2009 (11) TMI 984 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Arbitrator
2. Applicability of the Arbitration Act, 1940 vs. Arbitration and Conciliation Act, 1996
3. Validity and enforceability of the decree passed by the Ratnagiri Court

Summary:

1. Jurisdiction of the Arbitrator:
The petitioner was awarded a contract which was later rescinded by the respondents. The petitioner invoked the arbitration clause and sought the appointment of an arbitrator. The Ratnagiri Court appointed an arbitrator, who passed an award in favor of the petitioner. The respondents challenged the jurisdiction of the arbitrator, but later withdrew their objection and participated in the arbitration proceedings. The award was made a decree by the Ratnagiri Court.

2. Applicability of the Arbitration Act, 1940 vs. Arbitration and Conciliation Act, 1996:
The core issue was whether the arbitration proceedings, which commenced under the Arbitration Act, 1940, should continue under the same Act or under the Arbitration and Conciliation Act, 1996. The Executing Court held that the new Act should apply, rendering the award and decree under the old Act a nullity. However, the petitioner argued that the proceedings should continue under the old Act, citing the Supreme Court's judgment in Milkfood Ltd. v. GMC Ice Cream (P) Ltd., which stated that if arbitration proceedings commenced under the old Act, they could culminate under the same Act even after the new Act came into force.

3. Validity and enforceability of the decree passed by the Ratnagiri Court:
The Executing Court dismissed the execution application, declaring the decree a nullity. The petitioner contended that the arbitration proceedings commenced with the notice dated 06.09.1994, prior to the new Act's enforcement, and thus should be governed by the old Act. The High Court agreed with the petitioner, referencing the Milkfood Ltd. case, and concluded that the arbitration proceedings and subsequent decree were valid and enforceable. The Court also noted that the respondents had substantially satisfied the decree by paying a significant amount, and only a balance amount remained to be recovered.

Conclusion:
The High Court quashed and set aside the Executing Court's order, allowing the petition and making the Rule absolute in terms of prayer Clause (a). The decree passed by the Ratnagiri Court was declared valid and enforceable, with parties bearing their respective costs.