ANDHRA PRADESH TOURISM DEVELOPMENT CORPN. LTD. & ANR.versusM/S. PAMPA HOTELS LTD.

                         [2010] 4 S.C.R. 942


A   ANDHRA PRADESH TOURISM DEVELOPMENT CORPN.
                       LTD. & ANR.
                            v.
               M/S. PAMPA HOTELS LTD.
             (Civil Appeal No. 3272 of 2007)
B                          APRIL 20, 2010
           [R.V. RAVEENDRAN AND H.L. DATTU, JJ.]

        Arbitration and Conciliation Act, 1996:
c
       ss. 7 and 2(h) - Party to arbitration agreement -
  Company entering into contract before the date on which it
  was entitled to commence business - On dispute invoking
  arbitration clause of the contract - Held: Since the company
D was non-existent on the date of contract, there was no contract
  - Consequently there was no arbitration agreement - The
  agreement would have been valid, if the contract were entered
  into by the promoters of the non-existing company on its
  behalf - Companies Act, 1956 - s. 149 (4) - Specific Relief
E Act, 1963 - s. 15(h).

         ss. 11 and 16 - Decision as regards existence or validity
    of arbitration agreement - Whether to be decided by Chief
    Justice/Designate or by the arbitrator - Chief Justice!
    Designate in application uls. 11 appointing the arbitrator and
F   leaving the question as regards validity of the arbitration
    agreement to be decided by arbitrator relying on *Konkan
    Railway cases - Subsequent decision in **SBP case over-
    ruling Konkan Railway cases - SBP case resorting to
    prospective over-ruling - Held: In view of decision in SBP
G   case, validity of arbitration agreement is to be decided by the
    Chief Justice/Designate - However, in view of prospective
    over-ruling direction in SBP case, the validity of the arbitration
    agreement in the present case, has to be decided by the
    arbitrator - The appeal to the Supreme Court cannot be
H                                  942
ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 943
           PAMPA HOTELS LTD.

treated as a pending application u/s. 11 and hence decision   A
in SBP case will not apply - Prospective Over-ruling -
Doctrine of Merger.

    The questions which arose for consideration in the
present appeal were:                                          B

    (i) where the party seeking arbitration is a company
    which was not in existence on the date of the signing
    of the contract containing the arbitration agreement,
    whether it can be said that there is an arbitration
    agreement between the parties; and                    C

    (ii) whether the question as to the existence or validity
    of the arbitration agreement, has to be decided by the        "
    Chief Justice/Designate while considering the
    petition u/s. 11 of the Act or by the Arbitrator.         D

    Disposing of the appeal, the Court
     HELD: 1.1. The certificate of registration issued by
Registrar of companies shows the date of its
incorporations as 9.4.2003. Section 149(4) of the E
Companies Act, 1956 provides that any contract made by
a company (which is already registered) before the date
at which it is entitled to commence business shall be
provisional only, and shall not be binding on that
company until that date, and on that date it shall become F
binding. The Lease Agreement and also the Management
Agreement were made on 30.3.2002 between the
appellant and the respondent. A certificate u/s. 149(3) of
the Companies Act was issued by the Registrar of
Companies only on 6.6.2003 certifying that respondent is G
entitled to commence business. It is thus clear that the
applicant in application u/s. 11 of the Act was non-
existent on 30.3.2002 when the arbitration agreement was
entered into. [Paras 8 and 9) [951-B-E; 952-D-F]
    1.2. Section 7 of Arbitration and Conciliation Act,       H
    944     SUPREME COURT REPORTS               [2010] 4 S.C.R.


A   1996 defines an arbitration agreement as an agreement
    by the parties to submit to arbitration. The word 'party' is
    defined in Section 2(h) of the Arbitration Act as a party
    to an arbitration agreement. An agreement enforceable by
    law is a contract. An agreement has to be between two
B   or more persons. Therefore if one of the two parties to
    the arbitration agreement was not in existence when the
    contract was made, then obviously there was no contract
    and if there was no contract, there is no question of a
    clause in such contract being an arbitration agreement
c   between the parties. [Para 10] [952-G-H; 953-A]
       1.3. The agreements are not entered by the.promoters
  of the company, but purportedly by the company itself,
  represented by its Managing Director. Admittedly on
  30.3.2002 there was no such company in existence.
D Admittedly there was no such company having its
  registered office at the address mentioned on that date.
  Admittedly, one of the signatories of the agreements was
  not the Managing Director of any company of that name
  on that date. When one of the parties to the Lease
E Agreement and Management Agreement, was a non-
  existent imaginary party, there is no contract. This is not
  a case of one of the parties being in existence, but being
  under some legal disability to enter into contracts. This
  is a case where there was no 'party' at all. but someone
F claiming that there was an existing company capable of
  entering into contracts. [Para 10] [953-B-E]
       1.4. The p->sition would have been different, had the
  agreement been entered by the promoters of the
  respondent-company before its incorporation for the
G purposes of the company and such contract was
  warranted by the terms of incorporation. It is evident from
  Section 15(h) of Specific Relief Act, 1963 that if the Lease
  Agreement and the Management Agreement had been
  entered into by the promoters of the company stating
H that they are entering into the contract for the purpose
 ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 945
            PAMPA HOTELS LTD.

of the company to be incorporated, in their capacity as          A
promoters and that such contract is warranted by the
terrr.s of the incorporation of the company, the agreement
would have been valid; and the term regarding arbitration
therein could have been enforced. But for reasons best
known to themselves, the agreement was entered not by                B
the promoters on behalf of a company proposed to be
incorporated by them, but by a non-existing company              1
claiming to be an existing company. This clearly shows
that there is no arbitration agreement between the
respondent (applicant in the applicatiOn u/s. 11 of the Act)     c
and the appellant-company against whom such
agreement is sought to be enforced. [Para 11] [953-E-F;
954-B-D]
       2.1. The question as to who should decide the
  question whether there is an existing arbitration              D
  agreement or not has been decided in **SBP case holding
  that the question whether there is an arbitration
  agreement and whether the party who has applied u/s.
  11 of the Arbitration Act, is a party to such an agreement,
  is an issue which is to be decided by the Chief Justice            E
  or his Designate u/s.11 of the Act before appointing an
  arbitrator. Therefore there can be no doubt that the issue
  ought to have been decided by the Designate of the Chief
  Justice and could not have been left to the arbitrator. But,
  since the Designate of the Chief Justice proceeded on              F
. the basis that while acting u/s. 11 of the Arbitration Act,
  he was not acting under a judicial capacity but only
  under an administrative capacity and therefore he cannot
  decide these contentious issues by following the two
  decisions in *Konkan Railway cases which were then             G
  holding the field. [Para 12] [954-E-H; 955-A-B]
    2.2. In SBP case a seven-Judge Bench of Supreme
Court overruled the two decisions in Konkan Railway. The
decision in SBP case was rendered a few weeks after the
                                                                     H
    946      SUPREME COURT REPORTS                  [2010] 4 S.C.R.


A impugned decision by the Designate. Having regard to
  the fact that several decisions rendered under section 11
  of the Arbitration Act had followed the decisions in
  Konkan Railway case, this court, when it rendered its
  decision in SBP case, resorted to prospective overruling.
B [Para 13] [955-B-D]

          2.3. It is not correct to say that the appeal to this Court
    should be considered as a continuation of the application
    u/s. 11 of the Arbitration Act or as pending matter to
    which the decision in SBP case would apply, even
C   though the Designate had rendered the decision before
    the judgment passed in SBP case; and that a pending
    matter would refer not only to the original proceedings
    but also would include any appeal arising therefrom and
    therefore any proceeding which has not attained finality
D   is a pending matter. This would have been the position
    if there was a statutory provision for appeal and SBP case
    had directed that in view of prospective overruling of
    Konkan Railway cases pending matters will not be
    affected. But sub-section (7) of Section 11 of the
E   Arbitration Act makes the decision of the Chief Justice or
    his Designate final. There is no right of appeal against the
    decision u/s. 11 of the Act. Further, in SBP case, the Court
    issued the categorical direction that appointment of
    Arbitrators made till then are to be treated as valid and
F   all objections are to be left to be decided u/s. 16 of the
    Act. [Para 15] [956-F-H]
       2.4. On account of the prospective overruling
  direction in SBP case, any appointment of an arbitrator
  u/s. 11 of the Act made prior to 26.10.2005 has to be
G treated as valid and all objections including the existence
  or validity of the arbitration agreement, have to be
  decided by the arbitrator u/s. 16 of the Act. The legal
  position enunciated in the judgment in SBP case will
  govern only the applications to be filed u/s. 11 of the Act
H from 26.10.2005 as also the applications u/s. 11(6) of the
ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 947
           PAMPA HOTELS LTD.

Act pending as on 26.10.2005 (where the Arbitrator was         A
not yet appointed). In view of this categorical direction in
SBP case, it is not possible to say that this case should
be treated as a pending application. [Para 16] [957-A-C]
     2.5. The arbitrator will have to decide the issue as to
                                                               8
whether there is an arbitration agreement, with reference
to the legal position in regard to the existence of
arbitration agreement. Though such an exercise by the
arbitrator will only be an academic exercise such an
exercise becomes inevitable in view of the peculiar
position arising out of the specific direction contained in    C
para 47 (x) of the decision in SBP case and the
subsequent decision in Maharishi Dayanand University
case. [Para 17] [957~0-F]
    **SBP and Co. v. Patel Engineering Ltd. 2005 (8) SCC       D
618, followed.
    National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd
2009 (1) SCC 267; Sarwan Kumar v. Madan Lal Aggarwal
2003 (4) SCC 147; Maharishi Dayanand University v. Anand
Coop. UC Society Ltd. and Anr. 2007 (5) SCC 295, relied on.    E
    *Konkan Railway Corporation Ltd. v. Mehul Construction
Co. 2000 (7) SCC 201; Konkan Railway Corporation Ltd. v.
Rani Construction Pvt. Ltd. 2002 (2) SCC 388, referred to.
                                                               F
                    Case Law Reference:
    2005 (8) sec 618           followed.           Para 12
    2009 (1) sec 267           Relied on.          Para 12
    2000 (7) sec 201           Referred to.        Para 12     G
    2002 (2) sec 388           Referred to.        Para 12
    2003 (4) sec 141           Relied on.          Para 13
    2001 (5) sec 295           Relied on.          Para 16     H
    948      SUPREME COURT REPORTS               [2010] 4 S.C.R.


A       CIVIL APPELLATE JURISDICTION : Civil Appeal No.
    3272 of 2007.

       From the Judgment & Order dated 16.8.2005 of the High
  Court of Andhra Pradesh at Hyderabad in Arbitration
B Application No. 24 of 2005.

        Bhaskar P. Gupta, T.V. Ratnam, K. Paari Vendhan for the
    Appellants.

          L. Nageswara Rao, G. Ramakrishna Prasad, B.
c Suyodhan, Amarpal, Bharat J. Joshi for the Respondent.
          The Judgment of the Court was delivered by

        R.V. RAVEENDRAN, J. 1. The respondent is a company
  incorporated on 9.4.2003 under the Companies Act, 1956. The
D appellant (Andhra Pradesh Tourism Development Corporation
  Ltd., for short 'APTDC') is a "government company" within the
  meaning of that expression in section 617 of the Companies
  Act, 1956.

E       2. According to the respondent, the parties had entered
  into two agreements in regard to a property known as Hill View
  Guest House, Alipiri, Tirupathi, measuring 1.08 acres. The first
  was a lease agreement under which APTDC granted a lease
  of the said property to the respondent for a term of 33 years;
F and the second was a development and management
  agreement under which APTDC entrusted to the respondent,
  the development of a Three-Star Hotel in Hill View Guest House
  property on construction, operation and management basis.
  According to the respondent, both agreements contained a
  provision for disputes resolution (clause 17 of the lease
G agreement and Article 18 of the management agreement)
  providing that in the event of disputes, best efforts shall be
  made to resolve them by mutual discussions, amicably; and in
  the event of the parties not finding an acceptable solution to
  the disputes within 30 days (60 days in the case of
H
ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 949
  PAMPA HOTELS LTD. [R.V. RAVEENDRAN, J.]

management agreement), the same shall be referred to              A
arbitration in accordance with the procedure specified in the
Act.

     3. APTDC claims that it had terminated the said
agreements on 21.4.2004 and took possession of the property
                                                                  8
on 21.8.2004. The respondent filed Arbitration Application No.
24/2005 in March, 2005 before the Andhra Pradesh High Court
under section 11 of the Arbitration and Conciliation Act, 1996
['Act' for short], alleging that certain disputes had arisen
between the parties in regard to the said Lease Agreement
and Management Agreement, and the parties could not arrive        C
at a mutually acceptable solution in respect of those disputes.
The respondent therefore sought appointment of a sole
arbitrator for adjudication bf the disputes and differences
between the parties (respondent and APTDC) in regard to
lease agreement dated 30.3.2062 and the management                D
agreement dated 30.3.2002 entered between the parties.

     4. APTDC resisted the application. One of the contentions
urged by APTDC was that there was no arbitration Agreement
between them and therefore the question of appointing an          E
Arbitrator under -section 11 of the Act did not arise. It was
pointed out that according to the respondent, the arbitration
agreement came into existence on 30.3.2002, when parties
executed the Lease Agreement and Management Agreement
on 30.3.2002 containing the arbitration clause; that admittedly
                                                                  F
the respondent was not in existence on that date, as it was
incorporated more than a year thereafter on 9.4.2003; and that
when it is alleged that the parties to the petition had entered
into contracts which contained arbitration agreements on
30.3.2002, and one of the parties thereof had not even come
into existence on that date, obviously there was no contract      G
much less any arbitration agreement between the parties.

     5. The Designate of the Chief Justice of Andhra Pradesh
allowed the application filed by the respondent under Section
11 of the Act by order dated 16.8.2005 and appointed a retired    H
    950      SUPREME COURT REPORTS                    [2010] 4 S.C.R.


A Judge of the said High Court as Ar">itrator, with the observation
  that the appellant herein is entitled to raise all its pleas including
  the validity of the arbitration agreement before the Arbitrator.
  He however noticed the contention that there was no arbitration
  agreement. He held that having regard to the decisions in
8 Konkan Railway Corporation Ltd. v. Mehul Construction Co.
  [2000 (7) SCC 201] and Konkan Railway Corporation Ltd. v.
  Rani Construction Pvt. Ltd. [2002 (2) SCC 388], he had only
  a limited administrative role under section 11 of the Act, that
  is, to appoint the arbitrator as per the agreed procedure, leaving
C all contentious issues including whether there was any
  arbitration agreement or not, to be decided by the Arbitrator.
  The said order is challenged in this appeal by special leave.

        6. On the contentions urged, two questions arise for
    consideration:
D
          (i) where the party seeking arbitration is a company which
          was not in existence on the date of the signing of the
          contract containing the arbitration agreement, whether it
          can be said that there is an arbitration agreement between
E         the parties ?

          (ii) whether the question as to the existence or validity of
          the arbitration agreement, has to be decided by the Chief
          Justice/Designate when considering the petition under
          section 11 of the Act or by the Arbitrator ?
F
    Re : Question (i) :

        7. Section 7 of the Act defines an arbitration agreement.
  Sub-section (1) thereof provides that an arbitration agreement
G means an agreement by the parties to submit to arbitration all
  or certain disputes which have arisen or which may arise
  between them in respect of a defined legal relationship,
  whether contractual or not. Sub-section (2) provides that an
  arbitration agreement may be in the form.of an arbitration clause
  in a contract or in the form of a separate agreement. Sub-
H
 ANDHRA PRADESH TOURISM DEV. CORPN. LTD.                    951
  v. PAMPA HOTELS LTD. [R.V. RAVEENDRAN, J.]
section (3) provides that an arbitration agreement shall be in A
writing. Sub-section (4) inter alia provides that an arbitration
agreement is in writing if it is contained in a document signed
by the parties. The specific and clear case of the respondent
is that the arbitration agreement between the parties, is in
writing contained in the Lease Agreement and Management B
Agreement signed by them on 30.3.2002.

    8. The Lease Agreement was made on 30.3.2002
between 'APTDC' (Lessor) and Pampa Hotels Ltd. (Lessee).
The opening part containing the description of the parties C
describes the lessee as follows:

    "M/S Pampa Hotels Limited, a company incorporated
    under the provisions of the Companies Act, 1956, and
    having its registered office at 209, T.P.Area, Tirupati
    through its Managing Director Sri S. Jayarama Chowdary         D
    hereinafter referred to as "Lessee", promoted inter alia for
    the purpose of implementing the project by M/s
    Sudalagunta Hotels Limited the successful bid:ler, of the
    other part."
                                                                   E
Similarly the Management Agreement which was also made on
30.3.2002 between APTDC (the first party) and Pampa Hotels
Ltd (the second party). described the second party as follows:

    "M/S Pampa Hotels Limited (promoted for the purpose of
    implementing the project by "the Bidder" Sudalagunta F
    Hotels Limited) a company incorporated under the
    Companies Act, 1956, having its registered office at 209,
    T.P.Area, Tirupati represented by Sri S.Jayarama
    Chowdary, Managing Director (hereinafter referred to as
    "Company" which expression unless repugnant to the G
    context or meaning thereto include its successors,
    administrators and assigns on the second part)."

It is not disputed that both the agreements contain a provision
for arbitration. It is also not disputed that both of them were    H
    952      SUPREME COURT REPORTS                  [2010] 4 S.C.R.


A   signed by Mr. C.Anjaneya Reddy as Chairman of APTDC and
    Mr. S.Jayarama Chowdary as Managing Director of Pampa
    Hotels Ltd.

          9. Pampa Hotels Ltd., (with the registered office at 209,
    TP Area, Tirupati, Chittoor District, represented by its
8
    Mana!,ing Director Shri Jayarama Chowdary), the applicant in
    the ar;plication under section 11 of the Act, was incorporated
    only on 9.4.2003. The certificate of registration issued by the
    Registrar of Companies shows the date of its incorporation as
    9.4.2003. Section 34(2) of the Companies Act, provides that
C   from the date of incorporation mentioned in the certificate of
    incorporation, such of the subscribers of the memorandum and
    other persons, as may from time to time be members of the
    company, shall be a body corporate by the name contained in
    the memorandum, capable forthwith of exercising all the
D   functions of an incorporated company. Sub-section (3) of
    section 149 provides that Registrar shall, on the filing of
    declaration/statement as stated therein, certify that the company
    is entitled to commence business. Section 149(4) of the
    Companies Act provides that any contract made by a company
E   (which is already registered) before the date ~t which it is
    entitled to commence business shall be provisional only, and
    shall not be binding on that company until that date, and on that
    date it shall become binding. A certificate under section 149(3)
    of the Act was issued by the Registrar of Companies only on
F   6.6.2003 certifying that respondent is entitled to commence
    business. It is thus clear that the applicant in application under
    section 11 of the Act was non-existent on 30.3.2002 when the
    arbitration agreement was entered into.

G         10. Section 7 of the Act as noticed above, defines an
    arbitration agreement as an agreement by the parties to submit
    to arbitration. The word 'party' is defined in section 2(h) of the
    Act as a party to an arbitration agreement. An agreement
    enforceable by law is a contract. An agreement has to be
    between two or more persons. Therefore if one of the two
H
 ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 953
   PAMPA HOTELS LTD. [R.V. RAVEENDRAN, J.]

   parties to the arbitration agreement was not in existence when
                                                                         A.
   the contract was made, then obviously there was no contract
   and if there was no contract, there is no question of a clause
   in such contract being an arbitration agreement between the
   parties. The two agreements dated 30.3.2002 categorically
   refer to Pampa Hotels Ltd. as an existing company (promoted           B
   for the purpose of implementing the project by Sudalagunta
   Hotels Ltd.) incorporated under the provisions of the
   Companies Act, having its registered office at 209, T.P. Area,
 . Tirupati and represented by its Managing Director Sri S.
, Jayarama Chowdary. The agreements are not entered by the               c
   promoters of the company, but purportedly by the company
   itself, represented by its Managing Director. Admittedly on
   30.3.2002 there was no such company in existence. Admittedly
   there was no such company having its registered office at 209,
   T.P. Area, Tirupati on that date. Admittedly, S. Jayarama             D
   Chowdary was not the Managing Director of any company of
   that name on that date. When one of the parties to the Lease
   Agreement and Management Agreement, was a non-existent
   imaginary party, there is no contract. This is not a case of one
   of the parties being in existence, but being under some legal
                                                                         E
   disability to enter into contracts. This is a case where there was
    no 'party' at all, but someone claiming that there was an existing
   company capable of enteringfnto contracts.

      11. The position would have been different, had the
 agreement been entered by the promoters of the respondent               F
 company before its incorporation for the purposes of the
 company and such contract was warranted by the terms of
 incorporation. Section 15 of the Specific Relief Act, 1963
 provides as follows:
                                                                         G
       "Except as otherwise provided by this Chapter, the
       specific performanr,e of a contract may be obtained by -
       xx xx x (h) when the promoters of a company have, before
       its incorporation, entered into a contract for the purposes
       of the company, and such contract is warranted by the
                                                                         H
    954      SUPREME COURT REPORTS                  [2010] 4 S.C.R.


A         terms of the incorporation, the company, provided that the
          company has accepted the contract and has
          communicated such acceptance to the other party to the
          contract."

  It is evident from section 15(h) of Specific Relief Act that if the
8
  lease a Jreement and the management agreement had been
  enterec. into by the promoters of the company stating that they
  are entering into the contract for the purpose of the company
  to be incorporated, in their capacity as promoters and that such
C contract is warranted by the terms of the incorporation of the
  company, the agreement would have been valid; and the term
  regarding arbitration therein could have been enforced. But for
  reasons best known to themselves, the agreement was entered
  not by the promoters of Pampa Hotels Ltd., on behalf of a
  company proposed to be incorporated by them, but by a non-
D existing company claiming to be an existing company. This
  clearly shows that there is no arbitration agreement between
  the respondent (applicant in the application urider section 11
  of the Act) and APTDC against whom such agreement is
  sought to be enforced.
E
    Re : Question (ii) :

        12. Let us next consider the question as to who should
  decide the question whether there is an existing arbitration
  agreement or not. Should it be decided by the Chief Justice or
F his Designate before making an appointment under section 11
  of the Act, or by the Arbitrator who is appointed under section
  11 of the Act? This question is no longer res integra. It is held
  in SBP & Co. v. Patel Engineering Ltd. [2005 (8) SCC 618]
  and National Insurance Co. Ltd. v. Boghara Polyfab Pvt. Ltd.
G [2009 (1) SCC 267] that the question whether there is an
  arbitration agreement and whether the party who has applied
  under section 11 of the Act, is a party to such an agreement,
  is an issue which is to be decided by the Chief Justice or his
  Designate under section 11 of the Act before appointing an
H arbitrator. Therefore there can be no doubt that the issue ought
ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 955
  PAMPA HOTELS LTD. [R.V. RAVEENDRAN, J.]
to have been decided by the learned Designate of the Chief A
Justice and could not have been left to the arbitrator. But as
noticed above, the learned Designate proceeded on the basis
that while acting under section 11 of the Act, he was not acting
under a judicial capacity but only under an administrative
capacity and therefore he cannot decide these contentious B
issues. He did so by following the two decisions in Konkan
Railway (supra) which were then holding the field.

     13. In SBP (supra), a seven-Judge .Jench of this Court
overruled the two decisions in Konkan Railway. The decision C
in SBP was rendered on 26.10.2005, a few weeks after the
impugned decision by the Designate on 16.8.2005. Having
regard to the fact that several decisions rendered under section
11 of the Act had followed the decisions in Konkan Railway,
this court, when it rendered its decision in SBP, resorted to
prospective .overruling by directing as follows:                 D

    "(x) Since all were guided by the decision of this Court in
    Konkan Rly. Corpn. Ltd. v. Rani Construction (P) Ltd.
    [2002 (2) SCC 388] and orders under Section 11 (6) of the
    Act have been made based on the position adopted in that E
    decision, we clarify that appointments of arbitrator.s or
    Arbitral Tribunals thus far made; are to be treated as valid,
    all objections being left to be decided under Section 16
    of the Act. As and from this date, the position as adopted
    in this judgment will govern even pending applications F
    under Section 11 (6) of the Act." ·

                                          (emphasis supplied)

This Court in Sarwan Kumar v. Madan Lal Aggarwal [2003 (4)
SCC 147] observed:                                                 G

    "The doctrine of "prospective overruling" was initially made
    applicable to the matters arising under the Constitution but
    we understand the same has since been made applicable
    to the matters arising under the statutes as well. Under the   H
    956       SUPREME COURT REPORTS                   [2010] 4 S.C.R.


A         doctrine of "prospective overruling" the law declared by the
          Court applies to the cases arising in future only and its
          applicability to the cases which have attained finality is
          saved because the repeal would otherwise work hardship
          to those who had trusted to its existence. Invocation of
s         doctrine of "prospective overruling" is left to the discretion
          of the court to mould with the justice of the cause or the
          matter before the court."
                                                 (emphasis supplied)

C         14. Learned counsel for the appellants contended that the
    impugned order was rendered. on 16.8.2005; that as on
    26.10.2005 when the decision in SBP was rendered, the time
    for filing a special leave petition under Article 136 of the
    Constitution had not expired; that the special leave petition was
D   filed by the appellant on 22.11.2005, which has been
    entertained by granting leave. The appellants therefore contend
    that this appeal should be considered as a continuation of the
    application under section 11 of the Act or as pending matter
    to which the decision in SBP would apply, even though the
E   Designate had rendered the decision on 16.8.2005. The
    appellants submitted that a pending matter would refer not only
    to the original proceedings but also would include any appeal
    arising therefrom and therefore any proceeding which has not
    attained finality is a pending matter.
F        15. What the appellants contend, would have been the
    position if there was a statutory provision for appeal and SBP
    had directed that in view of prospective overruling of Konkan
    Railwa,y pending matters will not be affected. But sub-section
    (7) of Section 11 of the Act makes the decision of the Chief
G   Justice or his designate final. There is no right of appeal
    against the decision under Section 11 of the Act. Further, the
    seven Judge Bench in SBP issued the categorical direction that
    appointment of Arbitrators made till then are to be treated as
    valid and all objections are to be left to be decided under
H   Section 16 of the Act.
ANDHRA PRADESH TOURISM DEV. CORPN. LTD. v. 957
  PAMPA HOTELS LTD. [R.V. RAVEENDRAN, J.]
      16. On account of the prospective overruling direction in         A
SBP, any appointment of an arbitrator under Section 11 of the
Act made prior to 26.10.2005 has to be treated as valid and
all objections including the existence or validity of the arbitration
agreement, have to be decided by the arbitrator under section
16 of the Act. The legal position enunciated in the judgment in         B
SBP will govern only the applications to be filed under Section
11 of the Act from 26.10.2005 as also the applications under
section 11 (6) of the Act pending as on 26.1 O.W05 (where the
Arbitrator was not yet appointed). In view of this categorical
direction in SBP, it is not possible to accept the contention of        c
the appellant that this case should be treated as a pending
application. In fact we may mention that in Maharishi Dayanand
University v. Anand Coop. UC Society Ltd. & Anr. [2007 (5)
SCC 295], this Court held that if any appointment has been
made before 26.10.2005, that appointment has to be treated              0
as valid even if it is challenged before this Court.

     17. In view of the above, we are not in a position to accept
the contention of the appellant. But the arbitrator will have to
decide the issue as to whether there is an arbitration
agreement, with reference to the legal position explained by us         E
in regard to the existence of arbitration agreement. Though
such an exercise by the arbitrator will only be an academic
exercise having regard to our decision in this case, such an
exercise becomes inevitable in view of the peculiar position
arising out of the specific direction contained in para 47 (x) of       F
the decision in SBP and the subsequent decision in Maharishi
Dayanand University.

     18. We accordingly dispose of the appeal without
interfering with the appointment but with a direction to the            G
Arbitrator to decide the issue in regard to the existence/validity
of the arbitration agreement as a preliminary issue relating to
jurisdiction in the light of what has been stated above.

K.K.T.                                       Appeal disposed of.
                                                                        H