The case revolved around the composition of an arbitral tribunal. The Appellant argued that Section 10 of the Arbitration and Conciliation Act, 1996, was a mandatory provision that could not be ignored. According to sub-section (1) of Section 10, parties could decide the number of arbitrators, but the total number could not be even. Sub-section (2) further stated that if the parties did not specify the number of arbitrators, the tribunal would automatically consist of a sole arbitrator.

The Appellant pointed out that while parties had the freedom to decide the number of arbitrators, they could not choose an even number. It was also contended that any agreement allowing an even number of arbitrators would be against the mandatory provisions of the Act and, therefore, legally invalid.

Issues before the Court

• Is Section 10 of the Arbitration Act a provision that cannot be ignored or set aside under any circumstances?
• Can parties voluntarily agree to waive a mandatory requirement of the Arbitration Act?

Appellant's Arguments:

5. The appellant argued that the arbitration agreement was invalid because the Arbitral Tribunal was not properly formed.
5. Since the tribunal itself was not validly constituted, any proceedings or awards made by it would also be invalid and unenforceable.
5. The appellant contended that a legally flawed tribunal could not pass a binding decision.
   
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Respondent's Arguments:

5. The respondents countered by citing Sections 4, 10, and 16 of the Arbitration Act, stating that these provisions should be interpreted harmoniously to avoid conflicts.
5. They emphasized that Section 10 begins with the phrase, "The parties are free to determine the number of arbitrators," meaning arbitration is based on mutual agreement.

The respondents argued that:

a) The parties could mutually agree on an even number of arbitrators.

b) Even after agreeing to an even number, a party still had the right to object to the tribunal’s composition.

c) Such an objection could be raised even if the party had participated in appointing the arbitrator, as per Section 16(2).

d) Section 16 was broad enough to allow objections regarding the composition of the tribunal.

5. It was further submitted that an award could only be challenged on the grounds of tribunal composition if an objection had first been raised before the tribunal under Section 16 and had been rejected. Therefore, the challenge needed to be made at the earliest opportunity.
5. Additionally, the respondents pointed out that Section 34(2)(a)(v) does not allow an award to be set aside on the ground of tribunal composition if it was formed as per the parties' agreement.
5. In the present case, the tribunal’s composition was claimed to be in line with the agreement between the parties.

Analysis of the Court

The Supreme Court analyzed Sections 10 and 16 of the Arbitration Act and concluded that an objection to the composition of the Arbitral Tribunal is not mandatory (derogable). This means that if a party does not raise an objection within the time limit mentioned in Section 16(2), they lose the right to challenge it later. The Court clarified that Section 10 should be read along with Section 16, making it clear that the provision is not absolute.

The Court further stated that even if a party was involved in appointing the arbitrator or participated in the process, they could still challenge the tribunal's composition later. However, it rejected the appellant’s argument that Section 10 should be treated as a matter of public policy and made non-derogable. The Court reasoned that arbitration is based on an agreement between the parties, and it is not possible for the Legislature to regulate every aspect of it in detail.

Concluding Remark

In simple terms, the current legal position is that parties can appoint an even number of arbitrators, even though this seems to go against the intent of the law. However, if any party has an objection to this, they must raise it at the earliest opportunity before the Arbitral Tribunal itself. After the Supreme Court’s ruling, the law has essentially been reaffirmed to align with the literal wording of the statute, despite the proviso in the section suggesting otherwise.