TMI Blog2001 (7) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... ord here, Justice H.L. Anand opinion about the validity of the Arbitral Tribunal consisting of three members, in view of section 10(1), did require consideration. However, in view of the findings recorded by us this controversy stands settled. No hesitation to uphold the impugned judgment and the order of the High Court which holds Arbitral Tribunal consists of three members Justice Avadh Behari Rohatgi to be the Chairman along with Mr. Justice H.L. Anand (Retd.) and Mr. C.S. Aggarwal, Advocate as other two members - CIVIL APPEAL NO. 4051 OF 2001 SLP (C) NO. 19 OF 2001 - - - Dated:- 11-7-2001 - A.P. MISRA AND DORAISWAMY RAJU, JJ. F.S. Nariman, Lalit Bhasin, Nina Gupta, Uday Gupta, Jaya Srivastava, Arpita Mahajan, Sushma Sharma and Vineet Kumar for the Appellant. K.K. Venugopal, R.K. Chadha, Meenakshi Singh, Prof. Bhim Singh, Yasmine Tarapore and Janendra Lal for the Respondent. JUDGMENT Misra, J. - Leave granted. 2. Heard the learned counsel for the parties. 3. Since long, both the Legislature through its enactment and the courts through its interpretation have been battling to cut short the traditional procedures in Courts to dispense quic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . No. 133 of 1999 by Delhi High Court through which the said O.M.P. has been allowed, holding Justice Avadh Behari Rohatgi to be the Chairman of the Arbitral Tribunal along with Justice H.L. Anand (Retd.) and Mr. C.S. Aggarwal, Advocate. The High Court while interpertating the aforesaid arbitration clause held it to fall under sub-section (2) of section 10. The submission is the High Court erred in interpreting the arbitration clause to make it fall under sub-section (2) of section 10, in fact, it falls under sub-section (1) of section 10. In order to appreciate the controversies and the issues involved, it is necessary to dwell on to the necessary facts. So hereunder we are giving short matrix of facts. 7. The respondent was appointed as the general sales agent of the appellant Airlines for various territories. In pursuance to the same, two agreements dated 1-7-1987 and 5-1-1980 were executed between the appellant and the respondent. However, the engagement of the respondent was terminated by the appellant with effect from 20-12-1994. This led into the dispute and for resolving it, the respondent filed a suit under section 20 of the aforesaid Act. During pendency of this proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a stand that section 10(1) had no application on the facts of the present case. The Delhi High Court through its impugned judgment has held that Justice Rohatgi would continue to be the Chairman of the Arbitral Tribunal and the decision of the majority shall prevail. This is so as both the nominee arbitrators of the appellant and the respondent appointed the aforesaid Justice Avadh Behari Rohatgi to act as the Chairman of the Arbitral Tribunal. 10. On 16-9-1995 the Arbitral Tribunal consisting of the aforesaid three persons passed an order that both the counsels should seek instructions from their respective clients and state on the next date of hearing, whether they were prepared to refer their disputes arising under the agreements to this Arbitral Tribunal. On 1-6-1996 the counsels statement were recorded that their clients were agreeable to refer the disputes to this Arbitral Tribunal. After the appointment of Justice H.L. Anand on 30-12-1998, he sent a fax to Mr. C.S. Aggarwal for a meeting on 6-2-1999 to consider the question of appointing an Umpire or appointing the third arbitrator. During this period on the 8-3-1999 Justice Rohatgi through letter desired to convene a m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear intent of the parties as incorporated in the arbitration clause has to be read and if the intention of the parties, as in the present case, is clear that the dispute is to be resolved by the three arbitrators then the case would not fall under sub-section (1) but would fall under sub-section (2) and, thus, the High Court committed no error in concluding the same. 12. In order to further appreciate and adjudicate the issue involved we are herewith reproducing below both section 10 and article XVI of the arbitration clause of the aforesaid two agreements. Section 10: " Provisions as to appointment of three or more arbitrators. (1) Where an arbitration agreement provides that a reference shall be to three arbitrators, one to be appointed by each party and the third by the two appointed arbitrators, the agreement shall have effect as if it provided for the appointment of an umpire, and not for the appointment of a third arbitrator, by the two arbitrators appointed by the parties. (2) Where an arbitration agreement provides that a reference shall be to three arbitrators to be appointed otherwise than as mentioned in sub-section (1), the award of the majority shall, unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) or sub-section (2) it has to be found, whether the appointment of the three arbitrators could be said to be otherwise than as mentioned in sub-section (1). The submission on behalf of the appellant by Mr. Nariman is, the words, otherwise than as mentioned in sub-section (1) refers to the method of appointment while submission for respondent by Mr. Venugopal is, such an appointment in the present case is otherwise than as provided in sub-section (1), as appointment of the third umpire, namely, Mr. Rohatgi was as an Chairman, indicating the parties intended that the third arbitrator could not be an umpire. 14. Strong reliance is placed for the appellant in Ghasilal Todi v. Biswanath Kerwal AIR 1964 Cal. 466. The submission is, the arbitration clause in this case is similar to the one in the present case. For ready reference relevant portion is reproduced below : "That in case of any dispute arising out of this agreement or during the continuance of this partnership business between the parties the same will be decided by arbitration, each party will nominate one person and the persons so nominated will elect a third person as Chairman and the decision of the majority wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered opinion this decision could in no way be said to be the decision deciding the periphery of the two fields of sub-sections (1) and (2) in which the aforesaid two sub-sections operates. This decision merely considered, whether award by one of the appointed arbitrator would be valid. The question, whether the third appointed arbitrator would be an umpire or not was in issue thus adjudication if any could not be by the ratio decision of this case. 16. Reliance by the Calcutta High Court in the aforesaid case on the Marinos Frangos Ltd. ( supra ) is also of no avail as there also issue was limited to the question, whether the award by the single arbitrator could be valid in view of similar arbitration clause. Within this limitation the court did interprets section 9 of the English Arbitration Act, 1950 which is pari materia to section 10 of the aforesaid 1940 Act. Hence, we proceed to examine this case also in extenso. This case interpreted clause 35 of the arbitration clause incorporated in the agreement between the parties with reference to sections 7 and 9 : Clause 35 is quoted hereunder : "35. Any and all differences and disputes of whatsoever nature arising o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rator, S. had jurisdiction to act as sole arbitrator Order of Master reversed, shipowners being at liberty to enter judgment in terms of award in their favour." 18. It is significant to refer to section 8 also of the aforesaid 1950 Act which gives clear statutory intent of keeping in mind the arbitration agreement while interpreting such provisions. Section 8 is quoted hereunder : "8. (1) Unless a contrary intention is expressed therein, every arbitration agreement shall, where the reference is to two arbitrators, be deemed to include a provision that the two arbitrators shall appoint an umpire immediately after they are themselves appointed. (2) Unless a contrary intention is expressed therein, every arbitration agreement shall, where such a provision is applicable to the reference, be deemed to include a provision that if the arbitrators have delivered to any party to the arbitration agreement, or to the umpire, a notice in writing stating that they cannot agree, the umpire may forthwith enter on the reference in lieu of the arbitrators." 19. Section 8 starts with the words Unless a contrary intention is expressed therein (in the arbitration agreement) , so in the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss examined. The submission is that the plea of acquiescence is not sustainable because estoppel and acquiescence do not confer jurisdiction. Reliance is placed on Karnal Improvement Trust v. Smt. Parkashwanti 1995 (5) SCC 159 at p. 172 para 22. 22. The submission of Mr. Nariman, in his usual eloquence and he does at the first flash is impressive and attractive but on deeper examination it leads to a different result. There could be no dispute, as submitted by him, in a case where two arbitrators are appointed by the two parties separately and the third being appointed by the said two appointed arbitrators the third arbitrator in view of sub-section (1) of section 10 is to be construed as an umpire. But the question still is, whether the arbitration clause in the present case, stipulates appointment of third arbitrator as in sub-section (1) or his appointment could be said to be otherwise than as mentioned under sub-section (1) in terms of sub-section (2). In order to decipher and carve out separate field of the said two sub-sections, the interpretation of arbitration clause is very signifi- cant. If the appointment arbitrators under section 10(1) is an appointment simplici ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Chairman has to chair every meeting of the Tribunal over which he has to chair. In the present case, he has to chair the Arbitral Tribunal. In such a case could it be said that the appointment of the third arbitrator was simpliciter appointment of the third arbitrator as contemplated under sub-section (1) of section 10? In the present case the words who shall act as a Chairman gives clear intention of the parties. The submission of Mr. Nariman mere change of nomenclature would make no difference cannot be accepted. It has to be examined by picking up the intention of the parties out of totality of the words in the arbitration clause. Once parties clearly intend which could be culled out from the arbitration clause that the appointment of the third arbitrator is to function and chair the Tribunal then such Chairman, the third appointed arbitrator is to be interpreted to fall under sub-section (2). This intention in the said arbitration clause is further reinforced by clause 4 of the aforesaid article XVI, where it gives clear intention of the parties where it provides, in a case Arbitral Tribunal consists of more than one arbitrator its decision shall be given by a majority vot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid one date, was there or not. It can be said, even for the miscellaneous purposes the parties were appearing on the various dates before the three-member Tribunal without raising any objections. 25. One of the submissions for the respondent is that the appellant acquiescenced by presenting itself before the three-member Tribunal on large number of date for a period of three years hence is stopped from raising any such dispute that constitution of the Tribunal was not valid. Reliance is placed in Neelakanthan Bros. Const. v. Suptd. Engineers 1998 (4) SCC 462; Construction India v. Secretary, Works Dept. 1998 (2) SCC 89; M.K. Shah Engineers Contractors v. State of M.P. 1999 (2) SCC 594 and Prasun Roy v. Calcutta MDA 1987 (4) SCC 217. The first three cases are where objection is raised after making of the award. The last case is where objection is prior to the making of an award, based on allegation of bias of the arbitrator. On the other hand Mr. Nariman submits that the plea of acquiescence is not sustainable because estoppel and acquiescence do not confer jurisdiction reliance is on Karnal Improvement Trust ( supra ) 172 para 22. He further submits a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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