JUDGMENT

J.S. Verma, J.-The point involved for decision is, the effect of The Arbitration and Conciliation Act, 1996 (for short "New Act") in the present case on the arbitration agreement made prior to the commencement of the New Act. Clause VII of the agreement dated December 14, 1993 between the parties is, as under :

"VII. In the event of any question or dispute arising under or out of or relating to the construction, meaning and operation or effect of this agreement or breach thereof, the matter in dispute shall be referred to arbitrator. Both the parties shall nominate one Arbitrator each and the arbitrators shall appoint an umpire before proceeding with the reference. The decision of arbitrators or in the event of their not agreeing the decision of the umpire will be final and binding on the parties. The provisions of the Indian Arbitration Act and Rules made thereunder shall apply for proceedings. The arbitrators or the umpire, as the case may, shall be entitled with the consent of the parties to enlarge the time, from time to time, for making the award. The arbitrators/umpire shall give a reasoned award. The venue of the arbitration shall be Bombay."

(Emphasis supplied)

2. Sterlite Industries (India) Ltd.,-respondent, claimed that it had not received certain dues under the contract from the appellant-M.M.T.C. Ltd. and, therefore, it invoked the above arbitration clause in the agreement between them by a letter dated January 19, 1996 which was received by the M.M.T.C. Ltd. on January 31, 1996. On February 7, 1996 the respondent appointed Shri M.N. Chandurkar, a former Chief Justice of Madras High Court as its arbitrator. The M.M.T.C. Ltd. claimed that arbitration could not be resorted to and, therefore, it did not name its arbitrator. The Sterlite Industries (India) Ltd. filed an application in the Bombay High Court for appointing an arbitrator in accordance with the New Act.

3. Before the High Court, learned counsel for the MMTC Ltd. contended that the arbitration clause was not attracted but this objection was rejected. The other contention on behalf of the MMTC Ltd. was that the arbitration agreement provided for the appointment of two arbitrators while Section 10(1) of the New Act does not envisage the appointment of an even number of arbitrators. The High Court by its order dated 28.6.1996 rejected the contention and gave time to the MMTC Ltd. till July 5, 1996 to appoint an arbitrator. It further held that in the event of the MMTC Ltd. failing to name its arbitrator, the arbitrator appointed by Sterlite Industries (India) Ltd. would be the sole arbitrator under Section 10(2) read with Section 11(5) of the New Act. Time for appointment of the arbitrator was later extended. The MMTC Ltd. has in the meantime appointed Shri S.N. Sapra, a former Judge of the Delhi High Court as its arbitrator. Hence this appeal by special leave.

4. The contention of the learned Attorney General on behalf of the appellant is that an arbitration agreement providing for the appointment of an even number of arbitrators is not a valid agreement because of Section 10(1) of the New Act; and, therefore, the only remedy in such a case is by a suit and not by arbitration. For this reason, he urged, that sub-section (2) of Section 10 is not attracted since there is no failure to determine the number of arbitrators according to sub-section (1). Another argument of the learned Attorney General was that Section 10 is a departure from para 2 of the First Schedule of the Arbitration Act, 1940 (for short 1940 Act), which reads as under :

"2. If the reference is to an even number of arbitrators the arbitrators shall appoint an umpire not later than one month from the latest date of their respective appointments."

5. In reply Shri Dave, learned counsel for the respondent contended that there is no such inconsistency between Section 10 of the New Act and the corresponding provision in the 1940 Act, both being substantia