SAURABH KALANI Vs. TATA FINANCE LIMITED

JUDGEMENT

(1.) ADMIT. Respondents waive service. By consent taken up for hearing and final disposal. In these proceedings under section 34 of the Arbitration and Conciliation Act, 1996, a challenge is sought to be preferred to the Award of a sole arbitrator dated 25th August, 2001. Two significant issues arise in the present case. The first arises in the context of an allegation of bias against an arbitrator appointed under the Arbitration and Conciliation Act, 1996. The Court has to consider as to when it can be said that there are justifiable doubts as regards the independence and impartiality of an arbitrator within the meaning of section 12 of the Act. The Court must determine as to what would be the appropriate test to be applied in law. A related issue is as to when the duty of disclosure is attracted so as to warrant a disclosure of a given set of circumstances. The second important issue which arises in this case is as to whether the provisions of section 22 of the Sick Industrial Companies (Special Provisions) Act, 1985 are attracted to arbitral proceedings commenced against a guarantor when the principal debtor has been declared as a sick industrial company. The Facts

(2.) THE first respondent had granted financial facilities to a company by the name of Gilt Pack Limited. In so far as the petitioner is concerned, it is common ground that he had furnished a personal guarantee to secure the outstanding dues of the first respondent. The first respondent invoked the personal guarantee which was furnished by the petitioner upon an admitted default by the company in repaying the outstanding dues payable under four Bills of Exchange in the total amount of Rs. 50 lacs, which were discounted by the first respondent. On 16th December, 1999, in pursuance of a provision for arbitration contained in Clause 23 of the deed of guarantee, the first respondent referred the disputes which had arisen between the parties to the sole arbitration of Mr. Ashwin Ankhad, a practising Advocate, to act as to sole arbitrator under the provisions of the Arbitration and Conciliation Act, 1996.

(3.) IN February 2000, two applications came to be filed before the arbitrator, the first questioning the jurisdiction of the arbitrator under section 16 of the Act and the second, under section 12 on the ground that there was a justifiable doubt as regards the independence and impartiality of the arbitrator. In so far as the challenge to the jurisdiction of the arbitrator under section 16 was concerned, that was raised on the ground that the company to which the first respondent had granted financial facilities had been declared as a sick industrial company under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985. The submission was that under section 22 of the Act, arbitral proceedings were not maintainable and they could not be proceeded with. In so far as the second application under section 12 of the Act was concerned, the independence and impartiality of the arbitrator was sought to be questioned on the basis of the following averments: