M-S. ETHIOPIAN AIRLINES v. M-S. STIC TRAVELS (P) LTD

Citation: [2001] 3 S.C.R. 882

Court: Supreme Court of India

Bench: AJAY PRAKASH MISRA, DORAISWAMY RAJU

Judgment text

MIS. ETHIOPIAN AIRLINES v. MIS. STIC TRA VEyS (P) LTD. JULYII,2001 [A. P. MISRA AND DORAISWAMY RAJU, JJ. ] Arbitration Act, 1940-S. I0(1) and (2) Arbitration-Arbitral Tribunal-Third Arbitrator-Status of-Whether Chairman or only an umpire-Arbitration agreement stipulating appointment of one Arbitrator each by parties-Nominee Arbitrators lo apf)Oint the third Arbitrator to dct as Chairman-Intention of parties clear that the dispute to be resolved by thi;ee Arbitrators-High Court holding that the appointment of third Arbitratjor would fall under sub-section (2) who would continue to act as Chairman-Held, justified. Arbitration-Ar6iitral Tribunal consisting ofone nominee Arbitrator of each party-Nominee Arbitrators to appoint third Arbitrator as Chairman- Death of one of the nomi1~ee Arbitrator-Appointment of fresh nominee l Arbitrator-Held, would not give fres~ right to parties to appoint a fresh Chairman.

Interpretation of statutes Arbitration statute-Interpretation of-Held, if there are two possible interpretations, 1the one which leans to satisfj, the desired agreement between the parties should be accepted. -. - 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 plac~ during the tenure of Mr. O. P. Yaish. 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 28th December, 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. The dispute further has arisen 111 this case.

aforesaid, on account of different interpretation given by Mr. Justice H. L. Anand and Mr. Justice A-1adh Behari Rohatgi regarding the status of Justice Rohatgi. In case Section I0( I) is applicable he could only be an umpire, therefore, cannot participate in the arbitration proceedings and if Section I0(2) applies he can continue as a Chairman of the Arbitral Tribunal and participate i~ the same. The view of Justice H. L. Anand is contained in a letter dated 12th March, 1999 to Justice Rohatgi that the matter could only be heard by the nominee arbitrators and not by the three member Tribunal as it happened in the past. Another ancillary issue which arises as a result of the aforesaid view of Mr. Justice H. L. Anand is, whe. ther Justice Anand and Mr. C. S. Aggarwal would have to go through the exercise of appointing a third arbitrator/Umpire. The appellant in fact filed an application (I. A. No.

5676 of 1999) for clarification, however, the same could not be listed for hearing as the court file could not be traced. The respondent in the meanwhile filed the aforesaid O. M. P. No. 133 of 1999 taking 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 ofthe 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. On 16th September, 1995 the Arbitral Tribunal consisting ofthe aforesaid three persons passed an order that both the counsels should seek instructions from their respective clients and state on the next f fresh Tribunal from Ist June, 1996.

It is not in doubt that since the constitution of the threemember tribunal in the year 1995 till about April, 1998 including the proceeding on 17th January, 1998, when the appellant cross-examined the deponent who sworn the affidavit dated 23rd June, 1997 for the respondent, the proceedings continued before the three-member tribunal. Every date all the three members sat. This is without entering into the dispute, whether any effective date, except the aforesaid 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. One of the submissions for respondent is that the appellant acquiesced 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 Tribunal was not valid. Reliance is placed in Neelakantdan & Bros. Cohst; v. Suptd.

Engineers, [1998] 4 SCC 462; Mis. Construction India v. Secreta1y, Works Dept. , [1998] 2 SCC 89; M. K. Shah Engineers & Contractors v. State of M. P. , [1999] 2 sec 594 and f>raszm Roy V. Calcutta" MDA, [1987] 4 SCC 217. The first three cases are where objection is raised after making o( 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 acquiesc'ence do not confer jurisdiction reliance is on Karna! Improvement Trust v. Parkashwanti, [1995] 5 SCC 159 at 172 para T2. He further submits acquiescene cannot bring in a change of legal status relying on Sha Mulchand Co. v. Jawahar Mills ltd. , [l953] SCR 351.

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 p~riod without raising any objection. ··in-view-of the aforesaid finding,_the ancillary question raised through letter dated 25th 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. Ifthe Tribunal consisted of three member, as we have interpreted it so. as to fall under sub-section (2) ofSection 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 partie~, to appoint a fresh chairman. Appointed chairman · by the said two arbitrators does not fall because of the substitution of 01ie 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 (I), did require consideration. However, in view of the ETHIOPl/\N AIRLINES v. STIC TRAYlcLS (P) LTD. jMISRA• . 1. J 899 findings recorded by us this controversy stands settled. A For the aforesaid reasons, we have no hesitation to uphold the impugned judgment and order of the High Cou11 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 B clause XVI contained in the aforesaid two agreements that it falls under subsection (2) of Section I0. For the aforesaid reasons we dismiss the present appeal with costs on the parties. S. VK Appeal dismissed. C