1 IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.139/2003 M/s. M. N. Ninan, A proprietary concern, having its Office at 31, Trionora Apartments, III Floor, I Staircase, Near Municipality Market, Panaji, Goa. by its proprietor – Shri M.N. Ninan, resident of House No.124, Opposite E-6, Government Bungalow, Altinho, Panaji – Goa. ......... Petitioner. Versus State of Goa, by the Executive Engineer, Works Division I (Buildings), Public Works Department, Patto, Panaji, Goa. ......... Respondent. Mr. M. S. Usgaonkar, Senior Advocate with Mr. Sudesh Usgaonkar and Ms. Rossette Pereira, Advocate for the petitioner. Mr. S. R. Rivonkar, Government Advocate for the respondent. CORAM : P.B. MAJMUDAR, J. Date : 13th February, 2009. ORAL JUDGMENT : By filing this petition, the petitioner has prayed for 2 quashing and setting aside of the order at Exhibit-A passed by the IInd Additional District Judge, Panaji dated 12.11.2002. By the impugned order, the learned Addl. District Judge upheld the objections filed by the respondent and dismissed the execution application preferred by the present petitioner. 2. The petitioner herein filed an application under Section 20 of the Arbitration Act, 1940 on 7.8.1995 before the Court of Civil Judge, Sr. Division, Panaji for direction to the respondent to file an arbitration agreement in the Court for appointment of a sole arbitrator as the respondent had failed to make appointment within the stipulated period. The respondent herein filed written statement in the said proceedings and contended that as per the modified clause of the arbitration agreement, for a claim which is more than Rs.25,000/- a civil suit has to be filed and no arbitration agreement is provided. Subsequently, on 10.6.1998, the learned Civil Judge, Senior Division, Panaji allowed the application under Section 20 and the parties where asked to suggest the name of an arbitrator. Thereafter, the petitioner suggested 3 names and the respondent's Advocate gave consent for appointment of one Shri B. V. Khanolkar, Retired Chief Engineer, 3 Public Works Department and agreed that he may be appointed as the sole arbitrator in the matter. With the consent of both parties, accordingly, Shri B. V. Khanolkar was appointed as the sole arbitrator. The learned trial Judge, accordingly, recorded the said statement and passed an order appointing Shri B. V. Khanolkar as the sole arbitrator to adjudicate upon the disputes between the parties and directed him to file his Award within four months from the date of order. The said order is finding place at page 76 of the compilation. The matter, accordingly, went before the Arbitrator. 3. It is not in dispute that before the arbitrator both the sides agreed that the provisions of the Arbitration and Conciliation Act, 1996 will be made applicable for making the Award. Subsequently, both sides submitted their respective say before the Arbitrator and the Arbitrator ultimately declared his Award on 30.4.2000. The Arbitrator, thereafter, issued notices to the parties intimating the Award. It is required to be noted that the said Award of the Arbitrator was not challenged under Section 34 of the Arbitration and Conciliation Act, 1996 and no application as contemplated under Section 34 of the Act was preferred by the respondent. The present petitioner, thereafter, 4 preferred an application under Section 36 of the Arbitration and Conciliation Act, 1996 (“the New Act” for short) before the Additional District and Sessions Judge, North Goa, Panaji for executing the award. 4. On behalf of the respondent herein, the said application for execution was resisted on the ground that the order of the learned Civil Judge, appointing the arbitrator, is a nullity and, therefore, the award of the arbitrator cannot be enforced, as the said award of the arbitrator also can be said to be a nullity. It is the say of the respondent that at the time when the Sole Arbitrator was appointed by the learned Civil Judge, the Act of 1996 had already come into force and in view of the agreement between the parties, the learned Civil Judge, could not have proceeded under the Act of 1940, as the provision of the New Act was made applicable. 5. The learned IInd Additional District Judge, Panaji by the impugned Order dated 12.11.2002 upheld the said objections and came to the conclusion that in view of the agreement between the parties and more particularly, Clause 25 of the said Agreement, the New Act of 1996 was made applicable and, therefore, the learned Civil Judge could 5 not have appointed the Arbitrator under the Act of 1940. It was found that the order of the learned Civil Judge appointing the arbitrator is a nullity. The aforesaid order is impugned in this petition. 6. Mr. Usgaonkar, learned Senior Counsel appearing for the petitioner vehemently submitted that at the time when the arbitration proceedings commenced, both sides had agreed before the Arbitrator that the Arbitrator can proceed under the New Act i.e. the Arbitration and Conciliation Act, 1996. He submitted that in view of the said agreement, the Arbitrator conducted the proceedings as per the New Act and proceeded under the New Act and as per Section 34 of the New Act, the respondent was required to file an application under Section 34 within 3 months. Since no application was preferred by the respondent herein under Section 34 of the New Act, the Award of the Arbitrator has become final and the same is to be treated as decree. It is submitted by Mr. Usgaonkar that before the Arbitrator both sides have agreed that the Arbitrator may proceed as per the New Act and in that view of the matter, once the Arbitrator proceeded as per the New Act, all subsequent proceedings to be followed as per the New Act which has been followed by the Arbitrator and the petitioner has also 6 taken out further proceedings as per the New Act for the purpose of enforcing the said Award. 7. Mr. Rivonkar, learned Government Advocate, on the other hand, submitted that at the time when the Civil Judge passed an order appointing the Arbitrator, the New Act had already come into force. It is submitted that in view of Clause 25 of the Arbitration Agreement between the parties, any change in law to be made applicable and in that view of the matter when the Act of 1996 was already made applicable, the learned Civil Judge could not have passed the order appointing the arbitrator as per the Act of 1940 and the order of the learned Civil Judge appointing the arbitrator is, therefore, a nullity. 8. I have heard the learned Counsel of both sides at length and I have gone through the necessary papers. In order to appreciate the controversy, clause 25 of the Agreement is required to be considered. Clause 25 of the said agreement, reads as under : “Clause 25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions herein before mentioned 7 and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, Goa Public Works Department, incharge of the work at the time dispute or if there be no Chief Engineer, the administrative head of the said Goa Public Works Department at the time of such appointment. It will be no objection to any such appointment that arbitrator so appointed is a Government servant, that he had to deal with the matters to which the contract relates and that in the course of his duties as Government servant he had expressed views on all or any of the matters in dispute or difference. The arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or Administrative Head as aforesaid at the time of such transfer, 8 vacation office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Chief Engineer or administrative head of Goa P.W.D. as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases, where the amount of the claim in dispute is Rs.50,000/- (Rupees fifty thousand) and above, the arbitrator shall give reasons for the award. Subject as aforesaid, the provisions of the Arbitration Act, 1940, or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force, shall apply to the arbitration proceeding under this clause, - It is also a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute. It is also a term of the contract that if the 9 contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the Government that the bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.” 9. It is true, as argued by Mr. Rivonkar that in view of Clause 25 of the Agreement, the parties had agreed that the provisions of the New Act of 1996 would be made applicable and, therefore, the Civil Judge could not have passed the order appointing the arbitrator under Section 20 the Act of 1940. 10. At this stage, it is necessary to referred to Section 85 of the New Act. Section 85 reads as under : “ 85. Repeal and savings .- (1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed. 10 (2)Notwithstanding such repeal, - (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) 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.” As per sub-clause 2(a) of Section 25, the provisions of the Arbitration Act, 1940 is applicable in relation to arbitration proceedings which commenced before the New Act came into force, unless, otherwise agreed by the parties. In the instant case, it is required to be noted that the sole arbitrator was appointed by the Civil Judge with the consent of the parties. It is an admitted fact that before the Arbitrator both sides agreed that the New Act of 1996 is to be applied and accordingly, the parties went before the Arbitrator with a clear understanding that the 11 provisions of the New Act is to be made applicable before the Arbitrator. The Arbitrator has pointed out that both parties have agreed that the arbitration proceedings would be governed by the New Act, in para 8 of his Award. Both the parties, accordingly, submitted to the jurisdiction of the arbitrator and the arbitrator commenced the proceedings and concluded also as per the Act of 1996. The parties went before the Arbitrator with a clear understanding that the provisions of the New Act of 1996 is applicable. It is not a case where after the Award of the Arbitrator, the petitioner had moved the Civil Court for making the said Award as Rule of the Court. If the Civil Court had passed an order on such an application, naturally, such order would be without jurisdiction. But the parties on their own requested the Arbitrator to proceed as per the New Act of 1996 and after the Award since no application under Section 34 of the New Act was preferred by the respondent for setting aside the award of the arbitrator and after waiting for 3 months, as required by the Act the application for executing the award was moved by the petitioner, the award of the arbitrator has accordingly become final under section 34 of the New Act. The petitioner, after waiting for 3 months, subsequently filed an execution application for enforcing the said Award which can be said 12 to be a deemed decree. Considering the facts of the case, in my view, the parties to an agreement having agreed for referring the disputes to a particular arbitrator and having agreed before him to follow the procedure under the New Act of 1996, subsequently the respondent cannot back out from the stand taken by it on the ground the original order of the Civil Court appointing the arbitrator was without jurisdiction, as the parties had agreed for referring the dispute to an arbitrator as per the New Act. It is required to be noted that even as per the say of the learned Counsel Shri Rivonkar, the parties had agreed that if there is any change in law, the same shall be made applicable so far as the arbitration agreement is concerned. The matter does not rest here as, ultimately, when the arbitrator was appointed, the New Act had already come into force and the parties had agreed before the arbitrator that the arbitrator should follow the procedure as per the New Act. 11. In view of the aforesaid aspect of the matter, it is clear that irrespective of whether the Civil Court could have proceeded further or not under the old Act, the parties had ultimately agreed to appoint the arbitrator of their choice and the arbitrator proceeded as per the Act 13 of 1996. Therefore, it can safely be said that the arbitrator has proceeded as per the Act of 1996 which can be said to be the independent proceedings irrespective of the order passed by the learned Civil Judge, appointing the arbitrator. 12. The learned Government Advocate Mr. Rivonkar, however, submitted that though it is true that the New Act is applicable to the present proceedings, but his limited objection is that the Civil Court could not have appointed the Arbitrator after the New Act came into force and even as per clause 25 of the Arbitration Agreement since the new Act was applicable, the Civil Court had no jurisdiction to pass the order appointing the arbitrator. In this behalf, it is required to be noted that ultimately the parties had agreed to go to a particular arbitrator with consent and, therefore, independent of the civil court proceedings, the proceedings initiated before the arbitrator can be said to have been initiated independently under the New Act. It is also required to be noted that before the Arbitrator no such objection was taken by the respondent and it submitted to the jurisdiction of the arbitrator on merits and contested the claim on merits. It is only after having found that the order of the arbitrator is against the respondent, the respondent took 14 objection for the first time in the execution proceedings initiated by the petitioner herein. The respondent had enough opportunity to prefer an application under Section 34 of the New Act for setting aside the award. However, the respondent failed to prefer it. Considering the facts of the case, it is clear that in view of clause 25 of the Agreement between the parties, the parties ultimately decided to go to the arbitrator as per the Act of 1996. In view of the same, irrespective of the order of the Civil Court, the parties can be said to have independently proceeded as per the Act of 1996 and placed their respective say and ultimately submitted to the jurisdiction of the arbitrator. 13. Considering the said aspect of the matter, the learned IInd Additional District Judge has committed an error in coming to the conclusion that the Award of the Arbitrator is a nullity as the Civil Judge could not have appointed the Arbitrator under the Act of 1940. Once the arbitration proceedings commenced as per the Act of 1996 and when the respondent had not preferred an application under Section 34 of the Act of 1996, the said Award of the Arbitrator has become final and it can be executed as if it is a decree. 15 14. The Award of the Arbitrator is to be considered as if it is under the new Act of 1996 independently, and irrespective of whether the original appointment was made by the Civil Court or not. As pointed out earlier, as per Clause 25 of the Arbitration Agreement between the parties, Act of 1996 was made applicable and when the arbitrator has also declared the Award as per the said Act, it cannot be said that the said Award of the Arbitrator is not enforceable or that it is a nullity. 15. Under the circumstances, the petition is allowed. The order of the learned Addl. District Judge, Panaji is set aside. The matter is sent back to the learned IInd Additional District Court, Panaji for proceeding with the execution application, in accordance with law. Rule made absolute in the aforesaid terms. No order as to costs. P.B. MAJMUDAR, J. ssm.