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TMI Blog2004 (4) TMI 628X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be in accordance with and subject to the provisions of the Arbitrator Act, 1940, or any statutory modification or reenactment. 3. The contention of the appellant was that the first respondent herein did not fulfill its contractual obligations. It was also contended and two Demand Drafts sent by it for a sum of Rs. Five lakhs each which were required to be sent in the year 1992 were in fact sent on 7.5.1995 and the same were returned. 4. The contention of the first respondent, on the other hand, was that in terms of the agreement between the parties that an additional plant as per the specifications thereof for manufacture of ice cream was installed; but despite the same the appellant failed to supply the base materials for packing ice cream. 5. The first respondent herein apprehending that the appellant herein would cause disturbance in the manufacture and supply of ice cream filed a suit in the Court of Munsif 1st, Gaya which was marked as Title Suit No. 40 of 1995, wherein a decree for permanent injunction restraining the appellant from causing any disturbance in manufacture and supply of ice cream according to specifications given by the appellant was sought for. The appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Orissa High Court as Arbitrators. The dispute between the parties is referred to arbitrator. I hope that the learned Arbitrators will dispose of the arbitration proceeding within three months of the entering the reference. Let a copy of this order be sent to both Shri Hari Lal Agarwal at his address Nageshwar Colony, Boring Road, Patna-1 and Shri Uday Sinha at his Patna address 308, Patliputra Colony, Patna. 9. It would appear that by reason of the said order merely the constitution of the arbitral Tribunal had been changed but the dispute sought to be resolved in the arbitration proceeding was not formulated therein. The appellant appointed Respondent No. 4, Shri Agrawal, whereas the first respondent appointed Respondent No. 3, Shri Uday Sinha, as their arbitrators. Respondent No. 2, Shri A.B. Rohtagi was appointed by the learned arbitrators as the third arbitrator, which according to the appellant, was without its knowledge and consent. 10. The appellant having found that the learned arbitrators were proceeding under the 1996 Act filed an application seeking directions and the clarifications raising a contention that the provisions of the 1940 Act were applicable. The matter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration proceedings shall be in accordance with and subject to the provisions of the Arbitration Act, 1940 or any statutory modification or reenactment. In 1992, when the agreement was entered into the parties could not visualise the 1996 Act but in the relevant Clause 20 of the agreement, foundation of any statutory modification or reenactment has been laid down. When the parties by consent before the High Court agree to refer the dispute to the arbitration in that event parties have to be governed by 1996 Act. This conclusion is consistent even with the underlying intention of the parties according to Clause 20 of the Agreement. c) Logically, it has to be concluded that the arbitration proceedings begin when the disputes are referred for the arbitration. In the instant case, the disputes were referred for arbitration by the order of the High Court only on 6.5.1997. The parties have therefore, to be governed by the provisions of 1996 Act. d) The petitioner was aware of the third arbitration from the very beginning and it has to be assumed that the petitioner by necessary implication gave consent for referring the disputes to the arbitration. All this happened after the 1996 Act cam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge that having regard to the purport and object of the 1996 Act, as also in view of the fact that the arbitrators had already entered into the reference, this Court may not interfere with the impugned judgment in exercise of its jurisdiction under Article 136 of the Constitution of India. Strong reliance in this behalf has been placed Chandra Singh and Ors. v. State of Rajasthan and Anr. AIR2003SC2889. The learned counsel would next contend that a proceeding commences in the court of law when a plaint is filed and if the said analogy is applied, an arbitration proceeding must be held to be initiated when a claim petition is filed by the claimant before the arbitrator as before a proceeding is initiated before a court or tribunal, the existence thereof would be a condition precedent for initiation of proceeding. 17. The learned counsel would urge that for the purpose of determining the point of time 'when an arbitration proceeding commences', the arbitral tribunal must be constituted. Reliance in this connection has been placed on Secretary to the Government of Orissa and Anr. v. Sarbeswar Rout AIR1989SC2259 . 18. The learned counsel would further submit that an arbitrator e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Act. Section 14(3) provides that in the absence of such agreement, the provisions contained in Sub-sections (3) to (5) shall apply. Both the 1940 Act and the English Arbitration Act place emphasis on service of the notice by one party on the other party or parties requiring him or them to submit the matter to arbitration rather than receipt of the request by the respondent from the claimant to refer the dispute to arbitration. Commencement of an arbitration proceedings for certain purposes is of significance. Arbitration proceedings under the 1940 Act may be initiated with the intervention of the court or without its intervention. When arbitration proceeding is initiated without intervention of a Court, Chapter II thereof would apply. When there exists an arbitration agreement the resolution of disputes and differences between the parties are to be made in terms thereof. For the purpose of invocation of the arbitration agreement, a party thereto subject to the provisions of the arbitration agreement may appoint an arbitrator or request the notice to appoint an arbitrator in terms thereof. In the even, an arbitrator is appointed by a party, which is not opposed by the other side, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs in court. Sub-section (2) thereof provides that for the purpose of the said section and the Limitation Act, 1963, an arbitration shall be deemed to have commenced on the date referred to in Section 21. 27. Article 21 of the Model Law which was modelled on Article 3 of the UNCITRAL Arbitration Rules had been adopted for the purpose of drafting Section 21 of the 1996 Act. Section 3 of the 1996 Act provides for as to when a request can be said to have been received by the respondent. Thus, whether for the purpose of applying the provisions of Chapter II of the 1940 Act or for the purpose of Section 21 of the 1996 Act, what is necessary is to issue/serve a request/notice to the respondent indicating that the claimant seeks arbitration of the dispute. 28. Section 3 of the 1940 Act provides that an arbitration agreement, unless a different intention is expressed therein, shall be deemed to include the provisions set out in the First Schedule in so far as they are applicable to the reference. The First Schedule, therefore, contains implied conditions of arbitration agreements which are applicable to the reference and not for any other purpose. Clause (3) of the First Schedule envisage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondence developed in which Roussos alleged that Willie had been in breach of the MOC because at the time of delivery the vessel was suffering from average damage affecting class which led to engine breakdown in May, 1987 and January, 1988 (and again after delivery) and which had not been reported to class. Swinnerton Ashley Claydon ( SAC ) were involved in that correspondence as solicitors to Willie. 34. On March 12, 1992 HFW telexed SAC to invite Willie to agree on the appointment of a single arbitrator but in the event on Apr. 3, 1992 HFW appointed Mr. Kazantzis as Roussos' arbitrator and on Apr. 6, 1992 Mr. Newcomb was appointed as Willie's arbitrator. 35. On May 20, 1992 HFW telexed Mr. Kazantzis with copies to Mr. Newcomb and SAC stating inter alia: 36. We refer to our correspondence...appointing you as arbitrator on behalf of G Roussos Sons SA... 37. We should be grateful if ....you would also accept appointment as arbitrator again in respect of all disputes arising under the ... MOA with Charles M Willie and Co (Shipping) Limited on behalf of Ocean Laser Shipping Ltd. 38. By letter dated May 21, 1992 to Mr. Kazantzis with copies to HFW and Mr. Newcomb, SAC disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an arbitrator; but no because of the Limitation Act, but because the respondent was then estopped from denying that he had submitted the relevant dispute to arbitration or from disputing the tribunal's jurisdiction on the ground of the absence of a Limitation Act notice. For my part, I would prefer a more direct approach and say that a claimant had commenced arbitration, at any rate in a two or three arbitrator situation, by appointing his own arbitrator. On the authority of Tradax Export S.A. v. Volkswagenwerk A.G. [1970] 1 LR 62; [1970] 1 Q.B. 537 such appointment requires the consent of the arbitrator to act as such and in addition notification of his appointment to the respondent. In my view such notification can be regarded as an implied request to the respondent to appoint his own arbitrator, just as Lord Denning had said that I require the difference between us to be submitted to arbitration should be regarded as such a request; indeed the hypothesis under consideration appears as an a fortiori case. But whether that be so or not, where the claimant has actually completed the appointment of his own arbitrator by notifying the respondent party, I do not see why such an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act is Section 14. Its effect is as follows: (a) Where the tribunal is named or designated in the arbitration agreement, a written notice by party A to party B requiring the latter to submit to the named or designated person a particular matter or dispute starts arbitral proceedings in connection with that matter or dispute. (b) Where the tribunal is to be appointed by the parties, the arbitral proceedings in respect of a matter or dispute commence when Party A serves on Party B a written notice requiring the latter to appoint an arbitrator or agree on the appointment of an arbitrator in respect of the matter or dispute. (c) Finally, where the tribunal is to be appointed by a third party, arbitral proceedings commence in respect of a dispute or matter where Part A or Party B requests the third party to make an appointment in respect of that dispute or matter. 45. The learned author referring the decision of Nea Agrex v. Baltic Shipping [1976] 2 LR 47 states: 2-200. Well prior to the enacting of the Act, the Court of Appeal heard the case of Nea Agrex v. Baltic Shipping (The Agios Lazaros ) [1976] 2 LR 47. The notice simply stated please advise your proposals in order to settle thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the term as the said expression has been used for a certain purpose including the purpose of following statutory procedures required therefore. If the provisions of the 1940 Act applies, the procedure for appointment of an arbitrator would be different than the procedure required to be followed under the 1996 Act. Having regard to the provisions contained in Section 21 of the 1996 Act as also the common parlance meaning is given to the expression 'commencement of an arbitration' which admittedly for certain purpose starts with a notice of arbitration, is required to be interpreted which would be determinative as regard the procedure under the one Act or the other is required to be followed. It is only in that limited sense the expression 'commencement of an arbitration' qua 'a notice of arbitration' assumes significance. Section 21 vis-a-vis Section 85(2)(a) of 1996 Act: 49. The importance of the expression 'commencement of the arbitration proceeding' arises having regard to Section 85 of the 1996 Act, which reads thus: 85. Repeal and savings.-(1) The Arbitration (Protocol and Convention) Act, 1938 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 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 respondents on and after 26-1-1996 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. As seen from the affronted factual matrix, it at once becomes obvious that the demand for referring the disputes for arbitration was made by the petitioners in all these cases months before 26-1-1996, in March and April 1995 and in fact thereafter all the four arbitration suits were filed on 24-8-1995. These suits were obviously filed prior to 25-1-1996 and hence they had to be decided under the old Act of 1940. This preliminary objection, therefore, is answered by holding that these four suits will be governed by the Arbitration Act, 1940 and that is how the High Court in the impugned judgments has impliedly treated them. 53. In Thyssen Stahlunion GMBH (supra), this Court was concerned with the enforce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f that court. The only difference, therefore, appears to be that while under the Foreign Awards Act a decree follows, under the new Act the foreign award is already stamped as the decree. Thus if provisions of the Foreign Awards Act and the new Act relating to enforcement of the Foreign award are juxtaposed there would appear to be hardly any difference. Again a bare reading of the Foreign Awards Act and the Arbitration (Protocol and Convention) Act, 1937 would show that these two enactments are concerned only with recognition and enforcement of the foreign awards and do nt contain provisions for the conduct of arbitral proceedings which would, of necessity, have taken place in a foreign country. The provisions of Section 85(2)(a) in so far these apply to the Foreign Awards Act and 1937 Act, would appear to be quite superfluous. Literal interpretation would render Section 85(2)(a) unworkable. Section 85(2)(a) provides for a dividing line dependent on commencement of arbitral proceedings which expression would necessarily refer to Section 21[21], Commencement of arbitral proceedings. = Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular disput ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , would appear to be quite superfluous. A literal interpretation would render Section 85(2)(a) unworkable. Section 85(2)(a) provides for a dividing line dependent on 'commencement of arbitral proceedings' which expression would necessarily refer to Section 21 of the new Act. This Court has relied on this section as to when arbitral proceedings commence in the case of Shetty's Constructions Co. (P) Ltd. v. Konkan Rly. Construction AIR1999SC1535 . Section 2(2) read with Section 2(7) and Section 21 falling in Part I of the new Act make it clear that these provisions would apply when the place of arbitration is in India i.e. only in domestic proceedings. There is no correspondent provision anywhere in the new Act with reference to foreign arbitral proceedings to hold as to what is to be treated as 'date of commencement' in those foreign proceedings. We would, therefore, hold that on a proper construction of Section 85(2)(a) the provision of this sub-section must be confined to the old Act only. Once having held so it could be said that Section 6 of the General Clauses Act would come into play and the foreign awards would be enforced under the Foreign Awards Act. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intment of arbitrator pursuant thereto and in furtherance thereof are proceedings which are required to be taken under the 1940 Act. Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of Sub-section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who does not intend to proceed under Chapter II praying for filing of arbitration agreement in court. 60. Noticing that in Thyssen (supra) this Court was concerned with the enforcement of a foreign award and despite noticing paras 41 and 42 thereof that in respect of a foreign award, the purpose of making an award rule of court i.e. a decree has been dispensed with, rejecting the contention raised therein that the words in relation to arbitral proceedings which commenced for the purpose of the 1940 Act must be given the same meaning as contained in Rule 3 of the First Schedule appended thereto, it was held: The said rule was enacted for a different purpose. The words employed therein are entering on the reference . In Hari Shankar Lal v. Shambhunath Prasad and Ors. [1962]2SCR720 whereupon Mr. Ray relied upon, a four-judge bench of this Court held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... approach shall be applied in an arbitration proceeding. It was held that as soon as the arbitrator indicates his willingness to act as such, the proceeding must be held to have commenced. 66. In Sumitomo Heavy Industries Ltd. (supra), this Court was concerned with a case where the parties to the contract belonged to two different countries. Considering the applicability of the curial law vis-a-vis the law of the country governing the arbitration agreement, this Court was called upon to determine the question as to when a proceeding before the arbitrator commences. This Court answered the same saying that the proceeding before the arbitrator commences when he enters upon the reference and conclude with making of the award. 67. In Jupitor Chit Fund (P) Ltd. v. Shiv Narain Mehta (Dead) by Lrs. and Ors. [2000]1SCR767 , this Court was concerned with the construction of Sub-section (5) of Section 37 of the 1940 Act as in that case no notice was issued to the respondent by the appellant. It was held that for the purpose of applicability of Sub-section (5) of Section 37 of the Act fictional meaning given to the phrase commencement of an arbitration as contained in Sub-section (3) thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms of Section 37 of the Act the Court must be satisfied that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement and that the applicant was at the time when the proceedings commenced were and still remains ready and wiling to do so for the proper conduct of the arbitration. The Court, therefore, while passing an order in terms of Section 37 of the Act must satisfy that there exists a 'dispute' between the parties within the meaning of the provisions of arbitration agreement and such dispute should be referred to arbitration in accordance with the arbitration agreement. Although under Section 37 of the 1940 Act, the Court itself does not make a reference to an arbitrator but the very purpose for which the suit is stayed is that the parties may take recourse to the provisions contained in the arbitration agreement. A reference is made to the arbitrator in terms of the arbitration agreement to make a reference. (See Bhailal Manilal v. Amratlal Lallubhai Shah, AIR1963Guj141 , Dinabandhu v. Durga Prasad Jana, AIR 1919 Cal 479). 70. Once a suit is stayed by the Court the other provisions of the Arbitrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e commenced before coming into force of the 1996 Act are saved and the provisions of the 1996 Act would apply in relation to arbitral proceeding which commenced on or after the said Act came into force. Even for the said limited purpose, it is necessary to find out as to what is meant by commencement of arbitral proceedings for the purpose of the 1996 Act where for also necessity of reference to Section 21 would arise. The court is to interpret the repeal and savings clauses in such a manner so as to give an pragmatic and purposive meaning thereto. It is one thing to say that commencement of arbitration proceedings is dependent upon the fact of each case as that would be subject to the agreement between the parties. It is also another thing to say that the expression 'commencement of arbitration proceedings must be understood having regard to the context in which the same is used; but it would be a totally different thing to say that the arbitration proceedings commences only for the purpose of limitation upon issuance of a notice and for no other purpose. The statute does not say so. Even the case laws do not suggest the same. On the contrary the decisions of this Court operat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equired to be gone into even in the suit as to which of the parties thereto was in breach of the contract. Such a dispute necessarily fell within the purview of the arbitration agreement. The arbitration agreement can be invoked by a party to a dispute and not only by a person who has a claim against the other. the law does not say that only a party who has a monetary claim may invoke the arbitration agreement. The arbitration agreement was invoked by the appellant by filing an application under Section 34 of the Arbitration Act pursuant whereto or in furtherance whereof the proceeding of the suit was stayed and the matter was directed to be referred to the arbitrator. 78. The question as to whether in the facts and circumstances of this case an order for permanent injunction should be granted or not was itself a dispute within the meaning of the arbitration agreement. Evidently the stand of the appellant was that such an injunction should not be granted. The arbitrator, having regard to the scope and purport of the reference would be entitled to determine the said dispute. It is, therefore, irrelevant as to whether the appellant had any monetary claim against the respondent or not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ointment of the learned arbitrators had been made in pursuance of the order of the learned Munsif has, therefore, not been disputed. The majority of the learned Arbitrators held : The notice dated 14.9.1995 was served by the respondent. Not by the claimant. Therefore this notice is worthless. It was a non-starter. The notice contemplated is a notice by a claimant to the respondent calling upon him to appoint arbitrator for the settlement of the dispute raised in the notice by the claimant. Why should a respondent appoint an arbitrator unless the arbitrator calls upon him to do so? No respondent will be anxious to appoint an arbitrator unless the claimant first appoints the arbitrator. No defendant will save limitation for a plaintiff by giving notice unless he himself is a counter-claimant. It is always the claimants (a plaintiff) who gives notice for appointment of the arbitrator because he invokes the arbitration clause and has a dispute, unless the defendant is also a counter claimant. The claimant communicates to the respondent the nature of the dispute he has with hi and seeks resolution by arbitration. The notice contemplates in Section 37(3) is a notice of a claim. From the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstruction, meaning or operation or effect of this contract or the breach thereof shall unless amicably settled between the parties hereto; be settled by arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC), Paris, France by a sole Arbitrator appointed by the Chairman of the Arbitral Tribunal of the Court of Arbitration of ICC and the Award made in pursuance thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi, India. 85. The court proceeded on the basis that such a change in the procedure before the arbitrator is permissible if the parties agree that the new Act be applicable to the arbitral proceeding when the same is pending before the arbitrator. We are not concerned in the present case with the situation where the parties agree to change in the procedure before the arbitrator. In fact, they did not and, as noticed at the first opportunity, the appellant filed an application for a direction or clarification that the proceeding under the 1940 Act would apply. 86. In Delhi Transport Corporation (supra), factually it was held: ...The conduct of the arbitration p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... des 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. 90. It was further observed: Conclusion 3 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, the arbitrator is required to follow the said procedure. Reason being, the arbitrator is appointed on the basis of the contract between the parties and is required to act as per the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 94. 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. 95. The question for consideration in the present appeals is -- as to whether the Arbitration Act, 1940 (hereinafter referred to as the 1940 Act ) would apply in the facts and circumstances of the case or whether the case will have to be dealt with under the Arbitration Conciliation Act, 1996 (hereinafter referred to as the 1996 Act )? 96. Briefly, the facts of the case are as follows. The parties, hereto entered into an agreement on 7.4.1992 in terms whereof the first respondent herein was to m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e entering the reference. 98. The above order is a consent order by which application for stay of the suit stood disposed of. Pursuant to the consent order, the arbitrators nominated by the respective parties in turn appointed an umpire. On 19.8.1997, the parties were asked to appear. The respondent was called upon to file statement of claim. An issue arose for determination at that stage as to which of the two Acts applied to the arbitration. On behalf of the appellant, it was submitted that application under Section 34 of the 1940 Act constituted a request to refer the matter to the arbitration and consequently the request marked the commencement of the arbitration proceedings. This argument was rejected by the arbitrators on the ground that a proceeding under Section 34 of the 1940 Act was essentially a defence to the suit and it did not amount to referring a claim to arbitration. It was further held that the arbitration commenced in the present case when the claim was referred to the arbitrators on 6.5.1997. In this connection, reliance was placed on the provisions of Section 85(2)(a) of the 1996 Act. It was further held that the order dated 6.5.1997 was a consent order and con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arbitral proceedings and, therefore, the 1996 Act was applicable. 99. One of the learned arbitrators, Mr. H.L. Aggarwal in his dissenting opinion held that the arbitration proceedings commenced in the present case when the notice dated 14.9.1995 was issued by the appellant to the respondent. In this connection, he placed reliance on Section 37(3) of the 1940 Act. Questioning the majority decision of the arbitrators, the appellant herein moved an application under Section 33 of the 1940 Act in the High Court. A learned single Judge of the High Court held that in the present case the disputes were referred to for arbitration only on 6.5.1997 and, therefore, the parties have to be governed by the provisions of the 1996 Act. The Letters Patent Appeal preferred therefrom was also dismissed by a five-Judge Bench of the High Court as not maintainable. 100. Mr. Harish Salve, learned senior counsel appearing on behalf of the appellant submitted that having regard to the fact that the notice appointing the arbitrator had been served by the appellant upon the respondent as far back as 14.9.1995 in terms whereof the arbitration proceedings commenced, the 1940 Act was applicable in the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance in this connection was placed on the judgment of this Court in the case of Secy. to Government of Orissa v. Sarbeswar Rout reported in AIR1989SC2259 . It was further submitted that an arbitrator enters into a reference when he applies his mind to the differences and disputes between the parties and not prior thereto. Alternatively, it was submitted that the proceeding commences when the arbitrator enters upon the reference. Reliance was placed on the judgment of this Court in the case Sumitomo Heavy Industries Ltd. v. ONGC Ltd. reported in AIR1998SC825 . It was further submitted that in any event, the starting point for commencement of the arbitration proceedings would be when the dispute was referred to by the High Court on 6.5.1997 and not prior thereto. 104. Learned counsel for the respondent contended that in any event as the parties had agreed in terms of Clause 20 of the contract that all such arbitration proceedings shall be in accordance with and subject to the provisions of the 1940 Act or any statutory modifications or re-enactment thereof they must be deemed to have agreed that new Act shall apply. Strong reliance has been placed on the judgment of this Court in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding at the commencement of the said Act, to which the law in force immediately prior to the commencement shall continue to apply notwithstanding any repeal effected by the Act. Section 48 was a transitory provision in which the emphasis was on reference . Section 48 of the 1940 Act which corresponded to Section 25 of the English Arbitration Act 1899 was a subject of debate in larger number of matters as different dates for different stages of arbitration proceedings were provided for. 106. Since transitory provision is to be interpreted in the light of facts and circumstances existing on the date the new Act coming into force, Section 21 and 85(2) of the 1996 Act are quoted below:-- 21. Commencement of arbitral proceedings . -- Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. 85. Repeal and savings.-- (1) .... (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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts 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 (see Principles of Statutory Interpretation by G.P. Singh 8thEd. Page 188). In Thyssen's case (supra), 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 partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80; and it is also an essential first step towards the making of a default appointment under Section 10(a) of the Arbitration Act. But the arbitration has not at this stage 'commenced' in any practical sense, since there is no person or group of persons charged with any authority to determine the matters in dispute. 109. Therefore, the position in law is that before the English Arbitration Act 1996, the expression commencement of arbitration proceedings depended upon the facts of each case. There was no single conclusive test to determine 'commencement . In a case, where it was necessary to consider whether one party had taken sufficient steps for setting arbitration in motion, the court has to consider the date of setting up of arbitral tribunal. In the matter involving the scope of reference the test of the state of dispute was relevant. Therefore, the expression commencement of arbitration proceedings' had different meanings in various contexts. The learned authors have further observed that although notice to concur is an essential step, arbitration proceedings cannot be said to have commenced in practical sense till tribunal charged with authority stood duly co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case, showed that the parties had agreed to be governed by the law in force at the relevant time and such arbitration clauses were recognised under the new Act. This Court further found from the conduct of the arbitration proceedings and the participation of the parties therein that the parties had agreed to proceed under the 1996 Act and, accordingly, this Court upheld the judgment of the division bench of the High Court. In my view the said judgment applies to the present case. The point to be noted is that while construing Section 85(2) of the 1996 Act, which is a transitional provision, the terms of the arbitration clause and the conduct of the parties were taken into account. Therefore, interpretation of Section 85(2)(a) cannot be confined to Section 21 of the 1996 Act. However, in cases where the new Act is applicable one has to go by Section 21 and in which case arbitration proceedings will commence from the date when request is received by the respondent for referring the dispute to arbitration, unless the parties have agree to the contrary. 110. In the case of N.S. Nayak (supra), this court held that even in cases of pending arbitration proceedings the parties had an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96 were to apply. 112. 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. 113. In the light of what is stated above, I now refer to the facts of the present case. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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