Global Aviation Services Pvt Ltd V/S Airports Authority Of India

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“The expression “in relation to the arbitral proceedings” prescribed in section 26 has to be read with section 21 of the arbitration & Conciliation Act, 1996”

Case name:Global Aviation Services Pvt Ltd V/S Airports Authority Of India
Case number:Commercial arbitration petition number- 434 of 2007
Court:Bombay high court
Bench:Justice R.D Dhanuka
Decided on:FEBRUARY 21, 2018
Relevant Act/Sections:Section 5 of the limitation act, Section 34 of te arbitration and conciliation act, 1966
  • BRIEF FACTS AND PROCEDURAL HISTORY:
  • The respondents had invited the bids for setting up flying schools at 11 airports all over India including two at Surat Airport. The final bid of the petitioner was accepted by the respondents. The petitioner accepted all the terms and conditions of the allotment letter sent by the respondents. The respondents issued a modification by a letter of allotment to the petitioner on 28 th March, 2008. The petitioner accepted the terms and conditions of the letter of allotment as well as modification thereto on 4th April, 2008. The dispute arose between the parties.
  • On 28th February, 2011, the petitioner issued a notice invoking arbitration agreement to the respondents to settle the claims between the parties. The petitioner sent a reminder to the respondents on 7th April, 2011 and once again called upon to appoint a sole arbitrator. On 5th January, 2012, the respondents issued a notice of termination of agreement. The petitioner filed an application under section 11 of the Arbitration & Conciliation Act, 1996 for seeking an appointment of a sole arbitrator.
  • ISSUE BEFORE THE COURT:
  • If the notice invoking arbitration agreement is issued prior to 23rd October, 2015, whereas the impugned award is rendered after 23rd October, 2015 and if the arbitration agreement contemplate that the parties would be governed not only by the provisions of the Arbitration & Conciliation Act, 1996, but also any statutory modification thereof or repeal thereto, the carbp434-17 provisions inserted by the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such proceedings filed after 23rd October, 2015 or not?
  • If there was no agreement between the parties that that the parties would be governed by not only the provisions of the Arbitration & Conciliation Act, 1996 but also any statutory amendment thereto or repeal thereto and the notice was issued prior to 23rd October, 2015 but the arbitral award is rendered after 23rd October, 2015, whether provisions of the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such arbitral proceedings commenced prior to 23rd October, 2015?
  • If the arbitral notice was issued prior to 23rd October, 2015 and the arbitral award was rendered prior to 23rd October, 2015 however the arbitration petition is filed after 23rd October, 2015 whether the provisions of the Arbitration & Conciliation (Amendment) Act, 2015 would apply to such pending petitions?
  • RATIO OF THE COURT:
  • The court heard the issues and submissions of all the learned counsels an stated one by one on the petitions that insofar as Commercial Arbitration Petition No.434 of 2017 is concerned, the petitioner had issued a notice invoking arbitration clause on 28th February, 2011. On 4th December, 2012, the learned designate of the Chief Justice appointed the sole arbitrator in an application filed by the petitioner under section 11(6) of the Arbitration & Conciliation Act, 1996. On 23 rd October, 2015, the Amendment Act came into effect. On 12th April, 2017, learned arbitrator made an award i.e. after the Amendment Act came into force. On 21 st August, 2017, the petitioner filed this arbitration petition. The respondent has raised a plea in the affidavit in reply dated 5th October, 2017 about the maintainability of this petition in view of non-issuance of prior notice by the petitioner under section 34(5) of the Amendment Act.
  • Insofar as Commercial Arbitration Petition No.236 of 2017 carbp434-17 is concerned, the petitioner had issued a notice invoking arbitration agreement on 14th June, 2014. Learned arbitrator accepted his nomination and entered upon the reference on 7 th August, 2014. Learned arbitrator made an award on 25 th November, 2016. The petitioner filed this arbitration petition on 12 th April, 2017. The respondent has raised an objection about the maintainability of this petition on the ground that the notice under section 34(5) of the Amendment Act has not been served upon the respondent before filing this petition across the bar.
  • On perusal of the aforesaid admitted facts, it is clear that in both these matters the arbitration agreements were invoked much prior to 23rd October, 2015. The arbitral awards are delivered by the Arbitral Tribunal after 23rd October, 2015. Both the Arbitration Petitions have been filed under section 34 of the Arbitration & Conciliation Act, 1996 after 23rd October, 2015.
  • Insofar as Commercial Arbitration Petition No.434 of 2017 is concerned, the arbitration agreement is recorded in clause 20 of the agreement dated 6th June, 2008 between the parties to this petition. The arbitration agreement does not provide that in case of any dispute arising between the parties in future under the said arbitration agreement, the parties will be governed not only by the provisions of the Arbitration & Conciliation Act, 1996 but also by any statutory repeal thereto or 66. Insofar as Commercial Arbitration Petition No.236 of 2017 is concerned, the arbitration agreement is recorded in clause 25 of the Terminalling / Handling Services Agreement dated 5 th August, carbp434-17 2011. The arbitration agreement provides that the provision of the Arbitration & Conciliation Act, 1996 or any statutory modification or re-enactment thereof and the rules made thereunder for the time being in force shall apply to the arbitration proceedings under the said provision.
  • By section 27 of the Amendment Act, the Arbitration and Conciliation (Amendment) Act, 2015 is repealed. Section 21 of the Arbitration and Conciliation Act, 1996 provides that unless 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. Section 43 of the Arbitration and Conciliation Act, 1996 provides that for the purposes of this section and the Limitation Act, 1963 (36 of 1963), an arbitration shall be deemed to have commenced on the date referred in section.
  • This Court held that in view of section 26 of the Amendment Act and in view of the specific agreement between the parties that the disputes will be settled not only in accordance with the provisions of the Arbitration & Conciliation, Act, 1996 prevailing on the date of the execution of the said agreement but also any statutory modifications thereof, Amendment Act would apply even if arbitral proceedings had commenced prior to 23rd October, 2015. It is held that section 11(6-A) of the Amendment Act thus would apply to the parties. This Court also followed the earlier two judgments of this Court in case of M/s.Amisha Buildcon Pvt. Ltd. vs. Jidnyasa Co- op. Housing Society Ltd., 2016 SCC OnLine Bom. 5234 and in case of Vipin Bhimlal Shah vs. Slum Rehabilitation Authority in carbp434-17 Arbitration Application No.251 of 2015 delivered on 12 th October, 2017 holding that the provisions of Amendment Act would apply in view of such agreement between parties. This Court also adverted to the judgment of Supreme Court in case of Duro Felguera vs. Gangavaram Port Ltd., (2017) 9 SCC 729 in which the Supreme Court had held that the parties would be governed by the amended provisions under section 11(6-A) of the Amendment Act and also to the several judgments of various High Courts taking a similar view.
  • The court stated that in section 26 of the Amendment Act of 2015 clearly indicates that unless the parties otherwise agree, no provisions of the Amendment Act would apply to arbitral proceedings commenced in accordance with the provisions of section 21 of the Arbitration and Conciliation Act, 1996 prior to 23rd October, 2015. It also makes it clear that the provisions of Amendment Act shall apply in relation to the arbitral proceedings commenced on or after the date of commencement of the Amendment Act. It is thus clear that if in an arbitration agreement is entered into prior to 23rd October, 2015, and the parties had agreed that the parties would be governed not only by carbp434-17 the provisions of the Arbitration and Conciliation Act, 1996 but also by statutory amendment thereto or repeal thereto and if the notice invoking arbitration agreement under section 21 is received by the other party prior to 23rd October, 2015 when the arbitral proceedings contemplated under section 21 is commenced, the party will be governed by not only the provisions of Arbitration and Conciliation Act, 1996 but also by the statutory amendments thereto or repeal thereto and not otherwise.
  • If however there was no such agreement between the parties to apply the provisions of statutory amendments or repeal to the Arbitration and Conciliation Act, 1996 and the arbitral proceedings have commenced prior thereto 23rd October, 2015 by virtue of section 21 of the Arbitration Act, such arbitral proceedings will be governed by the provisions of the Arbitration and Conciliation Act, 1996 before its amendment brought into effect by Amendment Act w.e.f. 23rd October, 2015 irrespective of the fact that the award is rendered after 23rd October, 2015 or that the arbitration petition challenging an award is pending as on 23rd October, 2015 or filed thereafter.
  • The court observed that the arbitral proceedings commences on receipt of the notice invoking arbitration agreement by the other party as contemplated under section 21 read with section 43 of the Arbitration and Conciliation Act, 1996, if such notice is received by the other side after 23rd October, 2015, the provisions of the Amendment Act would apply to such matters. The parties cannot agree that they will not be bound by the provisions of the Amendment Act.
  • The court observed that there was no contest between the parties that the first part of saving section 26 carries restrictive meaning that the proceedings before the arbitral tribunal which proceedings get terminated with passing of the final award. The parties in that proceedings also did not dispute that the section 26 was consisting of two parts i.e. the arbitral proceedings before arbitral tribunal which are terminated by virtue of an order under section 32(1) and another arbitral proceedings before Court of law.
  • This Court held that if use of the verb “has been” is held to be in “present perfect tense”, section 36 of the Arbitration Act will be applicable not only to cases where a petition under section 34 of the Arbitration Act is filed after 23rd October, 2015 but also to cases where a petition has been filed before 23rd October, 2015. It is held that all the applications under section 34 pending in the Court for consideration will attract section 36(2) of the Amended Act. It is held that the vested right of the award-debtor under section 34 of the Arbitration Act is unaffected by the amendment to section 36 of the Arbitration Act.
  •  It is held that by the amended section 34 of the Arbitration Act, the shadow or impediment on the enforceability of the arbitral award has been removed to enable a successful claimant to enforce the arbitral award, unless the award-debtor obtains an order carbp434-17 of interim stay from the Court under section 36(3) of the Arbitration Act. The lifting of this shadow or impediment, on the enforceability of the arbitral award operates only in future i.e. after 23 October, 2015 on the basis of an existing state of affairs, even if the award was passed or the petition under section 34 of the Arbitration Act was filed before 23rd October, 2015. The Amended section 36 of the Arbitration Act cannot be said to operate retrospectively, its operation is prospective in nature. This Court accordingly dismissed the chamber summons inter-alia praying for dismissing of the execution application.
  • The court contended that a plain and simple interpretation of section 26 of the Amendment Act on conjoint reading with other provisions of the Arbitration Act referred to aforesaid wherein the term ‘arbitral proceedings’ are referred would clearly indicate that the provisions in the Arbitration and Conciliation Act prior to the provisions of Amendment Act having been brought into effect would apply to all the arbitral proceedings wherein a notice invoking arbitration agreement under section 21 was received by the other party prior to 23 rd October, 2015 and the provisions of the Arbitration Act duly amended by the Amendment Act would apply to all the arbitral proceedings which have commenced after 23rd October, 2015 by virtue of a receipt of notice invoking arbitration agreement by other party in view of section 21 of the Arbitration and Conciliation Act, 1996. The phrase “the date of commencement of the arbitral proceedings” is a legal fiction and has to be read in conjunction with the words “commenced in accordance with section 21”.
  • The court contended it is not the case of any of the parties that section 34(5) an 34(6) inserted by the Amendment Act would be carbp434-17 applicable with retrospective effect. Even otherwise the intent of the legislation while inserting these two provisions does not indicate that the said provisions are brought into effect with retrospective effect. In my view, when the arbitration proceedings commenced in view of the notice issued by the petitioner under section 21 much prior to 23rd October, 2015 and since at that point of time, the petitioner was not required to issue any prior notice to the respondent before filing of the arbitration petition under section 34, merely because the award is rendered after 23rd October, 2015 and the petition is filed after the said amendment, the conditions imposed in section 34(5) and 34(6) cannot be made applicable to such matters where the arbitral proceedings had commenced much prior to the date of the amendment.
  • The court observed that the parties would be governed by the right and remedy available to the parties existing on the date of invoking the arbitration agreement and not on the date of the award or on the date of filing of the arbitration petition unless the legislature so specifically provided for a different remedy or the conditions introduced by invoking such remedy in law with retrospective effect. In my view, section 34(5) and 34(6) thus cannot be pressed in the service by the respondent to deprive the petitioner of filing a petition challenging an award in such matters without issuing any prior notice to the respondent. In my view, the right of challenging the award under section 34 is a vested right to impugn the arbitral award which cannot be taken away by such amendment under section 34(5).
  • This Court even today deals with the matters under section 30 of the Arbitration Act, 1940 in respect of which notice for carbp434-17 appointment of an arbitrator under section 37(3) of the Arbitration Act, 1940 was issued prior to the provisions of the Arbitration & Conciliation Act, 1996 came into effect. All such matters where the arbitral proceedings commenced under the provisions of Arbitration Act, 1940 are continued to be governed by the provisions of the said Act though an arbitration petition challenging the award under section 30 of the Arbitration Act, 1940 is filed after the Arbitration & Conciliation Act, 1996 came into force.
  • The court observed that the provisions of section 34(5) and 34(6) cannot be construed as mandatory but has to be construed as directory. In my view, the requirement of the notice under section 34(5) of the Amendment Act is procedural in nature and not a substantive provision. The compliance of such procedural provision without providing any consequences in case of defiance thereof thus cannot be construed as mandatory and has to be construed as directory. Even if a notice is not given prior to the date of filing of the petition, the right of challenging an award vested in section 34 of the Arbitration & Conciliation Act, 1996 cannot be taken away.
  • The court contended that the expression “arbitral proceedings” described in section 26 of the Arbitration & Conciliation (Amendment) Act, 2015 refers to two different periods i.e. (i) before 23rd October, 2015 and (ii) after 23rd October, 2015. The expression “in relation to the arbitral proceedings” provided in section 26 of the Arbitration & Conciliation (Amendment) Act, 2015 does not refer to the arbitral proceedings in Court. The expression “in relation to the arbitral proceedings” prescribed in section 26 has to be read with section 21 of the carbp434-17 Arbitration & Conciliation Act, 1996.
  • Even in those cases where the notice invoking arbitration agreement under section 21 is received by other party after 23rd October, 2015, the provisions under section 34(5) and 34(6) are directory and not mandatory. The Court has ample power to direct the petitioner to issue notice along with papers and proceedings upon the respondent after the petitioner files the arbitration application under section 34(1) and before such petition is heard by the Court at the stage of admission.
  • DECISION HELD BY COURT:
  • At last the court stated the provisions of the Arbitration & Conciliation Act, 1996 in force prior to 23 rd October, 2015 would be applicable to such matters for all the purposes.
  • Appeals dismissed.
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