Arbitrator bias and contract interpretation under arbitration law: revocation needs real grounds, while related trade clauses remained valid.

Revocation of an appointed arbitrator's authority under section 5 of the Arbitration Act, 1940 is described as an exceptional discretionary remedy, available only on proof of a real and reasonable apprehension of bias or other circumstances likely to cause a substantial miscarriage of justice. On the facts discussed, ordinary market conditions and the tribunal's composition did not establish likely partiality, so revocation was not warranted. The commentary also notes that a contractual time-extension for furnishing a licence was treated as consistent with the governing bye-laws, and that differences between the bought note and sold note did not show lack of consensus on the cancellation clause, leaving the contract effective.

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Issues: (i) whether the alleged emergency in the jute trade and the alleged conflict between buyers and sellers created a reasonable apprehension of bias warranting revocation of the arbitrator's authority under section 5 of the Arbitration Act, 1940; (ii) whether the contracts were inconsistent with the governing bye-laws and therefore not in accordance with law; (iii) whether the parties were not ad idem on the cancellation clause in the contract notes.

Issue (i): whether the alleged emergency in the jute trade and the alleged conflict between buyers and sellers created a reasonable apprehension of bias warranting revocation of the arbitrator's authority under section 5 of the Arbitration Act, 1940.

Analysis: Revocation of an appointed arbitrator's authority is an exceptional discretionary remedy and is justified only where the Court is satisfied that refusal would lead to a substantial miscarriage of justice or that a real and reasonable ground for apprehending bias is established. The material placed before the Court did not show an extraordinary commercial crisis dividing the market into opposing camps. The evidence indicated ordinary and fluctuating market conditions, and the composition of the arbitral tribunal did not, on the facts proved, establish likely partiality. The supposed conflict of interest was therefore not sufficient to displace the agreed arbitral forum.

Conclusion: The alleged emergency and apprehension of bias were not proved, and revocation of the arbitrator's authority was not warranted.

Issue (ii): whether the contracts were inconsistent with the governing bye-laws and therefore not in accordance with law.

Analysis: The contractual clause extending the time for furnishing the requisite authority or licence up to December 1960 did not materially conflict with the relevant bye-law, which contemplated a period for compliance and the consequences of default. The variation was treated as a permissible extension of time rather than a departure from the legal framework governing the contract.

Conclusion: The contracts were not shown to be contrary to the governing bye-laws or unlawful.

Issue (iii): whether the parties were not ad idem on the cancellation clause in the contract notes.

Analysis: The difference in wording between the bought note and the sold note did not create any real divergence of intention. The clause, read as a whole, showed that if the buyer failed to furnish the necessary licence within the stipulated time, the contract would stand cancelled and the parties' reciprocal rights and obligations would end. The additional words in one note did not alter the substance of the agreement.

Conclusion: The parties were ad idem, and the clause did not invalidate the contract.

Final Conclusion: The appeals failed on all substantive grounds and the refusal to revoke the arbitral authority was upheld, leaving the arbitral reference undisturbed.

Ratio Decidendi: Leave to revoke an appointed arbitrator's authority under section 5 of the Arbitration Act, 1940 can be granted only on proof of a real, objective ground for apprehending bias or other exceptional circumstances likely to cause a substantial miscarriage of justice.

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