Narayan Prasad Lohia v. Nikunj Kumar Lohia (2002)

Section 10(1) says the parties may fix the number of arbitrators provided it is not an even number. Read as a mandatory rule, that sentence would destroy every award made by a tribunal of two — including awards made after both parties argued their case for months without a murmur. Narayan Prasad Lohia holds that s. 10 is derogable, and in doing so it gives the course its clearest illustration of waiver under s. 4: an objection not taken in time is gone.

The same judgment explains the internal structure of the composition-and-procedure ground in s. 34, which is the ground candidates most often state wrongly.

The parties referred their disputes to a tribunal of two arbitrators, an even number. Both took part in the proceedings without objecting to the composition. Only after the award did the losing side challenge it on the ground that the tribunal was evenly numbered and therefore not constituted in accordance with s. 10.

The award stood. An agreement for two arbitrators is not invalid; the two should appoint a third as presiding arbitrator. Parties who proceeded without objection waived the objection, and could not raise it for the first time in a challenge to the award.

On s. 34(2)(a)(v) the Court explained the structure of the composition-and-procedure ground:

• if the composition or procedure followed the parties' agreement, the award cannot be challenged on this ground even if it departed from Part I — unless a non-derogable provision was broken;
• if it followed the Act but departed from the agreement, again no challenge lies on this ground;
• only where there was no agreement and the Act was not followed does the ground arise.

1. Ask first whether the provision is derogable. Part I is built on party autonomy; almost every section begins with words permitting contrary agreement. Section 10 is one of the provisions the parties may derogate from, so an even-numbered tribunal is not a nullity.
2. Read s. 4 as the sanction for delay. A party who knows that a derogable provision of Part I, or a requirement of the arbitration agreement, has not been complied with and proceeds without objecting without undue delay is deemed to have waived the objection. Participation in an even-numbered tribunal is precisely that.
3. Keep the objection where the Act puts it. Section 16(2) requires a plea of no jurisdiction not later than the statement of defence. The scheme is that objections to the tribunal are taken at the tribunal, early; s. 34 is not a second chance to take a point that was available and unused.
4. Cure rather than destroy. Where there are two arbitrators, the answer is for them to appoint a third as presiding arbitrator — the Act's own mechanism for producing a decision — not to void the reference.

It opens any problem in which a defect in the tribunal's composition or in the procedure is raised late, and it is the authority to cite for s. 4 waiver generally. It also carries the non-derogable floor: equality of treatment and full opportunity to present the case under s. 18, and the grounds in s. 34 itself, are the provisions below which agreement cannot go — so a waiver argument fails where one of those has been broken.

It disposes of the argument that an even-numbered tribunal is void, and the argument that any departure from Part I is automatically a s. 34(2)(a)(v) ground.

It does not decide anything about the merits of an award, and it does not help a party who did object in time: where the arbitrator enlarged the reference despite objection, continued participation is not acquiescence (Union of India v. G.S. Atwal). Contrast also Krishna Bhagya Jala Nigam, where a party that consented to arbitration and took part could not later deny that there was an arbitration clause — the same waiver principle applied to the existence of the agreement rather than to the composition of the tribunal.