Union Of India (Uoi) And Anr. vs Jamil Ahmed
2004 Latest Caselaw 1296 Del

JUDGMENT

Anil Kumar, J.

1. A number of petitions under Section 20 of the Arbitration Act, 1940 for appointment of Arbitrator and for reference of disputes were disposed of by judgment dated 6th November, 2000 by the learned single Judge. However while disposing of the petition it was held that since after filing of these petitions Arbitration Act, 1940 had been repealed and Arbitration and Conciliation Act, 1996 had been enacted and since the parties had agreed that any statutory modification to Arbitration Act, 1940 will apply to the arbitration proceedings, therefore Arbitration and Conciliation Act, 1996 shall apply. It was held that Section 16 of the Arbitration and Conciliation Act, 1996 will be applicable and the Arbitrator will have the power to decide on his own jurisdiction It was held that the question as to whether any dispute raised by the claimant would be subject-matter of Arbitration or not and `excepted matter' and whether the claimants shall be entitled to interest are also the matters to be decided by the arbitrator.

2. Aggrieved by the impugned judgment dated 6th November, 2000, the above noted appeal has been filed contending inter alia that the learned single Judge had relied upon the judgments of the Division Bench of this Hon'ble Court in RFA(OS) Nos. 31/89 and 250/93 titled ''Sarvesh Chopra v. General Manager and Anr.'' dated 28th July, 2000 regarding `excepted matters'. However, a Special Leave Petition was filed against the said judgments where the Supreme Court had directed that the arbitration proceedings could go on but learned Arbitrator will not proceed in respect of claims which are excepted matters. It is also contended by the appellant that the learned single Judge erred in holding that Arbitration and Conciliation Act, 1996 will apply and not the Arbitration Act, 1940.

3. The learned counsel for the appellant has relied on decisions of this Court in the cases of Delhi Development Authority V. Bhai Sardar Singh and Sons, FAO(OS) 93 of 2002 decided on April 20th, 2004; M/s Minny Enterprises V. General Manager, I.T.D.C, (FAO(OS) No. 348/2003) decided on July 28th, 2004 and Milk Food Limited V. GMC Ice Cream Pvt. Ltd., 2004 (7) Supreme Court Cases 288.

4. We have considered the contention of the appellants and the impugned judgment and the authorities relied on by the appellants. The provisions of Arbitration and Conciliation Act, 1996, nowhere provides or mandates that the re-enacted Act or law would automatically apply to pending arbitration proceedings or that the old Act would automatically be not applicable and the rights, if any, accrued to the parties would also be negated. In the case of M/s Minny Enterprises (Supra) it had been held that where the arbitration petition had already been commenced new Arbitration and Conciliation Act, 1996 will not apply nor the rights which had accrued to the parties under the old Act would be negated. In Milk Food Limited (Supra), it was held that under the Arbitration Act, 1940, an arbitration is deemed to have commenced when one party to the arbitration agreement serves on the other a notice requiring the appointment of an Arbitrator. It was further held that for the purpose of applicability of the 1940 At service of a notice for appointment of an Arbitrator would be relevant date for the purpose of commencement of the arbitration proceeding and if the date of notice is prior to the date of enforcement of Act of 1996, the Arbitration Act, 1940 would apply. The Supreme Court held:

''72.Keeping in view the fact that in all the decisions, referred to hereinbefore, this Court has applied the meaning given to the expression ''commencement of the arbitral proceeding'' as contained in Section 21 of the 1996 act for the purpose of applicability of the 1940 Act having regard to Section 85(2)(a) thereof, we have no hesitation in holding that in this case also, service of a notice for appointment of an arbitrator would be the relevant date for the purpose of commencement of the arbitration proceedings.''

5. In the facts of the appellant, the claimants/respondent had filed the petition under Section 20 of the Arbitration Act for the appointment an Arbitrator after the appellants failed to appoint an arbitrator though the respondent wrote to the appellants for appointment and for reference of disputes. During the pendency of the petition under Section 20, the Arbitration Act, 1940, the Arbitration and Conciliation Act, 1996 came into force. The learned single Judge proceeded on the assumption that since the parties had agreed that any statutory modification to the Arbitration Act, 1940 will apply to the arbitration proceedings and since arbitration proceedings have not commenced, therefore the Arbitration and Conciliation Act, 1996 was applicable. The reasoning of the learned single Judge was erroneous as the proceeding under the Arbitration Act, 1940 had commenced on the date the respondent wrote to the appellants to appoint an arbitrator in terms of the agreement for arbitration and refer the disputes, which was a notice given by the claimant and the arbitration petition was filed by the claimant/respondent thereafter. In the facts of the case it is apparent that during the pendency of the petition under Section 20 of the Arbitration Act, 1940, the new Arbitration and Conciliation Act, 1996 came in to force.

6. The commencement of arbitration proceeding is different from commencement of proceeding before an arbitrator as observed by the Supreme Court in the case of Milk Food Ltd (supra), demand for appointment of arbitrator and reference of disputes to the arbitrator and filing of petition under Section 20 of the Arbitration Act by the respondent shall be commencement of arbitration proceedings under the Arbitration Act, 1940. Under Section 85(2) of the Arbitration and Conciliation Act,1996 the provision of Arbitration Act, 1940 will apply in relation to arbitral proceedings commenced before the Arbitration and Conciliation Act, 1996. It had also been held that the commencement of arbitration proceedings under Section 20 of the Arbitration Act, 1940 could be y a person other than the claimant. In the present case the arbitration proceedings were commenced by the respondent.

7. In view of this, the judgment of the learned single Judge is erroneous and appointment of the Arbitrator could not be under the provision of the Arbitration and Conciliation Act, 1996 and therefore the judgment dated 6th November, 2000 of the Learned Single Judge in suit no. 1314 A/1995 is liable to be set aside. The Arbitration Act, 1940 in the facts and circumstances will be applicable between the parties as the proceedings had already commenced on the date when the Arbitration and Conciliation Act 1996 had came into force and, thereafter the parties had not mutually agreed for the application of Arbitration and Conciliation Act, 1996.

8. The appellant has also contended that some of the disputes involved are `excepted matters' and can not be referred to the Arbitration. Under Section 20 of the Arbitration Act, 1940, the Learned Single Judge will determine in accordance with law whether the disputes sought to be referred are covered by the Arbitration agreement or not or whether any of the claims comes within ''excepted matter'' and not liable to be referred to the arbitration.

9. Accordingly the impugned judgment of the learned single Judge dated 6th November, 2000 in suit no. 1314 A/1985 is set aside and the case is remanded to the learned single Judge for fresh decision in accordance with law for reference of disputes to the Arbitrator on the petition of the claimant/respondent under Section 20 of the Arbitration Act, 1940. Consequently the appeal is allowed and parties are left to bear their own costs.