M.M.T.C. LIMITED versus STERLITE INDUSTRIES (INDIA) LTD.

Citation: [1996] SUPP. 8 S.C.R. 676 · Decided: 18-11-1996 · Supreme Court of India · Bench: J.S. VERMA · Disposal: Disposed off

Judgment (excerpt)

A 
M.M.T.C. LIMITED 
v. 
STERLITE INDUSTRIES (INDIA} LTD. 
NOVEMBER 18, 1996 
B 
[J.S. VERMA AND B.N. KIRPAL, JJ.] 
Arbitration and Conciliation Act, 1996: Sections 7, JO (1) and 11 
(3). 
Arbitration agreement-Provided appointment of one arbitrator by 
C each party-The two appointed arbitrators required to appoint a third 
arbitrator-Act of J 996 became applicable as dispute arose after Act came 
into force-Held: Arbitration agreement valid~It satisfied requirements of 
Ss. 7 and 10(1)-And accorded with implied condition contained in para 
2 of First Sch. to Arbitration Act, 1940-Hence, third arbitrator had to be 
D appointed to act as presiding arbitrator in accordance with S. 11 (3)-
Arbitration Act, 1940, First Sch. para. 2. 
The respondent claimed that it had not received certain dues 
under the contract from the appellant and, therefore, it invoked the 
arbitration clause in the agreement between them. Subsequently, the 
E respondent appointed its arbitrator. The appellant claimed that 
arbitration could not be resorted to and, therefore, it did not name 
its arbitrator. The respondent tiled an application in the High Court 
for appointing an arbitrator in accordance with the Arbitration and 
Conciliation Act, 1996. 
F 
The High Court allowed the application and directed the 
appellant to appoint an arbitrator. The appellant had in the meantime 
appointed its arbitrator. Hence this appeal. 
· 
On behalf of the appellant it was contended that an arbitration 
G agreement providing for the appointment of an even number of 
arbitrators was not a valid agreement because of Section JO (1) of the 
New Act; that Section 10(2) of the New Act was not attracted since 
there was no failure to determine the number of arbitrators according 
to Section 10 (1) of the New Act; and that Section 10 of the New Act 
was inconsistent with para 2 of the First Schedule of the Arbitration 
H Act, 1940. 
676 
M.M.T.C. LTD. v. STERLITE INDS. (I) LTD. 
677 
On.behalf of the respondent it was contended that each of the A 
parties having nominated its arbitrator, the third arbitrator was 
required to be appointed according to Section 11(3) of the New Act 
and the failure to do so attracted the consequences under the New 
Act; and that the provision for number of arbitrators was a machinery 
provision and did not affect the validity of the arbitration agreement 
which "'as to be determined according to Section 7 of the Ne\v Act. 
B 
Disposing of the appeal, this Court 
HELD: I. The validity of an arbitration agreement does not 
depend on the number of arbitrators specified therein. The number of 
arbitrators is dealt with separately in Section IO of the Arbitration and C 
Conciliation Act, 1996 which is a part of machinery provision for the 
working of the arbitration agreement. Therefore, an arbitration 
agreement specifying an even number of arbitrators cannot be a ground 
to render the arbitration agreement invalid under the new Act. 
Moreover, the arbitration agreement in the present case accords with 
the implied condition contained in para 2 of the First Schedule to the D 
Arbitration Act, 1940 requiring the two arbitrators, one each appointed 
by the two sides, to appoint an umpire not later than one month from 
the latest date of their respective appointments. [682 H, 683 D,EJ 
2. In view of the term in the arbitration agreement that the two 
arbitrators would appoint the umpire or the third arbitrator before E 
proceeding with the reference, the requirement of Section 10(1) of the 
New Act is satisfied and sub-section (2) thereof has no application. Since 
the agreement satisfies the requirement of Section 7 of the New Act 
and, therefore, is a valid arbitration agreement, the appointment of 
arbitrators must be governed by Section 11 of the New Act. [683-D-G) 
3. In view of the fact that each of the two parties have appointed 
their own arbitrators Section II (3) of the new Act was attracted and 
F 
the two appointed arbitrators were required to appoint a third 
arbitrator to act as the presiding arbitrator, failing which the Chief 
Justice of the High Court or any person or institution designated by G 
him would be required to appoint the third arbitrator as required by 
Section 11(4) (b) of the New Act. Since the procedure prescribed in 
Section 11 (3) has not been followed the further consequences provided 
in Section Ii must follow. [683H, 684A[ 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 12736 of H 
678 
SUPREME COURT REP

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