2005(2) ALL MR 420
IN THE HIGH COURT OF JUDICATURE AT BOMBAY

D.K. DESHMUKH, J.

Shri. Murlidhar Roongta & Ors.Vs.M/S. S. Jagannath Tibrewala & Ors.

Arbitration Petition No.594 of 2001,Arbitration Petition No.595 of 2001

16th August, 2004

Petitioner Counsel: Mr. D. J. KHAMBATA,Mr. P. PALKHIWALLA,Lokhandwala & Co.
Respondent Counsel: Mr. RISHABH SHAH,Mr.RAVI GOENKA,GOENKA,Mr. SHAILESH SHAH
Other Counsel: Mr. P. N. MODY,Mr. SAGAR DIVEKAR,WADIA GHANDYI & Co.

(A) Arbitration and Conciliation Act (1996) S.34 and Rules Framed by Bombay Stock Exchange, Rr.53, 54 - Arbitration Tribunal - Jurisdiction - Scope - Arbitration reference in Arbitration Dispute Cell of Bombay Stock Exchange - Status of party to the transaction on date of transaction is relevant - Subsequent change in status of member will not render the dispute non-arbitrable - Arbitral tribunal shall not lose its jurisdiction thereby.

In order that a dispute can be referred to arbitration under Bye-law No.248(a) and decided, a party to the transaction which is a source of the dispute should be a member and non-member at the time of transaction. If the status of the party is that on the date of the transaction and the transaction is subject to rules, bye-laws and regulations of the Stock Exchange, then the dispute would be arbitrable. Subsequent change in the status of the member will not make the dispute non-arbitrable. In the instant cases therefore, it has to be held that though the Respondent No.1 ceased to be a member during the pendency of the dispute, the dispute between him and the Petitioners which related to a transaction which was subject to the bye-laws, rules and regulations of the Stock Exchange and was between the member and non-member continued to be arbitrable and therefore for these reasons the arbitral tribunal does not lose its jurisdiction to continue to decide the reference. [Para 9,11]

(B) Arbitration and Conciliation Act (1996) Ss.34, 12 - Arbitral award - Grounds of challenge - Circumstances giving rise to justifiable doubts as to independence of Arbitrator - Must be disclosed by arbitrator in writing - Advocate appearing for the respondent also appearing in personal matters of the arbitrator during pendency of arbitration proceeding - Arbitrator under a duty to disclose this fact to the parties during the arbitral proceedings - Non disclosure thereof by arbitrator - Improper - Award passed by arbitral tribunal set aside.

The Act casts a duty on the Arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubt as to his independence or impartiality. It is to be seen that by this Act the entire law of arbitration has been drastically changed. The power of the court to interfere with the award made by the Arbitrator is now extremely limited in view of the provisions of Section 34 of the Act and therefore, Section 12 is in the nature of a procedural safeguard afforded to a party by the Act. Section 12 casts a solemn duty on an Arbitrator, who is put in a position of a Judge to disclose to the parties his interest which is likely to give rise to a reasonable doubt about his independence in the mind of the parties. So far as the question of justifiable doubts as to independence or impartiality is concerned the basis is whether the party to the dispute would have reasonable apprehension in his mind about the independence of the Arbitrator and not whether the Arbitrator thinks that he is capable of being impartial. In the instant case, the advocate on behalf of the respondent party was also appearing in some personal matters for the respondent arbitrator and there was a non disclosure of this fact to the petitioner before the arbitral proceedings. Hence, the award passed by the arbitral tribunal was held to be unsustainable. [Para 13]

Cases Cited:
Harinarayan G. Bajaj Vs. Rajesh Meghani, Arbitration Petition No.366/2002, dt.5/6/2003 [Para 6]
W. H. Brady & Co. Ltd. Vs. Kamladevi K. Poddar, Arbitration Petition No.279/2001, dt: 1/7/2003 [Para 6]
Chiranjilal Ramchandra Loyalka Vs. Jatashankar N. Joshi, 1942 (XLIV) BLR 692 [Para 6]
Satyendra Kumar Vs. Hind Constructions Ltd., AIR 1952 Bom 227 [Para 12]
Ranjit Thakur Vs. Union of India, (1987)4 SCC 611 [Para 13]


JUDGMENT

JUDGMENT :- The learned Counsel appearing for both sides are agreed that common question of law and facts are involved in these two petitions, therefore, they can be conveniently disposed of by a common order.

2. In Arbitration Petition No.595 of 2001, Award dated 29th May, 2001 which was amended by order dated 20th July, 2001 and 23rd July, 2001, is challenged.

In Arbitration Petition No.594 of 2001, interim award dated 2nd March, 2001 and the Award dated 29th May, 2001 is challenged.

3. By the award challenged in Arbitration Petition No.595 of 2001 the Petitioner has been directed to pay an amount of Rs.16,69, 508/- which was reduced by order dated 23rd July, 2001 to Rs.16,17,799/-. This amount is directed to be paid with interest which is specified in the award. The Respondent No.1 has been directed, on receiving payment from the Petitioners, to deliver certain securities to the Petitioner.

By the award which is challenged in the Arbitration Petition No.594 of 2001, the Petitioner in that Petition is directed to pay an amount of Rs.17,13,720/- with interest to the Respondent No.1.

4. Facts that are relevant and material for deciding these two petitions are that the Respondent No.1 in both these petitions filed Arbitration Reference in the Arbitration Dispute Cell of the Bombay Stock Exchange contending that he was member of the Bombay Stock Exchange till 27-1-1998 from which date he has been declared as defaulter. According to the Respondent No.1, Shri. Omprakash Roongta who is Petitioner in Arbitration Petition No.595 of 2001 was his constituent. According to statement of claims submitted by the Respondent No.1 during 1994 the said Omprakash approached the Respondent No.1 for carrying out transaction in shares on his behalf. In view of the order that I propose to pass in these petitions,it is not necessary to go into details of the transactions between the parties. Suffice to say that according to the Respondent No.1 as a result of transaction conducted by him into shares of the Stock Exchange on behalf of the said Omprakash certain amounts became payable to him. Similarly, at the instance of the said Omprakash he conducted transactions on behalf of the members of the family of said Omprakash who are petitioners in Arbitration Petition No.594 of 2001 and certain amounts also became recoverable by him from them. After the matter was referred to arbitration, before the Arbitral tribunal the Petitioners appeared and contested the claims.

It may be pointed out here that an objection to the jurisdiction of the arbitral tribunal constituted under the bye-laws of the Bombay Stock Exchange to entertain the dispute was raised on behalf of the Petitioners. The objection was that though the reference was filed in November, 1997, before the reference was decided, the Respondent No.1 was declared a defaulter on 27-1-1998 and his membership of the Stock Exchange was cancelled and therefore the arbitral tribunal loses the jurisdiction to entertain the claim. That objection has been overruled by the Arbitral Tribunal on the ground that that objection was raised late. The arbitral tribunal after hearing the parties on the basis of the documents produced on record made its awards which have been referred to above. These awards have been challenged in these two petitions. The learned Counsel appearing for the Petitioners advanced various submissions including submissions on the merits of the controversy. But in view of the order that I propose to make, in my opinion, only two submissions are required to be dealt with and decided upon.

i) Whether because of cancellation of the membership of the Respondent No.1, the arbitral tribunal of the Bombay Stock Exchange would lose the jurisdiction to make the award;

ii) Whether one of the arbitrators namely Shri. R. B. Khandelwal who is Respondent No.2 failed to perform the duty cast on him by Section12 of the Arbitration & Conciliation Act and therefore the awards made by the arbitral tribunal are vitiated;

5. It may be pointed out here that as there are several petitions pending in this court where the first question referred to above arises for consideration, I heard the learned Counsel appearing for the parties in those petitions also only on the question of law.

6. Now, taking up the first question for consideration, on behalf of the Petitioners it is submitted that there was no arbitration agreement in existence between the parties at the time when the dispute was decided by the arbitrators. It is submitted that the provisions in the bye-laws of the Stock Exchange providing for arbitration between a member and non-member is bye-law No.248(a). It is submitted that the provisions of bye-law No.248(a) constitutes an arbitration agreement between the parties and the authority of the arbitrators to deal with the dispute is to be strictly determined on the basis of contents of bye-law No.248 (a). It is submitted that in order that the dispute becomes arbitrable under bye-law No.248(a) there are two requirements. First requirement is that the dispute must be between the member and non-member, both at the time of reference as also at the time of decision of the arbitration. Thus in order that the arbitral tribunal can decide the dispute, the member who is party to the arbitration must continue to be the member till the award is made. The second requirement is that the claim or dispute must arise in relation to dealing and transaction made subject to rules, bye-laws and regulations of the Stock Exchange. It is submitted that the satisfaction of the second requirement does not mean that the first requirement i.e. existence of the membership throughout the arbitration is waived. Reference is made to the provisions of National Stock Exchange, especially, bye-law No.XI (I) and pointed out that where different provision was to be made specific words are to be used by the bye-law of the National Stock Exchange. Reference is also made to the provisions of Rules 53 and 54 of the Bombay Stock Exchange to contend that once membership is cancelled, member ceases to have any privilege or right of the member. It is submitted that the reference of a dispute to arbitration is one of the rights of the member and therefore as soon as the membership comes to an end the dispute ceases to be arbitrable. Reference is also made to the provisions of the bye-law No.315(D) to contend that in so far as the disputes between members inter-se are concerned, by virtue of the statutory fiction contained in bye-law No.315(D) the disputes between the members inter-se are arbitrable even after cancellation of the membership of the member who is party to the dispute. It is submitted that absence of such a statutory fiction in relation to dispute between member and non-member, on cessation of membership dispute ceases to be arbitrable. Reference is also made to the provisions of bye-law No.252(1) as also bye law No.257 in support of this submission. Reliance is also placed on a judgment of this Court dated 5th June, 2003 in the case of Harinarayan G. Bajaj Vs. Rajesh Meghani & anr., in Arbitration Petition No.366 of 2002. Reference is also made to the judgment of this Court in the case of W. H. Brady & Co.Ltd. Vs. Kamladevi K. Poddar & ors. dated 1st July, 2003 in Arbitration Petition No.279 of 2001. Reliance is also placed on the judgment of this Court in the case of Chiranjilal Ramchandra Loyalka Vs. Jatashankar N. Joshi, 1942 (XLIV) Bombay Law Reporter, 692. It is also submitted that the arbitral tribunal was not justified in rejecting the plea of jurisdiction only because of delay in raising the same.

7. Learned Counsel appearing for the Petitioners in other Arbitration Petition also supported the arguments advanced by the learned Counsel appearing for the Petitioner.

8. On behalf of the Respondents it is submitted that it is clear from bye-law No.248(a) that it operates in relation to the transactions which are conducted in accordance with rules, bye-laws and regulations of the Stock Exchange and which are between the members and non-members. Continuance of the status as a member till the decision of the dispute by the arbitrator is not necessary.

9. I have heard the learned Counsel appearing for the Bombay Stock Exchange. The Bombay Stock Exchange supported the arguments advanced on behalf of the Respondents. It is submitted that the settled interpretation of bye-law No.248(a) is that the provisions of that bye-law are attracted if the transaction is between the member and non-member and is governed by the provisions of the bye-laws, rules and regulations of the Bombay Stock Exchange and continuance of the status of the member till the award is made is not necessary. In my opinion decision on the question raised whether the arbitral tribunal loses its jurisdiction to decide the dispute between a member and non-member in case a member who is party to the dispute ceases to be a member before award is made by the arbitral tribunal depends on what is the scheme of the bye-laws, rules and regulations of the Bombay Stock Exchange in this regard. In my opinion, therefore, first provision that is required to be seen is the provision of bye-law No.192. It reads as under :-

" All bargains Subject to Rules, Bye-laws and Regulations :

All bargains in securities in which dealings are permitted shall in all cases be deemed made subject to the Rules, Bye-laws and Regulations of the Exchange which shall be a part of the terms and conditions of all such bargains and they shall be subject to the exercise by the Governing Board and the President of the powers with respect thereto vested in it or him by the Rules, Bye-laws and Regulations of the Exchange."

It is clear from the perusal of the above quoted provision that it introduces a statutory fiction that all transactions in securities in which dealings are permitted shall be deemed to be made subject to rules, bye-laws and regulations of the Stock Exchange, and the bye-laws, rules and regulations of the Stock Exchange automatically become part of the terms and conditions of the transactions. The next provision which, in my opinion, is relevant is regulation 14.2. It reads as under :-

"14.2 Contract Notes issued by members to constituents when acting for them as agents and when dealing with them as principals shall be in (accordance with) Form A and Form B respectively prescribed in Appendix B to this Regulation or in such other form or forms as the Governing Board may from time to time prescribe in addition thereto or in modification or in substitution thereof."

By virtue of this provision all contract notes to be issued by members to the constituents are required to be in Form-A and Form-B. Perusal of Form-B which is prescribed by this regulation shows that clause 1 of Appendix B lays down that the contract which is mentioned in the contract note is subject to the rules, bye-laws and regulations and usages of the Stock Exchange, Bombay. Clause 4 and Clause 5 read as under :-

"In the event of any claim (whether admitted or not) difference or dispute arising between you and me/us out of these transactions the matter shall be referred to arbitration in Bombay as provided in the Rules, Bye-laws and Regulations of The Stock Exchange, Bombay.

5. This contract constitutes and shall be deemed to constitute as provided overleaf an agreement between you and me/us that all claims (whether admitted or not), differences and disputes in respect of any dealings, transactions and contracts of a date prior or subsequent to the date of this contract (including any question whether such dealings, transactions and contracts have been entered into or not) shall be submitted to and decided by arbitration in Bombay as provided in the Rules, Bye-laws and Regulations of the Stock Exchange, Bombay."

Thus, it is clear that the arbitration clause contained in the bye-laws is attracted to the transactions. The next provision which, in my opinion, is relevant is provision of Bye-law No.248(a). It reads as under :-

"248(a) All claims (whether admitted or not) difference and disputes between a member and a non-member or non-members (the terms 'non-member' and 'non-members' shall include a remisier, authorised clerk, a sub-broker who is registered with SEBI as affiliated with that member or employee or any other person with whom the member shares brokerage) arising out of or in relation to dealings, transactions and contracts made subject to the Rules, Bye-laws and Regulations of the Exchange or with reference to anything incidental thereto or in pursuance thereof or relating to their construction, fulfillment or validity or in relation to the rights, obligations and liabilities of remisiers, authorised clerks, sub-brokers, constituents, employees or any other persons with whom the member shares brokerage in relation to such dealings, transactions and contracts shall be referred to and decided by arbitration as provided in the Rules, Bye-laws and Regulations of the Exchange."

It is clear that there are two basic requirements of bye-law No.248(a); (i) that the transaction must be between the member and non-member and (ii) the transaction must be subject to rules, bye-laws and regulations of the Stock Exchange. According to the Petitioner, there is a third requirement that the member who is party to this dispute must continue to be a member till the award is made. According to the Petitioner that requirement exists because of the following words used by Bye-law No.248(a)

"shall be referred to and decided by arbitration"

According to the Petitioners, therefore status of the member must continue on the date of reference as also on the date of decision. In my opinion, however, provisions of sub-bye-law (1) of Bye-law No.252 suggests a contrary indication. It reads as under :-

"252(1)(a) No claim which has arisen or has become due before a member has been declared defaulter as per the Rules, Bye-laws and Regulations of the Exchange, shall be entertained against him by the arbitrators after the expiry of six months from the day the member is declared defaulter.

(b) No claim which has arisen after a member has been declared defaulter as per the Rules, Bye-laws & Regulations of the Exchange shall be entertained against him by the arbitrators after the expiry of six months from the day the claim arises or becomes due.

(c) Whether the claim falls within the period of limitation provided in Clause (a) and (b) shall be decided by the arbitrator and in case he finds that it does not fall within the period specified therein, he shall dismiss the application for reference to arbitration. He may admit the application after the prescribed period if the applicant satisfies him that there is sufficient cause for not making the application within such period as provided in section 5 of the Limitation Act, 1963."

Perusal of the above provisions shows that the bye-law contemplates a claim arising between a member and non-member before a member is declared a defaulter as also a claim arising between a member and non-member after a member is declared a defaulter. If according to bye-law No.252 a claim which has arisen between a member and non-member after a member has been declared a defaulter is arbitrable, obviously such a firm or a member would not be a member of the Stock Exchange either on the date of reference or on the date of decision. In my opinion, the provisions of bye-law No.257 also indicates the same thing. It reads as under :-

"257. The parties to the reference shall in all things abide by and forthwith carry into effect the award of the arbitrators which shall be final and binding on the parties and their respective representatives notwithstanding the death of or legal disability occurring to any party before or after the making of the award and such death or legal disability shall not operate as a revocation of the reference or award."

Perusal of the above quoted provisions shows that an arbitration clause and an award made thereunder continue to be binding on the legal representatives of the dead person. They also continue to be binding on a person who has suffered a legal disability. A reference at this stage may be made to the provisions of Rules 53 and 54 of the Rules. They read as under :-

DEFAULT

"53. A member who is declared a defaulter shall at once cease to be a member of the Exchange and as such cease to enjoy any of the rights and privileges of membership but the rights of his creditor members against him shall remain unimpaired.

LAPSE OF MEMBERSHIP RIGHT

54. A member's right to membership shall lapse to and vest in the Exchange immediately he is declared a defaulter."

By relying on the provisions of Rule 53, it was argued on behalf of the Petitioners that a member who has been declared a defaulter ceases to enjoy any right or privilege of a member. It is submitted that availability of a forum of arbitration is one of the privileges of membership and therefore a member on ceasing to be a member shall lose the forum of arbitration to have a dispute between him and the non-member decided. In other words, according to the petitioner, Rule 53 creates a legal disability on cancellation of membership. Assuming that to be so, in my opinion, by virtue of provision of Bye-law No.257, even that legal disability will not take away the binding effect of the arbitration clause. It thus appears that in order that a dispute can be referred to arbitration under Bye-law No.248(a) and decided, a party to the transaction which is a source of the dispute should be a member and non-member at the time of transaction. If the status of the party is that on the date of the transaction and the transaction is subject to rules, bye-law and regulations of the Stock Exchange, then the dispute would be arbitrable. Subsequent change in the status of the member will not make the dispute non-arbitrable. In my opinion, this construction is a possible construction of the relevant bye-laws of the Stock Exchange. On behalf of the Bombay Stock Exchange an affidavit has been filed in these petitions. It is stated in that affidavit that it is this interpretation of Bye-law No.248(a) which is holding the field for the last many decades. According to Stock Exchange, this interpretation of Bye-law No.248(a) that it has nexus with the transaction and therefore if the parties to the transactions are member and non-member and if the transaction is subject to the bye-laws, rules and regulations of the Stock Exchange, a dispute arising from that transaction is arbitrable is a settled interpretation of Bye-law No.248(a). In my opinion, in view of this affidavit and as I find that it is a possible interpretation, it will not be appropriate to disturb the settled position. It appears from the affidavit of the Bombay Stock Exchange that on the basis of this interpretation disputes are being decided by the arbitral tribunal and arrangements have also been made by the Bombay Stock Exchange for making recovery from the amounts that are due from the such defaulter member for the benefits of the other members and constituants. In the affidavit, the Bombay Stock Exchange has stated thus :

"4.4. It is also pertinent to note that within six months of being declared a defaulter, a defaulter member is entitled to apply for re-admission, subject to various conditions as stipulated in the Exchange's Rules, Bye-laws and Regulations. Rule 60(1) of the Exchange's Rules, Bye-laws and Regulations, inter alia, provides that one of the conditions for eligibility to apply for readmission is that the defaulter must make full payment of his liabilities and where the claim of a creditor "is the subject matter of an arbitration proceeding under the Rules, Bye-laws and Regulations which is pending, the governing Board may in its discretion consider the defaulter to be eligible for re-admission if he deposits with the Exchange a sum equal to the amount of such disputed claim. The sum so deposited shall be paid to the claimant to the extent to which the arbitration award is in favour of the claimant and the balance shall be refunded to the defaulter". Therefore, Rule 60(a) of the Exchange's rules, Bye-laws and Regulations clearly envisions a continuation of arbitration proceedings and/or commencement of arbitration proceedings even after the declaration of default, which completely belies the Petitioners' aforesaid contentions.

4.5 The Investors Protection Fund is a registered public charitable trust, which has been set up by the Exchange for the purpose of assisting small investors and the said trust makes gratuitous payments up to a ceiling limit, which is presently Rs.10 Lakhs per claim. Consequently, under Bye-law 353-A of the Exchange's Rules, Bye-law and Regulations, it is stipulated that all amounts payable to a defaulter by a non-member, shall be payable instead to the Trustees of the said Trust. This Bye-law would be rendered otiose and meaningless if all arbitration proceedings were to cease upon declaration of default as contended by the Petitioners, since once a member is declared a defaulter, his debtor constituents invariably refuse to pay the amounts payable by them to the defaulter until an arbitration award is passed against them."

10. It is obvious that if the settled interpretation is disturbed the welfare scheme of the Stock Exchange for the benefit of the creditors of the defaulting member would also come in difficulty.

11. Taking overall view of the matter, therefore, it has to be held that though the Respondent No.1 ceased to be a member during the pendency of the dispute, the dispute between him and the Petitioners which related to a transaction which was subject to the bye-laws, rules and regulations of the Stock Exchange and was between the member and non-member continued to be arbitrable and therefore for these reasons the arbitral tribunal does not lose its jurisdiction to continue to decide the reference.

12. The next submission which is required to be dealt with is that the Respondent No.2/Arbitrator failed to discharge a statutory duty imposed on him by Section 12 of the Arbitration & Conciliation Act. It is submitted on behalf of the Petitioners that second Respondent had a duty to disclose certain facts which were likely to give rise to justifiable doubt as to his independence or impartiality. These circumstances were that the advocate appearing on behalf of the first Respondent in the Arbitration proceedings was throughout the pendency of the arbitration proceedings also acting as an advocate for the Respondent No.2/Arbitrator in several personal courts' matters. The Petitioners became aware of this fact on or about 24th October, 2001 after the award was made. It is submitted that the Petitioners took search of the proceedings before the Metropolitan Magistrate and discovered several proceedings in which the first Respondent's said advocate Shri. A. K. Maheshwari has acted as an advocate for the second Respondent. The Petitioners, therefore, obtained certified copies of those proceedings, which have been filed in these petitions. It is submitted that the second Respondent has not denied any of these facts. The first Respondent has stated that he was not aware that his advocate was also an advocate for the second Respondent/Arbitrator. During the hearing of these petitions, on 20th July, 2004 Shri. Maheshwari, advocate has filed an affidavit. He states therein that he filed a complaint on behalf of the Respondent No.2, but thereafter another advocate took away all papers from him and thereafter he did not act as an advocate for the Respondent No.2. It is submitted that however Shri. Maheshwari, Advocate does not disclose as to when these papers were taken away from him. It is submitted that even if it is assumed that that is so, as the advocate appearing for the first Respondent before the arbitrator was also an advocate engaged by the Respondent No.2 to represent him in personal matters in the court of Metropolitan Magistrate, the Respondent No.2 was under a duty to disclose this fact to the parties during the arbitration proceedings. Failure of second Respondent to disclose this fact vitiates the award made by the second Respondent. Reliance is placed on the judgment of this Court in the case of The Union of India Vs. Tolani Bulk Carriers Limited in Arbitration Petition No.340 of 1999. Reliance is also placed on a judgment of this Court in the case of Satyendra Kumar Vs. Hind Constructions Ltd., AIR 1952 Bombay 227.

13. Now to decide this submission, it becomes necessary to refer to provision of Section 12 of the Arbitration & Conciliation Act. It reads as under :-

"12. Grounds for challenge - (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 through out 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."

It is clear from the provisions of Section 12 quoted above that the Act casts a duty on the Arbitrator to disclose in writing any circumstances likely to give rise to justifiable doubt as to his independence or impartiality. It is to be seen that by this Act the entire law of arbitration has been drastically changed. The power of the court to interfere with the award made by the Arbitrator is now extremely limited in view of the provisions of Section 34 of the Act and therefore, Section 12 is in the nature of a procedural safeguard afforded to a party by the Act. Section 12 casts a solemn duty on an Arbitrator, who is put in a position of a Judge to disclose to the parties his interest which is likely to give rise to a reasonable doubt about his independence in the mind of the parties. So far as the question of justifiable doubts as to independence or impartiality is concerned the basis is whether the party to the dispute would have reasonable apprehension in his mind about the independence of the Arbitrator and not whether the Arbitrator thinks that he is capable of being impartial. The following observations from para 17 of the judgment of the Supreme Court in the case of Ranjit Thakur Vs. Union of India and ors. reported in (1987)4 Supreme Court Cases 611 are pertinent. The said paragraph 17 reads thus :

"17. As to the tests of the likelihood of bias what is relevant is the reasonableness of the apprehension in that regard in the mind of the party. The proper approach for the judge is not to look at his own mind and ask himself, however, honestly, "Am I biased?"; but to took at the mind of the party before him."

In such a situation, in my opinion, the court has to look at the impression, which would be given to the other people.

14. So far as the present case is concerned,it is an admitted position, as a result of affidavit filed by Shri. Maheshwari, that Shri. Maheshwari was an advocate representing the Respondent No.2/Arbitrator in a personal matters of the Arbitrator in the Metropolitan Magistrate's Court, this fact was within the exclusive knowledge of Shri. Maheshwari, who was the advocate of the Respondent No.2, and the Respondent No.2 therefore, in my opinion, the Respondent No.2 was under a duty to disclose this fact to both the parties. In the judgment in the case of Union of India Vs. Tolani Bulk Carriers Ltd. this aspect of the matter has been considered in detail and it has been held that in view of the powers that are conferred on the Arbitrator and the manner in which the proceedings are contemplated to be conducted, the procedural safeguards which are provided by the Act have to be strictly enforced. In this view of the matter, therefore, in my opinion, it will be appropriate to set aside the awards passed by the arbitral tribunal, which are impugned in both the petitions. The awards made in both the petitions are accordingly set aside. The arbitration department of the Bombay Stock Exchange is directed to constitute a new arbitral panel and refer the disputes between the parties to that panel for denovo consideration and decision in accordance with law and observations made and findings recorded above. It is clarified that except the question of arbitrability of the dispute because of the cessation of the membership of the Respondent No.1 all questions are left open to be decided by the Arbitrators.

Petitions disposed of.

Office to furnish certified copy of this order to the Stock Exchange, Bombay.

Parties to act on ordinary copy of the order duly authenticated by the Associate/Personal Secretary of the Court as a true copy.

Order accordingly