Bombay High Court
M/S Strongwell Construction ... vs Maharashtra State Seeds ... on 31 March, 2023
Bench: Avinash G. Gharote
MCA 342 of 2022.odt
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
NAGPUR BENCH AT NAGPUR
MISC. CIVIL APPLICATION NO. 342/2022
APPLICANT M/s. Strongwell Construction Company, a
Partnership Firm, having its office at 23, NMV
Colony, Byramji Town, Nagpur, Tahsil and
District Nagpur, through its Partner
Mr. Gopaldutt son of Mangaldutt Sharma, aged
76 years, Occupation Business, R/o. 23, N.M.V.
Layout, Byramji Town, Nagpur.
...Versus...
NON-APPLICANTS 1. Maharashtra State Seeds Corporation Ltd.,
(State of Maharashtra Undertaking), Plot No.8,
Shastri Nagar, Akola-444001 Through its
Chairman-cum-Managing Director.
2. Maharashtra State Seeds Corporation Ltd.,
'Mahabij' Bhawan, Krushi Nagar, Akola-444104.
Through its General Manager (Processing &
Engineering)
3. Maharashtra State Seeds Corporation Ltd.,
'Mahabij' Bhawan, Krushi Nagar, Akola-444 104,
Through its Executive Engineer,
4. The Secretary, Government of Maharashtra,
Department of Agriculture, Animal Husbandry,
Dairy Development, Mantralaya Annexe,
Mumbai 400 032.
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Mr. N.G.Moharir, Advocate for applicant
Mr. J.B.Kasat, Advocate for non-applicant no.2
Ms. T.H.Khan, AGP for non-applicant no.4
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MCA 342 of 2022.odt
2
CORAM : AVINASH G. GHAROTE, J.
Judgment reserved on : 10/03/2023
Judgment pronounced on : 31/03/2023
1] Heard Mr. N.G. Moharir, learned counsel for the
applicant, Mr. J.B. Kasat, learned counsel for the non-applicant
no.2 and Ms T.H. Khan, learned Assistant Government Pleader for
the non-applicant no.4. Rule. Rule made returnable forthwith. Heard
finally with the consent of the learned counsel for the rival parties.
2] The application is under Section 11(6) of the
Arbitration and Conciliation Act,1996 (for short, "the A & C Act",
hereinafter) for appointment of an Arbitrator. In the instant matter,
the following position is material.
Sr.No Date Event
1. 30/07/1999 In exercise of the power under Section 11(6) of
the A & C Act, in MCA (Arb.) No.10/1999, an
Arbitrator was appointed by this Court, who
was Shri K.G. Khadse, Architect, Akola.
2. 17/11/1999 The above order dated 30.7.1999 was
challenged before the Hon'ble Apex Court in
MCA 342 of 2022.odt
Petition for Special Leave to Appeal (Civil) No.
15961-15962/1999 by the present
respondents, which was dismissed.
3. 01/08/2001 Writ Petition No.72/2000 filed by the present
non-applicants challenging the appointment of
Shri K.G.Khadse, was disposed of and
Secretary, Department of Agriculture and Dairy
Development, State of Maharashtra, was
appointed as an Arbitrator.
4. 24/07/2007 Award passed by Arbitrator, Shri N.B.Patil.
5. 20/09/2019 Challenge to the Award dated 24.7.2007 under
Section 34 of the A & C Act in Civil M.A. No.
163/2007 was allowed by the District Judge,
Akola and the Award dated 24.7.2007 was set
aside and the matter was remitted back to the
Arbitrator, who had since then superannuated.
6. Appeal under Section 37 of the A & C Act was
filed before this Court, in which the challenge
was restricted to the order of remand by the
Principal District Judge vide order dated
20/09/2019.
7. 07/04/2022 Arbitration Appeal No.9 of 2020 was allowed
by setting aside the order of remand and the
parties were left to pursue their remedy in
MCA 342 of 2022.odt
accordance with law.
8. 21/11/2022 SLP (C)-Diary No. 29281/22 filed by the non-
applicants was dismissed as withdrawn.
9. 25/04/2022 Notice for appointment of Arbitrator was issued
by the applicant to the non-applicants.
10. 25/05/2022 Reply was given by non-applicants repudiating
the claim.
11. 20/06/2022 Present application under Section 11(6) of the
A & C Act has been filed for appointment of an
independent Arbitrator.
3] Mr. N.G. Moharir, learned counsel for the applicant
submits that in view of the judgment dated 7.4.2022 in Arbitration
Appeal No.9/2020, which is confirmed by the dismissal of the
special leave petition, there is a need to appoint an independent
Arbitrator, in view of Section 12(5) read with Schedule VII of the A
& C Act. In support of it, reliance is placed upon Ellora Paper Mills
Limited Vs. State of Madhya Pradesh, (2022) 3 SCC 1; TRF Ltd Vs.
Energo Engineering Projects Ltd., AIR 2017 SC 3889; Jaipur Zila
MCA 342 of 2022.odt
Dugdh Utpadak Sahkari Sangh Limited and others Vs. Ajay Sales
and Suppliers, 2021 SCC Online SC 730.
4] Mr. Kasat, learned counsel for the non-applicant no.2
opposes the submission and contends that the amendment to the
A & C Act in 2015 would not be applicable in the instant matter, as
the amendment to Section 12(5), which has come into force w.e.f.
23.10.2015, would be prospective in effect in light of Section 26 of
the Arbitration and Conciliation (Amendment) Act No.3 of 2016. He
further relies upon Rajasthan Small Industries Corporation Limited
Vs. Ganesh Containers Movers Syndicate, (2019) 3 SCC 282 and
State of West Bengal Vs. Amritlal Chatterjee, (2003) 10 SCC 572.
5] Ellora Paper Mills (supra) was a case in which though in
terms of the agreement between the parties, the Arbitral Tribunal i.e.
the Stationery Purchase Committee comprising of the officers of
respondent was constituted in the year 2001, no steps, however,
were taken and no proceedings, in fact, were commenced, in light of
which, it was held that technically it cannot be said that the
arbitration proceedings by the Tribunal had commenced and
therefore, since an application was filed before the High Court under
MCA 342 of 2022.odt
Section 14 read with Sections 11 & 15 of the A & C Act, seeking
termination of the mandate of the originally constituted Arbitral
Tribunal and for appointment of new Arbitrator, it was held that in
such circumstances that is in absence of commencement of the
proceedings, the provisions of Section 11 of the A & C Act could be
invoked with the assistance of Section 12 (5) of the A & C Act, as it
stood amended w.e.f. 23.10.2015 and therefore, a fresh Arbitrator
was required to be appointed.
5.1. Ellora Paper Mills (supra) relies upon Jaipur Zila Dugdh
Utpadak Sahakari Sangh Limited (supra) and also takes into
consideration TRF Ltd. (supra).
5.2. In Jaipur Zila Dugdh Utpatak Sahakari Sangh Limited
(supra) the Hon'ble Apex Court was considering a position where
though the agreement in question containing the arbitration clause
was dated 31.03.2015, a grievance/dispute was raised by the
respondent vide a representation dated 22.08.2018, the respondent
was advised to raise dispute before the sole Arbitrator/Chairman of
the Sangh. The respondent approached the sole Arbitrator on
19.10.2019, for settlement of the commercial dispute between the
MCA 342 of 2022.odt
parties, during the pendency of which. an application under Section
11(6) of the A & C Act, was filed by the respondent before the High
Court for appointment of an Arbitrator. It is this contextual
background that the appointment of the Arbitrator was opposed
contending that since the agreement dated 31.03.2015, was prior to
the amendment of 2015, which was w.e.f. 23.10.2015, Section 12(5)
of the A & C Act, would not be attracted, which contention was
refuting holding that since the Managing Director of the Sangh had
become ineligible on account of the applicability of Section 12(5)
read with Schedule VII of the A & C Act, it was inconceivable in law
that the person who is statutorily ineligible can nominate a person.
5.3. In TRF Ltd. (supra), the purchase order was dated
10.05.2014, and the arbitration was invoked by the letter dated
28.12.2015, in terms of Clause 33 of the General Terms and
Conditions, which was denied by the respondent and eventually by
letter dated 27.01.2016, a former Judge of the Hon'ble Supreme
Court was nominated as an Arbitrator. After this appointment, the
appellant had preferred an application under Section 11(6) of the A
& C Act contending that after the Amendment Act No.3 of 2016, the
Managing Director of the respondent having become ineligible to act
MCA 342 of 2022.odt
as an Arbitrator, under Section 12 (5) read with Schedule VII of the
Amended A & C Act, had no power to nominate, which has been
upheld.
5.4. It would thus be apparent that neither in Jaipur Zila
Dugdh Utpatak Sahkari Sangh Ltd.; nor in TRF Ltd. (supra), the
applicability of the Amending Act No.3 of 2016, whereby Section 12
(5) and Schedule VII were introduced in the A & C Act, to
proceedings in which arbitration had already commenced, prior to
the coming into force of the Amendment Act No.3 of 2016 was
under consideration, as in both these matters, though the agreement
between the parties containing the arbitration clause was prior to
23.10.2015, the arbitration proceedings had not commenced
altogether on the relevant date when the Amendment Act No.3 of
2016 came into force i.e. on 23.10.2015. In Ellora Paper Mills
(supra) though the agreement containing the arbitration clause was
prior to 23.10.2015 and the Arbitrator had already been appointed,
on the premise that no steps whatsoever had been taken further it
was held that the arbitration proceedings had not commenced at all.
6] Section 26 of the Arbitration and Conciliation
(Amendment) Act, 2015 [No.3 of 2016], has a great relevance to the
MCA 342 of 2022.odt
controversy in the present matter. For the sake of ready reference
Section 26 of the Arbitration & Conciliation (Amendment) Act, 2015
[No.3 of 2016], is reproduced 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."
6.1. The provisions of Section 26 of the Amendment Act
No.3 of 2016, fell for consideration of the Hon'ble Apex Court, in
Board of Control For Cricket In India Vs. Kochi Cricket Private
Limited and others, (2018) 6 SCC 287 , wherein while considering
the meaning, effect and applicability of the same, it was held as
under :
"36. All the learned counsel have agreed, and this
Court has found, on a reading of Section 26, that the
provision is indeed in two parts. The first part refers to the
Amendment Act not applying to certain proceedings,
whereas the second part affirmatively applies the
Amendment Act to certain proceedings. The question is
what exactly is contained in both parts. The two parts are
separated by the word "but", which also shows that the two
parts are separate and distinct. However, Shri Viswanathan
has argued that the expression "but" means only that there
is an emphatic repetition of the first part of Section 26 in
MCA 342 of 2022.odt
the second part of the said section. For this, he relied upon
Concise Oxford Dictionary on Current English, which states:
"introducing emphatic repetition; definitely (wanted
to see nobody, but nobody)."
Quite obviously, the context of the word "but" in Section 26
cannot bear the aforesaid meaning, but serves only to
separate the two distinct parts of Section 26.
37. What will be noticed, so far as the first part is
concerned, which states--
"26. Act not to apply to pending arbitral
proceedings.--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...."
is that: (1) "the arbitral proceedings" and their
commencement is mentioned in the context of Section 21
of the principal Act; (2) the expression used is "to" and not
"in relation to"; and (3) parties may otherwise agree. So far
as the second part of Section 26 is concerned, namely, the
part which reads, "... but this Act shall apply in relation to
arbitral proceedings commenced on or after the date of
commencement of this Act" makes it clear that the
expression "in relation to" is used; and the expression "the"
arbitral proceedings and "in accordance with the provisions
of Section 21 of the principal Act" is conspicuous by its
absence.
38.That the expression "the arbitral proceedings" refers to
proceedings before an Arbitral Tribunal is clear from the
heading of Chapter V of the 1996 Act, which reads as
follows:
"Conduct of arbitral proceedings"
The entire chapter consists of Sections 18 to 27 dealing
with the conduct of arbitral proceedings before an Arbitral
Tribunal. What is also important to notice is that these
proceedings alone are referred to, the expression "to" as
contrasted with the expression "in relation to" making this
MCA 342 of 2022.odt
clear. Also, the reference to Section 21 of the 1996 Act,
which appears in Chapter V, and which speaks of the
arbitral proceedings commencing on the date on which a
request for a dispute to be referred to arbitration is
received by the respondent, would also make it clear that it
is these proceedings, and no others, that form the subject-
matter of the first part of Section 26. Also, since the
conduct of arbitral proceedings is largely procedural in
nature, parties may "otherwise agree" and apply the
Amendment Act to arbitral proceedings that have
commenced before the Amendment Act came into force.
[ Section 29-A of the Amend (sic Amended) Act provides
for time-limits within which an arbitral award is to be
made. In Hitendra Vishnu Thakur v. State of Maharashtra,
(1994) 4 SCC 602 at p. 633 : 1994 SCC (Cri) 1087, this
Court stated: (SCC p. 633, para 26)"26.... (iii) Every
litigant has a vested right in substantive law but no such
right exists in procedural law. (iv) A procedural statute
should not generally speaking be applied retrospectively
where the result would be to create new disabilities or
obligations or to impose new duties in respect of
transactions already accomplished.(v) A statute which not
only changes the procedure but also creates new rights and
liabilities shall be construed to be prospective in operation,
unless otherwise provided, either expressly or by necessary
implication."It is, inter alia, because timelines for the
making of an arbitral award have been laid down for the
first time in Section 29-A of the Amendment (sic Amended)
Act that parties were given the option to adopt such
timelines which, though procedural in nature, create new
obligations in respect of a proceeding already begun under
the unamended Act. This is, of course, only one example of
why parties may otherwise agree and apply the new
procedure laid down by the Amendment Act to arbitral
proceedings that have commenced before it came into
force.] In stark contrast to the first part of Section 26 is the
second part, where the Amendment Act is made applicable
"in relation to" arbitral proceedings which commenced on
MCA 342 of 2022.odt
or after the date of commencement of the Amendment Act.
What is conspicuous by its absence in the second part is
any reference to Section 21 of the 1996 Act. Whereas the
first part refers only to arbitral proceedings before an
Arbitral Tribunal, the second part refers to court
proceedings "in relation to" arbitral proceedings, and it is
the commencement of these court proceedings that is
referred to in the second part of Section 26, as the words
"in relation to the arbitral proceedings" in the second part
are not controlled by the application of Section 21 of the
1996 Act.
39. Section 26, therefore, bifurcates proceedings, as has
been stated above, with a great degree of clarity, into two
sets of proceedings -- arbitral proceedings themselves, and
court proceedings in relation thereto. The reason why the
first part of Section 26 is couched in negative form is only
to state that the Amendment Act will apply even to arbitral
proceedings commenced before the amendment if parties
otherwise agree. If the first part of Section 26 were
couched in positive language (like the second part), it
would have been necessary to add a proviso stating that
the Amendment Act would apply even to arbitral
proceedings commenced before the amendment if the
parties agree. In either case, the intention of the legislature
remains the same, the negative form conveying exactly
what could have been stated positively, with the necessary
proviso. Obviously, "arbitral proceedings" having been
subsumed in the first part cannot re-appear in the second
part, and the expression "in relation to arbitral
proceedings" would, therefore, apply only to court
proceedings which relate to the arbitral proceedings. The
scheme of Section 26 is thus clear: that the Amendment
Act is prospective in nature, and will apply to those arbitral
proceedings that are commenced, as understood by Section
21 of the principal Act, on or after the Amendment Act,
and to court proceedings which have commenced on or
after the Amendment Act came into force."
MCA 342 of 2022.odt
BCCI (supra) also goes on to hold that Section 36 as
substituted by the Amendment Act No.3 of 2016, would apply to
Section 34 petitions which have been filed before the
commencement of the Amendment Act, on the ground that
execution of a decree pertains to the realm of procedure, and there
is no substantive vested right in a judgment-debtor to resist
execution. We are however not concerned with this proposition in
the instant matter.
6.2. Rajasthan Small Industries Corporation Limited
(supra), was a case in which the agreement was dated 28.01.2000,
and on account of a dispute having arisen, one I.C. Shrivastava IAS
(Retd.) was appointed as the sole Arbitrator on 21.02.2005, who
on account of unsatisfactory progress was removed on 26.03.2009,
and was replaced by Chairman-cum-Managing Director of the
appellant Corporation by the consent of both the parties. The
proceedings before the Arbitrator were not completed as the
matter was being adjourned from time to time. On 07.02.2013, the
respondent-contractor sent a legal notice calling upon the appellant
to make payment which was replied on 19.03.2013 stating that
since the Arbitrator was transferred, award could not be passed.
MCA 342 of 2022.odt
On 13.05.2015 the respondent-contractor filed an application
under Section 11(6) and Section 15 of the A & C Act, for
appointment of an independent Arbitrator. In spite of this position
being brought to the notice of the Arbitrator and a request for
adjournment was made, the same was rejected and some time
thereafter an ex parte award was passed by the Arbitrator on
21.01.2016. The High Court thereafter appointed an Arbitrator,
which was assailed before the Hon'ble Apex Court. After
considering TRF Ltd. (supra) and relying on BCCI (supra), it was
held as under :
"26. The facts of the said case are entirely different from
the case in hand. In the said case, when notice invoking
arbitration was issued on 28-12-2015, after the Amendment
Act, 2015 came into force with effect from 23-10-2015, by
virtue of which the person named in the agreement became
ineligible to act as the arbitrator. In the case in hand, the
arbitration proceedings started way back in 2009, long
before the 2015 Amendment Act came into force and
therefore, the 2015 Amendment Act is not applicable to the
case in hand. The statutory provisions that would govern the
matter are those which were then in force before the
Amendment Act.
36. As held in Yashwith Constructions [Yashwith
Constructions (P) Ltd. v. Simplex Concrete Piles (India) Ltd.,
(2006) 6 SCC 204] , Section 11(6) of the Act would come
into play only when there was failure on the part of the party
concerned to appoint an arbitrator in terms of the arbitration
agreement. In the case in hand, the High Court, in our view,
was not right in appointing an independent arbitrator
MCA 342 of 2022.odt
without keeping in view the terms of the agreement between
the parties and therefore, the impugned order appointing an
independent arbitrator/retired District Judge is not
sustainable."
By invoking Article 142 of the Constitution, the Hon'ble
Apex Court in order to do full justice to the parties, passed the
following order :
"41. In the result, the impugned order of the High Court
dated 22-4-2016 is set aside and this appeal is allowed. The
present Managing Director of the appellant Rajasthan Small
Industries Corporation Limited shall be the sole arbitrator and
the Managing Director is directed to take up the matter and
continue the proceedings and afford sufficient opportunity to
both the parties to adduce further evidence and to make oral
submissions and pass the final award within a period of four
months. It is made clear that the arbitrator may not be
influenced by any of the views expressed by the High Court."
7] Section 21 of the A & C Act, 1996, speaks of
commencement of the arbitration proceedings, which commences
on the date on which a request for that dispute to be referred to
arbitration is received by the respondent, unless otherwise agreed by
the parties. In the instant case, there is no agreement between the
parties hereto. The arbitration proceedings have already commenced
long back by the Arbitrator, having already passed an award on
24.07.2007, which was set aside by judgment dated 20.09.2019, by
the learned Principal District Judge in an application under
MCA 342 of 2022.odt
Section 34 of the A & C Act, by remanding the matter back to the
Arbitrator, challenge to the same to the extent of remand under
Section 37 of the A & C Act has been allowed by this Court by the
judgment dated 07.04.2022.
8] The position therefore enunciated by the Hon'ble Apex
Court, in BCCI (supra) and Rajasthan Small Industries Corporation
Limited (supra), is clearly applicable to the facts of the present
matter, and the same would be governed by the pre-amendment
position and the parties will be bound by the terms of the agreement
between them and the arbitration clause therein, which requires that
any dispute is to be referred to Secretary, Department of Agriculture,
Animal Husbandry, Government of Maharashtra or his nominee.
9] Since the dispute between the parties has not yet been
resolved, it would be appropriate to appoint an Arbitrator,
considering which the Secretary, Department of Agriculture Animal
Husbandry, Government of Maharashtra, is hereby appointed as an
Arbitrator to arbitrate the disputes between the parties hereto.
MCA 342 of 2022.odt
10] The Misc. Civil Application is allowed. Rule is made
absolute in the aforesaid terms. No order as to costs.
(AVINASH G. GHAROTE, J.)
Rvjalit
