Madhya Pradesh High Court
Mohammad Akil Khan vs M.P. Film Development Corporation Ltd. on 1 April, 1999
Equivalent citations: AIR1999MP255, AIR 1999 MADHYA PRADESH 255, 2000 (1) ARBI LR 157, (2000) 1 ARBILR 157, (2000) 2 CURCC 105, (2000) 1 MPLJ 54, (2000) 1 CIVLJ 818
Author: Dipak Misra
Bench: Dipak Misra
JUDGMENT Dipak Misra, J.
1. In this appeal preferred under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as 'the Act'), the non-applicant has called in question order dated 30-4-98 passed by the VIth Additional District Judge, Bhopal in Civil Suit No, 3/97 whereby he has come to hold that the provisions of the Act is not applicable but the provisions of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act 1996') is attracted, and hence, the question of making the award rule of the Court did not arise. It is to be noted here that though the Court observed as aforesaid proceeded to deal with the objections placed on the record.
2. The facts as have been unfolded are that the appellant had availed a loan from the M. P. Film Development Corporation. As disputes arose with regard to payment of loan, the respondent-Corporation referred the disputes to the sole Arbitrator of their own choice, namely, the Managing Director. The sole Arbitrator by notice dated 18-1-96 directed the parties to appear before him for further proceedings. The Arbitrator entered into reference and eventually passed an award on 5-2-97. The sole Arbitrator directed the loanee-ap-pellant to pay a sum of Rs. 14,50,197.16 with interest. There was also a direction that the aforesaid amount was to be realised by sale/auction of the mortgaged property, hypothecated goods and also by other means prescribed in law. The learned Arbitrator sent the award to the competent Court as required under Section 14(2) of the Act for making it a rule of Court. The claimant-appellant filed its preliminary objection contending, inter alia, that the award passed by the Arbitrator was null and void, as disputes had really not arisen between the parties. It was also putforth that even if disputes had arisen, the Arbitrator had no jurisdiction to adjudicate the same. Apart from this various other objections were taken questioning the justifiability of the award. A further objection was filed under Section 151 of the Code of Civil Procedure to set aside the award. It was also pointed out before the Court below that the Arbitrator had committed gross legal misconduct and was biased. It is worth noting here that to the objection filed by the present appellant the Corporation also filed its reply justifying that the Arbitrator was correct in his determination of the claim and the award did not suffer from any infirmity. The rule making Court framed as many as four issues and came to hold that the Arbitration and conciliation Ordinance had already come into effect by the time the learned Arbitrator had entered into reference and, therefore, the provisions of the Act would not be applicable. The Court referred to Section 21 of the Act and opined that the commencement of arbitration proceeding would be deemed to have taken place the day the Arbitrator had entered into reference. Being of this view, he rejected all the objections raised by the appellant.
3. Assailing the aforesaid order Mr. Abhay Gohil, learned counsel for the appellant has contended that the Court below has fallen into error by coming to hold that the Act 1996 is applicable to the facts of the present case. His further submission is that the Court below while holding that the Act 1996 is applicable has proceeded to adjudicate whether the Arbitrator had legally misconducted himself or not. The learned counsel has criticised that the objections raised by the appellant have not been properly dealt with by the Court below for the simple reason the Court was of the view that the Act was not applicable.
Mrs. Shobha Menon, learned counsel for the respondent supported the order passed by the learned trial Judge.
4. To appreciate the rival submissions raised at the Bar, we have carefully perused the order passed by the Court below. On a scrutiny of the same, we find mat the learned trial Judge has held that the Act 1996 came into force on 25-1-96 and the Arbitrator had entered into reference on 24-1-96. But the non-applicant received the same notice on 25-1-96 and, therefore, it is to be presumed that the proceedings had commenced after the Act had come into force.
5. The core question that arises for consideration is whether the learned Arbitrator had entered into reference. On a perusal of the note-
sheet of the Arbitrator dated 24-1-96, we find he has passed the following order :--
"Shri Nityanand Shrivastava, authorised representative, on behalf of the M.P. Film Development Corporation Ltd., has submitted a claim valued at Rs. 14,50,197.16 only against Shri Mohd. Akil Khan, Proprietor of the Cinema Samrat, Bemta with a request that the matter may be taken up in arbitration since the party has failed to make payment of the loan and interest amount inspite of a number of reminders.
I have perused the claim documents and the relevant papers enclosed with the claim. In my opinion this is a fit case to be taken up for arbitration. The case may be registered. Notices may be issued to the parties informing that the case will be taken up by me in the office of the M.P. Film Development Corporation Shanshkriti Bhavan, Banganga, Bhopal at 3 p.m. on 16-2-1996."
On a perusal of the aforesaid order there remains no iota of doubt that the Arbitrator had entered into reference on 24-1-96. This view of ours gets fortified by the decisions rendered in the case of Ramsahai Sheduram v. Harishchandra Dulichandji, AIR 1963 MP 143 and Lal Chand Roshan Lal v. Ghulam Mohd. Nazir Ahmad, AIR 1986 J&K53.
6. Now we shall advert to deal with the purpose and import of the provisions of the new Act. The Arbitration and Conciliation Ordinance, 1995 was originally promulgated by the President of India as a law with effect from 25-1-96. It was replaced on 26-3-96 by the Arbitration and Conciliation (Second Ordinance), 1996. The second one was replaced by the Third Ordinance on 26-6-96. Eventually, the Act came into force with effect from 22nd of August, 1996. Section 85 of the Act deals with repeal and savings. It reads as under :--
"Section 85: Repeal and Savings-
(1) The Arbitration (Protocol and Convention) Act, 1937, the Arbitration Act, 1940 and the Foreign Awards (Recognition and Enforcement) Act, 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."
By virtue of the aforesaid provision the arbitral proceedings which commenced before the present Act came into force, would continue under the old Act. In the case at hand, in our view, the proceedings had already commenced and, therefore, they would be governed by the Arbitration Act, 1940 and in that event, the award has to be sent to the competent Court for making it a rule of Court or otherwise, and the parties would be at liberty to file their objections within the stipulated time under the parameters of Sections 30 and 33 of the Indian Arbitration Act, 1940.
7. This being the position, the learned trial Judge has committed illegality by holding that the new Act would be applicable. The said error goes to the very root of the proceedings. Though, he has dealt with the objections raised by the appellant. We notice that they have not been properly dealt with and we are not persuaded to accept the discussion as the Court had already held that the proceedings are to be governed by the new Act. In view of the obtaining factual matrix, we are inclined to set aside the impugned order and remand the matter to the Court below to adjudicate the controversy afresh. He shall deal with the objections raised by the parties in proper perspective within parameters of the provisions as enjoined under the Indian Arbitration Act, 1940.
8. Consequently, the appeal succeeds and the impugned order is set aside, and the matter is remanded for fresh adjudication. However, in the peculiar facts and circumstances of the case, there shall be no order as to costs.