M/S. Rose Advertising vs M/S. Delhi Transport Corporation
2001 Latest Caselaw 153 Del

ORDER

Devinder Gupta, J.

1. Whether the Arbitration Act, 1940 (Act No. 10 of 1940) or the Arbitration and Conciliation Act, 1996 (Act No. 1 of 1996) would apply to enforce the award of the arbitrator is in this appeal.

2. Relevant facts are that on 15.1.1993 an agreement was entered into between the parties for display of advertisements on the body of D.T.C. Buses. Validity period of the agreement was from 15.1.1993 to 11.1.1996. Dispute appears to have arisen during continuance of the agreement. A request was made by the appellant on 9.1.1995 to settle the disputes or to get those settled by appointment of an arbitrator in terms of the agreement. No action appears to have been taken on such a request made by the appellant. Another letter dated 26.11.1995 was sent, inter alia, asking the respondent to either settle the dispute or to appoint an arbitrator in terms of arbitration clause. Since the request of the appellant was again not acceded to, on 16.1.1996 a petition under Section 20 of the Arbitration Act, 1940 was filed by the appellant. Notice of this petition was issued to the respondent and an interim order was also passed. Counsel for the respondent appeared on 19.7.1996 and stated that by communication dated 4.7.1996 am arbitrator had already been appointed in terms of the agreement. In view of this statement, the petition was rendered infructuous and was disposed of as such.

3. The Arbitrator entered into reference. Parties were called upon to file their respective claims and counter claims. The appellant filed its claims. The appellant filed its claim on 8.2.1997. The respondent filed its claim on 12.2.1997. On 6.10.1998 award was made and published by the arbitrator. In order to have the award enforced, the appellant filed an application under the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"). It was registered as Execution Application No. 637/99. The respondent put in appearance and raised a preliminary objection about maintainability of execution petition under the provisions of 1996 Act. It was stated that 1996 Act was not applicable to the arbitration proceedings rather provisions of the Arbitration Act, 1940 would apply in relation to the arbitration proceedings, which had commenced prior to 1996 Act coming into force. By the impugned order, learned Single Judge upheld the objection of the respondent holding that the Arbitration Act, 1940 would apply. The reason assigned for holding so is that the claimant/appellant had called upon the respondent on 9.11.1995 to appoint an arbitrator under Clause 25 of the Agreement. As such on a conjoint reading of Section 85 with Section 21 of the 1996 Act, the arbitration proceedings commenced on the date on which request for appointment of arbitrator was made, therefore, 1996 Act would apply on the ratio of the decision of Supreme Court in Thyssen Stahlunion GMBH v. Steel Authority of India Ltd. .

4. We have heard and considered the respective submissions made at the bar by learned counsel for the parties. We have also been taken through the record.

5. Learned counsel for the appellant contended that learned Single Judge has not correctly applied the ratio of decision in Thyssen Stahlunion's case (supra) to the facts and circumstances of the case. As per terms of the agreement dated 15.1.1993 parties had agreed that Arbitration Act, 1940 or any statutory modification or re-enactment thereof in force for the time being shall apply to arbitration proceedings. As on the date of appointment of arbitrator and of making of the award, Act of 1996 was applicable, proceedings for arbitration were rightly held under the 1996. Act and the award would also be enforceable under the provisions of 1996, Act.

6. Learned counsel for the respondent placing reliance upon the decision of Supreme Court in M/s. Shetty's Constructions Co. Pvt. Ltd. v. M/s. Konkan Railway Construction and another urged that since demand for referring the disputes was made prior to coming into force of 1996, Act, the proceedings would be governed by the Arbitration Act, 1940.

7. Clause 25 of the Agreement is the arbitration clause, which provide that all questions and disputes between the parties, the settlement of which has not been specifically recorded, shall be referred to the sole arbitration of the Chairman-cum-Managing Director, Delhi Transport Corporation or any other officer so nominated by him and no person other than a person appointed by Chairman-cum-Managing Director, Delhi Transport Corporation shall act as an arbitrator. Sub-clause (d) of Clause 25 provide for applicability of the law to the arbitration proceedings as follows:-

"Subject to as aforesaid, the provision of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceedings under this clause."

8. There is no dispute on the facts that demand by the appellant for referring disputes for arbitration, in terms of the arbitration clause contained in the agreement was made firstly in January, 1995 and lastly in November, 1995. Therefore, in terms of the ratio of the decision in M/s. Shetty's Constructions Co. Pvt. Ltd. s case (supra) on a conjoint reading of Section 21 thereof, the proceedings, which had been initiated by the appellant under Arbitration Act, 1940 seeking reference for arbitration would have been continued to have been governed by the Arbitration Act, 1940 and not by 1996 Act. But there is a distinguishing feature in this case. No order was passed by the Court on the petition filed by the appellant under Section 20 of the Arbitration Act, 1940. A statement was made by learned counsel for the respondent on 19.7.1996 that by virtue of communication dated 4.7.1996 appointment of the arbitrator had already been made. In response to the notice from the arbitrator, the appellant submitted claim before the Arbitrator, which is captioned:-

"ARBITRATION MATTER UNDER THE ARBITRATION AND CONCILIATION ACT 1996 RE. DISPLAY OF ADVERTISEMENT ON D.T.C. BUSES OF NORTH REGION w.e.f. 15.1.1993 to 14.1.1996."

9. The respondent also submitted its claim on 12.2.1997. Title given by the respondent on its claim also expressed the intention of the respondent that the proceedings before the arbitrator were under the Arbitration and Conciliation Act. 1996. The petitioner filed rejoinder to the reply submitted by the respondent stating clearly therein that the proceedings are under the Arbitration and Conciliation Act, 1996.

10. The Arbitrator in his award while making reference to the facts also clarified the position about the law governing arbitration proceedings stating:-

"both parties submitted claims before me under the Arbitration and Conciliation Act. 1996".

11. In the penultimate para of the award, future interest is awarded by the Arbitrator saving:-

"I further award that the advertiser shall also be entitled for future interest @ 18% p.a. on all payments awarded in accordance with Section 31(7)(b) of the Arbitration and Conciliation Act, 1996 from the date of Arbitration Award till date of payment."

12. From the facts narrated above, it becomes clear that the appointment of the arbitrator was made after the 1996, Act had come into force, who made his award 1996, Act was in force.

13. In Thyssen Stahlunion's case (supra) three different cases were considered by the Supreme Court. One of them was of M/s. Rani Construction Pvt. Ltd. (CA No. 61 of 1999). In the said case the contract, which was for construction of certain works of Himachal Pradesh State Electricity Board. There was an arbitration agreement, which also contained a clause similar to sub-clause (d) of Clause 25 of the Arbitration Act in the instant case. Para 9 of the Judgment of Supreme Court has quoted the said clause. In the said case, disputed were referred to the sole arbitration on 4.12.1993 and the award was made and published by the arbitrator after 1996. Act had come into force, namely, on 23.2.1996. While dealing with the said case, it was observed by the Apex Court that parties can before 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. The Court in para 47 of the report held that the parties can agree to the provision of arbitration law existing at that time would apply to the arbitral proceedings and it is not necessary for the parties to know what law will be in force at the time of the conduct of arbitration proceedings. They can always agree that provisions that are in force at the relevant time would apply. Accordingly, it was held that since parties had agreed that at the relevant time provisions of law as existing at this time would apply, there can be no objection to that. Award will have to be enforced in accordance with law, which was applicable on the date award of arbitration was being enforced.

14. We are concerned in this case about the objection raised by the respondent about enforcement of the arbitration award and in our view, judgment in Thyssen Stahlunion's case (supra), which deals with one of the three cases referred to therein, namely, Rani Constructions Pvt. Ltd.'s case (supra) would squarely apply to the facts of the instant case. In Thyseen Stahlunion's case (supra) demand for arbitration had been made when Arbitration Act. 1940 was in force: arbitration was also appointed while Arbitration Act, 1940 was in force, but award was made after the 1996, Act had come into force. In the instant case though the demand for making reference to arbitration was made when Arbitration Act, 1940 was in force and the appellant had approached the Court for making reference to arbitration also when Arbitration Act, 1940 was in force, but the Chairman-cum-Managing Director of the respondent made appointment of the arbitrator only on 4.7.1996 after coming into force the 1996, Act. On the date of making of appointment of the arbitrator the Arbitration Act, 1940 already stood repealed. No appointment could have been made by the Chairman-cum-Managing Director by invoking the provisions of Arbitration Act, 1940 and in terms of Thyssen Stahlunion's case (supra) award made by the arbitrator would be governed by 1996, Act. Needless to add that similar provision, as is contained in Section 21 of the 1996, Act, is not to be found in the Arbitration Act, 1940. As per the settled law, arbitration proceedings under the Arbitration Act, 1940 commenced only when the arbitrator indicated his willingness to act as such and not on any date prior thereto. Therefore, as on the day when the claimant/appellant had sought reference by filing a petition under Section 20 of the Arbitration Act, 1940, namely, 16.1.1996 it could not have been said on that since the claimant/appellant had on 9.1.1995 or 29.11.1995 made a demand for appointment of an arbitrator, the arbitration proceedings had commenced on that date. Since Section 21 of the 1996, Act was not in force on that day. Till 1996, Act came into force, arbitration proceedings had not commenced since till that date parties were governed by the Arbitration Act, 1940. Appointment of arbitrator was made only on 4.7.1996 when 1996 Act had come into force. The Arbitrator also seems to have conducted the proceedings under the 1996, Act. The parties also had expressed their intention in their claims and replies that the proceedings were under the 1996, Act. Intention of the parties was also clear that proceedings were being conducted by the Arbitrator under the 1996, Act. Therefore, in our view, learned Single Judge was not justified in holding that the proceedings would be governed by the Arbitration Act, 1940.

15. Consequently, we allow the appeal, set aside the impugned order and answer the question holding that the proceedings for enforcement of the award would be governed by the 1996, Act not be the Arbitration Act, 1940.