Mukundakam Sharma, J.
1. The respondent invited tenders by issuing a Notice Inviting Tender (NIT) dated 30.9.1982 for design, manufacture, erection, testing and commissioning of 'Aerial Ropeway System' for the Gandhamardan Bauxite Mines in Orissa.
2. It is specifically stated in the petition that the said tender was invited at New Delhi. The tender submitted by the petitioner as against the aforesaid Notice Inviting tender from New Delhi was received by the respondent at New Delhi and by a letter of acceptance dated 13.10.1983 sent by the respondent from New Delhi, the respondent awarded the aforesaid work on turnkey basis to the petitioner. On receipt of the said letter the petitioner also wrote to the respondent at their office at New Delhi acknowledging the letter of acceptance dated 13.10.1983 sent from New Delhi stating that the bank guarantee as sought for would be furnished. However, due to certain agitation by tribals of the locality, namely, at Paikual the field activities of the project had to be stopped. Finally by a letter dated 29.2.1988 the petitioner informed the respondent about the financial implications as a result of the suspension of the project work and requested for an ad hoc payment of Rs.50 lacs as interim relief and to issue necessary directions to Deputy General Manager to resolve the issues. On 12.6.1988, another letter was written by the petitioner to the respondent addressed to the Chairman cum Managing Director at New Delhi informing that it was more than three years since the project had been stalled. The petitioner requested the respondent to release the payment or in the alternative to agree to refer the above dispute for arbitration and to suggest the name of the sole arbitrator. As no response was received by the petitioner from the respondent as against the aforesaid letter, another letter was written by the petitioner to the respondent at New Delhi suggesting the name of Hon'ble Mr. Justice H.L. Anand (Retd. Judge) as the sole arbitrator or in the alternative Mr. A.N. Banerjee, Ex-Chairman of Balco and also stating that in case of any objection, the respondent should inform the petitioner within 15 days. On 31.8.1988, a reply dated 16.9.1988 was received from the respondent to the petitioner's letter stating that they would intimate their view by first half of September 1988. However, no further response was received from the respondent thereafter and accordingly the present petition was filed by the petitioner under Section 20 of the Arbitration Act.
3. While filing this petition, the petitioner has relied upon the clauses in the contract relating to settlement of disputes. The said clauses include the clause wherein it is provided that all disputes or differences of any kind whatsoever arising, out of or in connection with the contract whether during the progress of the works or after their completion and whether before or after the determination of the contract, would be referred to arbitration of the contractor and the sole arbitrator shall be officer of the company in case the claims in question are below Rs.50,000/- and where the claim in question exceeds Rs.50,000/- the arbitrator shall be appointed as per Indian Arbitration Act 1940 as modified from time to time. Clause 9.2.3.1.3 further provides that 'subject as aforesaid Indian Arbitration Act, 1940 and the Rules there under and any enactment or statutory modification thereof for the time being in force shall apply to the arbitration proceedings under the clause.' It is also provided that the venue of arbitration proceedings shall be the Administrative Officers of the Korba/Ratnagiri Projects. Although the said agreement also includes a clause regarding court of jurisdiction, but the said clause was left unfilled in the agreement between the parties.
4. As against the aforesaid petition filed by the petitioner, a reply is filed by the respondent contending, inter alia, that the arbitration agreement between the parties is void and that there is no territorial jurisdiction of this Court to try and decide the present case. It was also stated in the reply filed that no claim by the petitioner could be entertained as an order of restraint was passed by the government restraining Installment of any ropeway for which the aforesaid tender was invited by the respondent.
5. During the pendency of the present petition in this Court, the new Arbitration and Conciliation Act, 1996 was enacted and, thereforee, with the enactment and enforcement of the said Act, another question arises for consideration in this proceeding i.e. as to whether or not the new Arbitration Act is applicable to the facts and circumstances of the case. The issue as to whether the old Arbitration Act or the new Arbitration Act is applicable in the facts and circumstances of the present case and a decision thereon is crucial as in the present case a contention is also raised as to whether or not the arbitration agreement between the parties is valid or void. If in case the new Act is applicable, the arbitrator or the arbitral tribunal, as the case may be could decide and rule on its own jurisdiction and on objection with respect to the existence or validity of the arbitration agreement but if in case the old Arbitration Act is applicable to the facts and circumstances of the case then in that event any question as to the existence and validity of the arbitration agreement is to be decided only by the Court. The aforesaid disability on the part of the arbitrator to rule on its jurisdiction regarding existence and validity of an arbitration agreement as existing under the Act of 1940 is now removed by incorporating a provision of Section 16 of the Arbitration and Conciliation Act, 1996. Now, Section 16 has conferred power and jurisdiction on the arbitrator or the arbitral tribunal, as the case may be to decide and rule on existence and validity of an arbitration clause between the parties.
6. In the light of the aforesaid decision and in the light of the pleadings of the parties, the following issues were framed in the present case:
i) Whether this Court has no jurisdiction to entertain and try the present petition?
ii) Whether there exists a valid, subsisting arbitration agreement between the parties?
iii) Whether the petitioner has properly invoked the arbitration clause?
iv) What are the disputes required to be referred to arbitration.
7. Since a serious contention is raised by the respondent with regard to the territorial jurisdiction of this Court, the said dispute and the plea not only goes to the root of the matter but also even concerns the jurisdiction of this Court to entertain and decide the present issue and, thereforee, I prefer to decide the said issue at the very threshold.
8. The aforesaid plea regarding the jurisdiction to entertain and try the present petition arises for consideration on the basis of the contention of the respondent as raised in para 4 of the reply wherein it is stated thus:
'4. This Hon'ble Court has no jurisdiction to entertain the present petition inasmuch as according to the terms of he Agreement based on the Invitation to Tender and General Conditions of the Contract, all disputes arising out of or in any connected with the Agreement are deemed to have arisen in Billaspur/Rattanagiri and only the Courts in Billaspur/Rattanagiri shall have jurisdiction to determine the same. The present petition, is thereforee, liable to be rejected accordingly.'
9. I have heard the counsel appearing for the parties on the aforesaid plea, who have painstakingly taken me through the relevant records concerning the said issue. On perusal of the said record, I find no such provision either in the general invitation to tender or the general conditions of contract providing that only Courts in Billaspur/Rattanagiri would have jurisdiction to determine the disputes. In the notice inviting tender to which reference is made earlier in the discussion, the clause of jurisdiction of the court has been left blank. It is also stated in the NIT that the venue of the arbitration proceeding shall be the Administrative Officers of Billaspur/Rattanagiri/Rattanagiri Project. The said clause in my considered opinion neither vests nor conclusively determines the territorial jurisdiction of the court. The same only provides for the venue of the arbitration proceeding. The petitioner has stated in paragraph 12 of the petition as under:
'The agreement was entered at Delhi, The respondent has its Head Office at Delhi, correspondence and meetings took place at Delhi, thereforee, Delhi Courts have jurisdiction in the matter.'
10. The documents placed on record indicate that the letter of acceptance of the offer of the petitioner was sent from Delhi by the respondent to the petitioner, which is indicated from the letter dated 13.10.1983, which is annexure-C of the petition. The said letter was sent intimating the petitioner of the award of the work in its favor for installation of the aforesaid Aerial Ropeway System wherein it was stated that the technical and commercial offer of the petitioner for installation of Aerial Ropeway System is accepted on the terms and conditions broadly mentioned in the said letter. It was also stated in the said letter that other terms and conditions of the contract would be as per notice inviting tender, the technical and commercial offers and various minutes of meeting and correspondence exchanged and terms agreed upon by the both parties. The said letter was issued by the respondent in their letter head with letter No.HO/CME/210(1)/417. The said letter is, thereforee, shown to have been issued from the head office. Registered office of the petitioner is also located at New Delhi. It is, thereforee, established from the aforesaid letter that the offer of the petitioner was submitted at Delhi and the said offer of the petitioner was accepted in Delhi and the said acceptance was sent by post from Delhi. An offer when accepted by post gives rise to a contract which is complete at the place from where the letter of acceptance is posted. Section 4 of the Contract Act, which reads as follows, requires consideration:-
'Sec.4: Communication when complete.- The communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.
The communication of an acceptance is complete. -
as against the proposer, when it is put in a course of transmission to him so as to be out of the power of the acceptor;
as against the acceptor, when it comes to the knowledge of the proposer.
11. Section 20 of the Civil Procedure Code decides and identifies the Court which shall have the jurisdiction to decide a suit. There is no dispute with regard to the fact that even in respect of a petition filed under the Arbitration Act, the provisions of Section 20 CPC would determine and guide the place where the proceeding is to be instituted. thereforee, the said provisions also require consideration, which read as follows:-
'20. Other suits to be instituted where defendants reside or cause of action arises.- Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdiction -
(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain; or
(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain provides that in such case either the leave of the Court is given, or the defendants who do not reside, or carry or business, or personally work for gain, as aforesaid, acquiesce in such institution; or
(c) the cause of action, wholly or in part arises.
12. There is an Explanationn also added to the said provision. However, the said Explanationn has no applicability to the facts and circumstances of the present case and, thereforee, the same is not extracted. The aforesaid provision clearly establishes that a suit can be instituted in a Court within the local limits of whose jurisdiction the defendant or each of the defendants where there are more than one, actually and voluntarily resides, or carries on business, or personally works for gain or in a Court within the local limits of whose jurisdiction the cause of action in whole or in part arises. The said provision has been subject matter of discussion in various decisions of the Supreme Court and also of this Court.
13. In M/s Progressive Constructions Ltd. v. Bharat Hydro Power Corporation Corporation Ltd. reported in AIR 1996 Del. 92, this Court has clearly held that in view of Section 4 of the Contract Act when offered and offeree are not at at one place and are exchanging the offer and acceptance through post then the contract would be deemed to have been entered into at the place where the offer was received and the acceptance was posted and that the place of delivery of acceptance is irrelevant and does not provide any cause of action. It was further held that merely by placing reliance on the delivery of the letter of acceptance of offer, suit by reference to Section 20(c) CPC cannot be filed at the place where the letter of acceptance was delivered for delivery of the letter of acceptance is not a part of the cause of action.
14. The aforesaid conclusion was arrived at by this Court after taking notice of the decision of the Calcutta High Court in American Pipe Co. v. State of U.P. reported in AIR 1983 Cal 186, wherein the Division Bench of the Calcutta High Court held that since acceptance of the offer was admittedly posted in U.P. and the said acceptance took place as soon as it was posted at U.P., receipt of the same by a party in Calcutta within the jurisdiction of the Calcutta High Court would not form any part of the cause of action and, thereforee, as no part of the cause of action arose within the jurisdiction of the Calcutta High Court it has no jurisdiction to entertain and/or try the suit. Reference was also made to the decision of the Supreme Court in Bhagwan Dass Kedia v. Girdhari Lal reported in : [1966]1SCR656 wherein it was held by the Supreme Court that the contract was complete when the letter of acceptance of tender was posted in Calcutta and also because the contract was entered into at Calcutta. It was further held that the delivery of letter of acceptance at Delhi is wholly inconsequential, for it does not provide accrual of cause of action or part thereof in Delhi.
15. In paragraph 15 of A.B.C. Laminart Pvt. Ltd. and another v. A.P. Agencies, Salem, the Supreme Court has held thus:
'15. In the matter of a contract there may arise causes of action of various kinds. In a suit for damages for breach of contract the cause of action consists of the making of the contract, and of its breach, so that the suit may be filed either at the place where the contract was made or at the place where it should have been performed and the breach occurred. The making of the contract is part of the cause of action. A suit on a contract, thereforee, can be filed at the place where the contract was made. The determination of the place where the contract was made is part of the law of contract. But making of an offer on a particular place does not form cause of action in a suit for damages for breach of contract. Ordinarily, acceptance of an offer and its intimation result in a contract and hence a suit can be filed in a court within whose jurisdiction the acceptance was communicated. The performance of a contract is part of cause of action and a suit in respect of the breach can always be filed at the place where the contract should have (been) performed or its performance completed. If the contract is to be performed at the place where it is made, the suit on the contract is to be filed there and nowhere else.'
16. thereforee, once the tenders were accepted and acceptance was communicated to the petitioner from New Delhi the ratio of the judgment of the Supreme Court in A.B.C. Laminart Pvt. Ltd. and another v. A.P. Agencies, Salem would squarely apply and, thereforee, it must be held that Courts at Delhi shall have jurisdiction to entertain such suits.
17. In the light of the aforesaid discussion, it is established in the present case that cause of action in the present case also arises in part in New Delhi and, thereforee, this Court shall have territorial jurisdiction to entertain and decide the present proceeding.
18. Having decided the said issue in the aforesaid manner, I now proceed to decide the issue as to whether the Arbitration Act, 1940 or the Arbitration and Conciliation Act, 1996 is applicable to the facts and circumstances of the present case. It is already indicated that in case it is held that the Arbitration Act, 1940 is applicable then in that event the plea that is raised by the respondent that the arbitration agreement in the present case is not valid and is void shall have to be considered as the aforesaid objection with regard to the legality and validity of the arbitration agreement under the Arbitration Act, 1940 cannot be left to be decided by the arbitrator but the same must be decided by this Court. In order to decide the said issue, one has to take notice of the provisions of Section 85 of the Arbitration and Conciliation Act, which are the provisions of Repeal and Savings of the Arbitration Act, 1940 and other connected Acts. Sub-section (2) of Section 85 provides as follows:
'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;
(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.'
19. The aforesaid provision came to be interpreted by the Supreme Court in various decisions rendered. In Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd. reported in : AIR1999SC3923 , it was held that Section 85(2)(a) prevents the accrued right under the old Act from being affected inasmuch the saving provision preserves the existing right accrued under the old Act. It was also held in that context that 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, for it was certainly a right accrued.
20. In paragraph 22 of the said judgment, the Supreme Court recorded conclusions and the relevant part of it is extracted herein below:
'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, 1966).
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 17 thereof and also appeal arising there under.
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 . xx xx xx xx'
21. In paragraph 23 of the said judgment, it was held thus by the Supreme Court:
'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.'
22. In para 35 of the said judgment, the Supreme Court held that :
'Parties can agree to the applicability of the new Act even before the new Act comes into force and when the old Act is still holding the field. There is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing. There is, however, a bar that they cannot agree to the applicability of the old Act after the new Act has come into force when arbitral proceedings under the Old Act have not commenced though the arbitral agreement was under the old Act.'
23. Reference may be made to another decision of the Supreme Court in N.S. Nayak & Sons v. State of Goa reported in : (2003)6SCC56 . In the said decision, the Supreme Court analysed the decision of Thyssen's case (supra) and held that in such cases where the arbitral proceedings commenced under the old Act, it is an accrued right to proceed in accordance with that law and it would be the old Act which would apply even for enforcing the award. It was again held in the said decision that in para 22 of Thyssen's case it is nowhere laid down that after the new Act came into force, even appeals filed under the provisions of old Act are to be decided on the basis of the provisions contained in the new Act. By reference to para 22 in Thyssen's case (supra), it was held by the Supreme Court in N.S. Nayak's case (supra) that in terms of conclusion-1, the provisions of old Act would apply in relation to arbitral proceedings which commenced before coming into force of the new Act and in terms of conclusion-2 the proceedings would cover not only proceedings pending before the arbitrator but also cover the proceedings before the Court and in any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising there under. Conclusion-3 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.
24. In paragraph 16 of the judgment, the findings and the conclusions of the Court are recorded thus:-
'The aforesaid discussion only deals with the contention that parties could not have agreed to the application of the New Act till they had the knowledge about the provisions thereof and, thereforee, the agreement to the effect that to the arbitral proceedings, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof would be applicable, is not valid. The Court negatived the said contention by interpreting the expression 'unless otherwise agreed'. The Court held that such agreement could be entered into even before coming into force of the New Act. However, it nowhere lays down that in a pending arbitral proceeding, which was being conducted as per the procedure prescribed under the Old Act, the parties have option of changing the procedure.'
25. In the present case there was a specific agreement between the parties providing for application of 1940 Act and rules there under and any enactment or statutory modification thereof from time to time. Section 85(2)(a) of the Arbitration and Conciliation Act provides that the provisions of Arbitration Act, 1940 would apply in relation to arbitral proceedings which commenced before the Arbitration and Conciliation Act came into force, unless otherwise agreed to by the parties. Then again the Arbitration and Conciliation Act would apply in relation to arbitral proceedings which commenced on or after Arbitration and Conciliation Act came into force. It is, thereforee, crystal clear from the aforesaid provisions that the new Act would automatically apply to such arbitral proceedings which have commenced on or after coming into force of the new Act. However, in respect of the arbitration proceeding which commenced before the new Act came into force, the old Act would continue to apply unless parties agreed otherwise meaning thereby that if the parties to the arbitral proceeding had agreed that the statutory modification or re-enactment to the Arbitration Act, 1940 would be applicable in such an event the provisions of the new Act would be applicable. Reliance was placed by the counsel for the respondent on the concluding part of the paragraph 16 of the judgment in the case of N.S. Nayak (supra). It is observed therein that where arbitration proceeding had commenced and pending, the parties cannot be asked to change the procedure because of a reenactment. There is no dispute with the said proposition. But the same shall have no application in the present case, as no arbitration proceeding had ever commenced under the old Act in the present case. If, however, it had commenced according to the provisions of the old Act, the position would have been certainly different, in which case the aforesaid proposition of law laid down by the Supreme Court would have also been applicable.
26. In The Secretary to the Govt. of Orissa v. Sarbeswar Rout reported in : AIR1989SC2259 , the Supreme Court held that as soon as the arbitrator communicates his willingness to act as such arbitrator, the arbitration proceedings must be held to have commenced.
27. It was sought to be contended by the counsel appearing for the respondent that the parties never intended in the present case that any re-enactment of the Arbitration Act would be applicable as no such clause exists in the arbitration agreement between the parties.
28. I have carefully perused the expression used in the aforesaid agreement providing that the provisions of the Arbitration Act, 1940 and the Rules there under and any enactment or statutory modification thereof for the time being in force shall apply to the arbitration proceedings under the clause. Although the word 're-enactment' does not exist in the said clause, expression 'any enactment' is used in the expression and is a part of the said clause, which would definitely mean and include the word 're-enactment' also and, thereforee, the aforesaid clause is a similar clause to that of the case of Rani Construction, which was noticed by the Supreme Court in Thyssen's case. In view of the said provisions and in the light of the earlier decisions of this Court in Sukumar Chand Jain v. DDA reported in (99) 2002 (99) DLT 3, I hold that the parties in the present case were clear in their mind that re-enactment, if any, would govern the arbitration proceedings. It is settled law that the parties can also agree that the provisions of the Arbitration Act existing at that time would apply to the arbitration proceedings and that it is not necessary for the parties to know what law would be in force at the time of conducting of the arbitration proceedings and they can always agree that the provisions that are in force at the relevant time would apply.
29. thereforee, in the light of the decisions of the Supreme Court in Thyssen's case (supra), I hold that the provisions of the new Act would apply to the facts and circumstances of the present case and, thereforee, the present petition, which is filed under Section 20 of the Arbitration Act is converted to a petition under Section 11 of the Arbitration Act.
30. Under the provision of Section 16 of the Act, power and jurisdiction is vested on the arbitrator to rule on its own jurisdiction. thereforee, all the pleas with regard to jurisdiction and existence and validity of an arbitration agreement could be adjudicated upon and decided by the arbitrator. Consequently, all the pleas raised by the respondent in respect of the transaction and relating to existence and validity of the arbitration agreement could be left to be decided by the arbitrator. Accordingly, the issues raised herein are answered accordingly. By exercising the powers under Section 11 of the Act, I appoint Hon'ble Mr. Justice Arun B. Saharya, retired Chief Justice of the Punjab & Haryana High Court (A-22, Niti Bagh, New Delhi-110049 Ph.26525334) as the sole arbitrator to adjudicate and decide the disputes arising between the parties. The parties shall file their claims and counter claims and take all pleas before the arbitrator which when raised shall be appropriately decided by the arbitrator. It shall be open to the learned arbitrator to fix his own remuneration after discussion with the parties. The petition stands disposed of in terms of the aforesaid order leaving the parties to bear their own costs.