1. Respondents Dodsal Private Ltd. had taken on hire on bareboat charter basis a dredger called ‘Portos-I’ from the Captain of Ports, Goa for assisting in construction work in river Mindhola near Surat, Gujarat. After the work was completed the respondents wanted the dredger returned to the Captain of Ports Goa For this purpose they entered into a Towage Agreement dt/- 11th Nov. 1985 with the petitioners Asiatic Salvors under which the petitioners undertook to safely tow the dredger from its site near Surat to an anchorage site at Goa for a lump sum of Rs. 3.75 lacs. 25% of this payment was given as an advance with order. The balance amount was payable within 15 days of written acknowledgment from the Captain of Ports of safe arrival and anchorage at Goa Port. The agreement provided for preparation of the dredger for the voyage. In this connection under Cl. 7 the towage contractor undertook to comply at his own expense with the requirements of dredger's insurance underwriters with reference to (i) warranty survey inspection of the towing vessel before commencement of towage and certification of it as fit and seaworthy by a surveyor approved by the Insurance; (ii) Warranty survey/inspection of the tow and towing arrangement by the surveyors appointed by the underwriters and certification of the same as fit for the intended tow. Under Cl. 15 of the contract it was provided as follows:

“Any dispute arising out of this Agreement or the operations thereunder shall be referred to the decision of Mr. A.W.J Fernandez, who has been accepted as a sole arbitrator by both parties concerned and whose decision will be final and binding to both parties.”

2. Under the contract the period of completion was 31 days from the date of signing of the agreement, though the contract provided that additional days of grace may be allowed at the sole discretion of the respondents within the validity period of various certificates which were required in connection with towage. It seems that the petitioners were unable to arrange for towage or complete the towage within the contract period.

3. One J.B Boda Offshore Surveyors and Adjusters were appointed by the underwriters to carry out the survey of dredger in connection with its towage. As consultant of the surveyors of the underwriters, A.W.J Fernandez inspected the dredger at site on 5th Jan. 1986 after notice to both the sides. The respondents by their letter of 8th Jan. 1986 addressed to the petitioners have recorded inter alia this inspection visit of A.W.J Fernandez and complained that no responsible person from the side of the petitioners was available at site on that occasion. The letter requested the petitioners to co-operate and post a senior and responsible person at site during the visit of the underwriters' surveyor. By that letter the respondents extended the contractual period of completion up to 20th Jan. 1986. The next letter of 13th Jan. 1986 which was addressed by the respondents to the petitioners recorded that the underwriters' surveyor had visited the site and after inspection found the vessel fit for voyage. The letter also recorded that the petitioners, notwithstanding the request of the respondents, did not depute any responsible official to site to coincide with the visit of the surveyor. Ultimately since the petitioners did not carry out the contractual towage and there were differences and disputes between the parties, the respondents invoked the arbitration clause on 20th Feb. 1986 and referred the differences and disputes to the sole arbitration of A.W.J Fernandez.

4. The claim of the respondents against the petitioners as filed before the arbitrator was for damages for breach of contract. The petitioners (respondents) made a claim for special damages in the form of additional insurance premium paid due to delay and non-compliance on the part of the petitioners, additional rental paid to the Captain of Ports, Goa and various other charges incurred by the petitioners. They also asked for general damages to the tune of Rs. 50,000 and refund of Rs. 93,750 paid as advance 25% of towing contract to the petitioners at the time of entering into contract. The claim of the respondents was filed before the arbitrator on or about 2nd May, 1986.

5. It seems that the petitioners addressed a letter to the respondents dt/- 27th May, 1986 in which, inter alia, the petitioners for the first time alleged that the arbitrator was; no longer an independent person because he had served the respondents in various capacities subsequent to the entering into of the towage contract and that the respondents had employed him to act as a Surveyor on the same work. They alleged bias and prejudice on the part of the arbitrator. A copy of this letter appears to have been addressed to the arbitrator also. The arbitrator sent a reply to the petitioners, which is dt/- 31st May, 1986 and is annexed as Exhibit ‘E’ to the present petition. He has very correctly pointed out that as a Sole Arbitrator appointed by the parties he did not wish to enter into any discussion with any of the parties and the appropriate time and place for presenting each party's case would be at the arbitration proceedings. He has, however, pointed out to the petitioners that it was factually inaccurate to state that he was ever employed by the respondents in any capacity. He also pointed out that he had not been employed by the respondents to act as a surveyor on the same work. The arbitrator has also pointed out that he would be happy if the parties settle the matter amicably amongst themselves, but until he heard from both sides in writing that he was not required to act as the Sole Arbitrator, he will continue to act as the sole arbitrator in the best interests of all concerned. He also pointed out to the petitioners that they are required to submit their reply to the respondents' statement of claim within 21 days of receipt of their claim and that they should do so.

6. Reference in the letter of 27th May, 1986 to the arbitrator being the surveyor on the same work presumably had a reference to the arbitrator being the Chief Consultant of the surveyors of the underwriters who had asked the arbitrator to survey the dredger for the purpose of its towage to Goa. This survey work has no bearing on the dispute between the petitioners and the respondents. The underwriters to the Insurance Company were not protecting the interest of either party to the arbitration in any way.

7. It is also necessary to bear in mind that A.W.J Fernandez was chosen by both the parties as sole arbitrator presumably because he was an expert, or at least had considerable experience of the kind of work involved in the contract. The survey done by the A.W.J Fernandez on behalf of the surveyors of the underwriters after notice to both sides cannot make him in any manner a person having a bias or prejudice one way or the other against either side to the dispute.

8. The petitioners have also relied upon a letter dated 27th Feb., 1986 which addressed to the petitioners by J.B Boda and signed both by the General Manager J.B Boda as well as by A.W.J Fernandez as Chief Consultant. It seems that the respondent had entered into another contract with the petitioner dt. 21st Oct., 1985 for salvage of another dredger which had sunk off Tarapore. In connection with salvage of this dredger off Tarapore the underwriters' surveyor J.B Boda had asked the petitioners for the exact location of the sunken dredger because the petitioners reported that they had refloated the dredger but it had later on sunk again while under tow. It seems that the petitioners did not co-operate with the underwriters' surveyors in helping to locate the sunken dredger. In the letter of 27th Feb., 1986 which is relied upon by the petitioners, the underwriters' surveyors have pointed out that they are in no way concerned with the termination of salvage contract effected by the respondents and that their sole purpose was to locate the sunken dredger so as to prevent further loss or damage and to minimise the underwriters' liabilities. There is also another letter of 7th April, 1986 in this connection which is addressed on behalf of J.B Boda by A.W.J Fernandez correcting some factual inaccuracies in the letter of 5th March, 1986 addressed by the petitioners to them. This incident in connection with a totally different contract cannot lead to a conclusion that the arbitrator would be biased or prejudiced against the petitioners in respect of disputes under a separate towage contract regarding a different dredger. In Russel on Arbitration, 20th Edition, p. 143 it is stated, “In order that a person may be disqualified by interest from acting as an arbitrator, the interest must be so connected with his duties as arbitrator as to render it inequitable that the parties should be held bound by the agreement to accept his decision.” At page 213 under the heading “The Duty To Act Fairly” it is stated, “The first principle is that the arbitrator must act fairly to both parties, and in the proceedings throughout the reference he must not favour one party more than another, or do anything for one party which he does not do or offer to do for the other.” In the case of Jackson v. Barry Railway Company reported in (1893) 1 Ch D 238 there was a contract by which the plaintiff undertook to construct a dock for the defendant company. The contract provided for reference of dispute between the company and the contractor to arbitration of the company's engineer. A dispute arose whether the contract required the interior of a certain embankment to be made of stone, or whether rocky marl was allowable. The Company engineer had taken the stand that the contract required embankment to be made of stone. In view of the dispute the matter was referred to him as an arbitrator. The contractor sought to restrain the engineer for acting as an arbitrator on the ground that he was disqualified because he had already made up his mind on the dispute. Lord Justice Bowen held that on a fair construction of correspondence it cannot be said that the engineer had precluded himself from keeping his mind open and from deciding according to evidence and according to advice which might be given to him. They declined to stop the arbitration.

9. In the present case, the arbitrator has not at any time expressed his mind upon the disputes which were referred to him for arbitration and it cannot be said that he is biased or interested.

10. The incident regarding sunken dredger relied upon by the petitioners as disclosing bias on the part of the arbitrator occurred around Jan. or Feb., 1986. The respondents invoke the arbitration clause in the towage contract on 28th Feb., 1986. The petitioners did not immediately object to the arbitrator. It was only on 27th May, 1986 that the petitioners for the first time raised an objection to the arbitrator.

11. The petitioners were called upon by the arbitrator to file their reply. The petitioners did not file their reply. They were served with notices of all the meetings held before the arbitrator. They were also served with the minutes of the meetings held. They did not, however, participate in the arbitration proceedings. They also did not take any steps for the removal of the arbitrator or stopping the arbitration proceedings. The arbitrator, therefore, proceeded with the reference ex parte and he published his award on 25-9-1986. In the Award he has directed the petitioners to refund to the respondents the sum of Rs. 93,750 which was 25% advance paid by the respondents to the petitioners. He has disallowed the claim of the respondents for the labour supply. The respondent also gave up their claim for Rs. 2,65,551.63 for general damages and additional amount paid as hire charges to Captain of Ports, Goa for the delay in towing the dredger to Goa.

12. In the present case the arbitrator has not done anything which can be considered as unfair or indicative of any bias or interest on his part. He has scrupulously called upon both sides to present their case, has given notices of all meetings, supplied them with the minutes of the meetings. When the petitioners objected to his acting as an arbitrator, he has pointed out that unless he is validly preented from acting as an arbitrator and is properly restrained by proper legal proceedings he was bound to continue to act as an arbitrator. There is nothing in his conduct which is indicative of any bias.

13. It has also been urged by Mr. Tulzapurkar, learned Counsel jor the respondents that the petitioners have not taken steps within a reasonable time to stop arbitration proceedings but have waited for the award before taking any steps against the arbitrator. It was only when the award went against the petitioners that they are now seeking to challenge the award on the ground of the arbitrator's bias. The petitioners are now stopped from challenging the award on this ground. In this connection he relied upon the observations of the M.P High Court in the case of Ramsahai Sheduram v. Harishchandra Dullachandji reported in AIR 1963 Madh Pra 143. In that case the court held that if a party discovers that the arbitrator suffers from a personal disqualification for reasons which the party could not have ascertained with due diligence at the time of the reference, the party must take immediate steps to stop arbitration. If the party fails to go to the Court for revocation of reference and takes part in the arbitration proceedings, he cannot later on challenge the award on that ground. There are similar observations in the case of B.K Dhar (Private) Ltd. v. Union of India reported in AIR 1965 Cal 424, paragraphs 13 and 14. The Calcutta High Court has also observed that the Court will not interfere if a party participates in the arbitration proceedings, allows an award to be made and if it suits its purpose, attacks the proceedings thereafter on the ground of irregularity.

14. In the present case, although the petitioner did not immediately ask for revocation of the arbitration agreement in Feb., 1986 or within a reasonable time thereafter, the petitioners did not actually participate in the arbitration proceedings. The petitioners however, did allow arbitration to continue and culminate in an award.

15. The petitioners were aware of the alleged bias some months prior to the commencement of arbitration. The petitioners could have taken steps much earlier for removal of the arbitrator if it was their contention that the arbitrator was biased. Instead, the petitioners allowed arbitration to proceed and waited until an award was filed in this court before challenging it. In these circumstances, it would not be in the interest of justice to allow the petitioners to raise their objection to the arbitration at this late stage. It is, however, not necessary to decide this aspect of the matter since, in my view, the arbitrator has not displayed any bias or interest which could disentitle him from functioning as an arbitrator.

16. In this connection my attention is also drawn to a decision of the Calcutta High Court in the case of Co-operative Hindustan Bank Ltd. v. Bhola Nath Barooah reported in AIR 1915 Cal 832. In that case the arbitrator's interest which was discovered at a late stage was found to be insignificant. The arbitrator had only one share in the company whose dispute was referred to him. The court held that the interest was too insignificant for the award to be set aside. This case is not applicable here.

17. It has also been urged by the petitioners that the arbitrator was guilty of misconduct because he did not go into the question of any amount being awarded to the petitioners on the basis of quantum meruit. The petitioners, however, did not file any claim before the arbitrator in this connection. The petitioner had abandoned the contract in the present case and had not towed the dredger to Goa. This work had to be done by another contractor. If the petitioners had done any work for which they were making a claim on the basis of quantum meruit, they should have filed such a claim before the arbitrator; not having done so they cannot now say that the arbitrator is guilty of misconduct.

18. For these reasons the petition is dismissed with costs.

Petition dismissed.