Very Important points
1. A foreign award given after the commencement of the Arbitration and Conciliation Act, 1996 can be enforced only under the 1996 Act.
2. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before coming into force of the new Act (The Arbitration and Conciliation Act, 1996); award given after 1996 Act came into force even in proceedings commenced before can be enforced under old Act and not under new Act.
3. The phrase “in relation to Arbitral proceedings” occurring in Section 85(2) of the Arbitration and Conciliation Act, 1996 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 award becoming decree under Section 17 thereof and also appeal arising thereunder.

Headnote:(i) Arbitration and Conciliation Act, 1996-Section 85(2)-Application of new Act to proceeding commenced under 1940 Act-Repeal and savings-Scope of-Phrase ‘in relation to arbitral proceedings’ is Section 85(2) cannot be given narrow meaning-It would cover not only proceedings pending before arbitrator but would also cover proceedings before Court-Provisions of 1940 Act shall apply in relation to arbitral proceedings which have commenced before coming into force of new 1996 Act-New Act would be applicable in relation to arbitral proceedings commenced on or after new Act came into force-Award rendered under old Act cannot be enforced under new Act, in absence of agreement between parties to that effect-It is open to parties to pending arbitral proceeding under old Act to agree that new Act be applicable to such arbitral proceedings-Parties could so agree even before coming into force of new Act.
       Held : 1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before coming into force of the new Act (The Arbitration and Conciliation Act, 1996). 2. The phrase “in relation to arbitral proceedings” cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the Arbitrator. It would cover not only 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 award becoming decree under Section 17 thereof and also appeal arising thereunder. 3. In cases where arbitral proceedings have commenced before coming into force of the new Act and are pending before the Arbitrator, it is open to the parties to agree that new Act be applicable to such arbitral proceedings and they can so agree even before the coming into force of the new Act. 4. The new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act comes into force. 5. Once the arbitral proceedings have commenced, it cannot be stated that right to be governed by the old Act for enforcement of the award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the award enforced under the old Act that some legal proceedings for its enforcement must be pending under that Act at the time new Act came into force. (6) If narrow meaning of the phrase “in relation to arbitral proceedings” is to be accepted, it is likely to create great deal to confusion with regard to the matters where award is made under the old Act. Provisions for the conduct of arbitral proceedings are vastly different in both the old and the New Act. Challenge of award can be with reference to the conduct of arbitral proceedings. An interpretation which leads to unjust and inconvenient results cannot be accepted. (7) A foreign award given after the commencement of the new Act can be enforced only under the new Act. There is no vested right to have the foreign award enforced under the Foreign Awards Act (Foreign Awards (Recognition and Enforcement) Act. 1961). (Para 22)
       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) new Act shall apply in relation to arbitral proceedings which commenced on or after the new Act came into force. First limb can further be bifurcated into two : (a) Provisions of old Act shall apply in relation to arbitral proceedings commenced before the new Act came into force and (b) old Act will not apply in such cases where the parties agree that it will not apply in relation to arbitral proceedings which commenced before the new Act came into force. The expression “in relation to” is of widest import. This expression “in relation to” has to be given full effect to, particularly when read in conjunction with the word “the provisions” of the old Act. That would mean that the old Act will apply to whole gambit of arbitration culminating in the enforcement of the award. If it is 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. 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. (Para 23)
       The contention that if it is accepted that the expression “in relation to” arbitral proceedings would include proceedings for the enforcement of the award as well, the second limb of Section 85(2)(a) would become superfluous cannot be accepted. The second limb also takes into account the arbitration agreement entered into under the old Act when the arbitral proceedings commenced after the coming into force of the new Act. (Para 24)
       Multiple and complex problems would arise if the award given under the old Act is said to be enforced under the new Act. Both the Acts are vastly different to each other. It has been rightly contended that when arbitration proceedings are held under the old Act, the parties and the arbitrator keep in view the provisions of that Act for the enforcement of the award. As noted above, under the old Act, there is no requirement for the arbitrator to give reasons for the award. That is not mandatory under the new Act. Section 27 of the old Act provides that arbitrator or umpire may, if they think fit, make an interim award, unless of course different intention appears from the arbitration agreement. Interim award is also an award and can be enforced in the same way as the final award. It would certainly be a paradoxical situation if for the interim award, though given after the coming into force of the new Act, it would still be the old Act which would apply and for the final award, it would be the new Act. Yet another instance would be when under Section 13 of the old Act, the arbitrators or umpire have power to state a special case for the opinion of the Court on any question of law involved in the proceedings. Under sub-section (3) of Section 14 of the old Act when the Court pronounces its opinion thereon such opinion shall be added to and shall form part of the award. From this part of the award no appeal is maintainable under Section 39 of the old Act. (Para 27)
       Section 85(2)(a) is the saving clause. It exempts the old Act from complete obliteration so far as pending arbitration proceedings are concerned. That would include saving of whole of the old Act uptill the time of the enforcement of the award. This Section 85(2)(a) prevents the accrued right under the old Act from being affected. Saving provision preserves the existing right accrued under the old Act. There is a presumption that Legislature does not intend to limit or take away vested rights unless the language clearly points to the contrary. It is correct that the new Act is a remedial statute and, therefore, Section 85(2)(a) calls for strict construction, it being a repealing provision. But then as stated above where one interpretation would produce an unjust or an inconvenient result and another would not have those effects, there is then also a presumption in favour of the latter. (Para 28)
       It is not necessary that for the right to accrue that legal proceedings must be pending when the new Act comes into force. To have the award enforced when arbitral proceedings commenced under the old Act under that very Act is certainly an accrued right. Consequences for the parties against whom award is given after arbitral proceedings have been held under the old Act though given after the coming into force of the new Act, would be quite grave if it is debarred from challenging the award under the provisions of the old Act. Structure of both the Acts is different. (Para 32)
       In the instant case when arbitral proceedings commenced under the old Act it would be in the mind of everybody, i.e., arbitrators and the parties that the award given should not fall foul of Sections 30 and 32 of the old Act. Nobody at that time could have thought that Section 30 of the old Act could be substituted by Section 34 of the new Act. As a matter of fact appellant Thyssen in Civil Appeal No. 6036/98 itself understood that the old Act would apply when it approached the High Court under Sections 14 and 17 of the old Act for making the award rule of the Court. It was only later on that it changed the stand and now took the position that new Act would apply and for that purpose filed an application for execution of the award. By that time limitation to set aside the award under the new Act had elapsed. Appellant itself led the respondent Sail in believing that the old Act would apply. Sail had filed objections to the award under Section 30 of the old Act after notice for filing of the award was received by it on the application filed by the Thyssen under Sections 14 and 17 of the old Act. We have been informed that numerous such matters are pending all over the country where the award in similar circumstances is sought to be enforced or set aside under the provisions of the old Act. We, therefore, cannot adopt a construction which would lead to such anomalous situations where the party seeking to have the award set aside finds himself without any remedy. We are, therefore, of the opinion that it would be the provisions of the old Act that would apply to the enforcement of the award in the case of Civil Appeal No. 6036 of 1998. Any other construction on the Section 85(2)(a) would only lead to the confusion and hardship. (Para 32)
       The above construction is is consistent with the wording of Section 85(2)(a) using the terms “provision” and “in relation to arbitral proceedings” which would mean that onve the arbitral proceedings commenced under the old Act it would be the old Act which would apply for enforcing the award as well. (Para 32)
       (ii) Arbitration and Conciliation Act, 1996-Section 85(2)(a)-Construction of-Provisions of Section 1948 Act not relevant to interpret Section 85(2)(a) of 1996 Act. (Paras 32 & 33)
       (iii) Interpretation of Statutes-Interpretation of Statute which repeal old law-Purposive approach-If construction of new Act leads to inconvenient and unjust result concept of purposive approach has to be shed.
       Held : Present day the courts tend to adopt 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. But then if the construction of the new Act leads to inconvenient and unjust results, the concept of purposive approach has to be shed. (Paras 26 & 27)
       (iv) Arbitration and Conciliation Act, 1996-Section 85(2)-Application of provisions of New Act to execute award passed under provision of old Act-Arbitration proceedings commenced under old Act-Award came to be given after New Act came into force-Arbitration agreement provided that parties would be bound by arbitration law ‘for the time being in force’-Held, award could be executed under provisions of New Act.
       Held : Parties can agree to the applicability of the new Act even before the new Act comes into force and when the old Act is still holding the field. There is nothing in the language of Section 85(2)(a) which bars the parties from so agreeing. There is, however, a bar that they cannot agree to the applicability of the old Act after the new Act has come into force when arbitral proceedings under the old Act have not commenced though the arbitral agreement was under the old Act. (Para 35)
       Section 28 of the Contract Act contains provision regarding agreements in the restraint of legal proceedings. Exception 1 to Section 28 of the Contract Act does not render illegal a contract by which the parties agree that any future dispute shall be referred to arbitration. That being so parties can also agree that the provisions of the arbitration law existing at that time would apply to the arbitral proceedings. It is not necessary for the parties to know what law will be in force at the time of the conduct of arbitration proceedings. They can always agree that provisions that are in force at the relevant time would apply. In this view of the matter, if the parties have agreed that at the relevant time provisions of law as existing at that time would apply, there cannot be any objection to that. (Para 37)
       Arbitration clause in the contract in the case of Rani Constructions (Civil Appeal 61 of 1999) uses the expression “for the time being in force” meaning thereby that provision of that Act would apply to the arbitration proceedings which will be in force at the relevant time when arbitration proceedings are held. The expression “for the time being in force” not only refers to the law in force at the time the arbitration agreement was entered into but also to any law that may be in force for the conduct of arbitration proceedings, which would also include the enforcement of the award as well. Expression “unless otherwise agreed” as appearing in Section 85(2)(a) of the new Act would clearly apply in the case of Rani Construction in Civil Appeal No. 61 of 1999. Parties were clear in their minds that it would the old Act or any statutory modification or re-enactment of that Act which would govern the arbitration. We accept the submission of the appellant Rani Construction that parties could anticipate that the new enactment may come into operation at the time the disputes arise. We have seen Section 28 of the Contract Act. It is difficult for us to comprehend that arbitration agreement could be said to be in restraint of legal proceedings. There is no substance in the submission of respondent that parties could not have agreed to the application of the new Act till they knew the provisions thereof and that would mean that any such agreement as mentioned in the arbitration clause could be entered into only after the new Act had come into force. When the agreement uses the expressions “unless otherwise agreed” and “law in force” it does give option to the parties to agree that new Act would apply to the pending arbitration proceedings. That agreement can be entered into even before the new Act comes into force and it cannot be said that agreement has to be entered into only after coming into force of the new Act. (Para 35)
       (v) Arbitration and Conciliation Act, 1996-Section 85(2)-Foreign Awards Act-Execution of foreign award given after commencement of 1996 Act-Section 85(2)(a) of 1996 Act would not keep alive Foreign Awards Act for purpose of enforcement of foreign award given after date of commencement of 1996 Act-Such an award can be enforced only under 1996 Act.
       Held : Foreign Awards Act gives the party right to enforce the foreign award under that Act. But before that right is exercised Foreign Awards Act has been repealed. It cannot, therefore, be said that any right had accrued to the party for him to claim to enforce the foreign award under the Foreign Awards Act. After the repeal of the Foreign Awards Act a foreign award can now be enforced under the new Act on the basis of the provisions contained in Part II of the new Act depending whether it is a New York Convention Award or Geneva Convention Award. It is irrespective of the fact when the arbitral proceedings commenced in a foreign jurisdiction. Since no right has accrued Section 6 of the General Clauses Act would not apply. (Para 38)
       In the very nature of the provisions of Foreign Awards Act it is not possible to agree to the submissions that Section 85(2) (a) of the new Act would keep that Act alive for the purpose of enforcement of a foreign award given after the date of commencement of the new Act though arbitral proceedings in foreign land had commenced prior to that. It is correct that Section 85(2)(a) uses the words “the said enactments” which would include all the three Acts, i.e., the old Act, Foreign Awards Act and the Arbitration (Protocal and Convention) Act, 1937. Foreign Awards Act and even the 1937 Act contain provisions only for the enforcement of the foreign award and not for the arbitral proceedings. Arbitral proceedings and enforcement of the award are two separate stages in the whole process of arbitration. When the Foreign Awards Act does not contain any provision for arbitral proceedings it is difficult to agree to the argument that in spite of that the applicability of the Foreign Awards Act is saved by virtue of Section 85(2)(a). As a matter of fact if we examine the provisions of Foreign Awards Act and the new Act there is not much difference for the enforcement of the foreign award. Under the Foreign Awards Act when the court is satisfied that the foreign award is enforceable under that Act the court shall order the award to be filed and shall proceed to pronounce judgment accordingly and upon the judgment so pronounced a decree shall follow. Sections 7 and 8 of the Foreign Awards Act respectively prescribe the conditions for enforcement of a foreign award and the evidence to be produced by the party applying for its enforcement. Definition of foreign award is same in both the enactments. Sections 48 and 47 of the new Act correspond to Sections 7 and 8 respectively of the Foreign Awards Act. While Section 49 of the new Act states that where the court is satisfied that the foreign award is enforceable under this Chapter (Chapter I, Part II, relating to New York Convention Awards) the award is deemed to be decree of that court. The only difference, therefore, appears to be that while under the Foreign Awards Act a decree follows, under the new Act foreign award is already stamped as the decree. Thus if provisions of the Foreign Awards Act and the new Act relating to enforcement of the foreign award are juxtaposed there would appear to be hardly any difference. (Para 39)
       Again a bare reading of the Foreign Awards Act and the Arbitration (Protocol and Convention) Act, 1937 would show that these two enactments are concerned only with recognition and enforcement of the foreign awards and do not contain provisions for the conduct of arbitral proceedings which would, of necessity, have taken place in a foreign country. The provisions of Section 85(2)(a) in so far these apply to the Foreign Awards Act and 1937 Act, would appear to be quite superfluous. Literal interpretation would render Section 85(2)(a) unworkable. Section 85(2)(a) provides for a dividing line dependent on “commencement of arbitral proceedings” which expression would necessarily refer to Section 21 of the new Act. (Para 40)
       Section 2(2) read with Section 2(7) and Section 21 falling in Part I of the new Act make it clear that these provisions would apply when the place of arbitration is in India, i.e., only in domestic proceedings. There is no corresponding provision anywhere in the new Act with reference to foreign arbitral proceedings to hold as to what is to be treated as “date of commencement” in those foreign proceedings. We would, therefore, hold that on proper construction of Section 85(2)(a) the provision of this sub-section must be confined to the old Act only. Once having held so it could be said that Section 6 of the General Clauses Act would come into play and foreign award would be enforced under the Foreign Awards Act. But then it is quite apparent that a different intention does appear that there is no right that could be said to have been acquired by a party when arbitral proceedings are held in a place resulting in a foreign award to have that award enforced under the Foreign Awards Act. (Para 40)
       Therefore a foreign award given after the commencement of the new Act can be enforced only under the new Act. There is no vested right to have the foreign award enforced under the Foreign Awards Act (Foreign Awards (Recognition and Enforcement) Act. 1961). (Para 22)
       (vi) Words and Phrases-Phrase “in relation to” occurring in Section 85(2)(a)-Meaning of. (Paras 22, 23 & 24)
       (vii) Words and Phrases-”For the time being in force”-meaning of. (Paras 35 & 36)

Judgment

D.P. Wadhwa, J. -The Facts :

These three appeals raise three different questions relating to the construction and interpretation of Section 85 of the Arbitration and Conciliation Act, 1996 (the ‘new Act’ for short) which contains repeal and saving provision of the three Acts, namely, the Arbitration (Protocol and Convention) Act 1937, the Arbitration Act, 1940 (the ‘old Act’ for short) the Foreign Awards (Recognition and Enforcement) Act, 1961 (the ‘Foreign Awards Act’ for short).

2. This Section 85 of the new Act we reproduce at the outset :

“85. Repeal and saving.-(1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.

(2) Notwithstanding such repeal,-

(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;

(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.”

3. In the case of Thyssen Stahlunion GMBH (CA No. 6036 of 1998) the contract for sale and purchase of prime cold rolled mild steel sheets in coils contains arbitration agreement. Relevant clauses are as under :

“Clause 12 : Legal Interpretation

12.1 This contract shall be governed and construed in accordance with the Laws of India for the time being in force.

12.2 To interpret all commercial terms and abbreviations used herein which have not been otherwise defined, the rules of “INCOTERMS 1990” shall be applied.

Clause 13 : Settlement of Disputes

All disputes of differences whatsoever between the parties hereto arising out of or relating to the construction, meaning or operation or effect of this contract or the breach thereof shall unless amicably settled between the parties hereto; be settled by arbitration in accordance with the Rules of Conciliation and Arbitration in accordance with the Rules of Conciliation and Arbitration of the International Chamber of Commerce (ICC). Paris, France by a sole Arbitrator appointed by the Chairman of the Arbitral Tribunal of the Court of Arbitration of ICC and the Award made in pursuance thereof shall be binding on both the parties. The venue for the arbitration proceedings shall be New Delhi, India.

4. Disputes and differences having arisen, the arbitration proceedings commenced on September 14, 1995 under the old Act. On this date request for arbitration was made to the ICC under the arbitration clause in the contract. Mr. Cecil Abraham of the Malaysian Bar was appointed sole arbitrator on November 15, 1995. Terms of reference in the arbitration were finalised on May 13, 1996. Hearing before the sole arbitrator took place from January 7, 1997 till January 28, 1997. Award was given on September 24, 1997. By this time on January 25, 1996 the new Act had come into force. On October 13, 1997 Thyssen filed a petition in the Delhi High Court under Sections 14 and 17 of the old Act for making the award rule of Court (Arbitration Suit No. 352-A/97). While these proceedings were pending in the High Court, Thyssen, on February 12, 1998, filed an application under Section 151 of the Code of Civil Procedure for stay of the proceedings. On the following day Thyssen filed an application in the High Court for execution of the award under the new Act (Execution Petition No. 47/98). The ground taken was that the arbitration proceedings had been terminated with the making of the award on September 24, 1997 and, therefore, the new Act was applicable for enforcement of the award. The respondent, Steel Authority of

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1999 Supreme(SC) 1162

Cases Referred (21)