Commencement of arbitration proceedings – Meaning of

SUPREME COURT OF INDIAArticle 124 of the Constitution of India Constitution of India > 124. Supreme Court (1) There shall be a Supreme Court of India consisting of a Chief Justice of India and, until Parliament by law prescribes a larger number, of not more than seven other Judges. (2) Every Judge of the Supreme Court shall be appointed by the President by warrant under his hand and seal and shall hold office until he attains the age of sixty-five years: Provided that-- (a) a Judge may, by writing under his hand addressed to the President, resign his office (b) a Judge may be removed from his office in the manner provided in clause (4). (2A) The age of a Judge of the Supreme Court shall be determined by such authority and in such manner as Parliament may by law provide. (3) A person shall not be qualified for appointment as a Judge of the Supreme Court unless he is a citizen of India and-- (a) has been for at least five years a Judge of a High Court or of two or more such Courts in succession; or (b) has been for at least ten years an advocate of a High Court or of two or more such courts in succession; or (c) is, in the opinion of the President, a distinguished jurist. (4) A Judge of the Supreme Court shall not be removed from his office except by an order of the President passed after an address by each House of Parliament supported by a majority of the total membership of that House and by a majority of not less than two-third of the members of the House present and voting has been presented to the President in the same session for such removal on the ground of proved misbehavior or incapacity. (5) Parliament may by law regulate the procedure for the presentation of an address and for the investigation and proof of the misbehavior or incapacity of a Judge under clause (4): (6) Every person appointed to be a Judge of the Supreme Court shall, before he enters upon his office, make and subscribe before the President, or some person appointed in that behalf by him, an oath or affirmation according to the form set out for the purpose in the Third Schedule. (7) No person who has held office as a Judge of the Supreme Court shall plead or act in any court or before any authority within the territory of India.

DIVISION BENCH

( Before : V. N. Khare, C.J; S. B. Sinha, J )

STATE OF WEST BENGALWest Bengal Bengal derived its name from Vedic king Vanga (Son of Vali). Banga was part of the Magadha Kingdom of Jarasandha and later Nanda dynasty. After the Garuda Dynasty ( history lost) the region was named Gouda Bhumi. Districts North 24 Parganas South 24 Parganas Bankura Birbhum CoochBihar Dakshin Dinajpur Darjeeling Hooghly Howrah Jalpaiguri Jhargram Kalimpong Kolkata Malda Murshidabad Nadia Paschim Burdwan Purba Burdwan Paschim Medinipur Purba Medinipur Purulia Uttar Dinajpur Alipurduar Govt Site Calcutta High Court KMC  Vs. AMRITLAL CHATTERJEE

Civil AppealCivil Appeal Vasant Ganesh Damle vs. Shrikant Trimbak Datar (AIR 2002 SC 1237) in the following words: "The appeal is considered to be an extension of the suit because U/S. 107 of the Code of Civil Procedure, the appellate Court has the same powers as are conferred by the Code on Courts of original jurisdiction in respect of suits instituted therein. Such a power can be exercised by the appellate Court "as nearly as may be" exercised by the trial Court under the Code. If the powers conferred upon the trial Court are under a specified statute and not under the Code, it has to be ascertained as to whether such a power was intended to be exercised by the appellate Court as well. Such a position can be ascertained by having a reference to the specified law by keeping in mind the legislative intention of conferment of power on the appellate Court either expressly or by necessary implication." No’s. 2477 and 2478 of 1997

Decided on : 03-09-2003

ArbitrationArbitration (ADR) A dispute settlement process whereby the parties agree to submit their differences to judges of their own choice and to abide by the decision of the judges. Act, 1940 – Section 11, Section 12, Section 17, Section 20, Section 20(1), Section 5
Arbitration and ConciliationConciliation A non-binding dispute settling procedure by which a dispute is referred to a commission of persons who are empowered to examine the facts and make recommendations for settlement. Act, 1996 – Section 2(2), Section 2(7), Section 21, Section 85(2)
General Clauses Act, 1897 – Section 6
Words and phrases – Commencement of arbitration proceedings – Meaning of – Said words not defined in the Act – Hence, ordinary meaning to the words be given, having regard to provisions in Chapter II of Arbitration Act.

Arbitration Act, 1940 – Section 11 – ‘Commencement of arbitration proceedings’ – Meaning of – Said words not defined in the Act – Hence, ordinary meaning to the words be given, having regard to provisions in Chapter II.

Cases Referred

Shetty’s Constructions Co. Pvt. Ltd. Vs. Konkan Railway Construction and Another, AIRAIR All India Reporter 1999 SC 1535 : (1998) 2 ARBLR 314 : (1998) 3 CTC 233 : (1998) 6 JT 643 : (1998) 5 SCCSCC Supreme Court Cases 599 : (1998) AIRSCW 4004
Thyssen Stahlunion Gmbh Vs. Steel Authority of IndiaIndia Hind/ hend >hindia. Bharat Varsha (Jambudvipa used in Mahavamsha) is the name of this land mass. The people of this land are Sanatan Dharmin and they always defeated invaders. Indra (10000 yrs) was the oldest deified King of this land. Manu's jurisprudence enlitened this land. Vedas have been the civilizational literature of this land. Guiding principles of this land are : सत्यं वद । धर्मं चर । स्वाध्यायान्मा प्रमदः । The place also been called Hindusthan in Pesia. The word Hendu is mentioned in Avesta. Read more Ltd., AIR 1999 SC 3923 : (2000) 99 CompCas 383 : (1999) 8 JT 66 : (1999) 6 SCALE 441 : (1999) 9 SCC 334 : (1999) 3 SCRSupreme Court Reports It is the official Reporter of the reportable decisions delivered by the Supreme Court of India. It is published under the authority of the Supreme Court of India by the Controller of Publications, Government of India. 461 Supp : (1999) AIRSCW 4016 : (1999) 10 Supreme 378
M/s. Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., AIR 2001 SC 2293 : (2001) 2 ARBLR 1 : (2001) 3 CompLJ 9 : (2001) 1 JT 263 Supp : (2001) 3 SCALE 708 : (2001) 6 SCC 356 : (2001) 3 SCR 479 : (2001) AIRSCW 2087 : (2001) 4 Supreme 141
Hari Shankar Lal Vs. Shambhunath Prasad and Others, AIR 1962 SC 78 : (1962) 2 SCR 720
Counsel for Appearing Parties

Tapas Ray, Satish Vig, Chinmoy Khaladkar and S. K. Nandy, for the Appellant; Bhaskar P. Gupta Raj Kumar Gupta, Sheo Kumar Gupta and A. N. Bardiyar, for the Respondent

ORDER

1. As a result of an agreementContract An agreement enforceable by law is a contract. All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Indian Contract Act. between the parties certain work orders were given to the respondent herein. It is alleged that the respondent completed the construction work on 3rd July, 1990. Subsequently, on 20th October, 1993, the respondent raised a demandDemand In economics, the amount of a good or service that consumers are willing to buy at a particular price. on account of additional work that it carried out to the Executive Engineer. It appears that the demand was not accepted by the Executive Engineer and as a result thereof the respondent sought reference for adjudication of disputes by an arbitrator.”

2. Consequently on 7th September, 1994, the Chief Engineer of Irrigation and Waterways Directorate appointed one Shri K.P. Choudhary, former Secretary of the said Directorate as an arbitrator and referred the disputes raised by the respondent to the arbitrator. Since for a considerable period of timeTime χρόνος. Judicial: Where any expression of it occurs in any Rules, or any judgment, order or direction, and whenever the doing or not doing of anything at a certain time of the day or night or during a certain part of the day or night has an effect in law, that time is, unless it is otherwise specifically stated, held to be standard time as used in a particular country or state. (In Physics, time and Space never exist actually-“quantum entanglement”) यमः , पुं, (यमयति नियमयति जीवानां फलाफलमिति । यम् + अच् । विश्वे च कलयत्येव यः सर्व्वायुश्च सन्ततम् । अतीव दुर्निवार्य्यञ्च तं कालं प्रणमाम्यहम् ॥यमैश्च नियमैश्चैव यः करोत्यात्मसंयमम् । स चादृष्ट्वा तु मां याति परं ब्रह्म सनातनम् ॥ the arbitrator did not enter upon the reference, the respondent filed an application under Sections 5, 11 and 12 of the Arbitration Act, 1940 for removal of the arbitrator and appointment of a new arbitrator in his place before a learned Single Judge exercising original jurisdictionJurisdiction Authority by which courts receive and decide cases. Limited Jurisdiction: the authority over only particular types of cases, or cases under a prescribed amount in controversy, or seeking only certain types of relief, the District Court is a court of limited jurisdiction. Original Jurisdiction: Jurisdiction of the first court to hear a case. before the Calcutta High CourtHigh Court at Calcutta The High Court at Calcutta (High Court of Judicature at Fort William>opened on 1st July 1862, with Sir Barnes Peacock as its first Chief Justice) was established by the Letters Patent dated 14th May 1862 (High Court's Act, 1861), which provided the jurisdiction and powers of the High Court.. The learned Single Judge by an order dated 22nd August, 1996 allowed the said application and appointed Shri Sibaji Mitra, Bar.-at-LawLaw νόμος:  Positive command of sovereign or divine. One can be ruled either by a Statute, a Statue, or a Statement. Legislation is the rule-making process by a political or religious organisation. Physics governs natural law. Logical thinking is a sign of a healthy brain function. Dharma is eternal for Sanatanis. Judiciary > Show me the face, and I will show you the law. Some people know how to bend the law rather than break it. Law Practice. Read a scholarly article as an arbitrator by replacing Shri K.P. Choudhary. It. is against the said order of the High CourtHigh Court High Court Judges in England and Wales handle complex and tough cases, sitting in London and traveling to court centers around the country. They preside over serious criminal and important civil cases, and support the Lord and Lady Justices in hearing appeals. High Court Judges are commonly referred to as ‘Mr/Mrs/Ms Justice surname’ and are given the prefix ‘The Honourable’. They are assigned to the King’s Bench Division, the Family Division, or the Chancery Division. The King’s Bench Division focuses on civil wrongs and judicial review, the Family Division deals with family law, and the Chancery Division handles various cases including company law and probate. Judges are appointed through a rigorous process overseen by the Judicial Appointments Commission., the appellant is in appeal before us.

3. Shri Tapas Ray, learned senior counsel appearing for the appellant urged that, the order passed by the learned Single Judge of the High Court was illegal, inasmuch as it was without jurisdiction on account of the factFact Something तथ्य (In-formation) that truly exists or happens or some-thing that has actual existence. Circumstances: a fact or event that makes a situation the way it is. Indian Evidence Act: It means and includes— (i) anything, state of things, or relation of things, capable of being perceived by the senses; (ii) any mental condition of which any person is conscious. “facts in issue” means and includes any fact from which, either by itself or in connection with other facts, the existence, non-existence, nature or extent of any right, liability or disability, asserted or denied in any suit or proceeding, necessarily follows. that the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the new Act”) came into force on 25.1.1996 We do not find any merit in the contention.

4. It may be noticed that the earlier arbitrator was appointed by the Chief Engineer on 7th September, 1994 under the Arbitration Act, 1940. The new Act came into force with effect from 25.1.1996. Section 21 of the new Act provides that 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. Clause (a) of Sub-section (2) of Section 85 of the new Act provides that notwithstanding repeal of the Arbitration Act, 1940, the provisions of the said enactment 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.

5. On the argumentsArguments It is not quarreling. It can be divided into Deductive, inductive, and conductive > Functional includes include: “because”, “since”, “for”, and “as”; typical conclusion indicators include “therefore”, “thus”, “hence”, and “so”. पंच अवयव तर्कः प्रतिज्ञा हेतू उदाहरणम् निगमनम् अवयवाः > premises to conclusion or conclusion to premises to Proof something. Proof is a derivation of a conclusion from premises through a valid argument. of the learned senior counsel for the appellant, the question that arises is as to when the proceedings commence.

6. In Shetty’s Constructions Co. Pvt. Ltd. Vs. Konkan Railway Construction and Another, , it was held that the arbitration suit in respect of arbitration dispute shall be deemed to have commenced on the date on which the request for referring the dispute for arbitration is received by the respondent.

7. In Thyssen Stahlunion Gmbh Vs. Steel Authority of India Ltd., , which was passionately relied upon by the learned senior counsel for the appellant, has, in our view, no application to the facts of the present cases. The Bench concluded :

“1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before coining into force of the new Act (The Arbitration and Conciliation At, 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 the award becoming a decree u/s 17 thereof and also appeal arising thereunder.”

There cannot be any doubt that invoking the arbitration clause by a party and appointment of arbitrator pursuant thereto and in furtherance thereof are proceedings which are required to be taken under the 1940 Act. Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of Sub-section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who do not intend to proceed under Chapter II prayingPraying It can be interpreted as a political idea. It implicitly assumes the existence of the powerful and the powerless, with an intermediate agency positioned between them. This agency, often unquestioned and abstract, functions to preserve the existing balance between power and poverty. In doing so, prayer operates as a mechanism that normalizes hierarchy, encourages acceptance over challenge, and sustains the status quo without requiring conscious awareness from those who participate in it. for filing of arbitration agreement in court.

8. In Thyssen Stahlunion GMBH case (supra), this Court was concerned with enforcement of a foreign award and execution thereof. In respect of a foreign award, the purpose of making an award rule of court, i.e. a decree, has been dispensed with. The said decision, therefore, has no application in the instant case, (see also M/s. Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., . Paragraphs 41 and 42 of Thyssen Stahlunion GMBH case (supra) read as under:

“41. Again a bare reading of the Foreign Awards Act and the Arbitration (ProtocolProtocol A term used to denote an international agreement. A protocol is often used to supplement, clarify, amend, or qualify a treaty and is sometimes of a less formal nature than a treaty. Security Protocol. and ConventionConvention A term which denotes an international agreement concluded at an international conference. Often used interchangeably with ‘‘treaty.’’) 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) insofar these apply to the Foreign Awards Act and the 1937 Act, would appear to be quite superfluous. A 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. This Court has relied onRelied on Relied to make the decision (ratio decidendi) and not only referred to push an issue. this section as to when arbitral proceedings commence in the case of Shetty’s Constructions Co. (P) Ltd. v. Konkan Rly. Construction. 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 a proper construction of Section 65(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 the foreign award would be enforced under the Foreign Awards At. But then it is quite apparent that a different intentionIntention This means to “have in mind.” A plant to do a thing (Planning: premeditation is evident through evidence of active preparation, e.g., hoarding pills, purchase of weapon). It refers to the aim, purpose, or goal of the behavior, e.g., to seek an end to/solution. A conscious mental process to move precedes the brain’s preparation for movement. 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.”

“42. We, therefore, hold that the award given on 24-9-1997 ….. when the arbitral proceedings commenced before the Arbitration and Conciliation Act, 1996 came into force on 25-1-1996, would be enforced under the provisions of the Arbitration Act, 1940. …….”

9. Mr. Ray would contend that Section 21 of the 1996 Act would not be applicable in the instant case. He would submit that the words “in relation to arbitral proceedings” which commenced for the purpose of the 1940 Act must be given the same meaning as contained in Rule 3 of the First Schedule appended thereto.

10. Rule 3 of the First Schedule of the 1940 Act reads thus:

“The arbitrators shall make their award within four months after entering on the reference or after having been called upon to act by notice in writing from any party to the arbitration agreement or within such extended, time as the Court may allow.”

11. The said rule was enacted for a different purpose. The words employed therein are “enter on the reference”. In Hari Shankar Lal Vs. Shambhunath Prasad and Others, where upon Mr. Ray relied upon, a four-judge Bench of this Court held that the words “enter on the reference” occurring in the said rule are not synonymous with the words “to act” which is more comprehensive and of a wider import.

12. Rule 3 of the First Schedule to the 1940 Act imposes a duty on the arbitrators to make their award within one or other of the three alternative period mentioned therein.

13. The Court having regard to the duty imposed upon the arbitrator held that the arbitrators enter on the reference as soon as they have accepted their appointment and have communicated to each other about the reference. If the Arbitrator fails in his duty to enter on the reference or make a public award during the period stipulated under Rule 3 of the First Schedule indisputable a cause of action will arise for his removal or appointment of a new arbitrator in terms of Section 11 and 12 of the 1940 Act. The words “commencement of the arbitration proceedings” have not been defined in the 1940 Act, They have to be given their ordinary meaning having regard to the provisions contained in Chapter II -thereof.

14. Furthermore, Section 85(2)(a) of the new Act may have to be construed, keeping in view the provisions contained in Section 21 of the new Act.

15. For the aforesaid reasons, we do not find any merit in the appeals. They are, accordingly, dismissed. The interim orderInterim order Once an interim order is passed in a suit or a proceeding, the interim relief granted to the party seeking interim relief could either be confirmed or vacated at the time of final disposal of the suit or proceedings, as the case may be. If the disposal is by way of an order of dismissal, interim relief which is granted as an aid of or ancillary to the final relief cannot continue beyond termination of such suit or proceedings. This is the position of law flowing from the decision in State of Orissa v. Madan Gopal Rungta ( [1952] 1 SCR 28 : (1951) SCC 1024) stands vacated. There shall be no order as to costsCosts Subject to any written law, costs are at the discretion of the Court, and the Court has the power to determine all issues relating to the costs of or incidental to all proceedings, including by whom and to what extent the costs are to be paid, at any stage of the proceedings or after the conclusion of the proceedings. Generally “Costs” includes charges, disbursements, expenses, fees, and remuneration. Costs in any matter are payable from the date of the order of the Court unless the parties otherwise agree. The costs of a third-party funding contract are not recoverable as part of the costs of, or costs..

16. The arbitrator is directed to give award within four months from the date of service of this order upon him. It is understood that the parties shall cooperate before the arbitrator and shall not seek unnecessary adjournments.

(2003) 12 AIC 440 : (2003) AIR(SCW) 5339 : (2003) AIR(SC) 4564 : (2003) 6 AllWC 4728 : (2004) 2 ALT 5 : (2003) 3 ArbiLR 158 : (2003) 3 CivCC 291 : (2004) 3 CompLJ 11 : (2003) 3 DNJ 867 : (2004) 1 ICC 238 : (2003) 4 JCR 130 : (2003) Sup1 JT 308 : (2003) 3 RAJ 267 : (2004) 1 RCR(Civil) 252 : (2003) 7 SCALE 274 : (2003) 10 SCC 572 : (2003) 47 SCL 804 : (2003) SCR 346 : (2003) 7 Supreme 85 : (2004) 1 WBLR 30 : (2003) 2 WLC 620