Supreme Court of India
M/S. N.S. NAYAK AND SONSversusSTATE OF GOA
- Citation
- 2003 INSC 286
- Decided
- 8 May 2003
- Disposal
- Dismissed
- Bench
- M B SHAH
Holding
For arbitral proceedings that commenced before the 1996 Act came into force, the provisions of the Arbitration Act, 1940 continue to apply to the award, its enforcement and any appeal, and the 1996 Act does not supersede them.
Summary
The appellant, N.S. Nayak & Sons, challenged the High Court's dismissal of its appeals under Section 37 of the Arbitration Act, 1940, arguing that the Arbitration and Conciliation Act, 1996 should govern the appeals because the arbitration agreement referred to "the provisions of the Arbitration Act, 1940 or any statutory modification or re‑enactment thereof". The Supreme Court examined Section 85(2)(a) of the 1996 Act, which saves the provisions of the 1940 Act for arbitral proceedings that commenced before the 1996 Act came into force, unless the parties agree otherwise. Relying on Thyssen Stahlunion GMBH v. Steel Authority of India Ltd., the Court held that once arbitral proceedings begin under the 1940 Act, the right to appeal and the procedure for enforcement of the award remain governed by the 1940 Act. The Court clarified that the phrase "in relation to arbitral proceedings" includes appellate proceedings, and that parties cannot alter the statutory appellate procedure by agreement. Consequently, the pending appeals were to be decided under the 1940 Act, and the appellant's contentions were rejected.
Issues considered
- The applicability of the Arbitration and Conciliation Act, 1996 to appeals filed under Section 37 of the Arbitration Act, 1940.
- Whether the arbitration agreement's reference to "any statutory modification or re‑enactment" brings the 1996 Act into force for pending appeals.
- The interpretation of Section 85(2)(a) of the 1996 Act concerning accrued rights and "in relation to arbitral proceedings".
- The extent to which parties may vary the appellate procedure by agreement.
Legislation cited
Subjects
ArbitrationAccrued rightSection 85Arbitration agreementStatutory interpretationAppeal procedureOld Act vs New Act
Judgment
MIS. N.S. NAYAK AND SONS A
v.
STATE OF GOA
MAY 8, 2003
[M.B. SHAH AND ARUN KUMAR, JJ.] B
Arbitration Act, 1940/Arbitration and conciliation Act, 1996-Section
) 37/Section 85(2)(a)-Appeals under 1940 Act-Subsequent enactment of 1996
Act-Applicability of 1996 Act to the pending appeals-Plea that 1996 Act C
applicable in view of arbitration agreement-Held, not applicable-Once the
. arbitral proceedings have commenced under 1940 Act, the same Act would
apply for the award becoming decree and also for appeal arising thereunder-
Right to file an appeal is accrued right and the same would be governed as
per statutory provisionr-Parties to arbitration agreement have no right to
change the same. D
Present appeals raised question of applicability of Arbitration and
Conciliation Act, 1996 to the appeals filed under Section 37 of Arbitration
Act, 1940.
Appellant contended that appeals filed by the respondents under E
Section 37 of 1940 Act were required to be decided on the basis of the
Arbitration and Conciliation Act, 1996 because the Arbitration agreement
provided that the provisions of the 1940 Act or any statutory modification
or re-enactment thereof and the rules made thereunder and for the time
being in force shall apply to the arbitration proceedings; and that in F
Thyssen Stahlunion GMBH v. Steel Authority of India Ltd., (19991 9 SCC
334 the phrase "in relation to arbitral proceedings" is given wider meaning
so as to include arbitral proceedings before the arbitrator as well as the
proceedings before the Court and hence once 1996 Act came into force,
further proceedings including appeals were required to be dealt with and
decided in accordance with 1996 Act as per the agreement. G
Dismissing the appeals, the Court
HELD: 1. On the basis of Section 85(2)(a) of Arbitration and
Conciliation Act, 1996 the provisions of the Arbitration Act, 1940 would
69 H
70 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A apply to the arbitral proceedings which commenced on or before 1996 Act
came into force. Part of the arbitration clause also provides that the
provisions of 1940 Act, which were for time being in force were to apply
to the arbitral proceedings between the parties. It nowhere provides that
once the arbitral proceedings have commenced under 1940 Act, they
should be conducted under 1996 Act as soon as 1996 Act comes into
B operation. Hence, in the proceedings where the award is passed under 1940
Act, the remedy of filing appeal or petition for setting aside the said award
would be as per the provisions of 1940 Act. In cases where the arbitral
proceedings commenced under 1940 Act, it is an accrued right to proceed
in accordance with that law and it would be 1940 Act which would apply
C even for enforcing the award. (72-C, E, F; 74-Al
2. Thyssen 's case nowhere lays down that after 1996 Act came into
force, even appeals filed under the provisions of 1940 Act are to be decided
on the basis of the provisions contained in 1996 Act. It rather reiterates
that once the arbitral proceedings have started under the 1940 Act, it
D would apply for the award becoming decree and also for appeal arising
thereunder; and that the phrase 'unless otherwise agreed by the parties'
used in various Sections namely, 17, 21, 23(3), 24(1), 25, 26, 29, 31, 85(2)(a)
etc. of 1996 Act indicates that it is open to the parties to agree otherwise.
So if there is an agreement between the parties with regard to the
E procedure to be followed by the arbitrator, arbitrator is required to follow
the said procedure. However, this would not mean that in appeal parties
can contend that appellate procedure should be as per their agreement.
Appellate procedure would be governed as per the statutory provisions
and parties have no right to change the same. The right to file an appeal
is accrued right that cannot be taken away unless there is specific provision
F to the contrary. There is no such provision in 1996 Act. In the present
cases, the appeals were pending before the ~igh Court under the
provisious of 1940 Act and, therefore, appeals are required to be decided
on the basis of the statutory provisions under the said Act.
(74-E, F; 76-D, E, F, G, HJ
G Thyssen Stah/union GMBH v. Steel Authority of India ltd, (1999) 9
sec 334, relied on.
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 97 of 2002.
From the Judgment and Order dated 27.4.2000 of the Mumbai High
H Court in A.A. No. I of 1993.
N.S. NAY AK AND SONSv. STATE [M.B. SHAH, J.) 71
WITH A
C.A. Nos. 98, 99, 100 and 101 of 2002.
S.G. Desai, Prashant Kumar, Ms. Triveni Poteker, Amarjit Singh Bedi
and Aruneshwar Gupta for the Appellant.
B
Raju Ramachandran, Additional Solicitor General, Ms. A. Subhashini,
Ashish Dholakia, U.A. Rana and Ms. Anuradha Priyadarshini for the
Respondents.
The Judgment of the Court was delivered by
c
SHAH, J. These appeals are directed against the judgment and order
dated 27th April, 2000 passed by the High Court of Bombay, Goa Bench, in
Arbitration Appeal No. I of 1993 etc. etc.
In pending appeals, a contention was raised by the appellant that appeals D
filed by the respondents under Section 37 of the Arbitration Act, 1940
(hereinafter referred to as the 'Old Act'), are required to be decided on the
basis of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as
the 'New Act') because the arbitration agreement provides as under:-
"Subject as aforesaid the provisions of the Arbitration Act, 1940, E
or any statutory modification or re-enactment thereof and the Rules
made thereunder and for the time being in force shall apply to the
arbitration proceedings under this clause."
That contention was rejected by the High Court. Hence, these appeals.
F
In support of aforesaid contention, learned senior counsel Mr. Desai for
the appellant relied upon the decision in Thyssen Stahlunion GMBH v. Steel
Authority of India Ltd., [ 1999] 9 SCC 334.
Before referring to the decision in Thyssen 's case, we would first refer
to Section 85 of the New Act, which reads as under: G
"85. Repeal and saving- (I) The Arbitration (Protocol and Convention)
Act, 1937 (6of1937), the Arbitration Act, 1940 (IO of 1940) and the
!
Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of
1961) are hereby repealed.
H
(2) Notwithstanding such repeal, -
72 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A (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 (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."
Section 85 (2) (a) specifically provides that - (I) the provisions of the
C Old Act shall apply in relation to arbitral proceedings which commenced on
or before the New Act came into force, unless otherwise agreed by the
parties; (2) it also provides that the New Act shall apply in relation to arbitral
proceedings which commenced on or after the New Act came into force.
D In all these matters arbitrators were appointed prior to 25th January
I 996. Arbitral proceedings started before that date and the awards in CA
No.97/2002, CA No.99/2002, C.A. No. I 00/2002 and CA. No. I01/2002 were
passed on 20.12.1991, 17.5.1994, 7.5.1992, 3.2.1989 respectively, i.e. prior
to 25th January, I 996, and in CA No.98/2002, the award was passed on
30.9. I 996, i.e. after 25th January, 1996. On the basis of sub-section 2(a), the
E provisions of the Old Act would apply to the arbitral proceedings which
commenced on or before the New Act came into force.
Further, the part of the arbitration clause which is quoted above also
provides that the provisions of Arbitration Act, I 940 which were for time
F being in force were to apply to the arbitral proceedings between the parties.
It nowhere provides that once the arbitral proceedings have commenced under
the Old Act, they should be conducted under the New Act as soon as the New
Act comes into operation. Hence, in the proceedings where the award is
passed under the Old Act, the remedy of filing appeal or petition for setting
aside the said award would be as per the provisions of the Old Act.
G
Further, the complete answer to the contention of the learned counsel
for the appellant is in the following paragraph (para 32) of Thyssen 's case
wherein the Court has specifically held that once the arbitral proceedings
commenced under the Old Act, it would be Old Act which would apply in
H arbitral proceedings and also for enforcing the award:-
"32. Principles enunciated in the judgments show as to when a right
N.S. NAY AK AND SONSv. STATE [M.B. SHAH, J.] 73
accrues to a party under the repealed Act. It is not necessary that for A
the right to accrue 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 party against whom
award is given after arbitral proceedings have been held under the B
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. When arbitral proceedings commenced under the old Act it
} would be in the mind of everybody, i.e., the arbitrators and the parties
that the award given should not fall foul of Sections 30 and 32 of the C
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 of 1998
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 D
award rule of the court. It was only later on that it changed the stand
and now took the position that the 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. The
appellant itself led the respondent SAIL in believing that the old Act E
would apply. SAIL had filed objections to the award under Section
30 of the old Act after notice for filing the award was received by it
on the application filed by 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 F
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 G
No.6036of1998. Any other construction on Section 85(2)(a) would
only lead to confusion and hardship. This construction put by us is
consistent with the wording of Section 85(2)(a) using the terms
f
"provision" and "in relation to arbi:ral proceedings" which would
mean that once the arbitral proceedings commenced under the old
Act it would be the old Act which would apply for eriforcing the H
award as well. "
74 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A The highlighted portion in terms emphasizes that in such cases where
the arbitral proceedings commenced under the Old Act, it is an accrued right
to proceed in accordance with that law and it would be the Old Act which
would apply even for enforcing the award.
Learned senior counsel Mr. Desai submitted that in Thyssen 's case, the
B phrase 'in relation to arbitral proceedings' is given wider meaning so as to
include arbitral proceedings before the arbitrator as well as the proceedings
before the Court and once New Act came into force, further proceedings
including appeals are required to be dealt with and decided in accordance
with the New Act as per the agreement. For this purpose, he placed reliance
C on paragraph 22 of the said judgment.
In our view, paragraph 22 nowhere lays down that after the New Act
came into force, even appeals filed under the provisions of Old Act are to be
decided on the basis of the provisions contained in the New Act. Paragraphs
22 and 23 are as under:·
D
"The Conclusions
22. For the reasons to follow, we hold:
1. The provisions of the old Act (Arbitration Act, 1940) shall apply
E in relation to arbitral proceedings which have commenced before the
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
F before the arbitrator. It would cover not only proceedings pending
before the arbitrator but would also cover the proceedings before the
court and any proceedings which are required to be taken under the
old Act for the award becoming a decree under Section I 7 thereof
and also appeal arising thereunder.
G 3. In cases where arbitral proceedings have commenced before the
coming into force of the new Act and are pending before the arbitrator,
it is open to the parties to agree that the new Act be applicable to
such arbitral proceedings and they can so agree even before the coming
into force of the new Act.
H
4. The new Act would be applicable in relation to arbitral proceedings
N.S. NAY AK AND SONS v. STATE [M.B. SHAH, J.] 75
which commenced on or after the new Act comes into force. A
5. Once the arbitral proceedings have commenced, it cannot be stated
that the 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 some legal proceedings for its enforcement must be B
pending under that Act at the time the new Act came into force.
6. If a narrow meaning of the phrase "in relation to arbitral
proceedings" is to be accepted, it is likely to create a great deal of
> confusion with regard to the matters where award is made under the
old Act. Provisions for the conduct of arbitral proceedings are vastly c
different in both the old and the new Act. Challenge of award can be
with reference to the conduct of arbitrat 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 D
have the foreign award enforced under the Foreign Awards Act
[Foreign Awards (Recognition and Enforcement) Act, 1961).
23. Section 85(2)(a) of the new Act is in two limbs: (1) provisions
of the old Act shall apply in relation to arbitral proceedings which
E
commenced before the. new Act came into force unless otherwise
agreed by the parties and (2) the new Act shall apply in relation to
arbitral proceedings which commenced on or after the new Act came
into force. The first limb can further be bifurcated into two: (a)
provisions of the old Act shall apply in relation to arbitral proceedings
commenced before the new Act came into force, and (b) the old Act F
will not apply in such cases where the parties agree that it will not
apply in relation to arbitral proceedings which commenced before the
·new Act came into force. The expression "in relation to" is of the
widest import as held by various decisions of this Court in Doypack
Systems (P) Ltd, Mansukhlal Dhanraj Jain, Dhanrajamal Gobindram
G
and Navin Chemicals Mfg. This expression "in relation to" has to be
given full effect to, particularly when read in conjunction with the
! words "the provisions" of the old Act. That would mean that the old
Act will apply to the whole gambit of arbitration culminating in the
enforcement of the award If it was not so, only the word "to" could
have sufficed and when the legislature has used the expression "in H
76 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A relation to", a proper meaning has to be given. This expression does
not admit of restrictive meaning. The first limb of Section 85(2)(a) is
not a limited saving clause. It saves not only the proceedings pending
at the time of commencement of the new Act but also the provisions
of the old Act for enforcement of the award under that Act. "
B As stated in paragraph 22, Conclusion- I without any reservation
provides that the provisions of Old Act shall apply in relation to arbitral
proceedings which have commenced before coming into force of the New
Act Conclusion-2, in our view, is required to be read in context with
Conclusion-I, that is to say, the phrase 'in relation to arbitral proceedings'
C cannot be given a narrow meaning to mean only pendency of the proceedings
before the arbitrator. It would cover not only proceedings pending before the
arbitrator but would also cover the proceedings before the court and any
proceedings which are required to be taken under the old Act for the award
becoming a decree under Section 17 thereof and also appeal arising thereunder.
Hence, conclusions-I and 2 are to be read together which unambiguously
D reiterate that once the arbitral proceedings have started under the Old Act, the
Old Act would apply for the award becoming decree and also for appeal
arising thereunder.
Conclusion-3 only reiterates - what is provided in various Sections of
E the Arbitration Act, which gives option to the parties to opt for the procedure
as per their agreement during the arbitral proceedings before the arbitrator.
The phrase 'unless otherwise agreed by the parties' used in various Sections
namely, 17, 21., 23(3), 24(1), 25, 26, 29, 31, 85(2)(a) etc. indicates that it is
open to the parties to agree otherwise. During the arbitral proceedings, right
is given to the parties to decide their own procedure. So if there is an agreement
F between the parties with regard to the procedure to be followed by the
arbitrator, arbitrator is required to follow the said procedure. Reason being,
arbitrator is appointed on the basis of the contract between the parties and is
required to act as per the contract. However, this would not mean that in
appeal parties can contend that appellate procedure should be as per their
G agreement Appellate procedure would be governed as per the statutory
provisions and parties have no right to change the same. It is also settled law
that the right to file an appeal is accrued right that cannot be taken away
unless there is specific provision to the contrary. There is no such provision
in the New Act. In the present cases, the appeals were pending before the
High Court under the provisions of the Old Act and, therefore, appeals are
H required to be decided on the basis of the statutory provisions under the said
N.S. NAY AK AND SONS v. STATE[M.B. SHAH.J.] 77
Act. Hence, there is no substance in the submission made by the learned A
counsel for the appellant.
Learned counsel for the appellant however relied upon paragraph 35 of
Thyssen 's case. In our view, it nowhere lays down anything contrary to what
we have stated above. Relevant portion of the said discussion is as under:-
B
" ..... The expression "unless otherwise agreed" as appearing in
Section 85(2)(a) of the new Act would clearly apply in the case of
Rani Constructions in Civil Appeal No.61 of 1999. Parties were clear
in their minds that it would be 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 Constructions that parties C
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 the respondent that parties could not D
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
an option to the parties to agree that the new Act would apply to the E
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 the coming into force of
the new Act."
The aforesaid discussion only deals with the contention that parties F
could not have agreed to the application of the New Act till they had the
knowledge about the provisions thereof and, therefore, the agreement to the
effect that to the arbitral proceedings, the provisions of the Arbitration Act,
1940 or any statutory modification or re-enactment thereof would be
applicable, is not valid. The Court negatived the said contention by interpreting G
the expression 'unless otherwise agreed'. The Court held that such agreement
could be entered into even before coming into force of the New Act. However,
it nowhere lays down that in a pending arbitral proceeding, which was being
conducted as per the procedure prescribed under the Old Act, the parties have
option of changing the procedure.
G
78 SUPREME COURT REPORTS [2003] SUPP. I S.C.R.
A In this view of the matter, there is no substance in these appeals and
they are accordingly dismissed. The appellant in each case shall pay the costs
of Rs. I 0,000 to the respondent within a period of three months from today.
K.K.T. Appeals dismissed
Search Indian case law
Ask in plain English, not just keywords. 25,000 AI words free, no card.
Try "Arbitration"Sign in to search