Retrospective Operation of the Benami Laws : The Confusion Remains!

Author : Saurabh Seth

The Benami Transactions (Prohibition) Act, 1988 (“Original Act”) was enacted in the year 1988 with the object of prohibiting benami transactions. A benami transaction in simple terms refers to a transaction where a person actually purchasing a property does not do so in his own name, and does so in the name of another person, who is merely a ‘name lender’ or a ‘benamidar’. Such person who pays consideration is commonly referred to as the ‘beneficial owner’.

The Original Act contained a mere 9 sections, including the power of acquisition of such benami property by an appropriate authority and also powers to prosecute offenders. Although the Original Act empowered the Central government to make rules under Section 8, no such rules were ever framed. Therefore, the Original Act was widely regarded as a “toothless” legislation, which though empowered the state to confiscate properties, was rarely used and most importantly, no procedure, rules or mechanism was prescribed to give effect to the provisions of the Original Act.

With the change of dispensation in Parliament, the then Finance Minister, Late Mr. Arun Jaitley, sought to “give teeth to” this “toothless” legislation by introducing the Benami Transactions (Prohibition) Amendment Act, 2016. The amendment was passed into law and came into force on 01.11.2016. The amended legislation was re-christened as the Prohibition of Benami Property Transactions Act, 1988 (“New Act”) and sought to amend the Original Act by adding as many as 72 sections and proper Rules for the effective implementation of the New Act.

But why did the government opt for amending the Original Act instead of enacting a fresh legislation? The reason is not far to see, and was explained by Late Mr. Jaitley in parliament in answer to a question where he categorically stated that:

“Anybody will know that a law can be made retrospective, but under Article 20 of the Constitution of India, penal laws cannot be made retrospective. The simple answer to the question why we did not bring a new law is that a new law would have meant giving immunity to everybody from the penal provisions during the period 1988 to 2016 and giving a 28 years immunity would not have been in larger public interest, particularly if large amounts of unaccounted and black money have been used to transact those transactions” 

But the question which arises is whether such a course is legally permissible? Can the legislature do something indirectly which it could not have done directly? The answer in my view is that such a course could not have adopted, especially given the strict provisions of the New Act, which have the effect of not only depriving a person of his property but also of initiation of criminal prosecution against a person found guilty under the New Act.

The Hon’ble Supreme Court has repeatedly held that amendment to a statute can be implemented retrospectively, however such retrospective amendment cannot defeat the substantive rights of a party. It is well recognized that generally amendments to procedural laws may be retrospective, but when substantive rights of parties are affected, can such laws be implemented retrospectively?

The New Act was notified vide Notification No. 98/2016 dated 25.10.2016, which appointed the 1st day of November, 2016 as the date on which the provisions shall come into force.

Section 1(3) remains untouched

Interestingly, the New Act keeps Section 1(3) of the Original Act untouched, which provided that:

“(3) The provisions of sections 3, 5 and 8 shall come into force at once, and the remaining provisions of this Act shall be deemed to have come into force on the 19th day of May, 1988.”

The aforesaid date of 19.05.1988 relates to the coming into force of the Presidential Ordinance whereas the date of 05.09.1988 relates to the date when the Original Act was brought into force. It is for this reason that Section 1(3) reads that Sections 3, 5 and 8 shall come into force at once.

In the New Act, Section 1(3) has been retained in its original form even though there are substantial amendments to Section 3, 5 and 8. The said provision creates an anomalous situation with the use of the words “shall come into force at once”. What date does this relate to is something that requires deep consideration particularly in view of the substantive amendments brought about to the aforesaid sections. A literal reading of the words “shall come into force at once” lends credence to the interpretation that the amendments to the said Section shall be effective only post 01.11.2016, thus making the provision prospective in its operation.

Substantive amendments in the New Act

Substantive changes have been made to various provisions of the Original Act, and there is no doubt that such amendments are not mere procedural amendments. In fact, substantive changes affecting the vital rights of persons have been made to the New Act, thus warranting a prospective operation. Some of these substantive changes are:

• Section 2(9) of the New Act expands the definition of “Benami Transaction” and brings within its fold certain transactions, which were hitherto not considered Benami. This certainly qualifies as a substantive change of the scope and operation of the New Act.
• Section 3 of the New Act seeks to make a distinction between transactions entered into prior to the New Act, by providing for a lesser punishment under Section 3(2) for past acts and a higher punishment under Chapter VII of the New Act for acts done after 01.11.2016. Such cases are covered by Section 3(3) of the New Act. This also leads us to the inevitable conclusion that the applicability of the new regime and punishment thereunder is only prospective.
• Section 5 read with Chapter IV of the New Act provide for attachment, adjudication and confiscation of the properties under the New Act. Under the Original Act, though the provision for confiscation was present, however, the same was to be undertaken in terms of the procedure and rules prescribed. It is an admitted position that no rules were ever framed or brought into force for the said purpose.
• Thus even though the substantive provision for confiscation was present under the Original Act, the absence of rules framed thereunder would certainly militate against the prescription of the detailed procedure now laid down [and rules framed] under the New Act. This, some may argue, is directly contrary to Article 20 of the Constitution of India, 1950 as Section 5 (without rules) of the Original Act was the “law in force” for transactions prior to 01.11.2016.
• Even Chapter IV of the New Act tends to disturb various vested rights of persons, as it gives the Initiating Officer under the New Act the power to provisionally attach properties even before adjudication proceedings.
• Various levels of the adjudication have been introduced under the New Act, which never existed earlier. Though these changes may be termed as “procedural”, the fact remains that creating layers of appeals, which were non existent earlier, certainly represents substantive amendment affecting vested rights of parties.
• Chapter VII of the New Act prescribes penalties, which were non existent under the Original Act. These penalties cannot by any stretch of imagination be applied retrospectively, and any such misadventure would fall foul of Article 20 of the Constitution of India, 1950.

Interpretation by the High Courts

The question of whether the amendments brought about in the form of the New Act are to be applied prospectively or retrospectively have vexed various High Courts throughout the Country. So far there is unanimity of judicial opinion [barring one] that the provisions of the New Act are to be applied prospectively. Some of these decisions are being noted hereunder:

1. Joseph Isharat v. Rozy Nishikant Gaikwad 2017 (5) ABR 706, where the Bombay High Court held:

“7. What is crucial here is, in the first place, whether the change effected by the legislature in the Benami Act is a matter of procedure or is it a matter of substantial rights between the parties. If it is merely a procedural law, then, of course, procedure applicable as on the date of hearing may be relevant. If, on the other hand, it is a matter of substantive rights, then prima facie it will only have a prospective application unless the amended law speaks in a language “which expressly or by clear intention, takes in even pending matters.”. Short of such intendment, the law shall be applied prospectively and not retrospectively.

“8. As held by the Supreme Court in the case of R. Rajagopal Reddy vs. Padmini Chandrasekharan, Section 4 of the Benami Act, or for that matter, the Benami Act as a whole, creates substantive rights in favour of benamidars and destroys substantive rights of real owners who are parties to such transaction and for whom new liabilities are created…These observations clearly hold the field even as regards the present amendment to the Benami Act. The amendments introduced by the Legislature affect substantive rights of the parties and must be applied prospectively.”

[Note: SLP [C] No. 12328 of 2017 against this judgment was dismissed by the Hon’ble Supreme Court by its order dated 28.04.2017]

2. Mangathai Ammal [Died] through LRs & Ors. Vs. Rajeshwari & Ors. [2019 SCC OnLine SC 717] dated 09.05.2019, where Hon’ble Supreme Court observed:

“12. It is required to be noted that the benami transaction came to be amended in the year 2016. As per Section 3 of the Benami Transaction [Prohibition] Act 1988, there was a presumption that the transaction made in the name of the wife and children is for their benefit. By Benami Amendment Act, 2016, Section 3 [2] of the Benami Transaction Act, 1988 the statutory presumption, which was rebuttable, has been omitted. It is the case on behalf of the respondents that therefore in view of omission of Section 3[2] of the Benami Transaction Act, the plea of statutory transaction that the purchase made in the name of wife or children is for their benefit would not be available in the present case. Aforesaid cannot be accepted. As held by this Court in the case of Binapani Paul [supra] the Benami Transaction Act would not be applicable retrospectively?”

3. Niharika Jain V. Union of India & Ors. 2019 SCC On Line Raj 1640, dated 12.07.2019, wherein the Rajasthan High Court observed:

“93. … this Court has no hesitation to hold that the Benami Amendment Act, 2016, amending the Principal Benami Act, 1988, enacted w.e.f. 1st November, 2016, i.e. the date determined by the Central Government in its wisdom for its enforcement; cannot have retrospective effect.

94. It is made clear that this Court has neither examined nor commented upon merits of the writ applications but has considered only the larger question of retrospective applicability of the Benami Amendment Act, 2016 amending the original Benami Act of 1988. Thus, the authority concerned would examine each case on its own merits keeping in view the fact that amended provisions introduced and the amendments enacted and made enforceable w.e.f. 1st November, 2016; would be prospective and not retrospective.”

4. M/s Ganpati Delcom Private Limited v. Union of India & Anr. (APO no. 8 of 2019 with WP no. 687 of 2017, decision dated 12.12.2019), wherein the Hon’ble Calcutta High Court held as under:

“In Canbank Financial Services Ltd vs Custodian & Others reported in (2004) 8 SCC 355 the Supreme Court specifically held in paragraph 67 that the said Act of 1988 had not been made workable as no rules under Section 8 of the said Act for acquisition of benami property had been framed. These two cases were also cited by Mr. Khaitan. Section 6(c) of the General Clauses Act, 1897 is most important. It lays down that repeal of an enactment, which necessarily includes an amendment, would not affect “any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed”, unless a different intention is expressed by the legislature. Without question, the omission on the part of the government to frame rules under Section 8 of the 1988 Act rendered it a dead letter and wholly inoperative. Assuming that the appellant had entered into a benami transaction in 2011, no action could be taken by the Central government, in the absence of enabling procedural rules. It is well within the right of the appellant to contend that the Central government had waived its rights. It could also contend that no criminal action could be initiated on the ground of limitation. Now, these rights which had accrued to the appellant could not, in the absence of an express provision be extinguished by the amending Act of 2016. In other words, applying the definition of benami property and benami transaction the Central government could not, on the basis of the 2016 amendment allege contravention and start the prosecution in respect of a transaction in 2011.”

[Note: The Hon’ble Supreme Court in SLP (C) No. 2784 of 2020 has stayed the said the above judgment. The SLP remains pending.]

Contrary view of Chhattisgarh High Court

5. Tulsiram & Manki Bai V. ACIT (Benami Prohibition) & Ors. (W. P. No. 3819/2019), dated 15.11.2019, wherein the Chhattisgarh High Court held:

“20. … It can also not to be said that provisions of the Amended Act of 2016 could not have been made applicable in respect of properties, which were acquired prior to 01.11.2016. The whole Act of 1988 as it stands today inclusive of the amended provisions brought into force from 01.11.2016 onwards applies irrespective of the period of purchase of the alleged Benami property. Amended Act of 2016 does not have an existence by itself. Without the provisions of the Act of 1988, the amended provisions of 2016 has no relevance and the amended Provisions are only laying down the proceedings to be adopted in a proceeding drawn under the Act of 1988 and the penalties to be imposed in each of the cases taking into consideration the period of purchase of Benami property.”

Conclusion:

The amendments made by way of the New Act, in my view, are clearly substantive and not procedural in nature, and hence cannot be applied retrospectively. The New Act expands the scope of the law, casts a negative burden / onus on a person to prove that a property is not “benami property”, creates disabilities such as immediate attachment and subsequent confiscation and most importantly attracts criminal action. All these aspects lead to the inescapable conclusion that the New Act cannot and should not be applied retrospectively.

The golden words of the Hon’ble Supreme Court in Commissioner of Income Tax (Central)- I, New Delhi vs. Vatika Township Private Limited (2015) 1 SCC 1 that “The idea behind the rule is that a current law should govern current activities. Law passed today cannot apply to the events of the past. If we do something today, we do it keeping in view the law of the day in force and not tomorrow’s backward adjustment to it. Our belief in the nature of the law is founded on the bed rock that every human being is entitled to arrange his affairs by relying on the existing law and should not find that his plans have been retrospectively upset”, are clearly applicable to the present situation.

The views taken by the various High Courts as highlighted above correctly lay down this position of law, and now all eyes will be on the Hon’ble Supreme Court to take a final view on this issue – once and for all. Till then the confusion remains!

Saurabh Seth, the author, is a practicing advocate in the Delhi High Court. The views expressed are personal to the author.

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.

120 day Statutory Period for filing Written Statement 'Mandatory' under the Commercial Courts Act: Supreme Court Holds

(Justice Nariman (Left) and Justice Saran (Right)
Hon'ble Judges, Supreme Court of India

A bench of Justice Nariman and Justice Saran of the Hon'ble Supreme Court has held in SCG Contracts India P. Ltd. v. K.S. Chamankar Infrastructure P. Ltd. that the provisions of Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 with regard to filing of written statements within 120 days from date of service of summons is mandatory and any delay beyond 120 days cannot be condoned by the Court. While holding so, the bench observed as under:

8) The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 came into force on 23.10.2015 bringing in their wake certain amendments to the Code of Civil Procedure. In Order V, Rule 1, sub-rule (1), for the second proviso, the following proviso was substituted:

“Provided further that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the written statement on such other days, as may be specified by the Court, for reasons to be recorded in writing and on payment of such costs as the court deems fit, but which shall not be later than one hundred twenty days from the date of service of summons and on expiry of one hundred and twenty days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.” Equally, in Order VIII Rule 1, a new proviso was substituted as follows:

“Provided that where the defendant fails to file the written statement within the said period of thirty days, he shall be allowed to file the written statement on such other day, as may be specified by the court, for reasons to be recorded in writing and on payment of such costs as the Court deems fit, but which shall not be later than one hundred and twenty days from the date of service of summons and on expiry of one hundred and twenty days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the court shall not allow the written statement to be taken on record.” This was re-emphasized by re-inserting yet another proviso in Order VIII Rule 10 CPC, which reads as under:-

“Procedure when party fails to present written statement called for by Court.- Where any party from whom a written statement is required under Rule 1 or Rule 9 fails to present the same within the time permitted or fixed by the Court, as the case may be, the Court shall pronounce judgment against him, or make such order in relation to the suit as it thinks fit and on pronouncement of such judgment a decree shall be drawn up.

Provided further that no Court shall make an order to extend the time provided under Rule 1 of this Order for filing of the written statement.” A perusal of these provisions would show that ordinarily a written statement is to be filed within a period of 30 days.

However, grace period of a further 90 days is granted which the Court may employ for reasons to be recorded in writing and payment of such costs as it deems fit to allow such written statement to come on record. What is of great importance is the fact that beyond 120 days from the date of service of summons, the defendant shall forfeit the right to file the written statement and the Court shall not allow the written statement to be taken on record. This is further buttressed by the proviso in Order VIII Rule 10 also adding that the Court has no further power to extend the time beyond this period of 120 days.

9) In Bihar Rajya Bhumi Vikas Bank Samiti (supra), a question was raised as to whether Section 34(5)of the Arbitration and Conciliation Act, 1996, inserted by Amending Act 3 of 2016 is mandatory or directory. In para 11 of the said judgment, this Court referred to Kailash vs. Nanhku, (2005) 4 SCC 480 referring to the text of Order 8 Rule 1 as it stood pre the amendment made by the Commercial Courts Act. It also referred to the Salem Advocate Bar Association vs. Union of India, (2005) 6 SCC 344, which, like the Kailash judgment, held that the mere expression “shall” in Order 8 Rule 1 would not make the provision mandatory. This Court then went on to discuss in para 17 State vs. N.S. Gnaneswaran, (2013) 3 SCC 594 in which Section 154(2) of the Code of Criminal Procedure was held to be directory inasmuch as no consequence was provided if the Section was breached. In para 22 by way of contrast to Section 34, Section 29-A of the Arbitration Act was set out. This Court then noted in para 23 as under:

“23. It will be seen from this provision that, unlike Sections 34(5) and (6), if an award is made beyond the stipulated or extended period contained in the section, the consequence of the mandate of the arbitrator being terminated is expressly provided. This provision is in stark contrast to Sections 34(5) and (6) where, as has been stated hereinabove, if the period for deciding the application under Section 34 has elapsed, no consequence is provided. This is one more indicator that the same Amendment Act, when it provided time periods in different situations, did so intending different consequences.”

10) Several High Court judgments on the amended Order VIII Rule 1 have now held that given the consequence of non-filing of written statement, the amended provisions of the CPC will have to be held to be mandatory. [See Oku Tech Private Limited vs. Sangeet Agarwal & Ors. by a learned Single Judge of the Delhi High Court dated 11.08.2016 in CS (OS) No. 3390/2015 as followed by several other judgments including a judgment of the Delhi High Court in Maja Cosmetics vs. Oasis Commercial Pvt. Ltd. 2018 SCC Online Del 6698.

11) We are of the view that the view taken by the Delhi High Court in these judgments is correct in view of the fact that the consequence of forfeiting a right to file the written statement; non-extension of any further time; and the fact that the Court shall not allow the written statement to be taken on record all points to the fact that the earlier law on Order VIII Rule 1 on the filing of written statement underOrder VIII Rule 1 has now been set at naught.

12) However, learned counsel appearing for the respondents relied strongly upon the judgment in Bhanu Kumar Jain (supra) and Shaikh Salim Haji Abdul Khayumsab (supra) and, in particular, paras 22 and 27 of the first judgment and paras 4 & 19 of the second judgment.

13) We are of the view that since both these judgments dealt with the pre-amendment position, they would not be of any direct reliance insofar as the facts of the present case is concerned.

14) Learned counsel appearing for the respondents also relied upon R.K. Roja vs. U.S. Rayudu and Another (supra) for the proposition that the defendant is entitled to file an application for rejection of plaint under Order VII Rule 11 before filing his written statement. We are of the view that this judgment cannot be read in the manner sought for by the learned counsel appearing on behalf of the respondents. Order VII Rule 11 proceedings are independent of the filing of a written statement once a suit has been filed. In fact, para 6 of that judgment records “However, we may hasten to add that the liberty to file an application for rejection under Order 7 Rule 11 CPC cannot be made as a ruse for retrieving the lost opportunity to file the written statement”.

15) Learned counsel appearing for the respondents then argued that it cannot be assumed that the learned Single Judge did not know about these amendments when he passed the first impugned order dated 05.12.2017. We do not wish to enter upon this speculative arena. He then argued that since this judgment permitted him to file the written statement beyond 120 days, it was an act of the Court which should prejudice no man. This doctrine cannot be used when the res is not yet judicata. The 05.12.2017 order is res sub judice inasmuch as its correctness has been challenged before us.

16) Learned counsel for the respondents then strongly relied upon the inherent powers of the Court to state that, in any case, a procedural provision such as contained in the amendment, which may lead to unjust consequences can always, in the facts of a given case, be ignored where such unjust consequences follow, as in the facts of the present case. We are again of the view that this argument has also no legs to stand on, given the judgment of this Court in Manohar Lal Chopra vs. Rai Bahadur Rao Raja Seth Hiralal, [1962] Suppl 1 SCR 450. In this judgment, the Court held:

“The suit at Indore which had been instituted later, could be stayed in view of s.10 of the Code. The provisions of that section are clear, definite and mandatory. A Court in which a subsequent suit has been filed is prohibited from proceeding with the trial of that suit in certain specified circumstances.

When there is a special provision in the Code of Civil Procedure for dealing with the contingencies of two such suits being instituted, recourse to the inherent powers under s.151 is not justified...” (at page 470) Clearly, the clear, definite and mandatory provisions of Order V read with Order VIII Rule 1 and 10 cannot be circumvented by recourse to the inherent power under Section 151 to do the opposite of what is stated therein.

17) Clearly, therefore, the 05.12.2017 order which applies in the face of the amendments made to the Civil Procedure Code cannot be sustained. When we come to the second order dated 24.09.2019, the only reason for this order is that 05.12.2017 has attained finality.

18) Factually speaking, this is not correct as a Special Leave Petition from the said order has been filed. Even otherwise, this Court in Canara Bank vs. N.G. Subbaraya Setty and Anr. (supra) has held (page 3414):

“(ii) An issue of law which arises between the same parties in a subsequent suit or proceeding is not res judicata if, by an erroneous decision given on a statutory prohibition in the former suit or proceeding, the statutory prohibition is not given effect to. This is despite the fact that the matter in issue between the parties may be the same as that directly and substantially in issue in the previous suit or proceeding. This is for the reason that in such cases, the rights of the parties are not the only matter for consideration (as is the case of an erroneous interpretation of a statute inter parties), as the public policy contained in the statutory prohibition cannot be set at naught.

This is for the same reason as that contained in matters which pertain to issues of law that raise jurisdictional questions. We have seen how, in Natraj Studios (AIR 1981 SC 537) (supra), it is the public policy of the statutory prohibition contained in Section 28 of the Bombay Rent Act that has to be given effect to. Likewise, the public policy contained in other statutory prohibitions, which need not necessarily go to jurisdiction of a Court, must equally be given effect to, as otherwise special principles of law are fastened upon parties when special considerations relating to public policy mandate that this cannot be done.” The aforesaid para applies on all fours to the facts of the present case, as even assuming that the 05.12.2017 order is final, res judicata cannot stand in the way of an erroneous interpretation of a statutory prohibition. The present is one such case. Therefore, the second order must also be set aside.

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.