General Electric Canada Inc. And ... vs National Hydroelectric Power ...
2002 Latest Caselaw 1796 Del

JUDGMENT

R.C. Jain, J.

1. Order of the learned Single Judge dated 14th November, 2000 dismissing OMP 150/96 filed the appellant -- General Electric Canada Inc.

(in short as 'GECI') under Sections 44 and 49 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the 1996 Act') for making the award of the Arbitral Tribunal dated 7th May, 1996 as rule of the Court. By the same order, the learned Single Judge has also held that the petition under Section 14(2) and Section 17 of the Arbitration Act, 1940 (in short '1940 Act') was maintainable and award was not liable to be enforced under Section 49 of the 1996 Act, as it is the 1940 Act and not 1996 Act which governed the proceedings before the Court.

2. The undisputed facts are that on 3rd August, 1984 GECI entered into a contract with the respondent National Hydroelectric Power Corporation Limited (NHPCL). Article 15 of the general terms and conditions of the said contract contained an arbitration clause for the settlement of disputes, in case they arise, through arbitration subject to the rules of procedure of the International Chambers of Commerce, Paris. Disputes having arisen between the parties in 1991, GECI invoked the arbitration clause and requested to ICC Paris nominating Mr. Jeffery M. Hertzfeld as their arbitrator, while NHPCL appointed Justice R.C. Pathak (Retd) as its arbitrator and the ICC nominated Prof. John Murray. All the three constituted the Arbitral Tribunal. The Arbitral Tribunal passed an award at Paris on 7th May, 1996 thereby awarding a sum of Candadian Dollars 7,59,758.52 with interest @ 6% per annum from February, 1994 in favor of GECI. The NHPCL filed a petition under Section 14(2) of 1940 Act, which was registered as Suit No. 1475A/96, for a direction to the Arbitral Tribunal to file the award together with the record and proceedings in Court. The GECI on its part filed a petition, being OMP 150/96, under Sections 44 and 49 of the 1996 Act for making the award a rule of the Court. In view of these two proceedings, one filed under the 1940 Act and the other under the 1996 Act, a basic question arose before the learned Single Judge as to which of the above referred acts will apply and govern the proceedings in this case and the said question has been answered by the learned Single Judge by means of the impugned order.

3. We have heard Mr. Manmohan, learned counsel representing the appellant GECI and Mr. B. Dutta, Senior Advocate on behalf of the respondent NHPCL and have given our thoughtful consideration to their respective submission. The main plan on which the impugned order is sought to be assailed is that the award in this case is a foreign award having been rendered by the Arbitral Tribunal at Paris by following the rules of procedure of ICC Paris and the award cannot be deemed to be a domestic award in terms of Section 9 of the Foreign Awards (Recognition and Enforcement) Act, 1961 (in short FARE) and because the award was rendered subsequent to the repeal of FARE by Section 85 of the 1996 Act, further proceedings in regard to the enforcement of the award would be governed by the provisions of 1996 Act. In our opinion, the submission has been noted just to be rejected and it is fro the obvious reason that admittedly in terms of Clause 20.3 of the contract, the contract was to be governed and interpreted in accordance with the laws of India. Merely because the venus of the Arbitral Tribunal was Paris and that the arbitration was subject to the rules of procedure of ICC Paris, the award in the case cannot be termed as a foreign award. Section 9 of the FARE reads as under:-

9. Nothing in this Act shall---

(a) prejudice any rights which any person would have had of enforcing in India of any award or of availing himself in India of any award in this Act had not been passed; or

(b) apply to any award made on an arbitration agreement governed by the law of India."

We are, therefore, of the considered opinion that the parties having once agreed that the contract shall be governed and interpreted by the law of India, by no stretch, the award rendered by the Arbitral Tribunal is a domestic award and by no stretch it can be termed as a foreign award. We also see no merit in the contention of the learned counsel for the appellant that on the repeal of the FARE Act by Section 85 of the 1996 Act, the appellant is left with no remedy except to seek the enforcement of the award in question by invoking the provisions of Sections 44 and 49 of the 1996 Act.

4. The other ground pressed on behalf of the appellant GECI is that in the case in hand even though the arbitration proceedings had commenced prior to the coming into force of the 1996 Act, but as the award was rendered subsequent to the enforcement of the said Act, the appellant is entitled to have recourse to the provisions of the 1996 Act. This contention is based on the submissions that the arbitration proceedings comprise of two stages, first stage being of the proceedings held before the arbitrator which commences when the arbitrator enters upon the reference and terminates with the making of the award while the second stage is the enforcement of the award. which is subsequent to and independent of the proceedings before the arbitrator. According to the learned counsel for the appellant, the fist stage of the proceedings before the arbitrator are to be governed and regulated by the curial law and procedural law to which the parties may have agreed, which in the present case is ICC rules, while the second stage i.e. enforcement stage of the award, it is the proper Indian law i.e. 1996 Act in the present case, law which would govern the proceedings. In support of his contention, the learned counsel for the appellant has heavily relied upon the Supreme Court decision in the case of Sumitomo Heavy Industries Ltd. v. ONGC ltd. and Ors. . In the said case, the Supreme Court held as under:-

"The conclusion that we reach is that the curial law operates during the continuance of the proceedings before the arbitrator to govern the procedure and conduct thereof. The Courts administering the curial law have the authoirty to entertain applications by parties to arbitrations begin conducted within their jurisdiction for the purpose of ensuring that the procedure that is adopted in the proceedings before the arbitrator conforms to the requirements of the curial law and for reliefs incidental thereto. Such authoirty of the Courts administering the curial law ceases when the proceedings before the arbitrator are concluded."

"The proceedings before the arbitrator commence when he enters upon the reference and conclude with the making of the award. As the work by Mustill the Boyd aforementioned puts it, with the making of a valid award the arbitrator's authority, powers and duties in the reference comes to an end and he is 'functus officio" (page 404). The arbitrator is not obliged by law to file his award in Court but he may be asked by the party seeking to enforce the award to do so. The need to file an award in Court arises only if it is required to be enforced and the need to challenge it arises if it is being enforced. The enforcement process is subsequent to and independent of the proceedings before the arbitrator. It is not governed by the curial or procedural law that governed the procedure that the arbitrator followed in the conduct of the arbitration."

5. Learned counsel for the respondent- NHPCL, on the other hand, submitted that there is no quarrel with the legal preposition flowing from the said decision, but his contention is that this does not advance the case of the appellant in any way because by virtue of Section 85(2)(a) of the 1996 Act, not only the proceedings commenced or pending before or at the time of enforcement of the 1996 Act are saved, but also the proceedings of enforcement thereof are saved and have to be governed by the provisos of the 1940 Act under which the arbitration proceedings had commenced.What is the meaning and effect of Section 85(2)(a) of 1996 Act, came up for consideration before the Supreme Court in the case of Thysseen Sthaulunion GMBH v. Steel Authority of India Ltd. and the Apex Court laid down that the phrase "in relation to arbitral proceedings" appearing in the said Sub-Section cannot be given a narrow meaning to mean only the pendency of the arbitration proceedings before the arbitrator and it would not' only cover the proceedings pending before the arbitrator, but would also cover the proceedings before the Court and any proceedings which are required to be taken under the old Act (1940 Act) for making the award a rule of the Court under Section 17 of the Old Act and also appeal arising there under. The Apex Court also held that if the narrow meaning of the phrase "in relation to arbitral proceedings" is to be accepted, it is likely to create a great deal of confusion with regard to the matters where award is made under the old Act, because the provisions for the conduct of arbitral proceedings are quite different under the old Act and the new Act. The Court also ruled that the provisions of new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act come into force. The right for enforcement of the award under the old Act in relation to the arbitral proceedings which had commenced prior to the enforcement of the new Act is an accrued right and cannot be taken away or diluted because the new Act has been enforced at a later date.

6. Learned Single Judge taking note of the above legal position has accordingly, held that even thought he award, in the case in hand, was rendered after the enforcement of the 1996 Act, but as the arbitral proceedings had commenced before the coming into force of the 1996 Act, the proceedings before the Court in relation to the said arbitral proceedings were to be governed by the 1940 Act. In our opinion, the said finding of the learned Single Judge is based on a correct interpretation of the provisions of Sections 85 and 86 of the 1996 Act and in consonance with the Supreme Court decision in the case of Thyssen Stahlunion GMBH (supra) and we find no reason to differ with the same.

In the result, we see no merits in the present appeal. The appeal is dismissed and the impugned order of the learned Single Judge is upheld. Parties are left to bear their own costs in these proceedings.