SECRETARY TO THE GOVERNMENT, TRANSPORT DEPTT., MADRAS versus MUNUSWAMY MUDALIAR & ORS.

Citation: [1988] SUPP. 2 S.C.R. 673 · Decided: 29-08-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Appeal(s) allowed

Judgment (excerpt)

SECRETARY TO THE GOVERNMENT, TRANSPORT 
DEPTT., MADRAS 
v. 
MUNUSW AMY MUDALIAR & ORS. 
AUGUST 29, 1988 
[SABYASACi-II MUKHARJI AND S. RANGANATHAN, JJ.] 
Arbitration Act, 1940: S. 5-Chosen Arbitrator-Removal of-
Apprehension of bias-To be based on cogent materials. 
The dispute as to the refund of earnest money deposit to the 
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respondent-contractor was referred to an arbitrator named in the arbit-
ration clause of the agreement. The respondent filed claim before him. 
During the pendency of the claim before the said arbitrator, there was 
succession to that office by another incumbent. The succeeding officer 
wanted to continue the arbiiration proceedings but before that the 
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respondent made an application under s. 5 of the Arbitration. Act for 
removal of the arbitrator on the ground that he being an employee of 
the State the petitioner apprehended bias. The Judge, City Civil Court 
found that the Chief Engineer of the-Circle concerned was in favour of 
the cancellation of the contract in question and when-11 came to. be 
terminated the construction was sought to be entrusted at the risk and 
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cost of the petitioner on the advice or the proposal of the Chief 
Engineer. Being of the view that the arbitrator, the Superintending 
Engineer, being subordinate to the said Chief Engineer, would neces-
sarily have a leaning .to accept the attitude expressed by latter, he 
·concluded that there could legitimately be a bias in the mind of the 
arbitrator. The High Court dismissed the appeal in limine. 
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Allowing the appeal by special leave, 
HELD: A named and agreed arbitrator cannot and should not be 
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removed in exercise of a discretion vested in the court under s. 5 of the 
Act unless there is allegation either against his honesty or capacity or · G 
ma/a fide or_ interest in the subject matter or reasonable .apprehension 
of the bias. [677E-F] 
A predisposition to decide for or against one party, without 
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proper regard to the true merits of the di~pute is. bias. T.here must be ' 
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"'--~r'reasunable apprehension of that predisposition based on cogent 111ate-
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673 
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674 
SUPREME COURT REPORTS 
[1988] Supp. 2 S.C.R. 
rials. Mere imagination of a ground cannot be an excuse for apprehend-
ing bias. l677F-G; 678C] 
· 
InternatL ;al Authority of India v. K.D. Bali & Anr., J.T. 1988 2 
S.C.1. and Commercial Arbitration, by Mustill & Boyd., [1982] Edn. p. 
214, Halsbury's Laws of England, 4th Edn. Vol. 2, para 551, p. 282 
referred to. 
In the instant case, when the parties entered into the contract they 
knew the terms of the contract including arbitration clause providing 
that the Superintending Engineer of a particular Circle shall be the 
arbitrator. They also knew the scheme and the fact that the said 
Superintending Engineer was subordinate to the Chief Engineer of the 
Circle. In spite of that the parties agreed and entered into arbitration 
and indeed submitted to the jurisdiction of the arbitrator at th;it time to 
begin with, who however, could not complete the arbitration because he 
was transferred and succeeded by a successor. In these circumstances 
no bias could reasonably be apprehended and made a ground for 
removal of a named contractor. In numerous contracts with the Gov-
ernment, clauses requiring the Superintending Engineer or some offi-
dal of the Government to be the arbitrator are there. It cannot be said 
that the Superintending Engineer as such cannot be entrusted with the 
work of arbitration and that apprehension simpliciter in the mind of the 
contractor without any tangible ground, wonld be a justification for 
B removal. [677C-F] 
The case is remanded back to the Judge, City Civil Com;, Madras 
to appoint the Superintending Engineer, Trichy to be the arbitrator in 
accordance with the arbitration agreement. [678C-D] 
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CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3251 
of 1988. 
From the Judgment and Order dated 21. 9 .1984 of the Madras 
High Court in C.R.P. No. 3482 of 1984. 
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A. V. Rangam for the Appellant. 
P. Krishna Rao and K.R. Nagaraja for the Respondents. 
The Judgment of the Court was delivered by 
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SABYASACHI MUKHARJI, J. Leave granted and the appeal is 
disposed of by the following judgment. 
SECY., TYT. DEPTT. v. M. MUDALIAR IMUKHARJI, J.] 
675 
This appeal -arises out of an order of the fiigh Court of Madras, ·A 
dated 21st September, 1984. The appellant is the Secretary to the 
Gover.nment, Transport.Dept!., Madras, and the res

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