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2003 (5) TMI 358 - SC - Companies LawArbitral proceedings - Held that - Appeal dismissed. 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.
Issues Involved:
1. Applicability of the Arbitration and Conciliation Act, 1996 to arbitration proceedings commenced under the Arbitration Act, 1940. 2. Interpretation of Section 85 of the Arbitration and Conciliation Act, 1996. 3. Rights accrued under the old Arbitration Act, 1940. 4. Parties' agreement regarding the applicability of the new Act. Issue-wise Detailed Analysis: 1. Applicability of the Arbitration and Conciliation Act, 1996 to arbitration proceedings commenced under the Arbitration Act, 1940: The primary contention raised by the appellant was that the appeals filed by the respondents under Section 37 of the Arbitration Act, 1940 should be decided based on the Arbitration and Conciliation Act, 1996 due to the arbitration agreement clause. The clause stated that the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof would apply to the arbitration proceedings. The Supreme Court upheld the High Court's rejection of this contention, emphasizing that the Old Act would continue to apply to proceedings that commenced before the New Act came into force. 2. Interpretation of Section 85 of the Arbitration and Conciliation Act, 1996: Section 85(2)(a) of the New Act specifies that the provisions of the Old Act shall apply to arbitral proceedings commenced before the New Act came into force unless otherwise agreed by the parties. The Court noted that in the present cases, the arbitrators were appointed, and the arbitral proceedings started before the New Act came into force. Hence, the Old Act would apply to these proceedings. The Court also referenced the decision in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd., which supported this interpretation. 3. Rights accrued under the old Arbitration Act, 1940: The judgment emphasized that once arbitral proceedings commenced under the Old Act, the Old Act would apply to the entire process, including the enforcement of the award. This was seen as an accrued right, and the New Act would not apply to proceedings that had already started under the Old Act. The Court highlighted that the structure and provisions of both Acts are different, and applying the New Act retroactively would lead to confusion and hardship. 4. Parties' agreement regarding the applicability of the new Act: The Court examined the arbitration clause and concluded that it did not provide for the New Act to apply to ongoing proceedings that had commenced under the Old Act. The phrase "unless otherwise agreed by the parties" was interpreted to mean that parties could agree to the New Act's applicability during the arbitral proceedings, but such an agreement did not extend to changing the appellate procedure. The appellate procedure would be governed by the statutory provisions of the Old Act, and parties could not alter this through agreement. Conclusion: The Supreme Court dismissed the appeals, affirming that the Old Act would apply to arbitration proceedings that commenced before the New Act came into force. The Court reiterated that the right to file an appeal is an accrued right that cannot be taken away unless explicitly provided by law. The appeals were to be decided based on the provisions of the Old Act, and the appellant was ordered to pay costs to the respondent. Costs: The appellant in each case was ordered to pay costs of Rs. 10,000 to the respondent within three months.
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