R.K. Sharma, J.@mdashThis Rule arises at the instance of Kailash Saving Units Private Limited, hereinafter called the Company which felt
aggrieved by order No. 21 dated 30.11.1978, passed by the learned Chief Judge, City Civil Court, Calcutta, in Misc. Case No. 390 of 1977.
The learned Chief Judge in passing that order was hearing an application u/s 28 of the Arbitration Act, 1940 filed on behalf of the company for
extension of time for making the award. The learned Chief Judge by his aforesaid order held that the appointment of the Arbitrator was invalid and
was inclined not to exercise the discretionary power of the court u/s 28 of the Arbitration Act and therefore refused the company''s prayer for
extension of time. Aggrieved by that order the present Rule was obtained. Briefly stated the petitioner''s case is that this company granted loan to
opposite party No. 1 Shanti Ranjan Ghosh under a scheme known as Kuri scheme according to the rules and regulations of the company relating
to the said scheme. Opposite Party No. 2 Smt. Dipika Ghosh wife of Shanti Ranjan Ghosh was the guarantor for the due repayment of the loan.
The rules and regulations of the scheme included an arbitration clause. In course of time a dispute arose between the parties and the petitioner by a
letter dated 7th August, 1976 referred the said dispute to the arbitration of Shri Om Prakash Malhotra. This gentleman was the Managing Director
of the company. The Arbitrator duly entered upon the reference on 9th August, 1976 and by a letter of the same date intimated to the opposite
parties that the petitioner had referred to him the dispute and differenences between the company and themselves in accordance to the arbitration
clause and called upon them to answer the claim by 30th August, 1976 at 10 A.M. On that date the Company was represented by its employee
Shri S.K. Karmakar but in spite of service of notice no one appeared for the opposite parties. In the circumstances the arbitrator decided to give
another chance to the opposite parties for the ends of justice and issued a letter dated 15th September, 1976 and called upon the opposite parties
to appear peremptorily before him on the noon of 8th October, 1976 at the office of the company at 23A, Netaji Subhas Road, Calcutta. The
opposite parties were also warned that their failure to appear before the arbitrator would lead to hearing of the arbitration proceeding ex-parte.
Thereafter no further notice was given as there was no sufficient time for holding the meeting by the arbitrator. The time to make '' and publish the
result of the award by the arbitrator expired on the 9th December, 1976. Talks of settlement were also going on between the parties and in the
meantime an application u/s 28 of the Arbitration Act, 1940 was filed before the court below for ex-tension of time for making the award.
2. The opposite parties who contested the proceedings filed their affidavit and urged several grounds opposing the prayer for extension or
enlargement of time for making the award. The first ground urged was that the appointment of Shri Om Prakash Malhotra, Managing Director of
the company was mala fide and illegal inasmuch as the Arbitrator cannot but support his own cause and thereby deny justice to the opposite
parties. The next ground taken was that the application of the company contained misstatement and untruth showing mala fide attempt to explain
the delay in making the award. Therefore, the prayer for enlargement of time should not be granted.
3. The learned Court below held that in view of the fact that the arbitrator was nobody else other than the managing director of the company
himself there was a possibility of bias. He further held that the order recorded by the arbitrator on 8.10.1976 shows that the arbitrator somehow or
other consciously or unconsciously identified himself with the petitioner company. In this connection, the use of the word ''so'' by the arbitrator was
taken exception of. Therefore, taking the facts and circumstances into consideration he passed the impugned order.
4. Mr. Saraf appearing on behalf of the petitioner submits that the learned court below was in error in holding that there was a possibility of bias.
Mr. Mitra appearing on behalf of the opposite parties supports the order passed by the learned Court below. I have considered the matter. The
company in question is a private limited company. The Managing Director is the person in charge of the interest of the company and he is to
safeguard the interest of the company. He is the executive head of the company as well. In the capacity of the executive head of the company he
will have first to decide and then refer the dispute to the arbitrator between the company and the opposite parties after giving his decision the
company being able to appoint arbitrator. The managing director took the unsafe effort to appoint himself as the sole arbitrator. The net result is
that the company became its own judge in its own cause. The person who is interested in prosecuting the company''s cause is ultimately the
managing director. Therefore when the managing director himself resumes the office of the arbitrator he becomes a judge in his own cause.
Therefore, in the facts and circumstances, actual bias need not be proved. The possibility of bias cannot be denied. In my opinion, the learned
Court below was justified in holding that there was possibility of bias.
5. The learned court below held that there was no dispute between the parties to go to arbitration. But on this I am not satisfied. It appears that in
one of his communication to the company the opposite party had contended that it had paid more than Rs. 25000/- whereas his liability was only
to the extent of Rs. 23000/-. On the other hand the company''s case was that the opposite party made payment to the extent of Rs. 10,000/- and
adding the interest @ 12% per annum the outstanding dues against the opposite party was Rs. 23,000/-. This I find to be the position and the
parties before me have admitted this position emerging out of their correspondence. Therefore, in the facts and circumstances of the case, I do not
agree with the learned court below that there was no dispute between the parties.
6. The Rule is thus discharged without any order as to costs. Although this Rule is discharged, liberty is given to the petitioner company to appoint
an impartial arbitrator in accordance with terms of agreement and to settle the dispute between the parties. If the petitioner company wants to
proceed further it may take steps within three months hereof.
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