Arbitration clause construction: third appointee treated as Chairman, not umpire, where majority decision-making was expressly provided.

An arbitration clause providing for three arbitrators, with one nominated by each party and the third designated as Chairman, was construed as falling under section 10(2) of the Arbitration Act, 1940. The Court distinguished section 10(1), which treats a third appointee as an umpire where the agreement merely contemplates three arbitrators in the prescribed manner. Here, the clause contemplated a three-member tribunal acting as a body with majority decision-making, so the third appointee was a Chairman and not an umpire. The tribunal was therefore validly constituted on that construction.

---

---

Issues: Whether the arbitration clause providing for three arbitrators, with one to be appointed by each party and the third to act as Chairman, fell under section 10(1) or section 10(2) of the Arbitration Act, 1940, and whether the third appointee was an umpire or a chairman empowered to participate in the reference.

Analysis: Section 10(1) applies where the agreement merely provides for a reference to three arbitrators, one to be appointed by each party and the third by the two appointed arbitrators, in which event the third appointee is deemed to be an umpire. Section 10(2) governs an agreement for three arbitrators appointed otherwise than in that manner, and in such a case the award of the majority prevails unless the agreement provides otherwise. The arbitration clause here expressly stated that the tribunal shall consist of three arbitrators, that the third appointed by the two party-nominated arbitrators shall act as Chairman, and that the tribunal's decision shall be by majority vote. Those terms disclosed a clear intention that the tribunal function as a three-member body with a Chairman and majority decision-making, not as a reference where the third appointee was only an umpire. The parties' conduct before the tribunal also supported that construction, though the conclusion rested on the clause itself.

Conclusion: The arbitration clause fell under section 10(2) of the Arbitration Act, 1940, and the third appointed member was a Chairman, not an umpire. The tribunal was validly constituted as a three-member arbitral tribunal, and the challenge to its composition failed.

Ratio Decidendi: Where an arbitration agreement expressly provides for three arbitrators, names the third appointee as Chairman, and contemplates decision by majority, the clause is one for appointment of arbitrators otherwise than as contemplated by section 10(1), so the third appointee is not deemed to be an umpire.

---