Holding

The umpire’s act of filing the award and engaging counsel is not bias or misconduct under s.30, and a party cannot raise a bias claim for the first time after having knowingly participated without objection.

Summary

The State Bank of India entered into a construction contract with a contractor that contained an arbitration clause. An umpire awarded Rs. 15.85 lakh to the contractor in 1984, then filed the award himself in the Hyderabad Civil Court and engaged a lawyer to conduct the proceedings, making the award a rule of court. The bank objected under Sections 30 and 33 of the Arbitration Act, 1940, but never raised any bias claim against the umpire. After the Andhra Pradesh Amendment Act of 1990 made reasoned awards mandatory, the High Court set aside the award for lack of reasons and, while remitting it, criticised the umpire’s conduct but did not deem it misconduct. The Supreme Court was asked whether the umpire’s filing of the award and appointment of counsel amounted to bias or misconduct under s.30 and whether the bank could raise a bias plea for the first time. The Court held that such conduct, though a mistake, does not constitute bias or misconduct, and a party that knowingly participates in the proceedings without objection cannot later raise a bias claim. Consequently, the appeals were dismissed.

Issues considered

The umpire’s filing of the award in civil court and appointment of a lawyer – does it amount to misconduct or bias under Section 30 of the Arbitration Act, 1940.
Whether the High Court’s adverse comments on the umpire’s conduct constitute a ground for setting aside the award.
Whether a party may raise a bias plea for the first time before the Supreme Court after having participated in the arbitration without objection at earlier stages.
The effect of the Andhra Pradesh Amendment Act, 1990 (provisos to Sections 14(1) and 17) on the requirement of reasoned awards.

Legislation cited

Arbitration Act, 1940s. 14(1), s. 17, s. 30, s. 33, s. 39

Subjects

ArbitrationUmpireBiasMisconductSection 30Reasoned awardRule of courtAppealHigh CourtSupreme Court

Judgment

A STATE BANK OF INDIA
v.
RAM DAS AND ANR.

OCTOBER 29, 2003

B [V.N. KHARE, CJ. AND S.B. SINHA, J.]

Arbitration Act, 1940 :

s. 30-Umpire-Misconduct-Umpirefiling award in civil court and
C appointing a lawyer to conduct the proceedings--Held, if the umpire was
advised to file the award in civil court and appoint a lawyer to conduct
the proceedings, he did commit a mistake where/or adverse comments were
made by High Court, but _the same cannot be said to be an act of bias-
No such act would amount to misconduct within the meaning of s.30.

D International Airports Authority of India v. K.D. Eali and Anr.,
[1988] 2 sec 360, held inapplicable.

Bihar State Mineral Development Corporation and Anr. v. Encon
Builders (!) (P) Ltd., (2003) 7 SCC 418, referred to.
E
Arbitration :

Plea of bias against umpire-Raisedfor the first time before Supreme
Court-Maintainability of-Umpire filing award in civil court and
F appointing a lawyer to conduct the proceedings-Award made rule of
court-Appeal before High Court-Plea of bias against umpire not raised
before civil court nor before High Court-High Court, in view ofamendment
made ins. 17 ofArbitration Act, 1940, by A.P. Amendment Act I of 1990,
did not find sufficient the reasons assigned by the umpire for his award,
set it aside and remitted the matter back to the umpire for giving reasons-
G High Court also adversely commented on the conduct of the umpire for
himselffiling award in court and appointing a lawyer for conducting the
proceedings-Appeal before Supreme Court-Appellant for the firsNime
taking the plea of bias against the umpire for himselffiling the award in
civil court-Held, High Court did not set aside the award on the ground (}
H of any misconduct on the part of the umpire-Therefore, the observations
1142
STATE BANK OF INDIA r. RAM DAS AND;ANR. 1143
/
made by High Court must be held to have been ,nade only for future A
guidance ofarbitrators-Appellant never questim;zed the conduct ofumpire
during arbitration proceedings-No case of p7i/on{lf~<a~, was made ~~t
against arbitrator-Where a party despite knowledge~oflhe defect in the
jurisdiction or bias or malice ofan arbitrator participated in the proceedings
without any kind ofobjection by his conduct it disentitles itself to raise such B
a question in the subsequent proceedings-The appellant despite numerous
opportunities made available to it, although it was aware of the defect in
the award of the Umpire, at no stage made out any case of bias against
the Umpire-The appellant cannot be permitted to raise question of bias
for the first time before Supreme Court-Arbitration Act, I 940-ss. I 4(1) C
and 17-A.P. Amendment Act I .of 1990.

S. Pratap Singh v. The State of Punjab, 11964) 4 SCR 733, cited.

CIVIL APPELLATE JURISDICTION Civil Appeal Nos. 4542-
4544 of 1998. D
From the Judgment and Order dated 12.3.98 of the Andhra Pradesh
High Court in C.R.P. Nos. 5383; 5367 and C.M.A. No. 1805 of 1994 .
•
WITH
. ". E
C.A. Nos. 4545-4547 of 1998.

Dr. Rajeev Dhawan, Sanjay Kapur and Rajiv Kapur for the Appell:mt
in C.A. Nos. 4542-44/98.
F
M.L. Verma, S. V. Deshpande, Mrs. Anuradha Rac;togi for the Appellant
in C.A. Nos. 4545-4547/98.

R.F. Nariman, S.V. Deshpande, Mrs. Anuradha Rastogi for the·
Respondents in C.A. No. 4542-44/98.
G
The Order of the Court was delivered :

Before us there are two sets of appeals, one, C:A. Nos. 4542-4544/
I998 at the instance of State Bank of India and other, C.A. Nos. 4545-454 7I
I 998 at the instance of the respondent-Contractor. H
1144 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A On 6th of October, 1978, the State Bank of India entered into an
agreement with the respondent herein (Contractor) for constructing Local
Head Office building at Hyderabad. Clause 36 of the agreement provided
for resolution of disputes by arbitration. It is not disputed that in the year
1982 the Contractor completed the constructions in tenns of the contract.
B However, certain disputes arose between the parties as a result whereof the
matter was referred to arbitration. Mr. MU Hattikuddur was chosen by the
Arbitrators as an Umpire. On 8.8.1984 the Umpire gave an award wherein
four claims of the Contractor were allowed in full, seven claims were
allowed in part and 15 claims were rejected. A total sum of Rs. 15.85 lacs
C were found to be payable by the appellant to the Contractor under the said
. award. The Umpire, however, also rejected the counter-claim of the
appellant.

It is not disputed that the umpire in the year 1985 himself filed the
award in the. City Civil Court, Hyderabad for making the award the rule
D of Court. It is also not disputed that the Umpire appointed a lawyer for
prosecuting the proceedings. The said suit was numbered as Original suit
No. 191/1985. The appellant herein filed an objection before the City Civil
Court for setting aside the award under Sections 30 & 33 of the Arbitration
Act. The respondent filed his counter affidavit to the objections of the •
E appellant herein. The Umpire also filed an affidavit to the objection filed
by the appellant. It i~ furthermore not disputed that the appellant did not·
raise any plea in its objection as regards bias against the Umpire.

The State Legislature of Andhra pradesh, however, by amending Act
I of 1990 inserted provisos to both Sections 14( 1) and 17 of the Arbitration
F Act, 1940 (hereinafter referred to as "the Act") which are in the following
tenns :

Section 14(1) :

"provided that the arbitrators or Umpire shall give reasons
G for any award made under this section·and no award shall be valid
unless the reasons therfore are given as aforesaid."

Section 17 :

"provided that where an award pending in the court at the
H commencement of the Arbitration (Andhra Pradesh Amendment)
STATE BANK OF INDIA''- RAM DAS AND ANR. 1145

Act, 1990, or an award filed in the court, thereafter does not A
oontain reasons therefor as required by the proviso to sub-section
(l) of section 14 the Court shall not proceed to pronounce the
Judgment according to the Award, but shall remit the award to
the Arbitrators ... "
B
The aforesaid provisos were inserted with retrospective effect providing for
giving the reasons by the Arbitrator or the umpire in the award. By reason
of the said Amending Act, thus, assignment of reasons by the arbitrators
or umpire while making an award, not only was made imperative but by
reason thereof provisions were made for remitting the unreasoned awards C
back to the arbitrators. In terms of the provisions of the Arbitration Act,
1940, the question as to whether the arbitrators or the umpires are required
to paSs a reasoned award depends upon the nature of the arbitration
agreement. In terms of the said Amending Act, therefore, the arbitrators
became liable to assign reasons in support of their awards irrespective
of any agreement to the contrary by the parties to the arbitration D
agreement.

It appears that in pursuance of the said legislative development the
• appellant-herein moved an I.A. in the year 1990 for setting aside the award
on the ground that it did not contain the reasons. In this I.A. also the E
appellant did not raise any objection as regards bias of the Umpire. The
City Civil Court, in view of the said amendment in Sections 14 and 17 of
the Act, set aside the award and remitted back the matter to the Umpire
for giving reasons in the award. The umpire, thereafter, passed a purported
reasoned award. Thereafter, the Contractor filed the award for being made F
the Rule of the Court under Sections 14 and 17 of the Act in the year 1993.

On 7 .10.1994, by a common judgment, the First Addi. Judge, City
Civil Court made the award the rule of the Court and further awarded 18%
interest on the awarded amount. The objection filed by the appellant herein
was dismissed. It is further relevant to mention that even before the learned G
District Judge the appellant did not raise any contention as regards bias on
the part of the Umpire.

. Aggrieved by and dissatisfied with judgment of the City Civil Court,
the appellant filed CRP No. 5383 and 5367/1994 and CMA No. 1805/1994 H
1146 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A b'efore the High Court of Judicature Andhra Pradesh at Hyderabad. On
26/9/I 995, the High court granted interim stay subject to tlie 'condition that
the appellant deposits 50% of 'the amount awarded and costs within six
weeks. It is stated that in pursuance of that order the appellant deposited
the said amount and it is also not disputed the said money was withdrawn
B by the respondent herein. Subsequently, the matter came up before the
High Court and it by its impugned judgment dated 12th March, 1998; found
that the Umpire did not assign sufficient reasons for giving his award and
in view of the s'aid amendment in Section 17 of the Act it was set aside
ahd the matter was remitted back' to the·Umpire for giving reasons. The

c High Court also -in the impugned judgment, adversely commented on the •
conduct of the Umpire so far as he himself filed the award in the court and
appointed a lawyer for conducting the proceedings before the City Civil
Court: It·is against the 'said judgment, the aforesaid two sets of appeals have
been filed.

D When this matter was t:i!<.en up, Mr. R.F. Narim'an, learned senior
counsel for the respondent-Contractor in CAs 4542-4544/98 and Mr. ML
Verma, learned senior counsel for the said appellant-Contractor in CAs
4545-4541198 raised a preliminary objection that since impugned order ~
under challenge has been acted- upon therefore this appeal has rendered
E infructuous and this Court need not go info the merits of the matter.

Dr. Rajeev Dhavan, learned senior counsel appearing for the appellant
urged that since the plea taken by the appellant that the Umpire was biased
goes to the root of the matter and this plea will not be available to the
appellant -in case if it challenges the award given by the Umpire in
F pursuance of the judgment and therefore the appeal has not been rendered
infructuous and is required to be decided on merits.

In view of the submissions made by Dr. Dbavan, we proceeoe& to
hear the appeal on·merits. Dr. Dhavan urges that the conduct ofthe"umpire
G -to the effect that he himself filed· the award in City Civil Court for being ....
made Rule of the Court and appointed a lawyer to prosecute the proceeding
and- in view of the fact that the said conduct of the Umpire was adversely
commented upon by the High Court, it ought not to have remitted back
the matter to.the same Umpire and' ought to have-referred the same to some
~
H retired High Court Judge.
STATE BANK OF INDIA v. RAM DAS AND ANR. 1147

Shri R.F. Nariman, the learned senior counsel appearing on behalf of A
the respondent would, on the other hand, contend that the purported act
on the part of the Umpire which has adversely been commented upon by
the High Court would not amount to bias nor the same can be construed
to be a malafide act on his part. In any event,_ _the learned senior
counsel would contend that such a question having not been -raised by the B
appellant at any st&ge whatsoever, should it be allowed to be raised before
_thi~ Court.

The High Court while passing the impugned judgment did not set
aside the award on the ground of any misconduct on the part of the Umpire. C
Before the High Court, an appeal in terms of Section 39 of the Act as also
a revision were filed. The appeal of the appellant related to that part of the
order of the learned Addi. Judge, City Civil Court whereby and whereunder
it rejected the objections filed by the appellant under Sections 30 and 33
of the Arbitration Act. The other part of the order which was the subject
matter of the civil revision application was refusal to remit the matter back D
to the Umpire, inter alia, on the ground that the award was a reasoned one.
The jurisdiction of a civil court under Sections 30 and 33 of the Act is a
limited one. In terms of the said provisions, an award can be set aside inter
alia, on the ground that the arbitrator has misconducted himself or the
proceedings or there exists an error apparent on the face of the records. E
In the event the award is a reasoned one, non-application of correct
principles of law may also be a ground for setting aside the same.

The Additional Judge, City Civil Court and consequently the High
Court while determining the objections filed by the respondent herein F
under Sections 30 and 33 of the Arbitration Act were, therefore, entitled
to arrive at a conclusion that the Umpire had misconducted himself or the
proceedings as a result whereof the award was liable to be set aside.

Once the High Court did not choose to do so, in our opinion, the said
observations must be held to have been made only for future guidance of G
the arbitrators and by reason thereof the High Court did not intend to set
aside the award.

Furthermore, concedely the appellant had never questioned the
conduct of the Umpire during pendency of the arbitration proceedings. No H
1148 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A case of personal bias had been made out as against the Umpire either during
the arbitration proceedings or otherwise.

Dr. Dhavan, however, would submit that the aforementioned objection
had been taken in the Memo of Appeal filed before the High Court which
B is in the following tenns :

"The Court below should have rejected the OS 191/85 filed
by the Umpire to pass a decree in tenns of his award. An Umpire
is not competent to present such a petition. The same is not
c maintainable. .. .. "

A bare perusal of the aforementioned ground would clearly go to show that ·
what was contended by the appellant was that the Umpire was not
competent to present such a petition and, therefore, it was not maintainable.
D No plea as regards bias or malice on the part of the Umpire had specifically
been taken. Learned counsel would then contend that the appellant
is entitled to raise .the aforementioned question having regard to the
disclosures made by the respondent in their counter affidavit
in paragraph 5 of the counter affidavit filed in this Court which reads as
under:
E
"On 15.8.1984 the respondent herein addressed letter to the
Umpire requesting him to file the award in the court. The umpire
thereafter had taken assistance of a counsel Mr. Y. Raja Redciy,
Advocate, sending him the original award with all other documents
F and requested.him to file the award in the court. The said counsel
has thereafter filed O.S. 191/85 before the Court of the First
Additional Judge. The petitioner bank filed written statement in
the said suit, copy of which is also annexed herewith. It is
noteworthy that the petitioner bank had not raised any issue of
G bias against the umpire as is sought to be done in the present.
Special Leave Petition."

According to Dr. Dhavan from the aforementioned statements it is clear
that the Umpire was acting at the behest of the respondent herein.
H Our attention has further been drawn to para 4 of the award dated 7th
ST ATE BANK OF INDIA v. RAM DAS AND ANR. 1149

._ August, 1998 for raising a contention that despite the aforementioned A
adverse remarks, the Umpire acted through his lawyer. The said para is as
follows :

"As per the order dated 12th March, 1998 of the Hon'ble High
Court of Judicature of Andhra Pradesh at Hyderabad, the Award B
was remitted back to me for giving reasons in the light of the
observations made in the said Judgment. The Award along with
all records has been returned to me through K. Hanumantha Rao,
Advocate, who is appearing on my behalf in the matter, in a sealed
packet on 24.7.1998 with a request to file the Award after giving C
the reasons in the light of the observations made in the said
Judgment."

We do not agree with the said submission.

It is one thing to say that the Umpire has misconducted himself but D
it is another thing to say that under certain misconception of law he filed
a suit through a lawyer at the first instance or filed the award in the court
at the behest of the respondent. So lor1g the award is not vitiated by reason
of any. act of misconduct on the part of the Umpire, the same cannot be
set aside. As would appear from the discussions made a little later, it would E
appear that the said fact was known to the appellant. The respondent was
entitled to request the Umpire to file the award in court. In what manner
he would do it, was a matter which was left to the Umpire. Ifhe was advised
to file such a award by filing a suit by appointing a lawyer, he did commit
a mistake wherefor the adverse comments were made by the High Court, F
but the same cannot be said to be an act of bias. No such act would amount
to a misconduct under the meaning of Section 30 of the Act.

So far as the statements made in paragraph 4 of the award dated
7.8.1998 is concerned, suffice it to point out that thereby he merely stated
that fact that the records were handed over to his lawyer by the High Court. G
We cannot read between the lines to arrive at a conclusion that the Umpire
was biased. If the High Court was of the opinion that the Umpire should
not have filed the suit, it ought not to have delivered the records to his
lawyer. The very fact that the High Court handed over the records to the
learned advocate appearing on behalf of the Umpire, is itself suggestive H
1'150 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A of the fact that even the High Court did not consider the same to be an -4
act of misconduct on the part of the Umpire. It may further be noticed that
same procedure was followed on an earlier occasion by the District Judge
. of the City Civil Court.

B. The submission of Dr. Dhavan to the effect that the conduct of the
Umpire was unbecoming of an arbitrator is stated to be rejected. Only
because an arbitrator committed a mistake in presenting an application
himself under a misconception, the same by itself~annot be said to be a
biased attitude on his part nor his action cart be attributed as malafide. ·

c The doctrines of bias and malice stand on different footing. How far
a bias on the part of a party would vitiate a proceeding has been considered
by this Court recently in Bihar State Mineral Development Corporation
and Another v. Encon Builders (I) (P) Ltd, [2003] 7 SCC 418. This case
does not fall within any of the categories enumerated therein.
D
Strong reliance has been placed by Dr. Dhavan on International
Airports Authority of India v. K.D. Bali and Another, [1988] 2 SCC 360.
The fact situation obtaining therein was absolutely different. It was sought
to be urged in that case that the petitioner had lost confidence in the sole
E arbitrator and was apprehensive that the arbitrator. was biased against the
petitioner. In the facts and circumstances of the said case, this Court held
as under in para 5 :

" .... It is well settled that there must be·purity in the administration
of justice as well as in administration of quasi-justice as are
F .involved in the adjudicatory process before the arbitrators. It is
well said that once the arbitrator enters in an arbitration, the
arbitrator must not be guilty of any act which can possibly be
construed as indicative of partiality of any act which can possibly
be construed as indicative of partiality or unfairness. H is not a
question .of the effect which misconduct on his part had in fact
upon the result of the proceeding, but of what effect it might
possibly have produced. It is not enough to show that, even ifthere
was misconduct on his part, the award was unaffected by it, and
was in reality just; arbitrator must not do anything which is not
H in itself fair and impartial."
STATE BANK OF INDIA v. RAM DAS AND ANR. 1151

.. The said decision has no application in the instant case . A
Reliance placed on S. Pratap Singh v. The State of Punjab, [1964]
4 SCR 733 by Dr. Rajeev Dhavan is also misplaced.

We in this case are not concerned with any act of malice on the part B
of the Umpire. Malice has to be specifically pleaded and proved. Neither
there exists any pleading in that behalf nor would it appear from the
discussions made hereinafter that at any stage such a contention has been
raised.

The appellant had four opportunities to raise the question of bias. The C
first opportunity was when the umpire filed the award in the court for being
made rule of the Court and appointed a lawyer to prosecute the matter. It
is not disputed the appellant was aware of the fact that the umpire did file
the appeal himself in the City Civil Court and appointed a lawyer to
prosecute the proceedings. Despite knowledge of the fact of filing objections D
under Sections 30 & 33 of the Act it did not raise the question of bias
against the umpire. The second stage made available to the appellant when
.. it filed an I.A. for setting aside the award on the ground that it did not
contain reasons in view of the said amendment in the Act in Section 17
of the Act. Not only this, the appellant had third opportunity when the E
matter was remitted back tg the umpire. It is relevant to mention here the
appellant was cross-examined before the Addi. Judge, City Civil Court but
no question as regard bias was put to him. The fourth opportunity arose
when the proceedings were remitted back to the umpire and thereto also
the appellant did not raise any question as regards bias.
F
Again, when the aforesaid award was given by the umpire and same
was filed in City Civil Court again the appellant did not raise any objection
as regard bias and the appellant happily participated in the proceedings.
Yet again when the award was made rule of the Court, the appellant
filed an appeal before the High Court of Judicature at Hyderabad but no G
ground of bias was taken in the Memo of Appeal or in the Civil Revision
Petition.

It was only after the High Court adversely commented upon the
conduct of the Arbitrator in the manner as noticed hereinbefore, that the H
1152 SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R.

A appellant became wiser and for the first time this objection has been taken
before us. It is an established view of law that where a party despite
knowledge of the defect in the jurisdiction or bias or malice of an Arbitrator
participated in the proceedings without any kind of objection by his
conduct it disentitle.5 itself to raise such a question . in the subsequent ......
'

B proceedings. What we find is that the appellant despite numerous
,,
opportunities made available to it althoug~ it was aware of the defect in
the award of the Umpire at no stage made out any case of bias against the
Umpire. We, therefore, find that the appellant cannot be permitted to raise
question of bias for the first time before this Court.

C Mr. M.L. Verma, the learned senior counsel appearing in the second
set of appeals would urge that the High Court committed an error in setting
aside the award and remitting the matter back to the Umpire for assigning
fresh reasons despite the fact that the award dated I 993 contained sufficient
reasons. Having regard to the subsequent events that the order of the High
D Court has been acted upon and the Umpire has made an award on or about
1998, we cio not intend to go into the aforesaid question. For the self-same
..
reasons, we also refrain from going into the question as to the parameters
and extent of the reasons required to be assigned by an Umpire in a
situation of this nature.
E For the aforesaid reasons, we do not find any merit in the appeals.
Therefore, they are dismissed. However, it will be open to the appellant
to challenge the award, if it is so advised, before the appropriate forum.

R.P. Appeals dismissed.