GURCHARAN SINGH SAHNEY Vs. HARPREET SINGH CHABBRA

JUDGEMENT

(1.) This petition, under Article 227 of the Constitution of India, is preferred against the order passed by the XXV Additional Chief Judge, City Civil Court, Hyderabad in Arbtn. O.P. No.2889 of 2014 dated 30.04.2015. Arbitration O.P. No.2889 of 2014 was filed by the petitioners herein, under Sections 14(2) and 15 of the Arbitration and Conciliation Act, 1996 (hereinafter called the Act), to have the order, passed by the 6th respondent -arbitrator dated 15.11.2014, set aside; to direct the sole -arbitrator to terminate his mandate under Sections 12 and 14 of the Act; and to appoint a Retired District Judge as the Arbitrator to resolve the disputes between the parties.

(2.) Petitioners 6 and 7, in Arbitration O.P.No.2889 of 2014, are companies registered under the Companies Act, and are controlled by the family of petitioners 1 to 4. The 5th petitioner is a partnership firm wherein petitioner Nos.1 and 4 are partners. Petitioners 1 to 4 are all part of one family. Respondents 3 to 5 are companies, registered under the Companies Act, controlled by respondent Nos.1 and 2. The 2nd respondent is the wife of the 1st respondent and the sister of the 4th petitioner.

(3.) Arbitration O.P. No.2889 of 2014 was filed against the order passed by the Arbitrator dated 15.11.2014 dismissing the application filed by the petitioners under Section 12 of the Act. In the petition filed, in the said O.P. before the Court below, the petitioners stated that the wives of the 6th respondent -Arbitrator and the 4th petitioner are sisters, and the 1st respondent is their brother; while the petitioners are from Delhi, the sole arbitrator and the other respondents reside in Hyderabad; during the years 2007 -2010, they had lent around Rs.20 crores to the respondents; as the said amount was not returned, they instituted proceedings for recovery under Section 138 of the Negotiable Instruments Act; as a counter -blast the respondents filed a police complaint in Cr. No.59 of 2012, two years after the petitioners had initiated proceedings against them; in their complaint, the respondents concocted a story that they had to recover Rs.2 crores from the petitioners who had played fraud on them; petitioners 3 and 5 were arrested by the CCS police, Hyderabad and, while in custody, they were forced by the respondents to agree to pay Rs.9 crores; under duress, the petitioners signed the settlement deed dated 30.04.2012, the letter of guarantee dated 30.04.2012, and the ratification deed dated 03.05.2012; the petitioners were not allowed to read the contents of these documents when they signed it; they were unaware of the contents of the aforesaid documents, including that the sixth respondent was appointed as a named arbitrator therein; after securing bail, and on reading the documents, they were shocked to learn that the 6th respondent was appointed as the named arbitrator; they filed an application, under Section 11(5) and (6) of the Act, which was dismissed by this Court by its order dated 15.03.2013; the petition, filed seeking review thereof, was also dismissed on 13.09.2013; the arbitrator issued notices dated 25.07.2012, and passed orders on 15.03.2013 and 13.09.2013 initiating arbitration proceedings; the petitioners filed an application under Section 12 of the Act before the Arbitrator; in the meanwhile, against the order of the High Court, they filed SLP(Civil)No.CC 4610 -4611/2014 which was disposed of by the Supreme Court by its order dated 11.08.2014; during the pendency of the SLP, the petitioners came to know various facts, and filed an amended application under Section 12; parties are not required, in proceedings instituted under Section 12 of the Act, to prove that the sole arbitrator was biased; it would suffice if there are justifiable doubts about his impartiality for his mandate to be terminated; the arbitrator had appointed Sri G.S.Thakur, an Advocate, to assist him; the order of the High Court dated 15.03.2013 only enabled the arbitrator to take the assistance of an Advocate to assess the damages claimed by the parties; the entire proceedings were conducted by Sri G.S. Thakur, and the arbitrator was merely a mute spectator; the day -to -day orders and proceedings were recorded and dictated by the Advocate, and not by the arbitrator; the arbitrator is not capable of conducting proceedings himself; though the petitioners filed an application, the arbitrator dismissed it; the arbitrators bias is apparent; in some instances Sri G.S. Thakur refused to record the submissions and arguments raised by the petitioners; the orders drafted by the Advocate are non -operative in the eye of law; the arbitrator passed a non -speaking order without even considering the grounds taken by the petitioners in their application, and the amended application, filed under Section 12; the order is merely a verbatim extract of the application and counters filed by the parties, and reveals non -application of mind; the close association between the arbitrator and the other respondents have created justifiable doubts of his impartiality; this is apparent from the invitation cards of the marriage of the son of the sixth respondent -arbitrator and the son of the first respondent; the petitioners attended neither of the marriages; the arbitrator was listed, in the wedding invitation card of the son of the first respondent as among his near and dear; respondents 1 and 2 hosted the mehandi and cocktail functions of the son of the arbitrator; and these facts substantiate his bias, and his vested interest in the outcome of the arbitration.