Case Note & Summary
The dispute arose from a contract for the construction of a bridge, where the respondent, a contractor, sought the refund of earnest money after the contract was terminated by the appellant, the Secretary to the Government, Transport Department, Madras. The arbitration clause specified that the Superintending Engineer would act as the arbitrator. After the original arbitrator was succeeded by another, the respondent filed an application for the removal of the arbitrator, citing apprehension of bias due to the arbitrator's subordination to the Chief Engineer, who had favored the contract's cancellation. The City Civil Court initially agreed to remove the arbitrator, leading to an appeal to the Supreme Court. The Supreme Court analyzed the grounds for removal under Section 5 of the Arbitration Act, emphasizing that mere apprehension of bias without substantial evidence does not justify removal. The court noted that the parties had knowingly accepted the arbitration clause and the circumstances surrounding the arbitrator's appointment. The court concluded that there was no reasonable basis for the apprehension of bias and remanded the case back to the City Civil Court to appoint the Superintending Engineer as the arbitrator, directing him to proceed with the arbitration in accordance with the agreement. The appeal was allowed, and no costs were awarded.
Headnote
A) Arbitration Law - Removal of Arbitrator - Grounds for Removal - Section 5 Arbitration Act, 1940 - A named and agreed arbitrator cannot be removed unless there are allegations against his honesty, capacity, mala fide, or reasonable apprehension of bias based on cogent materials. The court held that mere imagination of bias is insufficient for removal, and the parties had previously agreed to the arbitrator's appointment knowing the circumstances. (Paras 677E-F, 678C-D)
Issue of Consideration
Whether the apprehension of bias against the arbitrator warranted his removal under Section 5 of the Arbitration Act, 1940.
Final Decision
The Supreme Court allowed the appeal, set aside the orders of the City Civil Court and the High Court, and remanded the case back to the City Civil Court to appoint the Superintending Engineer as the arbitrator in accordance with the arbitration agreement.
Law Points
- Arbitration
- Bias
- Removal of Arbitrator
- Section 5 Arbitration Act
- 1940
