Sri Tufan Chatterjee vs Sri Rangan Dhar on 2 March, 2016

[Cites 25, Cited by 35]

Calcutta High Court (Appellete Side)

Sri Tufan Chatterjee vs Sri Rangan Dhar on 2 March, 2016

Judgment on : 02.03.2016 INDIRA BANERJEE, J.: This appeal is against an Order No. 9 dated 5th January, 2016 passed by the Court of the learned District Judge, South 24 Parganas at Alipore, in an application of the appellant for interim relief, under Section 9 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act.

The appellant and the respondent carried on business in real estate, as partners of the partnership firm 'Pyramid Construction and Contractors.

A Deed of Partnership dated 31 st November 1995 was executed by and between the appellant and the respondent in terms whereof the respondent contributed 100% to the capital of the firm. The petitioner made no contribution.

It was, however, agreed that the share of profits and loss of the partnership firm, would be shared between the partners in the proportion of 75 percent and 25 percent, the share of the respondent being 75 percent, and the share of the appellant being 25 percent. The said partnership firm contained a clause for settlement of disputes by arbitration.

The partnership firm undertook six construction projects, particulars whereof have been given in the petition. However, disputes and differences arose between the respondent and the petitioner with regard to the partnership business and/or sharing of profits thereof.

After the disputes arose, the appellant filed an application in the Court of the learned District Judge, Alipore, under Section 9 of the 1996, Act praying for inter alia an order of injunction restraining the respondent, his men, agent, representatives from transferring, alienating or creating rights in favour of third parties in respect of the assets and properties, including bank accounts, investment, securities in the name of the partnership firm, jointly owned by the petitioner and the respondent and other consequential reliefs, including appointment of a receiver.

On the said application being moved, the Court of the learned District Judge passed an order restraining the respondent from transferring, alienating, disposing of or parting with possession or creating third party interest in respect of the assets and properties of the partnership firm. After the aforesaid order was passed an Arbitral Tribunal was constituted, and arbitration proceedings commenced.

While the arbitration proceedings were pending, Parliament enacted the Arbitration and Conciliation (Amendment) Act, 2015, hereinafter referred to as the Amendment Act of 2015, which came into force with retrospective effect from 23rd October, 2013.

After the Amendment Act of 2015 was enacted the respondent filed an application seeking dismissal of the application of the appellant under Section 9 of the 1996, in view of the amendment of Section 9 of the 1996 Act by the Amendment Act of 2015, by incorporation of Section 9(3), placing fetters on the power of the Court to entertain an application under Section 9, after the Arbitral Tribunal was constituted. The application of the respondent was heard and disposed of along with the pending application of the appellant under Section 9 of the 1996 Act.

By the impugned order dated 5 th January, 2016, the learned Court dismissed the application of the appellant under Section 9 of the 1996 Act, inter alia observing that since the arbitral proceedings had already been initiated, the Court was no longer authorized to pass any order on an application under Section 9(1) of the 1996 Act.

The learned Court, in effect held that, in view of the enactment and enforcement of the Amendment Act of 2015, amending Sections 9 and 17 of the 1996 Act with effect from 23 rd October, 2015, the Court could not pass an order of interim relief under Section 9 of the 1996 Act once the Arbitral Tribunal had been constituted.

The short question in this appeal is, whether the Court has been denuded of power to grant interim relief to the appellant under Section 9 of the 1996 Act, from the date on which the Amendment Act of 2015 came into force, since an Arbitral Tribunal has been constituted, and arbitral proceedings have commenced.

Sections 9 and 17 of the 1996 Act as they stood before their amendment by the Arbitration and Conciliation Act, 2015 are set out hereinbelow:-

"9. Interim measures etc. by Court. - A party may, before, or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to a court-

i. for the appointment of a guardian for a minor or person of unsound mind for the purposes of arbitral proceedings; or ii. for an interim measure of protection in respect of any of the following matters, namely:-

(a) the preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-

matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in the possession of any party or authorising any samples to be taken or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

(d) interim injunction or the appointment of a receiver;

(e) such other interim measure of protection as may appear to the Court to be just and convenient, and the Court shall have the same power for making orders as it has for the purpose of, and in relation to, any proceedings before it.

17. Interim measures ordered by arbitral tribunal.-

(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, order a party to take any interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute.

(2) The arbitral tribunal may require a party to provide appropriate security in connection with a measure ordered under sub-section (1).

Some of the relevant provisions of the Amendment Act of 2015 are set out herein below for convenience:-

"5. Section 9 of the principal Act shall be renumbered as sub-section (1) thereof, and after sub-section (1) as so renumbered, the following sub-sections shall be inserted, namely:-

"(2) Where, before the commencement of the arbitral proceedings, a Court passes an order for any interim measure of protection under sub-section (1), the arbitral proceedings shall be commenced within a period of ninety days from the date of such order or within such further time as the Court may determine.

       (3)       Once       the     arbitral   tribunal      has       been
       constituted,      the      Court   shall     not    entertain    an

application under sub-section (1), unless the Court finds that circumstances exist which may not render the remedy provided under section 17 efficacious."

10. For section 17 of the principal Act, the following section shall be substituted, namely:-

"17.(1) A party may, during the arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with section 36, apply to the arbitral tribunal -

(i) For the appointment of a guardian for a minor or person of unsound mind for the purpose of arbitral proceedings; or

(ii) For an interim measure of protection in respect of any of the following matters, namely:-

(a) The preservation, interim custody or sale of any goods which are the subject-matter of the arbitration agreement;

(b) Securing the amount in dispute in the arbitration;

(c) the detention, preservation or inspection of any property or thing which is the subject-matter of the dispute in arbitration, or as to which any question may arise therein and authorising for any of the aforesaid purposes any person to enter upon any land or building in possession of any party, or authorising any samples to be taken, or any observation to be made, or experiment to be tried, which may be necessary or expedient for the purpose of obtaining full information or evidence;

             (d)   interim           injunction             or      the
             appointment of a receiver;


             (e)   such       other    interim          measure      of
             protection as may appear to the arbitral
             tribunal to be just and convenient,

and the arbitral tribunal shall have the same power for making orders, as the court has for the purpose of, and in relation to, any proceedings before it.

(2) Subject to any orders passed in an appeal under section 37, any order issued by the arbitral tribunal under this section shall be deemed to be an order of the Court for all purposes and shall be enforceable under the Code of Civil Procedure, 1908, in the same manner as if it were an order of the Court."

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."

Section 9(3) incorporated in the 1996 Act, by the Amendment Act of 2015 provides that once the Arbitral Tribunal has been constituted, the Court shall not entertain an application under Section 9(1), unless the Court finds that circumstances exist, which may not render the remedy provided under Section 17 efficacious.

Section 26 of the Amendment Act of 2015 provides that nothing contained in the said amendment Act is to apply to arbitral proceedings commenced in accordance with the provisions of Section 21 of the principal Act, before the commencement of the Amendment Act of 2015, unless the parties otherwise agree, but the Amendment Act would apply in relation to arbitral proceedings commenced on or after the date of commencement of 2015 Act.

Section 21 of the 1996 Act provides as follows :

"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."

In this case, the application for interim relief under Section 9 was moved in the Court in August, 2015 before the Amendment Act of 2015 came into force. While the application was pending, arbitral proceedings commenced under Section 21 of the 1996 Act and an arbitral tribunal was constituted.

Mr. Jishnu Chowdhury, appearing on behalf of the petitioner drew the attention of this Court to Section 26 of the Amendment Act of 2015 and argued that the Amendment Act of 2015 would not apply to proceedings which had commenced before the said Act came into force.

Mr. Chowdhury argued that the proceedings under Section 9 of the 1996 Act, had been initiated by the appellant in the Court below, long before the Amendment Act of 2015 came into force.

Mr. Chowdhury also argued that the amendments to Section 17 of the 1996 Act, by the Amendment Act of 2015, to confer on the learned Tribunal, the same power to grant interim relief, as the Courts, would not apply to the arbitral proceedings in this case, which had commenced long before the Amendment Act of 2015 came into force. Moreover the appellant would not be able to enforce any interim order passed by the Arbitral Tribunal, under the Code of Civil Procedure, 1908, in the manner as if it were an order of Court.

Mr. Sabyasachi Bhattacharya appearing with Mrs. Sohini Chakraborty, however, argued that Section 26 of the Amendment Act of 2015 provides that, nothing contained in the said Amendment Act would apply to arbitral proceedings, commenced in accordance with the provisions of Section 21 of the principal Act, before the commencement of the said Amendment Act, unless the parties agreed otherwise. The provisions of the Amendment Act of 2015, would apply to proceedings initiated in Court.

As argued by Mr. Bhattacharya, Section 21 of the principal Act, that is, the 1996 Act provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commences on the date on which a request for the reference of dispute to arbitration, is received by the respondent.

Arbitral proceedings are proceedings before an Arbitral Tribunal, and no proceedings in Court under the provisions of the 1996 Act. Section 21 of the 1996 Act creates a legal fiction by which the arbitral proceedings commence on the date of receipt, by the respondent, of a request to refer the dispute to arbitration. Thus for the purpose inter alia of limitation the Arbitration proceedings commence on the date of receipt of a request by the respondent, to refer the dispute to arbitration, so that a claim is not defeated merely by delaying the reference.

Section 32 of the 1996 Act provides as follows:-

"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 (2).

(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."

A careful reading of the provisions of the 1996 Act, and in particular Sections 21 and 32 thereof, makes it amply clear that the expression 'arbitral proceedings' in Section 26 of the Amendment Act of 2015 cannot be construed to include proceedings in a Court under the provisions of the 1996 Act, and definitely not any proceedings under Section 9 of the 1996 Act, instituted in a Court before a request for reference of disputes to arbitration is made.

Arbitral proceedings can be said to commence, when a request for reference to arbitration is received by the respondent and/or the authority competent under the arbitration agreement, upon notice to the respondent. The arbitral proceedings, which so commence, terminate with a final award as provided in Section 32(1) of the 1996 Act or with an order under Section 32(2) of the 1996 Act Proceedings in Court under the 1996 Act whether initiated before, during or after the termination of the arbitral proceedings, would not attract Section 26 of the Amendment Act of 2015.

The amendment Act of 2015, which came into force with effect from 23rd October, 2015, would apply to arbitral proceedings which commenced after 23rd October, 2015 but not to arbitral proceedings which commenced before 23rd October, 2015. The Amendment Act of 2015 would apply to all Court proceedings on and from 23rd October, 2015.

The amendment Act of 2015 has retrospective operation from 23 rd October, 2015. After 23 rd October, 2015, the Court cannot entertain an application for interim relief under Section 9(1) of the 1996 Act, once the arbitral tribunal has been constituted, unless the Court is satisfied that circumstances exist, which may not render the remedy provided under Section 17 efficacious.

Mr. Chowdhury cited Thyssen Stahlunion Gmbh Etc vs. Steel Authority Of India Ltd (supra) reported in (1999) 9 SCC 334 in support of his argument that the Amendment Act of 2015 would have no application to Court proceedings which commenced before the enforcement of the Amendment Act, 2015.

In Thyssen Stahlunion Gmbh Etc vs. Steel Authority Of India Ltd (supra) the Supreme Court held that where arbitral proceedings had commenced before the enforcement of the 1996 Act, the arbitral award would have to be enforced in accordance with Arbitration Act, 1940 and not in accordance with Section 36 of the 1996 Act.

The judgment in Thyssen Stahlunion Gmbh Etc vs. Steel Authority Of India Ltd (supra) was rendered in the context of Section 85(2)(a) of the 1996 Act, which is set out hereinbelow for convenience, along with Section 85(1):

85. Repeal and savings.--(1) 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;"

There is a significant difference between the language of Section 86(2)(a) of the 1996 Act and Section 26 of the Amendment Act of 2015. As observed above, Section 85(2)(a) makes the provisions of the repealed enactments applicable "in relation to" arbitral proceedings, whereas Section 26 of the Amendment Act of 2015, which reads "nothing in this Section shall apply to the arbitral proceedings ............", restricts the applicability of the Amendment Act of 2015 to arbitral proceedings which commenced before the commencement of the said Act. The crucial difference is in the words 'in relation to in Section 85(2)(a) of the 1996 Act which are not there in Section 26 of the Amendment Act of 2015.

Mr. Chowdhury argued that the bar of Section 9(3) of the 1996 Act read with Section 26 of the said Act would not apply to the application of the appellant under Section 9 of the 1996 Act, as the application had been filed in the Court below, and interim orders had also been passed, long before the Amendment Act of 2015 came into force.

However, as rightly argued by Mr. Bhattacharya, there is difference between the expressions 'institute' and the expression 'entertain'. The expression 'institute' is not synonymous with the expression 'entertain'. In Martin & Harris Ltd. Vs. 6th Additional District Judge and Ors. reported in (1998) 1 SCC 732 cited by Mr. Bhattacharya, the Supreme Court interpreted the expression 'entertain' in Clause 21(1)(a) of the U.P. Urban Buildings (Regulation of Letting, Rent and Eviction) Act, 1972, to mean entertaining the ground for consideration for the purpose of adjudication on merits and not any stage prior thereto. Unlike the Limitation Act, which bars the institution of a suit after expiry of the period of limitation, Section 26 prohibits the Court from entertaining an application under Section 9, except in circumstances specified in Section 9(3), which necessarily means considering application on merits, even at the final stage.

After amendment by the Amendment Act of 2015, the scope of Section 17 has considerably been widened and the Arbitral Tribunal has expressly been conferred the same power, as the Court under Section 9. An order of the Tribunal under Section 17 is also enforceable in the same manner as an order of Court under Section 9, under the provisions of the Civil Procedure Code.

Mr. Chowdhury questioned the power of the Arbitral Tribunal to grant the interim reliefs contemplated in Section 17 of the 1996 Act, as amended by the Amendment Act of 2015, in case of arbitral proceedings which had commenced before the Amendment Act of 2015 came into force.

Mr. Chowdhury submitted that, since the Amendment Act did not apply to arbitral proceedings that had already commenced before the said Act came into force the arbitral tribunal lacked power to grant those reliefs. The only remedy available to the appellant was to approach Court under Section 9 of the 1996 Act.

The power of the Arbitral Tribunal under Section 17 of the 1996 Act was always of the widest amplitude. From the inception, the Arbitral Tribunal had power under the 1996 Act to order a party to take any interim measure of protection, as the Arbitral Tribunal might consider necessary, in respect of the subject matter of the disputes. The Arbitral Tribunal, therefore, all along had all the powers of Court under Section 9 of the 1996 Act. The Amendments to Section 17 of the 1996 Act by the Amendment Act of 2015 are only clarifactory. The amendments have possibly been made only by way of abundant caution.

It is a cardinal principle of construction that every statute is prospective unless it is expressly or by necessary implication made to have retrospective operation, but the rule in general is applicable when the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. Unless there are words in the statute sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only.

In contrast to statutes dealing with substantive rights, statutes dealing with merely matters of procedure are presumed to be retrospective, unless such a construction is textually inadmissible. As held by the Supreme Court in Anant Gopal Sheorey Vs. State of Bombay reported in AIR 1958 SC 915 no person has vested right in any course of procedure. He has only the right of prosecution or defence in the manner prescribed for the time being by law in the Court in which the case is pending and if by an Act of Parliament the mode of procedure is altered he has no other right than to proceed according to the altered mode. Law relating to forum is procedural in nature.

If, therefore, during the pendency of proceedings in the Civil Court, a new law is enacted, which is worded as to denude the Civil Court of jurisdiction except in specified circumstances, the Civil Court will be debarred from exercising jurisdiction unless the conditions precedent for exercise of jurisdiction by the Civil Court exist. This proposition finds support from the judgment of the Supreme Court in Inacio Martines Vs. Narayan Hari Naik reported in AIR 1993 SC 1756. Reference may also be made to United Bank of India, Calcutta Vs. Abhijit Tea Co. Pvt. Ltd. reported in AIR 2000 SC 2957.

Even though an earlier application for interim relief may have been filed in Court, once arbitral proceedings have commenced and an arbitral tribunal has been appointed, interim relief would have to be sought before the learned Arbitrator. The Court would be denuded of its power to grant interim relief unless the Court is satisfied that circumstances exist, which may not render the remedy provided under Section 17 efficacious.

In this case there are no such circumstances. However, considering that the application for interim relief had been entertained long before the amendment and an interim order had been in force, the Court might have passed limited interim relief and remitted the parties to proceedings under Section 17 before the Arbitral Tribunal.

We do not interfere with the order under appeal. We however direct that status quo with regard to the properties and assets in question shall be maintained for a period of six weeks from date or till the application, if any, under Section 17 filed by the petitioner, is taken up, whichever is earlier.

The appeal and the application are disposed of accordingly. Urgent Photostat certified copy, if applied for, be delivered to the learned counsel for the parties, upon compliance of all usual formalities.

( INDIRA BANERJEE, J. ) I Agree ( SAHIDULLAH MUNSHI, J. )

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Calcutta High Court (Appellete Side)