2010 Supreme(Cal) 696

AIR 2010 Cal 172,
IN THE HIGH COURT OF CALCUTTA
Ashim Kumar Banerjee and Kalidas Mukherjee, JJ.
Bhilai Wires Limited – Appellant
Vs.
Bharat Sanchar Nigam Ltd. – Respondent
APO No. 26 of 2005 and A.P. No. 1 of 2001
Decided On: 29.06.2010

The commencement of arbitration proceedings under the new law is permissible when the request for arbitration was made prior to the repeal of the old law, provided that the parties agree to be bound by the new law by agreement, which may be express, implied, or manifested by their conduct.

Headnote:

ARBITRATION - Old-New Law Controversy - Limitation - Interest - Applicability of New Arbitration and Conciliation Act, 1996 - Whether the commencement of arbitration proceedings under the new law is permissible when the request for arbitration was made prior to the repeal of the old law - Whether the subsequent purchase orders issued under a parent agreement constitute separate contracts - Whether interest can be awarded when the principal claim is disputed - Interpretation of relevant provisions of the Arbitration and Conciliation Act, 1996.

Fact of the Case:

The appellant and respondent entered into an agreement dated December 5, 1985, for the supply of wire required for telecommunication purposes. The appellant contended that the agreement was a parent agreement under which different purchase orders were issued, including one on December 5, 1985, followed by three others dated September 1, 1986, May 27, 1987, and March 7, 1988. The respondent, however, contended that all four purchase orders were distinct and would constitute a separate agreement and had no connection with the first agreement dated December 5, 1985. Disputes arose when the appellant demanded additional sums as compensation for the purchase of steel from the open market and interest on delayed payment. The appellant invoked the arbitration clause in the agreement and demanded arbitration in terms of the agreement. The respondent initially denied the claim and refused to refer the dispute to arbitration. The appellant filed a writ petition before the High Court, which directed the respondent to appoint an arbitrator and refer the dispute for adjudication. The Division Bench of the High Court set aside the single Judge's order and granted liberty to the appellant to move the arbitration Court. The appellant filed an application under Section 11 of the Arbitration and Conciliation Act, 1996, before the High Court, which directed the Chief General Manager, Telecommunication Department, either to adjudicate the dispute as an arbitrator or to nominate any other person to act as an arbitrator in terms of the Arbitration Agreement. The arbitrator published a reasoned award in favor of the appellant. The respondent filed an application for setting aside the award before the High Court, which set aside the award.

Finding of the Court:

The High Court held that: 1. The Division Bench order granting liberty to the appellant to move under the old arbitration law should be construed as a liberty to approach the arbitration Court in accordance with the new law, as the old law had been repealed and the new law had come into effect. 2. The subsequent purchase orders issued under the parent agreement did not constitute separate contracts, and the last payment received on August 13, 1991, was the relevant date for the purpose of computation of the period of limitation for the entire claim made by the appellant under the agreement dated December 5, 1985. 3. The arbitrator did not commit any error in awarding interest on the principal claim, but the rate and mode of interest awarded were excessive and should be modified.

Issues: 1. Whether the commencement of arbitration proceedings under the new law is permissible when the request for arbitration was made prior to the repeal of the old law? 2. Whether the subsequent purchase orders issued under a parent agreement constitute separate contracts? 3. Whether interest can be awarded when the principal claim is disputed?

Ratio Decidendi: 1. When the request for arbitration was made prior to the repeal of the old law, the old law would continue to prevail until the proceeding attained finality, and the relevant date for this purpose would be the date when the request for arbitration was made by one party to the other. However, the parties may agree to be bound by the new law by agreement, which may be express, implied, or manifested by their conduct. 2. Subsequent purchase orders issued under a parent agreement do not constitute separate contracts if they are issued as a follow-up action in relation to the parent order, and the parties, by their conduct, understood the parent order as a single contract. 3. Interest can be awarded on the principal claim when the arbitrator, after considering the rival contentions, comes to a finding that the appellant was entitled to the principal claim.

Final Decision: The appeal was allowed in part. The order of the learned single Judge setting aside the award was set aside. The award dated September 26, 2000, was upheld as modified to the extent that the principal sum awarded therein would carry interest for Rs. 67,62,366/- in full and final settlement of the interest claim.