http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10

CASE NO.:

Appeal (civil) 9672 of 2003

PETITIONER:

Milkfood Limited

RESPONDENT:

M/s GMC Ice Cream (P) Ltd.

DATE OF JUDGMENT: 05/04/2004

BENCH:

S.H. KAPADIA

JUDGMENT:

J U D G M E N T

WITH

CIVIL APPEAL Nos. 9673-9674 OF 2003

KAPADIA, J.

The question for consideration in the present appeals is

\027 as to whether the Arbitration Act, 1940 (hereinafter referred

to as "the 1940 Act") would apply in the facts and

circumstances of the case or whether the case will have to be

dealt with under the Arbitration & Conciliation Act, 1996

(hereinafter referred to as "the 1996 Act")?

Briefly, the facts of the case are as follows. The parties

hereto entered into an agreement on 7.4.1992 in terms whereof

the first respondent herein was to manufacture and pack in its

factory a wide range of ice cream for and on behalf of the

appellant. The agreement was to remain valid for five years.

Admittedly, the contract contained an arbitration agreement

being clause 20 thereof which is as under:\027

"In the case of any dispute or any difference

arising at any time between the Company and the

Manufacturer as to the construction, meaning or

effect of this Agreement or any clause or thing

contained therein or the rights and liabilities of the

Company or the Manufacturer hereunder in

relation to the premises, shall be referred to a

single arbitrator, in case the parties can agree upon

one, and failing such Agreement, to two arbitrators

one to be appointed by either party and in case of

disagreement between the two arbitrators aforesaid

and in so far as and to the extent that they disagree

to, an umpire to be appointed by the said two

arbitrators before they enter upon the reference.

All such arbitration proceedings shall be in

accordance with and subject to the provisions of

the Arbitration Act, 1940, or any statutory

modification or reenactment."

On the strength of this agreement dated 7.4.1992, the

respondent herein filed title suit No.40 of 1995 on 20.5.1995 for

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10

an injunction restraining the appellant herein from disturbing

manufacture and supply of ice cream. In the said suit, the

appellant applied for stay of suit vide application dated

17.7.1995 under section 34 of the 1940 Act. By order dated

3.8.1995, the trial Court stayed the suit. Being aggrieved, the

respondent herein filed an application before Additional District

Judge, Gaya, which was dismissed on 13.3.1996. Aggrieved,

the respondent herein carried the matter in revision to the High

Court which was disposed of on 6.5.1997 in terms of the

following order:\027

"Before this court parties have agreed that the

dispute between them may be referred as per the

agreement to arbitrators chosen by the parties. The

plaintiff has chosen Shri Uday Sinha, a retired

judge of this court and Senior Advocate of the

Supreme Court, while the defence have chosen

Shri Hari Lal Agarwal, Senior Advocate of the

Supreme Court, a former judge of this court and

Chief Justice of Orissa High Court as arbitrators.

The dispute between the parties is referred to

arbitrators.

I hope that the learned Arbitrators will dispose of

the arbitration proceedings within three months of

the entering the reference."

The above order is a consent order by which application

for stay of the suit stood disposed of. Pursuant to the consent

order, the arbitrators nominated by the respective parties in turn

appointed an umpire. On 19.8.1997, the parties were asked to

appear. The respondent was called upon to file statement of

claim. An issue arose for determination at that stage as to

which of the two Acts applied to the arbitration. On behalf of

the appellant, it was submitted that application under section 34

of the 1940 Act constituted a request to refer the matter to the

arbitration and consequently the request marked the

commencement of the arbitration proceedings. This argument

was rejected by the arbitrators on the ground that a proceeding

under section 34 of the 1940 Act was essentially a defence to

the suit and it did not amount to referring a claim to arbitration.

It was further held that the arbitration commenced in the present

case when the claim was referred to the arbitrators on 6.5.1997.

In this connection, reliance was placed on the provisions of

section 85(2)(a) of the 1996 Act. It was further held that the

order dated 6.5.1997 was a consent order and consequently, the

arbitration proceedings commenced only after the said order

which was passed after the new Act came into force. At this

stage, it may be pointed out that in the course of hearing before

the arbitrators and before the decision could be given on the

above question, the appellant herein filed an application before

the arbitrators dated 7.3.1998 enclosing notice dated 14.9.1995

served by the appellant on the respondent herein whereby the

appellant had appointed Mr. H.L. Aggarwal as their arbitrator

and by which notice the respondent herein was called upon to

appoint their own arbitrator in terms of clause 20 quoted above.

In the application dated 7.3.1998, the appellant submitted that

in view of the above notice dated 14.9.1995, the arbitration

proceedings had commenced under the 1940 Act. By majority

decision, the arbitrators took the view that the said notice dated

14.9.1995 did not make any difference to the question of

commencement of the arbitral proceedings in view of the

provisions of section 85(2)(a) of the 1996 Act as there was a

clear and explicit agreement between the parties recorded in the

consent order dated 6.5.1997. It was held that in relation to

arbitration proceedings which commenced before the 1996 Act,

parties were free to agree as to when arbitration proceedings are

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10

to be regarded as commenced for the purposes of section

85(2)(a) of the 1996 Act and since there was such an agreement

in the consent order dated 6.5.1997, the arbitration proceedings

had commenced under the 1996 Act. It was further held that by

order dated 6.5.1997 passed by the High Court, the arbitration

was set in motion by the parties when they nominated their

respective arbitrators and the Court ordered that the dispute

between the parties be referred to the arbitrators and that the

arbitration proceedings be disposed of within three months of

entering upon the reference. It was held that arbitration

commenced when there was a completely constituted

arbitration Tribunal to decide the dispute, which on facts took

place only after the 1996 Act commenced. It was further held

that the notice dated 14.9.1995 served by the appellant was a

non-starter and that such a notice did not commence arbitral

proceedings in terms of section 85(2) of the 1996 Act.

Consequently, by majority decision, it was held that the consent

order dated 6.5.1997 marked the commencement of the arbitral

proceedings and, therefore, the 1996 Act was applicable.

One of the learned arbitrators, Mr. H.L. Aggarwal in his

dissenting opinion held that the arbitration proceedings

commenced in the present case when the notice dated 14.9.1995

was issued by the appellant to the respondent. In this

connection, he placed reliance on section 37(3) of the 1940 Act.

Questioning the majority decision of the arbitrators, the

appellant herein moved an application under section 33 of the

1940 Act in the High Court. A learned single Judge of the High

Court held that in the present case the disputes were referred to

for arbitration only on 6.5.1997 and, therefore, the parties have

to be governed by the provisions of the 1996 Act. The Letters

Patent Appeal preferred therefrom was also dismissed by a five-

Judge Bench of the High Court as not maintainable.

Mr. Harish Salve, learned senior counsel appearing on

behalf of the appellant submitted that having regard to the fact

that the notice appointing the arbitrator had been served by the

appellant upon the respondent as far back as 14.9.1995 in terms

whereof the arbitration proceedings commenced, the 1940 Act

was applicable in the instant case. Referring to section 21 and

section 85 (2) (a) of the 1996 Act, it was urged that there are

well known expressions in arbitral proceedings being

"commencement of the arbitration proceedings", "continuance

of arbitration proceedings", "entering into reference", which in

different context could carry different meanings. The

Parliament however in the 1996 Act has chosen to use the

expression "commencement of arbitral proceedings", in section

21 the meaning thereof as is understood in common parlance

should be applied. Strong reliance in this connection was

placed on the decision of Queen's Bench Division in Charles

M. Willie & Co. (Shipping) Ltd. v. Ocean Laser Shipping Ltd.

[(1999) 1 Lloyds Law Report 225].

Learned counsel for the appellant further submitted that

there was a conflict in the decision of the two-Judge Benches of

this Court as regards the construction of the arbitration

agreement as contained in clause 20 thereof vis-`-vis the

applicability of the 1996 Act. In this connection, my attention

was drawn to the decision of this Court in the case N.S. Nayak

& Ors. v. State of Goa [(2003) 6 SCC 56], wherein allegedly a

different note has been struck from an earlier decision of this

Court in Delhi Transport Corporation Ltd. v. Rose Advertising

[(2003) 6 SCC 36].

Per contra, Mr. R.K. Jain, learned senior counsel

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10

appearing on behalf of the respondent urged that having regard

to the object of 1996 Act, as also in view of the fact that the

arbitrators had already entered into the reference pursuant to the

consent order dated 6.5.1997, this Court may not interfere with

the impugned judgment in exercise of jurisdiction under Article

136 of the Constitution. Strong reliance was placed on the

judgment of this Court in the case Chandra Singh v. State of

Rajasthan [(2003) 6 SCC 545].

It was next contended that a proceeding commences in

the Court of law when a plaint is filed and by analogy an

arbitration proceeding must be held to be initiated when a claim

petition is filed by the claimant before the arbitrator; that before

a proceeding is said to be initiated before a Court or Tribunal,

the existence of such Tribunal was a condition precedent for

initiation of proceedings. The learned counsel, therefore,

contended that for purposes of determining the point of time

"when an arbitration proceeding commences", an arbitral

Tribunal must be constituted. Reliance in this connection was

placed on the judgment of this Court in the case of Secy. to

Government of Orissa v. Sarbeswar Rout reported in [(1989) 4

SCC 578]. It was further submitted that an arbitrator enters into

a reference when he applies his mind to the differences and

disputes between the parties and not prior thereto.

Alternatively, it was submitted that the proceeding commences

when the arbitrator enters upon the reference. Reliance was

placed on the judgment of this Court in the case Sumitomo

Heavy Industries Ltd. v. ONGC Ltd. reported in [(1998) 1 SCC

305]. It was further submitted that in any event, the starting

point for commencement of the arbitration proceedings would

be when the dispute was referred to by the High Court on

6.5.1997 and not prior thereto.

Learned counsel for the respondent contended that in any

event as the parties had agreed in terms of clause 20 of the

contract that all such arbitration proceedings shall be in

accordance with and subject to the provisions of the 1940 Act

or any statutory modifications or re-enactment thereof, they

must be deemed to have agreed that new Act shall apply.

Strong reliance has been placed on the judgment of this Court

in the case of Thyssen Stahlunion GMBH v. Steel Authority of

India Ltd. reported in [(1999) 9 SCC 334]}, Delhi Transport

Corporation Ltd. (supra) and N.S. Nayak (supra). Lastly, it

was submitted that section 37 of the 1940 Act, being for the

purposes of commencement of the period of limitation, had no

application whatsoever for the purposes of determining the

question as to whether the 1940 Act will apply or the 1996 Act

will apply.

I may now notice the provisions of the 1940 Act. Section

2 defines arbitration agreement to mean a written agreement to

submit present or future dispute to the arbitration, whether an

arbitrator is named therein or not. Section 2(e) defines

"reference" to mean reference to arbitration. Therefore, the term

"arbitration agreement" is different from the term "reference".

"An agreement to refer" and "a reference" are two separate

transactions while an arbitration agreement is only a contract to

refer, reference is delegation of authority to a named arbitrator.

Section 8 confers power upon the Court to appoint arbitrator

where the parties concurred in the appointment of an arbitrator.

In such a case, after the Court appointed an arbitrator, it is the

parties who referred the dispute to him. On the other hand,

section 20 enabled a party to apply for filing of the arbitration

agreement in the Court and that section empowered the Court to

make an order of reference to the arbitrator appointed by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10

parties and in the absence of such appointment, the Court was

empowered to make an order of reference to the arbitrator

appointed by it. In other words, under section 20, unlike

section 8, it is the Court which referred the dispute. In the case

of Fertilizer Corporation of India Limited v. M/s Domestic

Engineering Installation reported in [AIR 1970 Allahabad 31],

it has been held that under section 20(4), three courses were

open to the Court. After the arbitration agreement was ordered

to be filed, the Court shall proceed to make reference, firstly to

the arbitrator appointed by the parties in the agreement,

secondly to the arbitrator not named in the agreement but with

regard to whom the parties agreed otherwise, and thirdly when

the parties did not agree upon an arbitrator, to an arbitrator

appointed by itself. This difference between section 8 and 20

was important as under section 48 of the 1940 Act, it was

provided that the Act shall not apply to any reference pending

at the commencement of the said Act, to which the law in force

immediately prior to the commencement shall continue to apply

notwithstanding any repeal effected by the Act. Section 48 was

a transitory provision in which the emphasis was on

"reference". Section 48 of the 1940 Act which corresponded to

section 25 of the English Arbitration Act 1899 was a subject of

debate in larger number of matters as different dates for

different stages of arbitration proceedings were provided for.

Since transitory provision is to be interpreted in the light

of facts and circumstances existing on the date the new Act

coming into force, section 21 and 85(2) of the 1996 Act are

quoted below:\027

"21. Commencement of arbitral proceedings. \027

Unless otherwise agreed by the parties, the arbitral

proceedings in respect of a particular dispute

commence on the date on which a request for that

dispute to be referred to arbitration is received by

the respondent.

85. Repeal and savings.\027 (1) \005.

(2) Notwithstanding such repeal,\027

(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."

A bare reading of section 21 of the 1996 Act indicates

that arbitral proceedings in respect of a dispute commences on

the date on which request to refer such dispute to arbitration is

received by the respondent, unless otherwise agreed by the

parties. Section 21 is similar to section 14 of the English

Arbitration Act 1996 which provides that parties are free to

agree as to when an arbitration is to be regarded as commencing

both under the Arbitration Act 1996 and for limitation

purposes. In the absence of such agreement, section 14 of that

Act applies. Russell on Arbitration, [XXII Ed. Page 165] says

as follows:-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10

"Commencement for limitation purposes. The

parties are free to agree when an arbitration is to be

regarded as commencing both under the

Arbitration Act 1996 and for limitation purposes.

In the absence of agreement the provisions of

section 14 of the Arbitration Act 1996 apply.

Under that section an arbitration is treated as being

commenced when a notice in writing is served on

the other party requiring him to agree to the

appointment of an arbitrator or, if the parties are

each to make an appointment, requiring him to

appoint an arbitrator. The party giving the notice

does not have to have already appointed his own

arbitrator. Where, however, the arbitration

agreement specifies the person to be appointed as

arbitrator, the arbitration is treated as being

commenced when a notice in writing is served on

the other party requiring him to submit the dispute

to that person. Finally, if the arbitrator is to be

appointed by someone other than a party to the

arbitration proceedings, such as an arbitral

institution, the arbitration is treated as being

commenced when notice in writing is given to that

other person requesting him to make the

appointment. It is prudent to send to the

respondent a copy of the notice addressed to the

person requested to make the appointment as this

may avoid arguments about when the notice was

given."

In the present matter, one is concerned with transitional

provision, i.e. section 85(2)(a) which enacts as to how the

statute will operate on the facts and circumstances existing on

the date it comes into force and, therefore, the construction of

such a provision must depend upon its own terms and not on

the basis of section 21 (see Principles of Statutory

Interpretation by G.P. Singh 8th Ed. Page 188). In Thyssen's

case (supra), section 48 of the old Act and section 85(2)(a) of

the 1996 Act came for consideration. It has been held by this

Court that there is a material difference between section 48 of

the 1940 Act, which emphasized the concept of "reference" vis-

`-vis section 85(2)(a) of the 1996 Act which emphasizes the

concept of "commencement"; that there is a material difference

in the scheme of two Acts; that the expression "in relation to"

appearing in section 85(2)(a) refers to different stages of

arbitration proceedings under the old Act; and lastly that section

85(2)(a) provides for limited repeal of the 1940 Act, therefore, I

am of the view that one cannot confine the concept of

'commencement' under section 85(2)(a) only to section 21 of

the 1996 Act which inter alia provides for commencement of

arbitral proceedings from the date on which a request to refer a

particular dispute is received by the respondent. In this

connection, I may usefully quote commentary on

"Commercial Arbitration" (2nd Edition, page 169) by

Mustill & Boyd which reads as under:\027

"It is common to use expressions such as 'a

notice of arbitration' or 'the commencement of an

arbitration' as if they had the same meaning for all

purposes, in the context of all the various possible

types of agreement to arbitrate. This is misleading,

for when enquiring whether sufficient steps have

been taken to set an arbitration in train, the answer

may depend on the reason why the question is

being asked. There are several different reasons

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10

why it may matter when the arbitration has begun.

Of these, the following are probably the most

important.

First, the question may be whether, at a

given moment, there is any person or group of

persons with jurisdiction to make an award, and

power to give directions and make rulings in the

course of the reference. For this purpose, what is

being considered is whether the arbitration has

reached the stage where there is a completely

constituted arbitral tribunal.

Second, the problem may relate to the

jurisdiction of the arbitrator. Thus, if there is a

general reference of disputes the scope of the

reference will be determined by the state of the

disputes at the moment when the arbitration was

begun. Disputes arising thereafter must be the

subject of a separate arbitration, unless brought

within the existing reference by consent.

Third, the purpose of the enquiry may be to

ascertain whether the claimant has taken such steps

as may be prescribed by statute or contract for the

purpose of preventing his claim from being time

barred.

Finally, it may be necessary to consider

whether one party has taken sufficient steps

towards setting the arbitration in motion to give

him certain procedural advantages in the

appointment of the tribunal: either as a preliminary

to appointing his own nominee as sole arbitrator,

or at least by way of preventing the other party

from exercising his statutory right to make, or

procure, a nomination in default.

It is plain that expressions such as 'the

commencement of the arbitration' must have

different meanings in these various contexts. For

example, the giving of a notice to concur in the

appointment of a sole arbitrator is sufficient to

prevent time from running under the Limitation

Act 1980; and it is also an essential first step

towards the making of a default appointment under

section 10(a) of the Arbitration Act. But the

arbitration has not at this stage 'commenced' in

any practical sense, since there is no person or

group of persons charged with any authority to

determine the matters in dispute."

Therefore, the position in law is that before the English

Arbitration Act 1996, the expression "commencement of

arbitration proceedings" depended upon the facts of each case.

There was no single conclusive test to determine

'commencement". In a case, where it was necessary to consider

whether one party had taken sufficient steps for setting

arbitration in motion, the court has to consider the date of

setting up of arbitral tribunal. In the matter involving the scope

of reference the test of the state of dispute was relevant.

Therefore, the expression "commencement of arbitration

proceedings' had different meanings in various contexts. The

learned authors have further observed that although notice to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10

concur is an essential step, arbitration proceedings cannot be

said to have commenced in practical sense till tribunal charged

with authority stood duly constituted. It is for this reason that

English Arbitration Act 1996 now provides under section 14

that commencement will take place from the date when notice

to concur is served. This view is supported by the judgment of

the division bench of this Court in Delhi Transport

Corporation Ltd. (supra), in which a similar question was

raised. In that matter, the parties had entered into an agreement

on 15.1.1993 for display of advertisement on DTC buses in

Delhi. The agreement was for a period of three years

commencing from 15.1.1993. The agreement contained an

arbitration clause. Disputes arose between the parties. A

request was made by the contractor on 9.1.1995 for

appointment of arbitrator to settle the disputes. This was

followed by another letter dated 26.11.1995 containing a

similar request. On 16.1.1996, he filed a petition under section

20 of the 1940 Act. The counsel appearing for DTC made a

statement in the court on 19.7.1996 that an arbitrator had been

appointed on 4.7.1996 as per the agreement. The petition

became infructuous in view of that statement. The arbitrator

conducted the proceedings and made an award on 6.10.1998.

To enforce the award, the contractor filed an application under

1996 Act. The DTC contested that application on the ground

that the 1996 Act was not applicable and, therefore, the

execution petition was not maintainable. The contention of the

DTC before the High Court was that the proceedings had

commenced under the old Act. This objection was upheld by

the learned single Judge based on the view that the arbitration

proceedings had commenced on the date when request for

appointment of arbitrator was made which was prior to

16.8.1996 when the new Act came into force. The contractor

went in appeal. The division bench of the High Court found on

facts that the parties went for arbitration with clear

understanding that the proceedings would be conducted under

the new Act, particularly when the appointment of arbitrator

was made after the new Act had come into force and

particularly when the parties had participated in the arbitration

proceedings with the understanding that the proceedings would

be governed by the new Act. Hence, the High Court decided

the matter in favour of the contractor. Aggrieved, the DTC

came in appeal to this Court. This Court found on facts that the

arbitration clause, which is identical to the clause in the present

case, showed that the parties had agreed to be governed by the

law in force at the relevant time and such arbitration clauses

were recognised under the new Act. This Court further found

from the conduct of the arbitration proceedings and the

participation of the parties therein that the parties had agreed to

proceed under the 1996 Act and, accordingly, this Court upheld

the judgment of the division bench of the High Court. In my

view the said judgment applies to the present case. The point to

be noted is that while construing section 85(2) of the 1996 Act,

which is a transitional provision, the terms of the arbitration

clause and the conduct of the parties were taken into account.

Therefore, interpretation of section 85(2)(a) cannot be confined

to section 21 of the 1996 Act. However, in cases where the

new Act is applicable one has to go by section 21 and in which

case arbitration proceedings will commence from the date when

request is received by the respondent for referring the dispute to

arbitration, unless the parties have agree to the contrary.

In the case of N.S. Nayak (supra), this court held that

even in cases of pending arbitration proceedings the parties had

an option of changing the procedure so as to be governed by the

provisions of the 1996 Act.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10

In the case of Charles M. Willie & Co. (Shipping) Ltd.

(supra), the facts were as follows. By a memorandum of

agreement dated April 1, 1990, Charles M. Willie & Co.

(Shipping) Ltd. sold their vessel to Ocean Laser Shipping Ltd.

The MOA provided for an arbitration clause, which inter alia

stated that if any dispute arises in connection with the contract,

the same shall be decided by a single arbitrator and if the parties

did not agree on the appointment of a single arbitrator, the

dispute shall be settled by three arbitrators, each party

appointing one arbitrator, the third to be appointed by London

Maritime Arbitrators Association. On 21.11.1990, Willie

received a letter from solicitor of Ocean Laser Shipping Ltd.

enquiring about an engine stoppage in January, 1988.

Consequently, the dispute started. On 12.3.1992, Ocean Laser

Shipping Ltd. through their solicitor invited Willie & Co. to

agree on the appointment of a single arbitrator and further

stated that in the event of Willie & Co.'s failure to nominate its

arbitrator by 3.4.1992, Ocean Laser Shipping Ltd. appointed

one Mr. Kazantzis as an arbitrator. On 5.11.1993, Ocean Laser

submitted their claim before the arbitrator. On 18.2.1994,

points of defence were filed. One of the points which arose for

determination was as to when the arbitration could be said to

have commenced. Taking a clue from section 34(3) of the

Limitation Act, 1980 which provided that an arbitration should

be treated as having been commenced when one party served on

the other party a notice requiring him to agree to the

appointment of an arbitrator, it was held by Queen's Bench that

commencement took place from receipt of such notice. This

judgment has no application to the facts of the present case.

The present case involves interpretation of transitional

provisions, which was not in issue in the said judgment.

Further, the judgment of Queen's Bench was based on

provisions of Limitation Act, by analogy. Further, the

judgment of Queen's Bench was delivered under the

Arbitration Act, 1996 under which the parties are free to agree

when arbitration is to be regarded as having commenced both

under the said Act and for limitation purposes and that in the

absence of the agreement, the provisions of section 14 of the

English Arbitration Act, 1996 were to apply.

To sum up, in this case, the question concerns

interpretation of transitional provisions; that section 85(2)(a)

emphasizes the concept of "commencement" whereas section

48 of the 1940 Act emphasized the concept of "reference"; that

section 85(2)(a) provides for implied repeal; that the scheme of

1940 Act is different from the 1996 Act; that the word

"reference" in section 48 of the old Act had different meanings

in different contexts; and for the said reasons, I am of the view

that while interpreting section 85(2)(a) in the context of the

question raised in this appeal, one cannot only rely on section

21 of 1996 Act.

In the light of what is stated above, I now refer to the

facts of the present case. The parties entered into an agreement

on 7.4.1992 which contained an arbitration clause 20, which

inter alia stated that in the case of dispute between the parties

arising in relation to the contract, the dispute shall be referred to

a single arbitrator, in case both sides agree upon one such

arbitrator and failing such agreement, the dispute shall stand

referred to two arbitrators, one to be appointed by the either

party, and in case of disagreement, between the two arbitrators,

the dispute was to be referred to an umpire to be appointed by

the two arbitrators. Before entering upon the reference under

clause 20 quoted above, all such arbitration proceedings were to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10

be governed by the provisions of the Arbitration Act, 1940 or

under any statutory re-enactment. This clause is similar to the

one considered by this Court in the case of Delhi Transport

Corporation Ltd. (supra). On the strength of the agreement

dated 7.4.1992, the respondent herein filed title suit No.40 of

1995 for injunction and in the said suit, the appellant herein

applied for stay under section 34 of the 1940 Act. Suffice it to

state that on 6.5.1997, when the matter came up before the High

Court, the parties agreed that all disputes between them may be

referred to arbitrators chosen by the parties as per the

agreement. A consent order was accordingly passed on that day

by the High Court referring the dispute to the arbitrators.

Therefore, for all practical purposes, the arbitration commenced

on 6.5.1997, by which time the 1996 Act had come into force.

In the circumstances, I am in agreement with the majority

decision of the arbitrators that the proceedings in the present

case would be governed by the provisions of the 1996 Act.

For above reasons, I respectfully dissent from the opinion

of Sinha, J. Consequently I am of the view that this Civil

Appeal ought to fail and be dismissed with no order as to costs.

CIVIL APPEAL Nos. 9673-9674 OF 2003

Now coming to the Civil Appeal Nos.9673-9674 of 2003,

the facts briefly are as follows. On 6.4.1998, the learned

arbitrators by majority decision took the view that in the present

case the arbitration proceedings had commenced on 6.5.1997

when a consent order was passed by the Patna High Court and,

therefore, the proceedings were governed by the 1996 Act.

Aggrieved, the appellant herein had moved the single Judge of

Delhi High Court. By order dated 13.10.1998, the learned

single Judge of the High Court was pleased to uphold the

majority decision dated 6.4.1998. Being aggrieved, the

appellant carried the matter in Letters Patent appeal which was

dismissed as not maintainable. Having regard to the provisions

of section 39 of the 1940 Act as interpreted by this Court in the

case of Union of India v. Mohindra Supply Company reported

in [AIR 1962 SC 256] second appeal, which included Letters

Patent appeal under section 39(2), was not maintainable.

Accordingly, the civil appeal Nos.9673-74 of 2003 fail and are

dismissed.

There shall be no order as to costs in all the appeals.