| SooperKanoon Citation | sooperkanoon.com/727622 |
| Subject | Arbitration |
| Court | Kerala High Court |
| Decided On | Jun-02-2009 |
| Case Number | CRP. No. 222 of 2007 |
| Judge | Harun-Ul-Rashid, J. |
| Reported in | 2009(2)KLJ451 |
| Acts | Arbitration Act, 1940 - Sections 20; Arbitration and Conciliation Act, 1996 - Sections 16(2), 18, 19(3), 21, 22(3), 23(3), 31(5), 32, 34, 85 and 85(2); Arbitration (Protocol and Convention) Act, 1937; Foreign Awards (Recognition and Enforcement Act), 1961 |
| Appellant | M.N. Babu |
| Respondent | The Secretary |
| Appellant Advocate | Raju Abraham Pulpara, Adv. |
| Respondent Advocate | M.K. Pushpalatha, SC, Cochin Corporati |
| Disposition | Petition allowed |
| Cases Referred | Inder Sain Mittal v. Housing Board |
Harun-Ul-Rashid, J.
1. Petitioner/award holder in E.P. No. 104/2005 on the file of the IInd Additional District Judge, Ernakulam is the revision petitioner herein.
2. The award holder filed a suit, O.S. No. 156/95 before the Sub Court, Ernakulam under Section 20 of the Arbitration Act, 1940. The suit was decreed on 21/7/1999. By the said decree the Sub Court appointed Sri Babu Thomas. K. as sole Arbitrator to pass an award by arbitrating the disputes between the parties and to file the same in court within six months from the date of the decree.
3. The decree holder thereafter filed I.A. No. 6051/99 for communicating the order and forwarding the records produced by him to the Arbitrator. The said IA was allowed on 12/12/2001. The court below ordered that the Arbitrator shall complete the arbitration and shall file the award before the Sub Court within six months from the date of receipt of the communication ordered in I.A. No. 6051/99. The Arbitrator conducted an enquiry and an award was passed on 18/12/2003. After passing the award, the decree holder filed E.P. No. 61/04 for execution of the award. The said E.P. was withdrawn with permission from the court below to file a fresh execution petition, when the respondent challenged the executability of the award while an application under Section 34 of the Act is pending. Thereafter E.P. No. 104/05 was filed for execution.
4. The respondent filed objection stating that the Arbitrator was appointed not under the Arbitration and Conciliation Act, 1996; but was appointed under Section 20 of the Arbitration Act, 1940 and the Sub Court has directed the Arbitrator to file the award before the Sub Court within six months and therefore it was incumbent upon the Arbitrator to file the Arbitral award before the Sub Court for approval. Since the Sub Court has not approved the arbitral award under the provisions of the Arbitration Act, 1940, the decree holder is not entitled to execute the award.
5. Originally, the court below rejected the preliminary point raised by the respondent regarding the maintainability of the execution proceedings and directed the decree holder to proceed with the execution of the award. In CRP.No.461/06 filed by the respondent, this Court set aside the order and directed the court below to re-consider the matter and decide whether the parties have given their consent to proceed under Section 85(2) of the Arbitration and Conciliation Act, 1996. This Court further observed that the mere fact that the Arbitrator had made a statement in the award to the effect that he had proceeded under the Arbitration and Conciliation Act, 1996 alone is not a ground to hold that the parties have given their consent under Section 85(2)(a) of the Act. After remand, the decree holder was examined as PW-1 and marked Exts.A1 to A3 on his side. The documents pertaining to the arbitration proceedings were marked as Exts.C1 to C19. The maintainability of execution petition and the question of consent under Section 85(2)(a) of the Arbitration and Conciliation Act 1996 was re-examined by the court below. After elaborately discussing the issue, the court below held that the execution petition is not maintainable and further directed that the parties should take steps to direct the Arbitrator to file his award before the Sub Court for approval under the provisions of the Arbitration Act, 1940. The short but the important question arises for consideration by this court is 'did the parties to the execution petition consent to proceed under Section 85(2)(a) of the Arbitration an Conciliation Act, 1996.' Section 85(2)(a) of the Arbitration and Conciliation Act reads as follows:
Repeal and Saving:
(1) The Arbitration (Protocol and Convention) Act, 1937 (VI of 1937), the Arbitration Act, 1940 (X of 1940) and the Foreign Awards (Recognition and Enforcement Act), 1961 (XLV of 1961) are hereby repealed.
(2) Notwithstanding such repeal,-
(a) the provisions of the said enactment 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.
6. A reading of the above said provision shows that despite repeal of Arbitration Act, 1940, the provisions of the said enactments shall be applicable in relation to the arbitral proceedings which commenced prior to coming into force of the new Act. The new Act came into force on 25/6/1996. Section 21 of the said Act alone is relevant for consideration. Section 21 of the Act reads as follows:
Commencement of arbitral proceedings: Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
7. It is settled law that on a conjoint reading of Section 21 and Section 85(2)(a) of the new Act, the request by a party for referring the disputes for arbitration on or after 26/1/1996, the proceedings will be governed by the old Act. If a demand for referring the disputes for arbitration was made by a party before 26/1/1996 by filing the suit, since the suit is obviously filed prior to 26/1/1996, it is to be decided under the Arbitration Act, 1940. The only exception considered is that unless otherwise agreed by the parties, the old Act shall apply. The provisions of the Arbitration Act, 1940 shall consequently apply in relation to the arbitral proceedings which commenced on or after the the new Act coming into force.
8. The Supreme Court in Neeraj Munjal and Ors. v. Atul Grover and Anr. : AIR2005SC2867 held that the court of law has no jurisdiction to direct a matter to be governed by one statute when provisions of another statute are applicable. It also held that if a party to the lis has a right to question an award in terms of the 1940 Act, no court has the requisite jurisdiction to deprive him therefrom. It is a case which originated before coming into force of the 1996 Act, the Supreme Court held that it did not have any jurisdiction to direct that the award should be enforced in terms of the provisions of the 1996 Act which was not applicable and that the Court could not have deprived the parties from a remedy which is otherwise available to them in law. The Supreme Court in Milkfood Ltd. v. GMCICE Cream (P) Ltd. : (2004)7SCC288 interpreting Section 85 of the Act 1996 the same view was taken and held that those arbitral proceedings which were commenced before coming into force of the 1996 Act and the provisions of the 1996 Act could not apply in relation to the arbitral proceedings which commenced on or after the said act came into force. The Apex Court held that the commencement of arbitral proceeding is depending upon the fact of each case subject to the agreement between the parties. The Supreme Court has applied the meaning given to the expression 'commencement of the arbitral proceedings' under Section 21 of the 1996 Act for the purpose of applicability of the 1940 Act having regard to Section 85(2)(a) thereof, service of notice for appointment of an Arbitrator would be the relevant date for the purpose of commencement of the arbitration proceeding.
9. Thyssen Stahlunion GMBH v. Steel Authority of India Ltd. : AIR1999SC3923 was also followed by the Apex Court in the decision referred to above, which considered the applicability of the 1996 Act to the pending arbitral proceedings. The Apex Court held that the 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, that there is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing and that 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. The Apex Court further proceeded to consider the expression 'unless otherwise agreed' as appearing in Section 85(2)(a) of the new Act, by which the parties agree that any future dispute shall be referred to arbitration does not render the contract illegal. That being so, parties can also agree that the provisions of the arbitration law existing at that time would apply to the arbitral proceedings, that it is not necessary for the parties to know what law will be in force at the time of the conduct of arbitration proceedings and therefore they can always agree that provisions that are in force at the relevant time would apply. The Apex Court further held that when the agreement uses the expressions 'unless otherwise agreed' and 'law in force' it does give option to the parties to agree that new Act would apply to the pending arbitration proceeding.
10. The question to be decided in this case depends on the facts of this case. The date of agreement between the parties is 31/5/1985. On 26/4/1994 the respondent issued notice for appointment of the Arbitrator. 21/10/1999 is the date of the decree in O.S. No. 156/95. Arbitrator was appointed by order dated 12/12/2001 in I.A. No. 501/99. The court below directed the Arbitrator to complete the arbitration and file his award before it within six months from the date of receipt of the order. The learned Sub Judge intimated the appointment of the Arbitrator by a communication dated 9/1/2002. On receiving the intimation regarding his appointment, the Arbitrator initiated arbitration proceedings by issuing notice dated 14/1/2002 to the parties under the Arbitration and Conciliation Act, 1996. The intimation dated 9/1/2002 addressed to the Arbitrator is produced as Annexure-1. The learned Sub Judge informed the Arbitrator that as per order dated 12/12/2001 you are appointed as Sole Arbitrator in O.S. No. 156/95 to pass an award by adjudicating disputes between the parties as promulgated under the Arbitration and Conciliation Act, 1996. On the basis of Annexure-1 the Arbitrator issued notice dated 14/1/2002 referred to above which is produced as Annexure-II. Notice is titled 'in the matter of Arbitration and Conciliation Act, 1996'. By Annexure-II notice the claimant was directed to file a detailed statement of facts and claims along with documents and the respondent was directed to submit statement of defence. Annexure-III is a statement of defence dated 5/8/2002 submitted by the respondent. In Annexure-III statement of defence the title reads 'in the matter of Arbitration and Conciliation Act, 1996'. An additional statement was filed by the respondent on 7/6/2003. The said statement also contains a heading 'in the matter of Arbitration and Conciliation Act, 1996'. Annexur-VI is a notice dated 23/5/2003 issued by the Arbitrator granting further time to produce documents pertaining to the work contract in question. In Annexure-VI notice also titled 'in the matter of Arbitration and Conciliation Act, 1996'. It is stated in the said notice that in view of Sections 18, 19(3), 22(3), 23(3) and 32 of the Arbitration and Conciliation Act 1996, the Tribunal considered it appropriate to allow the application for reopening of the evidence and to accept the amended statement of facts and claims. Annexure-VII is another notice issued by the Arbitrator which also titled 'in the matter of Arbitration and Conciliation Act, 1996'.
11. Annexure-I is the intimation dated 9/1/2002 issued by the learned Sub Judge to the Arbitrator informing him about his appointment as Arbitrator and directing him to pass an award in accordance with the provisions of the Arbitration and Conciliation Act. Direction itself was to proceed under the new Act. The revision petitioner filed claim statement under the new Act. Statement of defence filed twice are also under the provisions of the new Act. Notices were sent by the Arbitrator under the new Act. The award was passed by the Arbitrator on 18/12/2003 under Section 31(5) of the Act, a signed copy of which was issued to the parties. It is true that the suit was filed under Section 20 of the Arbitration Act, 1940. The suit was decreed in 1999 when the new Act was in force. In 2001 the learned Sub Judge directed the Arbitrator to conduct arbitration proceedings and pass an award. The materials above show that the arbitration proceedings was initiated under the old Act when the request was made for appointment of the Arbitrator. As directed by the learned Sub Judge in Annexure-1 the Arbitrator initiated and completed the arbitration proceedings under the new Act. It is worthy to note that the appointment of the Arbitrator was made after coming into force of the new Act and the parties participated in the arbitration proceedings with the understanding and belief that the proceedings were governed by the 1996 Act. It is also worthy to note that neither parties had objected to the arbitration proceedings to be governed by 1996 Act; but in fact the parties had expressed their intention to proceed under the new Act. The conduct of the arbitral proceedings and the participation of the parties therein shows that the parties acted under 1996 Act. The Arbitrator also rightly proceeded on that basis and gave his award under 1996 Act.
12. The conduct of the respondent in the above said factual matrix is very important. The Arbitrator commenced proceedings by issuing Annexure-II notice dated 14/1/2002. In that notice the Arbitrator informed the parties that arbitration proceedings are being commenced under the provisions of the Arbitration and Conciliation Act, 1996. After receiving the said notice, the respondent, who is now objecting the enforcement of the award, submitted Annexure-III statement of defence on 5/8/2002. The same was filed under the Arbitration and Conciliation Act, 1996. Subsequently, he filed an additional statement on 7th June, 2003, under the provisions of the new Act, which is marked as Annexure-V. The parties filed documents and participated in the proceedings under the clear understanding that the proceedings are initiated, continued and going to be completed under the Arbitration and Conciliation Act, 1996. Such a party cannot be allowed to turn round after the award goes against him by taking a chance and is estopped from challenging validity or otherwise of the arbitration proceedings. When the matter was pending before the Arbitrator, the respondent has no case that the proceedings initiated or continued by the Arbitrator under the new Act is illegal or un-enforceable. At the same time, the respondent appeared and participated in the proceedings with the firm belief and understanding that the proceedings are going on under the new Act. He will be precluded from raising the point, after making of the award. Therefore, by their conduct by participating in the arbitration proceedings without any protest the parties would be deemed to have waived their right to challenge validity of the proceedings and the awards, consequently, the objection taken to this effect did not merit any consideration. The respondent with open eyes agreed to go to arbitration and then participated in the proceedings.
13. The Apex Court in Inder Sain Mittal v. Housing Board, Haryana and Ors. : [2002]2SCR5 held that if a party acquiesced to the invalidity by his conduct by participating in the proceedings and taking a chance therein, such party cannot be allowed to turn round after the award goes against him and is estopped from challenging validity or otherwise of the reference , arbitration proceedings and/or award inasmuch as right of such a party to take objection is defeated.
14. The aforesaid facts definitely conclude that there is consent under Section 85(2)(a) of the new Act. The said Section does not insist consent in writing. Even after the decree the parties can give consent to proceed under the new Act. There is positive consent on the part of the respondents, clear cut and without ambiguity. This is a case where there is consent with positive acts. Moreover, by Annexure-I intimation, the court below directed the Arbitrator to arbitrate the disputes under the Arbitration and Conciliation Act. The Arbitrator had proceeded under the new Act for which consent was given by the positive acts of the parties. The term 'consent' according to Law Lexicon, is a legal term and is of wider import as if includes with express and implied consent. 'To consent' means, according to the Concise Oxford Dictionary, 'to acquiesce' or to agree'.
15. The Respondent also failed to challenge the proceedings by raising a contention before the Arbitrator that he does not have jurisdiction to proceed under the new Act. He did not choose to take up such a plea under Section 16(2) of the new Act. It is also pertinent to note that when the revision petitioner filed an application under Section 23(3) of the new Act for amending his claim and reopen the evidence, the respondent filed his objection under the new Act.
16. The view taken by the court below that there is no consent and therefore the execution petition is not maintainable, is unsustainable in law and facts. The court below held that a reading of the arbitral award does not specifically state whether the parties had consented or agreed to proceed under the provisions of the new Act and therefore under Section 85(2)(a) of the Act the proceeding ought to have continued under the Arbitration Act 1940. Such finding cannot stand in the light of the factual position and conduct of the parties. The arbitral award is passed following the proceedings under the provisions of the new Act. I fail to understand how the court below observed that the arbitral award does not specifically state that the parties had consented or agreed to proceed under the provisions of the new Act. The fact that the arbitration proceedings commenced, continued and completed by the Arbitrator with participation of the parties admits no doubt that the arbitral award was passed under the new Act. The learned Sub Judge held that there must be an express agreement between the parties to proceed under the Arbitration and Conciliation Act. On the basis of the facts and circumstances of the case and the conduct of parties, the court below ought to have held that there is consent as enjoined under Section 85(2)(a) of the new Act. The conclusion of the learned Sub Judge that there is no express consent is against the facts. The facts squarely indicate that there is express consent. The learned Sub Judge states that the Arbitrator has committed a mistake in stating that the award is passed under the provisions of the new Act. None of the parties has such a case that the award passed by the Arbitrator under the new Act is a mistake.
In the result, the order under challenge is set aside. The court below is directed to proceed with the execution petition and to pass orders in accordance with the findings of this Court. C.R.P. is allowed. No order as to costs.