
proceeding, but of what effect it might poSsibly have produced. It is not 
E 
enough to show that even if there was misconduct on his part, the award 
was unaffected by it and was io reality just; the arbitrator must not do 
anything which is not io itself fair and impartial. In the words of Lord 
O'Brien, L.C. J, there must be a real likelihood of bias and not a mere 
suspicion of bias before proceedings can be quashed on the ground that 
the person conducting the proceedings is disqualified by ioterest. The 
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purity of administration requires that the party to the proceedings 
should not have apprehension that the authority is biased an

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