CASE NO.: Appeal (civil) 97 of 2002 Appeal (civil) 98 of 2002 Appeal (civil) 99 of 2002 Appeal (civil) 100 of 2002 Appeal (civil) 101 of 2002 PETITIONER: M/s N.S. Nayak & Sons M/s Heera Constructions M/s Rani Constructions Pvt. Ltd. M/s Rani Constructions Pvt. Ltd. M/s Pioneer Engineering Syndicate RESPONDENT: State of Goa State of Goa State of Goa & Another State of Goa & Another Board of Trustees of Port Mormugao DATE OF JUDGMENT: 08/05/2003 BENCH: M.B. SHAH & ARUN KUMAR. JUDGMENT:
J U D G M E N T
Shah, J.
These appeals are directed against the judgment and order dated
27th April, 2000 passed by the High Court of Bombay, Goa Bench, in
Arbitration Appeal No.1 of 1993 etc. etc.
In pending appeals, a contention was raised by the appellant
that appeals filed by the respondents under Section 37 of the
Arbitration Act, 1940 (hereinafter referred to as the ‘Old Act’), are
required to be decided on the basis of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as the ‘New Act’) because the
arbitration agreement provides as under:
“Subject as aforesaid the provisions of the
Arbitration Act, 1940, or any statutory modification or
re-enactment thereof and the Rules made thereunder and
for the time being in force shall apply to the arbitration
proceedings under this clause.”
That contention was rejected by the High Court. Hence, these
appeals.
In support of aforesaid contention, learned senior counsel Mr.
Desai for the appellant relied upon the decision in Thyssen
Stahlunion GMBH v. Steel Authority of India Ltd. [(1999) 9 SCC
334].
Before referring to the decision in Thyssen’s case, we would
first refer to Section 85 of the New Act, which reads as under:
“85. Repeal and saving. (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are hereby repealed.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;
(b) all rules made and notifications published,
under the said enactments shall, to the extent
to which they are not repugnant to this Act,
be deemed respectively to have been made
or issued under this Act.”
Section 85 (2) (a) specifically provides that (1) the provisions
of the Old Act shall apply in relation to arbitral proceedings which
commenced on or before the New Act came into force, unless
otherwise agreed by the parties; (2) it also provides that the New Act
shall apply in relation to arbitral proceedings which commenced on or
after the New Act came into force.
In all these matters arbitrators were appointed prior to 25th
January 1996. Arbitral proceedings started before that date and the
awards in CA No.97/2002, CA No.99/2002, C.A. No.100/2002 and
C.A. No.101/2002 were passed on 20.12.1991, 17.5.1994, 7.5.1992,
3.2.1989 respectively, i.e. prior to 25th January, 1996, and in CA
No.98/2002, the award was passed on 30.9.1996, i.e. after 25th
January, 1996. On the basis of sub-section 2(a), the provisions of the
Old Act would apply to the arbitral proceedings which commenced on
or before the New Act came into force.
Further, the part of the arbitration clause which is quoted above
also provides that the provisions of Arbitration Act, 1940 which were
for 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. Hence, in the proceedings where the award is passed under
the Old Act, the remedy of filing appeal or petition for setting aside
the said award would be as per the provisions of the Old Act.
Further, the complete answer to the contention of the learned
counsel for the appellant is in the following paragraph (para 32) of
Thyssen’s case wherein the Court has specifically held that once the
arbitral proceedings commenced under the Old Act, it would be Old
Act which would apply in arbitral proceedings and also for enforcing
the award:
32. Principles enunciated in the judgments show as to
when a right accrues to a party under the repealed Act. It
is not necessary that for the right to accrue legal
proceedings must be pending when the new Act comes
into force. 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. As a matter of fact appellant Thyssen
in Civil Appeal No.6036 of 1998 itself understood that
the old Act would apply when it approached the High
Court under Sections 14 and 17 of the old Act for making
the award rule of the court. It was only later on that it
changed the stand and now took the position that the new
Act would apply and for that purpose filed an application
for execution of the award. By that time limitation to set
aside the award under the new Act had elapsed. The
appellant itself led the respondent SAIL in believing that
the old Act would apply. SAIL had filed objections to
the award under Section 30 of the old Act after notice for
filing the award was received by it on the application
filed by Thyssen under Sections 14 and 17 of the old Act.
We have been informed that numerous such matters are
pending all over the country where the award in similar
circumstances is sought to be enforced or set aside under
the provisions of the old Act. We, therefore, cannot
adopt a construction which would lead to such
anomalous situations where the party seeking to have
the award set aside finds himself without any remedy.
We are, therefore, of the opinion that it would be the
provisions of the old Act that would apply to the
enforcement of the award in the case of Civil Appeal
No.6036 of 1998. Any other construction on Section
85(2)(a) would only lead to confusion and hardship. 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 commenced under
the old Act it would be the old Act which would apply
for enforcing the award as well.”
The highlighted portion in terms emphasizes that in such cases
where the 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.
Learned senior counsel Mr. Desai submitted that in Thyssen’s
case, the phrase ‘in relation to arbitral proceedings’ is given wider
meaning so as to include arbitral proceedings before the arbitrator as
well as the proceedings before the Court and once New Act came into
force, further proceedings including appeals are required to be dealt
with and decided in accordance with the New Act as per the
agreement. For this purpose, he placed reliance on paragraph 22 of
the said judgment.
In our view, paragraph 22 nowhere lays down that after the
New Act came into force, even appeals filed under the provisions of
Old Act are to be decided on the basis of the provisions contained in
the New Act. Paragraphs 22 and 23 are as under:
“The Conclusions
22. For the reasons to follow, we hold:
1. The provisions of the old Act (Arbitration
Act, 1940) shall apply in relation to arbitral proceedings
which have commenced before the 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 old Act for the award
becoming a decree under Section 17 thereof and also
appeal arising thereunder.
3. In cases where arbitral proceedings have
commenced before the coming into force of the new Act
and are pending before the arbitrator, it is open to the
parties to agree that the 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 the 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 some legal proceedings
for its enforcement must be pending under that Act at the
time the new Act came into force.
6. If a narrow meaning of the phrase “in
relation to arbitral proceedings” is to be accepted, it is
likely to create a 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.
7. A foreign award given after the
commencement of the new Act can be enforced only
under the new Act. There is no vested right to have the
foreign award enforced under the Foreign Awards Act
[Foreign Awards (Recognition and Enforcement) Act,
1961].
23. Section 85(2)(a) of the new Act is in two
limbs: (1) provisions of the old Act shall apply in
relation to arbitral proceedings which commenced before
the new Act came into force unless otherwise agreed by
the parties and (2) the new Act shall apply in relation to
arbitral proceedings which commenced on or after the
new Act came into force. The first limb can further be
bifurcated into two: (a) provisions of the old Act shall
apply in relation to arbitral proceedings commenced
before the new Act came into force, and (b) the old Act
will not apply in such cases where the parties agree that it
will not apply in relation to arbitral proceedings which
commenced before the new Act came into force. The
expression “in relation to” is of the widest import as held
by various decisions of this Court in Doypack Systems
(P) Ltd., Mansukhlal Dhanraj Jain, Dhanrajamal
Gobindram and Navin Chemicals Mfg. This expression
“in relation to” has to be given full effect to, particularly
when read in conjunction with the words “the provisions”
of the old Act. That would mean that the old Act will
apply to the whole gambit of arbitration culminating in
the enforcement of the award. If it was not so, only the
word “to” could have sufficed and when the legislature
has used the expression “in relation to”, a proper
meaning has to be given. This expression does not admit
of restrictive meaning. The first limb of Section 85(2)(a)
is not a limited saving clause. It saves not only the
proceedings pending at the time of commencement of
the new Act but also the provisions of the old Act for
enforcement of the award under that Act.”
As stated in paragraph 22, Conclusion1 without any
reservation provides that the provisions of Old Act shall apply in
relation to arbitral proceedings which have commenced before coming
into force of the New Act. Conclusion2, in our view, is required to
be read in context with Conclusion1, that is to say, the phrase ‘in
relation to arbitral proceedings’ cannot be given a narrow meaning to
mean only pendency of the 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 old Act for the award
becoming a decree under Section 17 thereof and also appeal arising
thereunder. Hence, conclusions1 and 2 are to be read together which
unambiguously reiterate that once the arbitral proceedings have
started under the Old Act, the Old Act would apply for the award
becoming decree and also for appeal arising thereunder.
Conclusion3 only reiterates what is provided in various
Sections of the Arbitration Act, which gives option to the parties to
opt for the procedure as per their agreement during the arbitral
proceedings before the arbitrator. The phrase ‘unless otherwise
agreed by the parties’ used in various Sections namely, 17, 21, 23(3),
24(1), 25, 26, 29, 31, 85(2)(a) etc. indicates that it is open to the
parties to agree otherwise. During the arbitral proceedings, right is
given to the parties to decide their own procedure. So if there is an
agreement between the parties with regard to the procedure to be
followed by the arbitrator, arbitrator is required to follow the said
procedure. Reason being, arbitrator is appointed on the basis of the
contract between the parties and is required to act as per the contract.
However, this would not mean that in appeal parties can contend that
appellate procedure should be as per their agreement. Appellate
procedure would be governed as per the statutory provisions and
parties have no right to change the same. It is also settled law that the
right to file an appeal is accrued right that cannot be taken away
unless there is specific provision to the contrary. There is no such
provision in the New Act. In the present cases, the appeals were
pending before the High Court under the provisions of the Old Act
and, therefore, appeals are required to be decided on the basis of the
statutory provisions under the said Act. Hence, there is no substance
in the submission made by the learned counsel for the appellant.
Learned counsel for the appellant however relied upon
paragraph 35 of Thyssen’s case. In our view, it nowhere lays down
anything contrary to what we have stated above. Relevant portion of
the said discussion is as under:
” The expression “unless otherwise agreed” as
appearing in Section 85(2)(a) of the new Act would
clearly apply in the case of Rani Constructions in Civil
Appeal No.61 of 1999. Parties were clear in their minds
that it would be the old Act or any statutory modification
or re-enactment of that Act which would govern the
arbitration. We accept the submission of the appellant
Rani Constructions that parties could anticipate that the
new enactment may come into operation at the time the
disputes arise. We have seen Section 28 of the Contract
Act. It is difficult for us to comprehend that arbitration
agreement could be said to be in restraint of legal
proceedings. There is no substance in the submission of
the respondent that parties could not have agreed to the
application of the new Act till they knew the provisions
thereof and that would mean that any such agreement as
mentioned in the arbitration clause could be entered into
only after the new Act had come into force. 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
pending 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.”
The aforesaid discussion only deals with the contention that
parties could not have agreed to the application of the New Act till
they had the knowledge about the provisions thereof and, therefore,
the agreement to the effect that to the arbitral proceedings, the
provisions of the Arbitration Act, 1940 or any statutory modification
or re-enactment thereof would be applicable, is not valid. The Court
negatived the said contention by interpreting the expression ‘unless
otherwise agreed’. The Court held that such agreement could be
entered into even before coming into force of the New Act. However,
it nowhere lays down that in a pending arbitral proceeding, which was
being conducted as per the procedure prescribed under the Old Act,
the parties have option of changing the procedure.
In this view of the matter, there is no substance in these appeals
and they are accordingly dismissed. The appellant in each case shall
pay the costs of Rs.10,000/- to the respondent within a period of three
months from today.