LexM/S. LADLI CONSTRUCTION CO. (P) LTD. versus PUNJAB POLICE HOUSING CORPN. LTD. AND ORS.
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A B [2012] 4 S.C.R. 780 MIS. LADLI CONSTRUCTION CO. (P) LTD. v. PUNJAB POLICE HOUSING CORPN. LTD. AND ORS. (Civil Appeal No. 947 of 2006) FEBRUARY 23, 2012 [R.M. LODHA AND H.L. GOKHALE, JJ.) Arbitration Act, 1940 - ss. 5, 11, 12 and 30 - Arbitral award - Challenge to - Allegation of bias against the arbitrator - C Disputes arose out of contract between appellant-contractor and respondent-Corporation - Appellant moved the Court for appointment of arbitrator in terms of arbitration clause contained in the contract - Court ordered the Chief Engineer of respondent-corporation to act as arbitrator - Appellant did D not appear before the arbitrator and instead sent a letter intimating him that his appointment as arbitrator was not acceptable to it; and that it did not expect any justice and fair play from him - Thereafter, appellant made application ulss.5, 11 and 12 of the Act for removal of the arbitrator - Meanwhile, E the arbitrator proceeded with the arbitration ex parte and passed the award - Appellant submitted objections u/s. 30 alleging misconduct on the part of the arbitrator - Award, however, made rule of the court and decree passed in terms thereof - Justifiability - Held: The appellant-contractor F consciously agreed tor disputes between the parties to be referred for arbitration to the Chief Engineer of respondent- Corporation - Appellant moved the court for appointment of the Chief Engineer as arbitrator and then chose not to appear before him - What was the intervening event after the arbitrator was appointed at his instance that prompted him to ask the G arbitrator to recuse is not stated by the appellant - The award passed by the arbitrator also does not show that he misconducted in any manner in the proceedings - He gave full opportunity to the appellant to appear and put forth its case H 780 LADLI CONSTRUCTION CO. (P) LTD. v. PUNJAB 781 POLICE HOUSING CORPN. LTD. but the appellant failed to avail of that opportunity - Since the A parties entered into a contract knowing the role, authority or power of the Chief Engineer in the affairs relating to the contract but nevertheless agreed for him to be arbitrator and named him in the agreement to adjudicate the disputels between the parties, they stood bound by it unless a good or B valid legal ground was made out for his exclusion - Except raising vague and general objections that the arbitrator was biased and had predisposition to decide against the appellant, no materials, much less cogent materials, were placed by the appellant to show bias of the arbitrator - The c test of reasonable apprehension of bias in the mind of a reasonable man was not satisfied in the factual situation - A fanciful apprehension of bias was not enough - No reason for interference under Article 136 of the Constitution - Natural Justice - Bias. D Arbitration - Arbitral award - Challenge to - Allegation of bias against the arbitrator - Plea that bias on the part of the arbitrator was a/so reflected from the post arbitral conduct of the arbitrator inasmuch as he contested instant appeal (against the arbitral award being made rule of the court) and E filed affidavit in opposition - Held: Not tenable - What would have the arbitrator done when he has been personally impleaded as respondent in the appeal and the a/legations of bias have been made against him - He was left with no choice but to rebut the allegations by filing his affidavit - The F arbitrator did what any other person in his place would have done in the circumstances. A contract was entered into between the appellant- contractor and respondent-Corporation for construction G of 240 houses. The Contractor could not maintain the time schedule and consequently the Corporation rescinded the contract. Disputes arose between the parties, whereupon the Contractor moved the court of Sub Judge, First Class, for appointment of arbitrator in H 782 SUPREME COURT REPORTS [2012] 4 S.C.R. A terms of Clause 25A of the contract. The Sub Judge, on May 13, 1992, ordered the Chief Engineer of the Corporation to act as an arbitrator as provided under Clause 25A of the agreement. Both the parties were permitted to file claim and counter claim before the s arbitrator. In pursuance of the order dated May 13, 1992, the Corporation lodged its claim against the Contractor on June 15, 1992. The arbitrator - Chief Engineer of the Corporation - called upon the Contr
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