Seat / Venue of Arbitration not a determinative factor in attracting jurisdiction of a Writ Court: Delhi High Court

The Delhi High Court in Durgapur Freight Terminal P. Ltd. v. Union of India has recently held that an arbitration clause providing for seat / venue would not be a determinate factor for conferring jurisdiction on a writ court, if the court otherwise does not have jurisdiction in the traditional sense. The bench analysed the provisions of Article 226 of the Constitution of India, 1950 and also the concept of forum convenience, to hold that the courts at Delhi would not have jurisdiction as no part of cause of action has arisen in Delhi. The relevant observations of the bench, as as under:

11. In the writ petition, the petitioners have claimed jurisdiction of this Court in the following terms:-

"59. The present petition is maintainable before this Hon'ble Court inasmuch as the concerned respondents viz. respondent nos. 1 to 4 who took the decisions impugned are located within the territorial jurisdiction of this Hon'ble Court. Moreover the essential part of cause of action viz. decisions leading to the acts and/or omission including non- consideration of the petitioner's representation dated December 28, 2022 have taken place within the territorial jurisdiction of this Hon'ble Court."

12. Before proceeding further, it is deemed apposite to advert to clauses (1) and (2) of Article 226 of the Constitution of India, which read as under:-

"226. Power of High Courts to issue certain writs.--(1) Notwithstanding anything in Article 32, every High Court shall have power, throughout the territories in relation to which it exercises jurisdiction, to issue to any person or authority, including in appropriate cases, any Government, within those territories directions, orders or writs, including writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari, or any of them, for the enforcement of any of the rights conferred by Part III and for any other purpose. 

(2) The power conferred by clause (1) to issue directions, orders or writs to any Government, authority or person may also be exercised by any High Court exercising jurisdiction in relation to the territories within which the cause of action, wholly or in part, arises for the exercise of such power, notwithstanding that the seat of such Government or authority or the residence of such person is not within those territories."

13. A reading of Clauses (1) and (2) of Article 226 of the Constitution of India would show that a High Court has territorial jurisdiction to issue writs under two situations: one, where the person/authority to whom the writ is to be issued is situated within the territory over which the High Court exercises jurisdiction, and two, where the cause of action, wholly or in part, arises for issuance of a writ within such territory. For the sake of convenience, the first may be referred to as 'jurisdiction by virtue of situs' and the other as 'jurisdiction by virtue of cause of action'.

14. In the instant case, the petitioners have claimed jurisdiction of this Court under both clauses of Article 226 of the Constitution of India. The tests to determine whether this Court has jurisdiction under these Clauses are well-defined. While before exercising jurisdiction by virtue of situs, this Court is required to arrive at a positive finding that the authority/person to whom the writ has to be issued lies within the territory over which the Court exercises jurisdiction; in order to exercise jurisdiction by virtue of cause of action, the Court shall be of the opinion that cause of action, wholly or in part, has arisen within the jurisdiction over which it exercises jurisdiction.

15. The Supreme Court in Utpal Kumar Basu and Others (Supra) has observed that the question as to whether the High Court has territorial jurisdiction to entertain a writ petition has to be decided on the basis of facts pleaded in the petition, the truth or otherwise thereof being immaterial. Relevant excerpt from the decision is extracted hereunder:-

"6. ...Therefore, in determining the objection of lack of territorial jurisdiction the court must take all the facts pleaded in support of the cause of action into consideration albeit without embarking upon an enquiry as to the correctness or otherwise of the said facts. In other words the question whether a High Court has territorial jurisdiction to entertain a writ petition must be answered on the basis of the averments made in the petition, the truth or otherwise whereof being immaterial. To put it differently, the question of territorial jurisdiction must be decided on the facts pleaded in the petition. Therefore, the question whether in the instant case the Calcutta High Court had jurisdiction to entertain and decide the writ petition in question even on the facts alleged must depend upon whether the averments made in paragraphs 5, 7, 18, 22, 26 and 43 are sufficient in law to establish that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court."

16. The scope of Article 226(2) of the Constitution of India came to be analysed in depth in Kusum Ingots & Alloys Ltd. v. Union of India and Another reported as (2004) 6 SCC 254, where the Supreme Court observed thus:-

"9. Although in view of Section 141 of the Code of Civil Procedure the provisions thereof would not apply to writ proceedings, the phraseology used in Section 20(c) of the Code of Civil Procedure and clause (2) of Article 226, being in pari materia, the decisions of this Court rendered on interpretation of Section 20(c) CPC shall apply to the writ proceedings also. Before proceeding to discuss the matter further it may be pointed out that the entire bundle of facts pleaded need not constitute a cause of action as what is necessary to be proved before the petitioner can obtain a decree is the material facts. The expression material facts is also known as integral facts.

Jurisdiction Clause vis-a-vis Venue and Seat of Arbitration: Delhi High Court answers

Justice Yashwant Varma

The Delhi High Court in Inland Waterways Authority of India v. Reach Dredging Ltd. and Gayatri Projects P. Ltd. has examined the interplay between the jurisdiction clause in the arbitration agreement vis a vis the venue / seat prescribed under the agreement. The High Court held as under:

3. For the purposes of evaluating the correctness of the preliminary objection which stands raised, it would be apposite to extract the two competing clauses in the backdrop of which the question itself stands raised. Under the General Conditions of Contract2, Clause 22 while dealing with the laws governing the contract made the following provisions: -

―CLAUSE - 22: LAWS GOVERNING THE CONTRACT The Courts at Noida only shall have the jurisdiction for filing the award of the arbitration and for any other judicial proceedings. GCC 

4. The arbitration agreement stood comprised in Clause 47 titled ―Settlement of Disputes and Arbitration‖. Clause 47.11 which alone would have some bearing is extracted hereinbelow: -

―47.11 The parties to the agreement hereby undertake to have recourse only to arbitration proceedings under for Arbitration Act 1996 and the venue of the arbitration proceeding shall be Noida/ New Delhi and the parties will not have recourse to Civil Court to settle any of their disputes arising out of this agreement except through arbitration.‖

5. On facts it was admitted that the hearings in connection with the arbitral proceedings took place in Delhi. The award dated 28 July 2022 is stated to have been drawn and published at Noida, District Gautambudh Nagar falling in the State of Uttar Pradesh. It is also stated to have been duly stamped in that State.

6. Learned counsel appearing for the respondent contended that Clause 47.11 of the GCC merely designates the venue of arbitration to be either Noida or New Delhi. However, according to learned counsel, the venue restriction clause as comprised in Clause 22 would clearly establish that the seat of arbitration must be understood to be Noida only. Apart from the above, learned counsel would urge that since the award itself had been declared, published and dated at Noida, it is that place which must be recognised as being the seat of arbitration. Learned counsel also sought to draw sustenance from the fact that the respondent had invited tenders which were to be submitted at Noida. In view of the aforesaid and in light of Clause 22, it was urged that the present petitions are liable to be dismissed with the Court leaving it open to the petitioner to approach the competent court in District Gautambudh Nagar.

7. Countering the aforesaid submissions, learned counsel for the petitioner contended that Clause 47.11 is irrefutable evidence of both Noida or New Delhi constituting the seat where proceedings pertaining to the award could be initiated. It was further contended that the fact that all the proceedings of the Arbitral Tribunal were held at Delhi would further buttress the submission that it was that location which was ultimately chosen to be the seat of arbitration.

8. While learned counsel for the respondent contended that the issue that arises stands conclusively settled in light of the judgment rendered by the Supreme Court in BGS SGS SOMA JV v. NHPC3, learned counsel for the petitioner relied upon the judgment rendered by the Supreme Court in Inox Renewables Ltd. vs. Jayesh Electricals Ltd.4 to contend that the Section 34 petitions had been correctly filed and presented before this Court.

9. The answer to the question which stands posited would revolve upon the construction liable to be placed upon Clause 22 read with Clause 47.11. The Court notes that Clause 47.11 specifies Noida/New Delhi to be the venue of the arbitration proceedings. Clause 22, on the other hand, in categorical terms prescribes that the courts at Noida alone would be liable to be recognised for the purposes of filing of the award and for any other judicial proceedings. It is the perceived conflict between the aforenoted two clauses that has given rise to the controversy which stands raised.

10. On a plain reading of Clause 47.11, the Court notes that while (2020) 4 SCC 234 2021 SCC OnLine SC 448  stipulating Noida/New Delhi as the place for arbitration proceedings, parties appear to have essentially agreed to either of those two locations as being the acceptable venues for the holding of arbitral proceedings. Clause 47.11 thus appears to have granted the option to parties to convene arbitration proceedings either at Noida or New Delhi. Viewed in that light it would be manifest that Noida and New Delhi could have been interchangeably utilised as venues for the arbitration proceedings.

Non Est Filing and Condonation of Delay in challenge to Arbitral Awards : Delhi High Court answers

The Division Bench of the Delhi High Court in Oil and Natural Gas Corporation Ltd. v. Joint Venture of M/s Sai Rama Engineering Enterprises (SREE) & Megha Engineering & Infrastructure Ltd. (MEIL) has answered as to what would constitute a non est filing vis-a-vis a petition under S. 34 of the Arbitration & Conciliation Act, 1996 ("Act"). 

The Division Bench was called upon to examine the validity of a judgment rendered by a Single Judge, where the Petition filed under S. 34 of the Act was termed as a non est filing and the plea for condonation of delay in filing the Petition was rejected. While disagreeing with the view of the Single Judge, the Division Bench has held as under:

The Impugned Judgement

13. The learned Single Judge whilst analysing the matter, observed that the following three crucial issues arose for consideration.

"a) Whether the petition is filed within the statutory period of 3 months prescribed under section 34 (3) of the Act.

b) In the alternate; whether the petition was filed within the extended period of 30 days under the Proviso.

c) Whether the filing in the first or the second instance is a 'non est' filing."

14. The learned Single Judge relied on the decision in Union of India v Popular Construction Co.: 2001 (8) SCC 470, wherein the Supreme Court of India held that the legislative intent in providing a strict and non-flexible limitation period should not be defeated by condoning the delay, without "sufficient cause". The court noted that in Simplex Infrastructure Limited v. Union of India: 2019 (2) SCC 455, which cites Union of India v. Popular Construction Co. (supra), the Supreme Court had emphasized the importance of limitation in filing an application under Section 34 of the A&C Act.

15. The learned Single Judge found that the period of delay in filing the application to set aside the impugned award under Section 34 of the A&C Act was beyond the period of thirty days that could be condoned in terms of the proviso to Section 34(3) of the A&C Act. The Court, thus, held that it had no jurisdiction to condone the delay. The said conclusion of the learned Single Judge is premised on the finding that the application filed by the appellant prior to 25.02.2019, was not proper and did not qualify to be considered as an application under Section 34 of the A&C Act. According to the learned Single Judge, the filings done on 20.02.2019 or on 22.02.2019 could not be considered as valid and were required to be treated as non est. Reasons and Conclusion

16. The only questions that fall for consideration of this Court are whether the filings done by the appellant prior to 25.02.2019 are required to be considered as non est; and if not, whether the delay in filing the petition ought to be condoned.

17. At the outset, it is relevant to state that there is no cavil with the proposition that this Court does not have the jurisdiction to condone the delay in filing of the application to set aside an arbitral award beyond the period of thirty days, as specified under the proviso to Section 34(3) of the A&C Act. As noted above, the impugned judgement is premised on the basis that the appellant had failed to file any such application within the period of three months and a further thirty days, from the receipt of the impugned award.

18. The appellant states that it received the impugned award on 23.10.2018. Therefore, the period of three months available to the appellant to assail the impugned award expired on 23.01.2019. The further period of thirty days - being the period that could be condoned by the Court - expired on 22.02.2019. It was the appellant's case that it had filed the petition on 23.01.2019, within the specified period of limitation.

19. As a matter of fact, the appellant had uploaded certain documents on 23.01.2019 at 03:45 p.m. The Registry of this Court had acknowledged the said filing by an e-mail sent at 03:49 p.m. on 23.01.2019. The appellant claims that it was subsequently discovered that an incorrect file had been electronically uploaded on 23.01.2019. The file that was uploaded related to a case captioned "Reliance Infrastructure v. Aravali Power Co. Pvt. Ltd.". Thus, it is not in dispute that the said filing cannot be considered as filing of an application under Section 34 of the A&C Act, assailing the impugned award. Admittedly, no such application was filed on 23.01.2019.

20. The appellant, thereafter, uploaded another file at 3.10. p.m on 04.02.2019. The record indicates that this filing was also not an application under Section 34 of the A&C Act, seeking to set aside the impugned award. Admittedly, the application filed on 04.02.2019 was one under Section 14 of the A&C Act and related to another dispute, which had no bearing on the appellant's challenge to the impugned award. The said application under Section 14 of the A&C Act was defective. The defects were cured and that application under Section 14 of the A&C Act was registered as OMP(T)(COMM) 15/2019. The said application was, thereafter, disposed of by an order dated 14.02.2019. Thus, undisputedly, the appellant had not filed any application under Section 34 of the A&C Act to set aside the impugned award on 04.02.2019.

21. The appellant filed an application assailing the impugned award for the first time on 20.02.2019 at 11:39 a.m. The application and other documents uploaded on the said date, comprised of 6,313 pages. The said filing was acknowledged by the Registry of this Court by an e-mail sent at 11.40 a.m. on 20.02.2019.

22. The said application was defective and this was communicated by the Registry of this Court to the appellant on 21.02.2019. The soft copy of the application, as filed by the appellant on 20.02.2019, has been retrieved and placed on record by the Registry of this Court. The appellant had uploaded two files on 20.02.2019. The first comprised of an Index running into ten pages. The said Index was dated 19.02.2019 and was signed by the advocate of the appellant. The second file uploaded was a comprehensive file, which included an Index, an application under Section 34 of the A&C Act, statement of truth, affidavits supporting the application, other applications, impugned award, and documents. The file uploaded comprised of 6,313 pages. The Index was duly singed on behalf of the appellant by one Sudhir Kumar, DGM (Mech.) Onshore Engineering, ONGC, as well as the appellant's advocate. Both, the authorised representative of the appellant as well as the appellant's advocate had also signed other documents such as the urgent application and the memo of parties. The application under Section 34 of the A&C Act was signed on each page by the authorised representative of the appellant. The said petition clearly set out the grounds on which the impugned award is assailed. It is material to note that the said petition was also accompanied by an affidavit, which was signed by the deponent and also duly verified. However, the said affidavit was not attested. The authorised representative had also filed a duly signed statement of truth by way of an affidavit. However, the said affidavit was not attested. It was also accompanied by a vakalatnama, which was signed by the authorised representative of the appellant.

23. The aforesaid filing was found to be defective, inter alia, because the affidavits and the statement of truth by way of an affidavit were not attested and the vakalatnama was not stamped. In addition to the aforesaid defects, there were other minor defects, which were duly notified to the appellant.

24. The appellant re-filed the application on 22.02.2019. However, the filing done on that date is of no consequence. It comprised of only ten pages of Index.

25. The appellant again re-filed the application on 23.02.2019. Some of the defects were cured. The affidavits were attested and the date of 20.02.2019 was stamped on the affidavits. However, the body of the affidavits continued to reflect that they were affirmed on 19.02.2019. The vakalatnama was also stamped. However, this filing was also marked as defective as there were various other defects. The application was returned for re-filing.

26. The appellant cured all defects and re-filed the petition on 25.02.2019.

27. The learned Single Judge found that the period of delay in filing the application under Section 34 of the A&C Act was beyond the period of thirty days that could be condoned in terms of the proviso to Section 34(3) of the A&C Act. The Court, thus, held that it had no jurisdiction to condone the delay. The conclusion of the learned Single Judge is premised on the finding that prior to 25.02.2019, the appellant had not filed a proper application, which could qualify to be considered as an application under Section 34 of the A&C Act. The Court held that the filings done on 20.02.2019 or on 22.02.2019 were required to be treated as non est. 

28. At this stage, it is relevant to refer to the reasons that persuaded the learned Single Judge to hold that the applications filed on 20.02.2019 and on 23.02.2019, were non est. Paragraph 43, 44, 45 and 46 of the impugned judgement reads as under:-

"43. The common thread that runs in the aforesaid judgments is that 'non-est' filing cannot stop limitation and cannot be a ground to condone delay. Thus, for a petition, filed, under Section 34 of the Act to be termed as a 'properly' filed petition must fulfill certain basic parameters such as:

a) Each page of the Petition as well as the last page should be signed by the party and the Advocate;

b) Vakalatnama should be signed by the party and the Advocate and the signatures of the party must be identified by the Advocate;

c) Statement of Truth/Affidavit should be signed by the party and attested by the Oath Commissioner;

44. This in my view is the minimum threshold that should be crossed before the petition is filed and can be treated as a petition in the eyes of law. The rationale behind insisting on these fundamental compliances to be observed while filing a petition, is not far to seek. Vakalatnama is an authority which authorizes an Advocate to act on behalf of a party as a power of attorney and to carry out certain acts on his behalf.

Therefore, the vakalatnama is the first step and a precursor to the preparation of a petition. The Statement of Truth accompanying a petition or an application is sworn by the deponent who states on oath that the contents of the accompanying petition have been drafted under his instructions and are true and correct to his knowledge or belief. Surely, this affidavit must be signed after the petition is made and the attestation must also be done on the affidavit when the petition is filed. This is also a requirement under the Commercial Courts Act, 2015. The petition needs to be signed by the Advocate as well as the party before the same is filed as this would indicate that both have read the petition and there is authenticity attached to the pages filed in the Registry. If these basic documents are not annexed or the signatures as required are absent, one can only term the documents which are filed as a 'bunch of papers' and not a petition.

45. In several cases, of course, the defects may only be perfunctory and may not affect the filing of the petition, e.g. the documents may be illegible or the margins may not be as per the required standards etc. These defects are certainly curable and if the petition is filed with such like defects, it cannot be termed as a non-est petition.

46. Examined in the light of the above-mentioned judgments and the provisions of Section 34(3) of the Act, the filing of the petition on 20.02.2019 was a non-est filing and cannot stop limitation as clearly even the affidavits were not signed and not attested besides a few other objections."

29. We may, at this stage, point out a factual error, although it is not of much relevance. The applications under Section 34 of the A&C Act filed on 20.02.2019 and 23.02.2019 were accompanied by signed affidavits. However, the affidavits supporting the application filed on 20.02.2019 were not attested. Then the finding that the affidavits accompanying the application filed on 20.02.2019 was not signed is erroneous.

30. We concur with the learned Single Judge that certain defects are curable and do not render the application as non est. However, the nature of certain defects is such that it would not be apposite to consider the defective application as an application under Section 34 of the A&C Act, to set aside an arbitral award. Undisputedly, every improper filling is not non est.

31. We are unable to concur with the view that the minimum threshold requirement for an application to be considered as an application under Section 34 of the A&C Act is that, each page of the application should be signed by the party, as well as the advocate; the vakalatnama should be signed by the party and the advocate; and it must be accompanied by a statement of truth. And, in the absence of any of these requirements, the filing must be considered as non est. It is essential to understand that for an application to be considered as non est, the Court must come to the conclusion that it cannot be considered as an application for setting aside the arbitral award.

32. It is material to note that Section 34 of the A&C Act does not specify any particular procedure for filing an application to set aside the arbitral award. However, it does set out the grounds on which such an application can be made. Thus, the first and foremost requirement for an application under Section 34 of the A&C Act is that it should set out the grounds on which the applicant seeks setting aside of the arbitral award. It is also necessary that the application be accompanied by a copy of the award as without a copy of the award, which is challenged, it would be impossible to appreciate the grounds to set aside the award. In addition to the above, the application must state the name of the parties and the bare facts in the context of which the applicants seek setting aside of the arbitral award.

33. It is also necessary that the application be signed by the party or its authorised representative. The affixing of signatures signify that the applicant is making the application. In the absence of such signatures, it would be difficult to accept that the application is moved by the applicant.

34. In addition to the above, other material requirements are such as, the application is to be supported by an affidavit and a statement of truth by virtue of Order XI, Section 1 of the Commercial Courts Act, 2015. It is also necessary that the filing be accompanied by a duly executed vakalatnama. This would be necessary for an advocate to move the application before the court. Although these requirements are material and necessary, we are unable to accept that in absence of these requirements, the application is required to be treated as non est. The application to set aside an award does not cease to be an application merely because the applicant has not complied with certain procedural requirements.

35. It is well settled that filing an affidavit in support of an application is a procedural requirement. The statement of truth by way of an affidavit is also a procedural matter. As stated above, it would be necessary to comply with these procedural requirements. Failure to do so would render an application under Section 34 of the A&C Act to be defective but it would not render it non est. 

36. In Vidyawati Gupta & Ors. v. Bhakti Hari Nayak & Ors.: (2006) 2 SCC 777, the Supreme Court set aside the order of the Division Bench of the Calcutta High Court treating the suit instituted as non est for want of compliance with the requirements of Order 6 Rule 15(4) of the Code of Civil Procedure, 1908, which requires a person verifying the pleadings to furnish an affidavit in support of the pleadings. The Supreme Court after noting various decisions held as under :-

"49. In this regard we are inclined to agree with the consistent view of the three Chartered High Courts in the different decisions cited by Mr Mitra that the requirements of Order 6 and Order 7 of the Code, being procedural in nature, any omission in respect thereof will not render the plaint invalid and that such defect or omission will not only be curable but will also date back to the presentation of the plaint. We are also of the view that the reference to the provisions of the Code in Rule 1 of Chapter 7 of the Original Side Rules cannot be interpreted to limit the scope of such reference to only the provisions of the Code as were existing on the date of such incorporation. It was clearly the intention of the High Court when it framed the Original Side Rules that the plaint should be in conformity with the provisions of Order 6 and Order 7 of the Code. By necessary implication reference will also have to be made to Section 26 and Order 4 of the Code which, along with Order 6 and Order 7, concerns the institution of suits. We are ad idem with Mr Pradip Ghosh (sic) on this score. The provisions of sub-rule (3) of Rule 1 Order 4 of the Code, upon which the Division Bench of the Calcutta High Court had placed strong reliance, will also have to be read and understood in that context. The expression "duly"

used in sub-rule (3) of Rule 1 Order 4 of the Code implies that the plaint must be filed in accordance with law. In our view, as has been repeatedly expressed by this Court in various decisions, rules of procedure are made to further the cause of justice and not to prove a hindrance thereto. Both in Khayumsab [(2006) 1 SCC 46 : JT (2005) 10 SC 1] and Kailash [(2005) 4 SCC 480] although dealing with the amended provisions of Order 8 Rule 1 of the Code, this Court gave expression to the salubrious principle that procedural enactments ought not to be construed in a manner which would prevent the Court from meeting the ends of justice in different situations.

50. The intention of the legislature in bringing about the various amendments in the Code with effect from 1- 7-2002 were aimed at eliminating the procedural delays in the disposal of civil matters. The amendments effected to Section 26, Order 4 and Order 6 Rule 15, are also geared to achieve such object, but being procedural in nature, they are directory in nature and non-compliance therewith would not automatically render the plaint non est, as has been held by the Division Bench of the Calcutta High Court.

51. In our view, such a stand would be too pedantic and would be contrary to the accepted principles involving interpretation of statutes. Except for the objection taken that the plaint had not been accompanied by an affidavit in support of the pleadings, it is nobody's case that the plaint had not been otherwise verified in keeping with the unamended provisions of the Code and Rule 1 of Chapter 7 of the Original Side Rules. In fact, as has been submitted at the Bar, the plaint was accepted, after due scrutiny and duly registered and only during the hearing of the appeal was such an objection raised.

54. We have, therefore, no hesitation in holding that the Division Bench of the Calcutta High Court took a view which is neither supported by the provisions of the Original Side Rules or the Code nor by the various decisions of this Court on the subject. The views expressed by the Calcutta High Court, being contrary to the established legal position, must give way and are hereby set aside."

37. It is, thus, necessary to bear in mind the distinction between the procedural requirements that can be cured and those defects that are so fundamental that the application cannot be considered as an application under Section 34 of the A&C Act, at all.

38. In the facts of the present case, the application filed on 23.01.2019 was not an application assailing the impugned award. That filing was clearly non est. Similarly, as the application filed on 04.02.2019 also related to another matter, which could not be considered as an application assailing the impugned award. The filing on 22.02.2019 was only 10 pages of an Index. This too could not be construed as an application; however, the application filed on 20.02.2019 and 23.02.2019 cannot be construed to be non est.

39. The defects as noted by the Registry in the filing log relating to the application filed on 20.02.2019 reads as under: -

"TOTAL 6313 PAGES FILED. CAVEAT REPORT BE OBTAINED. COURT FEE BE PAID. AFFIDAVITS NOT ATTESTED NOT SIGNED. PLEASE CORRECT THE BOOKMARKING. VOLUMNS OF DOUCMENTS BE MADE. IN ADDITION TO THE E-FILING, IT IS MANDANTORY TO FILE HARD COPIES OF THE FRESH MATTERS FILED UNDER SECTION 9, 11 AND 34 OF THE ARB. ACT. 1996 WITH EFFECT FROM 22.10.2018. ORIENTATION OF DOCUMENTS BE CORRECT. PLEASE CORRECT THE BOOKMAKRING. ALL INDEXES BE PAGINATED."

40. It is relevant to note that the affidavits accompanying the application filed on 20.02.2019 were signed but not attested and to that extent, the defects as pointed out are not accurate. It is clear from the above, that none of the defects are fundamental as to render the application as non est in the eyes of law. All the defects, as pointed out, are curable defects. It is settled law that any defect in an affidavit supporting pleadings can be cured. It is seen from the record that the filing was also accompanied by an executed vakalatnama, however, the same was not stamped. It is also settled law that filing of a court fee is necessary, however, the defect in not filing the court fee along with the application can be cured. In view of above, we are unable to accept that the application, as filed on 20.02.2019 or thereafter on 23.02.2019, was non est.

41. We may also add that in given cases there may be a multitude of defects. Each of the defects considered separately may be insufficient to render the filing as non est. However, if these defects are considered cumulatively, it may lead to the conclusion that the filing is non est. In order to consider the question whether a filing is non est, the court must address the question whether the application, as filed, is intelligible, its filing has been authorised; it is accompanied by an award; and the contents set out the material particulars including the names of the parties and the grounds for impugning the award.

42. In the given facts, the first question - whether the application filed on 20.02.2019 and 23.02.2019 can be considered as non est - is answered in the negative.

Mere Participation in Arbitral Proceedings before an Ineligible Arbitrator would not constitute a Waiver of right to object to the Ineligibility : Delhi High Court Rules

The Division Bench of the Delhi High Court in Govind Singh v. M/s Satya Group P. Ltd. [Neutral Citation 2023/DHC/000081] has delivered a recent judgment examining the law relating to the validity of an award passed by an ineligible arbitrator. The Bench further held that mere participation by a party in the arbitral proceedings would not constitute a waiver of their rights to object to the ineligibility of the arbitrator. The observations of the Bench, are as under:

7. The principal question that falls for consideration for this Court is whether the impugned award is liable to be set aside on the ground that the learned Arbitrator was ineligible to be appointed as an arbitrator. The learned Commercial Court had found that the learned Arbitrator had complied with the provisions of Section 12 of the A&C Act by making the necessary disclosures before accepting his appointment as the Sole Arbitrator. The appellant had not challenged the said appointment and therefore, the learned Arbitrator’s appointment was in accordance with the provisions of the A&C Act. 

8. It is apparent that the learned Commercial Court failed to address the crucial question – whether the learned Arbitrator was ineligible for being appointed as an arbitrator. It is the petitioner’s case that the learned Arbitrator was unilaterally appointed by the Managing Director of the respondent company, which was not permissible. He was ineligible to act as an arbitrator and therefore, the impugned award was liable to be set aside. 

9. Ms. Kaadambari, learned counsel appearing for the respondent, earnestly contended that the learned Arbitrator had been appointed at the instance of the appellant. She contended that the appellant had neither raised any objections to the appointment of the Arbitrator nor challenged his appointment during the course of the proceedings and therefore, was precluded from doing so after the impugned award was rendered. She also referred to the decision of the learned Single Judge of this Court in Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited: (2021) 284 DLT 722; and on the strength of the said decision contended that it is not open for the appellant to raise the question regarding the applicability of Section 12(5) of the A&C Act after the arbitral award has been delivered. 

10. The appellant contends that he has raised an objection regarding the unilateral appointment of the Arbitrator. He also contends that the manner in which the proceedings were conducted, violated the principles of natural justice and indicated that respondent no.2 was biased in favour of the respondent company. Needless to state that the learned counsel appearing for the respondent company disputes the said contention. 

11. The appellant invoked the Arbitration Agreement (Arbitration Clause in the Builder Buyer Agreement dated 30.06.2014) by a notice dated 13.01.2018. The said notice was a common notice issued by the appellant and one Sh. Sumit Singh, raising disputes in respect of the respective agreements entered into by them. The said notice is clumsily worded; however, it expressly called upon the respondent company to take note that the appellant was willing for his concerns to be addressed by an arbitrator. The appellant had, in the said notice, raised various allegations against the respondent company. 

12. Thereafter, the Managing Director of the respondent company addressed a letter to respondent no.2 referring to the Arbitration Agreement (Arbitration Clause) between the parties and indicating his desire to appoint respondent no.2 as the Sole Arbitrator to adjudicate the disputes that had arisen between the parties in respect of the Buyer Agreement. Respondent no.2, a practicing advocate, accepted the appointment and declared that there were no circumstances that gave rise to any justifiable doubts as to his independence or impartiality. 

13. For the purpose of addressing the principal question involved in this appeal, it would be apposite to proceed on the facts as admitted. Admittedly, respondent no.2 was appointed unilaterally by the Managing Director of the respondent company. It is also conceded that there was no agreement in writing after the disputes had arisen, whereby the parties had concurred on appointing respondent no.2 as the Sole Arbitrator to adjudicate the disputes between the parties. 

14. In TRF Ltd. v. Energo Engineering Projects Ltd.: 2017 8 SCC 377, the Supreme Court had authoritatively held that a person who is ineligible to act as an arbitrator is also ineligible to be appointed as an arbitrator. It is important to note that the controversy before the Supreme Court was addressed in the context of Section 12(5) of the A&C Act. The relevant extract of the said decision, which clearly indicates the above, is set out below:- 

“50. First, we shall deal with Clause (d). There is no quarrel that by virtue of Section 12(5) of the Act, if any person who falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as the arbitrator. There is no doubt and cannot be, for the language employed in the Seventh Schedule, the Managing Director of the Corporation has become ineligible by operation of law. It is the stand of the learned Senior Counsel for the appellant that once the Managing Director becomes ineligible, he also becomes ineligible to nominate. Refuting the said stand, it is canvassed by the learned Senior Counsel for the respondent that the ineligibility cannot extend to a nominee if he is not from the Corporation and more so when there is apposite and requisite disclosure. We think it appropriate to make it clear that in the case at hand we are neither concerned with the disclosure nor objectivity nor any such other circumstance. We are singularly concerned with the issue, whether the Managing Director, after becoming ineligible by nor impartiality operation of law, is he still eligible to nominate an arbitrator. At the cost of repetition, we may state that when there are two parties, one may nominate an arbitrator and the other may appoint another. That is altogether a different situation. If there is a clause requiring the parties to nominate their respective arbitrator, their authority to nominate cannot be questioned. What really in that circumstance can be called in question is the procedural compliance and the eligibility of their arbitrator depending upon the norms provided under the Act and the Schedules appended thereto. But, here is a case where the Managing Director is the "named sole arbitrator" and he has also been conferred with the power to nominate one who can be the arbitrator in his place. Thus, there is subtle distinction. In this regard, our attention has been drawn to a two-Judge Bench decision in State of Orissa v. Commr. of Land Records & Settlement, In the said case, the question arose, can the Board of Revenue revise the order passed by its delegate. Dwelling upon the said proposition, the Court held: (SCC p. 173, para 25) 

“25. We have to note that the Commissioner when he exercises power of the Board delegated to him under Section 33 of the Settlement Act, 1958, the order passed by him is to be treated as an order of the Board of Revenue and not as that of the Commissioner in his capacity as Commissioner. This position is clear from two rulings of this Court to which we shall presently refer. The first of the said rulings is the one decided by the Constitution Bench of this Court in Roop Chand v. State of Punjab. In that case, it was held by the majority that where the State Government had, under Section 41(1) of the East Punjab Holdings (Consolidation and Prevention of Act, 1948, delegated its appellate powers vested in it under Section 21(4) to an "officer", an order passed by such an officer was an order passed by the State Government itself and "not an order passed by any officer under this Act" within Section 42 and was not revisable by the State Government. It was pointed out that for the purpose of exercise of powers of revisions by the State under Section 42 of that Act, the order sought to be revised must be an order passed by an officer in his own right and not as a delegate of that State. The State Government was, therefore, not entitled under Section 42 to call for the records of the case which was disposed of by an officer acting as its delegate.” (emphasis in original) 

53. The aforesaid authorities have been commended to us to establish the proposition that if the nomination of an arbitrator by an ineligible arbitrator is allowed, it would tantamount to carrying on the proceeding of arbitration by himself. According to the learned counsel for the appellant, ineligibility strikes at the root of his power to arbitrate or get it arbitrated upon by a nominee. 54 In such a context, the fulcrum of the controversy would be, can an ineligible arbitrator, like the Managing Director, nominate an arbitrator, who may be otherwise eligible and a respectable person. As stated earlier, we are neither concerned with the objectivity nor the individual respectability. We are only concerned with the authority or the power of the Managing Director. By our analysis, we are obligated to arrive at the conclusion that once the arbitrator has become ineligible by operation of law, he cannot nominate another as an arbitrator. The arbitrator becomes ineligible as per prescription contained in Section 12/5) of the Act. It is inconceivable in law that person who is statutorily ineligible can nominate a person. Needless to say, once the infrastructure collapses, the superstructure is bound to collapse. One cannot have a building without the plinth. Or to put it differently, once the identity of the Managing Director as the sole arbitrator is lost, the power to nominate someone else as an arbitrator is obliterated. Therefore, the view expressed by the High Court is not sustainable and we say so.” 

15. In Perkins Eastman Architects DPC & Ors. v. HSCC (India) Ltd.: (2020) 20 SCC 760, the Supreme Court referred to the earlier decision in TRF Ltd. v. Energo Engineering Projects Ltd. (supra) and held that in the cases where the arbitration clause provided that the party or its official would appoint an arbitrator, the element of ineligibility would also extend to the persons so appointed. The relevant extract of the said decision reads as under:- “21. But, in our view that has to be the logical deduction from TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] Para 50 of the decision shows that this Court was concerned with the issue, “whether the Managing Director, after becoming ineligible by operation of law, is he still eligible to nominate an arbitrator” The ineligibility referred to therein, was as a result of operation of law, in that a person having an interest in the dispute or in the outcome or decision thereof, must not only be ineligible to act as an arbitrator but must also not be eligible to appoint anyone else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint an arbitrator. The next sentences in the paragraph, further show that cases where both the parties could nominate respective arbitrators of their choice were found to be completely a different situation. The reason is clear that whatever advantage a party may derive by nominating an arbitrator of its choice would get counter-balanced by equal power with the other party. But, in a case where only one party has a right to appoint a sole arbitrator, its choice will always have an element of exclusivity in determining or charting the course for dispute resolution. Naturally, the person who has an interest in the outcome or decision of the dispute must not have the power to appoint a sole arbitrator. That has to be taken as the essence of the amendments brought in by the Arbitration and Conciliation (Amendment) Act, 2015 (3 of 2016) and recognised by the decision of this Court in TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72]” “28. In TRF Ltd. [TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377 : (2017) 4 SCC (Civ) 72] , the Managing Director of the respondent had nominated a former Judge of this Court as sole arbitrator in terms of the aforesaid Clause 33(d), after which the appellant had preferred an application under Section 11(5) read with Section 11(6) of the Act. The plea was rejected by the High Court and the appeal therefrom on the issue whether the Managing Director could nominate an arbitrator was decided in favour of the appellant as stated hereinabove. As regards the issue about fresh appointment, this Court remanded the matter to the High Court for fresh consideration as is discernible from para 55 of the judgment. In the light of these authorities there is no hindrance in entertaining the instant application preferred by the applicants.” 

16. It is important to note that the Supreme Court also held that in the cases where the arbitrator appointed by a party is ineligible to be appointed as an arbitrator, the counter-party is not precluded from approaching the court for appointment of an arbitrator under Section 11 of the A&C Act. 

17. Following the aforesaid decision of the Supreme Court in Perkins Eastman Architects DPC & Ors. v. HSCC (India) Ltd. (supra), a learned Single Judge of this Court in Proddatur Cable TV Digi Services v. Citi Cable Network Limited: (2020) 267 DLT 51 held that it would be impermissible for a party to unilaterally appoint an arbitrator. In terms of Section 12(5) of the A&C Act read with the Seventh Schedule of the A&C Act, an employee would be ineligible to act as an arbitrator by virtue of the law as explained by the Supreme Court in TRF Ltd. v. Energo Engineering Projects Ltd. (supra) and Perkins Eastman Architects DPC & Ors. v. HSCC (India) Ltd. (supra). Such ineligibility would also extend to a person appointed by such officials who are otherwise ineligible to act as arbitrators. 

18. In view of the law as noted above, the learned Arbitrator unilaterally appointed by the respondent company was ineligible to act as an arbitrator under Section 12(5) of the A&C Act. 

19. The contention that the appellant by its conduct has waived its right to object to the appointment of the learned Arbitrator is also without merit. The question whether a party can, by its conduct, waive its right under Section 12(5) of the A&C Act is no longer res integra. The Supreme Court in the case of Bharat Broadband Network Limited v. United Telecoms Limited: (2019) 5 SCC 755 had explained that any waiver under Section 12(5) of the A&C Act would be valid only if it is by an express agreement in writing. There is no scope for imputing any implied waiver of the rights under Section 12(5) of the A&C Act by conduct or otherwise. The relevant extract of the said decision reads as under:- “20. This then brings us to the applicability of the proviso to Section 12(5) on the facts of this case. Unlike Section 4 of the Act which deals with deemed waiver of the right to object by conduct, the proviso to Section 12(5) will only apply if subsequent to disputes having arisen between the parties, the parties waive the applicability of sub-section (5) of Section 12 by an express agreement in writing. For this reason, the argument based on the analogy of Section 7 of the Act must also be rejected. Section 7 deals with arbitration agreements that must be in writing, and then explains that such agreements may be contained in documents which provide a record of such agreements. On the other hand, Section 12(5) refers to an "express agreement in writing". The expression "express agreement in writing" refers to an agreement made in words as opposed to an agreement which is to be inferred by conduct. Here, Section 9 of the Contract Act, 1872 becomes important. It states: “9. Promises, express and implied. -Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express. Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied." It is thus necessary that there be an "express" agreement in writing. This agreement must be an agreement by which both parties, with full knowledge of the fact that Shri Khan is ineligible to be appointed as an arbitrator, still go ahead and say that they have full faith and confidence in him to continue as such..." 

20. Thus, it is not necessary to examine the question whether the appellant had raised an objection to the appointment of the learned Arbitrator. Even if it is assumed that the appellant had participated in the arbitral proceedings without raising any objection to the appointment of the learned Arbitrator, it is not open to hold that he had waived his right under Section 12(5) of the A&C Act. Although it is not material, the record does indicate that the appellant had objected to the appointment of respondent no.2 as an arbitrator. 

21. In view of the above, the remaining question to be addressed is whether an arbitral award rendered by a person who is ineligible to act as an arbitrator is valid or binding on the parties. Clearly, the answer must be in the negative. The arbitral award rendered by a person who is ineligible to act as an arbitrator cannot be considered as an arbitral award. The ineligibility of the arbitrator goes to the root of his jurisdiction. Plainly an arbitral award rendered by the arbitral tribunal which lacks the inherent jurisdiction cannot be considered as valid. In the aforesaid view, the impugned award is liable to be set aside as being wholly without jurisdiction. 

22. In Kanodia Infratech Limited v. Dalmia Cement (Bharat) Limited: (2021) 284 DLT 722 the learned Single Judge of this Court had declined to interfere with the arbitral award, which was challenged on the ground that the arbitrator was ineligible to act as an arbitrator, on the ground that the parties had participated in the arbitral proceedings. The learned Single Judge had observed that the decision of the Supreme Court in Bharat Broadband Network Limited v. United Telecoms Limited (supra) was not applicable as the said matter had travelled to the Supreme Court against the decision of this Court, rejecting the petition under Section 14 and 15 of the A&C Act. 

23. We are unable to agree that the decision in Bharat Broadband Network Limited v. United Telecoms Limited (supra) can be distinguished on the aforesaid ground. The said decision had authoritatively held that in terms of the proviso of Section 12(5) of the A&C Act, the ineligibility of an arbitrator under Section 12(5) of the A&C Act could be waived only by an express agreement in writing and cannot be inferred by the conduct of the parties. Thus, the fact that the parties had participated before the arbitral tribunal cannot be construed as a waiver of their rights to object to the ineligibility of the arbitrator(s). We are unable to accept that while such a right could be exercised prior to the delivery of the award, it would cease thereafter. If the arbitrator is ineligible to act as an arbitrator, the arbitral award rendered by the arbitral tribunal would be without jurisdiction.

Disputes falling within the ambit of SARFAESI Act are per se non arbitrable : Delhi High Court Rules

Justice Yashwant Varma, Delhi High Court  

Justice Yashwant Varma has recently in a batch of petitions under S. 9 of the Arbitration & Conciliation Act, 1996, titled Fermina Developers P. Ltd. v. Indiabulls Housing Finance Ltd. - Neutral Citation No. 2022/DHC/005642, held that disputes falling within the ambit of the Securitization & Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 ("SARFAESI Act") would be intrinsically non arbitrable in view of the various decisions rendered in this regard. While examining the entire gamut of judicial precedent on the subject, the Court held as under:

10. In order to appreciate the issues which arise, it would be apposite to briefly notice the provisions of the Recovery of Debts and Bankruptcy Act, 19937 and SARFAESI in order to ascertain the extent to which they bar the jurisdiction of a civil court. The RDB Act confers jurisdiction and authority on tribunals constituted thereunder in terms of Section 17 of the RDB Act, which reads thus: - “17. Jurisdiction, powers and authority of Tribunals. (1) A Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain and applications from the banks and financial institutions for recovery of debts due to such banks and financial institutions. (1A) Without prejudice to sub-section (1),- (a) the Tribunal shall exercise, on and from the date to be appointed by the Central Government, the jurisdiction, powers and authority to entertain and decide applications under Part III of Insolvency and Bankruptcy Code, 2016. (b) the Tribunal shall have circuit sittings in all district headquarters. (2) An Appellate Tribunal shall exercise, on and from the appointed day, the jurisdiction, powers and authority to entertain appeals against any order made, or deemed to have been made, by a Tribunal under this Act. (2A) Without prejudice to sub-section (2), the Appellate Tribunal shall exercise, on and from the date to be appointed by the Central Government, the jurisdiction, powers and authority to entertain appeals against the order made by the Adjudicating Authority under Part III of the Insolvency and Bankruptcy Code, 2016.”

11. The bar of jurisdiction which stands engrafted in terms of Section 18 of the RDB Act and ousts the jurisdiction of all courts reads thus: - “18. Bar of Jurisdiction. – On and from the appointed day, no court or other authority shall have, or be entitled to exercise, any jurisdiction, powers or authority (except the Supreme Court, and a High Court exercising jurisdiction under articles 226 and 227 of the Constitution) in relation to the matters specified in section 17: Provided that any proceedings in relation to the recovery of debts due to any multi-State co-operative bank pending before the date of commencement of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act, 2012 under the Multi-State Co-operative Societies Act, 2002 (39 of 2002) shall be continued and nothing contained in this section shall, after such commencement, apply to such proceedings."

Judgment / Award Debtor not entitled to deduct TDS on Awarded Amount : Delhi High Court Rules

Justice Vibhu Bakhru
Judge, Delhi High Court

The Delhi High Court recently in Voith Hydro Ltd. & Ors. v. NTPC Ltd. [OMP (ENF.) (COMM.) 64/2018] decided an interesting question as to whether a judgment / award debtor is entitled to deduct TDS on the amount awarded by an arbitral tribunal, and whether the deposit of such amounts with the Income Tax Authorities constituted a discharge of their debts under the award. While holding that no tax is to be deducted on the awarded amounts, the Court held as under:

"24. As is apparent from the above, the following three principal questions fall for consideration before this Court:

(i) Whether there is any binding agreement between the parties whereby they have agreed that the amounts awarded in foreign currency would be computed at the exchange rate as prevalent on 15.09.2017? If not, the exchange rate to be applied for discharge of the amounts awarded in foreign currency.

(ii) Whether it was open for NTPC to deduct TDS on the awarded amounts and whether the deduction of the said amount and deposit of the same with the Income Tax Authorities constitutes a discharge of the amounts awarded to the aforesaid extent?

(iii) Whether Voith is entitled to charges for extending the Bank Guarantees, as claimed?

Order Refusing to condone delay under Section 34 of the Arbitration & Conciliation Act, 1996 would be Appealable under Section 37 (1) (c) of the Act

A 3 Judge Bench of the Supreme Court recently in Chintels India Ltd. v. Bhayana Builders P. Ltd. [CA No. 4028 of 2020] has examined the legal question whether an appeal under section 37(1)(c) of the Arbitration Act, 1996 would be maintainable against an order refusing to condone delay in filing an application under section 34 of the Arbitration Act, 1996 to set aside an award. Answering the question of law in the affirmative, the Bench held as under:

5. Having heard learned counsel for the parties, it is important to first set out section 37 of the Arbitration Act, 1996 which is as follows:

“37. Appealable orders.—(1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely:—

(a) refusing to refer the parties to arbitration under section 8;

(b) granting or refusing to grant any measure under section 9;

(c) setting aside or refusing to set aside an arbitral award under section 34.

(2) Appeal shall also lie to a court from an order of the arbitral tribunal—

(a) accepting the plea referred to in sub-section (2) or sub- section (3) of section 16; or

(b) granting or refusing to grant an interim measure under section 17.

(3) No second appeal shall lie from an order passed in appeal under this section, but nothing in this section shall affect or takeaway any right to appeal to the Supreme Court.”

6. Since we are directly concerned with section 37(1)(c), it is important to advert to the language of section 34 as well. Section 34(1) reads as follows:

“34. Application for setting aside arbitral award.— (1) Recourse to a Court against an arbitral award may be made  only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).”

7. Section 34(2) and (2A) then sets out the grounds on which an arbitral award may be set aside. Section 34(3), which again is material for decision of the question raised in this appeal, reads as follows:

“(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.”

Amendment Conundrum

The President of India recently gave his assent to the Arbitration and Conciliation (Amendment) Bill, 2019 which was passed by the Rajya Sabha on July 18, 2019 and the Lok Sabha on August 01, 2019.

Though the amendment seeks to implement sweeping changes to the existing enactment (“1996 Act”), the most controversial insertion is Section 87, which reads as under;

87. Unless the parties otherwise agree, the amendments made to this Act by the Arbitration and Conciliation (Amendment) Act, 2015 shall— (a) not apply to–– (i) arbitral proceedings commenced before the commencement of the Arbitration and Conciliation (Amendment) Act, 2015; (ii) court proceedings arising out of or in relation to such arbitral proceedings irrespective of whether such court proceedings are commenced prior to or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015; (b) apply only to arbitral proceedings commenced on or after the commencement of the Arbitration and Conciliation (Amendment) Act, 2015 and to court proceedings arising out of or in relation to such arbitral proceedings.”.

The aforesaid provision seeks to nullify the effect of the judgment rendered by the Hon’ble Supreme Court in the matter of Board of Control for Cricket in India v. Kochi Cricket P. Ltd. & Ors. [C.A. No. 2879-2880 of 2018] (“BCCI Judgment”) and restore the position of law as decided by a Division Bench of the Delhi High Court in Ardee Infrastructure P. Ltd. v. Ms. Anuradha Bhatia [FAO (OS) No. 221/2016] (“Ardee”).

The central issue concerning the Court in Ardee (supra) was the interpretation of Section 26 of the Arbitration and Conciliation (Amendment) Act, 2015 which provided that “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.”. 

While interpreting the said provision, the Hon’ble Division Bench categorically ruled that the Arbitration and Conciliation (Amendment) Act, 2015 would not apply to arbitration and court proceedings, if the invocation of arbitration in terms of Section 21 of the 1996 Act was done prior to October 23, 2015 i.e. the date of coming into force of the Arbitration and Conciliation (Amendment) Act, 2015. As a result, in relation to awards passed in such arbitrations, there would be an automatic stay on the enforceability of an award once objections under S. 34 of the 1996 Act were filed.

The Hon’ble Supreme Court however in BCCI (supra) reversed the position and held that the Arbitration and Conciliation (Amendment) Act, 2015 would apply retrospectively insofar as court proceedings are concerned, and hence there would be no automatic stay of an award upon mere filing of objections under S. 34 of the 1996 Act.

On the basis of the above position, various courts in the country have retrospectively applied the provisions of the Arbitration and Conciliation (Amendment) Act, 2015 and directed parties to deposit monies awarded under arbitral awards whilst seeking stay of the operation of an award. 

With the present amendment, the legislature has once again hit the ‘reset’ button and taken us back to the position of law as prevailing at the time Ardee (supra) was pronounced. As a result of the amendments brought about by the Arbitration and Conciliation (Amendment) Bill, 2019, any arbitration invoked prior to October 23, 2015 shall be governed by the unamended 1996 Act and would mean that upon filing of objections under S. 34 of the unamended 1996 Act, the award passed would be rendered unenforceable. 

But the question remains, what would happen to cases where the parties have been directed to deposit monies or where such monies have been released to award holders under orders of the court in terms of BCCI. Are such judgment debtors now entitled to move courts for reconsideration of the orders passed? 

The Hon’ble Supreme Court had ‘advised’ the legislature to refrain from bringing the proposed amendment in the form of S. 87 on the ground that it would put all important amendments made by the Arbitration and Conciliation (Amendment) Act, 2015 on the ‘back burner’ and would defeat the object and purpose of the Arbitration and Conciliation (Amendment) Act, 2015.

The legislature has obviously not paid heed to the observations of the Hon’ble Supreme Court and it would be interesting to see how the Hon’ble Supreme Court deals with a constitutional or vires challenge, if so mounted in the future.

The legislature ought to have put in more thought into the amendment, and ought to have harmonized the findings of the Hon’ble Supreme Court in BCCI (supra) while passing the bill into law. The legislature has ensured that Courts in this country will now be flooded with fresh round(s) of litigation in relation to the amendment, in an attempt to ‘unscramble the scrambled egg’. 

Saurabh Seth, the Author, is a practicing advocate in the Delhi High Court and specialises in commercial dispute resolution.

Retrospectivity of amendments to the Arbitration & Conciliation Act, 1996 : Delhi High Court Rules

Justice B.D. Ahmad
Former Judge, Delhi High Court
(Now Chief Justice J & K High Court)

In a landmark decision, the Division Bench of the Delhi High Court in Ardee Infrastructure Pvt. Ltd. v. Anuradha Bhatia, has opined that the unamended provisions of the Arbitration & Conciliation Act, 1996 would apply to arbitrations commenced (in terms of Section 21 of the Arbitration & Conciliation Act, 1996) prior to 23.10.2015. While holding so, the Division Bench has held as under:

3. The controversy is with regard to the application of the amended provisions of the said Act. The amendments to, inter alia, Sections 34 and 36 of the said Act were brought about by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter referred to as 'the Amending Act') with retrospective effect from 23.10.2015. It is the case of the petitioners that the petitions under Section 34 of the said Act would be governed by the unamended provisions of, inter alia, Sections 34 and 36 and, therefore, the petitioners would have the right of an automatic stay on the filing of the petitions under Section 34 of the said Act. On the other hand, the respondents argue that the amended provisions would apply and, therefore, there would be no question of any automatic stay and that it was well within the powers of the learned single Judge to have required the petitioners to make a deposit of Rs 2.7 crores and to direct that in case such a deposit was not made, the petitions under Section 34 of the said Act would be liable to be dismissed.

4. We may point out that the notice invoking the arbitration clause was given by the respondents on 07.06.2011. The statement of claim was filed in February 2013 and an interim award was made on 10.07.2014. The final award was made by the arbitral tribunal on 13.10.2015. The petitions under Section 34 objecting to the award were, as mentioned earlier, filed on 04.01.2016. In the meanwhile, the amendments to, inter alia, Sections 34 and 36 were introduced by the Amending Act with retrospective effect from 23.10.2015. Section 26 of the Amending Act, on which the controversy mainly hinges, reads 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."

5. At this juncture, it would be necessary to also set down the differences in Section 36 of the said Act, pre and post-amendment:- Pre-amendment Post-amendment 36. Enforcement. - Where 36. (1) Where the time for the time for making an making an application to set application to set aside the aside the arbitral award under arbitral award under section section 34 has expired, then, 34 has expired, or such subject to the provisions of application having been sub-section (2), such award made, it has been refused, the shall be enforced in award shall be enforced accordance with the under the Code of Civil provisions of the Code of Procedure, 1908 (5 of 1908) Civil Procedure, 1908, in the in the same manner as if it same manner as if it were a were a decree of the Court. decree of the court. (2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub- section (3), on a separate application made for that purpose. (3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.

6. There is no dispute with the proposition that if the pre-amendment provisions of Section 36 of the said Act were to apply, the very filing and pendency of a petition under Section 34would, in effect, operate as a stay of the enforcement of the award. This has been materially changed by virtue of the amendment brought about in Section 36 of the said Act. The post-amendment scenario is that where an application to set aside an arbitral award is filed under Section 34 before a court, the filing of such an application would not by itself render the award non-enforceable unless the court granted an order of stay of operation of the arbitral award in accordance with the provisions of Section 36(3) on a separate application made for that purpose. Sub-section (3) of Section 36 stipulates that upon the filing of an application for stay of operation of the arbitral award, it would be open to the court, subject to such conditions, as it may deem fit, to grant stay of operation of the award for the reasons to be recorded in writing. The proviso thereto requires the court, while considering the application for grant of stay in the case of an arbitral award for payment of money, to have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.

7. According to the learned counsel for the petitioners, this change in law with regard to the enforcement of an award under Section 36 of the said Act tends to take away vested rights. Therefore, the provisions of Section 6 of the General Clauses Act, 1897 would be applicable. Section 6 of the General Clauses Act, 1897 reads as under:-

6. Effect of repeal. - Where this Act, or any [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid, and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.

8. It was submitted in the context of Section 6 of the General Clauses Act that a repeal of an enactment would not affect any right acquired or accrued under the repealed enactment, unless a different intention appears in the repealing Act. It was contended that Section 26 of the Amending Act does not express any intention of retrospective application prior to 23.10.2015. It was further submitted that under the old provision, there was no requirement for a party objecting to the award and seeking the setting aside of the award to separately ask for stay of the award. The mere filing of the petition under Section 34 of the said Act entailed an automatic stay of the enforcement of the award. That vested right of automatic stay is no longer available under the new Section 36. This, according to the learned counsel for the petitioners, would operate only prospectively, that is, to arbitral proceedings commenced after 23.10.2015 and not to arbitrations commenced prior to 23.10.2015.

9. It was further contended on the strength of the Supreme Court decision in the case of Hitendra Vishnu Thakur and Others etc. etc. v. State of Maharashtra and Others: 1994 (4) SCC 602 that a statute which affects substantive rights is presumed to be prospective in operation, unless made retrospective, either expressly or by necessary intendment. Furthermore, the law relating to forum and limitation is procedural in nature, whereas the law relating to action and right of appeal, even though remedial, is substantive in nature. This, according to the learned counsel for the petitioners, would cover petitions under Section 34 of the said Act.

10. The Supreme Court decision in Jose Da Costa and Another v. Bascora Sadasiva Sinai Narcornim and Others: 1976 (2) SCC 917 was also referred to by the learned counsel for the petitioners to contend that the provisions which touch a right in existence at the time of passing of a statute, are not to be applied retrospectively in the absence of express enactment or necessary intendment.

11. Reliance was also placed on Thirumalai Chemicals Limited v. Union of India and Others: 2011 (6) SCC 739, wherein it was held that though it may be true that amendments to procedural laws can be applied retrospectively, procedural statutes which affect the rights of the parties, cannot be applied retrospectively.

12. In this backdrop, it was submitted by the learned counsel for the petitioners that substantive rights of the petitioners have been affected by the amendments brought about by the Amending Act. For instance, the new provision of Section 34 restricts the scope for challenge to an award as compared to the earlier provisions of Section 34. Secondly, the new Section 36 takes away the right of automatic stay which existed under the old Section 36. This is so as now a party has to seek a stay by way of an application under Section 36(2) of the new provisions and conditions could be imposed on the parties even where the court grants a stay of the enforcement of the award.

13. It was next contended by the learned counsel for the petitioners that Section 26 of the Amending Act does not indicate any intention of retrospective application of the amended provisions.

14. On behalf of the respondents, it was contended that Section 26 of the Amending Act needs to be compared with Section 85(2)(a) of the said Act. The following table sets out the two provisions:-

Pre-amendment

Post-amendment

36. Enforcement.—Where the time for making an application to set aside the arbitral award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

“36. (1) Where the time for making an application to set aside the arbitral award under section 34 has expired, then, subject to the provisions of sub-section (2), such award shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a decree of the court. (2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-section (3), on a separate application made for that purpose. (3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908.”

15. It was contended that from a comparison of the two provisions, it is clear that the first part of Section 26 of the Amending Act uses the word ―to‖ instead of ―in relation to‖ and the expression ―in relation to‖ is used only in the second part, whereas under Section 85(2)(a) of the said Act, the expression ―in relation to‖ is used in both parts. A reference was made to the Supreme Court decision in Thyssen Stahlunion Gmbh v. Steel Authority of India Limited: 1999 (9) SCC 334. It was submitted that the meaning of the expression ―in relation to‖ was examined in the said decision in the context of Section 85(2)(a) by the Supreme Court. The Supreme Court examined the applicability of the provisions of the Arbitration Act, 1940 which had been repealed in relation to arbitration proceedings which had commenced prior to the enactment of the said Act (i.e., the 1996 Act). The conclusions arrived at by the Supreme Court were as under:-

22. For the reasons to follow, we hold:
1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (the Arbitration and Conciliation Act, 1996).
2. The phrase ―in relation to arbitral proceedings‖ cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only 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 for the award becoming a decree under Section 171 thereof and also appeal arising thereunder.
3. In cases where arbitral proceedings have commenced before the coming into force of the new Act and are pending before the arbitrator, it is open to the parties to agree that the new Act be applicable to such arbitral proceedings and they can so agree even before the coming into force of the new Act.
4. The new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act comes into force.
5. Once the arbitral proceedings have commenced, it cannot be stated that the right to be governed by the old Act for enforcement of the award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the award enforced under the old Act some legal proceedings for its enforcement must be pending under that Act at the time the new Act came into force.
6. If a 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. Provisions for the conduct of arbitral proceedings are vastly different in both the old and the new Act. Challenge of award can be with reference to the conduct of arbitral proceedings. An interpretation which leads to unjust and inconvenient results cannot be accepted.

―17. Judgment in terms of award.--Where the court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award.‖

7. A foreign award given after the commencement of the new Act can be enforced only under the new Act. There is no vested right to have the foreign award enforced under the Foreign Awards Act [Foreign Awards (Recognition and Enforcement) Act, 1961].‖ 

(underlining added)

16. The Supreme Court further examined the provisions of Section 85(2)(a) of the said Act in the following manner:-

―23. Section 85(2)(a) of the new Act is in two limbs: (1) provisions of the old Act shall apply in relation to arbitral proceedings which commenced before the new Act came into force unless otherwise agreed by the parties, and (2) the new Act shall apply in relation to arbitral proceedings which commenced on or after the new Act came into force. The first limb can further be bifurcated into two: (a) provisions of the old Act shall apply in relation to arbitral proceedings commenced before the new Act came into force, and (b) the old Act will not apply in such cases where the parties agree that it will not apply in relation to arbitral proceedings which commenced before the new Act came into force. The expression ―in relation to‖ is of the widest import as held by various decisions of this Court in Doypack Systems (P) Ltd.2, Mansukhlal Dhanraj Jain3, Dhanrajamal Gobindram4 and Navin Chemicals Mfg5. This expression ―in relation to‖ has to be given full effect to, particularly when read in conjunction with the words ―the provisions‖ of the old Act. That would mean that the old Act will apply to the whole gambit of arbitration culminating in the enforcement of the award. If it was not so, only the word ―to‖ could have sufficed and when the legislature has used the expression ―in relation to‖, a proper meaning has to be given.

This expression does not admit of restrictive meaning. The first 1988 (2) SCC 299 1995 (2) SCC 665 AIR 1961 SC 1285 1993 (4) SCC 320 limb of Section 85(2)(a) is not a limited saving clause. It saves not only the proceedings pending at the time of commencement of the new Act but also the provisions of the old Act for enforcement of the award under that Act. 

24. The contention that if it is accepted that the expression ―in relation to‖ arbitral proceedings would include proceedings for the enforcement of the award as well, the second limb of Section 85(2)(a) would become superfluous. We do not think that would be so. The second limb also takes into account the arbitration agreement entered into under the old Act when the arbitral proceedings commenced after the coming into force of the new Act. 

.......‖ xxxxx xxxxx xxxxx xxxxx xxxxx ― 

28. Section 85(2)(a) is the saving clause. It exempts the old Act from complete obliteration so far as pending arbitration proceedings are concerned. That would include saving of whole of the old Act up till the time of the enforcement of the award. This (sic Thus) Section 85(2)(a) prevents the accrued right under the old Act from being affected. Saving provision preserves the existing right accrued under the old Act. There is a presumption that the legislature does not intend to limit or take away vested rights unless the language clearly points to the contrary. It is correct that the new Act is a remedial statute and, therefore, Section 85(2)(a) calls for a strict construction, it being a repealing provision. But then as stated above where one interpretation would produce an unjust or an inconvenient result and another would not have those effects, there is then also a presumption in favour of the latter. 

29. Enforcement of the award, therefore, has to be examined on the touchstone of the proceedings held under the old Act. 

xxxxx xxxxx xxxxx xxxxx xxxxx 

32. Principles enunciated in the judgments show as to when a right accrues to a party under the repealed Act. It is not necessary that for the right to accrue legal proceedings must be pending when the new Act comes into force. To have the award enforced when arbitral proceedings commenced under the old Act under that very Act is certainly an accrued right. Consequences for the party against whom award is given after arbitral proceedings have been held under the old Act though given after the coming into force of the new Act, would be quite grave if it is debarred from challenging the award under the provisions of the old Act. Structure of both the Acts is different. When arbitral proceedings commenced under the old Act it would be in the mind of everybody, i.e., the arbitrators and the parties that the award given should not fall foul of Sections 30 and 32 of the old Act. Nobody at that time could have thought that Section 30 of the old Act could be substituted by Section 34 of the new Act. As a matter of fact appellant Thyssen in Civil Appeal No. 6036 of 1998 itself understood that the old Act would apply when it approached the High Court under Sections 14 and 17 of the old Act for making the award rule of the court. It was only later on that it changed the stand and now took the position that the new Act would apply and for that purpose filed an application for execution of the award. By that time limitation to set aside the award under the new Act had elapsed. The appellant itself led the respondent SAIL in believing that the old Act would apply. SAIL had filed objections to the award under Section 30 of the old Act after notice for filing of the award was received by it on the application filed by Thyssen under Sections 14 and 17 of the old Act. We have been informed that numerous such matters are pending all over the country where the award in similar circumstances is sought to be enforced or set aside under the provisions of the old Act. We, therefore, cannot adopt a construction which would lead to such anomalous situations where the party seeking to have the award set aside finds himself without any remedy. We are, therefore, of the opinion that it would be the provisions of the old Act that would apply to the enforcement of the award in the case of Civil Appeal No. 6036 of 1998. Any other construction on Section 85(2)(a) would only lead to confusion and hardship. This construction put by us is consistent with the wording of Section 85(2)(a) using the terms ―provision‖ and ―in relation to arbitral proceedings‖ which would mean that once the arbitral proceedings commenced under the old Act it would be the old Act which would apply for enforcing the award as well.‖ (underlining added)

17. It was contended on behalf of the respondents that a Division Bench of the Calcutta High Court in Tufan Chatterjee v. Rangan Dhar: AIR 2016 Cal 213 and the Madras High Court in New Tirupur Area Development Corporation Limited v. Hindustan Construction Company Limited: [Application No.7674/2015 in O.P. 931/2015] have held that since Section 26 of the Amending Act uses the expression ―to arbitral proceedings‖ instead of ―in relation to arbitral proceedings‖, the legislative intent was to limit its scope and, therefore, the said Section 26 could not be extended to include post-arbitral proceedings (including court proceedings). It was submitted that the crucial difference is in the words ―in relation to‖ in Section 85(2)(a) of the said Act which are missing from the first part of Section 26 of the Amending Act. It was submitted that the Supreme Court in the decision in Thirumalai (supra) was also relied upon by the Calcutta High Court and the Madras High Court in the aforesaid judgments. It was, therefore, submitted that since the first part of Section 26 of the Amending Act uses the phrase ―to arbitral proceedings‖ as distinct from the expression ―in relation to arbitral proceedings‖ used in Section 85(2)(a) of the said Act, it would, therefore, have a restrictive meaning.

18. It was also contended that the aid to Section 6 of the General Clauses Act ought not to be resorted to because of the use of the restrictive phrase in Section 26. This implies that the legislature deliberately and intentionally kept the post-arbitral proceedings outside the application of the first part of Section 26 of the Amending Act. It was also contended that the remedy available to a party under Section 34 has not been taken away by the Amending Act and there are only slight changes to Section 34. It was submitted that the only vested right was with regard to the challenge to an arbitral award which has remained intact. Section 36 relates to the enforcement of the award. Even under the unamended provisions, the party in whose favour the award was made was entitled for enforcement of the award after the expiry of the period mentioned in Section 34 or after the dismissal of a petition under Section 34. It was contended that the disability of the party in favour of whom the award was made in executing the award during the pendency of the petition under Section 34 under the unamended provision only provided an interim relief and the same cannot be said to be a vested or accrued substantive right. It was further contended that, in any event, the interim relief has not been completely taken away and only the stay of enforcement of an award has been made a subject matter of an order of the court in place of an automatic stay.

19. For all these reasons, it was contended by the learned counsel for the respondents that no interference with the impugned order was called for and the appeals ought to be dismissed.

20. In rejoinder, it was submitted by the learned counsel for the appellants that the decision of the Calcutta High Court in Tufan Chatterjee (supra) sought to bifurcate the words contained in Section 26 of the Amending Act inasmuch as it distinguished the terms ―to arbitration proceedings‖ and ―in relation to arbitration proceedings‖ to contend that the former means only proceedings before the arbitral tribunal, whereas the latter refers to all proceedings including court proceedings post the award. It was contended that if this interpretation was to be accepted, it would lead to serious contradictions, especially in the interplay between Sections 9 and 17, where the court proceedings (in relation to arbitral proceedings which commenced before the amendment) would be under Section 9 of the new regime, and the arbitral proceedings (which commenced before the amendment) would have to be under the old regime (including Section 17). It was, therefore, contended that it would certainly not be the intention of the Legislature to have the arbitral tribunal and the courts apply different standards in relation to the same proceedings.

21. Consequently, it was submitted that insofar as the petitions under Section 34 of the said Act, which have been filed in the present matters, are concerned, they ought to be governed by the unamended provisions.

22. Let us now analyse Section 26 of the Amending Act. It is comprised of two parts. The first part stipulates that nothing contained in the Amending Act shall apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of the principal Act before the commencement of the Amending Act (i.e., on 23.10.2015), unless, of course, the parties otherwise agree. The second part makes it clear that the Amending Act and, consequently, the amendments brought about by it in the said Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of the Amending Act. It is, therefore, clear that Section 26 bifurcates cases on the basis of the commencement of the arbitral proceedings being ‗prior' or ‗on or after' the date of commencement of the Amending Act. In other words, the date of commencement of the Amending Act, that is, 23.10.2015, is what separates the two parts of Section 26. Insofar as the second part is concerned, there is and can be no confusion inasmuch as the Amending Act and consequently, the amendments brought about by it in the said Act, would clearly apply in relation to arbitral proceedings which commence on or after the date of commencement of the Amending Act (i.e., 23.10.2015). In other words, in cases of any arbitral proceedings which commence on or after 23.10.2015, the amendments would apply to the entire gamut of such proceedings.

23. An issue has been raised (and, was the subject matter of debate before us) as to whether there was any difference in the expressions ―to the arbitral proceedings‖ and ―in relation to arbitral proceedings‖ appearing in the two parts of Section 26 of the Amending Act. It was contended on behalf of the respondents that the expression ―in relation to arbitral proceedings‖ was referable to the entire gamut of arbitration culminating in the enforcement of the award and that the expression related not only to proceedings before the arbitral tribunal, but also to the proceedings emanating therefrom before the court. This was contended on the basis of the Supreme Court decision in Thyssen Stahlunion (supra). It was also contended on the strength of an observation in the said decision that if it was not so, only the word ―to‖ could have sufficed. It may be recalled that in that decision, Section 85(2)(a) of the said Act had come up for interpretation. That provision also comprised of two parts. But, in both parts, the expression used was ―in relation to arbitral proceedings‖. In that context, the Supreme Court had observed that the expression ―in relation to‖ did not admit of a restrictive meaning and that the first limb of Section 85(2)(a) was not a limited saving clause as it saved not only the proceedings pending at the time of commencement of the Arbitration and Conciliation Act, 1996, but also the provisions of the Arbitration Act, 1940 for enforcement of the award under that Act (i.e., the 1940 Act). It was contended on behalf of the respondents that in Section 26 of the Amending Act, while the expression ―in relation to arbitral proceedings‖ is used in the second part, in the first part the expression employed is ―to the arbitral proceedings‖. It was, therefore, contended that the first part of Section 26 which saved the unamended provisions of the said Act only had reference to arbitral proceedings, i.e., proceedings before an arbitral tribunal and not to any other proceedings emanating from or related to such arbitral proceedings, including proceedings before court.

24. It is to be seen as to whether the two limbs of Section 26, if interpreted in the manner suggested by the respondents, exhaust all the categories of cases. To put it differently, does Section 26 of the Amending Act deal with all types of cases, which could fall for consideration under the said Act. It is clear that insofar as the second limb of Section 26 is concerned, it takes within its fold every type of situation, which may arise in relation to arbitral proceedings, including both proceedings before the arbitral tribunal and court proceedings in relation thereto or connected therewith. Therefore, insofar as the second limb is concerned, there is no dispute that for all arbitration proceedings commenced on or after 23.10.2015, the Amending Act would apply and, therefore, the amended provisions of the said Act would be applicable.

25. This leaves us to consider the first part of Section 26. This part saves the application of the unamended provisions of the said Act to arbitral proceedings.

26. Let us assume, for the time being, that the expression ―arbitral proceedings‖ covers only those proceedings which are pending before the arbitral tribunal and not to other proceedings which may be pending before court or are in the process of being instituted in court. If this interpretation were to be accepted, then it would be clear that those situations, where arbitral proceedings commenced prior to 23.10.2015, but were not pending before the arbitral tribunals, would have no reference either in the first part or the second part of Section 26 of the Amending Act.

27. To illustrate, all the arbitral proceedings, which commenced in accordance with the provisions of Section 21 of the said Act prior to 23.10.2015, can be classified into three categories. The first category being where the arbitral proceedings commenced prior to 23.10.2015 and were pending before an arbitral tribunal on 23.10.2015; the second category would be of those cases where arbitral proceedings commenced prior to 23.10.2015 and the award was also made prior to 23.10.2015, but the petition under Section 34 seeking the setting aside of the award was made after 23.10.2015; the third category would be comprised of those cases where the arbitral proceedings commenced prior to 23.10.2015 and not only the award was made prior to 23.10.2015, but the petition under Section 34 had also been instituted before court prior to 23.10.2015. The three categories can be graphically represented as follows:-

28. Given the three categories of cases, if the interpretation of the respondents is accepted, then the first part of Section 26 would only deal with the first category. In other words, there would be nothing in Section 26 of the Amending Act which pertained to the second and third categories of cases.

29. In such a situation, it would have to be considered, independent of Section 26 of the Amending Act, as to whether the amended provisions applied to the said second and third category of cases. In this regard, we may note the observations of the Supreme Court in Thyssen (supra) where, after, considering several earlier decisions, the Supreme Court observed in paragraph 32 (which we have already extracted above) that the principles enunciated in the judgments show as to when a right accrues to a party under a repealed Act. The Supreme Court observed that it is not necessary that for the right to accrue, legal proceedings must be pending when the new Act comes into force. Furthermore, and more importantly, the Supreme Court observed that to have the award enforced when arbitral proceedings commenced under the old Act under that very Act was certainly an accrued right. In other words, all the aspects of enforceability of an award entail an accrued right both in the person in whose favour the award is made and against whom the award is pronounced. It will also be noticed that the Supreme Court made it clear that for the right to accrue, there is no necessity that legal proceedings must be pending when the new Act comes into force. This exactly covers the situation as obtaining in the second category of cases, where the arbitral proceedings were commenced prior to 23.10.2015 and the award was also made prior to 23.10.2015, but the petition under Section 34 had not yet been filed. This is the same situation as in the present case. Thus, the pendency of any legal proceedings or otherwise would not come in the way of determining as to whether the right had accrued under the unamended provisions or not. We have already noted that the Supreme Court in Thyssen (supra) observed that the right to have the award enforced (which also comprises of the negative right of the award debtor to not have it enforced till his objections under Section 34 of the said Act are heard and decided) is certainly an accrued right. Given the fact that the amended Section 36 takes away the right of an automatic stay of enforcement of an award, it is clear that the amendment introduced in Section 36 by virtue of the Amending Act would definitely impinge upon the accrued right of the party against whom the award is given after the arbitral proceedings have been held under the unamended provisions. Since an accrued right is affected, unless a contrary intention appears in the amending statute, the amendments would have to be treated as prospective in operation. Prospective from the standpoint of commencement of the arbitral proceedings.

30. Now, if the argument of the respondents is to be accepted that the first limb of Section 26 applies only to arbitral proceedings in the sense of proceedings before arbitral tribunals and not to court proceedings, then, it is obvious that Section 26 is silent with regard to the second and third categories of cases to which we have already referred above. In other words, in respect of these categories, no contrary intention of retrospectivity is evinced upon a reading of Section 26 of the Amending Act. Therefore, even if we take the argument of the respondents to be correct, the result would still be the same and, that is, that in respect of all the arbitral proceedings commenced prior to 23.10.2015, the unamended provisions of the said Act would continue to operate till the enforcement of the award.

31. We may also notice that in case the argument of the respondents is to be accepted that where arbitral proceedings commenced prior to 23.10.2015, the unamended provisions would be saved only in respect of the proceedings before the arbitral tribunal and would not extend to court proceedings, the same would result in serious anomalies. This is so because the Amending Act has sought to bring about amendments in Section 9 as well as Section 17 of the said Act. While Section 9 pertains to interim measures which may be directed by the court prior, during arbitral proceedings or after the making of the award, Section 17 deals with the interim measures which may be ordered by an arbitral tribunal. If the interpretation of the respondents is to be accepted, then, in respect of arbitral proceedings commenced prior to 23.10.2015, the amended provisions would apply to proceedings under Section 9 of the said Act, but not to Section 17 thereof. This would result in a serious anomaly.

32. On the other hand, if the expression ―to the arbitral proceedings‖ used in the first limb of Section 26 is given the same expansive meaning as the expression ―in relation to arbitration proceedings‖ as appearing in the second limb of Section 26, then, the matter becomes very simple and does not result in any anomaly. All the arbitral proceedings (and here we mean the entire gamut, including the court proceedings in relation to proceedings before the arbitral tribunal), which commenced in accordance with the provisions of Section 21 of the said Act prior to 23.10.2015, would be governed, subject to an agreement between the parties to the contrary, by the unamended provisions and all those, in terms of the second part of Section 26, which commenced on or after 23.10.2015 would be governed by the amended provisions.

33. In view of the above analysis and discussion, we regret our inability to agree with the view taken by the Calcutta High Court in Tufan Chatterjee (supra). It must be reiterated that in the said Calcutta High Court decision, the second and third categories of cases mentioned above was not considered at all. Consequently, the arguments of the respondents based on the reasoning adopted in Tufan Chatterjee (supra) cannot be accepted.

34. The conclusions that we can draw from the above analysis and discussion are:-

1) Section 26 of the Amending Act, if a narrow view of the expression ―to the arbitral proceedings‖ is to be taken, is silent on those categories of cases where the arbitral proceedings commenced prior to 23.10.2015 and where even the award was made prior to 23.10.2015, but where either a petition under Section 34 was under contemplation or was already pending on 23.10.2015;

2) In such eventuality, the amended provisions pertaining to those categories would apply only if they were merely procedural and did not affect any accrued right;

3) In the facts of the present case, the amendment to Sections 34 and 36, which pertain to the enforceability of an award, certainly affect the accrued rights of the parties;

4) As a result, the petitions filed by the appellants under Section 34 of the said Act would have to be considered under the unamended provisions of the said Act and consequently, the appellants would be entitled to automatic stay of enforcement of the award till the disposal of the said petitions.

35. In sum, the impugned order, to the extent it imposes a condition on the appellants / petitioners to deposit a sum of Rs 2.7 crores, is set aside. There shall be no requirement of the petitioners depositing / paying a sum of Rs 2.7 crores or any other sum as the filing of the petitions under Section 34 themselves would amount to automatic stay under the unamended provisions of Sections 34 and 36 read together. The appeals are allowed to the aforesaid extent. There shall be no order as to costs.