M. A. NARAYANA MURTHY v. K. N. NAVANEETH GUPTHA — 1998 DIGILAW 776 (KAR)

V. K. SINGHAL, J. ( 1 ) BY this petition prayer is made for appointment of arbitrator. The petitioner, respondent Nos. 4 and 5 are brothers. They entered into partnership in the name and style of Sangeetha Enterprises on 14-1-1994. Earlier the business of the firm was started with two partners i. e. , the petitioner and the first respondent. The petitioner and his brothers notified by their letter dated 21-4-1982 the first respondent and other partners, their intention to dissolve the firm witheffect from 30-4-1982 by notice which was published in the Gazette dated 20-5-1982 and also in the Deccan Herald and Prajavani on the same day and thus the said firm stood dissolved with effect from 30-4-1982. The first respondent issued another public notice in Deccan Herald dated 3-6-1982 showing the retirement of the petitioner and his brothers from the said firm and as if the firm is not dissolved. Ultimately Civil Suit O. S. No. 2204/82 was filed against respondents 1 to 3 and the deceased-Srinivasa Murthy for an enquiry in- to the accounts of the firm for the purpose of determining the value of the assets and liabilities as on 3-4-1982 and for a declaration that the firm stood dissolved. ( 2 ) ). Respondents 1 to 3 filed an application under Section 34 of the Arbitration Act 1940 to stop further proceedings in the said suit in view of the arbitration clause in the partnership deed. Clause 17 of the Partnership deed provided for arbitration. It is not disputed that the copy of the said application was served on the petitioner. The application was allowed by the trial Court vide order dated 15-4-1983 and further proceedings in the suit were stayed and parties were directed to take steps for appointment of the arbitrator. Appeal No. 1712/1983 against that order was dismissed for non-prosecution on 7-11-1990. According to the petitioner respondents have taken no step for appointment of the arbitrator. According to the submission of the learned counsel for the petitioner the reconstitution of the firm on 1-5-1982 is not valid. CMP No. 70/1987 was filed but it was stated that since no request was made under Section 21, petition was dismissed. Now the petitioner has issued notice on 12-7-1998 on the basis of which it is requested that an arbitrator may be appointed. CMP No. 70/1987 was filed but it was stated that since no request was made under Section 21, petition was dismissed. Now the petitioner has issued notice on 12-7-1998 on the basis of which it is requested that an arbitrator may be appointed. ( 3 ) ARGUMENTS of the learned counsel for the parties have been heard. The order of the trial Court dated 15-4-1983 directed the parties to take steps for appointment of an arbitrator on or before 2-6-1983. This order has become final since the appeal preferred against that order was dismissed. Submission of the learned counsel for the petitioner is that since there was, no commencement of the proceedings under the Arbitration Act of 1940, this Court is empowered to appoint the arbitrator. Reliance is placed on the decision given in the case of Bombay Gas Company Ltd. v. Parameshwar Mittal, AIR 1998 Bom 118 , wherein it was observed that mere filing of application under Section 34 cannot amount to commencement of arbitral proceedings, unless there is a notice given by one side to the other side for referring the dispute for an arbitrator, arbitration proceedings cannot be said to be commenced within the meaning of Section 21 of the Act. ( 4 ) PROVISIONS of Section 85 of the Arbitration and Conciliation Act, 1996 provides that provisions of Arbitration Act, 1940 shall apply in respect of the arbitration proceedings, which commenced before commencement of this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitration proceedings which commenced on or after this Act comes into force. ( 5 ) SECTION 37 (3) of the old Act provides that the arbitration proceedings are deemed to commence when one party to the arbitration agreement serves on the other party a notice requiring the appointment of arbitrator. Commencement under Section 21 of the arbitral proceedings under the new Act is also when the service of notice is on the other side. Under the old Act even if the notice is not served when there is a stipulation for arbitration in the agreement, in the suit filed an application for stay of proceedings and referring the matter to arbitration would lie. The Court had the discretion unlike the present Act to refer or not to refer the matter for arbitration. Under the old Act even if the notice is not served when there is a stipulation for arbitration in the agreement, in the suit filed an application for stay of proceedings and referring the matter to arbitration would lie. The Court had the discretion unlike the present Act to refer or not to refer the matter for arbitration. Even if the notice under Section 37 (3) of the old Act is not served and an application under Section 34 is moved, the lis starts. The passing of the order by the Court after hearing both the parties crystallizes the rights of the parties. If the directions are given for appointment of arbitrator the question of appointment, thereof stand concluded by that order. If for any reason even the arbitrator is not appointed under the old Act a fresh application to consider as to whether the arbitrator is to be appointed or not under the new Act cannot be moved. The rights of the parties and the action taken under old Act are protected by Section 6 of the General Clauses Act also. The decision relied on by the learned counsel for the petitioner of the Bombay Gas Company Limited is not applicable because in that case only an application under Section 34 was moved and no orders of the Court were passed. ( 6 ) SECTION 21 provides that unless otherwise agreed by the parties the arbitral proceedings in respect of a particular dispute commence on the date on which the request for appointment of arbitrator was made. Simply moving the application under Section 34 may not be sufficient to come to the conclusion that the arbitral proceedings commenced. But a request is made beside the said proceeding for appointment of arbitrator and the copy thereof is served on the other side, then it will be considered that a request is made to refer the dispute to arbitration. The proceeding commences with the filing of that request in the suit pending. It is not merely filing of that application in suit but the trial Court has passed an order on 15-4-1983 after hearing the parties. It was observed that the relief sought for by the plaintiff can be granted by an arbitrator. Further proceedings in the suit were stayed and the parties were directed to take steps for appointment of arbitrator. It is not merely filing of that application in suit but the trial Court has passed an order on 15-4-1983 after hearing the parties. It was observed that the relief sought for by the plaintiff can be granted by an arbitrator. Further proceedings in the suit were stayed and the parties were directed to take steps for appointment of arbitrator. Here the steps were to be taken by both the parties and not by the party who moved the application. No steps were taken and this petition has been filed after 15 years. The right of the parties in civil matter are to be governed by that provisions of law which are in existence at the relevant time unless otherwise provided. Provisions of Section 21 cannot be interpreted to include matters where the request for stay of proceedings and prayer for appointment of an arbitrator is made under the old Act. Proceedings commenced at the stage when the application is filed and served on the other side. In these circumstances, I am of the view that the dispute is covered by the Arbitration Act, 1940 and no action could be taken under Arbitration and Conciliation Act, 1996. Petition is dismissed. --- *** --- .