Supreme Court observed that to have the award enforced when arbitral
proceedings commenced under the old Act under that very Act was
certainly an accrued right. In other words, all the aspects of enforceability
of an award entail an accrued right both in the person in whose favour the
award is made and against whom the award is pronounced. It will also be
noticed that the Supreme Court made it clear that for the right to accrue,
there is no necessity that legal proceedings must be pending when the new
Act comes into force. This exactly covers the situation as obtaining in the
second category of cases, where the arbitral proceedings were commenced
prior to 23.10.2015 and the award was also made prior to 23.10.2015, but
the petition under Section 34 had not yet been filed. This is the same
situation as in the present case. Thus, the pendency of any legal
proceedings or otherwise would not come in the way of determining as to
whether the right had accrued under the unamended provisions or not. We
have already noted that the Supreme Court in Thyssen (supra) observed
that the right to have the award enforced (which also comprises of the
negative right of the award debtor to not have it enforced till his objections
under Section 34 of the said Act are heard and decided) is certainly an
accrued right. Given the fact that the amended Section 36 takes away the
right of an automatic stay of enforcement of an award, it is clear that the
amendment introduced in Section 36 by virtue of the Amending Act would
definitely impinge upon the accrued right of the party against whom the
award is given after the arbitral proceedings have been held under the
unamended provisions. Since an accrued right is affected, unless a contrary
intention appears in the amending statute, the amendments would have to
be treated as prospective in operation. Prospective from the standpoint of
commencement of the arbitral proceedings.
As a result, the petitions filed by the appellants under Section 34
of the said Act would have to be considered under the unamended
provisions of the said Act and consequently, the appellants would
be entitled to automatic stay of enforcement of the award till the
disposal of the said petitions.
THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 06.01.2017
FAO (OS) No.221/2016
ARDEE INFRASTRUCTURE PVT. LTD
V
MS. ANURADHA BHATIA
CORAM:-
HON’BLE MR JUSTICE BADAR DURREZ AHMED
HON’BLE MR JUSTICE ASHUTOSH KUMAR
1. These appeals are taken up together as they arise out of the common
order dated 31.05.2016 passed in, inter alia, OMP Nos. 7 & 8 of 2016
which were petitions under Section 34 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as ‗the said Act‘). Those petitions had
been filed against an award dated 13.10.2015. The petitions were filed on
04.01.2016.
2. The appellants are aggrieved by the impugned order because the
learned single Judge has directed the appellants to deposit a sum of Rs 2.70
crores without prejudice to the rights and contentions of the parties and
subject to the deposit being made, it was directed that notice may be treated
as issued to the respondents on the objections filed by the petitioners under
Section 34 of the said Act. It was also directed that in case the amount was
not deposited by the petitioners, the objections filed by them under Section
34 of the said Act would be treated as dismissed.
3. The controversy is with regard to the application of the amended
provisions of the said Act. The amendments to, inter alia, Sections 34 and
36 of the said Act were brought about by the Arbitration and Conciliation
(Amendment) Act, 2015 (hereinafter referred to as ‗the Amending Act‘)
with retrospective effect from 23.10.2015. It is the case of the petitioners
that the petitions under Section 34 of the said Act would be governed by the
unamended provisions of, inter alia, Sections 34 and 36 and, therefore, the
petitioners would have the right of an automatic stay on the filing of the
petitions under Section 34 of the said Act. On the other hand, the
respondents argue that the amended provisions would apply and, therefore,
there would be no question of any automatic stay and that it was well
within the powers of the learned single Judge to have required the
petitioners to make a deposit of Rs 2.7 crores and to direct that in case such
a deposit was not made, the petitions under Section 34 of the said Act
would be liable to be dismissed.
4. We may point out that the notice invoking the arbitration clause was
given by the respondents on 07.06.2011. The statement of claim was filed
in February 2013 and an interim award was made on 10.07.2014. The final
award was made by the arbitral tribunal on 13.10.2015. The petitions under
Section 34 objecting to the award were, as mentioned earlier, filed on
04.01.2016. In the meanwhile, the amendments to, inter alia, Sections 34
and 36 were introduced by the Amending Act with retrospective effect from
23.10.2015. Section 26 of the Amending Act, on which the controversy
mainly hinges, reads as under:-
―26. Nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the provisions of
section 21 of the principal Act, before the commencement of
this Act unless the parties otherwise agree but this Act shall
apply in relation to arbitral proceedings commenced on or after
the date of commencement of this Act.‖
5. At this juncture, it would be necessary to also set down the
differences in Section 36 of the said Act, pre and post-amendment:-
Pre-amendment Post-amendment
36. Enforcement. – Where
the time for making an
application to set aside the
arbitral award under section
34 has expired, or such
application having been
made, it has been refused, the
award shall be enforced
under the Code of Civil
Procedure, 1908 (5 of 1908)
in the same manner as if it
were a decree of the Court.
36. (1) Where the time for
making an application to set
aside the arbitral award under
section 34 has expired, then,
subject to the provisions of
sub-section (2), such award
shall be enforced in
accordance with the
provisions of the Code of
Civil Procedure, 1908, in the
same manner as if it were a
decree of the court.
(2) Where an application to
set aside the arbitral award has
been filed in the Court under
section 34, the filing of such
an application shall not by
itself render that award
unenforceable, unless the
Court grants an order of stay
of the operation of the said
arbitral award in accordance
with the provisions of subsection
(3), on a separate
application made for that
purpose.
(3) Upon filing of an
application under sub-section
(2) for stay of the operation of
the arbitral award, the Court
may, subject to such
conditions as it may deem fit,
grant stay of the operation of
such award for reasons to be
recorded in writing:
Provided that the Court shall,
while considering the
application for grant of stay in
the case of an arbitral award
for payment of money, have
due regard to the provisions
for grant of stay of a money
decree under the provisions
for grant of stay of a money
decree under the provisions of
the Code of Civil Procedure,
1908.‖
6. There is no dispute with the proposition that if the pre-amendment
provisions of Section 36 of the said Act were to apply, the very filing and
pendency of a petition under Section 34 would, in effect, operate as a stay
of the enforcement of the award. This has been materially changed by
virtue of the amendment brought about in Section 36 of the said Act. The
post-amendment scenario is that where an application to set aside an
arbitral award is filed under Section 34 before a court, the filing of such an
application would not by itself render the award non-enforceable unless the
court granted an order of stay of operation of the arbitral award in
accordance with the provisions of Section 36(3) on a separate application
made for that purpose. Sub-section (3) of Section 36 stipulates that upon
the filing of an application for stay of operation of the arbitral award, it
would be open to the court, subject to such conditions, as it may deem fit,
to grant stay of operation of the award for the reasons to be recorded in
writing. The proviso thereto requires the court, while considering the
application for grant of stay in the case of an arbitral award for payment of
money, to have due regard to the provisions for grant of stay of a money
decree under the provisions of the Code of Civil Procedure, 1908.
7. According to the learned counsel for the petitioners, this change in
law with regard to the enforcement of an award under Section 36 of the said
Act tends to take away vested rights. Therefore, the provisions of Section 6
of the General Clauses Act, 1897 would be applicable. Section 6 of the
General Clauses Act, 1897 reads as under:-
―6. Effect of repeal. – Where this Act, or any [Central Act]
or Regulation made after the commencement of this Act,
repeals any enactment hitherto made or hereafter to be made,
then, unless a different intention appears, the repeal shall not–
(a) revive anything not in force or existing at the time at
which the repeal takes effect; or
(b) affect the previous operation of any enactment so
repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired,
accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in
respect of any offence committed against any enactment
so repealed; or
(e) affect any investigation, legal proceeding or remedy in
respect of any such right, privilege, obligation, liability,
penalty, forfeiture or punishment as aforesaid,
and any such investigation, legal proceeding or remedy may be
instituted, continued or enforced, and any such penalty,
forfeiture or punishment may be imposed as if the repealing Act
or Regulation had not been passed.‖
8. It was submitted in the context of Section 6 of the General Clauses
Act that a repeal of an enactment would not affect any right acquired or
accrued under the repealed enactment, unless a different intention appears
in the repealing Act. It was contended that Section 26 of the Amending Act
does not express any intention of retrospective application prior to
23.10.2015. It was further submitted that under the old provision, there was
no requirement for a party objecting to the award and seeking the setting
aside of the award to separately ask for stay of the award. The mere filing
of the petition under Section 34 of the said Act entailed an automatic stay
of the enforcement of the award. That vested right of automatic stay is no
longer available under the new Section 36. This, according to the learned
counsel for the petitioners, would operate only prospectively, that is, to
arbitral proceedings commenced after 23.10.2015 and not to arbitrations
commenced prior to 23.10.2015.
9. It was further contended on the strength of the Supreme Court
decision in the case of Hitendra Vishnu Thakur and Others etc. etc. v.
State of Maharashtra and Others: 1994 (4) SCC 602 that a statute which
affects substantive rights is presumed to be prospective in operation, unless
made retrospective, either expressly or by necessary intendment.
Furthermore, the law relating to forum and limitation is procedural in
nature, whereas the law relating to action and right of appeal, even though
remedial, is substantive in nature. This, according to the learned counsel
for the petitioners, would cover petitions under Section 34 of the said Act.
10. The Supreme Court decision in Jose Da Costa and Another v.
Bascora Sadasiva Sinai Narcornim and Others: 1976 (2) SCC 917 was
also referred to by the learned counsel for the petitioners to contend that the
provisions which touch a right in existence at the time of passing of a
statute, are not to be applied retrospectively in the absence of express
enactment or necessary intendment.
11. Reliance was also placed on Thirumalai Chemicals Limited v.
Union of India and Others: 2011 (6) SCC 739, wherein it was held that
though it may be true that amendments to procedural laws can be applied
retrospectively, procedural statutes which affect the rights of the parties,
cannot be applied retrospectively.
12. In this backdrop, it was submitted by the learned counsel for the
petitioners that substantive rights of the petitioners have been affected by
the amendments brought about by the Amending Act. For instance, the
new provision of Section 34 restricts the scope for challenge to an award as
compared to the earlier provisions of Section 34. Secondly, the new
Section 36 takes away the right of automatic stay which existed under the
old Section 36. This is so as now a party has to seek a stay by way of an
application under Section 36(2) of the new provisions and conditions could
be imposed on the parties even where the court grants a stay of the
enforcement of the award.
13. It was next contended by the learned counsel for the petitioners that
Section 26 of the Amending Act does not indicate any intention of
retrospective application of the amended provisions.
14. On behalf of the respondents, it was contended that Section 26 of the
Amending Act needs to be compared with Section 85(2)(a) of the said Act.
The following table sets out the two provisions:-
Comparison of Section 26 of the Amendment Act, 2015 and
Section 85(2)(a)of the 1996 Act
Section 26 under the 2015 Act Section 85(2)(a) under the
1996 Act
―Nothing contained in this Act
shall apply to the arbitral
proceedings commenced, in
accordance with the provisions
of section 21 of the principal
Act, before the commencement
of this Act unless the parties
otherwise agree but this Act
shall apply in relation to
arbitral proceedings
commenced on or after the date
of commencement of this Act.‖
―(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.‖
(Underlining added)
15. It was contended that from a comparison of the two provisions, it is
clear that the first part of Section 26 of the Amending Act uses the word
―to‖ instead of ―in relation to‖ and the expression ―in relation to‖ is used
only in the second part, whereas under Section 85(2)(a) of the said Act, the
expression ―in relation to‖ is used in both parts. A reference was made to
the Supreme Court decision in Thyssen Stahlunion Gmbh v. Steel
Authority of India Limited: 1999 (9) SCC 334. It was submitted that the
meaning of the expression ―in relation to‖ was examined in the said
decision in the context of Section 85(2)(a) by the Supreme Court. The
Supreme Court examined the applicability of the provisions of the
Arbitration Act, 1940 which had been repealed in relation to arbitration
proceedings which had commenced prior to the enactment of the said Act
(i.e., the 1996 Act). The conclusions arrived at by the Supreme Court were
as under:-
―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 171
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.
1
―17. Judgment in terms of award.—Where the court sees no cause to remit the award or any of the
matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time
for making an application to set aside the award has expired, or such application having been made, after
refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced
a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of,
or not otherwise in accordance with the award.‖
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].‖
(underlining added)
16. The Supreme Court further examined the provisions of Section
85(2)(a) of the said Act in the following manner:-
―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.2
, Mansukhlal Dhanraj
Jain3
, Dhanrajamal Gobindram4
and Navin Chemicals Mfg5
.
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
2
1988 (2) SCC 299
3
1995 (2) SCC 665
4
AIR 1961 SC 1285
5
1993 (4) SCC 320
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.
24. The contention that if it is accepted that the expression
―in relation to‖ arbitral proceedings would include proceedings
for the enforcement of the award as well, the second limb of
Section 85(2)(a) would become superfluous. We do not think
that would be so. The second limb also takes into account the
arbitration agreement entered into under the old Act when the
arbitral proceedings commenced after the coming into force of
the new Act. …….‖
―28. Section 85(2)(a) is the saving clause. It exempts the old
Act from complete obliteration so far as pending arbitration
proceedings are concerned. That would include saving of whole
of the old Act up till the time of the enforcement of the award.
This (sic Thus) Section 85(2)(a) prevents the accrued right
under the old Act from being affected. Saving provision
preserves the existing right accrued under the old Act. There is
a presumption that the legislature does not intend to limit or
take away vested rights unless the language clearly points to the
contrary. It is correct that the new Act is a remedial statute and,
therefore, Section 85(2)(a) calls for a strict construction, it
being a repealing provision. But then as stated above where one
interpretation would produce an unjust or an inconvenient result
and another would not have those effects, there is then also a
presumption in favour of the latter.
29. Enforcement of the award, therefore, has to be examined
on the touchstone of the proceedings held under the old Act.
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 of 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.‖
(underlining added)
17. It was contended on behalf of the respondents that a Division Bench
of the Calcutta High Court in Tufan Chatterjee v. Rangan Dhar: AIR
2016 Cal 213 and the Madras High Court in New Tirupur Area
Development Corporation Limited v. Hindustan Construction Company
Limited: [Application No.7674/2015 in O.P. 931/2015] have held that since
Section 26 of the Amending Act uses the expression ―to arbitral
proceedings‖ instead of ―in relation to arbitral proceedings‖, the legislative
intent was to limit its scope and, therefore, the said Section 26 could not be
extended to include post-arbitral proceedings (including court proceedings).
It was submitted that the crucial difference is in the words ―in relation to‖
in Section 85(2)(a) of the said Act which are missing from the first part of
Section 26 of the Amending Act. It was submitted that the Supreme Court
in the decision in Thirumalai (supra) was also relied upon by the Calcutta
High Court and the Madras High Court in the aforesaid judgments. It was,
therefore, submitted that since the first part of Section 26 of the Amending
Act uses the phrase ―to arbitral proceedings‖ as distinct from the expression
―in relation to arbitral proceedings‖ used in Section 85(2)(a) of the said Act,
it would, therefore, have a restrictive meaning.
18. It was also contended that the aid to Section 6 of the General Clauses
Act ought not to be resorted to because of the use of the restrictive phrase in
Section 26. This implies that the legislature deliberately and intentionally
kept the post-arbitral proceedings outside the application of the first part of
Section 26 of the Amending Act. It was also contended that the remedy
available to a party under Section 34 has not been taken away by the
Amending Act and there are only slight changes to Section 34. It was
submitted that the only vested right was with regard to the challenge to an
arbitral award which has remained intact. Section 36 relates to the
enforcement of the award. Even under the unamended provisions, the party
in whose favour the award was made was entitled for enforcement of the
award after the expiry of the period mentioned in Section 34 or after the
dismissal of a petition under Section 34. It was contended that the
disability of the party in favour of whom the award was made in executing
the award during the pendency of the petition under Section 34 under the
unamended provision only provided an interim relief and the same cannot
be said to be a vested or accrued substantive right. It was further contended
that, in any event, the interim relief has not been completely taken away
and only the stay of enforcement of an award has been made a subject
matter of an order of the court in place of an automatic stay.
19. For all these reasons, it was contended by the learned counsel for the
respondents that no interference with the impugned order was called for and
the appeals ought to be dismissed.
20. In rejoinder, it was submitted by the learned counsel for the
appellants that the decision of the Calcutta High Court in Tufan Chatterjee
(supra) sought to bifurcate the words contained in Section 26 of the
Amending Act inasmuch as it distinguished the terms ―to arbitration
proceedings‖ and ―in relation to arbitration proceedings‖ to contend that the
former means only proceedings before the arbitral tribunal, whereas the
latter refers to all proceedings including court proceedings post the award.
It was contended that if this interpretation was to be accepted, it would lead
to serious contradictions, especially in the interplay between Sections 9 and
17, where the court proceedings (in relation to arbitral proceedings which
commenced before the amendment) would be under Section 9 of the new
regime, and the arbitral proceedings (which commenced before the
amendment) would have to be under the old regime (including Section 17).
It was, therefore, contended that it would certainly not be the intention of
the Legislature to have the arbitral tribunal and the courts apply different
standards in relation to the same proceedings.
21. Consequently, it was submitted that insofar as the petitions under
Section 34 of the said Act, which have been filed in the present matters, are
concerned, they ought to be governed by the unamended provisions.
22. Let us now analyse Section 26 of the Amending Act. It is comprised
of two parts. The first part stipulates that nothing contained in the
Amending Act shall apply to the arbitral proceedings commenced in
accordance with the provisions of Section 21 of the principal Act before the
commencement of the Amending Act (i.e., on 23.10.2015), unless, of
course, the parties otherwise agree. The second part makes it clear that the
Amending Act and, consequently, the amendments brought about by it in
the said Act shall apply in relation to arbitral proceedings commenced on or
after the date of commencement of the Amending Act. It is, therefore, clear
that Section 26 bifurcates cases on the basis of the commencement of the
arbitral proceedings being ‗prior‘ or ‗on or after‘ the date of
commencement of the Amending Act. In other words, the date of
commencement of the Amending Act, that is, 23.10.2015, is what separates FAO (OS) Nos.221/16 & 222/16 Page 20 of 30
the two parts of Section 26. Insofar as the second part is concerned, there is
and can be no confusion inasmuch as the Amending Act and consequently,
the amendments brought about by it in the said Act, would clearly apply in
relation to arbitral proceedings which commence on or after the date of
commencement of the Amending Act (i.e., 23.10.2015). In other words, in
cases of any arbitral proceedings which commence on or after 23.10.2015,
the amendments would apply to the entire gamut of such proceedings.
23. An issue has been raised (and, was the subject matter of debate
before us) as to whether there was any difference in the expressions ―to the
arbitral proceedings‖ and ―in relation to arbitral proceedings‖ appearing in
the two parts of Section 26 of the Amending Act. It was contended on
behalf of the respondents that the expression ―in relation to arbitral
proceedings‖ was referable to the entire gamut of arbitration culminating in
the enforcement of the award and that the expression related not only to
proceedings before the arbitral tribunal, but also to the proceedings
emanating therefrom before the court. This was contended on the basis of
the Supreme Court decision in Thyssen Stahlunion (supra). It was also
contended on the strength of an observation in the said decision that if it
was not so, only the word ―to‖ could have sufficed. It may be recalled that FAO (OS) Nos.221/16 & 222/16 Page 21 of 30
in that decision, Section 85(2)(a) of the said Act had come up for
interpretation. That provision also comprised of two parts. But, in both
parts, the expression used was ―in relation to arbitral proceedings‖. In that
context, the Supreme Court had observed that the expression ―in relation
to‖ did not admit of a restrictive meaning and that the first limb of Section
85(2)(a) was not a limited saving clause as it saved not only the
proceedings pending at the time of commencement of the Arbitration and
Conciliation Act, 1996, but also the provisions of the Arbitration Act, 1940
for enforcement of the award under that Act (i.e., the 1940 Act). It was
contended on behalf of the respondents that in Section 26 of the Amending
Act, while the expression ―in relation to arbitral proceedings‖ is used in the
second part, in the first part the expression employed is ―to the arbitral
proceedings‖. It was, therefore, contended that the first part of Section 26
which saved the unamended provisions of the said Act only had reference
to arbitral proceedings, i.e., proceedings before an arbitral tribunal and not
to any other proceedings emanating from or related to such arbitral
proceedings, including proceedings before court.
24. It is to be seen as to whether the two limbs of Section 26, if
interpreted in the manner suggested by the respondents, exhaust all the FAO (OS) Nos.221/16 & 222/16 Page 22 of 30
categories of cases. To put it differently, does Section 26 of the Amending
Act deal with all types of cases, which could fall for consideration under
the said Act. It is clear that insofar as the second limb of Section 26 is
concerned, it takes within its fold every type of situation, which may arise
in relation to arbitral proceedings, including both proceedings before the
arbitral tribunal and court proceedings in relation thereto or connected
therewith. Therefore, insofar as the second limb is concerned, there is no
dispute that for all arbitration proceedings commenced on or after
23.10.2015, the Amending Act would apply and, therefore, the amended
provisions of the said Act would be applicable.
25. This leaves us to consider the first part of Section 26. This part saves
the application of the unamended provisions of the said Act to arbitral
proceedings.
26. Let us assume, for the time being, that the expression ―arbitral
proceedings‖ covers only those proceedings which are pending before the
arbitral tribunal and not to other proceedings which may be pending before
court or are in the process of being instituted in court. If this interpretation
were to be accepted, then it would be clear that those situations, where
arbitral proceedings commenced prior to 23.10.2015, but were not pending FAO (OS) Nos.221/16 & 222/16 Page 23 of 30
before the arbitral tribunals, would have no reference either in the first part
or the second part of Section 26 of the Amending Act.
27. To illustrate, all the arbitral proceedings, which commenced in
accordance with the provisions of Section 21 of the said Act prior to
23.10.2015, can be classified into three categories. The first category being
where the arbitral proceedings commenced prior to 23.10.2015 and were
pending before an arbitral tribunal on 23.10.2015; the second category
would be of those cases where arbitral proceedings commenced prior to
23.10.2015 and the award was also made prior to 23.10.2015, but the
petition under Section 34 seeking the setting aside of the award was made
after 23.10.2015; the third category would be comprised of those cases
where the arbitral proceedings commenced prior to 23.10.2015 and not only
the award was made prior to 23.10.2015, but the petition under Section 34
had also been instituted before court prior to 23.10.2015. The three
categories can be graphically represented as follows:-FAO (OS) Nos.221/16 & 222/16 Page 24 of 30
“Category I
Arbitral
proceedings 23/10/2015
commence award S.34 petition
t0 t1 t2
Time
Proceedings before Proceedings before court
Arbitral Tribunal
Category II Arbitral
Proceedings 23/10/2015
commence award S.34 petition
t0 t1 t2
Time
Proceedings before Proceedings before court
Arbitral Tribunal
Category III Arbitral Proceedings 23/10/2015
commence award S.34 petition
t0 t1
t2
Time
Proceedings before Proceedings before court
Arbitral Tribunal
t0 = date on which arbitral proceedings commence
t1 = date of award
t2 = date of filing of petition under Section 34 of the said Act
23.10.2015 = date on which amending act commenced.”
28. Given the three categories of cases, if the interpretation of the
respondents is accepted, then the first part of Section 26 would only deal
with the first category. In other words, there would be nothing in Section
26 of the Amending Act which pertained to the second and third categories
of cases.
29. In such a situation, it would have to be considered, independent of
Section 26 of the Amending Act, as to whether the amended provisions
applied to the said second and third category of cases. In this regard, we
may note the observations of the Supreme Court in Thyssen (supra) where,
after, considering several earlier decisions, the Supreme Court observed in
paragraph 32 (which we have already extracted above) that the principles
enunciated in the judgments show as to when a right accrues to a party
under a repealed Act. The Supreme Court observed that it is not necessary
that for the right to accrue, legal proceedings must be pending when the
new Act comes into force. Furthermore, and more importantly, the
Supreme Court observed that to have the award enforced when arbitral
proceedings commenced under the old Act under that very Act was
certainly an accrued right. In other words, all the aspects of enforceability
of an award entail an accrued right both in the person in whose favour the
award is made and against whom the award is pronounced. It will also be
noticed that the Supreme Court made it clear that for the right to accrue,
there is no necessity that legal proceedings must be pending when the new
Act comes into force. This exactly covers the situation as obtaining in the
second category of cases, where the arbitral proceedings were commenced
prior to 23.10.2015 and the award was also made prior to 23.10.2015, but
the petition under Section 34 had not yet been filed. This is the same
situation as in the present case. Thus, the pendency of any legal
proceedings or otherwise would not come in the way of determining as to
whether the right had accrued under the unamended provisions or not. We
have already noted that the Supreme Court in Thyssen (supra) observed
that the right to have the award enforced (which also comprises of the
negative right of the award debtor to not have it enforced till his objections
under Section 34 of the said Act are heard and decided) is certainly an
accrued right. Given the fact that the amended Section 36 takes away the
right of an automatic stay of enforcement of an award, it is clear that the
amendment introduced in Section 36 by virtue of the Amending Act would
definitely impinge upon the accrued right of the party against whom the
award is given after the arbitral proceedings have been held under the
unamended provisions. Since an accrued right is affected, unless a contrary
intention appears in the amending statute, the amendments would have to
be treated as prospective in operation. Prospective from the standpoint of
commencement of the arbitral proceedings.
30. Now, if the argument of the respondents is to be accepted that the
first limb of Section 26 applies only to arbitral proceedings in the sense of
proceedings before arbitral tribunals and not to court proceedings, then, it is
obvious that Section 26 is silent with regard to the second and third
categories of cases to which we have already referred above. In other
words, in respect of these categories, no contrary intention of
retrospectivity is evinced upon a reading of Section 26 of the Amending
Act. Therefore, even if we take the argument of the respondents to be
correct, the result would still be the same and, that is, that in respect of all
the arbitral proceedings commenced prior to 23.10.2015, the unamended
provisions of the said Act would continue to operate till the enforcement of
the award.
31. We may also notice that in case the argument of the respondents is to
be accepted that where arbitral proceedings commenced prior to
23.10.2015, the unamended provisions would be saved only in respect of
the proceedings before the arbitral tribunal and would not extend to court
proceedings, the same would result in serious anomalies. This is so
because the Amending Act has sought to bring about amendments in
Section 9 as well as Section 17 of the said Act. While Section 9 pertains to
interim measures which may be directed by the court prior, during arbitral
proceedings or after the making of the award, Section 17 deals with the
interim measures which may be ordered by an arbitral tribunal. If the
interpretation of the respondents is to be accepted, then, in respect of
arbitral proceedings commenced prior to 23.10.2015, the amended
provisions would apply to proceedings under Section 9 of the said Act, but
not to Section 17 thereof. This would result in a serious anomaly.
32. On the other hand, if the expression ―to the arbitral proceedings‖
used in the first limb of Section 26 is given the same expansive meaning as
the expression ―in relation to arbitration proceedings‖ as appearing in the
second limb of Section 26, then, the matter becomes very simple and does
not result in any anomaly. All the arbitral proceedings (and here we mean
the entire gamut, including the court proceedings in relation to proceedings
before the arbitral tribunal), which commenced in accordance with the
provisions of Section 21 of the said Act prior to 23.10.2015, would be
governed, subject to an agreement between the parties to the contrary, by
the unamended provisions and all those, in terms of the second part of
Section 26, which commenced on or after 23.10.2015 would be governed
by the amended provisions.
33. In view of the above analysis and discussion, we regret our inability
to agree with the view taken by the Calcutta High Court in Tufan
Chatterjee (supra). It must be reiterated that in the said Calcutta High
Court decision, the second and third categories of cases mentioned above
was not considered at all. Consequently, the arguments of the respondents
based on the reasoning adopted in Tufan Chatterjee (supra) cannot be
accepted.
34. The conclusions that we can draw from the above analysis and
discussion are:-
1) Section 26 of the Amending Act, if a narrow view of the
expression ―to the arbitral proceedings‖ is to be taken, is silent on
those categories of cases where the arbitral proceedings
commenced prior to 23.10.2015 and where even the award was
made prior to 23.10.2015, but where either a petition under
Section 34 was under contemplation or was already pending on
23.10.2015;
2) In such eventuality, the amended provisions pertaining to those
categories would apply only if they were merely procedural and
did not affect any accrued right;
3) In the facts of the present case, the amendment to Sections 34 and
36, which pertain to the enforceability of an award, certainly
affect the accrued rights of the parties;
4) As a result, the petitions filed by the appellants under Section 34
of the said Act would have to be considered under the unamended
provisions of the said Act and consequently, the appellants would
be entitled to automatic stay of enforcement of the award till the
disposal of the said petitions.
35. In sum, the impugned order, to the extent it imposes a condition on
the appellants / petitioners to deposit a sum of Rs 2.7 crores, is set aside.
There shall be no requirement of the petitioners depositing / paying a sum
of Rs 2.7 crores or any other sum as the filing of the petitions under Section
34 themselves would amount to automatic stay under the unamended
provisions of Sections 34 and 36 read together. The appeals are allowed to
the aforesaid extent. There shall be no order as to costs.
BADAR DURREZ AHMED, J
January 06, 2017 ASHUTOSH KUMAR, J
Print Page
proceedings commenced under the old Act under that very Act was
certainly an accrued right. In other words, all the aspects of enforceability
of an award entail an accrued right both in the person in whose favour the
award is made and against whom the award is pronounced. It will also be
noticed that the Supreme Court made it clear that for the right to accrue,
there is no necessity that legal proceedings must be pending when the new
Act comes into force. This exactly covers the situation as obtaining in the
second category of cases, where the arbitral proceedings were commenced
prior to 23.10.2015 and the award was also made prior to 23.10.2015, but
the petition under Section 34 had not yet been filed. This is the same
situation as in the present case. Thus, the pendency of any legal
proceedings or otherwise would not come in the way of determining as to
whether the right had accrued under the unamended provisions or not. We
have already noted that the Supreme Court in Thyssen (supra) observed
that the right to have the award enforced (which also comprises of the
negative right of the award debtor to not have it enforced till his objections
under Section 34 of the said Act are heard and decided) is certainly an
accrued right. Given the fact that the amended Section 36 takes away the
right of an automatic stay of enforcement of an award, it is clear that the
amendment introduced in Section 36 by virtue of the Amending Act would
definitely impinge upon the accrued right of the party against whom the
award is given after the arbitral proceedings have been held under the
unamended provisions. Since an accrued right is affected, unless a contrary
intention appears in the amending statute, the amendments would have to
be treated as prospective in operation. Prospective from the standpoint of
commencement of the arbitral proceedings.
As a result, the petitions filed by the appellants under Section 34
of the said Act would have to be considered under the unamended
provisions of the said Act and consequently, the appellants would
be entitled to automatic stay of enforcement of the award till the
disposal of the said petitions.
THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 06.01.2017
FAO (OS) No.221/2016
ARDEE INFRASTRUCTURE PVT. LTD
V
MS. ANURADHA BHATIA
CORAM:-
HON’BLE MR JUSTICE BADAR DURREZ AHMED
HON’BLE MR JUSTICE ASHUTOSH KUMAR
1. These appeals are taken up together as they arise out of the common
order dated 31.05.2016 passed in, inter alia, OMP Nos. 7 & 8 of 2016
which were petitions under Section 34 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as ‗the said Act‘). Those petitions had
been filed against an award dated 13.10.2015. The petitions were filed on
04.01.2016.
2. The appellants are aggrieved by the impugned order because the
learned single Judge has directed the appellants to deposit a sum of Rs 2.70
crores without prejudice to the rights and contentions of the parties and
subject to the deposit being made, it was directed that notice may be treated
as issued to the respondents on the objections filed by the petitioners under
Section 34 of the said Act. It was also directed that in case the amount was
not deposited by the petitioners, the objections filed by them under Section
34 of the said Act would be treated as dismissed.
3. The controversy is with regard to the application of the amended
provisions of the said Act. The amendments to, inter alia, Sections 34 and
36 of the said Act were brought about by the Arbitration and Conciliation
(Amendment) Act, 2015 (hereinafter referred to as ‗the Amending Act‘)
with retrospective effect from 23.10.2015. It is the case of the petitioners
that the petitions under Section 34 of the said Act would be governed by the
unamended provisions of, inter alia, Sections 34 and 36 and, therefore, the
petitioners would have the right of an automatic stay on the filing of the
petitions under Section 34 of the said Act. On the other hand, the
respondents argue that the amended provisions would apply and, therefore,
there would be no question of any automatic stay and that it was well
within the powers of the learned single Judge to have required the
petitioners to make a deposit of Rs 2.7 crores and to direct that in case such
a deposit was not made, the petitions under Section 34 of the said Act
would be liable to be dismissed.
4. We may point out that the notice invoking the arbitration clause was
given by the respondents on 07.06.2011. The statement of claim was filed
in February 2013 and an interim award was made on 10.07.2014. The final
award was made by the arbitral tribunal on 13.10.2015. The petitions under
Section 34 objecting to the award were, as mentioned earlier, filed on
04.01.2016. In the meanwhile, the amendments to, inter alia, Sections 34
and 36 were introduced by the Amending Act with retrospective effect from
23.10.2015. Section 26 of the Amending Act, on which the controversy
mainly hinges, reads as under:-
―26. Nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the provisions of
section 21 of the principal Act, before the commencement of
this Act unless the parties otherwise agree but this Act shall
apply in relation to arbitral proceedings commenced on or after
the date of commencement of this Act.‖
5. At this juncture, it would be necessary to also set down the
differences in Section 36 of the said Act, pre and post-amendment:-
Pre-amendment Post-amendment
36. Enforcement. – Where
the time for making an
application to set aside the
arbitral award under section
34 has expired, or such
application having been
made, it has been refused, the
award shall be enforced
under the Code of Civil
Procedure, 1908 (5 of 1908)
in the same manner as if it
were a decree of the Court.
36. (1) Where the time for
making an application to set
aside the arbitral award under
section 34 has expired, then,
subject to the provisions of
sub-section (2), such award
shall be enforced in
accordance with the
provisions of the Code of
Civil Procedure, 1908, in the
same manner as if it were a
decree of the court.
(2) Where an application to
set aside the arbitral award has
been filed in the Court under
section 34, the filing of such
an application shall not by
itself render that award
unenforceable, unless the
Court grants an order of stay
of the operation of the said
arbitral award in accordance
with the provisions of subsection
(3), on a separate
application made for that
purpose.
(3) Upon filing of an
application under sub-section
(2) for stay of the operation of
the arbitral award, the Court
may, subject to such
conditions as it may deem fit,
grant stay of the operation of
such award for reasons to be
recorded in writing:
Provided that the Court shall,
while considering the
application for grant of stay in
the case of an arbitral award
for payment of money, have
due regard to the provisions
for grant of stay of a money
decree under the provisions
for grant of stay of a money
decree under the provisions of
the Code of Civil Procedure,
1908.‖
6. There is no dispute with the proposition that if the pre-amendment
provisions of Section 36 of the said Act were to apply, the very filing and
pendency of a petition under Section 34 would, in effect, operate as a stay
of the enforcement of the award. This has been materially changed by
virtue of the amendment brought about in Section 36 of the said Act. The
post-amendment scenario is that where an application to set aside an
arbitral award is filed under Section 34 before a court, the filing of such an
application would not by itself render the award non-enforceable unless the
court granted an order of stay of operation of the arbitral award in
accordance with the provisions of Section 36(3) on a separate application
made for that purpose. Sub-section (3) of Section 36 stipulates that upon
the filing of an application for stay of operation of the arbitral award, it
would be open to the court, subject to such conditions, as it may deem fit,
to grant stay of operation of the award for the reasons to be recorded in
writing. The proviso thereto requires the court, while considering the
application for grant of stay in the case of an arbitral award for payment of
money, to have due regard to the provisions for grant of stay of a money
decree under the provisions of the Code of Civil Procedure, 1908.
7. According to the learned counsel for the petitioners, this change in
law with regard to the enforcement of an award under Section 36 of the said
Act tends to take away vested rights. Therefore, the provisions of Section 6
of the General Clauses Act, 1897 would be applicable. Section 6 of the
General Clauses Act, 1897 reads as under:-
―6. Effect of repeal. – Where this Act, or any [Central Act]
or Regulation made after the commencement of this Act,
repeals any enactment hitherto made or hereafter to be made,
then, unless a different intention appears, the repeal shall not–
(a) revive anything not in force or existing at the time at
which the repeal takes effect; or
(b) affect the previous operation of any enactment so
repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired,
accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in
respect of any offence committed against any enactment
so repealed; or
(e) affect any investigation, legal proceeding or remedy in
respect of any such right, privilege, obligation, liability,
penalty, forfeiture or punishment as aforesaid,
and any such investigation, legal proceeding or remedy may be
instituted, continued or enforced, and any such penalty,
forfeiture or punishment may be imposed as if the repealing Act
or Regulation had not been passed.‖
8. It was submitted in the context of Section 6 of the General Clauses
Act that a repeal of an enactment would not affect any right acquired or
accrued under the repealed enactment, unless a different intention appears
in the repealing Act. It was contended that Section 26 of the Amending Act
does not express any intention of retrospective application prior to
23.10.2015. It was further submitted that under the old provision, there was
no requirement for a party objecting to the award and seeking the setting
aside of the award to separately ask for stay of the award. The mere filing
of the petition under Section 34 of the said Act entailed an automatic stay
of the enforcement of the award. That vested right of automatic stay is no
longer available under the new Section 36. This, according to the learned
counsel for the petitioners, would operate only prospectively, that is, to
arbitral proceedings commenced after 23.10.2015 and not to arbitrations
commenced prior to 23.10.2015.
9. It was further contended on the strength of the Supreme Court
decision in the case of Hitendra Vishnu Thakur and Others etc. etc. v.
State of Maharashtra and Others: 1994 (4) SCC 602 that a statute which
affects substantive rights is presumed to be prospective in operation, unless
made retrospective, either expressly or by necessary intendment.
Furthermore, the law relating to forum and limitation is procedural in
nature, whereas the law relating to action and right of appeal, even though
remedial, is substantive in nature. This, according to the learned counsel
for the petitioners, would cover petitions under Section 34 of the said Act.
10. The Supreme Court decision in Jose Da Costa and Another v.
Bascora Sadasiva Sinai Narcornim and Others: 1976 (2) SCC 917 was
also referred to by the learned counsel for the petitioners to contend that the
provisions which touch a right in existence at the time of passing of a
statute, are not to be applied retrospectively in the absence of express
enactment or necessary intendment.
11. Reliance was also placed on Thirumalai Chemicals Limited v.
Union of India and Others: 2011 (6) SCC 739, wherein it was held that
though it may be true that amendments to procedural laws can be applied
retrospectively, procedural statutes which affect the rights of the parties,
cannot be applied retrospectively.
12. In this backdrop, it was submitted by the learned counsel for the
petitioners that substantive rights of the petitioners have been affected by
the amendments brought about by the Amending Act. For instance, the
new provision of Section 34 restricts the scope for challenge to an award as
compared to the earlier provisions of Section 34. Secondly, the new
Section 36 takes away the right of automatic stay which existed under the
old Section 36. This is so as now a party has to seek a stay by way of an
application under Section 36(2) of the new provisions and conditions could
be imposed on the parties even where the court grants a stay of the
enforcement of the award.
13. It was next contended by the learned counsel for the petitioners that
Section 26 of the Amending Act does not indicate any intention of
retrospective application of the amended provisions.
14. On behalf of the respondents, it was contended that Section 26 of the
Amending Act needs to be compared with Section 85(2)(a) of the said Act.
The following table sets out the two provisions:-
Comparison of Section 26 of the Amendment Act, 2015 and
Section 85(2)(a)of the 1996 Act
Section 26 under the 2015 Act Section 85(2)(a) under the
1996 Act
―Nothing contained in this Act
shall apply to the arbitral
proceedings commenced, in
accordance with the provisions
of section 21 of the principal
Act, before the commencement
of this Act unless the parties
otherwise agree but this Act
shall apply in relation to
arbitral proceedings
commenced on or after the date
of commencement of this Act.‖
―(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.‖
(Underlining added)
15. It was contended that from a comparison of the two provisions, it is
clear that the first part of Section 26 of the Amending Act uses the word
―to‖ instead of ―in relation to‖ and the expression ―in relation to‖ is used
only in the second part, whereas under Section 85(2)(a) of the said Act, the
expression ―in relation to‖ is used in both parts. A reference was made to
the Supreme Court decision in Thyssen Stahlunion Gmbh v. Steel
Authority of India Limited: 1999 (9) SCC 334. It was submitted that the
meaning of the expression ―in relation to‖ was examined in the said
decision in the context of Section 85(2)(a) by the Supreme Court. The
Supreme Court examined the applicability of the provisions of the
Arbitration Act, 1940 which had been repealed in relation to arbitration
proceedings which had commenced prior to the enactment of the said Act
(i.e., the 1996 Act). The conclusions arrived at by the Supreme Court were
as under:-
―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 171
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.
1
―17. Judgment in terms of award.—Where the court sees no cause to remit the award or any of the
matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time
for making an application to set aside the award has expired, or such application having been made, after
refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced
a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of,
or not otherwise in accordance with the award.‖
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].‖
(underlining added)
16. The Supreme Court further examined the provisions of Section
85(2)(a) of the said Act in the following manner:-
―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.2
, Mansukhlal Dhanraj
Jain3
, Dhanrajamal Gobindram4
and Navin Chemicals Mfg5
.
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
2
1988 (2) SCC 299
3
1995 (2) SCC 665
4
AIR 1961 SC 1285
5
1993 (4) SCC 320
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.
24. The contention that if it is accepted that the expression
―in relation to‖ arbitral proceedings would include proceedings
for the enforcement of the award as well, the second limb of
Section 85(2)(a) would become superfluous. We do not think
that would be so. The second limb also takes into account the
arbitration agreement entered into under the old Act when the
arbitral proceedings commenced after the coming into force of
the new Act. …….‖
―28. Section 85(2)(a) is the saving clause. It exempts the old
Act from complete obliteration so far as pending arbitration
proceedings are concerned. That would include saving of whole
of the old Act up till the time of the enforcement of the award.
This (sic Thus) Section 85(2)(a) prevents the accrued right
under the old Act from being affected. Saving provision
preserves the existing right accrued under the old Act. There is
a presumption that the legislature does not intend to limit or
take away vested rights unless the language clearly points to the
contrary. It is correct that the new Act is a remedial statute and,
therefore, Section 85(2)(a) calls for a strict construction, it
being a repealing provision. But then as stated above where one
interpretation would produce an unjust or an inconvenient result
and another would not have those effects, there is then also a
presumption in favour of the latter.
29. Enforcement of the award, therefore, has to be examined
on the touchstone of the proceedings held under the old Act.
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 of 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.‖
(underlining added)
17. It was contended on behalf of the respondents that a Division Bench
of the Calcutta High Court in Tufan Chatterjee v. Rangan Dhar: AIR
2016 Cal 213 and the Madras High Court in New Tirupur Area
Development Corporation Limited v. Hindustan Construction Company
Limited: [Application No.7674/2015 in O.P. 931/2015] have held that since
Section 26 of the Amending Act uses the expression ―to arbitral
proceedings‖ instead of ―in relation to arbitral proceedings‖, the legislative
intent was to limit its scope and, therefore, the said Section 26 could not be
extended to include post-arbitral proceedings (including court proceedings).
It was submitted that the crucial difference is in the words ―in relation to‖
in Section 85(2)(a) of the said Act which are missing from the first part of
Section 26 of the Amending Act. It was submitted that the Supreme Court
in the decision in Thirumalai (supra) was also relied upon by the Calcutta
High Court and the Madras High Court in the aforesaid judgments. It was,
therefore, submitted that since the first part of Section 26 of the Amending
Act uses the phrase ―to arbitral proceedings‖ as distinct from the expression
―in relation to arbitral proceedings‖ used in Section 85(2)(a) of the said Act,
it would, therefore, have a restrictive meaning.
18. It was also contended that the aid to Section 6 of the General Clauses
Act ought not to be resorted to because of the use of the restrictive phrase in
Section 26. This implies that the legislature deliberately and intentionally
kept the post-arbitral proceedings outside the application of the first part of
Section 26 of the Amending Act. It was also contended that the remedy
available to a party under Section 34 has not been taken away by the
Amending Act and there are only slight changes to Section 34. It was
submitted that the only vested right was with regard to the challenge to an
arbitral award which has remained intact. Section 36 relates to the
enforcement of the award. Even under the unamended provisions, the party
in whose favour the award was made was entitled for enforcement of the
award after the expiry of the period mentioned in Section 34 or after the
dismissal of a petition under Section 34. It was contended that the
disability of the party in favour of whom the award was made in executing
the award during the pendency of the petition under Section 34 under the
unamended provision only provided an interim relief and the same cannot
be said to be a vested or accrued substantive right. It was further contended
that, in any event, the interim relief has not been completely taken away
and only the stay of enforcement of an award has been made a subject
matter of an order of the court in place of an automatic stay.
19. For all these reasons, it was contended by the learned counsel for the
respondents that no interference with the impugned order was called for and
the appeals ought to be dismissed.
20. In rejoinder, it was submitted by the learned counsel for the
appellants that the decision of the Calcutta High Court in Tufan Chatterjee
(supra) sought to bifurcate the words contained in Section 26 of the
Amending Act inasmuch as it distinguished the terms ―to arbitration
proceedings‖ and ―in relation to arbitration proceedings‖ to contend that the
former means only proceedings before the arbitral tribunal, whereas the
latter refers to all proceedings including court proceedings post the award.
It was contended that if this interpretation was to be accepted, it would lead
to serious contradictions, especially in the interplay between Sections 9 and
17, where the court proceedings (in relation to arbitral proceedings which
commenced before the amendment) would be under Section 9 of the new
regime, and the arbitral proceedings (which commenced before the
amendment) would have to be under the old regime (including Section 17).
It was, therefore, contended that it would certainly not be the intention of
the Legislature to have the arbitral tribunal and the courts apply different
standards in relation to the same proceedings.
21. Consequently, it was submitted that insofar as the petitions under
Section 34 of the said Act, which have been filed in the present matters, are
concerned, they ought to be governed by the unamended provisions.
22. Let us now analyse Section 26 of the Amending Act. It is comprised
of two parts. The first part stipulates that nothing contained in the
Amending Act shall apply to the arbitral proceedings commenced in
accordance with the provisions of Section 21 of the principal Act before the
commencement of the Amending Act (i.e., on 23.10.2015), unless, of
course, the parties otherwise agree. The second part makes it clear that the
Amending Act and, consequently, the amendments brought about by it in
the said Act shall apply in relation to arbitral proceedings commenced on or
after the date of commencement of the Amending Act. It is, therefore, clear
that Section 26 bifurcates cases on the basis of the commencement of the
arbitral proceedings being ‗prior‘ or ‗on or after‘ the date of
commencement of the Amending Act. In other words, the date of
commencement of the Amending Act, that is, 23.10.2015, is what separates FAO (OS) Nos.221/16 & 222/16 Page 20 of 30
the two parts of Section 26. Insofar as the second part is concerned, there is
and can be no confusion inasmuch as the Amending Act and consequently,
the amendments brought about by it in the said Act, would clearly apply in
relation to arbitral proceedings which commence on or after the date of
commencement of the Amending Act (i.e., 23.10.2015). In other words, in
cases of any arbitral proceedings which commence on or after 23.10.2015,
the amendments would apply to the entire gamut of such proceedings.
23. An issue has been raised (and, was the subject matter of debate
before us) as to whether there was any difference in the expressions ―to the
arbitral proceedings‖ and ―in relation to arbitral proceedings‖ appearing in
the two parts of Section 26 of the Amending Act. It was contended on
behalf of the respondents that the expression ―in relation to arbitral
proceedings‖ was referable to the entire gamut of arbitration culminating in
the enforcement of the award and that the expression related not only to
proceedings before the arbitral tribunal, but also to the proceedings
emanating therefrom before the court. This was contended on the basis of
the Supreme Court decision in Thyssen Stahlunion (supra). It was also
contended on the strength of an observation in the said decision that if it
was not so, only the word ―to‖ could have sufficed. It may be recalled that FAO (OS) Nos.221/16 & 222/16 Page 21 of 30
in that decision, Section 85(2)(a) of the said Act had come up for
interpretation. That provision also comprised of two parts. But, in both
parts, the expression used was ―in relation to arbitral proceedings‖. In that
context, the Supreme Court had observed that the expression ―in relation
to‖ did not admit of a restrictive meaning and that the first limb of Section
85(2)(a) was not a limited saving clause as it saved not only the
proceedings pending at the time of commencement of the Arbitration and
Conciliation Act, 1996, but also the provisions of the Arbitration Act, 1940
for enforcement of the award under that Act (i.e., the 1940 Act). It was
contended on behalf of the respondents that in Section 26 of the Amending
Act, while the expression ―in relation to arbitral proceedings‖ is used in the
second part, in the first part the expression employed is ―to the arbitral
proceedings‖. It was, therefore, contended that the first part of Section 26
which saved the unamended provisions of the said Act only had reference
to arbitral proceedings, i.e., proceedings before an arbitral tribunal and not
to any other proceedings emanating from or related to such arbitral
proceedings, including proceedings before court.
24. It is to be seen as to whether the two limbs of Section 26, if
interpreted in the manner suggested by the respondents, exhaust all the FAO (OS) Nos.221/16 & 222/16 Page 22 of 30
categories of cases. To put it differently, does Section 26 of the Amending
Act deal with all types of cases, which could fall for consideration under
the said Act. It is clear that insofar as the second limb of Section 26 is
concerned, it takes within its fold every type of situation, which may arise
in relation to arbitral proceedings, including both proceedings before the
arbitral tribunal and court proceedings in relation thereto or connected
therewith. Therefore, insofar as the second limb is concerned, there is no
dispute that for all arbitration proceedings commenced on or after
23.10.2015, the Amending Act would apply and, therefore, the amended
provisions of the said Act would be applicable.
25. This leaves us to consider the first part of Section 26. This part saves
the application of the unamended provisions of the said Act to arbitral
proceedings.
26. Let us assume, for the time being, that the expression ―arbitral
proceedings‖ covers only those proceedings which are pending before the
arbitral tribunal and not to other proceedings which may be pending before
court or are in the process of being instituted in court. If this interpretation
were to be accepted, then it would be clear that those situations, where
arbitral proceedings commenced prior to 23.10.2015, but were not pending FAO (OS) Nos.221/16 & 222/16 Page 23 of 30
before the arbitral tribunals, would have no reference either in the first part
or the second part of Section 26 of the Amending Act.
27. To illustrate, all the arbitral proceedings, which commenced in
accordance with the provisions of Section 21 of the said Act prior to
23.10.2015, can be classified into three categories. The first category being
where the arbitral proceedings commenced prior to 23.10.2015 and were
pending before an arbitral tribunal on 23.10.2015; the second category
would be of those cases where arbitral proceedings commenced prior to
23.10.2015 and the award was also made prior to 23.10.2015, but the
petition under Section 34 seeking the setting aside of the award was made
after 23.10.2015; the third category would be comprised of those cases
where the arbitral proceedings commenced prior to 23.10.2015 and not only
the award was made prior to 23.10.2015, but the petition under Section 34
had also been instituted before court prior to 23.10.2015. The three
categories can be graphically represented as follows:-FAO (OS) Nos.221/16 & 222/16 Page 24 of 30
“Category I
Arbitral
proceedings 23/10/2015
commence award S.34 petition
t0 t1 t2
Time
Proceedings before Proceedings before court
Arbitral Tribunal
Category II Arbitral
Proceedings 23/10/2015
commence award S.34 petition
t0 t1 t2
Time
Proceedings before Proceedings before court
Arbitral Tribunal
Category III Arbitral Proceedings 23/10/2015
commence award S.34 petition
t0 t1
t2
Time
Proceedings before Proceedings before court
Arbitral Tribunal
t0 = date on which arbitral proceedings commence
t1 = date of award
t2 = date of filing of petition under Section 34 of the said Act
23.10.2015 = date on which amending act commenced.”
28. Given the three categories of cases, if the interpretation of the
respondents is accepted, then the first part of Section 26 would only deal
with the first category. In other words, there would be nothing in Section
26 of the Amending Act which pertained to the second and third categories
of cases.
29. In such a situation, it would have to be considered, independent of
Section 26 of the Amending Act, as to whether the amended provisions
applied to the said second and third category of cases. In this regard, we
may note the observations of the Supreme Court in Thyssen (supra) where,
after, considering several earlier decisions, the Supreme Court observed in
paragraph 32 (which we have already extracted above) that the principles
enunciated in the judgments show as to when a right accrues to a party
under a repealed Act. The Supreme Court observed that it is not necessary
that for the right to accrue, legal proceedings must be pending when the
new Act comes into force. Furthermore, and more importantly, the
Supreme Court observed that to have the award enforced when arbitral
proceedings commenced under the old Act under that very Act was
certainly an accrued right. In other words, all the aspects of enforceability
of an award entail an accrued right both in the person in whose favour the
award is made and against whom the award is pronounced. It will also be
noticed that the Supreme Court made it clear that for the right to accrue,
there is no necessity that legal proceedings must be pending when the new
Act comes into force. This exactly covers the situation as obtaining in the
second category of cases, where the arbitral proceedings were commenced
prior to 23.10.2015 and the award was also made prior to 23.10.2015, but
the petition under Section 34 had not yet been filed. This is the same
situation as in the present case. Thus, the pendency of any legal
proceedings or otherwise would not come in the way of determining as to
whether the right had accrued under the unamended provisions or not. We
have already noted that the Supreme Court in Thyssen (supra) observed
that the right to have the award enforced (which also comprises of the
negative right of the award debtor to not have it enforced till his objections
under Section 34 of the said Act are heard and decided) is certainly an
accrued right. Given the fact that the amended Section 36 takes away the
right of an automatic stay of enforcement of an award, it is clear that the
amendment introduced in Section 36 by virtue of the Amending Act would
definitely impinge upon the accrued right of the party against whom the
award is given after the arbitral proceedings have been held under the
unamended provisions. Since an accrued right is affected, unless a contrary
intention appears in the amending statute, the amendments would have to
be treated as prospective in operation. Prospective from the standpoint of
commencement of the arbitral proceedings.
30. Now, if the argument of the respondents is to be accepted that the
first limb of Section 26 applies only to arbitral proceedings in the sense of
proceedings before arbitral tribunals and not to court proceedings, then, it is
obvious that Section 26 is silent with regard to the second and third
categories of cases to which we have already referred above. In other
words, in respect of these categories, no contrary intention of
retrospectivity is evinced upon a reading of Section 26 of the Amending
Act. Therefore, even if we take the argument of the respondents to be
correct, the result would still be the same and, that is, that in respect of all
the arbitral proceedings commenced prior to 23.10.2015, the unamended
provisions of the said Act would continue to operate till the enforcement of
the award.
31. We may also notice that in case the argument of the respondents is to
be accepted that where arbitral proceedings commenced prior to
23.10.2015, the unamended provisions would be saved only in respect of
the proceedings before the arbitral tribunal and would not extend to court
proceedings, the same would result in serious anomalies. This is so
because the Amending Act has sought to bring about amendments in
Section 9 as well as Section 17 of the said Act. While Section 9 pertains to
interim measures which may be directed by the court prior, during arbitral
proceedings or after the making of the award, Section 17 deals with the
interim measures which may be ordered by an arbitral tribunal. If the
interpretation of the respondents is to be accepted, then, in respect of
arbitral proceedings commenced prior to 23.10.2015, the amended
provisions would apply to proceedings under Section 9 of the said Act, but
not to Section 17 thereof. This would result in a serious anomaly.
32. On the other hand, if the expression ―to the arbitral proceedings‖
used in the first limb of Section 26 is given the same expansive meaning as
the expression ―in relation to arbitration proceedings‖ as appearing in the
second limb of Section 26, then, the matter becomes very simple and does
not result in any anomaly. All the arbitral proceedings (and here we mean
the entire gamut, including the court proceedings in relation to proceedings
before the arbitral tribunal), which commenced in accordance with the
provisions of Section 21 of the said Act prior to 23.10.2015, would be
governed, subject to an agreement between the parties to the contrary, by
the unamended provisions and all those, in terms of the second part of
Section 26, which commenced on or after 23.10.2015 would be governed
by the amended provisions.
33. In view of the above analysis and discussion, we regret our inability
to agree with the view taken by the Calcutta High Court in Tufan
Chatterjee (supra). It must be reiterated that in the said Calcutta High
Court decision, the second and third categories of cases mentioned above
was not considered at all. Consequently, the arguments of the respondents
based on the reasoning adopted in Tufan Chatterjee (supra) cannot be
accepted.
34. The conclusions that we can draw from the above analysis and
discussion are:-
1) Section 26 of the Amending Act, if a narrow view of the
expression ―to the arbitral proceedings‖ is to be taken, is silent on
those categories of cases where the arbitral proceedings
commenced prior to 23.10.2015 and where even the award was
made prior to 23.10.2015, but where either a petition under
Section 34 was under contemplation or was already pending on
23.10.2015;
2) In such eventuality, the amended provisions pertaining to those
categories would apply only if they were merely procedural and
did not affect any accrued right;
3) In the facts of the present case, the amendment to Sections 34 and
36, which pertain to the enforceability of an award, certainly
affect the accrued rights of the parties;
4) As a result, the petitions filed by the appellants under Section 34
of the said Act would have to be considered under the unamended
provisions of the said Act and consequently, the appellants would
be entitled to automatic stay of enforcement of the award till the
disposal of the said petitions.
35. In sum, the impugned order, to the extent it imposes a condition on
the appellants / petitioners to deposit a sum of Rs 2.7 crores, is set aside.
There shall be no requirement of the petitioners depositing / paying a sum
of Rs 2.7 crores or any other sum as the filing of the petitions under Section
34 themselves would amount to automatic stay under the unamended
provisions of Sections 34 and 36 read together. The appeals are allowed to
the aforesaid extent. There shall be no order as to costs.
BADAR DURREZ AHMED, J
January 06, 2017 ASHUTOSH KUMAR, J
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