Madras High Court
Order vs Steel Authority Of India Ltd on 10 February, 2010
Author: G.Rajasuria
Bench: G.Rajasuria
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 10/02/2010 CORAM THE HON'BLE MR. JUSTICE G.RAJASURIA A.No.4020 of 2008 ORDER
This is an application filed seeking the following relief:
"to pass an interim order directing the respondent to furnish security for a sum of Rs.4,92,24,107(rupees four crores ninety two lakhs twenty four thousand one hundred and seven only), pending payment of the entire money awarded as per the award dated 9.8.2008."(extracted as such)
2. A summation and summarisation of the relevant facts necessary and germane for the disposal of this application would run thus:-
a) Indubitably and indisputably, the applicant herein and the respondent entered into an agreement during the year 1983, but subsequently, there erupted disputes between them. Whereupon invoking the Arbitration clause, as contained in the said agreement, initially Mr.G.Narasimhan, the retired Managing Director of HAL, was appointed as the arbitrator on the consent of both parties, and subsequently, by invoking Section 11 of the Arbitration Act,1940, he was replaced by the Hon'ble Mr.Justice Natarajan, the retired Judge of the Supreme Court, as the sold arbitrator under the old Act, namely, The Arbitration Act 1940 (hereinafter referred to as the 'Old Act 1940' for short). After commencing the proceedings and conducting it for some time, the Honourable Mr.Justice S.Natarajan expressed his unwillingness to proceed further. Whereupon, one other retired Judge of the Supreme Court, namely, Hon'ble Mr.Justice K.Venkatasamy was appointed in his place. The arbitration proceedings went on and he rendered his award on 9.8.2008.
b) Inasmuch as, according to the applicant, the respondent was attempting to delay and defeat the execution of the award, the applicant has filed this application under Section 9 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as the 'New Act, 1996' for short) seeking the relief as set out supra, on various grounds.
c) Per contra, by way of refuting and denying, challenging and impugning the averments/allegations in the affidavit, the respondent filed the counter challenging the jurisdiction of this Court to entertain this application under Section 9 of the new Act, 1996. It is the specific contention of the respondent that the provisions of the old Act, 1940, only are applicable. Whereupon the learned Senior advocates on both sides submitted their arguments and cited various decisions also.
3. Heard both sides.
4. The points for determination are as under:
(i) Whether the old Act, namely, The Arbitration Act, 1940, or the New Act, namely, The Arbitration and Conciliation Act, 1996 would be applicable in the facts and circumstances of this case and whether this Court has got jurisdiction to entertain the application under Section 9 of the New Act 1996.
(ii) Whether the applicant is entitled to obtain direction from this Court calling upon the respondent to furnish security for the due execution of the award dated 9.8.2009?
5. The tour d'horizon of the learned Senior counsel for the applicant would run thus:
(a) The entire arbitration proceedings were conducted on the understanding among the parties and the arbitrator, that it was only under the new Act, 1996 and not under the Old Act, 1940 was applicable.
(b) The arbitration clause as found incorporated in the agreement would amply make the point clear that even in respect of the arbitration proceedings commenced under the Old Act,1940, the New Act 1996 should be applied for the carriage of the proceedings to its logical end.
(c) In this case notwithstanding that the proceedings commenced under the Old Act 1940, by virtue of the Arbitration clause referred to supra, on the commencement of the New Act, 1996, automatically it came into operation and it was applied and in such a case, Section 9 application is maintainable and there can be no doubt about it.
(d) The respondent is dragging on the matter ad nauseam and ad infinitum and the applicant cannot wait until doomsday or till the hell freezes and in such a case there is genuine apprehension on the part of the applicant that unless the respondent furnishes security, it would not honour the award.
6. By way of torpedoing and pulverising the arguments as put forth on the side of the applicant, the learned Senior counsel for the respondent would put forth and set forth his argument, the pith and marrow, the gist and kernal of them would run thus:
(i) The arbitration proceedings conducted by the Honourable Justice K.Venkatasamy under the Old Act 1940 culminated in passing the award dated 9.8.2008 and in such a case, the question of invoking Section 9 of the New Act,1996, namely, Arbitration and Conciliation Act, 1996, does not arise.
(ii) The arbitration proceedings commenced even long prior to the commencement of the New Act, 1996, and the Honourable Mr.Justice S.Natarajan was appointed when the Old Act 1940 was in vogue and subsequently, the Honourable Mr.Justice K.Venkatasamy replaced Honourable Justice S.Natarajan only as per the procedure contemplated under the Old Act 1940 and the decision of the learned single Judge of this Court dated 16.9.2005 made in A.No.602 of 2005 would also evidence the same and the said order was confirmed by the Division Bench of this Court in O.S.A.No.10 of 2006.
(iii) After the commencement of the New Act,1996 no agreement emerged between the parties so as to proceed with the arbitration proceedings under it within the meaning of Section 85(2) of it and in such a case it is too late in the day on the part of the applicant to contend as though the New Act is applicable and not the Old Act.
(iv) The respondent is not liable to furnish any security and the allegations as against the respondent are all untenable.
7. The question of law of paramount importance involved in this matter is as to whether the agreement to adopt the provisions of the New Act 1996, which was yet to be passed at the time of emergence of such agreement could be taken as the one automatically making the New Act being made applicable to the pending proceeding, which was initiated under the Old Act 1940.
8. Pithily and precisely the learned Senior counsel for the applicant would submit that once such a pre-existing agreement is there between the parties, automatically the New Act would be applicable.
9. Whereas, the gist and kernal of the argument of the learned Senior counsel for the respondent is that de hors such a pre-existing agreement before the commencement of the New Act there should be a fresh agreement between the parties relating to the application of the provisions of the new Act or there should be some facts evincing that by implication such New Act has been applied to the pending proceedings.
10. At this juncture it is just and necessary to consider the precedents cited on both sides in seriatim.
11. The kingpin of the argument of the learned senior counsel for the applicant is based on the judgement of the Hon'ble Apex Court in Thyssen Stahlunion Gmbh vs. Steel Authority of India Ltd.,(herein after referred to as the 'Thyssen's case' for short); certain excerpts from it would run thus:
"33.. . .
(3). In cases where arbitral proceedings have commenced before coming into force of the new Act and are pending before the arbitrator, it is open to the parties to agree that new Act be applicable to such arbitral proceedings and they can so agree even before the coming into force of the new Act.
34. Section 85(2) 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) new Act shall apply in relation to arbitral proceedings which commenced on or after the new Act came into force. First limb can further be bifurcated into two: (a) Provisions of old Act shall apply in relation to arbitral proceedings commenced before the new Act came into force and (b) 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. . . . . . . . . "
. . . .
46. Parties can agree to the applicability of the new Act even before the new Act comes into force and when the old Act is still holding the field. There is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing. There is, however, a bar that they cannot agree to the applicability of the old Act after the new Act has come into force when arbitral proceedings under the old Act have not commenced though the arbitral agreement was under the old Act. Arbitration clause in the contract in the case of Rani Constructions (Civil Appeal 61 of 1999) uses the expression "for the time being in force" meaning thereby that provision of that Act would apply to the arbitation proceedings which will be in force at the relevant time when arbitration proceedings are held.. . . . . .
48. . . The reference "otherwise agreed by the parties" in Section 85(2)(c) of the new Act, therefore, would include an agreement already entered into between the parties even prior to enforcement of the new Act as also the agreement entered into after enforcement of the new Act. Such a conclusion is but natural since the expression "otherwise agreed" do not refer to the time actor but refers to the intention of the parties regarding applicability of the provisions of the new or old Act.
We agree with the High Court on interpretation put to the arbitration clause in the contract."
(emphasis supplied)
12. According to the learned Senior counsel for the applicant it is ex facie and prima facie, pellucidly and palpably, obviously and axiomatically clear that a mere pre-existing agreement even before the commencement of the new Act would be sufficient to attract the provisions of the new Act concerning the pending arbitral proceedings without any fresh agreement.
13. At this juncture itself I would like to observe that a mere poring over and perusal of the entire judgement by itself and more specifically the aforesaid excerpts would clearly highlight and spotlight the fact that the said decision appears to be in support of the stand taken by the learned Senior counsel for the applicant.
14. However the learned Senior counsel for the respondent would put forth and set forth his argument that had the proposition of law stood as above, then the matter would have been different, but the Honourable Apex Court in various other subsequent cases took a different view, even though there is no express indication in those subsequent judgements that the decision of the Honourable Apex Court in Thyssen's case was over ruled. In fact, in the subsequent judgments, the decision in Thyssen's case was distinguished and differentiated and it is therefore just and necessary to consider all those subsequent decisions in seriatim.
(i) (2003) 6 SCC 36 DELHI TRANSPORT CORPORATION LTD. V.. ROSE ADVERTISING,(hereinafter referred to as the 'DELHI TRANSPORT CORPORATION CASE' for short) certain excerpts from it would run thus:
"3. While referring to the judgment in Thyssen case the Court noted that parties can always agree that provision of law prevailing at the relevant time would apply to arbitral proceedings. The case of Rani Constructions (P) Ltd., decided in Thyssen case was held to squarely cover the present case. In view of the fact that the arbitrator was appointed after coming into force of the 1996 Act and the arbitration proceedings were conducted in pursuance of the provision of the said Act, it wa held that the case would be governed by the 1996 Act. It also weighed with the High Court that the parties had expressed their intention in the arbitration proceedings to be governed by the 1996 Act. The Division Bench thus allowed the appeal and set aside the judgment of the Single Bench.
5. The above clause shows that the parties agreed to be governed by the law as in force at the relevant time. Section 85(2) of the 1996 Act recognizes such an agreement between the parties. The conduct of the arbitration proceedings and the participation of the parties therein shows that the parties acted under the 1996 Act. Even the arbitrator proceeded on that understanding and gave his award in pursuance of the 1996 Act. Therefore, the impugned judgment of the High Court appears to be totally unassailable. We are unable to find any ground or reason to differ with the view taken by the High Court on the main issue."
In the aforesaid decision what I could understand is that the Honourable Apex Court gave a categorical finding that the arbitration proceedings commenced only under the new Act and in such a case, only the new Act, namely, Arbitration Act 1996 would be applicable and not the old Act. While holding so, Thyssen's case was distinguished on facts.
(ii) (2003) 6 SUPREME COURT CASES 56- N.S.NAYAK & SONS VS. STATE OF GOA, certain excerpts from it would run thus:
"14. Conclusion 3 only reiterates what is provided in various sections of the Arbitration Act, which gives option to the parties to opt for the procedure as per their agreement during the arbitral proceedings before the arbitrator. The phrase "unless otherwise agreed by the parties" used in various sections, namely 17, 21, 23(3), 24(1), 25, 26, 29, 31, 85(2)(a) etc. indicates that it is open to the parties to agree otherwise. During the arbitral proceedings, right is given to the parties to decide their own procedure. So if there is an agreement between the parties with regard to the procedure to be followed by the arbitrator, the arbitrator is required to follow the said procedure. Reason being, the arbitrator is appointed on the basis of the contract between the parties and is required to act as per the contract. However, this would not mean that in appeal parties can contend that the appellate procedure should be as per their agreement. The appellate procedure would be governed as per the statutory provisions and parties have no right to change the same. It is also settled law that the right to file an appeal is accrued right that cannot be taken away unless there is specific provision to the contrary. There is no such provision in the new Act. In the present cases, the appeals were pending before the High Court under the provisions of the old Act and, therefore, appeals are required to be decided on the basis of the statutory provisions under the said Act. Hence, there is no substance in the submission made by the learned counsel for the appellant.
16. The aforesaid discussion only deals with the contention that parties could not have agreed to the application of the new Act till they had the knowledge about the provisions thereof and, therefore, the agreement to the effect that to the arbitral proceedings, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof would be applicable, is not valid. The Court negatived the said contention by interpreting the expression 'unless otherwise agreed'. The Court held that such agreement could be entered into even before coming into force of the new Act. However, it nowhere lays down that in a pending arbitral proceeding, which was being conducted as per the procedure prescribed under the old Act, the parties have option of changing the procedure."
(emphasis supplied) This decision is on the point that once proceedings commenced under the old Act, and even if any appeal is pending before the appellate forum, the old Act would be applicable and not the new Act.
(iii) (2003) 10 SUPREME COURT CASES 572 STATE OF W.B. V.AMRITLAL CHATTERJEE, certain excerpts from it would run thus:
"4. It may be noticed that the earlier arbitrator was appointed by the Chief Engineer on 7.9.1994 under the Arbitration Act, 1940. The new Act came into force with effect from 25.1.1996. Section 21 of the new Act provides that 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. Clause (a) of sub-section (2) of Section 85 of the new Act provides that notwithstanding repeal of the Arbitration Act, 1940, the provisions of the said enactment 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.
7. Thyssen Stahlunion GMBH v. Steel Authority of India Ltd, which was passionately relied upon by the learned Senior counsel for the appellant, has, in our view, no application to the facts of the present cases. The Bench concluded:(SCC p.368, para 22) "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 (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 proeedings 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 17 thereof and also appeal arising thereunder.' There cannot be any doubt that invoking the arbitration clause by a party and appointment of arbitrator pursuant thereto and in furtherance thereof are proceedings which are required to be taken under the 1940 Act. Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of sub-section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who does not intend to proceed under Chapter II praying for filing of arbitration agreement in court.
8. In Thyssen Stahlunion GMBH case this Court was concerned with enforcement of a foreign award and execution thereof. In respect of a foreign award, the purpose of making an award rule of court i.e. A decree, has been dispensed with. The said decision, therefore, has no application in the instant case.(See also Fuerst Day Lawson Ltd.v.Jindal Exports Ltd.) Paragraphs 41 and 42 of Thyssen Stahlunion GMBH case read as under:(SCC pp.378-79) "41. Again a bare reading of the Foreign Awards Act and the Arbitration (Protocol and Convention) Act, 1937 would show that these two enactments are concerned only with recognition and enforcement of the foreign awards and do not contain provisions for the conduct of arbitral proceedings which would, of necessity, have taken place in a foreign country. The provisions of Section 85(2)(a) insofar as these apply to the Foreign Awards Act and the 1937 Act, would appear to be quite superfluous. A literal interpretation would render Section 85(2)(a) unworkable. Section 85(2)(a) provides for a dividing line dependent on 'commencement of arbitral proceedings' which expression would necessarily refer to Section 21 of the new Act. This Court has relied on this section as to when arbitral proceedings commence in the case of Shetty's Constructions Co.(P) Ltd. v. Konkan Rly.Construction. Section 2(2) read with Section 2(7) and Section 21 falling in part I of the new Act make it clear that these provisions would apply when the place of arbitration is in India i.e.only in domestic proceedings. There is no corresponding provision anywhere in the new Act with reference to foreign arbitral proceedings to hold as to what is to be treated as 'date of commencement' in those foreign proceedings. We would, therefore, hold that on a proper construction of Section 85(2)(a) the provision of this sub-section must be confined to the old Act only. Once having held so it could be said that Section 6 of the General Clauses Act would come into play and the foreign award would be enforced under the Foreign Awards Act. But then it is quite apparent that a different intention does appear that there is no right that could be said to have been acquired by a party when arbitral proceedings are held in a place resulting in a foreign award to have that award enforced under the Foreign Awards Act.
42. We, therefore, hold that the award given on 24.9.1997... when the arbitral proceedings commenced before the Arbitration and Conciliation Act, 1996 came into force on 25.1.1996, would be enforced under the provisions of the Arbitration Act, 1940."
13. The Court having regard to the duty imposed upon the arbitrator held that the arbitrators enter on the reference as soon as they have accepted their appointment and have communicated to each other about the reference. If the arbitrator fails in his duty to enter on the reference or make a public award during the period stipulated under Rule 3 of the First Schedule, indisputably, a cause of action will arise for his removal or appointment of a new arbitrator in terms of Section 11 and 12 of the 1940 Act. The words 'commencement of the arbitration proceedings' have not been defined in the 1940 Act. They have to be given their ordinary meaning having regard to the provisions contained in Chapter II thereof."
(emphasis supplied) This decision is mainly on the interpretation of the term 'commencement of the arbitration proceedings' and the decision in Thyssen's case was distinguished on facts. In the new Act,1996, Section 21 unambiguously and unequivocally highlights the point that unless otherwise agreed to by the parties the arbitration proceedings will commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent. However under the old Act there is no such provision. Even then, the Honourable Apex Court in the cited decision would hold that the terms 'commencement of arbitration proceedings' should be given their ordinary meaning having regard to the provisions contained under Chapter II thereof, and Section 85(2)(a) of the new Act may have to be construed keeping in view the provisions of Section 21 of the new Act.
15. The sum and substance of the aforesaid precedents cited supra is that once the arbitrator was appointed under the old Act and he entered into upon the reference, then the proceedings should be taken to have commenced under the old Act.
16. In this case indubitably and indisputably, unarguably and unassailably as has been highlighted supra, the first arbitrator, namely, Mr.Narasimhan was appointed under the old Act long before the commencement of the new Act and replacing the first arbitrator, the second arbitrator, namely, Honourable Mr.Justice S.Natarajan was appointed even under the old Act. However, the 3rd and final arbitrator, namely, Honourable Justice K.Venkatasamy was appointed after the new Act having come into force, but his appointment was under the old Act and that too under the same Old application as per which Hon'ble Mr.Justice Natarajan was appointed.
17. There is no quarrel over such factual matrix and also the fact that the arbitration proceedings commenced under the old Act. The only dispute is as to whether during the pendency of the proceedings the new Act could be held to have got automatically applied and adopted and ultimately the award was passed.
18. The learned Senior counsel for the respondent also cited yet one decision of the Honourable Apex Court reported in (2004) 7 SUPREME COURT CASES 288 MILKFOOD LTD VS. GMC ICE CREAM (P) LTD, (hereinafter referred to as the 'MILKFOOD' case for short) which in my considered opinion is the crucial and the most relevant judgement, certain excerpts from it would run thus:
"83. The Court proceeded on the basis that such a change in the procedure before the arbitrator is permissible if the parties agree that the new Act be applicable to the arbitral proceeding when the same is pending before the arbitrator. We are not concerned in the present case with the situation where the parties agree to change in the procedure before the arbitrator. In fact, they did not and, as noticed at the first opportunity, the appellant filed an application for a direction or clarification that the proceeding under the 1940 Act would apply.
86. It is one thing to say that the parties agree to take recourse to the procedure of the 1996 Act relying on or on the basis of tenor of the agreement as regards applicability of the statutory modification or re-enactment of the 1940 Act but it is another thing to say, as has been held by the High Court, that the same by itself is a pointer to the fact that the appellant had agreed thereto. If the arbitral proceedings commenced for the purpose of the applicability of the 1940 Act in September 1995, the question of adopting a different procedure laid down under the 1996 Act would not arise.
87. It is not a case where like Delhi Transport Corpn.the parties went for arbitration with a clear understanding and belief that the proceedings were being conducted under the 1996 Act. Therein the appointment of the arbitrator was made under the new Act; the parties participated in the arbitration proceedings with the understanding and belief that the proceedings are governed under the 1996 Act. In the award itself the arbitrator noted that 'both parties submitted claims before me under the Arbitration and Conciliation Act, 1996" and he purported to have made his award in terms thereof. In that situation sub-para (3) of para 22 of Thyssen was held to be applicable. Shah,J.who was a party in Thyssen as also Delhi Transport Corpn.in N.S.Nayak, however, noticed the distinctive features in Thyssen and while supplying the requisite emphasis thereon observed:(SCC p.60, para 8) "8. Further, the part of the arbitration clause which is quoted above also provides that the provisions of the Arbitration Act, 1940 which were for the time being in force were to apply to the arbitral proceedings between the parties. It nowhere provides that once the arbitral proceedings have commenced under the old Act, they should be conducted under the new Act as soon as the new Act comes into operation. Hence, in the proceedings where the award is passed under the old Act, the remedy of filing appeal or petition for setting aside the said award would be as per the provisions of the old Act."
It was further observed:(SCC pp/63-64, para 14) "14. Conclusion 3 only reiterates what is provided in various sections of the Arbitration Act, which gives option to the parties to opt for the procedure as per their agreement during the arbitral proceedings before the arbitrator. The phrase "unless otherwise agreed by the parties" used in various sections, namely 17, 21, 23(3), 24(1), 25, 26, 29, 31, 85(2)(a) etc. indicates that it is open to the parties to agree otherwise. During the arbitral proceedings, right is given to the parties to decide their own procedure. So if there is an agreement between the parties with regard to the procedure to be followed by the arbitrator, the arbitrator is required to follow the said procedure. Reason being, the arbitrator is appointed on the basis of the contract between the parties and is required to act as per the contract. However, this would not mean that in appeal parties can contend that the appellate procedure should be as per their agreement. The appellate procedure would be governed as per the statutory provisions and parties have no right to change the same. It is also settled law that the right to file an appeal is accrued right that cannot be taken away unless there is specific provision to the contrary. There is no such provision in the new Act. In the present cases, the appeals were pending before the High Court under the provisions of the old Act and, therefore, appeals are required to be decided on the basis of the statutory provisions under the said Act. Hence, there is no substance in the submission made by the learned counsel for the appellant."
88. Referring to the relevant portion of the discussion in Thyssen the learned Judge held:(SCC p.64, para 16)
16. The aforesaid discussion only deals with the contention that parties could not have agreed to the application of the new Act till they had the knowledge about the provisions thereof and, therefore, the agreement to the effect that to the arbitral proceedings, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof would be applicable, is not valid. The Court negatived the said contention by interpreting the expression 'unless otherwise agreed'. The Court held that such agreement could be entered into even before coming into force of the new Act. However, it nowhere lays down that in a pending arbitral proceeding, which was being conducted as per the procedure prescribed under the old Act, the parties have option of changing the procedure."
89. In N.S.Nayak also having regard to the fact that the arbitrator was appointed prior to 21.8.1996, the old Act was held to be applicable.
Conclusion
90. For the reasons aforementioned, we are of the view that in this case, the 1940 Act shall apply and not the 1996 Act. However, it is accepted at the Bar that the learned arbitrators had already entered into the reference. The proceedings before the arbitrators were not stayed. Only making of the award was stayed. In that view of the matter, in the peculiar facts and circumstances of this case, we are of the opinion that although the old Act would apply, the entire arbitral proceedings need not be reopened and the arbitrators may proceed to give their award. The award shall be filed in the court having jurisdiction whereafter the parties may proceed in terms of the old Act. We hope and trust that the award shall be made and all the legal proceedings shall come to an end at an early date and preferably within a period of four months from the date of the communication of this order. This order has been passed in the interest of justice and in the peculiar facts and circumstances of this case." (emphasis supplied)
19. Placing reliance on the said judgement and more specifically the aforesaid excerpts, including the underlined portions, the learned Senior counsel for the respondent would develop his argument that the said decision cited supra is squarely applicable to the facts and circumstances of this case and in the absence of any fresh agreement, emerging between the parties, expressly or by implication relating to the application of the new Act, the question of pressing into service the provisions of the new Act, does not arise.
20. Whereas the learned Senior counsel for the applicant would submit that the decisions of the Honourable Apex Court in (2003) 6 SUPREME COURT CASES 36; (2003) 6 SUPREME COURT CASES 56 and (2003)10 SUPREME COURT CASES 572 in no way disagree with the view taken in Thyssen's case and those decisions do not in any way contemplate that there should be a fresh agreement between the parties either expressly or by implication relating to the application of the new Act to the pending proceedings. The learned counsel would also develop his argument that even the decision of the Honourable Apex Court in Milkfood case in no way supports the proposition as put forth by the respondent for the reason that the dictum laid down in Thyssen's case has not been over ruled or even disagreed by the Supreme Court in the said decision. It is therefore just and necessary to understand the real purport of the proposition involved in the MilkFood case and the ultimate verdict rendered by the Supreme Court in that case .
21. At this juncture, I would like to refer to certain jurisprudential points. 'Ratio decidendi' of a case would act as a binding precedent normally. However, it is a trite proposition of law that so far the Supreme Court judgements are concerned both the 'ratio decidendi' and the 'obiter dictum' should be taken as binding precedents by all the lower Courts in India. I would hasten to add that 'obiter dictum' of the Supreme Court in a decision would not have binding effect on one other co-ordinate Bench of the same Supreme Court. However, the learned Senior counsel for the applicant would persuade this Court to adhere to the dictum laid down in Thyssen's case, irrespective of the ratio decedendi in the MilkFood case.
22. Whereas, the learned Senior counsel for the respondent would point out that this Court is bound to follow the recent decision of the Supreme Court, which at times may not be in full agreement or inconsonance or in pari materia with the earlier decision of the Supreme Court and that the verdict in Thyssen case is concerning the execution of a Foreign award.
23. I would like to agree with the view as put forth by the learned counsel for the respondent that this Court is bound by the recent judgement of the Honourable Apex Court. Incidentally I would like to point out that all the decisions cited ever since Thyssen's case till the emergence of the MilkFood Case were rendered by a Bench of the Supreme Court comprised of Honourable two Judges. However, the decision in MilkFood case was rendered by a Bench comprised of Honourable three Judges, but one Honourable Judge recorded his dissenting view, which is not with regard to the proposition now under consideration by this Court. As such, this Court has to follow only the dictum laid down by the Supreme Court in the MilkFood case, even though the decision rendered in Thyssen's case was not expressly over ruled or disagreed. In MilkFood case, the Honourable Apex Court discussed in extenso all the earlier decisions rendered by the same Court and highlighted and spotlighted that in view of the distinctive features in Thyssen's case, such a verdict was given by the Court and in subsequent judgements Thyssen's case was distinguished on facts.
24. Ultimately, the Honourable Apex Court in MilkFood's case arrived at the conclusion that only the old Act will apply to the pending proceedings and not the new Act in the absence of any fresh agreement either express or implied.
25. The learned Senior counsel for the applicant would try to persuade this Court to hold that there is no express wordings in the decision rendered in MilkFood case that there should be a fresh agreement de hors the earlier agreement. The underlined portions in the decision rendered in MilkFood case, as extracted supra, is the fitting answer to the applicant's contention.
26. To the risk of repetition and pleonasm but without being tautalogous I would like to point out the facts involved in MilkFood's case and the decision rendered thereon, including the observations made by the Honourable Apex Court, should be taken as binding precedent for this case. This Court being the High Court, while understanding the purport of the judgement of the Honourable Apex Court, cannot expect from such decision certain stereo typed phraseology or sentence. What I could understand from the entire perusal of the Honourable Apex Court's judgement in MilkFood's case is that their Lordships actually have held that unless there is a fresh agreement either expressly or by implication the question of applying the new Act to the pending arbitral proceedings would not arise.
27. Tersely and briefly, pithily and precisely, the whole kit and caboodle of the facts placed before the Honourable Apex Court necessitated the Honourable Apex Court to put forth the facts in the said decision to the effect that during the pendency of an arbitration proceedings, which commenced under the old Act, an application was came to be filed by one of the parties so as to get clarification as to whether the new Act 1996 or the old Act 1940 would be applicable. Whereupon alone certain decisions emerged at the lower level and ultimately the Honourable Apex Court held that in the absence of any such fresh agreement ushering in the provisions of the new Act 1996 for being applied to the pending proceedings, the question of applying the new Act does not arise and that based on the distinctive features involved in Thyssen's case, such a judgement was rendered which was not applicable to MilkFood case.
28. I would also like to point out that the cumulative reading of paragraph Nos.86, 87, 88, 89 and 90 of the decision in Milkfood case and the said underlined portions would leave no doubt in the mind of the Court that the Honourable Apex Court rendered its verdict on the proposition that de hors the pre-existing agreement anterior to the emergence of the new Act, 1996, there should be a fresh agreement either expressly or by implication for the application of the provisions of the new Act to the pending proceedings and with that proposition in mind alone the Honourable Apex Court interpreted Section 85(2) of the new Act and as such I am of the firm opinion that the recent judgement rendered by the Bench comprised of Honourable three Judges of the Apex Court in the Milkfood case should be taken as the binding precedent for deciding this case.
29. The learned Senior counsel for the applicant would try to factually distinguish and differentiate the facts involved in MilkFood case with that of the facts involved in this case by developing his argument that in the MilkFood case the arbitration clause contained was as under:
"All such arbitration proceedings shall be in accordance with and subject to the provisions of the Arbitration Act, 1940, or any statutory modification or re-enactment."
However, in this case a part of the arbitration clause runs as under:-
"The award of the arbitrator shall be final and binding on both the parties. Subject to aforesaid the provisions of the arbitration Act 1940 or any statutory modification or re-enactment thereof and the rules made thereunder, and for the time being in force, shall apply to the arbitration proceeding under this clause."
(emphasis supplied) Accordingly, the learned counsel would submit that the words 'for the time being in force' as found in the agreement involved in this case are not found in the agreement involved in the MilkFood case. Simply because the words 'for the time being in force' are not found in the agreement involved in the MilkFood case, by no stretch of imagination or even by phantasmagorical thoughts it could be held that those two clauses are different from each other and that the absence of the words 'for the time being in force' alone created an impression in the mind of the Honourable Apex Court to take a different view from Thyssen's case.
30. I would like to point out that simply because the words 'for the time being in force' is not found in the agreement involved in the MilkFood case, this Court cannot be persuaded to give a finding that the decision of the MilkFood case is not applicable to the facts and circumstances of this case. In my opinion, the distinction sought to be made on the appellant's side is one that of six of the one and half a dozen of the other and not that of one between chalk and cheese. The purport of the words in the clauses found in both the agreements are one and the same and as such, the dictum of the Honourable Apex Court in MilkFood case is clearly applicable to the facts and circumstances of the case.
31. The learned Senior counsel for the applicant also would try to canvas his case by pointing out that the arbitrator took at least three years for the purpose of rendering the award without getting any extension of time from the Court; and that itself is indicative of the fact that the arbitrator continued the arbitral proceedings under the New Act,1996 and the parties participated in the proceedings with the understanding that the new Act alone was applicable, as under the new Act there is no time limit and there is no necessity also for getting extension of time from the Court.
32. By way of countering the said argument, the learned Senior counsel for the respondent would invite the attention to of this Court to Clause 76 of the agreement, an excerpt from it would run thus:
"The arbitrator may, from time to time, with the consent of the parties, enlarge the time for making and publishing the award."
He also placed reliance on Section 28 of the old Act,1940, which is also extracted hereunder.
"28. Power to Court only to enlarge time for making award.-- (1) The Court may, if it thinks fit, whether the time for making the award has expired or not and whether the award has been made or not, enlarge from time to time, the time for making the award.
(2) Any provision in an arbitration agreement whereby the arbitrators or umpire may, except with the consent of all the parties to the agreement, enlarge the time for making the award, shall be void and of no effect.
33. As such placing reliance on the said Clause and Section 28 of the old Act, the learned Senior counsel for the respondent would stress upon the fact that since the parties themselves, as per the agreement, agreed for extending the time over and above what is contemplated in the old Act and they all in a supine fashion participated in the proceedings, the question of now the applicant veering round and taking a plea quite antithetical to such a conduct would not arise.
34. I could see considerable force in the submission made by the learned Senior counsel for the respondent as there is nothing to indicate that the applicant in any manner raised that issue earlier.
35. The learned Senior counsel for the applicant also inviting the attention of this Court to the un-numbered application filed by the respondent under Section 34 of the new Act,1996 would develop his argument that the very act of the respondent in filing such an application under Section 34 of the New Act,1996, would speak volumes that the respondent treated and understood that only the new Act is applicable to the proceedings.
36. Whereas, the learned Senior counsel for the respondent would reply by pointing out that without prejudice to the respondent's right to contend that only the old Act, 1940 is applicable, he has chosen to file such an application and it has not yet been numbered. He would also stress upon the fact that under the old Act there is no direct provision for a person who disagrees with the award to approach the Court for getting it annulled or set aside and for that matter such an extreme step was not warranted on the part of the respondent also and that too when the respondent herein has not chosen to get the award filed in Court for getting a decree under the old Act, 1940. No doubt the maxim "Boni judicis est ampliare jurisdictionem' would warrant the Judge to extend his jurisdiction but not at the risk of sacrificing the maxim 'Verba ita sunt intelligenda ut res magis valeat quam pereat' - The words (of an instrument) are to be so understood, that the subject matter may rather be of force than perish [rather be preserved than destroyed; or, in other words, that the instrument may have effect, if possible]. This Court cannot be persuaded to push the edge of the envelope so as to hold that even the pre-existing agreement which emerged anterior to the New Act should be taken as sufficient without any fresh agreement for applying the New Act to pending proceedings.
37. Wherefore I hold a fortiori so far this case is concerned, no fresh agreement had emerged between the paties for the application of the provisions of the new Act, 1996, either expressly or by implication and simply because three years period was taken for the conduct of the proceedings, the applicant cannot try to capitalise the same to his advantage as though the new Act,1996 is applicable. Merely based on the sole fact that the arbitrator took three years' time to render the award, this Court cannot jump to the conclusion that by implication the parties agreed for the application of the new Act,1996 and that would amount to throwing the baby along with the bath water and also would amount to not adhering to the recent decision of the Honourable Apex Court in MilkFood case.
38. In the result, point No.(i) is decided to the effect that this Court is having no jurisdiction to entertain this application under Section 9 of the Act.
Point No.(ii)
39. Relating to obtention of interim order as prayed for is concerned, unless the new Act is applicable, the question of invoking Section 9 of it does not arise. Under the old Act, only after filing the award before the Court a party could try to get an interim order. In this case it is quite obvious that no award has been filed before the Court. Accordingly, I could see no merit in this application and the same is dismissed.
40. In view of the ratiocination adhered to in deciding point No.(i), this Court also cannot call upon the respondent to furnish security. However, for the purpose of comprehensively deciding this point relating to calling upon the respondent to furnish security, I would like to recollect and call up the decision of the Honourable Apex Court in 2008-3-L.W.744 RAMAN TECH AND PROCESS ENGG.CO. AND ANOTHER VS. SOLANKI TRADERS, cwertain excerpts from it would run thus:
"5.The power under Order 38 Rule 5 CPC is drastic and extraordinary power. Such power should not be exercised mechanically or merely for the asking. It should be used sparingly and strictly in accordance with the Rule. The purpose of Order 38 Rule 5 is not to convert an unsecured debt into a secured debt. Any attempt by a plaintiff to utilize the provisions of Order 38 Rule 5 as a leverage for coercing the defendant to settle the suit claim should be discouraged. Instances are not wanting where bloated and doubtful claims are realised by unscrupulous plaintiffs by obtaining orders of attachment before judgement and forcing the defendants for out of court settlement, under threat of attachment.
6. A defendant is not debarred from dealing with his property merely because a suit is filed or about to be filed against him. Shifting of business from one premises to another premises or removal of machinery to another premises by itself is not a ground for granting attachment before judgement. A plaintiff should show, prima facie, that his claim is bona fide and valid and also satisfy the Court that the defendant is about to remove or dispose of the whole or part of his property, with the intention of obstructing or delaying the execution of any decree that may be passed against him, before power is exercised under Order 38 Rule 5 C.P.C. Courts should also keep in view the principles relating to grant of attachment before judgement (see Prem Raj Mundra v. Md.Maneck Gazi, AIR (1951) Cal 156, for a clear summary of the principles.)
41. Pellucidly and palpably, it is clear that the respondent is a Government company and there is nothing to indicate and exemplify that it is dwindling or it would dissipate its assets etc. and in such a case, I am of the view that there is no rhyme or reason on the part of the applicant in praying this Court to call upon the respondent to furnish security. Accordingly point No.(ii) is decided as against the applicant.
Accordingly, this application is dismissed. No costs.
Msk