JUDGMENT
B.A. Khan, J.
1. The short question that falls for determination is whether the old Arbitration Act of 1940 or the new Arbitration Act of 1996 would apply in the matter.
2. The facts are not in dispute. Respondent was awarded the contract for construction of 1068 houses at Motia Khan. During its execution, disputes arose between the parties and respondent invoked Arbitration clause (Clause 25) of the contract agreement which amongst other things provided :
“Subject as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modification or any re-enactment thereof and the rules made there under and for the time being in force shall apply to the Arbitration proceedings under this clause.”
3. Respondent then filed petition under Section 20 of the old Arbitration Act for appointment of an Arbitrator way back in 1982 which was registered as Suit No. 994-A/1982. One Shri Subramanyam, Superintending Engineer of appellant/DDA was appointed as the sole Arbitrator in this. He, however, expired before pronouncing the Award. He was substituted by one Shri O.P. Mittal who entered the reference on 17.01.1985 and who also expired before rendering the Award. Finally, one R.J. Bakhru was appointed as the sole Arbitrator .who finally published the Award on 12.08.1998 after the new Arbitration Act of 1996 had come into force on 25.01.1996. The Award was then filed in this Court and registered as Suit No. 2560/98. Notice of the Award was issued to appellant/DDA requiring it to file objections to the Award within 30 days from the service of notice which was received by it on 22.02.1999.
4. Appellant filed objections to the Award under Section 30/33 of the old Arbitration Act of 1940 within the prescribed statutory period of 30 days. Respondent also filed reply to these objections controverting the appellant’s stand on merits but without raising any objection to the maintainability of these. These objections later came up for consideration on 02.08.2001 and it seems that while arguing, respondent’s counsel raised an obligation against the maintainability of these objections claiming that the new Arbitration Act of 1996 was applicable in the matter. The issue was debated with both sides invoking Sections 85 and 21 of the new Act to support their respective positions. Learned Single Judge but accepted the stand of respondent and rejected appellant’s objections under Section 30/33 of the old Act by impugned judgment dated 02.08.2001 holding thus :
“In the present case in hand attention of the Court has not been drawn to any agreement between the parties to come to a conclusion that the proceedings after the Award were also to continue under the Arbitration Act, 1940. If there is no such agreement in that event the Delhi Development Authority cannot take recourse to Sub-section 2(a) of Section 85 of new Arbitration Act, 1996, it will have no application herein.
Similarly, recourse to Section 21 of the Arbitration Act would also be of little avail and consequence for Delhi Development Authority as the provisions of this section would be prospective in nature and as it has not been given any retrospective effect and as the proceedings had commenced before the commencement of the new Arbitration Act of 1996.
Once the Award had been pronounced and as referred to above it has to be in terms of Arbitration and Conciliation Act, 1996, the remedy of Delhi Development Authority would be to have recourse under Section 34 of the Act. Even if incidentally by mistake the notice had been issued by the Court, still it will not permit this Court to run contrary to the plain language of the law. Any other interpretation, even if equitable, would mean doing injustice to the plain language of Sections 30 and 36 of the new Act of 1996.”
5. Appellant assails this on several grounds. Appellant’s case is that once the entire Arbitration proceedings were conducted under the old Act and the Award was also filed under that Act and the notice for filing of objections under Section 30 was also issued under that Act, it was the old Act only which was applicable in the matter as vested rights had accrued to the appellant under that Act which could not be taken away by applying the new Act. It is submitted by appellant’s counsel Ms. Anusuya Salwan that the view taken and the conclusion drawn by the learned Single Judge resulting in rejection of appellant’s objections under the old Act ran counter to the established legal position enunciated by the Supreme Court in three of its recent judgments in Shetty’s Construction Co. Pvt. Ltd. v. Konkan Railway Construction and Anr., Thyssen Stahlunion GMBH v. Steel Authority of India Limited, and N.S. Nayak & Sons v. State of Goa, . All these judgments, she asserted, laid down that it would depend on the date of commencement of the Arbitration proceedings whether the old or the new Act would apply and if these had commenced before coming into force of the new Act, the old Act would apply irrespective of whether the Award was rendered or the objections to it were filed after the coming into force of the new Act. She also referred to the provisions of Section 21 and Section 85(2)(a) of the new Act to show that the Arbitral proceedings in the case had commenced years before coming into force of new Act of 1996 and that the relevant Arbitration clause could not be read or interpreted to invite application of the new Act to the case.
6. Mr. Sandeep Sethi, learned counsel for respondent, on the other hand, put all his eggs in the basket of the expression “unless otherwise agreed by the parties” occurring in Section 85(2)(a) of the new Act and “any re- enactment thereof” contained in relevant Arbitration clause to claim that since parties had agreed to the application of the re-enacted Act in the Arbitration clause, it was the new Act that would apply. He supported this by the Supreme Court judgment in Rani Constructions (P) Limited v. H.P. Electricity Board, C.A. 61/1999 [1999(3) Arb. LR 532(SC)] and a judgment of this Court in Vijay Industries & Projects Ltd. v. N.T.P.C., .
7. Whether the old Act of 1940 or new Act of 1996 would apply would depend on the interpretation to be placed on the provisions of Section 85(2)(a) of the new Act and the relevant Arbitration clause. Section 85 provides :
“85. Repeal and Savings-
(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,-
(a) the provisions of the said enactments shall apply in relation to Arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to Arbitral proceedings which commenced on or after this Act comes into force ;”
8. Clause 2 of Section 85 repeals the old Arbitration Act and Clause 2 is a saving clause which saves application of its provisions in certain circumstances. Therefore, at the same time, it keeps it alive for application to spending Arbitration proceedings which had commenced before the new Act came into force on 25.01.1996.
9. Section 85(2)(a) has two limbs thus : (i) it makes the provisions of old Act applicable in relation to the Arbitral proceedings which had commenced before the new Act came into force unless it is otherwise agreed to by the parties. The expression “unless otherwise agreed to by the parties” excludes the application of the old Act wherever there is an agreement by them that the old Act would not apply to such pending Arbitral proceedings. This agreement can be reflected in their Arbitration clause or reached by them or at any stage of the ongoing Arbitral proceedings. But where such agreement does not exist and the Arbitral proceedings had commenced before the promulgation of the new Act, the old Act alone would apply. There is no dispute in the present case about the date of commencement of these proceedings, therefore, any reference to provisions of Section 21 of the new Act for the purpose of determination of such commencement becomes unnecessary.
10. There is no confusion or ambiguity about the application of the new Act because this provision makes it clear that it would apply to Arbitral proceedings which would commence on or after it came into force.
11. The net position that emerges, therefore, is that the new Act would apply to all such Arbitral proceedings which have commenced on or after the coming into force of this Act and the old Act would survive to apply to these Arbitral proceedings which had commenced before coming into force of the new Act subject to the only rider that an agreement between the parties would exclude its application. This position is no more res Integra and is well established by several judgments of the Supreme Court. The Court first dealt with this aspect in Shetty’s Construction Co.’s case (supra), holding :
“For resolving this controversy we may turn to Section 21 of the new Act which lays down that unless otherwise agreed to between the parties, the Arbitration suit in respect of Arbitration dispute commenced on the date on which the request for referring the dispute for Arbitration is received by the respondents. Therefore, it must be found out whether the requests by the petitioner for referring the disputes for Arbitration were moved for consideration of the respondent on and after 26.0.1996 or prior thereto. If such requests were made prior to that date, then on a conjoint reading of Section 21 and Section 85(2)(a) of the new Act it must be held that these proceedings will be governed by the old Act.”
12. The Supreme Court then surveyed the whole legal position in Thyssen Stahlunion GMBH’s case (supra), and recorded the following conclusions for application of the old or the new Acts :
“(1) The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to Arbitral proceedings which have commenced before coming into force of the new Act (The Arbitration and Conciliation Act, 1996).
(2) The phrase “in relation to Arbitral proceedings” cannot be given a narrow meaning to mean only pendency of the Arbitration proceedings before the Arbitrator. It would cover not only proceedings pending before the Arbitrator but would also cover the proceedings before the Court and any proceedings which are required to be taken under the Act for Award becoming decree under Section 17 thereof and also appeal arising there under.
(3) In cases where Arbitral proceedings have commenced before coming into force of the new Act and are pending before the Arbitrator, it is open to the parties to agree that new Act be applicable to such Arbitral proceedings and they can so agree even before the coming into force of the new Act.
(4) The new Act would be applicable in relation to Arbitral proceedings which commenced on or after the new Act comes into force.
(5) Once the Arbitral proceedings have commenced, it cannot be stated that right to be governed by the old Act for enforcement of the Award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the Award enforced under the old Act that some legal proceedings for its enforcement must be pending under that Act at the time new Act came into force.
(6) If narrow meaning of the phrase “in relation to Arbitral proceedings” is to be accepted, it is likely to create great deal of confusion with regard to the matters where Award is made under the old Act. Provisions for the conduct of Arbitral proceedings are vastly different in both the old and the new Act. Challenge of Award can be with reference to the conduct of Arbitral proceedings. An interpretation which leads to unjust and inconvenient results cannot be accepted.”
13. The Court thereafter reiterated this position while disposing of a batch of appeals in N.S. Nayak v. State of Goa (supra). Though it mostly focused on reconciling and clarifying in what was said in Thyssen Stahl- union GMBH’s case (supra), it at the same time affirmed the position by holding :
“In such cases where Arbitral proceedings commenced under the old Act, it is an accrued right to proceed in accordance with that law and it would be the old Act which would apply even for enforcing the Award.”
14. The Court provided rationale for application of the old Act in Thyssen’s case (supra), observing :
“To have the Award enforced when Arbitral proceedings commenced under the old Act under that very Act is certainly an accrued right. Consequences for the party against whom Award is given after Arbitral proceedings have been held under the old Act though given after the coming into force of the new Act, would be quite grave if it is debarred from challenging the Award under the provisions of the old Act. Structure of both the Acts is different. When Arbitral proceedings commenced under the old Act it would be in the mind of everybody i.e. the Arbitrators and the parties that the Award given should not fall foul of Sections 30 and 32 of the old Act. Nobody at that time could have thought that Section 30 of the old Act could be substituted by Section 34 of the new Act. This construction put by us is consistent with the wording of Section 85(2)(a) using the terms ‘provision’ and ‘in relation to Arbitral proceedings’ which would mean that once the Arbitral proceedings which would mean that once the Arbitral proceedings commenced under the old Act, it would be the old Act which would apply for enforcing the Award as well.”
15. Going by all this, there should have been no hitch in holding that old Act was applicable to the matter in the present case as the Arbitral proceedings had undisputably commenced before the enforcement of the new Act. But going by the expression “unless otherwise agreed to by the parties” in Section 85(2)(a) of the new Act, it still remained to be seen whether parties had otherwise agreed that the old Act would be out and the new Act in to govern their pending Arbitral proceedings.
16. For this, learned counsel for respondent Mr. Sethi sets all his store by the expression “any re-enactment thereof” in the relevant Arbitration clause. He interprets this to mean that parties should be deemed to have agreed to the application of the new Act to their pending Arbitral proceedings even though these had commenced before the enforcement of this Act. He places reliance for this on the Supreme Court judgment in Rani Construction case (supra), in this regard.
17. Could the words “re-enactment thereof” occurring in the Arbitration clause be interpreted to mean that the re-enacted new law would apply to all pending Arbitration proceedings automatically where such clause exists or does Supreme Court hold so in Rani Construction Co.’s case (supra), is the question.
18. For this, relevant portion of the clause would have to be reproduced at the cost of repetition and it reads :
“85. Repeal and Savings-
(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,-
(a) the provisions of the said enactments shall apply in relation to Arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to Arbitral proceedings which commenced on or after this Act comes into force;”
19. Treating the expression “any re-enactment thereof” in this Arbitration clause to be covered by the expression “unless otherwise agreed to by the parties” occurring in Section 85(2)(a) of the new Act, it was still to be seen whether this attracted an automatic application of the new Act even though Arbitration proceedings had commenced under the old Act. Even if this clause was to be read between the lines, it nowhere attracts the application of the new Act to pending Arbitration proceeding straightaway. Nor does it exclude the application of the provisions of the old Act to such proceedings per se.
20. All it says is that the Act of 1940 or any statutory modifications made in it or any re-enactment thereof along with the rules made there under and for the time being in force would apply to Arbitration proceedings. The word “or” and the expression “for the time being in force” occurring in the Arbitration clause are significant. The word “or” gives option to the parties on the application of the law to the proceedings which could be Act of 1940 or any modification in it or for that matter any re-enacted law and the expression “for the time being in force” makes it clear that provisions of that Ac\t would apply to the Arbitration proceedings which are in force when these proceedings are commenced. If these are started when the old Act and rules made there under were in force, it is that Act and the rules which would apply and if these are commenced when the new Act came into force, it would be the new Act that would apply. However, if the parties wanted to apply re-enacted law /new Act to pending Arbitration proceedings under the old Act, they had to take step further and invoke the option of application of new Act in terms of the Arbitration clause. Unless they do so, the old Act would continue to apply to such proceedings. This is in harmony and consonance with the terms of Section 85(2)(a) which keeps the old Act alive and provides that its provisions would apply in relation to Arbitral proceedings which commenced before the new Act came into force, unless otherwise agreed to by the parties. Therefore, on a harmonious interpretation of the terms of this Arbitration clause and the provisions of Section 85(2)(a) of the new Act, it becomes easy to conclude that though the expression “any re-enactment thereof” in the Arbitration clause in this case could be said to be falling within the expression “unless otherwise agreed to by the parties” appearing in Section 85(2)(a) of the new Act, yet this nowhere provides or mandates that the re-enacted law/new Act would automatically apply to pending Arbitration proceedings or that the old Act would automatically evaporate in thin air and the rights accrued to the parties under it would also vanish with it. The new Act would, of course, apply to these proceedings if the parties act further and invoke this to govern the proceedings from that point.
21. The second aspect that remains to be seen is whether Supreme Court has laid down in Rani Construction Co/s case (supra), or whether this Court had held in Vijay Industries’ case (supra), that if identical provision exists in an Arbitration as in this case, new Act would straightaway apply to the pending proceedings because of the expression “any re-enactment thereof” occurring in that clause. We have vainly scanned through these judgments but have not found any such proposition having been enunciated or laid down.
22. In the first case, disputes arose out of a contract for construction of certain work of H.P. State Electricity Board. The relevant Arbitration clause was similar as in this case. The disputes were referred to Arbitration on 04.12.1993 and the Arbitrator rendered the Award on 23.02.1996 after the new Act had come into force. The controversy thereafter arose as to whether the old or the new Act would apply to the Arbitration proceedings. The two Judges of the Court had meanwhile rendered separate differing judgments on this. A reference was, therefore, made to the larger Bench in this case on the issue viz. : whether the parties, could agree to the application of the new Act before it had come into force in reference to the expression “unless otherwise agreed to by the parties” occurring in Section 85(2)(a) of the new Act. The Division Bench of the Court on this analysed the provisions of Section 85(2)(a) of the new Act and interpreted the expression “unless otherwise agreed to by the parties” to mean that it required a new agreement by the parties after coming into force of the new Act to exclude application of the old Act.
23. The Court held in its judgment dated 16.07.1998 :
“48. When the proceedings between the parties have been held under the old Act and the Award made, and subsequently objection are filed under the old Act where the scope of enquiring into the objections is wider than what is prescribed under the new Act, it would certainly cause prejudice to a party, particularly to the objector, when the provisions of the new Act are sought to be enforced on the pending proceedings taking away his right. The parties may in their wisdom, agree to be governed in the altered situation but for that matter they shall have to agree again.
49. No contrary intention of the parties is spelt out from the terms of the agreement so as to deny to any of the parties the benefit of the saving clause appearing in Section 85(2)(a) of Act of 1996.
51. It can, safely be held that in the absence of new agreement between the parties relating to the applicability to pending proceedings, the provisions of the new Act cannot be made applicable to them.
57. As a result in the light of detailed discussion above, it is held that with regard to Arbitration proceedings commenced before coming into force of the Arbitration and Conciliation Act, 1996 (referred in the judgment as “new Act” or ‘Act of 1996’) the rights and procedure would be governed by Arbitration Act, 1940. It would however be open to the parties to agree in any matter to be governed by the new Act.”
24. An appeal was taken to the Supreme Court against the issue whether parties had to execute a fresh agreement for application of the new Act after the enforcement of this Act or whether they could do so prior to that also. This appeal was disposed of along with Thyssen’s case (supra), and it was held by the Supreme Court:
“Parties can agree to the applicability of the new Act even before the new Act comes into force and when the old Act is still holding the field. There is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing. There is however, a bar that they cannot agree to the applicability of the old Act after the new Act has come into force when Arbitral proceedings under the old Act have not commenced though the Arbitral agreement was under the old Act. Arbitration clause in the contract in case of Rani Constructions, Civil Appeal No. 61 of 1999 uses the expression “for the time being in force’ meaning thereby that provision of that Act would apply to the Arbitration proceedings which will be in force at the relevant time when Arbitration proceedings are held.
When the agreement uses the expressions “unless otherwise agreed” and “law in force” it does give an option to the parties to agree that the new Act would apply to the penaing Arbitration proceedings. That agreement can be entered into even before the new Act comes into force and it cannot be said that agreement has to be entered into only after the coming into force of the new Act.
We also hold that Clause 25 containing the Arbitration agreement in the case of Rani Construction (P) Ltd. v. H.P. SEB, does admit of the interpretation that the case is governed by the provisions of the Arbitration and Conciliation Act, 1996.”
25. As would be seen from this, the Supreme Court nowhere interpreted the Arbitration clause in the case to hold that the new Act was straightaway applicable to the pending Arbitration proceedings where the Arbitration clause contained the expression “or any re-enactment thereof”. Had it done so, it would have gone contrary to its first conclusion that provisions of the old Act would be applicable to the Arbitration proceedings which had commenced before the commencement of the new Act. In the other case also, this Court has not said or held so anywhere. Therefore, all it held was that parties could agree to the application of the new Act before the enactment of such Act where such agreement was found to be in existence as contained in the Arbitration clause of the case and this case also, no new agreement was required to reached by them for the application of the new Act. This position was later clarified by the Court in Nayak’s case (supra). The Court rejected the contention that it had laid down any conflicting proposition in Rani Construction Co.’s case (supra). Dealing with an identical Arbitration clause as in the present case, it held :
“Further, the part of the Arbitration clause which is quoted above also provides that the provisions of the Arbitration Act, 1940 which were for the time being in force were to apply to the Arbitral proceedings between the parties. It nowhere provides that once the Arbitral proceedings have commenced under the old Act, they should be conducted under the new Act as soon as the new Act comes into operation.”
26. We, therefore, hold that while Section 85 of the new Act repeals the old Arbitration Act of 1940, it saves the application of its provisions to the Arbitration proceedings commenced before coming into force of the new Act and where the proceedings have so commenced, the old Act would apply to the proceedings at all stages including the objections to the Award and even the appeal against rejection of these, irrespective of whether the Award was passed or the objections to the Award were filed after coming into force of the new Act. This is, however, subject to any agreement reached by the parties to apply the new Act to the proceedings which they could do on entering the contract or at any stage of the proceedings and even prior to the coming into force of the new Act, provided it specifically provided for application of the new Act to pending proceedings on its coming into force. Since the Arbitration clause carrying expression “or any re-enactment thereof” in the present case does not provide for any automatic application of the new Act to the proceedings commenced before its enforcement, on its coming into force, it can’t be held that parties had agreed to its application via the expression “or any re-enactment thereof” used in the Arbitration clause within the meaning of the expression “unless otherwise agreed to” occurring in Section 85(2)(a) of the new Act.
27. Having held so and on noticing that there was no dispute that the Arbitration proceedings had commenced prior to the promulgation of the new Act, it is the old Act that would apply to the case. This appeal is, therefore, allowed arid the impugned judgment dated 02.08.2001 rejecting appellant’s objections, is set aside. These objections shall accordingly revive and learned Single Judge is requested to decide these afresh in accordance with law.