Ali C. J.:-
This is an appeal by the contractor against an order of Jaswant Singh J. sitting singly rejecting the prayer of the appellant for removing the arbitrator under Sec. 5 and 11 of the Arbitration Act.
2) It appears that the appellant was given a contract to construct a platform for the water conductor of water channel No. RD 37000 to 382000 on the terms and conditions mentioned in the agreement entered into between the contractor and the department. The appellant commenced the work, but before it was completed a number of disputes arose between the parties in connexion with the terms and conditions of the agreement resulting in a series of correspondence between the parties When the dispute assumed serious proportions, the appellant sent a notice under S 80 indicating his claim against the department and alleging further that the department had committed various breaches of the contract. This notice was given on 15-1-68 to the Secretary to the Government Works and Power and was referred to the department. The department after processing and analysing the notice sent by the appellant sent a letter dated 15-3-68 addressed by the Chief Project Engineer Chenani Hydel project to the Secretary to the Government Works and Power. The main stand taken by the Chief Engineer in his reply to the notice of the appellant was that as under the terms and conditions of the agreement all disputes had to be referred to the arbitration of the Chief Project Engineer, these disputes could only be considered in the aforesaid arbitration proceedings. Thereafter the appellant made an application to the court on 18-9-68 praying that- the Chief Project Engineer who was appointed as arbitrator under the agreement between the parties be removed and the appellant be relieved from his bargain and a fresh arbitrator may be appointed. The respondents filed their objections and the learned judge examined a head clerk of the department as also Mr. Pandita, Chief Engineer himself and after considering the relevant materials came to the conclusion that as there was no positive bias proved against the Chief Engineer, no cogent ground for removing the arbitrator had been made out. Hence this appeal.
(3) In support of the appeal the learned counsel for the appellant submitted that the arbitrator had expressed himself rather too strongly on the merits of the case against the appellant and therefore it would be a serious travesty of justice to allow the Chief Project Engineer to be an arbitrator to decide the dispute. It is no doubt well settled that where the parties have agreed to entrust their disputes to a particular domestic tribunal, they should not be lightly released from their bargain unless special circumstances showing bias or miscarriage of justice are proved to the satisfaction of the court. Even for the purpose of proving bias it is not necessary to show actual bias in the mind of the arbitrator, but if, the circumstances lead to a probability of the presence of bias in the mind of the arbitrator, that may be sufficient to relieve the party of its bargain. In Messrs Amar ChandVs Ambica Jute Mills, AIR 1966 SC 1036, 1042 the matter was considered at length by their Lordships of the Supreme Court who observed as follows :-
''We now turn to the legal position which seems to us to be quite clear. Before the court exercises its discretion to give leave to revoke an arbitrator's authority, it should be satisfied that a substantial miscarriage of justice will take place in the event of its refusal. In considering the exercise by the court of the power of revocation it must not be forgotten (hat arbitration is a particular method for the settlement of disputes. Parties not wishing the law's delays know or ought to know, that in referring a dispute to arbitration they take arbitrator for better or worse and that his decision is final both as to fact and law- In many cases the parties prefer arbitration for these reasons. In exercising its' discretion cautiously and sparingly, the court has no doubt these circumstances in view and considers that the parties should not be relieved from a tribunal they have chosen because they fear that the arbitrator's decision may go against them (See Russel) on Arbitration 16th edn. page 547. The grounds on which leave to revoke may be given have been put under five heads :-
1. Excess or refusal of jurisdiction by arbitrator.
2. Misconduct of arbitrator.
3. Disqualification of arbitrator.
4. Charges of fraud.
5. Exceptional cases.
(4) To the same effect is another decision of the Supreme Court in UP Cooperative Federation V. Sunder Bros. Delhi AIR SC 249, 252 where in it has been held :-
"The legal position is that an order of stay of suit under S. 34 of the Indian Arbitration Act will not be granted if it can be shown that there is good ground for apprehending that the arbitrator will not act fairly in the matter or that it is for some reason improper that he should arbitrate in the dispute between the parties. It is of course the normal duty of the court to hold the parties to the contract and to make them present their disputes to the forum of their choice but an order to stay the legal proceedings in a court of law will not be granted if it is shown that there is good ground for apprehending that the arbitrator will not act fairly in the matter or that it is for some reason improper that he should arbitrate in the dispute."
(5) It would thus appear that the crux of the matter is that there should be good ground for apprehending that the arbitrator would not act fairly in the matter or that he was guilty of misconduct before the court exercise could its discretion in revoking the authority of the arbitrator.
(6) In this case the Supreme Court allowed the prayer of the appellant because it found that the arbitrator who was the Registrar of the Co-operative Society was the Chief Controller and supervising officer in the society and therefore their Lordships thought that he may not act fairly in the matter.
(7) In the instant case also the arbitrator is the Chief Project Engineer and the Chief Controlling Authority of the department under which the contract was sanctioned.
(8) Before the matter came up to the Court, a notice under S. 80 Civil P. C. had been given by the appellant through his counsel and the arbitrator himself had an occasion not only to study and analyze this notice but also to answer it para-wise in his recommendation to the Government. In doing so, the arbitrator expressed himself very clearly against the appellant on the merits of the case and has thus, in our opinion, rendered himself incapable of acting as an arbitrator. A perusal of the manner in which the arbitrator has answered the notice of the appellant clearly shows how his mind has been made up. In his letter to the Government dated 15-3-68 which is signed by the arbitrator namely the Chief Project Engineer the arbitrator has expressed himself thus :-
''It is thus clear that contractor neither wanted to see to reason nor respond to offer of extension by Chief Project Engineer made vide No. CP/N/7674-78 dated 8-1-68 but to evade work by involving the department in legal manouvres. The claim for Rs. 82, 945-20 is baseless."
(9) In para 8 of the arbitrator commenting upon the nature of the claim of the contractor wrote thus :-
"Now since the contractor apprehends that in the event of the work being got done through other agency at his risk and cost and other action in terms of clause 3 of the, agreement, he will be bound to make good the excess amount which the department might incur on this account, he has preferred this unjustified claim in a vain attempt to involve the department in litigation and elicit cheap sympathy."
(10) Similarly in para 11 of the Chief Engineer has clearly mentioned that the contractor had no cause of action against the department and has written thus : -
"Para 11 of the notice is incorrect. In view of the facts narrated above, the contractor has no cause of action against the department. On the contrary the contractor has caused the breach of the agreement as explained in para 3 above. It is the contractor who will have to make good the loss that the department might incur oh account of getting this work completed at his risk and cost."
(11) In para 15 the arbitrator has concluded his recommendations in the following words :--
''In view of the above the 'case is recommended to be contested. But the question of jurisdiction of an appropriate court may kindly be got examined by the Law Department, as well It is also to be seen whether it is not incumbent upon the contractor to come up in arbitration instead of going straight to the court."
(12) Thus a perusal of the aforesaid clear expression of opinion of the arbitrator on the merits of the claim of the appellant goes to show that he has already made up his mind and has decided that the appellant's claim is absolutely baseless and that the appellant has got no cause of action against the Government. It is true that in the agreement the Chief Project Engineer was appointed as an arbitrator, but there was absolutely no necessity for him to stress this fact in the concluding portion of his letter (Supra) which shows that after having characterised the appellant's claim as false arid baseless, he was very anxious to see that the matter is sent for arbitration and is not allowed to go to the courts. The learned judge has relied greatly on the evidence of the Chief Project Engineer for the purpose that the reply given by him was actually drafted by his Executive Engineer and that the Chief Project Engineer did not apply his mind properly. We have gone through the statement of the Chief Project Engineer, and we are not satisfied that although he is the author of the letter dated 15-3-68, yet he signed the letter without understanding the contents thereof. On the other hand the head clerk K. Dutta has said in his statement that the draft reply was put up to she chief Project Engineer for approval and he approved of the same arid added para 15 himself and thereafter the reply was sent to the Secretary Works" and1 Power Department. This shows that the Chief Project Engineer did apply his mind to the facts mentioned in the letter before giving his final approval The oral assertion of the arbitrator before the learned judge that he did not apply his mind cannot be taken seriously because be did not want that his authority should be revoked The learned single judge does not appear to have considered the strong expression of opinion given by the arbitrator in his letter dated 15-3-63
(13) In a recent decision of the Allahabad High Court in Fertilizer Corporation of India v DE Installation, AIR 1970, Alld. 31 it was
observed:-
“It is clear from the above decision of the Supreme Court (AIR 1967 Sc 249) that a party is entitled to be released from a bargain of this nature if he could show that the selected arbitrator was likely to show bias or by sufficient reason to suspect that he would act unfairly or that he had been guilty of continued unreasonable conduct.''
(14) In AIR 1952 Cal, 294 Banerji J. observed that it was the most fundamental principle of justice that a judge or a tribunal should not decide a»dispute if there is a probability that he would be biased in the case.
(15) In the present case from the strong expression of opinion made by the arbitrator in his letter (Supra) it is manifest that there is a serious probability that he is biased against the appellant and it would be a miscarriage of justice if in view of his expression of opinion he is still allowed to arbitrate on the claim of the appellant. We are fortified in our view by the following observations made in Corpus Juries Secundum Vol. VI (VI CJS) 187.
The fact that an arbitrator has previously formed and expressed his opinion on the matter submitted may be a ground for setting aside the award, See Conrap V. Masasoit Ins Co: 4 Allen (Mass) 20-5 C. J, Page 66 note 58"
(16) The learned judge has cited a number of authorities by which the court should be guided in exercising its discretion to revoke the authority of an arbitrator. We do not have any quarrel with the propositions adumbrated by the learned judge as indicated in the authorities, but in each case it will be a question of fact as to whether or not a case for revoking the authority of an arbitrator has been made out. By and large the main question that has to be seen is as to whether or not either due to his immediate interest or on account of having expressed his opinion on the merits of the case and prejudged the issue, the arbitrator is expected to act fairly and without any bias. Where the court is satisfied that the arbitrator is not expected to get fairly for any of the reasons given above, the court has ample discretion to relieve the party from its bargain and remove the arbitrator. In the instant case we are satisfied that such a case has been made out and we do not agree with the learned judge that no cogent grounds for removing the arbitrator have been established.
For the reasons given above, we allow the appeal, set aside the order of the learned single judge rejecting the application of the applicant and remit the matter to him for disposal of the application afresh and appointing another arbitrator after consulting the parties. In the circumstances there will be no order as to costs.
Sd/- S. M. F. Ali. Chief Justice
I agree, Sd/-J. N. Bhat. Judge.