2000 (11) TMI 1116 - HC - Companies Law

Issues Involved:
1. Interpretation of Section 10 of the Arbitration Act, 1940.
2. Validity of the appointment and role of Justice Avadh Behari Rohtagi in the Arbitral Tribunal.
3. Application of principles of waiver, acquiescence, and estoppel in arbitral proceedings.
4. Competence of arbitrators to de novo select an umpire.

Detailed Analysis:

1. Interpretation of Section 10 of the Arbitration Act, 1940:
The primary issue revolves around the interpretation of Section 10 of the Arbitration Act, 1940. Section 10(1) states that if an arbitration agreement provides for three arbitrators, one appointed by each party and the third by the two appointed arbitrators, the third arbitrator should act as an umpire, not as a third arbitrator. Section 10(2) provides that if the agreement specifies three arbitrators to be appointed otherwise, the majority decision prevails. The court concluded that the arbitration clause in question was a hybrid, initially suggesting a sole arbitrator if agreed upon, and if not, a tribunal of three arbitrators, indicating that Section 10(2) was intended by the parties. This interpretation validated the proceedings of the Arbitral Tribunal with Justice Avadh Behari Rohtagi as Chairman.

2. Validity of the Appointment and Role of Justice Avadh Behari Rohtagi:
The controversy arose when Justice H.L. Anand, succeeding Justice G.C. Jain, questioned the appointment of Justice Avadh Behari Rohtagi as the third arbitrator instead of an umpire. The court found that both parties had agreed on 1-6-1996 to refer all disputes to an Arbitral Tribunal consisting of Justice Avadh Behari Rohtagi (Chairman), Justice G.C. Jain, and Shri C.S. Aggarwal. This agreement, even if contrary to Section 10(1), was deemed valid as it represented a fresh agreement between the parties.

3. Application of Principles of Waiver, Acquiescence, and Estoppel:
The court discussed several precedents where principles of waiver and acquiescence validated arbitral proceedings despite procedural irregularities. The court cited cases like Khardah Co. Ltd. v. Raymon & Co. (India) (P.) Ltd., AIR 1962 SC 1810, and Union of India v. B.M. Sen, AIR 1963 Calcutta 456, emphasizing that participation in arbitration without objection implies acceptance of the arbitrator's jurisdiction. The court concluded that Ethiopian Airlines, having participated in the proceedings with Justice Avadh Behari Rohtagi as Chairman, could not later object to his role.

4. Competence of Arbitrators to De Novo Select an Umpire:
Ethiopian Airlines raised queries about the competence of the arbitrators to select a new umpire. The court clarified that Justice Avadh Behari Rohtagi shall continue as Chairman, and the decision of the majority shall prevail as per Article XVI(4) of the Agreement and Section 10(2). The two arbitrators, Justice H.L. Anand and Mr. C.S. Agarwal, were not justified or competent to select a new umpire de novo.

Conclusion:
The court directed the parties to appear before the Arbitral Tribunal comprising Justice Avadh Behari Rohtagi, Chairman, Justice H.L. Anand, and Mr. C.S. Agarwal. The tribunal was instructed to make and publish its award within four months from the recommencement of hearings, or within an extended period by mutual consent. The court allowed OMP 133 of 1999 and dismissed Suit No. 1893/1995 and all interim applications, with parties bearing their respective costs.

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