THE HONOURABLE SRI JUSTICE G.CHANDRAIAH AND THE HONOURABLE SRI JUSTICE M.S.K. JAISWAL Review C.M.A. MP. No.123 of 2012 In C.M.A. No.3916 of 2002 ORDER: By order dated 19.08.2011, the Hon’ble Apex Court in Special Leave to Appeal in C.C. No.14103 of 2010, filed by the Union of India aggrieved by the judgment and decree dated 01.04.2009 passed by this Court in CMA. No.3916 of 2002, passed the following order. “When the matter was taken up for admission, it was pointed out by Mr. P.S. Narasimha, learned senior counsel appearing for the respondents, that the question of law now being sought to be raised by the learned Additional Solicitor General, Ms. Indira Jai Singh, regarding the applicability of the Arbitration and Conciliation Act, 1996, does not appear to have been canvassed before the High Court. Ms. Jai Singh, however, submits that a statement has been made on oath that the question had been raised but was not considered by the High Court. In order to resolve the dispute, this special leave petition is treated as withdrawn, with liberty to the petitioner to obtain a clarification from the High Court in this regard. We are not going into the question of the bar of limitation, as far as this special leave petition is concerned.” Pursuant to the said order, the Union of India filed the present review petition seeking to review the order dated 01.04.2009 passed in CMA. No.3916 of 2002 by this Court. For the purpose of better appreciation of the case, brief chronological events are as follows. The 1st respondent, M/s.Sayyapparaju Engineering Constructions Limited, is a contractor and the appellant is the Deputy Director General and Chief Engineer, Naval Projects, a wholly owned Central Government Project. The appellant called for the tenders for execution of certain skilled works and wherein the 1st respondent was the successful bidder. The tender was accepted and the 1st respondent signed the work order and commenced the work on 22.07.1991, for a some of Rs.13,06,89,131.00/-. The nature of the work involved in the contract was the provision of the Marine Works for slipway facilities as naval Dockyard, Visakhapatnam. While so, the contractor decided to invoke the arbitration clause for non payment of claims and the contractor approached the High Court for appointment of an Arbitrator. By an order dated 12.03.1998, the High Court appointed the 2nd respondent, Sri A.J. Kumaresan, retired Chief Surveyor of works of Hyderabad, as the sole Arbitrator in a the matter vide Arbitration Application No.13 of 1997 with a direction to adjudicate the dispute. Thereafter, the arbitral proceedings commenced and the parties filed pleadings and documents. Preliminary hearing commenced to sort out objections. The Department argued that the Arbitrator does not restrict adjudication of the Contractor’s claims alone, but, also has to adjudicate the disputes between parties. They have also argued that counter claims could be submitted without giving notice under Condition No.70 of IAFW 2249 of the General Conditions of Contracts. It was decided that the proceedings will be conducted under the Arbitration and Conciliation Act, 1996. Minutes of the proceedings are made and signed by both the parties and also the Arbitrator on 25.06.1998. It was recorded in the minutes of the proceedings (final hearing) held from 07.02.2000 to 10.02.2000 to a specific reference from the Arbitrator, both parties confirmed that their oral submissions are completed not only in respect of claim No.28 but on all other claims/counter claims etc. Both parties confirmed that they have been given full opportunity to present their claims and they have nothing further to add. The parties and the Arbitrator have expressed their full satisfaction on the cooperation and smooth conduct of the Arbitration proceedings. The Arbitrator, after considering both, oral and documentary evidence on various aspects, awarded Rs.9.6 crores to the contractor with a condition that the appellant should pay the amount within two months without interest, if not, they are liable to pay interest at the rate of 17.5% per year on the total amount awarded. The Arbitrator adopted a method in which he dealt the claims of the contractor and the claims of the company separately. The Arbitrator allowed some claims of the contractor and rejected some more claims put forth by him and whereas, the Arbitrator rejected all the claims made by the appellant on the ground that the company was at fault in the progress of the work and as all the claims of the company emanated from the losses sustained due to the delay in completion of their work. The Arbitrator further held that the appellant has illegally impounded the machinery of the 1st respondent worth Rs.1.35 crores. Aggrieved by the award passed by the Arbitrator, the appellant Government Company filed O.P. No.683 of 2003 under Section 34 of Arbitration and Conciliation Act, 1996, before the Principal District Judge, Visakhapatnam and prayed for setting aside the award dated 31.03.2000. In the said O.P., the learned District Judge, upheld the award passed by the Arbitrator and further held that the Courts interference is limited in cases where Arbitrator has applied his mind to the pleadings and documents and passed a reasoned award. Aggrieved by the order dated 22.10.2002 passed by the learned District and Sessions Judge, Visakhapatnam in O.P. No.683 of 2002, the appellant filed the present CMA. No.3916 of 2002, wherein this Court was pleased to issue notice and granted interim stay. The High Court vide its order dated 28.03.2003, while modifying the interim order passed on 10.02.2003 directed the appellant to deposit half of the amount awarded, within a period of four weeks from that day and the respondent was permitted to withdraw the same on furnishing bank guarantee. The respondent has withdrawn total amount of Rs.6 crores on depositing the title deeds in respect of immovable properties as per the orders passed by this Court. This Court allowed the appeal filed by the Union of India in part, to the extent of confirming the judgment and decree dated 22.10.2002 in O.P. No.683 of 2000, passed by the Civil Court in all respects, except modification in the rate of interest. The Union of India after lapse of more than one year filed Special Leave Petition with a delay condonation petition. The Special Leave to Appeal (Civil) in C.C. No.14103 of 2010 filed by the Union of India is treated as withdrawn, with a liberty to the Union of India to obtain clarification from the High Court, with regard to applicability of Arbitration and Conciliation Act, 1996. Pursuant to the order of the Apex Court, the appellant filed present review petition. The learned counsel for the respondent, Contractor, contended that the Review Petition filed by the Union of India/appellant is not maintainable under the guise of clarification petition. It is brought to the notice of this Court that pending disposal of the review petition, the Income Tax Department attached the balance amount lying in the lower Court and recovered the same towards Income Tax due from the respondent. Denying the averments of the petitioner/appellant, the 1st respondent, contractor, filed the counter affidavit. The learned counsel for the petitioner/appellant would submit that there is a specific ground raised with regard to the applicability of the old Act namely Arbitration Act, 1940 on various occasions, including in the grounds of CMA, but the same has not been answered. Therefore, the matter was carried to the Apex Court and the Apex Court without going into the merits of the case, while permitting the appellant to withdraw the SLP, gave liberty to seek clarification from this Court. Therefore, the learned counsel sought to draw the attention of this Court with regard to the ground that was raised by the petitioner/appellant in the memorandum of grounds of appeal in CMA at para 6, which reads as under. “6. The Court below ought to have noticed that the Appellant had rejected the request for appointment of an Arbitrator by proceedings dated 04.08.1993 on the ground that the contract do not provide for appointment of Arbitrator during the currency of the work. Thus the arbitral proceedings commenced within the meaning of Section 37(3) of the Arbitration Act, 1940 (hereinafter referred to as 1940 Act for brevity). When once the proceedings have commenced under the 1940 Act, they should be continued under the said Act alone despite repeal of the said enactment, in view of Section 85(2) (a) of the 1996 Act and thus the proceedings under the new Act are not maintainable. The contra conclusions of the lower court are unsustainable.” On the other hand, the learned counsel appearing for the respondent, Contractor, would submit that in response to the grounds raised in the memorandum of grounds of appeal in CMA the respondent in the counter affidavit had specifically answered stating that the provisions under the new Act would apply and the Court below had also considered an objection in this regard and held that the provisions under the Arbitration and Conciliation Act, 1996 are applicable. He also submitted that this Court also appointed an Arbitrator in 1996 Act and since the same has not been challenged therefore, the said aspect has attained the finality and now the appellant is estopped from raising the said ground. He specifically brought to the notice of this Court about the consideration of said aspect by this Court in its judgment dated 01.04.2009 passed in CMA No.3916 of 2002 at para 16, which reads as under. “16. Therefore, we are of the view that this Court has to examine – whether the civil Court had exercised its jurisdiction under Section 34 of the Act appropriately in order to either set aside or approve the award, not only in terms of the laws and the remedies available to the aggrieved party but also with realistic approach, not strictly confining to the principles of jurisprudence and also in accordance with the customary morality, which otherwise called as.” In view of the above, he submitted that this Court has categorically considered the grounds raised by the petitioner/appellant in the CMA. He further submitted that while the Arbitrator was appointed and the Arbitrator had undertaken the arbitration proceedings, both the parties have agreed for commencement of the proceedings under the new Act. He has brought the relevant portion of the award, which is as under: “The department argued that the Court Order does not restrict adjudication to the contractor’s claims alone but allow for adjudication of disputes between the parties. During Court proceedings they were objecting to the Appointment of Arbitrator during currency of the contract and hence question of submitting their disputes/claims in court was not possible/did not arise. They also argued that counter claims could be submitted by them without giving notice under condition 70 of IAFW 2249, the General Conditions of the contracts. In view of the court decision to refer all disputes between the parties to Arbitration which is implied as per their orders, include future claims also. Arbitrator decided that he would adjudicate the Department claims indicating in his award whether they are treated as claims or counter claims. It was decided that the proceedings will be under the New Act of 1996. Minutes of the proceedings are made and singed by both the parties and the Arbitrator on 25.06.98.” The learned counsel appearing for the respondent/Contractor also filed a detailed counter affidavit to the present application filed by the petitioner. At para 7 and 8 of the counter affidavit it is stated as under. “7. It is submitted that in the Arbitration Application No.13/1996 filed by the respondent herein, under Section 11 of the Arbitration and Conciliation Act, 1996, the Hon’ble Chief Justice by order dt.12.3.1998, was pleased to appoint the 2nd respondent herein, as Arbitrator to decide the disputes between the parties. Pursuant to the said order of appointment, the Arbitrator entered reference on 14.4.1998. After pleadings were completed the parties had filed the document before the Arbitrator. The petitioner appeared before the Arbitrator and submitted to the jurisdiction of the Arbitrator by defending the case filed against them and also made jhuge counter claims to a tune of Rs.65 crores. The petitioner argued before the Arbitrator that the Arbitrator does not restrict adjudication to the contractor claims alone, but allow for the adjudication of all the disputes between the parties. They also argued that counter claims could be submitted by them without giving notice to the contractor under condition 71 of IAFW 2249 the General Conditions of the Contract. After due consideration of various arguments made in the preliminary meeting, it was decided to take up Govt. claims also. The claims of the department have been considered as counter claims. Before the Arbitrator in the preliminary hearing, it was agreed/decided that the entire Arbitration proceedings be conducted under the New Act of 1996, and also the High Court itself has made it clear that the New Act, will apply by making the appointment under section 11 of the New Act. Minutes of the proceedings were made and singed by both the parties and the Arbitrator on 25.6.1998. In this Hon’ble High Court also the parties have acted under the New Act, (both in the application and the counter filed by the department no where the applicability of new Act, was questioned). If at all the department was aggrieved they could have questioned the order passed by the Hon’ble Chief Justice dt.12.3.1998 in Arbitration Application Nof.13/1996. The order passed by the Hon’ble Chief Justice dt.12.3.1998 in Arbitration Application No.13/1996. The order passed by the Hon’ble Chief Justice dt.12.3.1998 in Arbitration Application No.13/1996 has become final. As per the provisions of Act, 1996, it cannot be raised later than at the time of submission of pleadings and any challenge U/s 13 should have come immediately after the Arbitrator is appointed or at least before submission of the pleadings. 9. I respectfully submit that the petitioner/Appellant who sought adjudication of counter claims of Rs.65 crores cannot turn around now and say that the appointment of Arbitrator is contrary to the contract. I respectfully submit only after due deliberations, the learned Arbitrator had taken a decision and both parties were informed by the Arbitrator that the proceedings would be conducted under the Act 26 of 1996 and they were in fact so conducted after consent by both the parties. I submit that only after the petitioner and the respondents argued their case in full and gave written submissions stating that they are the fully satisfied with the proceedings conducted by the learned Arbitrator, the 2nd respondent herein closed the proceedings and passed an award on 31.3.2000 granting the claims of the respondent in part and rejecting the claims of the petitioner. The request made by the respondent contractor vide proceedings dt.4.8.1993 cannot be reckoned as the commencement of the Arbitral proceedings as contended by the petitioner. The issue with regard to the commencement of the Arbitral proceedings was raised before the lower court by the petitioner and the lower court in a well considered order rejected the same by holding that the Arbitration proceedings shall be deemed to be conducted under the New Act. The petitioner raised the issue with regard to the applicability of the Arbitration and conciliation Act, 1996 before this Hon’ble court also and the same was considered and rejected by this Hon’ble court orally by holding that the Arbitration proceedings shall be deemed to be conducted under the New Act. Hence, the contention of the petitioner though the question had been raised but has not been considered by the Hon’ble High court is totally incorrect and baseless. The said question was raised and negatived by this Hon’ble court in view of the reasons stated in the above mentioned paragraphs.” From the above two paragraphs it is clear that the Arbitration proceedings have been conducted under the new Act of 1996 and also the High Court made it clear that the new Act will apply and made appointment of Arbitrator. In this regard, minutes of proceedings were also signed by both the parties along with the Arbitrator on 25.06.1998. No reply affidavit has been filed by the petitioner denying the counter averments filed by the 1st respondent, Contractor. At this juncture, it is necessary to extract the Statement of Objects and Reasons as given in the Arbitration and Conciliation Bill, 1995, which reads as under. “Statement of Objects and Reasons as given in the Arbitration and Conciliation Bill, 1995.-The State of Objects and Reasons for this Bill are as follows :- The law on arbitration in India is at present substantially contained in three enactments, namely, the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. it is widely felt that the 1940 Act, which contains the general law of arbitration, has become outdated. The Law Commission of India, several representative bodies of trade and industry and experts in the field of arbitration have proposed amendments to this Act to make it more responsive to contemporary requirements. It is also recognised that our economic reforms may not become fully effective if the law dealing with settlement of both domestic and international commercial disputes remains out of tune with such reforms. Like arbitration, conciliation is also getting increasing worldwide recognition as an instrument for settlement of disputes. There is, however, no general law on the subject in India. 2. The United Nations Commission on International Trade Law (UNCITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly of the UnitedNations has recommended that all countries give due consideration to the said Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practice. The UNCITRAL also adopted in 1980 a set of Conciliation Rules. The General Assembly of the United Nations has recommended the use of these Rules in cases where the disputes arise in the context of international commercial relations and the parties seek amicable settlement of their disputes by recourse to conciliation. An important feature of the said UNCITRAL Model Law and Rules is that they have harmonised concepts on arbitration and conciliation of different legal systems of the world and thus contain provisions which are designed for universal application. 3. Though the said UNCITRAL Model Law and Rules are intended to deal with international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present Bill seeks to consolidate and amend the law relating to domestic arbitration, international commercial arbitration, enforcement of foreign arbitral awards and to define the law relating to conciliation, taking into account the said UNCITRAL Model Law and Rules. 4. The main objectives of the Bill are as under :- (i) to comprehensively cover international commercial arbitration and conciliation as also domestic arbitration and conciliation; (ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration ; (iii) to provide that the arbitral tribunal gives reasons for its arbitral award; (iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction; (v) to minimise the supervisory role of courts in the arbitral process ; (vi) to permit and arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes ; (vii) to provide that every final arbitral award is enforced in the same manner as if it were a decree of the court ; (viii) to provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal ; and (ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two International Conventions relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award. 5. The Bill seeks to achieve the above objects.” Further, it is also pertinent here to extract the Section 85 of the new Act, which reads as under. “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. (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.” It is clear from the above Sub-Section 2(a) that the provisions of the repealed 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. In the instant case, though the proceedings commenced earlier to the present Act, as there was consent between the parties to conduct proceedings under the new Act as per Sub-Section 2(a) only the provisions under the new Act are applicable and the appellant is estopped from raising the said ground. As could be seen from the grounds raised by the appellant in the CMA, it is true that the appellant had raised the aspect of jurisdiction with regard to application of the present new Act. In para 16 of the judgment rendered by this Court, in our view, though not specifically mentioned but we understand that this Court had considered that since the proceedings have already been initiated under the new Act, therefore, the provisions of new Act alone are applicable. Further, it can be seen that the CMA was filed by the appellant i.e. Union of India, represented by its Deputy Director General & Chief Engineer, under Section 37 of the Arbitration and Conciliation Act, 1996 against the order and decree passed in O.P. No.683 of 2000 dated 22.10.2002 on the file of the Court of District and Sessions Judge, Visakhapatnam. Therefore, it is the appellant/petitioner himself has chosen for invocation of the proceedings under the new Act. Therefore, at this juncture, it is not proper for the appellant to aprobate or reprobate his own action. With the above observations, review petition is disposed of with the clarification that the provisions of new Arbitration and Conciliation Act, 1996 are applicable. ___________________________ JUSTICE G.CHANDRAIAH ___________________________ JUSTICE M.S.K. JAISWAL Date: 18.06.2014 LSK