REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL Nos.2879-2880 OF 2018

(Arising out of SLP (C) Nos.19545-19546 of 2016)

BOARD OF CONTROL FOR CRICKET

IN INDIA … APPELLANT

VERSUS

KOCHI CRICKET PVT. LTD. AND ETC. … RESPONDENTS

WITH

CIVIL APPEAL NO. 2881 OF 2018

(Arising out of SLP (C) No.20224 of 2016)

WITH

CIVIL APPEAL NO. 2882 OF 2018

(Arising out of SLP (C) No.5021 of 2017)

WITH

CIVIL APPEAL NOs. 2883-2884 OF 2018

(Arising out of SLP (C) Nos.8372-8373 of 2017)

1

WITH

CIVIL APPEAL NOs. 2885-2886 OF 2018

(Arising out of SLP (C) Nos.8374-8375 of 2017)

WITH

CIVIL APPEAL NOs. 2887-2889 OF 2018

(Arising out of SLP (C) Nos.8376-8378 of 2017)

WITH

CIVIL APPEAL NOs. 2890-2891 OF 2018

(Arising out of SLP (C) Nos.9599-9600 of 2017)

WITH

CIVIL APPEAL NO. 2892 OF 2018

(Arising out of SLP (C) No.33690 of 2017)

J U D G M E N T

R.F. NARIMAN, J.

1.Leave granted.

2.The present batch of appeals raises an important

question as to the construction of Section 26 of the

Arbitration and Conciliation (Amendment) Act, 2015

2

(hereinafter referred to as the “Amendment Act”), which

reads as follows:

“Section 26. Act not to apply to pending

arbitral proceedings.

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.”

3.The questions raised in these appeals require the

mentioning of only a few important dates. In four of these

appeals, namely, Board of Control for Cricket in India

v. Kochi Cricket Pvt. Ltd. and Ors. (SLP(C) No. 19545-

19546 of 2016), Arup Deb & Ors. v. Global Asia

Venture Company (SLP(C) No. 20224 of 2016), M/s

Maharashtra Airports Development Company Ltd. v.

M/s PBA Infrastructure Ltd. (SLP(C) No.5021 of 2017)

and UB Cotton Pvt. Ltd. v. Jayshri Ginning and

Spinning Pvt. Ltd. (SLP(C) No.33690 of 2017), Section

34 applications under the Arbitration and Conciliation Act,

3

1996 (hereinafter referred to as the “1996 Act”) were all

filed prior to the coming into force of the Amendment Act

w.e.f. 23

rd

October, 2015. In the other four appeals, the

Section 34 applications were filed after the Amendment

Act came into force. The question with which we are

confronted is as to whether Section 36, which was

substituted by the Amendment Act, would apply in its

amended form or in its original form to the appeals in

question.

4.The relevant facts of the first appeal namely, Board

of Control for Cricket in India v. Kochi Cricket Pvt.

Ltd. and Ors. (SLP(C) Nos. 19545-19546 of 2016), are

as follows. A notice dated 18

th

January, 2012 was sent by

Respondent No.1 invoking arbitration under a franchise

agreement dated 12

th

March, 2011. A Sole Arbitrator was

appointed, who delivered two arbitral awards dated 22

nd

June, 2015 against the Appellant and in favour of the

Respondents. On 16

th

September, 2015, the Appellants

filed an application under Section 34 of the 1996 Act in

4

the Bombay High Court challenging the aforesaid arbitral

awards. On 26

th

November, 2015, the Respondents filed

two execution applications in the High Court for payment

of the amounts awarded under the two awards, pending

enforcement of such awards. These were resisted by two

Chamber Summons filed by the Appellants dated 3

rd

December, 2015, praying for dismissal of the aforesaid

execution applications stating that the old Section 36

would be applicable, and that, therefore, there would be

an automatic stay of the awards until the Section 34

proceedings had been decided. The Chamber Summons

were argued before a learned Single Judge, who, by the

impugned judgment in Special Leave Petition (Civil)

No.19545-19546 of 2016, dismissed the aforesaid

Chamber Summons and found that the amended Section

36 would be applicable in the facts of this case. This is

how the appeal from the aforesaid judgment has come

before us.

5

5.As aforementioned, the skeletal dates necessary to

decide the present appeals in the other cases would only

be that so far as two of the other appeals are concerned,

namely, Arup Deb & Ors. v. Global Asia Venture

Company (SLP(C) No.20224 of 2016) and M/s

Maharashtra Airports Development Company Ltd. v.

M/s PBA Infrastructure Ltd. (SLP(C) No.5021 of 2017),

the Section 34 applications were filed on 27

th

April, 2015,

and 25

th

May, 2015 respectively and the stay petitions or

execution applications in those cases filed under Section

36 were dated 16

th

December, 2015 and 26

th

October,

2016 respectively. In U.B. Cotton Pvt. Ltd. v. Jayshri

Ginning and Spinning Pvt. Ltd. (SLP(C) No.33690 of

2017), the Section 34 application was filed on 22

nd

February, 2013 and the execution application was filed in

2014, which was transferred, by an order dated 12

th

January, 2017, to the Commercial Court, Rajkot as

Execution Petition No. 1 of 2017. In the other cases,

namely, Wind World (India) Ltd. v. Enercon GMBH

6

through its Director (SLP(C) Nos.8372-8373 of 2017),

Yogesh Mehra v. Enercon GMBH through its Director

(SLP(C) Nos.8376-8378 of 2017), Ajay Mehra v.

Enercon GMBH through its Director (SLP(C)

Nos.8374-8375 of 2017), and Anuradha Bhatia v. M/s

Ardee Infrastructure Pvt. Ltd. (SLP(C) Nos.9599-9600

of 2017), the Section 34 applications were filed after 23

rd

October, 2015, viz., on 7

th

December, 2016 in the first two

appeals, on 6

th

December, 2016 in the third appeal and on

4

th

January, 2016 in the last appeal.

6.Section 36, which is the bone of contention in the

present appeals, is set out hereinbelow:

PRE-AMENDED PROVISION

“Section 36. Enforcement.

Where the time for making an application to

set aside the arbitral award under section 34

has expired, or such application having been

made, it has been refused, the award shall be

enforced under the Code of Civil Procedure,

1908 (5 of 1908) in the same manner as if it

were a decree of the Court.”

7

AMENDED PROVISION

“Section 36. Enforcement.

(1) Where the time for making an application

to set aside the arbitral award under section

34 has expired, then, subject to the provisions

of sub-section (2), such award shall be

enforced in accordance with the provisions of

the Code of Civil Procedure, 1908, in the

same manner as if it were a decree of the

court.

(2) Where an application to set aside the

arbitral award has been filed in the Court

under section 34, the filing of such an

application shall not by itself render that award

unenforceable, unless the Court grants an

order of stay of the operation of the said

arbitral award in accordance with the

provisions of sub-section (3), on a separate

application made for that purpose.

(3) Upon filing of an application under sub-

section (2) for stay of the operation of the

arbitral award, the Court may, subject to such

conditions as it may deem fit, grant stay of the

operation of such award for reasons to be

recorded in writing:

Provided that the Court shall, while

considering the application for grant of stay in

the case of an arbitral award for payment of

money, have due regard to the provisions for

grant of stay of a money decree under the

provisions of the Code of Civil Procedure,

1908 (5 of 1908).”

8

7.Wide ranging arguments have been made on behalf

of the parties before us. Shri C.A. Sundaram, learned

Senior Advocate, leading the charge on behalf of the

Appellants, has argued that Section 26 of the Amendment

Act consists of two parts. According to him, the second

part, which makes the Amendment Act applicable in

relation to arbitral proceedings commenced on or after the

date of commencement of this Act, is the principal part,

whereas the first part of Section 26 is in the nature of a

proviso or exception. It is his submission, therefore, that

so far as the first part is concerned, Section 6 of the

General Clauses Act, 1897 would be attracted, in which

event the vested right to challenge arbitral awards would

continue by virtue of the said Section under the old Act,

which would, therefore, apply to the facts of all these

cases. For this purpose, he relied upon certain passages

in Thyssen Stahlunion v. Steel Authority of India

(1999) 9 SCC 334, N.S. Nayak & Sons v. State of Goa

(2003) 6 SCC 56, and Milkfood Ltd. v GMC Ice Cream

9

Pvt. Ltd. (2004) 7 SCC 288. Given the fact that the

vested right is preserved, the amendment is only

prospective in nature, and for this purpose, he has cited a

large number of judgments, starting with the celebrated

judgment in Garikapati Veeraya v. N. Subbiah

Choudhry (1957) SCR 488. He then referred to a chart

of the effect of the amendments made in general by the

Amendment Act, in which he divided the amended

sections into three parts, namely, those that are only

procedural, those that are only substantive and those that

are procedural as well as substantive. In his submission,

Section 36 is substantive in nature, in that, in place of an

automatic stay of the award under the old regime, Order

LXI, Rule 5 of the CPC will now be applicable. As a result

of this, instead of an automatic stay, a deposit of the

entire amount or substantial amount of the award would

now have to be made in the interim period between the

award and the decision in the Section 34 application. He

referred to the 246

th

Law Commission Report as well as

10

the debates leading to the Amendment Act to buttress his

submissions. He also referred to the report of a High

Level Committee headed by Justice B.N. Srikrishna,

delivered on 30

th

July, 2017, in which, after referring to the

divergent views taken by the High Courts, the Committee

recommended that the Amendment Act will not apply to

arbitral proceedings as well as Court proceedings which

arise out of such arbitral proceedings, where the arbitral

proceedings themselves have commenced in accordance

with Section 21 before the commencement of the

Amendment Act. Concomitantly, according to the High

Level Committee, the Amendment Act will only apply to

arbitral proceedings commenced on or after the

commencement of the Amendment Act and to Court

proceedings that arise out of or in relation to such arbitral

proceedings.

8.Shri K.V. Viswanathan, learned Senior Advocate

appearing on behalf of the BCCI in Civil Appeal arising

out of SLP(C) No.19546 of 2016, has argued that the

11

expression “arbitral proceedings” in both parts of Section

26 refers only to proceedings before an arbitrator and is

the same in both parts. Consequently, it is clear that it is

only arbitral proceedings that have commenced after 23

rd

October, 2015 and Court proceedings in relation thereto,

that will be governed by the Amendment Act. If the

arbitral proceedings have commenced under the old Act,

then those proceedings as well as all Court proceedings

in relation thereto, would be governed only by the old Act.

According to him, Section 6 of the General Clauses Act

would be attracted, insofar as Court proceedings are

concerned, when the first part of Section 26 is applied.

According to him, the second part would not become

superfluous on his reading of Section 26, as the option

given to the parties would be given only on application of

the first part and not the second. According to the learned

senior counsel, the judgment in Thyssen (supra) is

determinative of the present case, inasmuch as an

entirely new challenge procedure under Section 34 is laid

12

down by the amendments made in 2015, somewhat like

the challenge procedure laid down in the original Section

34 of the 1996 Act, when contrasted with Section 30 of

the Arbitration Act, 1940. According to the learned senior

counsel, party autonomy must be respected, and this

being the position, parties who have entered into

agreements in the expectation that the old regime will

apply cannot suddenly be foisted with a completely

different regime under the Amendment Act. According to

the learned senior counsel, Section 85 of the 1996 Act is

similar to Section 26 of the Amendment Act and,

therefore, the judgment in Thyssen (supra) must apply on

all fours. The learned senior counsel also forcefully put

to us a number of anomalies that would arise if the

amendment to Section 36 were to be given retrospective

operation. According to him, the right to be governed by

the broad appellate/supervisory procedure found in

sections 34 and 37 of the 1996 Act would be a vested

right, resulting in the Amendment Act not being

13

applicable. Insofar as Section 36 is concerned, the

learned senior counsel made elaborate submissions on

the difference between enforceability and execution, and

stated that whereas the former dealt with substantive

rights, the latter dealt with procedural rights. Equally, the

expression “has been” contained in the amended Section

36(2) is purely contextual and equivalent to the

expression “is”. For this, he has cited certain judgments

which we will refer to in due course. According to the

learned senior counsel, the decision in National

Aluminium Co. Ltd. v. Pressteel & Fabrications (P)

Ltd. (2004) 1 SCC 540, which exhorted the legislature to

amend Section 36, cannot take the matter any further, in

that the said decision cannot be read to say that Section

36 should be substituted with retrospective effect.

9.Shri Tushar Mehta, learned Additional Solicitor

General appearing in SLP (C) No.5021 of 2017,

supported the arguments of his predecessor and added

that, given a retrospective operation of Section 36,

14

various anomalies would arise, which would lead to

hardship and inconvenience and that, therefore, we

should not impart retrospective operation to the aforesaid

provision.

10.Shri Arvind Datar, learned senior advocate appearing

in SLP (C) No.20224 of 2016, supported Shri

Viswanathan in stating that the amendments made by the

Amendment Act were very far reaching and changed the

basis of challenge to arbitral awards. It would not be fair

to retrospectively change the rules of the game insofar as

such awards are concerned. According to the learned

senior counsel, the expression “in relation to” that was

used in Section 85 of the 1996 Act, as expounded in

Thyssen (supra), was because Section 85 repealed three

enactments together, and not because it sought to refer to

Court proceedings. He reiterated that in the interest of

clarity, the report of the High Level Committee, headed by

Justice B.N. Srikrishna referred to by Shri Sundaram, was

the correct position so that it clearly be delineated that the

15

moment arbitral proceedings commenced before the

Amendment Act, such “proceedings”, which would include

all Court proceedings in relation thereto, would be

governed by the old Act, and only arbitral proceedings

commenced after the Amendment Act came into force,

together with related Court proceedings, would all be

governed by the Amendment Act.

11.Shri Anirudh Krishnan, learned Advocate appearing

for the intervenor in SLP (C) No.20224 of 2016, referred

to Section 85A contained in the 246

th

Law Commission

Report which, according to him, was given a go-by and

was not followed in Section 26. He referred to the Law

Minister’s speech stating that the amendment must be

given prospective effect and further argued that the

reason why the expression “in relation to” was used in the

second part of Section 26 was because a distinction was

made on whether the seat of the arbitral tribunal was in

India or outside India. According to the learned counsel,

since amendments have been made in Part II of the 1996

16

Act as well, if a seat based categorization is seen, the

expression “in relation to” would not apply to Court

proceedings simpliciter, but to arbitral tribunals which

have their seat outside India. He further argued that

Sections 34 and 36 are part of one scheme and are the

“appeal package” insofar as arbitral proceedings are

concerned and must, therefore, go along with the arbitral

proceedings. This being the position, it is clear that the

pre-amendment position would apply in case of

arbitrations which commenced before the Amendment Act

came into force.

12.Leading arguments for the other side, Shri Neeraj

Kaul, learned senior counsel appearing in SLP(C)

Nos.19545-19546 of 2016, emphasized that in the first

part of Section 26, there is an absence of the mention of

Court proceedings. According to the learned senior

counsel, this was of great significance and would,

therefore, show that the Amendment Act would

retrospectively apply to Court proceedings, as

17

distinguished from arbitral proceedings. On a correct

construction of Section 26, according to the learned

senior counsel, the second part of Section 26 takes within

its sweep both arbitral proceedings as well as Court

proceedings in relation thereto and would, therefore,

apply to arbitral proceedings as well as Court proceedings

in relation thereto, which have commenced after the

Amendment Act came into force. For this purpose, he

relied heavily on paragraph 23 in Thyssen (supra) and,

submitted that, therefore, on a true construction of

Section 26, Section 34 proceedings that have

commenced before the Amendment Act came into force

would be governed by the Amendment Act, and arbitral

proceedings which commenced after the Amendment Act,

together with Section 34 applications made in relation

thereto, would then be governed under the second part of

Section 26 of the Amendment Act. According to the

learned senior counsel, no vested right exists inasmuch

as Section 34 proceedings are not appellate proceedings.

18

In any case, Section 26 evinces a contrary intention and

would take away any such right assuming a vested right

is involved. He countered the arguments of Shri

Viswanathan, in particular, by stating that the original

intent of the 1996 Act was to minimise Court intervention

and to restrict the grounds of challenge of arbitral awards,

and inasmuch as the decisions of this Court in ONGC v.

Saw Pipes Ltd (2003) 5 SCC 705 and ONGC Ltd.

v. Western Geco International Ltd. (2014) 9 SCC 263

had gone contrary to the original intention of the 1996 Act,

all that the Amendment Act did was to bring the 1996 Act

back, in accordance with its original intent, by nullifying

the aforesaid judgments. He added that the ground of

patent illegality that had been added by the Amendment

Act also differs from the said ground as understood in the

earlier case law, and has been added only qua domestic

and not international commercial arbitrations. Learned

senior counsel then argued that given the fact that court

proceedings in this country take an inordinately long time,

19

the whole object of the amendment to Section 36 would

be stultified, if Section 36 is only to apply to court

proceedings that result from arbitral proceedings, which

have commenced on and after the commencement of the

Amendment Act. That this could never be the case is

clear from a judgment of the House of Lords, reported as

Minister of Public Works of the Government of the

State of Kuwait v. Sir Frederick Snow and Partners,

(1984) 2 WLR 340, which is strongly relied upon.

Learned senior counsel also stated that there is no

distinction between execution and enforcement, and

“enforcement” under Section 36, is nothing but execution

of an award, as if it were a decree under the Code of Civil

Procedure, 1908. He further argued that it is well settled

that execution proceedings are procedural in nature and

would be retrospective and, therefore, the substituted

Section 36 would apply even in cases where the Section

34 application is made before the commencement of the

Amendment Act. Another argument was that the

20

expression “has been” contained in Section 36(2), as

amended, would, in any case, refer to Section 34

proceedings that have already been filed, even pre-

amendment, and for this purpose, he referred to certain

judgments.

13.Shri P. Chidambaram, learned senior counsel

appearing for the Respondents in SLP (C) Nos.8372-8373

of 2017, emphasised the word “but” that appears in

Section 26, which not only segregates the first part of

Section 36 from the second part, but also makes it clear

that the two parts apply to two different situations. The

first part, according to learned senior counsel, would

apply to the arbitral proceedings themselves i.e. from the

Section 21 stage up to the Section 32 stage of the 1996

Act, whereas the second part would include all

proceedings that begin from the Section 21 stage and all

court proceedings in relation thereto. According to Shri

Chidambaram, Section 36, in its original form, is only a

clog on the right of the decree holder. He argued that

21

there is no corresponding vested right in the judgment

debtor to indefinitely delay proceedings and for this

purpose, he cited several judgments. According to the

learned senior counsel, Section 36 proceedings are

entirely independent of Section 34 proceedings and the

moment Section 36 speaks of an award being

enforceable under the Code of Civil Procedure as if it

were a decree, enforceability only means execution and

nothing else. He then referred to Satish Kumar v.

Surinder Kumar, (1969) 2 SCR 244 to show that an

award is not mere waste paper when it is delivered and

before it becomes a decree, as it decides the rights of the

parties and, therefore, being final and binding on parties,

is a judgment delivered between parties, which may

become executable on certain conditions being met, but

which do not detract from the fact that the award itself has

“vitality”.

14.Shri Kapil Sibal, learned senior counsel appearing

on behalf of the Respondents in SLP (C) Nos.8374-8375

22

of 2017, has argued before us that the Statement of

Objects and Reasons for the Amendment Act, in particular

paragraph 4 thereof, would make it clear that the

Amendment Act was necessitated because of India’s poor

performance in contract enforcement among the nations

in the world. For this reason, according to the learned

senior counsel, it is clear that Section 26 needs to be

interpreted in such a manner as would further the object

of the Amendment Act and that this being so, it is clear

that Section 26 must be read as being a provision which

is not a savings provision at all, but a provision which

destroys all rights, if any, that vested in the Appellants in

the 1996 Act as unamended. For this purpose, he cited

certain judgments which will be referred to in the course

of our judgment.

15.Dr. A.M. Singhvi, learned senior counsel appearing

on behalf of the Respondents in SLP (C) Nos.8376-8378

of 2017, has stated that the correct construction of

Section 26 would be the intermediate between the

23

extremes that have been canvassed before us by learned

counsel appearing on behalf of the Appellants. According

to him, it is important to emphasise that the first part

applies only to arbitral proceedings before an arbitral

tribunal and the second part would apply only to court

proceedings in relation thereto. This becomes clear from

two things; one, the expression “to” appearing in the first

part as contrasted with the expression “in relation to”

appearing in the second part; and, two, the presence of

Section 21 of the 1996 Act in the first part and its absence

in the second part of Section 26. According to him, this

would be the correct interpretation of Section 26, which

would result in no anomalies, as it is clear that the date of

commencement of an arbitral proceeding would be fixed

with reference to Section 21 and the date of

commencement of a court proceeding would be fixed with

reference to the date on which the court proceeding is

filed, and it is only arbitral proceedings and court

24

proceedings which are filed after the commencement of

the Amendment Act that would be so covered.

16.Shri Nakul Dewan, learned Advocate appearing on

behalf of the Respondent in SLP (C) No.20224 of 2016

has argued that the first part of Section 26 speaks of “the

arbitral proceedings” commenced in accordance with the

provisions of Section 21. The second part of Section 26

omits the word “the” as well as Section 21, making it clear

that it is the arbitral proceedings before the Arbitrator

alone that is referred to in the first part of Section 26, as

opposed to Court proceedings referred to in the second

part of Section 26, where the expression “in relation to

arbitral proceedings” does not contain the word “the”.

According to him, such interpretation is not contrary to the

doctrine of party autonomy, which is never conferred on

any party without limits, there being non-derogable

provisions in the 1996 Act from which parties, even by

agreement, cannot derogate. According to the learned

counsel, each and every Court proceeding under the

25

1996 Act is a separate and distinct proceeding and it is

the date of such proceeding alone which is relevant for

the purpose of determining whether the Amendment Act

applies. According to the learned counsel, there is no

vested right to resist the execution of an award merely

because an application for setting aside the award is

pending under Section 34 of the 1996 Act. Even on the

assumption that there is such a vested right, it is taken

away, given the clear legislative intent of Section 26 of the

Amendment Act. Lastly, he argued that on facts, clause

22.2(5) of the agreement between the parties

automatically brought in all amendments to the 1996 Act

and that, therefore, Section 36 in its amended form would

necessarily apply to the facts in this case.

17.Having heard extensive and wide ranging arguments

on the reach of Section 26 of the Amendment Act, it will

be important to first bear in mind the principles of

interpretation of such a provision. That an Amendment

Act does include within it provisions that may be repealed

26

either wholly or partially and that the provisions of Section

6 of the General Clauses Act would generally apply to

such Amendment Acts is beyond any doubt – See Bhagat

Ram Sharma v. Union of India, 1988 (Supp) SCC 30 at

40-41. That such a provision is akin to a repeal and

savings clause would be clear when it is read with Section

27 of the Amendment Act and Section 85 of the 1996 Act,

which are set out hereinbelow:

“Section 27. Repeal and savings.

(1) The Arbitration and Conciliation

(Amendment) Ordinance, 2015, is hereby

repealed.

(2) Notwithstanding such repeal, anything

done or any action taken under the principal

Act, as amended by the said Ordinance, shall

be deemed to have been done or taken under

the corresponding provisions of the principal

Act, as amended by this Act.

xxx xxx xxx

Section 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,—

27

(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.”

18.At this point, it is instructive to refer to the 246

th

Law

Commission Report which led to the Amendment Act.

This Report, which was handed over to the Government

in August, 2014, had this to state on why it was proposing

to replace Section 36 of the 1996 Act:

“AUTOMATIC STAY OF ENFORCEMENT OF

THE AWARD UPON ADMISSION OF

CHALLENGE

43. Section 36 of the Act makes it clear that

an arbitral award becomes enforceable as a

decree only after the time for filing a petition

under section 34 has expired or after the

section 34 petition has been dismissed. In

other words, the pendency of a section 34

petition renders an arbitral award

unenforceable. The Supreme Court, in

National Aluminum Co. Ltd. v. Pressteel &

Fabrications, (2004) 1 SCC 540 held that by

virtue of section 36, it was impermissible to

28

pass an Order directing the losing party to

deposit any part of the award into Court. While

this decision was in relation to the powers of

the Supreme Court to pass such an order

under section 42, the Bombay High Court in

Afcons Infrastructure Limited v. The Board of

Trustees, Port of Mumbai 2014 (1) Arb LR 512

(Bom) applied the same principle to the

powers of a Court under section 9 of the Act

as well. Admission of a section 34 petition,

therefore, virtually paralyzes the process for

the winning party/award creditor.

44. The Supreme Court, in National

Aluminium, has criticized the present situation

in the following words:

“However, we do notice that this automatic

suspension of the execution of the award, the

moment an application challenging the said

award is filed under section 34 of the Act

leaving no discretion in the court to put the

parties on terms, in our opinion, defeats the

very objective of the alternate dispute

resolution system to which arbitration belongs.

We do find that there is a recommendation

made by the concerned Ministry to the

Parliament to amend section 34 with a

proposal to empower the civil court to pass

suitable interim orders in such cases. In view

of the urgency of such amendment, we

sincerely hope that necessary steps would be

taken by the authorities concerned at the

earliest to bring about the required change in

law.”

45. In order to rectify this mischief, certain

amendments have been suggested by the

Commission to section 36 of the Act, which

29

provide that the award will not become

unenforceable merely upon the making of an

application under section 34.

So far as the transitory provision, so described by the

Report, is concerned, the Report stated:

“76. The Commission has proposed to insert

the new section 85-A to the Act, to clarify the

scope of operation of each of the

amendments with respect to pending

arbitrations/proceedings. As a general rule,

the amendments will operate prospectively,

except in certain cases as set out in section

85-A or otherwise set out in the amendment

itself.”

The Report then went on to amend Section 36 as follows:

“Amendment of Section 36

19. In section 36, (i) add numbering as sub-

section (1) before the words “Where the time”

and after the words “Section 34 has expired,”

delete the words “or such application having

been made, it has been refused” and add the

words “then subject to the provision of sub-

section (2) hereof,”

(ii) insert sub-section “(2) Where an

application to set aside the arbitral award has

been filed in the Court under section 34, the

filing of such an application shall not by itself

render the award unenforceable, unless upon

a separate application made for that purpose,

the Court grants stay of the operation of the

30

award in accordance with the provisions of

sub-section (3) hereof;”

(iii) insert sub-section “(3) Upon filing of the

separate application under subsection (2) for

stay of the operation of the award, the court

may, subject to such conditions as it may

deem fit, grant stay of the operation of the

award for reasons to be recorded in writing.”

(iv) insert proviso ”Provided that the Court

shall while considering the grant of stay, in the

case of an award for money shall have due

regard to the provisions for grant of stay of

money decrees under the Code of Civil

Procedure, 1908.”

[NOTE: This amendment is to ensure that the

mere filing of an application under section 34

does not operate as an automatic stay on the

enforcement of the award. The Supreme

Court in National Aluminium Co. Ltd. v.

Pressteel & Fabrications (P) Ltd. and Anr,

(2004) 1 SCC 540, recommends that such an

amendment is the need of the hour.]”

1

1

As a matter of fact, the amended Section 36 only brings back

Article 36(2) of the UNCITRAL Model Law, which is based on

Article 6 of the New York Convention, and which reads as under:

“36(2). If an application for setting aside or

suspension of an award has been made to a court

referred to in paragraph (1)(a)(v) of this article, the

court where recognition or enforcement is sought

may, if it considers it proper, adjourn its decision

and may also, on the application of the party

claiming recognition or enforcement of the award,

order the other party to provide appropriate

security.”

31

The transitory provision Section 85A was then set out as

follows:

“Insertion of Section 85A

A new section Section 85A on transitory

provisions has been incorporated.

Transitory provisions.— (1) Unless otherwise

provided in the Arbitration and Conciliation

(Amending) Act, 2014, the provisions of the

instant Act (as amended) shall be prospective

in operation and shall apply only to fresh

arbitrations and fresh applications, except in

the following situations –

(a) the provisions of section 6-A shall apply to

all pending proceedings and arbitrations.

Explanation: It is clarified that where the issue

of costs has already been decided by the

court/tribunal, the same shall not be opened to

that extent.

(b) the provisions of section 16 sub-section (7)

shall apply to all pending proceedings and

arbitrations, except where the issue has been

decided by the court/tribunal.

(c) the provisions of second proviso to section

24 shall apply to all pending arbitrations.

(2) For the purposes of the instant section,—

(a) “fresh arbitrations” mean arbitrations

where there has been no request for

appointment of arbitral tribunal; or application

for appointment of arbitral tribunal; or

appointment of the arbitral tribunal, prior to the

date of enforcement of the Arbitration and

Conciliation (Amending) Act, 2014.

32

(b) “fresh applications” mean applications to a

court or arbitral tribunal made subsequent to

the date of enforcement of the Arbitration and

Conciliation (Amending) Act, 2014.

[NOTE: This amendment is to clarify the

scope of operation of each of the proposed

amendments with respect to pending

arbitrations/proceedings.]”

19.The debates in Parliament in this context were

referred to by counsel on both sides. Shri T. Satpathy

(Dhenkanal) stated:

“You have brought in an amendment to

Section 25 (a) saying that this Act will not be

retrospective. When the Bill for judges’

pension and salary could be retrospective,

why can you not amend it with retrospective

effect so that ONGC-RIL case could be

brought under this Act and let it be adjudicated

as early as possible within 18 months and let

the people of this country get some justice

some time. Let us be fair to them.”

To similar effect is the speech of Shri APJ Reddy, which

reads as under:

“It is unclear whether the amended provisions

shall apply to pending arbitration proceedings.

The Law Commission of India, in its 246th

Report, which recommended amendments to

the Arbitration & Conciliation Act, 1996, had

proposed to insert a new Section 85-A to the

Act, which would clarify the scope of operation

33

to each amendment with respect to pending

arbitration proceedings. However, this specific

recommendation has not been incorporated

into the Ordinance. One of the reasons for

bringing about this ordinance is to instill a

sense of confidence in foreign investors in our

judicial process, with regard to certainty of

implementation in practice and ease of doing

business. Therefore, it is strongly urged to

incorporate Section 85A as proposed by the

246th Report of the Law Commission of India,

where it clearly states the scope of operation

of the amended provisions.”

The Law Minister in response to the aforesaid speeches

stated:

“Nobody has objected to this Bill but some of

our friends have observed certain things. They

have said that the Bill is the need of the hour

and that a good Bill has been brought. A few

suggestions have been given by them. One of

the suggestions was that it should have

retrospective effect. If the parties agree, then

there will be no problem. Otherwise, it will only

have prospective effect.”

20.Finally, Section 26 in its present form was tabled as

Section 25A at the fag end of the debates, and added to

the Bill. A couple of things may be noticed on a

comparison of Section 85A, as proposed by the Law

Commission, and Section 26 as ultimately enacted. First

34

and foremost, Section 85A states that the amendments

shall be prospective in operation and then bifurcates

proceedings into two parts – (i) fresh arbitrations, and (ii)

fresh applications. Fresh arbitrations are defined as

various proceedings before an arbitral tribunal that is

constituted, whereas fresh applications mean applications

to a Court or Tribunal, made subsequent to the date of

enforcement of the Amendment Act. Three exceptions are

provided by Section 85A, to which the Amendment Act will

apply retrospectively. The first deals with provisions

relating to costs, the second deals with the new provision

contained in Section 16(7) (which has not been adopted

by the Amendment Act) and the third deals with the

second proviso to Section 24, which deals, inter alia, with

oral hearings and arguments on a day-to-day basis and

the non-grant of adjournments, unless sufficient cause is

made out.

21.What can be seen from the above is that Section 26

has, while retaining the bifurcation of proceedings into

35

arbitration and Court proceedings, departed somewhat

from Section 85A as proposed by the Law Commission.

22.That a provision such as Section 26 has to be

construed literally first, and then purposively and

pragmatically, so as to keep the object of the provision

also in mind, has been laid down in Thyssen (supra) in

paragraph 26 as follows:

“26. Present-day courts tend to adopt a

purposive approach while interpreting the

statute which repeals the old law and for that

purpose to take into account the objects and

reasons which led to the enacting of the new

Act. We have seen above that this approach

was adopted by this Court in M.M.T.C. Ltd.

case [(1996) 6 SCC 716]. Provisions of both

the Acts, old and new, are very different and it

has been so observed in Sundaram Finance

Ltd. case [(1999) 2 SCC 479]. In that case,

this Court also said that provisions of the new

Act have to be interpreted and construed

independently and that in fact reference to the

old Act may actually lead to misconstruction of

the provisions of the new Act. The Court said

that it will be more relevant, while construing

the provisions of the new Act, to refer to the

UNCITRAL Model Law rather than the old Act.

In the case of Kuwait Minister of Public Works

v. Sir Frederick Snow and Partners [(1984) 1

All ER 733 (HL)] the award was given before

Kuwait became a party to the New York

36

Convention recognised by an Order in Council

in England. The House of Lords held that

though a foreign award could be enforced in

England under the (U.K.) Arbitration Act, 1975

as when the proceedings for enforcement of

the award were initiated in England Kuwait

had become a party to the Convention. It

negatived the contention that on the date the

award was given Kuwait was not a party to the

New York Convention.”

(at pages 370-371)

Similarly, in Milkfood Limited (supra) at 315, this Court,

while construing Section 85 of the 1996 Act, had this to

say:

“70. Section 85 of the 1996 Act repeals the

1940 Act. Sub-section (2) of Section 85

provides for a non obstante clause. Clause (a)

of the said sub-section provides for saving

clause stating that the provisions of the said

enactments shall apply in relation to arbitral

proceedings which commenced before the

said Act came into force. Thus, those arbitral

proceedings which were commenced before

coming into force of the 1996 Act are saved

and the provisions of the 1996 Act would

apply in relation to arbitral proceedings which

commenced on or after the said Act came into

force. Even for the said limited purpose, it is

necessary to find out as to what is meant by

commencement of arbitral proceedings for the

purpose of the 1996 Act wherefor also

necessity of reference to Section 21 would

arise. The court is to interpret the repeal and

savings clauses in such a manner so as to

37

give a pragmatic and purposive meaning

thereto. It is one thing to say that

commencement of arbitration proceedings is

dependent upon the facts of each case as that

would be subject to the agreement between

the parties. It is also another thing to say that

the expression “commencement of arbitration

proceedings” must be understood having

regard to the context in which the same is

used; but it would be a totally different thing to

say that the arbitration proceedings

commence only for the purpose of limitation

upon issuance of a notice and for no other

purpose. The statute does not say so. Even

the case-laws do not suggest the same. On

the contrary, the decisions of this Court

operating in the field beginning from Shetty's

Constructions [(1998) 5 SCC 599] are ad idem

to the effect that Section 21 must be taken

recourse to for the purpose of interpretation of

Section 85(2)(a) of the Act. There is no

reason, even if two views are possible, to

make a departure from the decisions of this

Court as referred to hereinbefore.”

23. All learned counsel have agreed, and this Court has

found, on a reading of Section 26, that the provision is

indeed in two parts. The first part refers to the

Amendment Act not applying to certain proceedings,

whereas the second part affirmatively applies the

Amendment Act to certain proceedings. The question is

38

what exactly is contained in both parts. The two parts are

separated by the word ‘but’, which also shows that the

two parts are separate and distinct. However, Shri

Viswanathan has argued that the expression “but” means

only that there is an emphatic repetition of the first part of

Section 26 in the second part of the said Section. For this,

he relied upon the Concise Oxford Dictionary on Current

English, which states:

“introducing emphatic repetition; definitely

(wanted to see nobody, but nobody)”.

Quite obviously, the context of the word “but” in Section

26 cannot bear the aforesaid meaning, but serves only to

separate the two distinct parts of Section 26.

24. What will be noticed, so far as the first part is

concerned, which states, “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…” is that: (1) “the arbitral

proceedings” and their commencement is mentioned in

39

the context of Section 21 of the principal Act; (2) the

expression used is “to” and not “in relation to”; and (3)

parties may otherwise agree. So far as the second part of

Section 26 is concerned, namely, the part which reads,

“…but this Act shall apply in relation to arbitral

proceedings commenced on or after the date of

commencement of this Act” makes it clear that the

expression “in relation to” is used; and the expression

“the” arbitral proceedings and “in accordance with the

provisions of Section 21 of the principal Act” is

conspicuous by its absence.

25.That the expression “the arbitral proceedings” refers

to proceedings before an arbitral tribunal is clear from the

heading of Chapter V of the 1996 Act, which reads as

follows:

“Conduct of Arbitral Proceedings”

The entire chapter consists of Sections 18 to 27 dealing

with the conduct of arbitral proceedings before an arbitral

40

tribunal. What is also important to notice is that these

proceedings alone are referred to, the expression “to” as

contrasted with the expression “in relation to” making this

clear. Also, the reference to Section 21 of the 1996 Act,

which appears in Chapter V, and which speaks of the

arbitral proceedings commencing on the date on which a

request for a dispute to be referred to arbitration is

received by the respondent, would also make it clear that

it is these proceedings, and no others, that form the

subject matter of the first part of Section 26. Also, since

the conduct of arbitral proceedings is largely procedural in

nature, parties may “otherwise agree” and apply the

Amendment Act to arbitral proceedings that have

commenced before the Amendment Act came into force.

2

2

Section 29A of the Amendment Act provides for time limits

within which an arbitral award is to be made. In Hitendra

Vishnu Thakur v. State of Maharashtra (1994) 4 SCC 602 at

633, this Court stated:

“(iii) Every litigant has a vested right in

substantive law but no such right exists in

procedural law.

(iv) A procedural statute should not generally

speaking be applied retrospectively where the

result would be to create new disabilities or

obligations or to impose new duties in respect of

transactions already accomplished.

41

In stark contrast to the first part of Section 26 is the

second part, where the Amendment Act is made

applicable “in relation to” arbitral proceedings which

commenced on or after the date of commencement of the

Amendment Act. What is conspicuous by its absence in

the second part is any reference to Section 21 of the 1996

Act. Whereas the first part refers only to arbitral

proceedings before an arbitral tribunal, the second part

refers to Court proceedings “in relation to” arbitral

proceedings, and it is the commencement of these Court

proceedings that is referred to in the second part of

Section 26, as the words “in relation to the arbitral

(v) A statute which not only changes the

procedure but also creates new rights and liabilities

shall be construed to be prospective in operation,

unless otherwise provided, either expressly or by

necessary implication.”

It is, inter alia, because timelines for the making of an

arbitral award have been laid down for the first time in Section

29A of the Amendment Act that parties were given the option to

adopt such timelines which, though procedural in nature, create

new obligations in respect of a proceeding already begun under

the unamended Act. This is, of course, only one example of why

parties may otherwise agree and apply the new procedure laid

down by the Amendment Act to arbitral proceedings that have

commenced before it came into force.

42

proceedings” in the second part are not controlled by the

application of Section 21 of the 1996 Act. Section 26,

therefore, bifurcates proceedings, as has been stated

above, with a great degree of clarity, into two sets of

proceedings – arbitral proceedings themselves, and Court

proceedings in relation thereto. The reason why the first

part of Section 26 is couched in negative form is only to

state that the Amendment Act will apply even to arbitral

proceedings commenced before the amendment if parties

otherwise agree. If the first part of Section 26 were

couched in positive language (like the second part), it

would have been necessary to add a proviso stating that

the Amendment Act would apply even to arbitral

proceedings commenced before the amendment if the

parties agree. In either case, the intention of the

legislature remains the same, the negative form

conveying exactly what could have been stated positively,

with the necessary proviso. Obviously, “arbitral

proceedings” having been subsumed in the first part

43

cannot re-appear in the second part, and the expression

“in relation to arbitral proceedings” would, therefore, apply

only to Court proceedings which relate to the arbitral

proceedings. The scheme of Section 26 is thus clear: that

the Amendment Act is prospective in nature, and will

apply to those arbitral proceedings that are commenced,

as understood by Section 21 of the principal Act, on or

after the Amendment Act, and to Court proceedings which

have commenced on or after the Amendment Act came

into force.

26.We now consider some of the submissions of learned

counsel for the parties as to what ought to be the true

construction of Section 26. According to Shri Sundaram,

the second part of Section 26 should be taken to be the

principal part, with the first part being read as an

exception to the principal part. This is so that Section 6 of

the General Clauses Act then gets attracted to the first

part, the idea being to save accrued rights. Section 6

applies unless a contrary intention appears in the

44

enactment in question. The plain language of Section 26

would make it clear that a contrary intention does so

appear, Section 26 being a special provision having to be

applied on its own terms.

27.Thus, in Transport and Dock Workers' Union &

others v. New Dholera Steamship Ltd., Bombay and

others, (1967) 1 LLJ 434, a Five Judge Bench of this

Court held:

“6. It was contended before us that as an

appeal is a continuation of the original

proceeding the repeal should not affect the

enforcement of the provisions of the

Ordinance in this case. Reliance is placed

upon Section 6 of the General Clauses Act,

1897 wherein is indicated the effect of repeal

of an enactment by another. It is contended

that as the Payment of Bonus Ordinance has

been repealed by Section 40(1), the

consequences envisaged in Section 6 of the

General Clauses Act must follow and the

present matter must be disposed of in

accordance with the Ordinance as if the Act

had not been passed. It is submitted that there

was a right and a corresponding obligation to

pay bonus under Section 10 of the Ordinance

and that right and obligation cannot be

obliterated because of the repeal of the

Ordinance. This argument is not acceptable

because of the provisions of the second sub-

45

section of Section 40. That sub-section reads

as follows:

“40. Repeal and saving.

(1)***

(2) Notwithstanding such repeal,

anything done or any action taken

under the said Ordinance shall be

deemed to have been done or

taken under this Act as if this Act

had commenced on the 29th May,

1965.”

Section 6 of the General Clauses Act applies

ordinarily but it does not apply if a different

intention appears in the repealing Act. Here a

different intention is made to appear expressly

and the special saving incorporated in the

repealing Act protects only anything done or

any action taken under the Ordinance which is

deemed to have been done or taken under

this Act as if the Act had commenced on 29th

May, 1965. Nothing had been done under the

Ordinance and no action was taken which

needs protection; nor was anything pending

under the Ordinance which could be

continued as if the Act had not been passed.

There was thus nothing which was to be

saved after the repeal of the Ordinance and

this question which might have arisen under

the Ordinance now ceases to exist.”

In Kalawati Devi Harlalka v. CIT (1967) 3 SCR 833, a

repeal and savings provision contained in Section 297 of

the Income Tax Act, 1961 was held to evidence an

46

intention to the contrary under Section 6 of the General

Clauses Act as follows:

“14. The learned counsel for the appellant

submits that Parliament had Section 6 of the

General Clauses Act in view, and therefore no

express provision was made dealing with

appeals and revisions, etc. In our view,

Section 6 of the General Clauses Act would

not apply because Section 297(2) evidences

an intention to the contrary. In Union of

India v. Madan Gopal Kabra [25 ITR 5] while

interpreting Section 13 of the Finance Act,

1950, already extracted above, this Court

observed at p. 68:

“Nor can Section 6 of the General

Clauses Act, 1897, serve to keep

alive the liability to pay tax on the

income of the year 1949-50

assuming it to have accrued under

the repealed State law, for a

“different intention” clearly appears

in Sections 2 and 13 of the

Finance Act read together as

indicated above.”

It is true that whether a different intention

appears or not must depend on the language

and content of Section 297(2). It seems to us,

however, that by providing for so many

matters mentioned above, some in accord

with what would have been the result under

Section 6 of the General Clauses Act and

some contrary to what would been the result

under Section 6, Parliament has clearly

evidenced an intention to the contrary.”

47

28.Shri Sundaram’s submission is also not in

consonance with the law laid down in some of our

judgments. The approach to statutes, which amend a

statute by way of repeal, was put most felicitously by B.K.

Mukherjea, J. in State of Punjab v. Mohar Singh, 1955 1

SCR 893 at 899-900, thus:

“In our opinion the approach of the High Court

to the question is not quite correct. Whenever

there is a repeal of an enactment, the

consequences laid down in Section 6 of the

General Clauses Act will follow unless, as the

section itself says, a different intention

appears. In the case of a simple repeal there

is scarcely any room for expression of a

contrary opinion. But when the repeal is

followed by fresh legislation on the same

subject we would undoubtedly have to look to

the provisions of the new Act, but only for the

purpose of determining whether they indicate

a different intention. The line of enquiry would

be, not whether the new Act expressly keeps

alive old rights and liabilities but whether it

manifests an intention to destroy them. We

cannot therefore subscribe to the broad

proposition that Section 6 of the General

Clauses Act is ruled out when there is repeal

of an enactment followed by a fresh

legislation. Section 6 would be applicable in

such cases also unless the new legislation

manifests an intention incompatible with or

contrary to the provisions of the section. Such

incompatibility would have to be ascertained

48

from a consideration of all the relevant

provisions of the new law and the mere

absence of a saving clause is by itself not

material. It is in the light of these principles

that we now proceed to examine the facts of

the present case.”

(Emphasis Supplied)

This statement of the law has subsequently been followed

in Transport and Dock Workers Union & Ors. v. New

Dholera Steamships Ltd., Bombay and Ors. (supra) at

paragraph 6 and T.S. Baliah v. T.S. Rengachari, 1969 3

SCR 65 at 71-72.

29.Equally, the suggested interpretation of Shri

Viswanathan would not only do violence to the plain

language of Section 26, but would also ignore the words

“in relation to” in the second part of Section 26, as well as

ignore the fact that Section 21 of the 1996 Act, though

mentioned in the first part, is conspicuous by its absence

in the second part. According to Shri Viswanathan, the

expression “arbitral proceedings commenced” is the same

in both parts and, therefore, the commencement of

arbitral proceedings under Section 21 is the only thing to

49

be looked at in both parts. Thus, according to the learned

senior counsel, if arbitral proceedings have commenced

prior to coming into force of the Amendment Act, the said

proceedings, together with all proceedings in Court in

relation thereto, would attract only the provisions of the

unamended 1996 Act. Similarly, when arbitral proceedings

have commenced under Section 21 after the coming into

force of the Amendment Act, those proceedings, including

all courts proceedings in relation thereto, would be

governed by the Amendment Act. This is not the scheme

of Section 26 at all, as has been pointed out above.

Further, this argument is more or less the conclusion

reached by the report of the High Level Committee,

headed by Justice B.N. Srikrishna, to amend the 1996

Act.

3

It can be seen from the report of the High Level

3

Shri Tushar Mehta, learned ASG, referred to a press release

from the Government of India, dated March 7

th

, 2018, after

arguments have been concluded, in a written submission made

to us. According to him, the press release refers to a new

Section 87 in a proposed amendment to be made to the 1996

Act. The press release states that the Union Cabinet, chaired by

the Prime Minister, has approved the Arbitration and Conciliation

(Amendment) Bill, 2018 in which a new Section 87 is proposed

to be inserted as follows:

50

Committee that an amendment would be required to

Section 26 to incorporate its findings. Section 87 of the

proposed Arbitration and Conciliation (Amendment) Bill,

2018 cannot be looked at, at this stage, for the

interpretation of Section 26 of the Amendment Act for two

“A new section 87 is proposed to be inserted

to clarify that unless parties agree otherwise the

Amendment Act 2015 shall not apply to (a) Arbitral

proceedings which have commenced before the

commencement of the Amendment Act of 2015 (b)

Court proceedings arising out of or in relation to

such arbitral proceedings irrespective of whether

such court proceedings are commenced prior to or

after the commencement of the Amendment Act of

2015 and shall apply only to Arbitral proceedings

commenced on or after the commencement of the

Amendment Act of 2015 and to court proceedings

arising out of or in relation to such Arbitral

proceedings.”

The Srikrishna Committee had recommended the following:

“The Committee feels that permitting the

2015 Amendment Act to apply to pending court

proceedings related to arbitrations commenced

prior to 23 October 2015 would result in

uncertainty and prejudice to parties, as they may

have to be heard again. It may also not be

advisable to make the 2015 Amendment Act

applicable to fresh court proceedings in relation to

such arbitrations, as it may result in an inconsistent

position. Therefore, it is felt that it may be desirable

to limit the applicability of the 2015 Amendment

Act to arbitrations commenced on or after 23

October 2015 and related court proceedings.

Recommendations

51

reasons: (i) Section 87, as ultimately enacted, may not be

in the form that is referred to in the press release; and (ii)

a proposed Bill, introducing a new and different provision

of law can hardly be the basis for interpretation of a

provision of law as it now stands. Obviously, therefore,

1. Section 26 of the 2015 Amendment Act

may be amended to provide that:

a. unless parties agree otherwise, the 2015

Amendment Act shall not apply to: (a) arbitral

proceedings commenced, in accordance with

section 21 of the ACA, before the commencement

of the 2015 Amendment Act; and (b) court

proceedings arising out of or in relation to such

arbitral proceedings irrespective of whether such

court proceedings are commenced prior to or after

the commencement of the 2015 Amendment Act;

and

b. the 2015 Amendment Act shall apply only

to arbitral proceedings commenced on or after the

commencement of the 2015 Amendment Act and to

court proceedings arising out of or in relation to

such arbitral proceedings.

2. The amended Section 26 shall have

retrospective effect from the date of

commencement of the 2015 Amendment Act.”

The High Level Committee recommended this after

referring to divergent views taken by various High Courts. This

included the interpretation given by the Calcutta High Court in

Electrosteel Castings Limited v. Reacon Engineers (India)

Pvt. Ltd. (A.P. No. 1710 of 2015 decided on 14.01.2016) and

Tufan Chatterjee v. Rangan Dhar , (FMAT No. 47 of 2016

decided on 02.03.2016), the Madhya Pradesh High Court in

Pragat Akshay Urja Limited Company v. State of M.P and

Ors., (Arbitration Case Nos. 48, 53 and 54/2014, decided on

30.06.2016), the Madras High Court in New Tirupur Area

Development v. Hindustan Construction Co. Limited ,

52

Shri Viswanathan’s approach leads to an amendment of

Section 26, as recommended by the Srikrishna

Committee, and not interpretation thereof. For all these

reasons, his argument must, therefore, be rejected. Shri

Datar’s argument is more or less the same as Shri

(Application No. 7674 of 2015 in O.P. No. 931 of 2015) and the

Bombay High Court in Rendezvous Sports World v. BCCI

(Chamber Summons No. 1530 of 2015 in Execution Application

(L) No. 2481 of 2015, Chamber Summons No. 1532 of 2015 in

Execution Application (L) No. 2482 and Chamber Summons No.

66 of 2016 in Execution Application (L) No. 2748 of 2015 decided

on 08.08.2016).

In addition to this, the following decisions by various High

Courts also deal with the applicability of the Amendment Act:

i. Calcutta High Court: Nitya Ranjan Jena v. Tata Capital

Financial Services Ltd., GA No. 145/206 with AP No.

15/2016, West Bengal Power Development

Corporation Ltd. v. Dongfang Electric Corporation ,

2017 SCCOnline Cal 9388, Saraf Agencies v. Federal

Agencies for State Property Management , AIR 2017

Cal. 65, Reliance Capital Ltd. v. Chandana Creations ,

2016 SCC Cal. 9558 and Braithwaite Burn & Jessop

Construction Company Ltd. v. Indo Wagon

Engineering Ltd., AIR 2017 (NOC 923) 314.

ii. Bombay High Court: M/s. Maharashtra Airport

Development Company Ltd. v. M/s. PBA

Infrastructure Ltd., 2017 SCCOnline Bom (7840),

Enercon GmbH v. Yogesh Mehra , 2017 SCC Bom 1744

and Global Aviation Services Pvt. Ltd. v. Airport

Authority of India, Commercial Arbitration Petition No.

434/2017,

iii. Madras High Court: Jumbo Bags Ltd. v. New India

Assurance Company Limited , 2016 (3) CTC 769.

iv. Delhi High Court: ICI Soma JV v. Simplex

Infrastructures Ltd., 2016 SCC Online Del 5315, Tantia-

CCIL (JV) v. Union of India , ARB. P. 615/2016, Raffles

Design International India Pvt. Ltd. v. Educomp

53

Viswanathan’s, and suffers from the same infirmity as Shri

Viswanathan’s interpretation. Shri A. Krishnan, in bringing

in the concept of “seat”, is again doing complete violence

to the language of Section 26, as “place of arbitration” is a

Professional Education Ltd. and Ors. , OMP (I) (COMM.)

23/2015, Orissa Concrete and Allied Industries Ltd. v.

Union of India and Ors., Arb. P. No. 174 of 2016,

Takamol Industries Pvt. Ltd. v. Kundan Rice Mills

Ltd., EX. P. 422/2014 & EA No. 739/2016, Apex Encon

Projects Pvt. Ltd. v. Union of India & Anr. , 2017 SCC

Online Del. 9779 and Ratna Infrastructure Projects Pvt.

Ltd. v. Meja Urja Nigam Pvt. Ltd. , 2017 SCC Online Del

7808.

v. Patna High Court: SPS v. Bihar Rajya Pul Nirman

Nigam Ltd., Request Case No. 14 of 2016 and Kumar and

Kumar Associates v. Union of India , 2017 1 PLJR 649.

vi. Gujarat High Court: OCI Corp. v. Kandla Export

Corporation & Ors. , 2017 GLH (1) 383, Abhinav

Knowledge Services Pvt. Ltd. v. Babasaheb

Amdebdkar Open University , AIR 2017 (NOC 1012) 344

and Pallav Vimalbhai Shah v. Kalpesh Sumatibhai

Shah, O/IAAP/15/2017.

vii. Kerala High Court: Shamsudeen v. Shreeram

Transport Finance Ltd ., ILR 2017 Vol. 1, Ker. 370 and

Jacob Mathew v. PTC Builders , 2017 (5) KHC 583.

viii. Tripura High Court: Subhash Podder v. State of

Tripura, 2016 SCC Tri. 500.

ix. Chhatisgarh High Court: Orissa Concrete and Allied

Industries Limited v. Union of India and Ors. ,

Arbitration Application No. 34/2014.

x. Rajasthan High Court: Dwarka Traders Pvt. Ltd. v.

Union of India, S.B., Arbitration Application No. 95/2013

and Mayur Associates, Engineers and Contractors v.

Gurmeet Singh & Ors. , S.B. Arbitration Application No.

74/2013.

xi. Himachal Pradesh High Court: RSWM v. The Himachal

Pradesh State Supplies Co. Ltd. , Arb Case No. 104/2016

54

well-known concept contained in Section 20 of the 1996

Act, which finds no mention whatsoever in Section 26 of

the Amendment Act. For these reasons, his interpretation

cannot also be accepted.

30.Shri Neeraj Kishan Kaul, learned senior counsel

appearing on behalf of Respondents in SLP(C)

Nos.19545-19546 of 2016, has argued that the first part

of Section 26 does not apply to Court proceedings at all,

thereby indicating that the Amendment Act must be given

retrospective effect insofar as Court proceedings in

relation to arbitral proceedings are concerned. For this

purpose, he relied on Minister of Public Works of the

Government of the State of Kuwait (supra).

31.In that case, the question that arose was as to the

correct construction of Section 7(1) of the U.K. Arbitration

Act, 1975. The said section was given retrospective effect

and P.K. Construction Co. & Ors. v. Shimla Municipal

Co. & Ors., Civil Writ Petition No. 2322/2016.

xii. Punjab & Haryana High Court: Alpine Minmetals India

Pvt. Ltd. v. Noble Resources Ltd., LPA No. 917/2017.

55

in applying the New York Convention to arbitration

agreements that were entered into before the convention

was made applicable, for the reason that nobody had an

accrued right/defence which was taken away. All defences

available in a common law action on the award would be

available and continued to be available. Hence, it was

held that the award could always have been enforced by

one form of procedure and that it subsequently became

enforceable by an alternative form. This judgment can

have no application to the present case, inasmuch as the

Amendment Act, as applicable to Court proceedings that

arose in relation to arbitral proceedings, cannot be said to

apply to mere forms of procedure, but also includes

substantive law applicable to such Court proceedings

post the Amendment Act. Also, it is wholly fallacious to

say that since the first part of Section 26 does not refer to

Court proceedings in relation to arbitral proceedings, the

Amendment Act is retrospective insofar as such

proceedings are concerned. The second part of Section

56

26 would then have to be completely ignored, which, as

has been seen hereinabove, applies to Court proceedings

in relation to arbitral proceedings only prospectively, i.e. if

such Court proceedings are commenced after the

Amendment Act comes into force. For these reasons,

such an interpretation of Section 26 is unacceptable.

32.Shri Chidambaram, appearing on behalf of some of

the Respondents, has argued that the interpretation

accepted by this Court supra is the correct interpretation.

He has also argued that, alternatively, the expression “in

relation to arbitral proceedings” in the second part of

Section 26 would also include within it arbitral

proceedings before the arbitral tribunal, as otherwise

Section 26 would not apply the Amendment Act to such

arbitral proceedings. We are afraid that this alternative

interpretation does not appeal to us, for the simple reason

that when the first part of Section 26 makes it clear that

arbitral proceedings commenced before the Amendment

Act would not be governed by the Amendment Act, it is

57

clear that arbitral proceedings that have commenced after

the Amendment Act comes into force would be so

governed by it, as has been held by us above. The

negative form of the language of the first part only

becomes necessary to indicate that parties may otherwise

agree to apply the Amendment Act to arbitral proceedings

commenced even before the Amendment Act comes into

force. The absence of any reference to Section 21 of the

1996 Act in the second part of Section 26 of the

Amendment Act is also a good reason as to why arbitral

proceedings before an arbitral tribunal are not

contemplated in the second part.

33.Shri Sibal has argued that Section 26 is not a savings

clause at all and cannot be construed as such. According

to the learned senior counsel, Section 26 manifests a

clear intention to destroy all rights, vested or otherwise,

which have accrued under the unamended 1996 Act. We

are unable to accept these submissions as it is clear that

the intendment of Section 26 is to apply the Amendment

58

Act prospectively to arbitral proceedings and to court

proceedings in relation thereto. This approach again

does not commend itself to us.

34.Dr. Singhvi has, however, argued that the approach

indicated by us above could be termed as an

“intermediate approach”, i.e. it is an approach which does

not go to either of the extreme approaches of Shri

Sundaram, Shri Viswanathan and Shri Datar or that of

Shri Sibal. Further, according to the learned senior

counsel, this approach has the merit of both clarity, as

well as no anomalies arising as a result, as it is clear that

the Amendment Act is to be applied only prospectively

with effect from the date of its commencement, and only

to arbitral proceedings and to court proceedings in

relation thereto, which have commenced on or after the

commencement of the Amendment Act. We think this is

the correct approach as has already been indicated by us

above.

59

35.The judgment in Thyssen (supra), was strongly relied

upon by counsel on both sides. It is, therefore, important

to deal with this judgment in a little detail. In Thyssen

(supra), Section 85 of the 1996 Act came up for

consideration. What is clear is that Section 85(2)(a) had

the expression “in relation to arbitral proceedings” in both

parts of sub-section (2)(a). When speaking of the

repealed enactments, it stated that they will apply “in

relation to” arbitral proceedings which commenced before

the 1996 Act came into force, but that otherwise the 1996

Act shall apply “in relation to” arbitral proceedings, which

commenced on or after the 1996 Act came into force.

36.The judgment in Thyssen (supra) construed Section

85 as follows:

“23. Section 85(2)(a) of the new Act is in two

limbs: (1) provisions of the old Act shall apply

in relation to arbitral proceedings which

commenced before the new Act came into

force unless otherwise agreed by the parties,

and (2) the new Act shall apply in relation to

arbitral proceedings which commenced on or

after the new Act came into force. The first

limb can further be bifurcated into two: (a)

60

provisions of the old Act shall apply in relation

to arbitral proceedings commenced before the

new Act came into force, and (b) the old Act

will not apply in such cases where the parties

agree that it will not apply in relation to arbitral

proceedings which commenced before the

new Act came into force. The expression “in

relation to” is of the widest import as held by

various decisions of this Court in Doypack

Systems (P) Ltd. [(1988) 2 SCC

299], Mansukhlal Dhanraj Jain [(1995) 2 SCC

665], Dhanrajamal Gobindram [AIR 1961 SC

1285 : (1961) 3 SCR 1020] and Navin

Chemicals Mfg. [(1993) 4 SCC 320] This

expression “in relation to” has to be given full

effect to, particularly when read in conjunction

with the words “the provisions” of the old Act.

That would mean that the old Act will apply to

the whole gambit of arbitration culminating in

the enforcement of the award. If it was not so,

only the word “to” could have sufficed and

when the legislature has used the expression

“in relation to”, a proper meaning has to be

given. This expression does not admit of

restrictive meaning. The first limb of Section

85(2)(a) is not a limited saving clause. It saves

not only the proceedings pending at the time

of commencement of the new Act but also the

provisions of the old Act for enforcement of

the award under that Act.”

(at page 369)

[Emphasis Supplied]

The judgment then goes on to refer to Section 48 of the

Arbitration Act, 1940, which is set out therein as follows:

61

“48. Saving for pending references.—The

provisions of this Act shall not apply to any

reference pending at the commencement of

this Act, to which the law in force immediately

before the commencement of this Act shall

notwithstanding any repeal effected by this Act

continue to apply.”

(at page 349)

Paragraph 33 goes on to state the difference between

Section 85(2)(a) of the 1996 Act and the earlier Section 48

of the 1940 Act, as follows:

“33. Because of the view of Section 85(2)(a)

of the new Act which we have taken, it is not

necessary for us to consider difference in the

repealing provisions as contained in Section

48 of the old Act and Section 85 of the new

Act. We may, however, note that under

Section 48 of the old Act the concept is of

“reference” while under the new Act it is

“commencement”. Section 2(e) of the old Act

defines “reference”. Then under Section 48

the word used is “to” and under Section 85(2)

( a ) the expression is “in relation to”. It,

therefore, also appears that it is not quite

relevant to consider the provision of Section

48 of the old Act to interpret Section 85(2)(a).”

(at page 375)

[Emphasis Supplied]

Paragraph 25 specifically states that Section 6 of the

General Clauses Act will not apply, inasmuch as a different

62

intention does appear from the plain language of Section

85(2)(a). Ultimately, after stating seven conclusions in

paragraph 22, this Court went on to state that enforcement

of an award under the 1940 Act would be an accrued right

for the reason that the challenge procedure under Section

30 of the 1940 Act was wider and completely different from

the challenge procedure under Section 34 of the 1996 Act,

and that to avoid confusion and hardship, it would be

important to refer to the expression “in relation to” as

meaning the entire gamut of arbitral proceedings,

beginning with commencement and ending with

enforcement of an award.

37.The judgment in Thyssen (supra) dealt with a

differently worded provision, and emphasized the

difference in language between the expression “to” and

the expression “in relation to”. In reference to the Acts

which were repealed under Section 85, proceedings which

commenced before the 1996 Act were to be governed by

the repealed Acts. These proceedings would be the entire

63

gamut of proceedings, i.e. from the stage of

commencement of arbitral proceedings until the challenge

proceedings against the arbitral award had been

exhausted. Similar was the position with respect to the

applicability of the 1996 Act, which would again apply to

the entire gamut of arbitral proceedings, beginning with

commencement and ending with enforcement of the

arbitral award. It is clear, therefore, that Section 85(2)(a)

has two major differences in language with Section 26:

one, that the expression “in relation to” does not appear in

the first part of Section 26 and only the expression “to”

appears; and, second, that “commencement” in the first

part of Section 26 is as is understood by Section 21 of the

1996 Act. The second part of Section 85(2)(a) is couched

in language similar to the second part of Section 26 with

this difference, that Section 21 contained in the first part of

Section 26 is conspicuous by its absence in the second

part.

64

38.The judgment in Thyssen (supra) was followed in

N.S. Nayak (supra). After setting out paragraph 32 of the

judgment in Thyssen (supra) and paragraphs 22 and 23

of the aforesaid judgment, this Court concluded:

“13. As stated in paragraph 22, Conclusion 1

without any reservation provides that the

provisions of the old Act shall apply in relation

to the arbitral proceedings which have

commenced before coming into force of the

new Act. Conclusion 2, in our view, is required

to be read in context with Conclusion 1, that is

to say, the phrase “in relation to arbitral

proceedings” cannot be given a narrow

meaning to mean only pendency of the

proceedings before the arbitrator. It would

cover not only proceedings pending before the

arbitrator but would also cover the

proceedings before the court and any

proceedings which are required to be taken

under the old Act for the award becoming a

decree under Section 17 thereof and also

appeal arising thereunder. Hence,

Conclusions 1 and 2 are to be read together

which unambiguously reiterate that once the

arbitral proceedings have started under the

old Act, the old Act would apply for the award

becoming a decree and also for appeal arising

thereunder.

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.

65

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.”

(at pages 63-64)

The majority judgment in Milkfood Limited (supra), after

referring to the judgments in Thyssen (supra) and N.S.

Nayak (supra), concluded that, on the facts of that case,

66

the 1940 Act will apply and not the 1996 Act. These

judgments are distinguishable for the same reasons, as

they only follow and apply Thyssen (supra).

39.From a reading of Section 26 as interpreted by us, it

thus becomes clear that in all cases where the Section 34

petition is filed after the commencement of the

Amendment Act, and an application for stay having been

made under Section 36 therein, will be governed by

Section 34 as amended and Section 36 as substituted.

But, what is to happen to Section 34 petitions that have

been filed before the commencement of the Amendment

Act, which were governed by Section 36 of the old Act?

Would Section 36, as substituted, apply to such petitions?

To answer this question, we have necessarily to decide

on what is meant by “enforcement” in Section 36. On the

one hand, it has been argued that “enforcement” is

nothing but “execution”, and on the other hand, it has

been argued that “enforcement” and “execution” are

67

different concepts, “enforcement” being substantive and

“execution” being procedural in nature.

40.At this stage, it is necessary to set out the scheme of

the 1996 Act. An arbitral proceeding commences under

Section 21, unless otherwise agreed by parties, when a

dispute arises between the parties for which a request for

the dispute to be referred to arbitration is received by the

respondent. The arbitral proceedings terminate under

Section 32(1) by the delivery of a final arbitral award or by

the circumstances mentioned in Section 32(2). The

mandate of the arbitral tribunal terminates with the

termination of arbitral proceedings, save and except for

correction and interpretation of the award within the

bounds of Section 33, or the making of an additional

arbitral award as to claims presented in the proceedings,

but omitted from the award. Once this is over, in cases

where an arbitral award is delivered, such award shall be

final and binding on the parties and persons claiming

under them, under Section 35 of the 1996 Act. Under

68

Section 36, both pre and post amendment, such award

shall be “enforced” in accordance with the provisions of

the Code of Civil Procedure, 1908, in the same manner

as if it were a decree of the Court. It is clear that the

scheme of the 1996 Act is materially different from the

scheme of the 1940 Act. Under Section 17 of the 1940

Act, once an award was delivered, the Court had to

pronounce judgment in accordance with the award,

following which a decree would be drawn up, which would

then be executable under the Code of Civil Procedure.

Under Section 36 of the 1996 Act, the Court does not

have to deliver judgment in terms of the award, which is

then followed by a decree, which is the formal expression

of the adjudication between the parties. Under Section 36

of the 1996 Act, the award is deemed to be a decree and

shall be enforced under the Code of Civil Procedure as

such.

41.This brings us to the manner of enforcement of a

decree under the Code of Civil Procedure. A decree is

69

enforced under the Code of Civil Procedure only through

the execution process – see Order XXI of the Code of

Civil Procedure. Also, Section 36(3), as amended, refers

to the provisions of the Code of Civil Procedure for grant

of stay of a money decree. This, in turn, has reference to

Order LXI, Rule 5 of the Code of Civil Procedure, which

appears under the Chapter heading, “Stay of Proceedings

and of Execution”. This being so, it is clear that Section

36 refers to the execution of an award as if it were a

decree, attracting the provisions of Order XXI and Order

LXI, Rule 5 of the Code of Civil Procedure and would,

therefore, be a provision dealing with the execution of

arbitral awards. This being the case, we need to refer to

some judgments in order to determine whether execution

proceedings and proceedings akin thereto give rise to

vested rights, and whether they are substantive in nature.

42.In Lalji Raja and Sons v. Hansraj Nathuram, (1971)

1 SCC 721 at 728, this Court was concerned with a

judgment debtor’s right to resist execution of a decree.

70

Section 20(1)(b) of the Code of Civil

Procedure (Amendment) Act, 1951 was extended to

Madhya Bharat and other areas, as a result of which the

judgment debtor’s right to resist execution of a decree

was protected. In this context, this Court held that the

Amendment Act of 1951 made decrees, which could have

been executed only by courts in British India, executable

in the whole of India. Stating that the change made was

one relating to procedure only, this Court held:

“15. This provision undoubtedly protects the

rights acquired and privileges accrued under

the law repealed by the Amending Act.

Therefore the question for decision is whether

the non-executability of the decree in the

Morena Court under the law in force in

Madhya Bharat before the extension of “the

Code” can be said to be a right accrued under

the repealed law. We do not think that even by

straining the language of the provision it can

be said that the non-executability of a decree

within a particular territory can be considered

as a privilege. Therefore the only question that

we have to consider is whether it can be

considered as a “right accrued” within the

meaning of Section 20(1)(b) of the Code of

Civil Procedure (Amendment) Act, 1950. In

the first place, in order to get the benefit of

that provision, the non-executability of the

decree must be a right and secondly it must

71

be a right that had accrued from the

provisions of the repealed law. It is contended

on behalf of the judgment-debtors that when

the decree was passed, they had a right to

resist the execution of the decree in Madhya

Bharat in view of the provisions of the Indian

Code of Civil Procedure (as adapted) which

was in force in the Madhya Bharat at that time

and the same is a vested right. It was further

urged on their behalf that that right was

preserved by Section 20(1)(b) of the Code of

Civil Procedure (Amendment) Act, 1950. It is

difficult to consider the non-executability of the

decree in Madhya Bharat as a vested right of

the judgment-debtors. The non-executability in

question pertains to the jurisdiction of certain

courts and not to the rights of the judgment-

debtors. Further the relevant provisions of the

Civil Procedure Code in force in Madhya

Bharat did not confer the right claimed by the

judgment-debtors. All that has happened in

view of the extension of “the Code” to the

whole of India in 1951 is that the decrees

which could have been executed only by

courts in British India are now made

executable in the whole of India. The change

made is one relating to procedure and

jurisdiction. Even before “the Code” was

extended to Madhya Bharat the decree in

question could have been executed either

against the person of the judgment-debtors if

they had happened to come to British India or

against any of their properties situated in

British India. The execution of the decree

within the State of Madhya Bharat was not

permissible because the arm of “the Code” did

not reach Madhya Bharat. It was the invalidity

of the order transferring the decree to the

72

Morena Court that stood in the way of the

decree-holders in executing their decree in

that court on the earlier occasion and not

because of any vested rights of the judgment-

debtors. Even if the judgment-debtors had not

objected to the execution of the decree, the

same could not have been executed by the

court at Morena on the previous occasion as

that court was not properly seized of the

execution proceedings. By the extension of

“the Code” to Madhya Bharat, want of

jurisdiction on the part of the Morena Court

was remedied and that court is now made

competent to execute the decree.

16. That a provision to preserve the right

accrued under a repealed Act “was not

intended to preserve the abstract rights

conferred by the repealed Act.... It only applies

to specific rights given to an individual upon

happening of one or the other of the events

specified in statute” — See Lord Atkin’s

observations in Hamilton Gell v. White. [(1922)

2 KB 422]. The mere right, existing at the date

of repealing statute, to take advantage of

provisions of the statute repealed is not a

“right accrued” within the meaning of the usual

saving clause — See Abbot v. Minister for

Lands [(1895) AC 425] and G. Ogden

Industries Pvt. Ltd. v. Lucas. [(1969) 1 All ER

121]”

In Narhari Shivram Shet Narvekar v. Pannalal

Umediram (1976) 3 SCC 203 at 207, this Court, following

Lalji Raja (supra), held as follows:

73

“8. Learned counsel appearing for the

appellant however submitted that since the

Code of Civil Procedure was not applicable to

Goa the decree became inexecutable and this

being a vested right could not be taken away

by the application of the Code of Civil

Procedure to Goa during the pendency of the

appeal before the Additional Judicial

Commissioner. It seems to us that the right of

the judgment debtor to pay up the decree

passed against him cannot be said to be a

vested right, nor can the question of

executability of the decree be regarded as a

substantive vested right of the judgment

debtor. A fortiori the execution proceedings

being purely a matter of procedure it is well

settled that any change in law which is made

during the pendency of the cause would be

deemed to be retroactive in operation and the

appellate court is bound to take notice of the

change in law.”

Since it is clear that execution of a decree pertains to the

realm of procedure, and that there is no substantive

vested right in a judgment debtor to resist execution,

Section 36, as substituted, would apply even to pending

Section 34 applications on the date of commencement of

the Amendment Act.

43.The matter can also be looked at from a slightly

different angle. Section 36, prior to the Amendment Act,

74

is only a clog on the right of the decree holder, who

cannot execute the award in his favour, unless the

conditions of this section are met. This does not mean

that there is a corresponding right in the judgment debtor

to stay the execution of such an award. Learned counsel

on behalf of the Appellants have, however, argued that a

substantive change has been made in the award, which

became an executable decree only after the Section 34

proceedings were over, but which is now made

executable as if it was a decree with immediate effect,

and that this change would, therefore, take away a vested

right or accrued privilege in favour of the Respondents. It

has been argued, relying upon a number of judgments,

that since Section 36 is a part of the enforcement process

of awards, there is a vested right or at least a privilege

accrued in favour of the Appellants in the unamended

1996 Act applying insofar as arbitral proceedings and

court proceedings in relation thereto have commenced,

prior to the commencement of the Amendment Act. The

75

very judgment strongly relied upon by senior counsel for

the appellants, namely Garikapati Veeraya (supra), itself

states in proposition (v) at page 515, that the vested right

of appeal can be taken away only by a subsequent

enactment, if it so provides specifically or by necessary

intendment and not otherwise. We have already held that

Section 26 does specifically provide that the court

proceedings in relation to arbitral proceedings, being

independent from arbitral proceedings, would not be

viewed as a continuation of arbitral proceedings, but

would be viewed separately. This being the case, it is

unnecessary to refer to judgments such as Union of

India v. A.L. Rallia Ram, (1964) 3 SCR 164 and NBCC

Ltd. v. J.G. Engineering (P) Ltd., (2010) 2 SCC 385,

which state that a Section 34 proceeding is a supervisory

and not an appellate proceeding. Snehadeep Structures

(P) Ltd. v. Maharashtra Small-Scale Industries

Development Corpn. Ltd., (2010) 3 SCC 34 at 47-49,

which was cited for the purpose of stating that a Section

76

34 proceeding could be regard as an “appeal” within the

meaning of Section 7 of the Interest on Delayed

Payments To Small Scale and Ancillary Industrial

Undertakings Act, 1993, is obviously distinguishable on

the ground that it pertains to the said expression

appearing in a beneficial enactment, whose object would

be defeated if the word “appeal” did not include a Section

34 application. This is made clear by the aforesaid

judgment itself as follows:

“36. On a perusal of the plethora of decisions

aforementioned, we are of the view that

“appeal” is a term that carries a wide range of

connotations with it and that appellate

jurisdiction can be exercised in a variety of

forms. It is not necessary that the exercise of

appellate jurisdiction will always involve re-

agitation of entire matrix of facts and law. We

have already seen in Abhayankar [(1969) 2

SCC 74] that even an order passed by virtue

of limited power of revision under Section 115

of the Code is treated as an exercise of

appellate jurisdiction, though under that

provision, the Court cannot go into the

questions of facts. Given the weight of

authorities in favour of giving such a wide

meaning to the term “appeal”, we are

constrained to disagree with the contention of

the learned counsel for the respondent

Corporation that appeal shall mean only a

77

challenge to a decree or order where the

entire matrix of law and fact can be re-agitated

with respect to the impugned order/decree.

There is no quarrel that Section 34 envisages

only limited grounds of challenge to an award;

however, we see no reason why that alone

should take out an application under Section

34 outside the ambit of an appeal especially

when even a power of revision is treated as

an exercise of appellate jurisdiction by this

Court and the Privy Council.

xxx xxx xxx

40. It may be noted that Section 6(1)

empowers the buyer to obtain the due

payment by way of any proceedings. Thus the

proceedings that the buyer can resort to, no

doubt, includes arbitration as well. It is

pertinent to note that as opposed to Section

6(2), Section 6(1) does not state that in case

the parties choose to resort to arbitration, the

proceedings in pursuance thereof will be

governed by the Arbitration Act. Hence, the

right context in which the meaning of the term

“appeal” should be interpreted is the Interest

Act itself. The meaning of this term under the

Arbitration Act or the Code of Civil Procedure

would have been relevant if the Interest Act

had made a reference to them. For this very

reason, we also do not find it relevant that the

Arbitration Act deals with applications and

appeals in two different chapters. We are

concerned with the meaning of the term

“appeal” in the Interest Act, and not in the

Arbitration Act.”

78

44.Learned senior counsel appearing on behalf of the

Respondents, has also argued that the expression “has

been” in Section 36(2), as amended, would make it clear

that the section itself refers to Section 34 applications

which have been filed prior to the commencement of the

Amendment Act and that, therefore, the said section would

apply, on its plain language, even to Section 34

applications that have been filed prior to the

commencement of the Amendment Act. For this purpose,

the judgment in State of Bombay v. Vishnu Ramchandra

(1961) 2 SCR 26, was strongly relied upon. In that

judgment, it was observed, while dealing with Section 57

of the Bombay Police Act, 1951, that the expression “has

been punished” is in the present perfect tense and can

mean either “shall have been” or “shall be”. Looking to the

scheme of the enactment as a whole, the Court felt that

“shall have been” is more appropriate. This decision was

referred to in paragraphs 60 and 61 of Workmen v.

Firestone Tyre & Rubber Co. of India (P) Ltd., (1973) 1

79

SCC 813 at 838 and the ratio culled out was that such

expression may relate to past or future events, which has

to be gathered from the context, as well as the scheme of

the particular legislation. In the context in which Section

11A of the Industrial Disputes Act, 1947 was enacted, this

Court held that Section 11A has the effect of altering the

law by abridging the rights of the employer. This being so,

the expression “has been” would refer only to future

events and would have no implication to disputes prior to

December 15, 1971. However, in a significant paragraph,

this Court held:

“63. It must be stated at this stage that

procedural law has always been held to

operate even retrospectively, as no party has

a vested right in procedure.…”

45.Being a procedural provision, it is obvious that the

context of Section 36 is that the expression “has been”

would refer to Section 34 petitions filed before the

commencement of the Amendment Act and would be one

pointer to the fact that the said section would indeed

apply, in its substituted form, even to such petitions. The

80

judgment in L’Office Cherifien Des Phosphates and

another v. Yamashita-Shinnihon Steamship Co. Ltd.,

(1994) 1 AC 486 is instructive. A new Section 13A was

introduced with effect from 1

st

January, 1992, by which

Arbitrators were vested with the power of dismissing a

claim if there is no inordinate or an inexcusable delay on

the part of the claimant in pursuing the claim. This

Section was enacted because the House of Lords in a

certain decision had suggested that such delays in

arbitration could not lead to a rejection of the claim by

itself. What led to the enactment of the Section was put

by Lord Mustill thus:

“My Lords, the effect of the decision of the

House in the Bremer Vulkan case, coupled

with the inability of the courts to furnish any

alternative remedy which might provide a

remedy for the abuse of stale claims, aroused

a chorus of disapproval which was forceful,

sustained and (so far as I am aware) virtually

unanimous. There is no need to elaborate.

The criticisms came from every quarter.

Several Commonwealth countries hastily

introduced legislation conferring on the court,

or on the arbitrator, a jurisdiction to dismiss

stale claims in arbitration. The history of the

matter, and the reasons why the question was

81

not as easy as it might have appeared, were

summarized in an article published in 1989 by

Sir Thomas Bingham (Arbitration International,

vol. 5, pp. 333 et seq.), and there is no need

to rehearse them here. Taking account of

various apparent difficulties the Departmental

Advisory Committee on Arbitration hesitated

for a time both as to the principle and as to

whether the power to dismiss should be

vested in the court or the arbitrator, but the

pressure from all quarters became irresistible

and in 1990 the Courts and Legal Services Act

inserted, through the medium of Section 102,

a new Section 13A in the Arbitration Act,

1950.”

(at page 522)

The question which arose in that case was whether delay

that had taken place before the Section came into force

could be taken into account by an arbitrator in order to

reject the claim in that case. The House of Lords held that

given the clamor for change and given the practical value

and nature of the rights involved, it would be permissible

to look at delay caused even before the Section came into

force. In his concluding paragraph, Lord Mustill held:

“In this light, I turn to the language of Section

13A construed, in case of doubt, by reference

to its legislative background. The crucial

words are: “(a). . . there has been inordinate

and inexcusable delay . . . “ Even if read in

82

isolation these words would I believe be

sufficient, in the context of Section 13A as a

whole, to demonstrate that the delay

encompasses all the delay which has caused

the substantial risk of unfairness. If there were

any doubt about this the loud and prolonged

chorus of complaints about the disconformity

between practices in arbitration and in the

High Court, and the increasing impatience for

something to be done about it, show quite

clearly that Section 13A was intended to bite

in full from the outset. If the position were

otherwise it would follow that, although

Parliament has accepted the advice of all

those who had urged that this objectionable

system should be brought to an end, and has

grasped the nettle and provided a remedy, it

has reconciled itself to the continuation of

arbitral proceedings already irrevocably

stamped with a risk of injustice. I find it

impossible to accept that Parliament can have

intended any such thing, and with due respect

to those who have suggested otherwise I find

the meaning of Section 13A sufficiently clear

to persuade me that in the interests of reform

Parliament was willing to tolerate the very

qualified kind of hardship involved in giving

the legislation a partially retrospective effect.

Accordingly, I agree with Beldam L.J. that the

arbitrator did have the powers to which he

purported to exercise. I would therefore allow

the appeal and restore the award of the

arbitrator.”

46.In 2004, this Court’s Judgment in National

Aluminium Company (supra) had recommended that

83

Section 36 be substituted, as it defeats the very objective

of the alternative dispute resolution system, and that the

Section should be amended at the earliest to bring about

the required change in law. It would be clear that looking

at the practical aspect and the nature of rights presently

involved, and the sheer unfairness of the unamended

provision, which granted an automatic stay to execution of

an award before the enforcement process of Section 34

was over (and which stay could last for a number of

years) without having to look at the facts of each case, it

is clear that Section 36 as amended should apply to

Section 34 applications filed before the commencement of

the Amendment Act also for the aforesaid reasons.

47.Both sides locked horns on whether a proceeding

under Section 36 could be said to be a proceeding which

is independent of a proceeding under Section 34. In view

of what has been held by us above, it is unnecessary for

us to go into this by-lane of forensic argument.

84

48.However, Shri Viswanathan strongly relied upon the

observations made in paragraph 32 in Thyssen (supra)

and the judgment in Hameed Joharan v. Abdul Salam,

(2001) 7 SCC 573. It is no doubt true that paragraph 32

in Thyssen (supra) does, at first blush, support Shri

Viswanathan’s stand. However, this was stated in the

context of the machinery for enforcement under Section

17 of the 1940 Act which, as we have seen, differs from

Section 36 of the 1996 Act, because of the expression “in

relation to arbitral proceedings”, which took in the entire

gamut, starting from the arbitral proceedings before the

arbitral tribunal and ending up with enforcement of the

award. It was also in the context of the structure of the

1940 Act being completely different from the structure of

the 1996 Act, which repealed the 1940 Act. In the present

case, it is clear that “enforcement” in Section 36 is to treat

the award as if it were a decree and enforce it as such

under the Code of Civil Procedure, which would only

mean that such decree has to be executed in the manner

85

indicated. Also, a stray sentence in a judgment in a

particular context cannot be torn out of such context and

applied in a situation where it has been argued that

enforcement and execution are one and the same, at

least for the purpose of the 1996 Act. In Regional

Manager & Anr. v. Pawan Kumar Dubey (1976) 3 SCR

540, at 544 it was held:

“We think that the principles involved in

applying Article 311(2) having been sufficiently

explained in Shamsher Singh's case (supra) it

should no longer be possible to urge that

Sughar Singh's case (supra) could give rise to

some misapprehension of the law. Indeed, we

do not think that the principles of law declared

and applied so often have really changed. But,

the application of the same law to the differing

circumstances and facts of various cases

which have come up to this Court could create

the impression sometimes that there is some

conflict between different decisions of this

Court. Even where there appears to some

conflict, it would, we think, vanish when the

ratio decidendi of each case is correctly

understood. It is the rule deducible from the

application of law to the facts and

circumstances of a case which constitutes its

ratio decidendi and not some conclusion

based upon facts which may appear to be

similar. One additional or different fact can

make a world of difference between

conclusions in two cases even when the same

86

principles are applied in each case to similar

facts.”

49.For the same reason, it is clear that the judgment in

Hameed Joharan (supra), which stated that execution

and enforcement were different concepts in law, was in

the context of Article 136 of the Limitation Act, 1963, read

with Section 35 of the Indian Stamp Act, 1899, which is

wholly different. The argument in that case was that

Article 136 of the Limitation Act prescribes a period of 12

years for the execution of a decree or order, after it

becomes enforceable. What was argued was that it would

become enforceable only when stamped and Section 35

of the Stamp Act was referred to for the said purpose. In

this context, this Court held:

“And it is on this score it has been contended

that the partition decree thus even though

already passed cannot be acted upon, neither

becomes enforceable unless drawn up and

engrossed on stamp papers. The period of

limitation, it has been contended in respect of

the partition decree, cannot begin to run till it

is engrossed on requisite stamp paper. There

is thus, it has been contended, a legislative

bar under Section 35 of the Indian Stamp Act

87

for enforceability of partition decree. Mr Mani

contended that enforcement includes the

whole process of getting an award as well as

execution since execution otherwise means

due performance of all formalities, necessary

to give validity to a document. We are,

however, unable to record our concurrence

therewith. Prescription of a twelve-year period

certain cannot possibly be obliterated by an

enactment wholly unconnected therewith.

Legislative mandate as sanctioned under

Article 136 cannot be kept in abeyance unless

the selfsame legislation makes a provision

therefor. It may also be noticed that by the

passing of a final decree, the rights stand

crystallised and it is only thereafter its

enforceability can be had, though not

otherwise.”

(at page 593)

It is for this reason that it was stated that enforceability of

a decree under the Limitation Act cannot be the subject

matter of Section 35 of the Stamp Act. Therefore, Section

35 of the Stamp Act could not be held to “overrun” the

Limitation Act and thus, give a complete go-by to the

legislative intent of Article 136 of the Limitation Act. Here

again, observations made in a completely different

context have to be understood in that context and cannot

be applied to a totally different situation.

88

50.As a matter of fact, it was noticed that furnishing of

stamp paper was an act entirely within the domain and

control of the Appellant in that case, and any delay in the

matter of furnishing the same cannot possibly be said to

stop limitation, as no one can take advantage of his own

wrong (see paragraph 13). As a matter of fact, the Court

held that unless a distinction was made between

execution and enforcement, the result in that case would

lead to an “utter absurdity”. The Court held, “absurdity

cannot be the outcome of an interpretation of a Court

order and wherever there is even a possibility of such

absurdity, it would be a plain exercise of judicial power to

repeal the same rather than encouraging it” (see

paragraph 38).

51.Shri Viswanathan then referred us to this Court’s

judgment in Akkayanaicker v. A.A.A. Kotchadainaidu

and Anr. (2004) 12 SCC 469, which, according to him,

has followed the judgment in Hameed Joharan (supra).

This judgment again would have no application for the

89

simple reason that the narrow point that was decided in

that case was whether the time period for execution of a

decree under Section 136 of the Limitation Act would start

when the decree was originally made or whether a fresh

period of limitation would begin after the decree was

amended having been substantially scaled down by a

Debt Relief Act. This Court held that as the original decree

could not be enforced and only the amended decree

could be enforced, 12 years has to be counted from the

date of the amended decree. It is clear that this

judgment also does not carry the matter further.

52.It was also argued that an award by itself had no

legal efficacy, until it became enforceable, and that,

therefore, until it could be enforced as a decree of the

Court, it would continue to remain suspended. Here again,

the judgment in Satish Kumar (supra) is extremely

instructive. The question in that case was as to whether,

under the 1940 Act, an award had any legal efficacy

before a judgment followed thereupon and it was made

90

into a decree. A Full Bench of the Punjab and Haryana

High Court held that until it is made a rule of the Court,

such an award is waste paper. This Court strongly

disagreed and followed its unreported decision in Uttam

Singh Dugal & Co. v. Union of India as follows:

“It seems to us that the main reason given by

the two Full Benches for their conclusion is

contrary to what was held by this Court in its

unreported decision in Uttam Singh Dugal &

Co. v. Union of India [ Civil Appeal No. 162 of

1962—judgment delivered on 11-10-1962] .

The facts in this case, shortly stated, were that

Uttam Singh Dugal & Co. filed an application

under Section 33 of the Act in the Court of the

Subordinate Judge, Hazaribag. The Union of

India, Respondent 1, called upon Respondent

2, Col. S.K. Bose, to adjudicate upon the

matter in dispute between Respondent 1 and

the appellant Company. The case of Uttam

Singh Dugal & Co.was that this purported

reference to Respondent 2 for adjudication on

the matters alleged to be in dispute between

them and Respondent 1 was not competent

because by an award passed by Respondent

2 on April 23, 1952 all the relevant disputes

between them had been decided. The High

Court held inter alia that the first award did not

create any bar against the competence of the

second reference. On appeal this Court after

holding that the application under Section 33

was competent observed as follows:

91

“The true legal position in regard

to the effect of an award is not in

dispute. It is well settled that as a

general rule, all claims which are

the subject-matter of a reference

to arbitration merge in the award

which is pronounced in the

proceedings before the arbitrator

and that after an award has been

pronounced, the rights and

liabilities of the parties in respect

of the said claims can be

determined only on the basis of

the said award. After an award is

pronounced, no action can be

started on the original claim which

had been the subject-matter of the

reference. As has been observed

by Mookerjee, J., in the case

of Bhajahari Saha Banikya v.

Behary Lal Basak [33 Cal. 881 at

p. 898] the award is, in fact, a final

adjudication of a Court of the

parties own choice, and until

impeached upon sufficient

grounds in an appropriate

proceeding, an award, which is on

the fact of it regular, is conclusive

upon the merits of the controversy

submitted, unless possibly the

parties have intended that the

award shall not be final and

conclusive … in reality, an award

possesses all the elements of

vitality, even though it has not

been formally enforced, and it may

be relied upon in a litigation

between the parties relating to the

92

same subject-matter”. This

conclusion, according to the

learned Judge, is based upon the

elementary principle that, as

between the parties and their

privies, an award is entitled to that

respect which is due to the

judgment of a court of last resort.

Therefore, if the award which has

been pronounced between the

parties has in fact, or can, in law,

be deemed to have dealt with the

present dispute, the second

reference would be incompetent.

This position also has not been

and cannot be seriously disputed.”

This Court then held on the merits “that the

dispute in regard to overpayments which are

sought to be referred to the arbitration of

Respondent 2 by the second reference are

not new disputes; they are disputes in regard

to claims which the Chief Engineer should

have made before the arbitration under the

first reference”. This Court accordingly

allowed the appeal and set aside the order

passed by the High Court.

This judgment is binding on us. In our opinion

this judgment lays down that the position

under the Act is in no way different from what

it was before the Act came into force, and that

an award has some legal force and is not a

mere waste paper. If the award in question is

not a mere waste paper but has some legal

effect it plainly purports to or affects property

within the meaning of Section 17(1)(b) of the

Registration Act.”

93

(at pages 248-249)

53.Justice Hegde, in a separate concurring judgment,

specifically stated that an award creates rights in property,

but those rights cannot be enforced until the award is

made a decree of the Court. The Learned Judge put it

very well when he said, “It is one thing to say that a right

is not created, it is an entirely different thing to say that

the right created cannot be enforced without further

steps”. The Amendment Act has only made an award

executable conditionally after it is made, like a judgment

of a Court, the only difference being that a decree would

not have to be formally drawn following the making of

such award.

54.Shri Viswanathan then argued, relying upon R.

Rajagopal Reddy v. Padmini Chandrasekharan (1995)

2 SCC 630, Fuerst Day Lawson Ltd. v. Jindal Exports

Ltd. (2001) 6 SCC 356, Sedco Forex International Drill.

Inc. v. CIT (2005) 12 SCC 717 and Bank of Baroda v.

Anita Nandrajog (2009) 9 SCC 462, that a clarificatory

94

amendment can only be retrospective, if it does not

substantively change the law, but merely clarifies some

doubt which has crept into the law. For this purpose, he

referred us to the amendments made in Section 34 by the

Amendment Act and stated that despite the fact that

Explanations 1 and 2 to Section 34(2) stated that “for the

avoidance of any doubt, it is clarified”, this is not language

that is conclusive in nature, but it is open to the Court to

go into whether there is, in fact, a substantive change that

has been made from the earlier position or whether a

doubt has merely been clarified. According to learned

senior counsel, since fundamental changes have been

made, doing away with at least two judgments of this

Court, being Saw Pipes Ltd (supra) and Western Geco

(supra), as has been held in paragraph 18 in HRD

Corporation (Marcus Oil and Chemical

Division) v. Gail (India) Limited (Formerly Gas

Authority of India Ltd.) 2017 SCC Online 1024, it is

clear that such amendments would only be prospective in

95

nature. We do not express any opinion on the aforesaid

contention since the amendments made to Section 34 are

not directly before us. It is enough to state that Section

26 of the Amendment Act makes it clear that the

Amendment Act, as a whole, is prospective in nature.

Thereafter, whether certain provisions are clarificatory,

declaratory or procedural and, therefore, retrospective, is

a separate and independent enquiry, which we are not

required to undertake in the facts of the present cases,

except to the extent indicated above, namely, the effect of

the substituted Section 36 of the Amendment Act.

55.Learned counsel for the Appellants have painted a

lurid picture of anomalies that would arise in case the

Amendment Act were generally to be made retrospective

in application. Since we have already held that the

Amendment Act is only prospective in application, no

such anomalies can possibly arise. It may also be noted

that the choosing of Section 21 as being the date on

which the Amendment Act would apply to arbitral

96

proceedings that have been commenced could equally be

stated to give rise to various anomalies. One such

anomaly could be that the arbitration agreement itself

may have been entered into years earlier, and disputes

between the parties could have arisen many years after

the said arbitration agreement. The argument on behalf of

the Appellants is that parties are entitled to proceed on

the basis of the law as it exists on the date on which they

entered into an agreement to refer disputes to arbitration.

If this were to be the case, the starting point of the

application of the Amendment Act being only when a

notice to arbitrate has been received by the respondent,

which as has been stated above, could be many years

after the arbitration agreement has been entered into,

would itself give rise to the anomaly that the amended law

would apply even to arbitration proceedings years

afterwards as and when a dispute arises and a notice to

arbitrate has been issued under Section 21. In such a

case, the parties, having entered into an arbitration

97

agreement years earlier, could well turn around and say

that they never bargained for the change in law that has

taken place many years after, and which change will

apply to them, since the notice, referred to in Section 21,

has been issued after the Amendment Act has come into

force. Cut off dates, by their very nature, are bound to

lead to certain anomalies, but that does not mean that the

process of interpretation must be so twisted as to negate

both the plain language as well as the object of the

amending statute. On this ground also, we do not see

how an emotive argument can be converted into a legal

one, so as to interpret Section 26 in a manner that would

be contrary to both its plain language and object.

56.However, it is important to remember that the

Amendment Act was enacted for the following reasons, as

the Statement of Objects and Reasons for the

Amendment Act states:

“2. The Act was enacted to provide for speedy

disposal of cases relating to arbitration with

least court intervention. With the passage of

98

time, some difficulties in the applicability of the

Act have been noticed. Interpretation of the

provisions of the Act by courts in some cases

have resulted in delay of disposal of arbitration

proceedings and increase in interference of

courts in arbitration matters, which tend to

defeat the object of the Act. With a view to

overcome the difficulties, the matter was

referred to the Law Commission of India, which

examined the issue in detail and submitted its

176th Report. On the basis of the said report,

the Arbitration and Conciliation (Amendment)

Bill, 2003 was introduced in the Rajya Sabha

on 22nd December, 2003. The said Bill was

referred to the Department-related

Parliamentary Standing Committee on

Personnel, Public Grievances, Law and Justice

for examination and Report. The said

Committee, submitted its Report to the

Parliament on 4th August, 2005, wherein the

Committee recommended that since many

provisions of the said Bill were contentious, the

Bill may be withdrawn and a fresh legislation

may be brought after considering its

recommendations. Accordingly, the said Bill

was withdrawn from the Rajya Sabha.

3. On a reference made again in pursuance of

the above, the Law Commission examined and

submitted its 246th Report on “Amendments to

the Arbitration and Conciliation Act, 1996” in

August, 2014 and recommended various

amendments in the Act. The proposed

amendments to the Act would facilitate and

encourage Alternative Dispute Mechanism,

especially arbitration, for settlement of disputes

in a more user-friendly, cost effective and

expeditious disposal of cases since India is

99

committed to improve its legal framework to

obviate in disposal of cases.

4. As India has been ranked at 178 out of 189

nations in the world in contract enforcement, it

is high time that urgent steps are taken to

facilitate quick enforcement of contracts, easy

recovery of monetary claims and award of just

compensation for damages suffered and reduce

the pendency of cases in courts and hasten the

process of dispute resolution through

arbitration, so as to encourage investment and

economic activity.

5. As Parliament was not in session and

immediate steps were required to be taken to

make necessary amendments to the Arbitration

and Conciliation Act, 1996 to attract foreign

investment by projecting India as an investor

friendly country having a sound legal

framework, the President was pleased to

promulgate the Arbitration and Conciliation

(Amendment) Ordinance, 2015.

6. It is proposed to introduce the Arbitration and

Conciliation (Amendment) Bill, 2015, to replace

the Arbitration and Conciliation (Amendment)

Ordinance, 2015, which inter alia, provides for

the following, namely:—

(i) to amend the definition of “Court” to provide

that in the case of international commercial

arbitrations, the Court should be the High

Court;

(ii) to ensure that an Indian Court can exercise

jurisdiction to grant interim measures, etc.,

even where the seat of the arbitration is outside

India;

100

(iii) an application for appointment of an

arbitrator shall be disposed of by the High Court

or Supreme Court, as the case may be, as

expeditiously as possible and an endeavour

should be made to dispose of the matter within

a period of sixty days;

(iv) to provide that while considering any

application for appointment of arbitrator, the

High Court or the Supreme Court shall examine

the existence of a prima facie arbitration

agreement and not other issues;

(v) to provide that the arbitral tribunal shall

make its award within a period of twelve

months from the date it enters upon the

reference and that the parties may, however,

extend such period up to six months, beyond

which period any extension can only be granted

by the Court, on sufficient cause;

(vi) to provide that a model fee Schedule on the

basis of which High Courts may frame rules for

the purpose of determination of fees of arbitral

tribunal, where a High Court appoints arbitrator

in terms of section 11 of the Act;

(vii) to provide that the parties to dispute may at

any stage agree in writing that their dispute be

resolved through fast track procedure and the

award in such cases shall be made within a

period of six months;

(viii) to provide for neutrality of arbitrators, when

a person is approached in connection with

possible appointment as an arbitrator;

101

(ix) to provide that application to challenge the

award is to be disposed of by the Court within

one year.

7. The amendments proposed in the Bill will

ensure that arbitration process becomes more

user-friendly, cost effective and lead to

expeditious disposal of cases.”

(Emphasis Supplied)

57.The Government will be well-advised in keeping the

aforesaid Statement of Objects and Reasons in the

forefront, if it proposes to enact Section 87 on the lines

indicated in the Government’s press release dated 7

th

March, 2018. The immediate effect of the proposed

Section 87 would be to put all the important amendments

made by the Amendment Act on a back-burner, such as

the important amendments made to Sections 28 and 34 in

particular, which, as has been stated by the Statement of

Objects and Reasons, “…have resulted in delay of

disposal of arbitration proceedings and increase in

interference of courts in arbitration matters, which tend to

defeat the object of the Act”, and will now not be

applicable to Section 34 petitions filed after 23

rd

October,

102

2015, but will be applicable to Section 34 petitions filed in

cases where arbitration proceedings have themselves

commenced only after 23

rd

October, 2015. This would

mean that in all matters which are in the pipeline, despite

the fact that Section 34 proceedings have been initiated

only after 23

rd

October, 2015, yet, the old law would

continue to apply resulting in delay of disposal of

arbitration proceedings by increased interference of

Courts, which ultimately defeats the object of the 1996

Act.

4

It would be important to remember that the 246

th

4

These amendments have the effect, as stated in HRD

Corporation (Marcus Oil and Chemical Division) v. Gail

(India) Limited (Formerly Gas Authority of India Ltd.)

2017 SCC Online 1024 (at paragraph 18) of limiting the grounds

of challenge to awards as follows:

“…In fact, the same Law Commission Report

has amended Sections 28 and 34 so as to narrow

grounds of challenge available under the Act. The

judgment in ONGC v. Saw Pipes Ltd, (2003) 5 SCC

705, has been expressly done away with. So has

the judgment in ONGC v. Western Geco

International Ltd., (2014) 9 SCC 263. Both Sections

34 and 48 have been brought back to the position

of law contained in Renusagar Power Plant Co. Ltd.

v. General Electric Co., (1994) Supp (1) SCC 644,

where “public policy” will now include only two of

the three things set out therein, viz., “fundamental

policy of Indian law” and “justice or morality”. The

ground relating to “the interest of India” no longer

obtains. “Fundamental policy of Indian law” is now

to be understood as laid down in Renusagar

(supra). “Justice or morality” has been tightened

and is now to be understood as meaning only basic

103

Law Commission Report has itself bifurcated proceedings

into two parts, so that the Amendment Act can apply to

Court proceedings commenced on or after 23

rd

October,

2015. It is this basic scheme which is adhered to by

Section 26 of the Amendment Act, which ought not to be

displaced as the very object of the enactment of the

Amendment Act would otherwise be defeated.

58.At the fag end of the arguments, Shri Viswanathan,

in rejoinder, raised another point which arises only in Civil

Appeals arising out of SLP(C) No. 8374-8375 of 2017 and

8376-8378 of 2017. According to him, the impugned

judgment, when it dealt with the majority award in favour

of respondent Enercon GmbH, went behind the award in

ordering execution of a portion of the award in favour of

Enercon, when the majority award, in paragraph 331(3)

notions of justice and morality i.e. such notions as

would shock the conscience of the Court as

understood in Associate Builders v. Delhi

Development Authority, (2015) 3 SCC 49. Section

28(3) has also been amended to bring it in line with

the judgment of this Court in Associate Builders

(supra), making it clear that the construction of the

terms of the contract is primarily for the arbitrator

to decide unless it is found that such a construction

is not a possible one.”

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(b), specifically ordered the 2

nd

and 3

rd

defendants to pay

to WWIL, which is a joint venture company, a sum of

Rs.6,77,24,56,570/-. The majority award of the tribunal

had specifically stated, in paragraph 298, as follows:

“Enercon’s claim is first pleaded as damages

payable by the Mehra directors directly to

Enercon. It also pleads an alternative claim for

such further or other relief as the Tribunal

considers appropriate (paragraph 18 of the

application of 13 December 2015 and

paragraph 323.4 of its closing written

submission dated 13 May 2016, as also its

Statement of Claim of 30 September 2014, at

paragraph 102(M).) In the Tribunal’s view,

given that WWIL is only part owned by

Enercon (hence Enercon’s pecuniary

disadvantage resulting from the Mehra

directors’ wrongdoing is not the same as that

of WWIL) and further that WWIL remains the

person most immediately affected by such

wrongdoing, the liability of the Mehra directors

is best discharged by requiring them to

deciding upon such relief in favour of WWIL

(as distinct from direct relief in favour of

Enercon), the Tribunal sees no material

disadvantage to Enercon, and, as for the

Mehra directors, no possible prejudice or

other unfairness, whether as a matter of

pleading, the form of relief or otherwise.”

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It is only thereafter that the Tribunal awarded the aforesaid

amount in paragraph 331(3)(b) as follows:

“(b) Jointly and severally-

(i) to pay to WWIL the sum of INR

6,772,456,570, being the profit made by Vish

Wind on the sale of allotment rights to WWIL

in the years ending 31 March 2011 and 2012

together with interest thereon at the rate of 3%

over European Central Bank rate from those

dates until the date of this Award.

(ii) To pay to the Claimants their legal and

other costs in the sum of €3,794,970.”

59.It is thus Shri Viswanathan’s contention that it is the

decree holder alone who can execute such decree in its

favour, and that in the present case it is WWIL who is the

decree holder, insofar as paragraph 331(3)(b) is

concerned and, that, therefore, Enercon’s Chamber

Summons, to execute this portion of the award, is

contrary to the Code of Civil Procedure as well as a

number of judgments construing the Code.

60.On the other hand, the submission of the other side

is that the Mehra brothers, who are the 2

nd

and 3

rd

106

defendants in the arbitration proceedings, are in control

and management of WWIL, and have wrongfully excluded

Enercon from such control and management. WWIL,

therefore, will never put this decree into execution. This

being so, the interest of justice requires that we should

not interfere with the High Court judgment as there is no

person that would be in a position to enforce the award

apart from Enercon.

61.We are of the opinion that even though the High

Court may not be strictly correct in its appreciation of the

law, yet it has attempted to do justice on the facts of the

case as follows:

“These last words are important. If what Mr.

Mehta says is correct and the decree was in

favour of WWIL and not Enercon, that

necessarily posits a rejection of Enercon’s

claim for damages and, therefore, a material

disadvantage to Enercon. But this is not what

the Arbitral Tribunal did at all. It accepted

Enercon's plea. It accepted its argument that

the Mehras were guilty of wrongdoing. It

accepted that the Mehras were liable to make

good any advantage or benefit they have

received. The Arbitral Tribunal merely

changed the vehicle or direction by which that

107

recompense, restitution or recovery was to be

made. The nomenclature is immaterial. Given

the nature of disputes, indeed, WWIL could

never put this decree into execution. It never

sought this relief. It could not have. This is not

in fact, as paragraph 298, says a relief in

favour of WWIL at all although WWIL may

benefit from it. It is a relief and a decree in

favour of and only of Enercon.”

In this view of the matter, we do not think it appropriate, in

the interest of justice, to interfere with the impugned

judgment on this count.

62.In view of the above, the present batch of appeals is

dismissed. A copy of the judgment is to be sent to the

Ministry of Law and Justice and the Learned Attorney

General for India in view of what is stated in paragraphs

56 and 57 supra.

…………………………… J.

(R.F. Nariman)

…………………………… J.

(Navin Sinha)

New Delhi;

March 15, 2018.

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