Facts: The Municipal Corporation of Greater Mumbai (MCGM) entered into an agreement in 1995 with M/s R.V. Anderson Associates Ltd., a Canadian firm, for consultancy services. In 2005, the respondent invoked arbitration under Clause 8.3(b), which provided that each party appoint an arbitrator, and these two must jointly appoint a third presiding arbitrator within 30 days; failing this, the third arbitrator "shall, at the request of either Party, be appointed by the Secretary General of the ICSID". The nominee arbitrators were appointed, but due to mediation attempts and subsequent resignations of two presiding arbitrators, the final presiding arbitrator, Mr. Anwarul Haque, was appointed by the co-arbitrators well beyond the 30-day period. MCGM participated in preliminary meetings without objection but later filed a Section 16 application alleging the tribunal was a nullity as the co-arbitrators lost their power to appoint after 30 days.
Procedural Posture: The Arbitral Tribunal dismissed the jurisdictional challenge, and subsequently passed a final award in 2010. MCGM challenged the award under Section 34 and then Section 37 of the Arbitration and Conciliation Act, 1996. Both the Single Judge and the Division Bench of the Bombay High Court dismissed the challenges, upholding the tribunal's jurisdiction. MCGM then appealed to the Supreme Court of India.
Issue: Whether the Arbitral Tribunal was improperly constituted and lacked jurisdiction because the presiding arbitrator was appointed by co-arbitrators after the 30-day period stipulated in the contract, rather than by the Secretary General of the ICSID?
Holding: No, the tribunal was properly constituted. The court held that Clause 8.3(b) is an enabling provision and the co-arbitrators did not lose their power to appoint the presiding arbitrator.
Reasoning: The Court reasoned that the 30-day period did not extinguish the co-arbitrators' power but merely triggered a "fail-safe" contingency where parties could approach the ICSID. Since neither party made such a request, the ICSID had no power to act "sua sponte". The interpretation provided by the tribunal was plausible and did not result in patent illegality. Furthermore, while statutory waiver under Section 4 was not strictly attracted because the objection was filed before the statement of defence as per Section 16(2), the appellant's prior conduct—acquiescing to three successive appointments by co-arbitrators without demur—served as a vital tool to understand their original contractual intent. A party cannot keep a "jurisdictional ace" up their sleeve to wipe out years of conduct when an outcome appears unfavourable.