JUDGMENT
S.D. Pandit, J.
(1) On 3.9.1976 the President of India and respondent entered into an agreement whereby the respondent undertook to manufacture and supply to the petitioner six mobile troposcatter communication equipment on the terms and conditions mentioned in the agreement and the schedules thereto.
(2) A supplementary agreement was also entered into between the parties on 20.1.1981. The original agreement provided for the arbitration clause. As the differences and disputes arose between the parties and in view of the arbitration clause contained in the agreement between the parties and the provisions of Section 9B of the Arbitration Act, 1940 the said differences and disputes were initially referred to as Sole Arbitrator on 23.2.1987. But the said Sole Arbitrator resigned.
(3) Thereafter on finding that the disputes and differences were to be adjudicated de novo, petitioner Union of India appointed Mr. P.G. Gokhale as its Arbitrator and respondents appointed Mr. David R. Solar as their Arbitrator. After the said appointments both the Arbitrators met and they had discussion and in the meeting on 1.1.1991 both the Arbitrators differed as regards the appointment of the third Arbitrator as per clause of arbitration in the said contract.
(4) Mr. P.G. Gokhale was of the view that the third Arbitrator was to be appointed and was to take part in the arbitration proceeding only in case the two Arbitrators happened to differ and to refer the differences to him whereas Mr. Solar was of the view that the third Arbitrator was to be appointed before the actual arbitration proceedings were started and all the three Arbitrators were to work together. Thus, according to Mr. P.G. Gokhale the arbitration proceedings in question were governed by the provisions of Section 10(1) of the Arbitration Act, 1940 whereas according to Mr. Solar the arbitration was governed by the provisions of Sub-section (2) of Section 10 of the Arbitration Act. In view of these differences between the two Arbitrators the present petition is filed by the Union of India to interpret and determine the clause of the contract between the parties and to issue necessary direction.
(5) In order to decide the controversy it is necessary to quote here the arbitration clause in the contract between the parties, which reads as under: “Any dispute, controversy or difference which may arise between the parties out of or in relation to or in connection with the agreement or for the breach thereof, shall be finally settled by arbitration of three persons to be held in New Delhi in accordance with the Arbitration Act, 1940. Each party shall appoint one Arbitrator and the third Arbitrator who will neither be a national of India or of Usa shall be appointed by the two Arbitrators before proceeding with arbitration. If the two Arbitrators appointed by the parties fail to agree on the third Arbitrator, such third Arbitrator shall be appointed by the International Chamber of Commerce, Paris. The Award of the Majority shall be final and binding on the parties. Pending determination of such arbitration, the parties shall proceed diligently with the performance of this agreement. The award rendered may be entered in any Court having competent jurisdiction.” It is the contention of the learned Counsel for the respondent that the above term of contract between the parties falls within the four-corners of Sub-section (2) of Section 10 whereas according to learned Counsel for the Union of India the said clause is governed by Sub-section (I’) of Section 10. Therefore, it is necessary to consider the provisions of Sub-sections (1) and (2) of Section 10 of the Arbitration Act, which read as under : 10. Provisions as to appointment of three or more Arbitrators:-(1) Where an arbitration agreement provides that a reference shall be to three Arbitrators, one to be appointed by each party and the third by the two appointed Arbitrators, the agreement shall have effect as if it provided for the appoint- ment of an umpire, and not for the appointment of a third Arbitrator, by the two Arbitrators appointed by the parties. (2) Where an arbitration agreement provides that a reference shall be to three Arbitrators to be appointed otherwise than as mentioned in Sub-section (1), the award of the majority shall, unless the arbitration agreement otherwise provides, prevail. If the provisions of Sub-section (1) and Sub-section (2) of Section 10 are read then it would be quite clear that the arbitration clause in the agreement between the parties, which is quoted above, is falling within the purview of Sub-section (1) of Section 10. What was intended by the parties is that in case there happens to be any difference between the two Arbitrators appointed by the two parties to the contract then there should be a third Arbitrator/Umpire who is to give the final decision regarding the controversy between the two Arbitrators regarding the issues to be decided by them.
(6) The First Schedule to the Arbitration Act, 1940 makes provision for the implied conditions of arbitration agreement and it lays down in Clause (2) as under: “If the reference is to even number of Arbitrators, the Arbitrators shall appoint an Umpire not later than one month from the latest date of their respective appointments.” If this provision of Clause (2) of the First Schedule to the Arbitration Act is considered then it would be quite clear that it is the duty of both the Arbitrators appointed by the petitioner and the respondent to appoint an Umpire within one month of their appointment. The agreement between the parties also makes provision that if there happens to be any difference between the two regarding the selection of the Umpire then how the umpire is to be selected. Thus, the third Umpire is to act as an Umpire.
(7) The word “Umpire” has a special meaning in law relating to arbitration. An Umpire may be appointed by the selected Arbitrators or may be appointed by the contending party. In the agreement before me the Umpire is appointed by the selected Arbitrators. The Umpire only acts when there is difference between the Arbitrators themselves. He may sit with the Arbitrators and watch the proceedings, hear the evidence and look into the papers but he is not supposed to confer with the Arbitrators so as to mould their decision. He is only to act when the differences between the two Arbitrators arise.
(8) No doubt the clause quoted above provides that “the Award of the majority shall be final and binding on the parties”, but merely because that clause is there in the terms of agreement between the parties it could not be said that the parties have agreed to have arbitration by three persons or three Arbitrators. This clause is contrary to the provisions of Sub-section (1) of Section 10 of the Arbitration Act, 1940. As the said clause is contrary to the mandatory provisions of Sub-section (1) of Section 10 it will have to be ignored as being contrary to that provision.
(9) Learned Counsel for the defendant has contended that as there is no agreement between the Arbitrators the arbitration clause has become unworkable and, consequently, it should be held that there is no arbitration clause in the contract between the parties. But in view of the discussion above, it would be quite clear that her claim that the arbitration clause is unworkable is not at all correct and proper. No doubt the two Arbitrators had different interpretation of the clause but ultimately the interpretation of the clause is to be made and decided in the light of legal provision. It could not be said that the arbitration clause is not at all workable? or the said clause could not be implemented. In the circumstances, it could not be said that there is no arbitration clause between the parties.
(10) Counsel for the respondents further urged before me that the present petition is not tenable in law but if the provisions of Section 33 of the Arbitration Act, 1940 are read then it would be quite clear that any party to an arbitration agreement can come before the Court to have the effect of the agreement between the parties determined by the Court. Thus, the present petition falls within the purview of Section 33 of the Arbitration Act, 1940.
(11) Thus, I hold that the present petition will have to be allowed and a direction is to be given to the Arbitrators appointed by each of the party to these proceedings to appoint an Umpire and the said Umpire can act and participate in the proceed- ings. He can sit along with the Arbitrators and watch the proceedings, hear the evidence and look into the papers but he is not supposed to confer with the Arbitrators so as to mould their decision. When there is difference between the Arbitrators then he is only to act by way of giving his decision as regards their differences.
(12) The original Arbitrator appointed by the petitioner Mr. P.G. Gokhale is no more available as per the statement by learned Counsel for the Union of India. The Union of India has, therefore, named Shri B.S. Shekon, former Law Secretary and Member of Administrative Tribunal as its Arbitrator in place of Shri P.G. Gokhale. Learned Counsel for the respondent has stated that their Arbitrator Mr. David R. Solar is still willing to work as Arbitrator and they are continuing with the same Arbitrator.
(13) I, therefore, direct both Mr. B.S. Shekon, Arbitrator of the petitioner and Mr. David R. Solar, Arbitrator of the respondent, to have their first meeting on 15.12.1995 and to select an Umpire and then to proceed further with the arbitration proceedings. Petitioner and respondent should inform their respective Arbitrators accordingly.
(14) Petition stands disposed of with no order as to cost.