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2006 DIGILAW 484 (SC)

Parwani Builders v. Western Coalfields Ltd.

2006-04-24

P.K.BALASUBRAMANYAN, S.B.SINHA

body2006
JUDGMENT : 1. Leave granted 2. The applicability of the Arbitration Act, 1940 (1940 Act) or the Arbitration and Conciliation Act, 1996 (1996 Act) is in question in this appeal which arises out of a judgment and order dated 11.12.2003 passed by the High Court of Judicature at Bombay, Nagpur Bench, Nagpur in W.P. Nos.4351, 4352 and 4394 of 2003. 3. The parties hereto entered into a contract on 7.3.1990, in terms whereof the Appellant was entrusted with civil construction works. Disputes and differences having arisen between the parties, the Appellant invoked the arbitration clause and requested the First Respondent herein to appoint a sole arbitrator in terms of the arbitration agreement. As the said request was not acceded to, the Appellant filed three applications under Section 20 of the 1940 Act bearing Suit Nos.741, 742 and 743 of 1991 in the Court of Civil Judge, Senior Division, Nagpur. One Shri S.S. Rao, Retired Chief Engineer (Civil) was appointed as an arbitrator therein. An award was made on 22.7.1999. The said award was said to have been corrected by the arbitrator on or about 27.8.1999 and a copy thereof was received by the Respondent on 30th August, 1999. 4. It is not in dispute that applications for enlarging the time for making the award in terms of sub-section (2) of Section 28 of the 1940 Act were filed and allowed. 5. The Respondents, however evidently under a mistaken belief that the 1996 Act would be applicable in the case, filed three applications before the District Judge purported to be under Section 34 of the 1996 Act along with an application for condonation of delay in each of the three matters. However, realising their mistake that the applications under Section 34 of the 1996 Act were not maintainable, applications for amendment of the said petition were filed praying therein that the same may be treated to be applications under Section 30 of the 1940 Act. 6. The learned District Judge, however, rejected the said applications for amendment by an order dated 13.7.2001. The learned District Judge, however, refused to condone the delay in filing the applications under Section 34 of the 1996 Act where against the Respondents moved the Nagpur Bench of the Bombay High Court by filing writ petitions marked as W.P. No.4351, 4352 and 4394 of 2003. The learned District Judge, however, refused to condone the delay in filing the applications under Section 34 of the 1996 Act where against the Respondents moved the Nagpur Bench of the Bombay High Court by filing writ petitions marked as W.P. No.4351, 4352 and 4394 of 2003. By reason of the impugned judgment, the said writ petitions have been allowed holding that as the arbitral proceedings commenced under the old Act, they would continue to be governed thereby and not by the 1996 Act. It was directed: "In this view of the matter, it is clear that the findings of the learned Additional District Judge is not sustainable. In the circumstances, I find that the impugned order is not sustainable in law in the sense that it could not have been decided under the 1996 Act. The impugned order is, therefore, set aside." 7. The controversy as to whether the 1940 Act or the 1996 Act would apply wherein the arbitral proceeding commenced prior to coming into force of the 1996 Act came to be considered by a 3-Judge Bench of this Court in Milkfood Ltd. GMC Ice Cream (P) Ltd., [ (2004) 7 SCC 288 ] wherein it was held : "Section 85 of the 1996 Act repeals the 1940 Act, Sub-section (2) of Section 85 provides for a non obstante clause. Clause (a) of the said sub-section provides for saving clause stating that the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before the said Act came into force. Thus, those arbitral proceedings which were commenced before coming into force of the 1996 Act are saved and the provisions of the 1996 Act would apply in relation to arbitral proceedings which commenced on or after the said Act came into force. Even for the said limited purpose, it is necessary to find out as to what is meant by commencement of arbitral proceedings for the purpose of the 1996 Act where for also necessity of reference to Section 21 would arise. The court is to interpret the repeal and savings clauses in such a manner so as to give a pragmatic and purposive meaning thereto. It is one thing to say that commencement of arbitration proceedings is dependent upon the facts of each case as that would be subject to the agreement between the parties. The court is to interpret the repeal and savings clauses in such a manner so as to give a pragmatic and purposive meaning thereto. It is one thing to say that commencement of arbitration proceedings is dependent upon the facts of each case as that would be subject to the agreement between the parties. It is also another thing to say that the expression "commencement of arbitration proceedings" must be understood having regard to the context in which the same is used; but it would be a totally different thing to say that the arbitration proceedings commence only for the purpose of limitation upon issuance of a notice and for no other purpose. The statute does not say so. Even the case-laws do not suggest the same. On the contrary, the decisions of this Court operating in the field beginning from Shetty's Constructions are ad idem to the effect that Section 21 must be taken recourse to for the purpose of interpretation of Section 85(2)(a) of the Act. There is no reason, even if two views are possible, to make a departure from the decisions of this Court as referred to hereinbefore." 8. In view of the fact that therein it was categorically held that when the proceeding was started, the 1940 Act was applicable and not the 1996 Act, arbitral proceedings were held to be governed by the former. The said decision has been followed by a Division Bench of this Court in U.P. State Sugar Corpn. Ltd. v. Jain Construction Co. [ (2004) 7 SCC 332 ] wherein it was held: "The only question which survives for consideration is the applicability of the 1996 Act to the facts of the present case. Disputes and differences between the parties arose in the year 1991. The respondent filed an application under Section 20 of the 1940 Act on 1-5-1991. It invoked the arbitration agreement as contained in clause 34 of the contract. The arbitral proceeding was, therefore, set in motion. In terms of Section 21 of the 1996 Act, the arbitral proceedings in respect of a particular dispute commences on a date on which the request for that dispute to be referred to arbitration was received by the respondent." 9. The arbitral proceeding was, therefore, set in motion. In terms of Section 21 of the 1996 Act, the arbitral proceedings in respect of a particular dispute commences on a date on which the request for that dispute to be referred to arbitration was received by the respondent." 9. Furthermore, in Neeraj Munjal (III) v. Atul Grover, (2005) 5 SCC 404 ], it was held: "We, therefore, are clearly of the opinion that the provisions contained in the 1940 Act would govern the proceedings arising out of the award and not the 1996 Act. Reference to the 1996 Act was a mere inadvertence on the part of this Court. The learned Single Judge of the High Court was also not correct in holding that as no leave to challenge the award was granted by this Court, the appellants could not avail the remedies provided for under the 1940 Act." 10. Mr. S. Muralidhar, learned counsel appearing on behalf of the Appellant submitted that the Respondents themselves proceeded on the basis that the 1996 Act would apply. The High Court failed to notice, Mr. Muralidhar would urge, that the learned District Judge has rightly opined that the application for amendment could not have been allowed by him. In any event, in this case, the parties must be held to have agreed by their conduct in terms of Section 85(2)(b) of the 1996 Act, that the 1996 Act only would apply. 11. We do not agree with the aforementioned contentions. There is nothing on record to show that the procedures laid down in the 1940 Act were not applicable or before the arbitrator the parties agreed that the provisions of the 1996 Act shall apply. 12. The Appellant filed applications under Section 20 of the 1940 Act. The said applications were allowed. The Court also exercised its discretionary jurisdiction under Section 28(2) of the 1940 Act in enlarging the period for making the award. The parties, therefore, had at all material times proceeded on the premise that the 1940 Act would apply. 13. 12. The Appellant filed applications under Section 20 of the 1940 Act. The said applications were allowed. The Court also exercised its discretionary jurisdiction under Section 28(2) of the 1940 Act in enlarging the period for making the award. The parties, therefore, had at all material times proceeded on the premise that the 1940 Act would apply. 13. However, although, we are of the opinion that in the facts and circumstances of this case, the High Court's judgment cannot be found fault with but interest of justice would be subserved if the applications filed by the Respondents herein purported to be under Section 34 of the 1996 Act, are treated to be applications under Section 30 of the 1940 Act, 14. The District Judge, Nagpur shall transmit the records to Small Causes Court, Nagpur in which Court the awards ought to have been filed. It would be open to the Appellant herein to file an objection to the Respondents' application for condonation of delay as also the objections under Section 30 of the 1940 Act. The respective contentions of the parties shall be considered on merit by the learned Small Causes Court which are available to them in terms of the 1940 Act. 15. Keeping in view the fact that the arbitral award has been made as far back on 22.7.1999, we would request the court to dispose of the matter as expeditiously as possible, preferably within a period of four months from the date of receipt of a copy of this order. 16. This appeal is allowed to the aforementioned extent. The parties shall pay and bear their own costs.