1998 (3) TMI 704 - HC - Indian Laws

Arbitration Agreement Applies New Act, Pre-Existing Agreements Valid.

M/s. Reshma Constructions Versus State Of Goa

The court held that the new Act applies to the arbitration proceedings due to the parties' agreement, which included a clause subjecting arbitration to ... - Issues Involved:1. Applicability of the Arbitration and Conciliation Act, 1996 to arbitration proceedings commenced under the Arbitration Act, 1940.2. Interpretation of Section 85 of the Arbitration and Conciliation Act, 1996.3. Validity of the arbitrator's appointment and the enforceability of the award under the new Act.4. Time factor concerning the agreement between parties for applicability of the new Act.5. Procedural aspects under Sections 33 and 34 of the new Act.Issue-Wise Detailed Analysis:1. Applicability of the Arbitration and Conciliation Act, 1996:The primary question was whether the new Act applies to arbitration proceedings that began under the old Act and were pending when the new Act came into force. The petitioner argued that the new Act should govern the proceedings, while the respondent contended that the old Act should continue to apply.2. Interpretation of Section 85:Section 85 of the new Act repeals the old Act but includes a saving clause for pending proceedings unless otherwise agreed by the parties. The court analyzed whether this agreement must be entered into after the enforcement of the new Act or if a pre-existing clause in the agreement suffices.3. Validity of the Arbitrator's Appointment and Enforceability of the Award:The trial court had appointed an arbitrator under the old Act, and the arbitrator gave his award while the new Act was in force. The petitioner claimed that the award should be enforceable as a decree under the new Act, bypassing the need for the trial court's intervention. The respondent objected, arguing that the arbitrator's appointment was invalid and that the old Act's procedures should apply.4. Time Factor Concerning Agreement:The court examined whether the phrase 'unless otherwise agreed by the parties' in Section 85(2)(a) implied that such an agreement must be made after the new Act's enforcement. The court concluded that the agreement could be pre-existing, provided it clearly indicated the parties' intention to be governed by any future statutory modifications or re-enactments.5. Procedural Aspects Under Sections 33 and 34:The court considered the procedural rights of the parties under Sections 33 and 34 of the new Act, which allow for correction, interpretation, or setting aside of the arbitral award within specific time limits. The court noted that the respondent had filed objections under the old Act within the prescribed time and should not be penalized for this.Judgment Summary:The court held that the new Act applies to the arbitration proceedings in question due to the agreement between the parties, which included a clause subjecting the arbitration to any statutory modifications or re-enactments. The court found that the trial court's interpretation requiring a new agreement post-enforcement of the new Act was erroneous and contrary to the Act's scheme and spirit.The court emphasized that the phrase 'otherwise agreed by the parties' refers to the parties' intention regarding the applicable procedural law, not the timing of the agreement. Consequently, the court set aside the trial court's order and declared the proceedings under the old Act closed.The court also allowed the parties to exercise their options under Sections 33 and 34 of the new Act, with the limitation period adjusted to exclude the time spent under the old Act's proceedings. The revision application was allowed, and no costs were awarded.Conclusion:The court's decision clarified that pre-existing agreements indicating the parties' intention to be governed by future statutory changes are valid under Section 85 of the new Act. The judgment ensures that the new Act's procedural benefits apply to pending arbitration proceedings, provided the parties had agreed to such applicability.