At, High Court of Delhi
By, THE HONOURABLE MR. JUSTICE B.A. KHAN & THE HONOURABLE MR. JUSTICE R.S. SODHI
For the Appearing Parties: Ashvani Kumar, Parag Tripathi, Ruchi Narula, Sandip Sharma, Advocates.
B.A. KHAN, J.
(1) C. M. 101/2003 Allowed subject to just exceptions.
(2) C. M. 100/2003 Application is allowed. Delay in filing this appeal is condoned.
(3) FAO (OS) 41/2003 appellant's application under Section 85 of New Arbitration and Conciliation Act of 1996 seeking dismissal of respondent's application (Suit No. 2065-A/95) filed under Section 5,11 and 12 of the old Arbitration Act of 1940 has been dismised by impugned order dated 9. 11. 2001. Hence this Appeal.
(4) APPELLANT was awarded a contract by the respondent for providing fire protection system at one of its plants way back on 18. 2. 1982. Later some disputes arose between parties, upon which Appellant invoked arbitration clause vide letter dated 9. 12. 1989 and again by letter dated 10. 5. 1994. Appellant then approached the Institute of Engineers for appointment of Arbitrators. Though two Arbitrators were appointed but respondent did not submit to the jurisdiction and on the contrary filed a petition under Section 5,11 and 12 of the old Arbitration Act of 1940 (Suit No. 2065-A/95) for supersession of arbitration agreement and removal of Arbitrators.
(5) FACED with this appellants filed an application (IA No. 8470/2001) under Section 85 of the New Arbitrator Act seeking dismissal of respondent's application under the old Act on the plea that under Clause 26. 6. 2 of the general conditions of the contract it was agreed to conduct the arbitration under the provisions of the Old Arbitration Act or "any statutory modification thereof" which included in the new Arbitration Act of 1996 also and under Sections 13 and 16 of this. Respondent could challenge the constitution of Arbitral Tribunal before the Tribunal itself.
(6) LD. Single Judge over-ruled this plea on two counts :-
(i) that a right had accrued to respondent to get his application decided under the provisions of the Old Act as he had filed it on 2. 9. 95 and before coming into force of New Act.
(ii) that award letter dated 24th March, 1982 containing the main arbitration clause would overide clause 26 of the general conditions of contract which would be inapplicable in the matter.
(7) LD. Judge also distinguished the observations of the Supreme Court in M/s Rani Construction Pvt. Ltd. Vs. Himachal Pradesh State Electricity Board (Civil Appeal No. 61 of 1999) on noticing that award in that case was made after coming into force of the New Act, when Respondent's application under Sections 5, 11 and 12 was made sometime in September, 1995.
(8) LD. Counsel for Appellant Mr. Prag Tripathi placed hole-hog reliance on observations of the Supreme Court in M/s Rani Construction case to urge that the New Arbitration Act was applicable in the matter as parties had agreed for the conduct of arbitration under the Old Arbitration Act of 1940 or any statutory modification thereof under Clause 26. 6. 2 of GCC which included the new Act also and under which respondent could challenge the constitution of Arbitral Tribunal before the Tribunal itself under Sections 15 and 16 of this Act. He claimed that the Arbitration clause in Rani Construction Case was pari materia with that of of the present case and once Supreme Court had made the New Act applicable in the first case it was attracted to this case also.
(9) THE submission appears to us farfetched if not fallacious and that is for the reasons to follow. In Rani Construction case, Supreme Court was seized of interpretation and import of Section 85 (2) (a) of the New Act alongwith terms of the Arbitration Clause. Section 85 (2) (a) provided:-
"repeal and saving - (2) Notwithstanding such repeal,-- (a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;
The Arbitration Clause in M/s Rani Construction case read thus:-"subject to the provisions of the contract to the contrary as aforesaid, the provisions of the Indian Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to all arbitration proceedings under this clause. "
It was on conjoint examination of the two provisions that Supreme Court observed thus:-"there is no substance in the submissions of the respondent that parties could not have agreed to the application of the new Act till they knew provisions thereof and that could mean that any such agreement as mentioned in the Arbitration Clause could be entered into only after the new Act had come into force. When the agreement used expression "unless otherwise agreed" and "law in force" it does give an option to the parties to agree that the new Act would apply to the pending arbitration proceedings. That agreement can be entered into even before the new Act comes into force and it can't be said that agreement has to be entered into only after coming into force of the New Act. "
(10) THERE may be no quarrel with the proposition that parties could also agree to the application of the New Act in tune with the expression "unless otherwise agreed to by the parties" occurring in Section 85 (2) (a) of the New Act but whether they had in fact agreed on that is the million dollar question. For this, the relevant Arbitration clause would have to be reproduced to test the validity of Appellant's contention. The main clause is contained in award letter dated 24. 3. 1982 which reads as under :-
"it is specifically agreed by and between the parties that all the differences or disputes arising out of this Contract or touching the subject matter of this Contract, shall be decided by process of settlement and arbitration as specified in clause 25. 0 and 26. 0 of section GCC, Conditions of Contract, Volume-I and provisions of the Indian Arbitration Act, 1940 shall apply and Delhi Courts alone shall have exclusive jurisdiction over the same. "
Clause 26. 6. 2 of the Conditions of the Contract provides :-"the arbitration shall be conducted in accordance with the provisions of the Indian Arbitration Act, 1940 or any statutory modification thereof. The venue of arbitration shall be New Delhi, India. "
(11) IGNORING the terms of main Arbitration Clause and focusing only on Clause 26 of GCC, Ld. Counsel for Appellant, Mr. Tripathi wants us to hold that ""any statutory modification thereof" occurring therein includes the New enactment also. We find it difficult to accept this because the expression in question would have to be read elude generis and word ""thereof" used therein leaves no scope for doubt that any statutory modification refers to the modification if any made or carried out in the Arbitration Act of 1940. By no stretch of imagination could it be overstretched to include the New Arbitration Act. It is also noteworthy that the arbitration clause in Rani Construction Case contains the additional word "re enactment" which is missing in the Arbitration Clause in the present case and which makes it different. Therefore, it is not
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a case of two similar clauses on all fours so as to attract the application of the New Act in consonance with the observations of Supreme Court in M/s Rani Construction case. It appears to us that this distinction in the terms of two clauses has escaped notice throughout which by itself was sufficient to exclude the application of the New Act in the matter. This is apart from whether the general conditions of contract would override the arbitration agreement between the parties and whether a right had accrued to Respondent on the date of filing of the application to have it decided under the old Act. We do not deem it necessary to examine these aspects in the face of the view taken by us that the New Act was otherwise not attracted in the matter. This Appeal accordingly fails and is dismissed on preliminary hearing.