VERY IMPORTANT POINT
Where the arbitration clause provided appointment of three arbitrators otherwise than as mentioned in Section 10(1) of Arbitration Act, 1940, therefore, the High Court was right in holding that arbitral Tribunal consists of three members. The High Court rightly interpreted arbitration clause in Article XVI contained in the agreements that it falls under Section 10(2) of Arbitration Act, that the third Arbitrator being Chairman and not umpire as the decision of Majority was made binding.

Headnote:(i) Arbitration Act, 1940-Sections 10(1) and 10(2)-Provisions as to appointment of three or more arbitrators-Scope and difference.
       Held : We find that the field of operation of both sub-section (1) and (2) of Section 10 are separate and exclusive. Sub-section (1) is applicable in a case : (a) where an arbitration agreement provides that a reference is to the three arbitrators; (b) one to be appointed by each party and the third by the two appointed arbitrators. If the case falls in this field, it further engraves a deeming clause that such appointment third arbitrator to be an umpire. While the field of sub-section (2) is in a case, (a) where an arbitration agreement provides for a reference to three arbitrators to be appointed otherwise than as mentioned in sub-section (1), then the award of the majority shall prevail unless the arbitration agreement otherwise provide. Both these two sub-sections speak about reference to three arbitrators. In order to find, whether case falls under sub-section (1) 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). (Paras 13 and 14)
       (ii) Arbitration Act, 1940-Sections 10(1) and 10(2)-Arbitration clause or agreement-Cannons of interpretation Article XVI, in agreement providing arbitration clause-Reference to three arbitrators, one to be nominated by each party, two nominated arbitrators to appoint Chairman and decision of majority will be binding-Whether third arbitrator is umpire? (No)-Whether case falls under Section 10(1) or 10(2)? (the later)-Case law discussed (Cross Ref: English Arbitration Act, 1950-Sections 9 and 8).
       Held : 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 should be accepted. (Para 4)
       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 three arbitrators by majority, by such words such as that the arbitrator is to be the chairman of such Tribunal, then the appointment of such third members is to be construed to be an appointment otherwise than as mentioned under sub-section (1). We find in the present case the clause 3 of the Article XVI of the agreement provides that the arbitral tribunal shall consist of three arbitrators. Each party to appoint one of the three arbitrators and two arbitrators so appointed shall appoint the third who shall act as Chairman. (Para 23)
       When parties referred to third arbitrator to act as Chairman the intention are very clear the chairman means who chairs a Tribunal or who heads the Tribunal and not as an umpire. The function of umpire only comes into play when there is difference between two arbitrators. When there is no difference umpire does not play any role. On the other hand, 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 intends 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 vote. This word `majority is to be found in sub-section (2) and not in sub-section (1). Thus after considering the submission on behalf of both the parties, we have no hesitation to come to the conclusion that the appointment of the third arbitrator in the present case is an appointment, otherwise than as mentioned in sub-section (1). Thus the present case would falls under sub-section (2) of Section 10. (Para 24)
       (iii) Arbitration Act, 1940-Sections 10(1) and 10(2) and Section 20-Arbitration through Court-Question of interpretation of Section 10 and Article XVI, the arbitration clause-High Court holding that case falls under Section 10(2)-Whether estoppel or acquiesence in the course of proceedings supersede and case falls under Section 10(1) (does not arise and not considered)-Appeal dismissed as High Court was right in holding case falls under Section 10(2) and third arbitrator is not umpire.
       Held : Having considered this submissions on this point, we feel, it is not necessary for us to adjudicate it as we have already concluded by interpreting the arbitration clause that the parties intended that their dispute be referred to the arbitral tribunal consisting of three arbitrators. We have also held that the conduct of the parties also indicates to the same effect which is also indicated by their conduct when they proceeded to appear before the three-member tribunal for a long period without raising any objection. (Para 26)
       In view of the aforesaid finding, the ancillary question raised through letter dated 28th December, 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 get 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 arbitrator 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. (Para 27)
       Held finally : For the aforesaid reasons, we have no hesitation to uphold the impugned judgment and 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. The High Court further rightly held while interpreting arbitration clause XVI contained in the aforesaid two agreements that it falls under sub-section (2) of Section 10. For the aforesaid reasons we dismiss the present appeal with costs on the parties. (Para 28)

JUDGMENT

Misra, J.-Leave granted.

2. Heard 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 quick justice by taking recourse through the arbitration proceedings. The laudable objectives and great expectations in spite of best efforts have never reached the desired results. To reach it, time and again comprehensive review of the Arbitration Act through amendments and re-enactment has been made. Every words of any statutes having stretchable meaning gives fertility 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 should be accepted.

5. The present case is one of such illustration, where the suit is filed in the year 1994 under Section 20 of the Arbitration Act, 1940, for the appointment of arbitrators, yet till this date, the challenge to the constitution of the Arbitral Tribunal has yet to be resolved. Placed in such situations, the courts have to rise, to give such interpretation, which fulfills its objectives, cut shorts the procedure and lend supports to the true intention of the parties as infused in the arbitration clause of their agreement.

6. The question raised is of the interpretation of Section 10 of the Arbitration Act, 1940 (hereinafter referred to as the aforesaid Act ) and the interpretation of Article XVI, the arbitration clause of the agreement between the parties. The present appeal is directed against the judgment and order dated 8th November, 2000 passed in O.M.P. No. 133 of 1999 by the 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 interpreting the aforesiad arbitration clause held it to fall under sub-section (2) of Section 10 of the aforesaid Act. 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 w.e.f. 20th December, 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 proceeding, late Justice G.C. Jain was appointed as the nominee arbitrator of t

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2001 Supreme(SC) 921

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