Delhi High Court
Thysen Stahlunion Gmbh vs The Steel Authority Of India on 1 September, 1998
Equivalent citations: 1999(48)DRJ210
Author: S.N. Kapoor
Bench: S.N. Kapoor
JUDGMENT S.N. Kapoor, J.
1.1 The D.H. has filed execution application for enforcing award dated 24.9.1997 as if it were a decree under the CPC and to award interest at the same rate as awarded in the award from the date of award till realisation alongwith cost of the execution.
1.2 This application is being contested on the ground that this award is not governed by the Arbitration and Conciliation Act, 1996 (hereinafter referred to '1996 Act'), but by the Arbitration Act, 1940 (hereinafter called '1940 Act').
1.3 Thus the following interesting question arises: "Whether the award dated 24.9.1997 and execution relating thereto would be governed by the Arbitration Act, 1940 or under the Arbitration and Conciliation Act, 1996?"
2. But first the factual background.
2.1 There was an agreement dated 4.3.1994 between the parties. The agreement contained an arbitration clause for settlement of disputes by arbitration in accordance with the rules of Conciliation and Arbitration of the International Chambers of Commerce (ICC) Paris by a sole Arbitrator appointed by the Chairman of the Arbitral Tribunal of the Court of Arbitration of ICC at New Delhi. This agreement also provided that the contract shall be "governed and construed in accordance with the laws of India for the time being in force". On 14.9.1995 the applicant submitted their request for arbitration including documents to the International Court of Arbitration in accordance with Article 3 of ICC Rules. On 20.9.1995 the International Court of Arbitration forwarded request of the applicant for arbitration to SAIL - calling for an answer within 30 days in accordance with Article 4 of the ICC Rules.
2.2 SAIL filed its answer setting out its defense alongwith relevant documents. On 15.11.1995 the Arbitral Tribunal nominated the sale Arbitrator in accordance with Article 2 of the ICC Rules read with the arbitration agreement. On 8.1.1996 the Arbitrator forwarded to the parties draft Terms of Reference containing issues drawn up by him on the basis of pleadings and documents filed in the proceedings. He called for comments and amendments, if any, to the same from the parties. On 25.1.1996 the new Act came into force. On 10.5.1996 Terms of Reference were finalised and singed by the parties. On 28.11.1996 the counsel for the applicant for-
warded to SAIL and the Arbitrator proposed "lay-out for arbitration bundles" which would contain documents exchanged between the parties. The lay-out, in the form of an index carried the title as "In the matter of Arbitration under the Indian Arbitration Act, 1940" On the conclusion of the hearing, the parties were directed by the Arbitrator to file written submissions and accordingly written submissions filed by TSU contained the title as "In the matter of Arbitration under the Indian Arbitration Act, 1940". On 24.9.1.997 the award was made. On 23.10.1997 the applicant filed an application under Sections 14 & 17 of the 1940 Act. On 17.11.1997 the counsel for the applicant wrote to Arbitrator stating that the Award has been filed under the Indian Arbitration Act, 1940 and requested for authority for the filing in the Delhi High Court pursuant to Section 14 of the Indian Arbitration Act, 1940. On 21.11.1997 the Arbitrator confirmed that the applicant had the authority to file the award in Delhi High Court pursuant to Section 14 of the Indian Arbitration Act, 1940. On 13.2.1998 the present application for execution under the 1996 Act alongwith application under Section 151 for stay of the suit under Sections 14 & 17 of the 1940 Act has ben filed on the ground that the arbitration proceedings had terminated on 24.9.1997 and the 1996 Act would apply to the enforcement of the Award.
3. Having heard the learned Senior counsel Shri Fali S. Nariman on behalf of applicant and learned Senior counsel Shri Dipankar P. Gupta on behalf of non-applicant it appears that the entire crux of the matter is the date on which the arbitration proceedings commenced for this alone will enable this Court to decide the course of these proceedings.
4. In order to reach to just conclusion it will be relevant here to refer to Section 85 of 1996 Act which provides for repeal and savings in the 1996 Act which came into force on 25.1.1996. It reads as under:
"85. Repeal and saving.--(l) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,--
(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;
(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act.
5. Thus while 1940 Act stand repealed with effect from 25.1.1996 Section 85 of the 1996 Act still saves the application of the 1940 Act "in relation to arbitral proceedings which commenced before this Act came into force". This is positive statement to apply 1940 Act in relation to arbitral proceedings which commenced before 1996 Act. In order not to keep anything vague it is further clarified "but the new Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force".
6. The learned Senior counsel Fali S. Nariman referred to Section 6(a) and (c) of the General Clauses Act also for the purpose of appreciating effect of repeal. It reads asunder:
"6. Where this Act, or any Central Act pr 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
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed."
7. The sum and substance of the submission of Shri Fali S. Nariman is that the purpose of 1996 Act is to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards as also to define the law relating to conciliation and for matters connected therewith or incidental thereto. As such approach should first be found in the 1996 Act itself. The Preamble, he submits, indicated that the United National Commission on International Trade law has adopted a Model Law on International Commercial Arbitration in 1985. The General Assembly of the United Nations has recommended to give due consideration to said Model Law, in view of specific needs of international commercial arbitration practice for it was thought "to be expedient to make law respecting arbitration and conciliation taking into account the aforesaid Model Law and Rules". He submits that it indicates the legislative intent to facilitate the commercial international arbitration and also to expedite the resolution of disputes arising international commercial transactions. There does not appear anything contrary to brush aside the submissions of the learned Senior counsel Shri F.S. Nariman in the light of the Preamble of the Act.
8. Learned Senior Counsel for the applicant also relies upon Ravulu Subba Raio and Ors. v. Commr. of Income-tax, Madras, . In this the Supreme Court observed as under:
"That being the correct position, the question is whether on its true interpretation, the statute intended that an application under Section 26-A should be signed by the partner personally, or whether it could be signed by his agent on his behalf. To decide that, we must have regard not only to the language of Section 26-A but also to the character of the legislation, the scheme of the Act and the nature of the right conferred b the section. The Act is, as stated in the preamble, one to consolidate and amend the law relating to income-tax. The rule of construction to be applied to such a statute is thus stated by Lord Herschell in Bank of England v. Vagliano, (1891) AC 107 at p. 141 (H).
"I think the proper course is in the first instance to examine the language of the statute, and to ask what is its natural meaning, uninfluenced by any considerations derived from the previous state of the law, and not to start with inquiring how the law previously stood, and then assuming that it was probably "intended to leave it unaltered....."
We must therefore construe the provisions of the Indian Income-tax Act as forming a code complete in itself and exhaustive of the matters dealt with therein, and ascertain what their true scope is."
9. On this aforesaid basis learned Senior counsel for the applicant submits that the 1996 Act being a Code complete in itself and exhaustive in respect of all the matters this Court must ascertain the true scope of the question involved in the light of the provisions of 1996 Act. The learned Senior Counsel for the applicant further builds his arguments and contends that 1996 Act incorporates certain improvements and innovations. In 1940 Act the award by itself was never taken to be a decree and was not having any statutory force. Now under the 1996 Act by virtue of Sections 35 and 36 subject to part I of the Act an arbitral award shall be final and binding on the parties and persons claiming under them respectively. Section 36 provides that "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.
10. The next limb of the argument of Shri F.S. Nariman is that Section 85(2) is very clear and nobody has any vested right in procedure. In support of this contention he relies upon D.C. Bhatia v. Union of India, . In this case Supreme Court observed as under:
"In the instant case, the legislature has decided to curtail or take away the protection of the Delhi Rend Control Act from a section of the tenants. The tenants had not acquired any vested right under the Delhi Rend Control Act, but had a right to take advantage of the provisions of the repealed Act so long as that law remained in force.
In the case of Mohinder Kumar v. State of Haryana, , the validity of the Amending Act of 1978 by which Haryana Urban (Control of Rent and Eviction) Act, 1973, was amended was challenged. The Amending Act by which a category of newly constructed buildings were exempted from the provisions of the Act for a period of ten years, was challenged, inter alia, on the ground that the provisions operated retrospectively and sought to take away the vested rights of the tenants under the Act. This contention was repelled by this Court in the following words: (SCC p. 231, para 17) "The argument that the tenants have acquired vested right under the Act prior to its amendment is without any substance. Prior to the amendment of Section 1(3) by the Amending Act of 1978, the provision as it originally stood cannot be said to have conferred any vested right on the tenants.
The provision, as it originally stood prior to its amendment, might not have constitutionally valid as the exemption sought to be granted was for an indefinite period. That does not necessarily imply that any vested right in any tenant was thereby created. The right claimed is the right to be governed by the Act prior to its amendment. If the legislature had thought it fit to repeal the entire Act, could the tenant have claimed any such right? Obviously, they could not have; the question of acquiring any vested rights really does not arise."
In view of the aforesaid, we are unable to uphold the contention that the tenants had acquired a vested right in the properties occupied by them under the statute. We are of the view that the provisions of Section 3(c) will also apply to the premises which had already been let out at the monthly rent in excess of Rs.3500 when the amendment made in 1988 came into force."
11. On the other hand the learned Senior counsel appearing on behalf of non-applicants submits that the execution application does not indicate the facts which could form basis for arriving at the conclusion that the 1996 Act applies. It just indicates in para 2 that the petitioner is now however advised that the provisions of the Indian Arbitration Act, 1940 do not apply to the aforesaid arbitral Award since the Arbitral proceedings had terminated on 24.9.1997 by the final award dated 24.9.1997 by virtue of Section 32 of the Arbitration and Conciliation Act, 1996. In absence of any pleading/foundation this legal submission about applicability of 1996 Act factual questions could not be allowed to be raised. However, Shri Dipankar Gupta, without prejudice to his submissions about facts submits that admittedly the arbitration commenced before 1996 Act came into force.
12. It is submitted that "The law for the time being in force in India" was made applicable as mentioned in the Award. According to the submissions of Shri Dipankar P. Gupta the arbitration proceedings commenced in terms of Section 21 when a request for referring the dispute to arbitration was received on 14.9.1995 and when the SAIL was called upon to answer within 30 days in accordance with Article 4 of the ICC Rules. Section 21 reads as under:
21. Commencement of arbitral proceedings. Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent."
13. As such arbitral proceedings commenced latest by 20.9.1995. Consequently, 1996 Act would not be applicable at all in terms of Section 85(2). On the other hand the contention of Shri F.S. Nariman is that the submission of Shri Dipankar P. Gupta cannot be accepted for Section 21 starts with a clause 'unless otherwise agreed by the parties' and this phrase takes out the wind of the submissions made by the opposite party-non-applicant.
14. It appears that Section 21 of 1996 Act treats the date of commencement of arbitral proceedings generally on the date a request for that dispute to be referred to arbitration is received by the respondent but it also provides for an exception to this general rule whereunder the parties could agree otherwise also. The question now is to be seen, therefore, whether the parties otherwise agreed to any different date of commencement of the arbitral proceedings.
15. In support of his contention the learned Senior Counsel Shri Fali S. Nariman referred to Article 3 of ICC Rules of Arbitration. It may be mentioned here that there is no dispute that the parties agreed to get the matter settled by an Arbitrator "in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC)". Therefore Article 3 of the ICC Rules of Arbitration is applicable to the facts of the present case. The second part of sub Article (1) provides that the date when the request is received by the Secretariat of the Court shall, for all purposes, be deemed to be the date of commencement of the arbitral proceedings. It is not in dispute that the applicants submitted their request for arbitration including documents to the International Court of Arbitration in accordance with Article 3 of the ICC Rules on 14th September, 1995. On this basis Shri Dipankar P. Gupta submits, that the arbitral proceedings commenced on 14.9.1995.
16. Seeing in the light of submissions made by Shri Dipankar P. Gupta, Senior counsel appearing on behalf of non-applicant it is felt that the arbitral proceedings had commenced before the commencement of 1996 Act on 25.1.1996 in terms of Article 3 in between 14.9.1995 to 20.9.1995 when International Court forwarded the TSU request to SAIL for calling upon answer within 30 days in accordance with Article 4 of the ICC Rules.
17. For the foregoing reasons it is apparent so far as the arbitral proceedings are concerned they are to be governed by 1940 Act.
18. Shri Fali S. Nariman with reference to Article 13 submits that the commencement would start only after the Terms of Reference were defined in accordance with Article 13, I think that this submission has no force for Article 3 provides that "the date when the Request is received by the Secretariat of the court shall, for all purposes, be deemed to be the date of commencement of the arbitral proceedings".
19. However it appears that the applicants are trying to build a case to the effect that since the arbitral proceedings came to an end on 24.9.1997 by making an award, so far as the question of execution of the Award is concerned that shall be governed by 1996 Act and not by 1940 Act for the application of 1940 Act was saved only in relation to arbitral proceedings and not in relation to execution proceedings.
20. This submission is challenged by Shri Dipankar P Gupta by submitting that execution proceedings is in relation to arbitral proceedings which commenced before 1996 Act came into force and, therefore, 1996 Act would not apply. Thus controversy in between the parties takes a new turn and relates to the interpretation of the phrase 'in relation to' arbitral proceedings which commenced before 1996 Act to ascertain whether execution proceedings are in relation to arbitral proceedings which commenced before 1996 Act.
21. Here it may be mentioned that so far as the question of termination of arbitral proceedings is concerned that shall be governed under Section 32 of 1996 Act. It reads as under:
"32. Termination of proceedings.-(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (1).
(2) The arbitral tribunal shall issue an order for the termination of the arbitral proceedings where-
(a) the claimant withdraws his claim, unless the respondent objects to the order and the arbitral tribunal recognises a legitimate interest on his part in obtaining a final settlement of the dispute.
(b) the parties agree on the termination of the proceedings, or
(c) the arbitral tribunal finds that the continuation of the proceedings has for any other reason become unnecessary or impossible.
(3) Subject to Section 33 and Sub-section (4) of section 34, the mandate of the arbitral tribunal shall terminate with the termination of the arbitral proceedings."
22. There is no dispute that in terms of Section 32 final arbitral award has been given and that is subject to Section 33 and Sub-section (4) of Section 34. It is not the case of either of the parties that any application was moved by either of the parties under Section 33 for correction and interpretation of the Award or for giving additional award. As such Section 33 would not apply. Now coming to Section 34 an application for setting aside the Award has been filed by the non-applicants on 2.4.1998 under the 1940 Act.
23. Thus at this stage two questions crop up for decision: (1) "Whether the execution proceedings are proceedings in relation to arbitral proceedings or totally independent of arbitral proceedings?" and (2) "Whether the arbitral award had attained finality under Section 35 and whether it should be executed as it is though the award has not been made rule of the Court?".
24. In so far the question of finality of the award is concerned that is certainly not final at this stage for an objection has been filed to set it aside if the execution proceedings are treated under the 1940 Act. In so far as 1996 Act is concerned, there cannot be any dispute that ordinarily the application for setting aside the award is to be made under Section 34 of 1996 Act for Sub-section (3) of Section 34 provides that 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. But there is a proviso added thereto which provides that if a 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. It is not disputed that no application has been filed by SAIL under the 1996 Act for setting aside the award before 2nd April, 1998. If 1996 Act is applicable in relation to these execution proceedings, then the award is final.
25. Now the only thing left to be decided is whether the execution proceedings arc in relation to arbitral proceedings under 1940 Act. The phrase 'in relation to came to be considered by the Supreme Court in Kawlapati Trivedi v. State of West Bengal, . In that on the complaint of Kamlapati Trivedi a case was registered under Suction 379 of the IPC. Warrants of arrest were issued. All the accused surrendered on May 6, 1970. Those accused were released on bail. Later on police submitted final report. Subequently, a complaint was filed before SDJM accusing Trivedi of the commission of offences under Sections 211 and 182 of IPC by reason of the latter having lodged with the police the false complaint dated April 18, 1970 and the question was the applicability of Section 195 of Cr.P.C. relating to cognizance. In that case the Supreme Court after referring to the cases of M.L. Sethi v. R. P. Kapur, and Ghulam Rasul v. and Ghulam Rasul v. Emperor, AIR 1936 Lah. 238 took the view that the words in Section 190 and 195 "in relation to any proceedings in any court" apply to the case of false report or false statement made in an investigation by the police. In para 60 Supreme Court observed as under:
"As the order releasing Trivedi on bail and the one ultimately discharging him o the offence complained of amount to proceedings before a Court, all that remains to be sen is whether the offence under Section 211 of the Indian Penal Code, which is the subject matter of the complaint against Trivedi can be said to have been committed "in relation to" those proceedings. Both the orders resulted directly from the information lodged by Trivedi with the police against Pathak and in this situation there is no getting out of the conclusion that the said offence must be regarded as one committed in relation to those proceedings. This requirement of clause (b) aforementioned is also therefore fully satisfied".
26. The phrase 'in relation to' or 'relating to' or 'in respect of came to be considered again in Renusagar Power Co. Limited v. General Electric Company, . After discussing numerous authorities Supreme Court observed in para 25.3 as under:
Four propositions emerge very clearly from the authorities discussed above:
1 xxxx
2. Expressions such as "arising out or or "in respect of or "in connection with" or 'In relation to" or "in consequence of or "concerning" or "relating to the contract are of the widest amplitude and content and include even (sic) as to the existence, validity and effect (scope) of the arbitration agreement".
27. The term 'in relation to' again came to be considered in Doypack Systems Pvt. Ltd. v. Union of India, (1998) 2 SCC 299. In that case the question related to the textile undertaking and right, title and interest of the company "in relation to every such textile undertaking", with reference to share purchased by textile undertaking. The question: "Whether the share purchased by the company out of the income of the company would fall in relation to every such textile undertaking?" was answered by the Supreme Court in affirmative by making following observations observed in paras 48 & 49 as under:
"The expressions "pertaining to", "in relation to" and "arising out of", used in the deeming provision, are used in the expansive sense, as per decisions of courts, meanings found in standard dictionaries, and the principles of broad and liberal interpretation in consonance with Article 39(b) and (c) of the Constitution.
The words "arising out of have been used in the sense that it comprises purchase of shares and lands from income arising out of the Kanpur undertaking We are of the opinion that the words "pertaining to" and "in relation to" have the same wide meaning and have been used interchangeably for among other reasons, which may include avoidance of repetition of the same phrase in the same clause or sentence, a method followed in good drafting. The word "pertain" is synonymous with the word "relate", see Corpus Juris Secundrum, Volume 17, page 693".
27.1 This indicates that execution proceedings are in relation to arbitral proceedings and as such 1940 Act would apply to the award and its execution.
28. Besides, it appears from the language of Section 85 that the Section classifies the cases in two categories, one relates to arbitral proceedings which commenced before the 1996 Act came into force and other with relation to the arbitral proceedings which commenced after the 1996 Act came into force. The Section does not classify it any further between pre award matters and post award matters. So far as the pre award matters are concerned if they relate to a case wherein the arbitral proceedings commenced before coming into force of the 1996 Act, 1940 Act would apply irrespective of the fact whether the proceedings relate to pre award matters or whether the proceedings relate to post award matters. Execution proceedings are post award matters in relation to same arbitral proceedings which commenced before 1996 Act came into force. The second part relate to arbitral proceedings in relation to the commencement of the proceedings after the 1996 Act came into force. They are obviously to be governed by the 1996 Act irrespective of the fact whether the subsequent phrase was added to the repealed and saving clause or not. This additional precaution give strengths to the submission that the proceedings in relation to execution proceedings in relation to the same arbitral proceedings which commenced before 1996 Act came into force would be governed only by 1940 Act. 1940 Act requires that before accepting any award as a decree it has to be made rule of the Court for the purpose of execution. In the case in hand the award has not been made rule of the Court. Consequently it remains unenforceable. It may further be mentioned that the petitioner themselves had filed Suit No. 352A/98 in this High court for making the award a rule of the Court and that matter is pending.
29. In the light of the foregoing it appears that the first phrase "in relation to" used in Section 85 indicates that execution proceedings are the just follow up stage of the arbitral proceedings and those proceedings are in relation to arbitral proceedings which commenced before 1996 Act came into force the 1940 Act would apply and not 1996 Act. All the proceedings relating to enforcement of the award shall be governed by 1940 Act. The execution application is accordingly not maintainable
30. For the foregoing reasons the present execution application being not maintainable, it is dismissed without any order as to costs.