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TMI Blog2001 (7) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... to the Bar to interpret it such, as to suit the exigency of his client by finding loopholes in a statute in spite of the best attempt by the Legislature to conclude the disputes at the earliest, by raising various objections thus frustrating its very objectives. It is here courts have to play an important role of taking recourse to such interpretation which subserve the objective and defeat any attempt to flout it. 4. Arbitration proceedings sprouts out of an agreement, understanding or consent of the contesting parties. It also lays down as to who shall arbiter over their dispute. It is their desire, explicitly or implicitly expressed in the agreement, which the courts have to guard and interpret so. The statute steps in, in aid of this agreement not in derogation of it. It is only when agreement is silent, against the public policy, or any person does not perform its obligation under such agreement, the statute steps in to fill up such gaps and issues directions where necessary, for doing an act which is also in aid of such agreement. Thus, while interpreting any arbitrator statute, if there be two possible interpretation, the one which leans to satisfy the desired agreement sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6-9-1995. 8. After the unfortunate demise of Justice G.C. Jain, the appellant nominated Mr. O.P. Vaish, the senior Advocate as its nominee arbitrator on 18-5-1998 but who later resigned and shortly thereafter Mr. Justice H.L. Anand (Retd.) was appointed as the nominee arbitrator by the appellant. The case of the appellant is that no formal proceedings took place during the tenure of Mr. O.P. Vaish. After stepping in of Justice H.L. Anand, he suggested to Mr. C.S. Aggarwal that further steps in the proceedings should be taken only after considering the request contained in the letter dated 28-12-1998 written by the counsel for the appellant which desired the two arbitrators to nominate afresh a Chairman. This according to the respondent triggered a fresh dispute thus thwarting the smooth flow of the arbitration proceedings before the said three arbitrators. 9. The dispute further has arisen in this case, as aforesaid, on account of different interpretation given by Mr. Justice H.L. Anand and Mr. Justice Avadh Behari Rohatgi regarding the status of Justice Rohatgi. In case section 10(1) is applicable he could only be an umpire, therefore, cannot participate in the arbitration proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it to remain stayed until the question of law raised is determined by the Court. On 13-3-1999 Justice Rohatgi rejected the said request of Justice Anand as he was of the opinion that there was no conflict between section 10(1) and section 10(2). He opined, in view of his appointment as Chairman there is no question of third arbitrator being an Umpire. This dispute as aforesaid, was decided by the Delhi High Court by holding section 10(2) to be applicable and not section 10(1) in view of the language of the aforesaid arbitration clause. 11. Mr. F.S. Nariman, the learned senior counsel for the appellant submits with vehemence, with reference to the arbitration clause that section 10(1) would be applicable in view of the deemed clause incorporated in it and the High Court erred in placing it under section 10(2). The submission is that language of section 10(1) is very clear which stipulates, when a reference is to three arbitrators, one to be appointed by each party and the third by the two appointed arbitrators, then such appointed third arbitrator would be deemed to be an umpire and not a third arbitrator. In the present case, admittedly both the appellant and the respondent nomi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tation or application of this Agreement, or concerning any rights or obligations based on or relating to the Agreement, such disputes shall be referred to and finally settled by an arbitral Tribunal. 2. If the parties agree to the appointment of a single arbitrator the arbitral Tribunal shall consist of him alone. 3. If they do not so agree the Arbitral Tribunal shall consist of three arbitrators. Each party shall within a reasonable time appoint one of the three arbitrators, and the two arbitrators so appointed shall appoint the third, who shall act as Chairman. Both parties shall do all in their powers to expedite the arbitral process. 4. When the Arbitral Tribunal consists of more than one arbitrator its decision shall be given by a majority vote. 5. The Arbitral Tribunal shall settle its own procedure and it necessary shall decide the law to be applied. The award shall include directions concerning allocation of costs and expenses of and or incidental to arbitration, including arbitrators' fees. 6. The award shall be final and conclusively binding upon the parties." We find that the field of operation of both sub-sections (1) and (2) of section 10 are separate and exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trator appointed in the manner indicated in section 10(1) to act as other than an umpire. He will have powers and functions as that of an umpire. In that view of the matter, if the arbitration clause provides for the appointment of a third arbitrator by the two arbitrators appointed by the parties, he, in law, is incompetent to sit along with the two others as a member of the board or arbitrators and decide the disputes by a majority. He is the umpire, in law, and comes in the picture only when the two arbitrators do not agree. The provision in the contract that the majority will decide and that their decision is to be final is contrary to the provisions of section 10(1) which is a mandatory provision and not merely directory....." (p. 468) 15. In that case, the Court was mainly called upon to decide, whether the award by single arbitrator, in view of the aforesaid arbitration clause was valid or not. Under the said arbitration clause, one party appointed an arbitrator while the other party could not appoint within the stipulated period and thus question of appointment of third arbitrator never arose. The Court held award by the single arbitrator would be valid. For this the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be to two arbitrators, one to be appointed by each party, then, unless a contrary intention is expressed therein- (a)if either of the appointed arbitrators refuses to act, or is incapable of acting, or dies, the party who appointed him may appoint a new arbitrator in his place; (b)if, on such a reference, one party fails to appoint an arbitrator, either originally, or by way of substitution as aforesaid, for seven clear days after the other party, having appointed his arbitrator, has served the party making default with notice to make the appointments, the party who has appointed an arbitrator may appoint that arbitrator to act as sole arbitrator in the reference and his award shall be binding on both parties as if he had been appointed by consent..... 9. (1) Where an arbitration agreement provides that the reference shall be to three arbitrators, one to be appointed by each party and the third to be appointed by the two appointed by the parties, 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." 17. We may first record here, this arbitrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intention exists in the agreement, as it was neither raised nor was a case there. This was also a case, where the two appointed arbitrators of the parties did not appoint the third arbitrator and further after one of the arbitrator died the party concerned did not renominate the arbitrator, hence the question was, whether the award by the sole arbitrator is valid? This case thus have no relevance nor has adjudicated the issue involved in the present case. The Calcutta High Court has merely relied on this decision to uphold the award by the sole arbitrator to be valid. 21. One of the submissions on behalf of the respondent is that not only arbitration clause clearly reveals that parties intended that the dispute be referred to the three arbitrators but the conduct of parties also reveals to the same effect. The proceedings went on before three arbitrators without objection been raised. Reliance is placed on the order dated 16-9-1995 when the aforesaid three member Tribunal directed both the parties to obtain instructions from their respective clients and to state on the next date of hearing, whether they were prepared to refer the dispute to this Tribunal (three member Tribunal). A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contrary are not clear than a third arbitrator is deemed to be an umpire. It is because of this sub-section (2) refers to the award of "the majority shall" and further the words, "unless the arbitration agreement otherwise provides" gives significant focus on intent of the contracting parties which is the foundation of arbitration proceedings. This is to satisfy the desired understanding of the agreement of the parties, who desired to refer their dispute for adjudication to the desired Arbitration Tribunal. Thus a conjoint reading of both the said two sub-sections, makes it clear, where an arbitration agreement provides simpliciter for a reference to an arbitral Tribunal consisting of three arbitrators one each appointed by parties and the third by such appointed arbitrators then the appointment of such third arbitrator is to be treated as an umpire but where parties intentions are clear, to be spelt out from the agreement that the parties intends their dispute to be decided by the three arbitrators by majority, by such words such as that the arbitrator is to be the Chairman of such the Tribunal, then the appointment of such third members is to be construed to be an appointment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a fresh agreement, the statutory consequences provided in section 10(1) would continue to flow notwithstanding the consent of the parties, as recorded on 1-6-1996. He submits it is not even the respondent case of any supersession of the arbitration clause in view of what is recorded by the arbitrators on 1-6-1996. To reinforce this he referred to the various extensions sought by the parties for making an award within time even after 1-6-1996 based on the extension of time for the Tribunal constituted in the year 1995. The submission to this extent cannot be discredited that parties accepted the continuance of originally constituted the Tribunal and no fresh Tribunal came into existence on 1-6-1996. This submission need not take us long to decide as learned counsel for the respondent very clearly accepted that he is not relying on what is recorded on 1-6-1996 to be a fresh agreement. Submission for the respondent is, what is recorded on 1-6-1996 by the respective counsels is in consonance with the stand taken by the respondent viz., both the parties understood clause XVI of the agreement to be that the reference to the Arbitral Tribunal is to be one which consists of three arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeded to appear before the three-member Tribunal for a long period without raising any objection. 26. In view of the aforesaid finding, the ancillary question raised through letter dated 28-12-1998 by the counsel for the appellant, regarding appointment of a fresh Chairman after the appointment of Mr. Justice H.L. Anand has no merit for acceptance. If the Tribunal consisted of three member, as we have interpreted it so as to fall under sub-section (2) of section 10, then even if one of the arbitrators nominated by the party is incapacitated or dies and is later substituted, would not give fresh right to such two arbitrators appointed by the parties, to appoint a fresh Chairman. Appointed Chairman by the said two arbitrators does not fall because of the substitution of one of the nominated arbitrators on account of death or incapacitation of one of the such nominated arbitrator. We may record 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. 27. For the aforesaid reasons, we have no hesita ..... X X X X Extracts X X X X X X X X Extracts X X X X
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