The Blues boss insists the former England captain should still be seen as the club's leader providing he is not embroiled in any further controversy, but Lord Ouseley disagrees
Terry will don the armband, embroided with the motto 'Unite against Racism', in Tuesday's Champions League clash with Shaktar Donetsk as part of with UEFA's Fight against Racism Europe campaign.
It will also be a year to the day since the fracas with QPR defender Anton Ferdinand that landed the 31-year-old a £220,000 fine from the FA, saw him handed a four match ban and docked two weeks wages by the Blues.
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And Ouseley has questioned whether the former England defender should be leading the west London club out in the Donbass Arena tonight.
"I'm not happy with Terry being captain," said Ouseley.
"It doesn't please me, but I'm irrelevant in that process. That is a matter for Chelsea. It will please some people and it won't please others."
Chelsea boss Di Matteo insists he has no qualms regarding Terry holding onto the captaincy, but admits that he has been warned that there will be grave consequences should he step out of line in the future.
"I think he has realised that he used language that was inappropriate and has apologised for that and has certainly learned from that,' the Italian said.
"With good performances and good behaviour he should still be looked upon as the leader for our club.
"I've never been concerned about picking him. He's been able to focus on the games.
"Everybody's different, dealing with issues, but what is common for players is that, even if they have family problems or issues in private life, they tend to be able to focus on the football because it kind of helps them."