2004 (4) TMI 628 - SC - Indian Laws

Applicability of the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996 - Commencement of arbitration proceedings - Validity of the notice for appointment of an arbitrator -Maintainability of the Letters Patent Appeal - Majority decision - The parties, hereto entered into an agreement on 7.4.1992 in terms whereof the first respondent herein was to manufacture and pack in its factory a wide range of ice cream for and on behalf of the appellant. The agreement was to remain valid for five years. S.B. Sinha, J. - HELD THAT - It is one thing to say that the parties agree to take recourse to the procedure of the 1996 Act relying on or on the basis of tenor of the agreement as regard applicability of the statutory modification or reenactment of the 1940 Act but it is another thing to say, as has been held by the High Court, that the same by itself is a pointer to the fact that the appellant had agreed thereto. If the arbitral proceedings commenced for the purpose of the applicability of the 1940 Act in September 1995, the question of adopting a different procedure laid down under the 1996 Act would not arise. We are of the view that in this case, the 1940 Act shall apply and not the 1996 Act. However, it is accepted at the Bar that the learned arbitrators had already entered into the reference. The proceedings before the arbitrators were not stayed. Only making of the award was stayed. Thus, we are of the opinion that although the old Act would apply, the entire arbitral proceedings need not be reopened and the arbitrators may proceed to give their award. The above shall be filed in the court having jurisdiction whereafter the parties may proceed in terms of the old Act. We hope and trust that the award shall be made and all the legal proceedings shall come to an end at an early date and preferably within a period of four months from the date of the communication of this order. This order has been passed in the interest of justice and in the peculiar facts and circumstances of this case. We are, however, of the opinion that the High Court of Delhi has rightly held that the letters patent appeal was not maintainable. Civil Appeal No. 9672 of 2003 is, therefore, allowed and Civil Appeal Nos. 9673-74 of 2003 are dismissed. No costs. S.H. Kapadia, J. - HELD THAT - In the present matter, one is concerned with transitional provision, i.e. Section 85(2)(a) which enacts as to how the statute will operate on the facts and circumstances existing on the date it comes into force and, therefore, the construction of such a provision must depend upon its own terms and not on the basis of Section 21. In Thyssen's case 1999 (10) TMI 636 - SUPREME COURT , Section 48 of the old Act and Section 85(2)(a) of the 1996 Act came for consideration. It has been held by this Court that there is a material difference between Section 48 of the 1940 Act, which emphasized the concept of reference visa-vis Section 85(2)(a) of the 1996 Act which emphasizes the concept of commencement ; that there is a material difference in the scheme of two Acts; that the expression in relation to appearing in Section 85(2)(a) refers to different stages of arbitration proceedings under the old Act; and lastly that Section 85(2)(a) provides for limited repeal of the 1940 Act therefore, I am of the view that one cannot confine the concept of 'commencement' under Section 85(2)(a) only to Section 21 of the 1996 Act which inter alia provides for commencement of arbitral proceedings from the date on which a request to refer a particular dispute is received by the respondent. To sum up, in this case, the question concerns interpretation of transitional provisions; that Section 85(2)(a) emphasizes the concept of commencement whereas Section 48 of the 1940 Act emphasized the concept of reference ; that Section 83(2)(a) provides for implied repeal; that the scheme of 1940 Act is different from the 1996 Act; that the word reference in Section 48 of the old Act had different meanings in different contexts; and for the said reasons, 1 am of the view that while interpreting Section 85(2)(a) in the context of the question raised in this appeal, one cannot only rely on Section 21 of 1996 Act. The parties entered into an agreement on 7.4.1992 which contained an arbitration Clause 20, which inter alia stated that in the case of dispute between the parties arising in relation to the contract, the dispute shall be referred to a single arbitrator, in case both sides agree upon one such arbitrator and failing such agreement, the dispute shall stand referred to two arbitrators, one to be appointed by the either party, and in case of disagreement, between the two arbitrators, the dispute was to be referred to an umpire to be appointed by the two arbitrators. Before entering upon the reference under Clause 20 quoted above, all such arbitration proceedings were to be governed by the provisions of the Arbitration Act, 1940 or under any statutory re-enactment This clause is similar to the one considered by this Court in the case of Delhi Transport Corporation Ltd. 2003 (4) TMI 437 - SUPREME COURT . On the strength of the agreement dated 7.4.1992, the respondent herein filed title suit No. 40 of 1995 for injunction and in the said suit, the appellant herein applied for stay u/s 34 of the 1940 Act. Suffice it to state that on 6.5.1997, when the matter came up before the High Court, the parties agreed that all disputes between them may be referred to arbitrators chosen by the parties as per the agreement. A consent order was accordingly passed on that day by the High Court referring the dispute to the arbitrators. Therefore, for all practical purposes, the arbitration commenced on 6.5.1997, by which time the 1996 Act had come into force. In the circumstances, I am in agreement with the majority decision of the arbitrators that the proceedings in the present case would be governed by the provisions of the 1996 Act. Thus, I respectfully dissent from the opinion of Sinha, J. Consequently I am of the view that this Civil Appeal ought to fail and be dismissed with no order as to costs. Thus, Civil Appeal No. 9672/2003 is allowed - Civil Appeal Nos. 9673-9674/2003 are dismissed.

Summary

Issues Involved:
1. Applicability of the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996.
2. Commencement of arbitration proceedings.
3. Validity of the notice for appointment of an arbitrator.
4. Maintainability of the Letters Patent Appeal.

Summary:

1. Applicability of the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996:
The primary issue was whether the arbitration proceedings should be governed by the 1940 Act or the 1996 Act. The court held that the 1940 Act would apply as the arbitration proceedings commenced before the 1996 Act came into force. The court emphasized that the arbitration proceedings commenced when the notice for the appointment of an arbitrator was served on 14.09.1995, which was before the 1996 Act came into force.

2. Commencement of Arbitration Proceedings:
The court analyzed Section 21 of the 1996 Act and Section 37(3) of the 1940 Act. It concluded that the arbitration proceedings commenced when the notice requiring the appointment of an arbitrator was served. The court stated, "Section 21 of the Act must, therefore, be construed having regard to Section 85(2)(a) of the 1996 Act."

3. Validity of the Notice for Appointment of an Arbitrator:
The court held that the notice dated 14.09.1995, served by the appellant, was valid and marked the commencement of arbitration proceedings. The court rejected the contention that the notice was a "non-starter" and emphasized that the arbitration agreement could be invoked by any party to the dispute, not just the claimant.

4. Maintainability of the Letters Patent Appeal:
The court upheld the decision of the Delhi High Court that the Letters Patent Appeal was not maintainable. The court referred to Section 39 of the 1940 Act and the precedent set in Union of India v. Mohindra Supply Company, stating, "second appeal, which included Letters Patent appeal under Section 39(2), was not maintainable."

Conclusion:
The court concluded that the 1940 Act would apply to the arbitration proceedings, and the arbitrators could proceed to give their award under the 1940 Act. The Letters Patent Appeal was dismissed as not maintainable. The court directed that the award should be made and all legal proceedings should conclude within four months from the date of the communication of the order.