PRINCIPAL COMMISSIONER OF INCOME TAX 5 KOLKATA vs. PREMIER TIE UP PVT LTD

IN THE HIGH COURT AT CALCUTTA Ordinary Original Civil Jurisdiction ORIGINAL SIDE

BEFORE:-

THE HON’BLE JUSTICE RAJASEKHAR MANTHA

EC 145 of 2020 IA No.: GA 1 of 2020, GA 2 of 2021

C AND E LTD (COMPONENTS AND EQUIPMENTS LTD) AND ANR.

VERSUS

GOPAL DAS BAGRI AND ORS.

AP 364 of 2020 IA No. GA 1 of 2020

GOPALDAS BAGRI AND ORS. VERSUS C AND E LTD AND ORS.

AP 402 of 2020 IA No. GA 1 of 2020

FEATHER TOUCH LIMITED AND ANR. VERSUS C AND E LTD AND ORS.

EC 81 of 2022 IA No. GA 1 of 2020

C AND E LTD (COMPONENTS AND EQUIPMENTS LTD) AND ORS. VERSUS GOPAL DAS BAGRI AND ORS.

For the Petitioners

: Mr. Nalin Kohli, Senior Adv.

Mr. Sandip Agarwal, Adv. Mr. Abhishek Swaroop, Adv. Mr. Tanay Agarwal, Adv. Mr. Naman Kandar, Adv. Mr. Vasu Manchanda, Adv. Ms. Nimisha Menon, Adv. Ms. Surabhi Banerjee, Adv. Mr. Biswaroop Bhattacharya, Adv. Ms. Sulagna Mukherjee, Adv. Ms. Shristi Sharma, Adv. For the Respondent

: Mr. Dhruba Ghosh, Adv. Ms. Sananda Ganguly, Adv. Ms. Ajaya Choudhury, Adv.

Mr. Soumyajit Ghosh, Adv. Mr. Rajarshi Dutta, Adv. Mr. Arindam Halder, Adv. Mr. Shubradip Roy, Adv.

Hearing Concluded on

: 21st July, 2023.

Judgment On

: 27th July, 2023.

Rajasekhar Mantha, J.:- 1. The subject matter of the instant proceeding is an award dated 29th February 2020 passed by Mr. XXX, learned Senior Advocate and Sole Arbitrator. The Arbitrator was appointed by consent as recorded in Consent Terms filed by the parties, recorded in order dated 1st August 2014 in C. S. No. 344 of 2014 filed in the Ordinary Original Civil Jurisdiction of this Court. 2. AP 364 of 2020 (Gopal Das Bagri Vs. C & E Ltd. &Ors.) has been filed by the award debtors under Section 34 of the Arbitration and Conciliation Act of 1996 (the Act of 1996). 3. AP 402 of 2020 (Feather Touch Ltd. Vs. C & E Ltd.) has been filed for setting aside the award under Section 34 of the Act. 4. EC 145 of 2020 (C & E Ltd. Vs. Gopal Das Bagri) is another application for execution under Section 36(1) of the said Act. 5. EC 81 of 2022 (C & E Ltd. Vs. Gopal Das Bagri) has been filed by the award holder under Section 36(1) of the said Act. 6. GA 1 of 2022 has been filed in AP 364 of 2020 by the award debtor under Section 36(2) of the said Act for the unconditional stay of the award, inter alia, for being vitiated by fraud. 7. The applications under Section 36(2), being GA 1 of 2020 in AP 402 of 2020 and GA 1 of 2020 in AP 364 of 2020 were taken up first.

and confidence in the learned Arbitrator. The relevant portions of the minutes of the meeting held on 10th August 2014 are set out below:- “2.1 At the outset, the Arbitrator informed the parties that he had professionally been engaged several years ago as counsel to appear for Mr. Bulaki Das Bhalya, one of the claimants in this proceeding, or by companies within his management and control in certain earlier legal proceedings with regard to which Shri Bhalya had attended the conferences and had occasion to confer with and meet the Arbitrator. The Arbitrator further informed the parties that his son Mr. Ravi Kapur, Advocate, had apparently also appeared for the claimants in interlocutory proceedings arising out of C.S. No. 344 of 2012 before the Hon'ble High Court. 2.2 Mr. JishnuSaha, appearing for the respondent No.1 to 5 and Ms. Sulagna Mukherjee, Advocate appearing for the respondent Nos. 6, 7 and 8 informed the Arbitrator that they had been apprised of detalls of the foregoing circumstances and being fully aware of the same had proposed the name of the Arbitrator before the Hon'ble High Court to act as Arbitrator in this proceeding. Counsel also stated that they had full confidence and no doubts about the independence and impartiality of the Arbitrator and requested him to enter upon reference and continue with the arbitral proceedings. 3.1 The Arbitrator thereupon commenced the arbitral proceedings.”

The Arbitrator directed both the parties to deposit Rs.2 lakhs each with him by Monday, the 7th January 2019 to meet the secretarial expenses, etc. in respect of preparation of the award.”

A-Promoter Group Shareholding Sl. No. Full name Address No. of Shares 1 NA NA NA TOTAL(A) B- Other Shareholders

Sl. No. Full name Address No. of Shares 1 Bulaki Das Bhaiya 17 Sunny Park, 2nd Floor, Ballygunge, Kolkata-700019 80 2 Gouri Shankar Baldewa 20L, Motilal Basak Lane, Kolkata-700054 20 3 Ganga Devi Bhaiya 17 Sunny Park, 2nd Floor, Ballygunge, Kolkata-700019 8000 4 Bulaki Das Bhaiya HUF 95, Park Street, 2nd Floor, Kolkata – 700016 1900 TOTAL (B)

10000 Total Shareholding (A+B) = 10000 Equity shareholders of Rs.10 Each

One set of notes was received in January 2018 the second set came from the other side in February 2018, and the last set came from the claimants in May 2018 which was just on the eve of summer vacation. I was then proceedings abroad and then took up the matter for consideration after the vacation. By then, I must honestly admit that very little of the case, if anything at all, remained within my immediate recollection. I was compelled to read the entire bundles of papers by myself and put together my own determination with regard to over 20 separate issues. I had prepared a draft Award in December, 2018 and before finalisation I took some time when unfortunately the matter because of my commitments went out of my mind again. By my notice of 18th February 2019 I asked the parties to come to address me on certain matters which I think they had left incomplete in their earlier arguments. Hence the meeting today.” ………… 17. As many as 13 more sittings were held from 23rd February 2019 to 9th September 2019. The award was made 6 months thereafter, on 29th February 2020. 18. A brief chart or sequence of events and dates in the Arbitration and the relevant intervening actions is set out herein below:-

10th August, 2014 The Learned Arbitrator informed the parties about his professional engagement with Mr. Bulakidas Bhaiya before the arbitration proceedings. 13th September, 2014 - 9th December, 2017 About 126 sittings were held in the arbitration proceedings during this period. January, 2018 – December, 2018 Hiatus. 3rd January, 2019 The Learned Arbitrator informed the parties that the Award had been finalised.

23rd February, 2019 Despite having notified the parties that the award would be delivered on 29th February 2019, the learned arbitrator wanted further hearing. 3rd March, 2019 – 9th September, 2019 The arbitration recommenced and as many as 13 sittings were held. 29thFebruary, 2020 The award was pronounced.

Claim No.-1 - There will be a Award in favour of the Claimant companyagainst Indra Kumar Bagri, Sarla Bagri, Abhishek Kothari and Feather Touch Limited for a sum of USD 5,15,409.50 together with simple interest thereon @ 12% per annum calculated from 1st June, 2012 up to the date of payment. Claim No.-2 - There will be an Award in favour of the Claimant companyagainst Indra Kumar Bagri, Sarla Bagri, Abhishek Kothari and Feather Touch Limited for a sum of Rs.30,02,037/- together with simple interest thereon @ 12% per annum calculated from 1st January, 2012 up to the date of payment. Claim No.-3 :There will be an Award in favour of the Claimant company against Gopaldas Bagri, Indra Kumar Bagri, Sarla Bagri, Anil Bagri and Abhishek Kothari for a sum of Rs.17.5 crores together with simple interest thereon @ 12% per annum calculated from 1 January, 2019 up to the date of payment. Claim No.-4- There will be an Award against Inder Kumar Bagri in favour of the Claimant company for a sum of RMB 3,24,351.14 together with simple interest thereon @ 12% per annum calculated from 1st January, 2012 up to the date of payment. Claim No.-5-There will be an Award against Inder Kumar Bagri in favour of the Claimant company for a sum of RMB 1,92,770. This amount will not carry any interest. Claim No.-6-There will be an Award against Inder Kumar Bagri in favour of the Claimant company for a sum of RMB 5,23,254.68together with simple interest thereon @ 12% per annum calculated from 1st January, 2012 up to the date of payment.

Claim No.-7 - The Claim No. 7 for a sum of RMB 5,66,645 is rejected. Claim No.-8- There will be an Award against Inder Kumar Bagri in favour of the Claimant company for a sum of RMB 28,000 together with simple interest thereon @ 12% per annum calculated from 1st January, 2012 up to the date of payment. Claim No.-9- There will be an Award against Inder Kumar Bagri and Abhishek Kothari jointly and also severally in favour of the Claimant company for a sum of RMB 52,800 together with simple interest thereon @ 12% per annum calculated from 1st December, 2011 up to the date of payment. Claim No. 10 There will be an Award against Gopaldas Bagri in favour of the Claimant company for a sum of Rs.2,48,374.23 together with simple interest thereon @ 12% per annum calculated from 1 January, 2012 up to the date of payment. Claim No.-11 Claim No 11 for RM 2,03,577.23 on account of foreign exchange fluctuations is rejected. Claim No.-12: a) There will be an Award against Respondent Nos. 1, 3, 4, 5, 6 and 7 in favour of the Claimant company for a sum of RMB 24,63,160.56 together with simple interest thereon @ 12% per annum calculated from 1st January, 2012 up to the date of payment. b) There will be an Award against Inder Kumar Bagri in favour of the Claimant company for a sum of USD 10,23,925 together with simple interest thereon @ 12% per annum calculated from 1st January, 2012 up to the date of payment. Claim No.-13 The claim made by the claimant for a sum of Rs.5 crores on account of profits of FTL between 2005-2011 is rejected. Claim No 14:1 further summarize the reliefs awarded with regard to the claims of the respondents. a) There shall be an Award in favour of Gopaldas Bagri against the claimant company for a sum of Rs.24,933/- being his claim on account of salary that was raised in the Solan suit filed by him. This amount will carry interest @ 12% per annum calculated from 1stApril, 2012 until the date of payment. All other claims of Gopaldas Bagri are rejected. b) So far as the claims made by IK Bagri against the company are concerned, all of them are rejected. c) So far as the claims made by Abhishek Kothari against the company are concerned, all of them are rejected. d) As agreed between the parties the respondents shall sell and transfer their entire shareholding[consisting of 10,33,716 equity shares of the face value of Rs. 10 each representing

34.98% of the issued share capital of the claimant company] in the Claimant Company free from all or any encumbrances to the Claimant No 2, BulakidasBhaiya or his nominees at the rate of Rs. 80/- per share. The details of the shareholdings to be sold are set out hereunder:

Name of Shareholder Number of Shares held Percentage Gopal Das Bagri 88,944 3.01% Mrs. Rama Bagri 3,51,393 11.89% Anil Kumar Bagri 1,53,675 5.20% Inder Kumar Bagri 4,39,275 14.87% Gopal Das Bagri Karta of Gopaldas Bagri HUF 429 0.01%

e) For the purposes of completing such sale and transfer the said respondents and each of them shall sign and deliver duly stamped and properly executed transfer deeds together with the original share scrips to BulakidasBhaiya or his nominee- purchasers in respect ofthe shares standing in their names respectively in the Register of Members of the Claimant Company. f)In consideration of such sale of shares the Claimant Company will be entitled to set-off and/or adjust the price of the shares sold in full settlement or in diminution of any claim due and owing to the claimant company under any of the sums awarded to the company by this final Award. g) The claimant company will be reimbursed by the purchasers the full price of the shares sold and transferred by the Bagri Group of respondents to BulakidasBhaiya and his nominees within a period of 7 days' from date of the handing over of the share scrips and properly executed transfer deeds by the sellers to the purchasers in terms of this final Award. h) All other claims by parties against each other that is to say such as are not hereby adjudicated including such as were referred to me as the Arbitrator in respect of the company proceedings by the order of the Hon'ble Mr. Justice Sanjib Banerjee shall stand dismissed and extinguished altogether. i) The claim for relief regarding pending criminal proceedings made by Mr. Sandip Agarwal on behalf of the Bagri respondents is dismissed. j) All or any claims between the parties interse only shall stand adjusted and settled as determined in this Award; but this of course shall be without prejudice to any rights in accordance with law that the claimants may have in respect of the subject

matter of these proceedings against any third parties who were neither arrayed as parties eonomine nor participated in these arbitral proceedings at all. 15. COSTS: There will be no order as to costs. This Final Award is made and published by me at my Chamber at No. 14B, Ballygunge Circular Road, Kolkata 700019 on this the Twenty-Ninth day of February 2020.

SUBMISSIONS ON BEHALF OF THE AWARD DEBTORS, THE BAGRI GROUP 20. Learned counsel for the Award Debtors, Mr. Nalin Kohli argued as follows:- 21. That there can be no dispute as regards the control of M/s. SSSMIL by said Bulaki Das Bhaiya. He had the direct or indirect power to control the Management affairs and policies of SSSMIL, either by himself and/or through his family members. It is stated that M/s. SSSMIL acted as per the dictates and wishes of the said Bulaki Das Bhaiya and his immediate family members. Reliance has been placed on paragraphs 50 and 51 of the decision of Arcelormittal India Pvt. Ltd. v. Satish Kumar Gupta and Ors., reported in (2019) 2 SCC 1. 22. The award is vitiated by fraud and hence in conflict with public policy and/or fundamental policy of India for non-disclosure and active concealment by the Learned Arbitrator of having represented and/or been associated with the award debtor, namely M/s. SSSMIL during the year-long hiatus in the Arbitration. He relied upon the following decisions:- i. State of Maharashtra v. Budhikata Subbarao reported in (1993) 2 SCC 567, paragraph 3;

ii. Shib Prasad Biswas v. State Bank of India reported in 2009 SCC Online Cal 2274, paragraphs 5 and 6; iii. Government of Kerala v. SomDatt Builders Ltd. reported in 2002 SCC OnLine Ker 134, paragraph 19; iv. McDermott International Inc. v. Burn Standard Corporation Ltd. reported in (2006) 11 SCC 181, paragraph 52; v. Venture Global Engg. v. Satyam Computer Services Ltd., reported in (2010) 8 SCC 660, paragraph 40; vi. Venture Global Engg. LLC v. Tech Mahindra Ltd. reported in (2018) 1 SCC 656, paragraph 120. 23. Mr. Kohli alternatively argues that the aforesaid actions give rise to justifiable doubts, within the meaning of Section 12 (1), (2), and (5), as regards the independence and impartiality of the Learned Arbitrator, and hence the award is vitiated. He relied upon the following decisions:- a. ACE Pipeline Contracts (P) Ltd. v. Bharat Petroleum Corpn. Ltd. reported in (2007) 5 SCC 304, paragraph 21; b. International Airports Authority v. K.D. Bali, (1988) 2 SCC 360 reported in (1988) 2 SCC 360; c. Himadri Chemicals & Industries Ltd. v. Steel Authority of India Limited reported in 2012 SCC Online CAL 3589, paragraphs 22, 23, and 28. 24. He submits that in view of the clear mandate of Section 12 of the Act, there is no need to prove actual bias on the part of the Arbitrator. The award is therefore vitiated. He relies upon paragraph 47 of the case of

Alcove Industries Ltd. v. Oriental Structural Engineers Ltd. reported in ILR (2008) 1 Delhi 1113. 25. Reliance is placed also on paragraphs 7 to 10 of the decision of Vinod Bhaiyalal Jain v. Wadhwani Parmeshwari Cold Storage (P) Ltd. reported in (2020) 15 SCC 726, and paragraph 10 in the case of Jagdish Kishanchand Valecha v. SREI Equipment Finance Limited and Another reported in 2021 SCC OnLine Cal 2076. 26. Referring to the test of whether a reasonable person would have understood bias on the part of the Arbitrator in the facts, reliance is placed on paragraphs 15 and 17 of the case of Ranjit Thakur v. Union of India &Ors. reported in (1987) 4 SCC 611. 27. On the question of control of M/s. SSSMIL by said Bulaki Das Bhaiya, it is argued that he had the direct or indirect power to control the Management and Policies of SSSMIL by contract and or through his family members. Reliance has been placed on paragraphs 50 and 51 of the decision of Arcelormittal India Pvt. Ltd.( Supra) 28. On the violation of the mandatory provision, it is argued that section 12(1)(a) requires the Arbitrator to disclose any past or present relationship with the parties in terms of section 12(2) of the Act. It is further argued that such obligation to disclose continues from the time of his appointment throughout the arbitral proceedings until the end. Reliance in this regard has been placed on paragraph 40 of the case of Alcove Industries Limited (supra). 29. On the requirement of the disclosure, paragraph 42 of the decision of Alupro Building Systems Pvt. Ltd. v. Ozone Overseas Pvt. Ltd.

reported in 2017 SCC Online Del 7228 has been relied upon. Further reliance has also been placed on paragraph 50 of the decision of Ganesh Builders, Nagpur v. Nagorao S/O Motiram Kaware and Ors. reported in 2019 SCC Online Bom 1730. 30. On the proposition that the Arbitrator must disclose to the parties all circumstances giving rise to justifiable doubts, reliance is placed on paragraph 20 of the decision of the Supreme Court in the case of Voestalpine Schienen GmbH v. Delhi Metro Rail Corp. Ltd. reported in (2017) 4 SCC 665. 31. By placing reliance on section 12(5) of the said Act and the Seventh Schedule, it is argued by Mr. Kohli that the Arbitrator had become de jure, incapable of performing his functions by reason of having appeared for the said M/s. SSSMIL during the pendency of the Arbitration. Reliance in this regard is placed on paragraph 17 of the decision of Bharat Broadband Network Ltd. v. United Telecoms Ltd reported in (2019) 5 SCC 755. Section 12(5) read with section 12(2), according to Mr. Kohli, casts a continuous obligation upon the Learned Arbitrator to “Disclose” from the commencement of the arbitration to the end. 32. On the rules against the bias applying to all judicial and quasi-judicial proceedings, Mr. Kohli relied upon paragraph 14 of the Jaipur Zila Dugdh Utpadak Sahkari Sangh Limited and Others v. Ajay Sales & Suppliers reported in 2021 SCC Online SC 730. 33. Relying upon paragraphs 20 and 22 on the case of HRD Corporation (Marcus Oil and Chemical Division) v. GAIL (India) Limited reported

in (2018) 12 SCC 471, it is submitted that the mandate under amended section 12 in the year 2015, when the Fifth and Seventh schedules, of the said Act, were introduced, would apply to the Arbitrator in the instant case, irrespective of whether the arbitration commenced before or after the amendment. SUBMISSIONS ON BEHALF OF THE AWARD HOLDERS, THE BHAIYA GROUP 34. Mr. Dhruba Ghosh, Ld. Senior Advocate, representing the award holder, would vehemently oppose the preliminary objections to the application under Section 36(1) of the 1996 Act and consequently the preliminary issue in the application under Section 34 of the Act filed by the award debtors i.e. the Bagri Group. 35. Mr. Ghosh argued that the allegations of fraud and corruption have been made out without any particulars and hence no credence whatsoever should be given to the argument of the award debtors, in this regard. Reliance is placed in the case of Svenska Hanelsbanken v. M/s. Indian Charge Chrome and Ors. reported in (1994) 1 SCC 502, paragraph 41, and Bishundeo Narain and Anr. v. Seogeni Rai and Anr. reported in 1951 SCC Online SC 34 paragraph 22. 36. Fraud must be established beyond reasonable doubt and the standard of proof is of a high degree, that has not been discharged by the award debtors. Reliance is placed on the case A.L.N Narayanan Chettyar and Anr v. Official Assignee of the High Court, Rangoon and Anr. reported in AIR (1941) PC 93.

arbitration. The alleged discovery of the Arbitrator's engagement and appearance in APD 252 of 2015, later, cannot be believed. 42. The non-disclosure by the Arbitrator can be attributed to oversight and was believed to be unnecessary. Non-disclosure in the instant case therefore cannot ipso facto be deemed as wilful, deliberate, or fraudulent. There is no causal connection between non-disclosure and the result of the proceedings and hence the same does not amount to concealment. The APD 252 of 2015 has little or nothing to do with the role of the Arbitrator in the instant proceedings. 43. On the argument under section 12 advanced by Mr. Kohli, Mr. Ghosh has submitted that section 12(5) and the Seventh schedule deal with cases of ineligibility at the time of appointment of the Arbitrator. The same cannot be applied to the facts of the instant case. It is only section 12(2) that would apply to the facts of the case, along with the Fifth schedule. The Fifth schedule and section 12(2), do not specify the requirement of any continuous disclosure. The Arbitrator did not guarantee or undertake, at the time of initial disclosure, that he would not represent any of the respondents again. Hence, in the facts of the case invoking section 12(5) and the Seventh schedule, to automatically terminate the mandate of the Arbitrator, is therefore incorrect and unwarranted. 44. The petitioners, being shareholders of M/s. C&E Ltd and M/s. SSSMIL themselves, are deemed to be aware of the engagement of the Learned Arbitrator by Bulaki Das Bhaiya.

FINDINGS OF THIS COURT Is M/s. SSSMIL an affiliate of the Bhaiya Group 48. Having heard counsel for the parties, this Court finds that the Bagri Group has not seriously disputed the shareholding of Bulaki Das Bhaiya and his family members in M/s. B.G. Chemicals Pvt. Ltd. which has a controlling interest in M/s. SSSMIL. Except to say that members of the Bagri family are also shareholders in M/s. SSSMIL, the control of Bulaki Das Bhaiya in M/s. SSSMIL through M/s. B.G. Chemicals Pvt. Ltd. could not be seriously disputed. On the contrary

at page 9 of the Affidavit-in-Opposition, there is an indirect assertion to that effect. “9.The allegations made in paragraph 4 of the said petition are denied and disputed. It is denied that the information given by learned Arbitrator to the parties, as is evident from the minutes of the first sitting of arbitration, in itself amounted to a representation that he would not appear for, represent or advise Bulaki Das Bhaiya or for any of his companies in the course of the arbitration, as alleged. It is denied that the petitioners, FTL and Abishekh Kothari agreed to the learned Arbitrator entering upon reference and continuing with the arbitral proceeding, clearly with the understanding that the learned Arbitrator would not act as legal adviser of Bulaki Das Bhaiya or any of his group companies during the pendency of the reference, as alleged. .... 16.In this connection it is stated that several sitting were held after July 2018 and the advocates appearing for the award debtors before the arbitrator were well aware of the fact that the learned senior arbitrator had appeared in the SSSMIL appeal in his professional capacity. In fact the learned senior advocate Mr JishnuSaha had also appeared in other matters of SSSMIL. As such it was though unnecessary to record the same at that time since the learned Arbitrator had already made full disclosureunder section 12 of the Act and all the parties had consented to his appointment. No application was made challenging his qualification independence and/or integrity even though continued upto February 2020 At every meeting the representative of the applicants were present and no one raise any objection. The learned Arbitrator is a Senior Advocate and had been associated with the suit C.S. 274B of 1996 at all material times. The plaintiff in the suit SSSML is not a party to the instant arbitration and there was no reason for the learned Arbitrator to disclose the proceedings in the appeal (APD No 252 of 2015 arising out of the decree passed in the said suit). 17. In fact some of the respondents in the arbitration proceedings are also shareholders in SSSML i.e. Inder Kumar Bagri 2400, Gopal Das Bagri 1600, & Rama Bagri 2000 and knew and/or were to deemed to have known about the said appeal. It is unfortunate that the applicant is insinuating that the advocates appearing for the claimant in the arbitration proceedings were also representing the appellants in APD no, 252 of 2015. As mentioned above the learned Arbitrator is an eminent and popular senior counsel and has even appeared with the advocates appearing for the applicants and in particular learned Senior Advocate

JishnuSaha and advocate Sandip Agarwal in numerous matters during the pendency of the arbitration proceedings. In fact, I have been informed by the Award Holder No. 2 that the learned Arbitrator held several conferences with the aforementioned advocates of the applicant / respondent during the continuance of the arbitration proceedings. Moreover, the learned Senior Advocate JishnuSaha has also appeared for SSSMIL in other matters from timeto time during the continuance of the proceedings and as such the insinuation made about the advocates appearing on behalf of the claimant is not appreciated. I state that the allegations made in the paragraph under reference are irrelevant, in bad taste and improper. Only because the learned Arbitrator happens to be a busy Senior Counsel working with different advocates and advocates on record who happen to represent the parties herein, does not ipso facto disqualify him from appearing as arbitrator. The appearance of the learned Senior Counsel in such matters including APD no. 252 of 2015 could not have under any circumstances led the applicants to reasonably believe that he appeared for other matters for B. D. Bhaiya or his companies. In fact there is no other matter wherein the learned Arbitrator appeared as counsel for B. D. Bhaiya or "his companies" as alleged. Copies of the orders evidencing the fact that Mr. JishnuSaha, senior advocate had appeared for and behalf SSSMIL as counsel and copies of orders evidencing the Mr. JishnuSaha, Learned Advocate appearing in various other matters with the learned Arbitrator during the pendency of arbitral proceeding are annexed hereto and collectively marked "A"”

(P) Ltd. v. SEBI [Subhkam Ventures (I) (P) Ltd. v. SEBI, 2010 SCC OnLine SAT 35] , made the following observations qua “control” under the SEBI

(Substantial Acquisition of Shares and Takeover) Regulations, 1997, wherein “control” is defined in Regulation 2(1)(e) in similar terms as in Section 2(27) of the Companies Act, 2013. The Securities Appellate Tribunal held : (SCC OnLine SAT para 6) “6. … The term control has been defined in Regulation 2(1)(c) of the Takeover Code to “include the right to appoint majority of the Directors or to control the management or policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner”. This definition is an inclusive one and not exhaustive and it has two distinct and separate features : (i) the right to appoint majority of Directors or, (ii) the ability to control the management or policy decisions by various means referred to in the definition. This control of management or policy decisions could be by virtue of shareholding or management rights or shareholders agreement or voting agreements or in any other manner. This definition appears to be similar to the one as given in Black's Law Dictionary (Eighth Edn.) at p. 353 where this term has been defined as under: ‘Control—The direct or indirect power to direct the management and policies of a person or entity, whether through ownership of voting securities, by contract, or otherwise; the power or authority to manage, direct, or oversee.’ Control, according to the definition, is a proactive and not a reactive power. It is a power by which an acquirer can command the target company to do what he wants it to do. Control really means creating or controlling a situation by taking the initiative. Power by which an acquirer can only prevent a company from doing what the latter wants to do is by itself not control. In that event, the acquirer is only reacting rather than taking the initiative. It is a positive power and not a negative power. In a board managed company, it is the board of Directors that is in control. If an acquirer were to have power to appoint majority of Directors, it is obvious that he would be in control of the company but that is not the only way to be in control. If an acquirer were to control the management or policy decisions of a company, he would be in control. This could happen by virtue of his shareholding or management rights or by reason of shareholders agreements or voting agreements or in any other manner. The test really is whether the acquirer is in the driving seat. To extend the metaphor further, the question would be whether he controls the steering, accelerator, the gears and the brakes. If the answer to these questions is in the affirmative, then alone would he be in control of the company. In other words, the question to be asked in each case would be whether the acquirer is the driving force behind the company and whether he is the one providing motion to the organization. If yes, he is in control but not otherwise. In short control means effective control.”

Income Tax, Delhi reported in (2023) SCC OnLine SC 386 at Paragraph 71 has stated as follows:- “71. The sum and substance of the above decisions of this Court as well as various High Courts would be that where the head and seat and directing power of the affairs of the company and the control and management is must be shown is not merely theoretical control and power, i.e., not de jure control and power, but de facto control and power actually exercised in the course of the conduct and management of the affairs of the firm; that the domicile or the registration of the company is not at all relevant and the determinate test is where the sole right to manage and control of the company lies.”

Has the Arbitrator rendered himself ineligible under Section 12(2) & (5) and Grounds 2, 11, 15, and 20 of the FIFTH SCHEDULE and

Grounds 2, 8, and 15 of the SEVENTH SCHEDULE of the Act of 1996 55. The preliminary question in the application under Section 36(1) and Section 34 is whether by reason of appearing for M/s. SSSMIL on several occasions in APD no. 252 of 2015, the Learned Arbitrator, rendered himself ineligible to continue the arbitral proceedings in an impartial manner. In other words, whether the Arbitrator has fallen foul of any of the grounds under the Fifth Schedule, in terms of Section 12(2) of the Act, and the Seventh Schedule in terms of sub- Section 5 of Section 12(5). 56. The first objection raised by the Bhaiya group, through their counsel Mr. Ghosh, is that since the alleged incident of the Learned Arbitrator appearing for M/s. SSSMIL occurred during the pendency of the arbitration proceedings, the Bagri group ought to have filed an application under Section 13 of the Act before the Arbitrator himself. 57. It is also argued that since the family members of the Bagri group are also shareholders of M/s. SSSMIL, they are deemed to have known of the appearance of the Arbitrator as a counsel for M/s. SSSMIL in APD No. 252 of 2015, on 11 occasions. 58. This Court has noted that the Bagri group stated on affidavit, that they came to know of the engagement and appearance of the Arbitrator after the award was passed, in course of a search on the internet. 59. This Court need not enter into an enquiry as regards when the Bagri Group came to know of the alleged impropriety of the Learned

Arbitrator. What is important is whether the same would attract ineligibility under section 12(2) and (5) of the Act of 1996. 60. The incident leading to the likelihood of ineligibility of the Arbitrator occurred during the pendency of the arbitration proceedings and there was admittedly no formal disclosure of the same in the Arbitration. 61. It also appears to this Court that the Arbitrator had not disclosed in the first sitting that he and/or his family members have represented M/s. SSSMIL in the suit and interlocutory proceedings leading to APD no. 252 of 2015. 62. Given the very limited scope of challenge of an award under section 34 of the said Act of 1996, the requirement of neutrality of the Arbitrator has assumed the highest importance. No matter how fair and judicious an award may be, one cannot be oblivious to the fact that there is one side who will succeed in receiving the huge financial benefit and the other side shall be liable for the same. The consequence of the award and the limited scope of challenge for the same are far-reaching on the parties. 63. It is observed from the language of Section 12(2) that it same castes a continuous obligation on the Arbitrator to remain neutral and continue to disclose to the parties any acts or omissions that are likely to fall foul of the mandate under Section 12, in the course of the Arbitration. 64. The observations of the Hon’ble Supreme Court in the case of Voestalpine Schienen GmbH (supra) must be noted.

“25. Section 12 has been amended with the objective to induce neutrality of arbitrators viz. their independence and impartiality. The amended provision is enacted to identify the “circumstances” which give rise to “justifiable doubts” about the independence or impartiality of the arbitrator. If any of those circumstances as mentioned therein exists, it will give rise to justifiable apprehension of bias. The Fifth Schedule to the Act enumerates the grounds which may give rise to justifiable doubts of this nature. Likewise, the Seventh Schedule mentions those circumstances which would attract the provisions of sub-section (5) of Section 12 and nullify any prior agreement to the contrary. In the context of this case, it is relevant to mention that only if an arbitrator is an employee, a consultant, an advisor or has any past or present business relationship with a party, he is rendered ineligible to act as an arbitrator. Likewise, that person is treated as incompetent to perform the role of arbitrator, who is a manager, director or part of the management or has a single controlling influence in an affiliate of one of the parties if the affiliate is directly involved in the matters in dispute in the arbitration. Likewise, persons who regularly advised the appointing party or affiliate of the appointing party are incapacitated. A comprehensive list is enumerated in Schedule 5 and Schedule 7 and admittedly the persons empanelled by the respondent are not covered by any of the items in the said list.”

leading to the opposite party no. 2 assuming jurisdiction as the arbitrator. According to the petitioner, it was only after the proceedings commenced that the opposite party no. 2 by his biased conduct demonstrated that he was incapable of resolving the disputes between the parties in a fair, just and proper manner. Bias of an arbitrator is de jure inability to conduct proceedings and the petitioner having justifiable doubts regarding lack of independence and impartiality of the opposite party no. 2 could have taken recourse to either of the two remedies that the Act provides, i.e. a challenge in terms of Sections 12 and 13 of the Act before the arbitrator himself or by presenting an application under Section 14 before the Court. It opted for the remedy made available by Sections 12 and 13 by presenting the challenge application before the opposite party no. 2. Mr. Bose is right in his contention that the petitioner on various occasions participated in the proceedings before the opposite party no. 2 to press the challenge application and, in the process, also obtained adjournments, at times on worthy but quite often on unworthy grounds and that the opposite party no. 2 never demonstrated a non- cooperative attitude to delay a decision on the point raised by the petitioner. If indeed a party seeks to challenge appointment of the arbitrator or constitution of the arbitral tribunal on the ground of lack of reflection of independence or impartiality, he must choose between the fora provided by Section 13 and Section 14 of the Act. It has to be borne in mind that the petitioner did not approach the learned Judge with any claim that the opposite party no. 2 has been suffering from such a disability that a decision on the challenge application cannot be rendered by him or that he has incurred de jure inability of a nature different from the one alleged in the challenge application. This Court is, accordingly, of the opinion that, in the circumstances, the petitioner having laid a challenge that is permissible under Sections 12 and 13 of the Act and the opposite party no. 2 not being under any apparent disability to decide such challenge and the petitioner being at fault for delaying a decision on such application cannot midway turn around and decide not to pursue the challenge application, and then prefer an independent application under Section 14 of the Act before the Court, basically on the same ground raised in the former, urging that de jure inability of the arbitrator disqualifies him to continue proceedings. The learned Judge was right in not entertaining a challenge on the ground of de jure inability of the opposite party no. 2.

SCC 377;Bharat Broadband Network Limitedv.United Telecoms Limited,(2019) 5 SCC 755;Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Limited,(2017) 4 SCC 665. In the aforesaid decisions this Court had an occasion to consider in detail the object and purpose of insertion of Subsection (5) of Section 12 read with Seventh Schedule to the Act. In the case ofVoestalpineSchienen GMBH(Supra) it is observed and held by this Court that the main purpose for amending the provision was to provide for ‘neutrality of arbitrators’. It is further observed that in order to achieve this, Sub-section (5) of Section 12 lays down that notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject-matter of the dispute falls under any of the categories specified in the Seventh Schedule, he shall be ineligible to be appointed as an arbitrator. It is further observed that in such an eventuality i.e. when the arbitration clause finds foul with the amended provisions (Sub-section (5) of Section 12 read with Seventh Schedule) the appointment of an arbitrator would be beyond pale of the arbitration agreement, empowering the court to appoint such arbitrator as may be permissible. It is further observed that, that would be the effect of non obstante clause contained in sub-section (5) of Section 12 and the other party cannot insist on appointment of the arbitrator in terms of the arbitration agreement.”

constitute bias or act likely to suggest or indicate bias on the part of the Arbitrator. 71. Reference in this regard is made to paragraph 8 of the decision in the case of Hasmukhlal H. Doshi and another Vs. M.L. Pendse, Retired Chief Justice, Karnataka High Court and others reported in 2000 SCC OnLine Bom 242. “8. The Apex Court thereafter considered various Judgments as reflected in paragraphs 18, 19, 20 and 21 and has set out the various tests laid down by Courts, in England and in the United States of America. It would be gainful to reproduce some of the tests as set out by the Apex Court in the case of State of West Bengal v. Shivananda Pathak, (1998) 5 SCC 513. “25. Bias may be defined as a preconceived opinion or a predisposition or predetermination to decide a case or an issue in a particular manner, so much so that such predisposition does not leave the mind open to conviction. It is in fact, a condition of mind, which sways judgments and renders the judge unable to exercise impartiality in a particular case. 26. Bias has many forms. It may be pecuniary bias, personal bias, bias as to subject-matter in dispute, or policy bias, etc. In the instant case, we are not concerned with any of these forms of bias. We have to deal, as we shall presently see, a new form of bias, namely, bias on account of judicial obstinacy. 27. Judges, unfortunately, are not infallible. As human beings, they can commit mistakes even in the best of their judgments reflective of their hard labour, impartial things and objective assessment of the problem put before them. In the matter of interpretation of statutory provisions or while assessing the evidence in a particular case or deciding questions of law or facts, mistakes may be committed bona fide which are corrected at the appellate stage. This explains the philosophy behind the hierarchy of Courts. Such a mistake can be committed even by a judge of the High Court which are corrected in the Letters Patent Appeal, if available.””

given dispute, is not the existence of actual bias, but the existence of such facts and circumstances as are “likely to give rise to justifiable doubts as to his independence and impartiality”. An Arbitrator may be challenged only on limited grounds i.e. if circumstances exist that give rise to justifiable doubts as to his independence or impartiality or that he does not possess the qualifications agreed to by the parties. Even this challenge is limited only to such cases where the party raising the challenge who has participated in the appointment of the Arbitrator becomes aware of the grounds on which the challenge is made after the Arbitrator has been appointed. Therefore, if a party was aware of such facts and circumstances at the time of participating in the process of appointment of the Arbitrator as would otherwise be considered good enough to give rise to justifiable doubts as to the independence or impartiality of the Arbitrator, that party is disentitled from challenging the Arbitrator on the same ground. Moreover, the challenge is required to be made within 15 days of the party learning of the relevant circumstances. If the challenge is not made in a timely manner, the same may fail as having being condoned and waived on the ground of his acquiescence in the holding of further proceedings.”

Arbitrator not to do so, during the pendency of the Arbitration. By representing the Bhaiya group in APD 252 of 2015, the Arbitrator has committed breach of such undertaking, underlying such disclosure. 74. In addition to the aforesaid breach, the Arbitrator also suppressed and/or failed to disclose before the parties to the arbitration, that he had appeared for M/s. SSSMIL (Bhaiya group) in APD No 252 of 2015. The chain of events between December 2017 and February 2019 would definitely give rise to a real likelihood or danger that the Arbitrator may have allowed himself to have been compromised and consequently raise justifiable doubts as regards his independence. This Court sees the above in no uncertain terms as any reasonable man in the facts of the case would also see. There is clear breach and/or infraction of the principle that ‘justice must not only be done but manifestly seem to have been done’. 75. It is well established that this Court or any Court or person cannot enter into the mind of the Arbitrator to determine whether there was actual or real bias. Even a threadbare reading of the Award in fact and law may not disclose or indicate any bias. 76. What must be borne in mind is that if two views are possible in the facts of a case and the Arbitrator has taken one view, a Court under Section 34 cannot impose the other plausible view and interfere with an award. In the facts of the instant case, this Court or any Court for that matter or any reasonable man would have to invariably doubt as to why the Learned Arbitrator has taken the other plausible view. This is not

permitted under section 34 of the Act. Hence Section 12(2) and (5) must be strictly enforced and imposed in the instant case. 77. Given the very narrow scope of intervention with an award under Section 34, the rigours of Section 12 and the Fifth and Seventh Schedules must be strictly and compulsively imposed. Such strict, compulsive, and rigorous imposition of the mandate of Section 12 is necessary to ensure that the institution of the arbitration remains sacrosanct. After all, the parties are deemed to have imposed pious and reverent faith in one individual or persons to resolve their disputes. 78. Any infraction of section 12(2) and (5) and the grounds under the Fifth and Seventh Schedules and the object and purpose thereof, would desecrate the foundation of the institution of Arbitration.

Bias; Real Bias; Likelihood of Bias; Danger of Bias; Apparent Bias 79. This Court, on the basis of the dicta of the Supreme Court and other Courts referred to herein, is of the view, that after a fair reading and/or fair and proper application of the mandate under Section 12, the actions of an Arbitrator should not suggest any likelihood of bias. 80. It should not appear to a common person or a prudent and informed reasonable man that there is likelihood and/or danger of bias on the part of the Arbitrator, as regards the representation of M/s. SSSMIL before the High Court during the pendency of the arbitration proceedings. Actual proof of bias may not be necessary as in most cases it is not possible. What is most important is a reasonable likelihood or danger of being inferred from the acts, not disclosed by the Arbitrator.

18.Lord EsherinAllinsonv.General Council of Medical Education and Registration[(1894) 1 QB 750, 758-59] said: “The question is not, whether in fact he was or was not biased. The court cannot inquire into that. . . . In the administration of justice, whether by a recognised legal court or by persons who, although not a legal public court, are acting in a similar capacity, public policy requires that, in order that there should be no doubt about the purity of the administration, any person who is to take part in it should not be in such a position that he might be suspected of being biased.”

biased and is likely to decide against the party. But we agree with the learned Judge of the High Court that it is equally true that it is not every suspicion felt by a party which must lead to the conclusion that the authority hearing the proceedings is biased. The apprehension must be judged from a healthy, reasonable and average point of view and not on mere apprehension of any whimsical person. While on this point we reiterate that learned counsel appearing for the petitioner in his submissions made a strong plea that his client was hurt and had apprehension because the arbitrator being the appointee of his client was not acceding to the request of his client which the petitioner considered to be reasonable. We have heard this submission with certain amount of discomfiture because it cannot be and we hope it should never be (that) in a judicial or a quasi-judicial proceeding a party who is a party to the appointment could seek the removal of an appointed authority or arbitrator on the ground that appointee being his nominee had not acceded to his prayer about the conduct of the proceeding. It will be a sad day in the administration of justice if such be the state of law. Fortunately, it is not so. Vague suspicions of whimsical, capricious and unreasonable people are not our standard to regulate our vision. It is the reasonableness and the apprehension of an average honest man that must be taken note of. In the aforesaid light, if the alleged grounds of apprehension of bias are examined, we find no substance in them. It may be mentioned that the arbitrator was appointed by the Chief Engineer of the petitioner, who is in the service of the petitioner.”

matter would result in doing violence to the object behind the enactment of section 12(1) of the said Act. The words “from the time of his appointment” in section 12(2) are distinct and have no connection with the provisions of section 21 of the said Act that refer to the commencement of arbitral proceedings.”

by the learned arbitrator on the merits of claim we would not venture to examine with regard to the ultimate conclusion on the claim as to whether it is justified or not. However, in the above background, what is to be seen is that there has been a reasonable basis for the appellants to make a claim that in the present circumstance the learned arbitrator would not be fair to them even if not biased. It could no doubt be only a perception of the appellants herein. Be it so, no room should be given for even such a feeling more particularly when in the matter of arbitration the very basis is that the parties get the opportunity of nominating a Judge of their choice in whom they have trust and faith unlike in a normal course of litigation where they do not have such choice. 10.That apart when one is required to judge the case of another, justice should not only be done, but it should also seem to be done, is the bottom line. Hence in that background, if the present circumstance is taken not, there was reasonable basis for the appellants to put forth such contention which resulted in the situation wherein they had not participated in the arbitration proceedings. If nothing else, at least propriety demanded that the learned arbitrator should have recused in the present facts; but he has failed to do so. In that view, such an award passed by the learned arbitrator was not sustainable and the learned District Judge was justified in entertaining the petition under Section 34 of the 1996 Act to set aside the award. In that view, we are of the opinion that the learned Judge of the High Court of Judicature at Bombay was not justified in allowing the appeal filed under Section 37(1)(b) of the 1996 Act.”

(1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.

(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.

(3) An arbitrator may be challenged only if—

(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or (b) he does not possess the qualifications agreed to by the parties. (4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.” 42. Section 12(2) of the Act requires an Arbitrator from the time of his appointment and throughout the arbitral proceedings, to mandatorily disclose to the parties, “without delay” and “in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.” The circumstances under sub-section (1) of Section 12 of the Act as it stood prior to 23rd October, 2015 were “any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.” 43. At this point, it is necessary to recapitulate the distinction between ‘actual bias’ and ‘apparent bias’. In Director General of Fair Trading v. The Proprietary Association of Great Britain (decision dated 21st December 2000 of the Court of Appeal (Civil Division) in case No. C/2000/3582), this distinction has been succinctly explained by the Court of Appeals as under: “38. The decided cases draw a distinction between ‘actual bias’ and ‘apparent bias’. The phrase ‘actual bias’ has not been used with great precision and has been applied to the situation: (1) where a Judge has been influenced by partiality or prejudice in reaching his decision and (2) where it has been demonstrated that a Judge is actually prejudiced in favour of or against a party. ‘Apparent bias’ describes the situation where circumstances exist which give rise to a reasonable apprehension that the Judge may have been, or may be, biased.” 44. Referring to the decision in Rex v. Sussex Justices, ex. P. McCarthy (1924) 1 K.B. 256, the Court of Appeals in Director General of Fair Trading v. The Proprietary Association of Great Britain (supra) discussed the leading judgment of Lord Hewart C.J. The facts of that case were that one of the Clerks to the Justices was a member of a firm of solicitors acting in a civil claim against the Defendant arising out of an accident that had given rise to the prosecution. The Clerk retired with the Justices who returned to convict the Defendant. On learning that the Clerk was a member of the firm of solicitors acting against the Defendant, the Defendant applied to have the conviction quashed. Lord Hewart CJ, who was satisfied that the conviction must be quashed reasoned that “a long line of cases shows that it is not merely of some importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.” 45. Explaining the above opinion of Lord Hewart CJ, the Court of Appeals in Director General of Fair Trading v. The Proprietary Association of Great Britain (supra) observed as under: “42. Had Lord Hewart asked the question ‘was there any likelihood that the Clerk's connection with the case influenced the verdict?’ he would have answered in the negative on the basis that he accepted the evidence that the Clerk had not intervened in the Justices’ discussion. Had he asked the question ‘would a reasonable onlooker aware of all the material facts, including the fact that the Clerk did not speak to the Justices after retiring, have concluded that the Clerk's connection with the case might have influenced the verdict?’ he would equally have answered in the negative. His

decision was reached on the premise that what actually transpired between the Clerk and the Justices behind closed doors was not relevant. The fact that the Clerk had retired with the Justices gave an appearance of the possibility of injustice, and that was enough to lead to the quashing of the verdict.” 46. The two alternative tests applied by the Courts in considering whether a decision was vitiated on account of bias or not, are as under: “(1) Did it appear to the Court that there was a real danger that the Judge had been biased? 2) Would an objective onlooker with knowledge of the material facts have a reasonable suspicion that the Judge might have been biased?””

Arbitrator. The Court found that the real test of likelihood of bias and sometimes more than that, should not amount to fanciful apprehension. The proposition of law of the Court cannot be disputed. However, it may not be applicable in the facts of this case. 91. Mr. Ghosh has placed the definition of reasonable man from the 8th Edition of Black’s Law Dictionary. “reasonable person. 1. A hypothetical person used as a legal standard, esp. to determine whether someone acted with negligence; specif., a person who exercises the degree of attention, knowledge, intelligence, and judgment that society requires of its members for the protection of their own and of others' interests. The reasonable person acts sensibly, does things without serious delay, and takes proper but not excessive precautions. Also termed reasonable man; prudent person; ordinarily prudent person; reasonably prudent person; highly prudent person. See reasonable care under CARE. [Cases: Insurance 1818; Negligence 233. C.J.S. Negligence §§ 34, 118-121,125-127, 130-131, 133.]

“The reasonable man connotes a person whose notions and standards of behaviour and responsibility correspond with those generally obtained among ordinary people in our society at the present time, who seldom allows his emotions to overbear his reason and whose habits are moderate and whose disposition is equable. He is not necessarily the same as the average man - a term which implies an amalgamation of counter-balancing extremes." R.F.V. Heu- ston, Salmond on the Law of Torts 56 (17th ed. 1977).

cases of apparent bias, whether concerned with justices or members of inferior tribunals, or with jurors or with arbitrators."

In many if not most cases it will make no difference which test is applied. That is so in the present case, and I am content to adopt real likelihood, which appears to lay the heaviest burden on the person alleging bias. But I do not, with great respect share the view of Lord Justice Cross (in Hannam's case) and Lord Justice Ackner (in the Liverpool City Justice's case) that there is little if any difference between the two. tests. If it had been necessary to decide the point. I would have followed what was said by Lord Justice Edmund-Davies in the Metropolitan Properties case [1969] 1 Q.B. at p. 606: With profound respect to those who have propounded the "real likelihood" test I take the view that the requirement that justice must manifestly be done operates with undiminished force in cases where bias is alleged and that any development of the law which appears to emasculate that requirement should be strongly resisted. That the different tests, even when applied to the same facts, may lead to different results is illustrated by Reg. v. Barns- ley Licensing Justices itself, as Devlin LJ made clear in the passage I have quoted. But L cannot bring myself to hold that a decision may properly be allowed to stand even. although there is reasonable suspicion of bias on the part of one or more members of the adjudicating body

Whilst endorsing and fully maintaining the integrity of the principle reasserted by Lord Hewart, this court feels that the continued citation of it in cases to which it is not applicable may lead to the erroneous impression that it is more important that justice should appear to be done than that it should in fact be done.

Whether or not that is so, I agree with the realism of the post-Gough assessment of Sir Thomas Bing- ham, M.R. in ex parteDallaglio at p. 162, that the famous aphorism of Lord Hewart now requires qualification in the light of the real danger test. Equally, however, I consider that the need forconcern in that respect is more illusory than real.

The law has first to ascertain the real circum- stances from the available evidence, knowledge of which would not necessarily be available to an observer at court.”

test is not whether there is a real likelihood of bias. There should be a danger of bias which is not fanciful, that can be inferred from the conduct of the Arbitration. 94. In the facts of the said AT&T Case (supra), the Arbitrator was a renowned QC from Montreal, Canada, appointed after the consent of the parties under the ICC Rules. He had failed to disclose to the parties that he was a non-executive director on the board of a Canadian Company, one M/s. Nortel, a competition of M/s. AT & T. The said M/s. Nortel also competed with M/s. AT &T for another series of contracts with M/s. Saudi Cable Company during the same time of the contract which was the subject matter of Arbitration. In fact M/s. Nortel and M/s. AT&T were also rivals competing in the telecom industry in North America and across the world. The Arbitrator was challenged after conciliation failed and a partial award was passed. Earlier M/s. Nortel had agreed to terminate an exclusive supply agreement with Bell Canada, in return for political support from the US Government in the contracts with Saudi Cable. 95. This Court is of the view that the conclusion of the Court of Appeals in the said case, upholding the mandate of the Arbitrator after setting aside the views of the High Court, may not apply to a case where there are codified rules like section 12 and Fifth and Seventh Schedules to the Act of 1996. 96. Secondly, in the instant case, the Arbitrator falls foul of the duty of disclosure of facts that would lead to justifiable doubts, both before and during the pendency of the arbitration. It is a completely different

matter, as to how Indian Courts would look at the facts and scenario available in the AT&T case (supra), in the context of the said Act of 1996. 97. However, this Court finds the danger and probability of bias test more acceptable as opposed to the likelihood and possibility of bias test. Even if one were to apply the real danger of bias and the probability thereof test, the Arbitrator’s conduct in the instant case would certainly fall foul of the mandate of grounds 2, 11, 15, and 20 of the Fifth Schedule and grounds 2, 8, and 15 of the Seventh Schedule under Section 12(2) and 12(5) of the Act of 1996. 98. In fact, the Hon’ble Supreme Court has already, in the cases of State of West Bengal v. Shivananda Pathak reported in (1998) 5 SCC 513 at paragraph 33, and N. K. Bajpai v. Union of India reported in (2012) 4 SCC 653 at paragraph 48, held as follows. State of W.B. v. Shivananda Pathak, (1998) 5 SCC 513

N.K. Bajpai v. Union of India, (2012) 4 SCC 653

probability of such bias, in the circumstances of a given case. If it falls in the prior category, the decision would attract judicial chastisement but if it falls in the latter, it would hardly affect the decision, much less adversely.”

only two of the three things set out therein viz. “fundamental policy of Indian law” and “justice or morality”. The ground relating to “the interest of India” no longer obtains. “Fundamental policy of Indian law” is now to be understood as laid down inRenusagar[Renusagar Power Co. Ltd.v.General Electric Co., 1994 Supp (1) SCC 644] . “Justice or morality” has been tightened and is now to be understood as meaning only basic notions of justice and morality i.e. such notions as would shock the conscience of the Court as understood inAssociate Buildersv.DDA[Associate Buildersv.DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Section 28(3) has also been amended to bring it in line with the judgment of this Court inAssociate Builders[Associate Buildersv.DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , making it clear that the construction of the terms of the contract is primarily for the arbitrator to decide unless it is found that such a construction is not a possible one.

20.However, to accede to Shri Divan's submission that because the grounds for challenge have been narrowed as aforesaid, we must construe the items in the Fifth and Seventh Schedules in the most expansive manner, so that the remotest likelihood of bias gets removed, is not an acceptable way of interpreting the Schedules. As has been pointed out by us hereinabove, the items contained in the Schedules owe their origin to the IBA Guidelines, which are to be construed in the light of the general principles contained therein—that every arbitrator shall be impartial and independent of the parties at the time of accepting his/her appointment. Doubts as to the above are only justifiable if a reasonable third person having knowledge of the relevant facts and circumstances would reach the conclusion that there is a likelihood that the arbitrator may be influenced by factors other than the merits of the case in reaching his or her decision. This test requires taking a broad commonsensical approach to the items stated in the Fifth and Seventh Schedules. This approach would, therefore, require a fair construction of the words used therein, neither tending to enlarge or restrict them unduly. It is with these prefatory remarks that we proceed to deal with the arguments of both sides in construing the language of the Seventh Schedule.

22.Shri Divan has pressed before us that since on a legal issue between GAIL and another public sector undertaking an opinion had been given by Justice Lahoti to GAIL in the year 2014, which had no concern with respect to the present matter, he would stand disqualified under Item 1 of the Seventh Schedule. Items 8 and 15 were also faintly argued as interdicting Justice Lahoti's appointment. Item 8 would have no application as it is nobody's case that Justice Lahoti “regularly” advises the respondent. And Item 15 cannot apply as no legal opinion qua the dispute at hand was ever given. On reading Item 1 of the Seventh Schedule, it is clear that the item deals with “business relationships”. The words “anyother” show that the first part of Item 1 also confines “advisor” to a “business relationship”. The arbitrator must, therefore, be an “advisor” insofar as it concerns the business of a party. Howsoever widely construed, it is very difficult to state that a professional relationship is equal to a business relationship, as, in its widest sense, it would include commercial relationships of all kinds, but would not include legal advice given. This becomes clear if it is read along with Items 2, 8, 14 and 15, the last item specifically dealing with “legal advice”. Under Items 2, 8 and 14, advice given need not be advice relating to business but can be advice of any kind. The importance of contrasting Item 1 with Items 2, 8 and 14 is that the arbitrator should be a regular advisor under Items 2, 8 and 14 to one of the parties or the appointing party or an affiliate thereof, as the case may be. Though the word “regularly” is missing from Items 1 and 2, it is clear that the arbitrator, if he is an “advisor”, in the sense of being a person who has a businessrelationshipin Item 1, or is a person who “currently” advises a

party or his affiliates in Item 2, connotes some degree of regularity in both items. The advice given under any of these items cannot possibly be one opinion given by a retired Judge on a professional basis at arm's length. Something more is required, which is the element of being connected in an advisory capacity with a party. Since Justice Lahoti has only given a professional opinion to GAIL, which has no concern with the present dispute, he is clearly not disqualified under Item 1.”

pendency and the actual award passed may not be apparent or established, and hence need not be established. 106. One need not also enter into the merits of an award while assessing the reasonable likelihood of bias. What is important is as to whether the representation of the Arbitrator before the High Court, on behalf of M/s. SSSMIL, which is a body corporate, exclusively in control and management of Bulaki Das Bhaiya, during the pendency of the arbitration, would reasonably indicate a likelihood and/or danger of bias to an uninformed common man and any of the parties in the arbitration. CONCLUSION 107. In the facts and circumstances of the instant case, this Court is of the view that the Arbitrator has rendered himself ineligible by reason of his actions, and non-disclosure thereof. Either bona fide or otherwise, his actions fall foul of the mandate under Section 12 of the Arbitration and Conciliation Act, particularly, grounds 11, 15, and 20 and the Fifth Schedule and ground 15 of the Seventh Schedule read with explanation 2 thereof. 108. The impugned award stands set aside. AP 364 of 2020 and AP 402 of 2020 are allowed. EC 145 of 2020 and EC 81 of 2022 shall stand dismissed. Consequently, all interim applications shall stand dismissed. GA 1 of 2022 in AP 364 of 2020 shall stand disposed of as infructuous. GA 1 of 2020 in AP 402 of 2020 shall also disposed of as infructuous.

(Rajasekhar Mantha, J.)