# Indian Oil Corporation Ltd. & Anr v. The Commercial Court, Varanasi & Anr

- **Citation:** (2023) 9 ILRA 921
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2023-09-06
- **Case number:** Civil Revision No. 53 of 2022
- **Bench:** Neeraj Tiwari
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/indian-oil-corporation-ltd-anr-v-the-commercial-court-varanasi-anr-50795
- **Pages:** 18

## Headnote

Civil Law - Constitution of India,1950 -
Article 227 - Arbitration and Conciliation
Act, 1996 - Sections 5, 33, 34, 36 &
85(2)(a) - Arbitration Act, 1940 - Sections
3, 14 & 28 - Code of Civil Procedure, 1908
- Sections 2(2) & 47 - Arbitral Award and
Execution - Petitioners challenged the order
dated 08.08.2022 rejecting objections under
Section 47 CPC in execution proceedings of an
arbitral award and the additional award dated
21.02.2006.
Arbitration
began
under
the
Arbitration Act, 1940, but continued under the
Arbitration and Conciliation Act, 1996, per the
arbitrator's order dated 14.04.2002, based on
the arbitration clause allowing statutory reenactments. Petitioners argued the arbitrator
lacked jurisdiction under the 1996 Act absent
party agreement and that the additional award
was time-barred, citing Thyssen Stahlunion
GMBH.
Respondents
countered
that
the
arbitration clause permitted the 1996 Act's
application,
petitioners
acquiesced
by
not
objecting earlier, and an arbitral award is not a
decree under Section 2(2) CPC, rendering
Section 47 objections invalid, citing Paramjeet
Singh Patheja. The court held that the
arbitration clause's provision for statutory reenactments satisfied Section 85(2)(a) of the
1996 Act, allowing proceedings under the 1996
Act, as supported by Thyssen Stahlunion GMBH
(Rani Constructions). Petitioners' failure to
challenge the 1996 Act's applicability earlier
estopped them. An arbitral award, not a decree,
cannot be challenged under Section 47 CPC, and
objections were barred post-Section 34 stage,
per Larsen & Toubro Limited. Petition dismissed
with costs of Rs. 1,00,000. (Paras 31-48)

Petition dismissed.

List of Cases cited:

## Text

_Characters 0–39,961 of 61,093. This is a partial read: ask again with offset=39961 for what follows._

9 All. Indian Oil Corporation Ltd. & Anr. Vs. The Commercial Court, Varanasi & Anr.
921
read as conclusive evidence in subsequent
proceeding before any Court of law, if
related to that controversy.

24. In present case, it is admitted by
the respondents-defendants (tenant) in
Original Suit No. 893 of 1993 that he is
having
permanent
alternative
accommodation, therefore, no case is made
out to quash the order of Regulatory
Authority and remand the matter for fresh
consideration.

25. Therefore, in light of facts as well
as law discussed herein above, impugned
order dated 23.01.2019 passed by 9th
Additional District and Sessions Judge,
Kanpur Nagar is bad in law and is hereby
set aside.

26. Accordingly, petition is allowed.
No order as to costs.
----------
(2023) 9 ILRA 921
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 06.09.2023

BEFORE

THE HON'BLE NEERAJ TIWARI, J.

Matters U/A 227 No. 7573 of 2022 (Civil)

Indian Oil Corporation Ltd. & Anr.
 ...Petitioners
Versus
The Commercial Court, Varanasi & Anr.
 ...Respondents

Counsel for the Petitioners:
Sri Pramod Kumar Rai, Sri Anil Sharma (Sr.
Advocate)

Counsel for the Respondents:
Sri Pranab Kumar Ganguli, Sri Manish Goyal
(Sr. Advocate)
Civil Law - Constitution of India,1950 -
Article 227 - Arbitration and Conciliation
Act, 1996 - Sections 5, 33, 34, 36 &
85(2)(a) - Arbitration Act, 1940 - Sections
3, 14 & 28 - Code of Civil Procedure, 1908
- Sections 2(2) & 47 - Arbitral Award and
Execution - Petitioners challenged the order
dated 08.08.2022 rejecting objections under
Section 47 CPC in execution proceedings of an
arbitral award and the additional award dated
21.02.2006.
Arbitration
began
under
the
Arbitration Act, 1940, but continued under the
Arbitration and Conciliation Act, 1996, per the
arbitrator's order dated 14.04.2002, based on
the arbitration clause allowing statutory reenactments. Petitioners argued the arbitrator
lacked jurisdiction under the 1996 Act absent
party agreement and that the additional award
was time-barred, citing Thyssen Stahlunion
GMBH.
Respondents
countered
that
the
arbitration clause permitted the 1996 Act's
application,
petitioners
acquiesced
by
not
objecting earlier, and an arbitral award is not a
decree under Section 2(2) CPC, rendering
Section 47 objections invalid, citing Paramjeet
Singh Patheja. The court held that the
arbitration clause's provision for statutory reenactments satisfied Section 85(2)(a) of the
1996 Act, allowing proceedings under the 1996
Act, as supported by Thyssen Stahlunion GMBH
(Rani Constructions). Petitioners' failure to
challenge the 1996 Act's applicability earlier
estopped them. An arbitral award, not a decree,
cannot be challenged under Section 47 CPC, and
objections were barred post-Section 34 stage,
per Larsen & Toubro Limited. Petition dismissed
with costs of Rs. 1,00,000. (Paras 31-48)

Petition dismissed.

List of Cases cited:

1. Thyssen Stahlunion GMBH etc. Vs Steel
Authority of India Ltd., (1999) 9 SCC 334

2. N D Nayak Vs St. of Goa, (2003) 6 SCC 56

3. Neeraj Munjal Vs Atul Grover Minor, (2005) 5
SCC 404

4. Kiran Singh & ors. Vs Chaman Paswan & ors.,
AIR 1954 SC 340
922 INDIAN LAW REPORTS ALLAHABAD SERIES
5. Bhavan Vaja Vs Solanki Hanuji Khodaji
Mansang, (1973) 2 SCC 40

6. Harsad Chiman Lal Modi Vs DLF Universal
Ltd., (2005) 7 SCC 791

7. Chief Engineer Hydel Project Vs Ravinder
Nath, AIR 2008 SC 1315

8. Smt. Shakuntala Devi Vs Smt. Vimla, (2005)
59 ALR 599

9. Caravel Shipping Services Pvt. Ltd. Vs Premier
Sea Foods Exim Pvt. Ltd., (2019) 11 SCC 461

10. Trading Engineers International Ltd. Vs U.P.
Power Transmission Corp. Ltd., 2022 (10) ADJ
176 (LB)

11. Sweta Construction Vs Chhatisgarh St.
Power Generation Company Limited, 2022 SCC
Online SC 1447

12. Paramjeet Singh Patheja Vs ICDS Ltd.,
(2006) 13 SCC 322

13. Larsen & Toubro Limited Vs Maharaji
Educational Trust, 2010 SCC Online All 1866

14. Bharat Pumps & Compressors Ltd. Vs
Chopra Fabricators and Manufactures Pvt. Ltd.,
Civil Revision No. 53 of 2022

15. Hari Shankar Lal Vs Shairtbhu Nath, AIR
1962 SC 78

16. Tribhuvandas Kalidas Vs Jiwan Chand,
(1911) 35 Bom 196

17. Manilal Vs The Bharat Spinning & Weaving,
(1935) Bom LR 941

18. Ramshai Vs Joylall, AIR 1928 Cal 840

19. Ghulam Hussein Vs Shahban, AIR 1938 Sind
220

20. Sidharth Srivastava Vs K.K. Modi Investment
& Financial Service Pvt. Ltd., (2002) 4 Mah LJ
281

21. Reshma Constructions Vs St. of Goa, (1999)
1 MLJ 462
(Delivered by Hon'ble Neeraj Tiwari, J.)

1. Heard Sri Anil Sharma, learned
Senior Counsel assisted by Sri P. K. Rai,
learned counsel for the petitioners and Sri
Manish Goyal, learned Senior Counsel
assisted by Sri Pranab Kumar Ganguli,
learned counsel for the respondents.

2. Present petition has been filed
challenging the order dated 08.08.2022
passed by Commercial Court, Varanasi i.e.
respondent no. 1 in Execution Case No. 24
of 2020 (Old Case No. 21/2012) and
additional award dated 21.02.2006 passed
by Arbitrator in the matter of M/s
Vidhyawati Construction Col vs. IOCL and
another.

3. Since, only legal question is
involved in the present petition and
pleadings have been exchanged between
the parties, therefore, with the consent of
parties, petition is being decided at the
admission stage itself.

4. Brief facts of the case are that
Original Suit No. 436 of 1989 was filed on
01.07.1989 for appointment of Arbitrator in
accordance with provision of Arbitration
Act, 1940 (hereinafter referred to as the '
Old Act, 1940), which was applicable at
that time. Vide order dated 12.8.1991,
learned Civil Court appointed Hon'ble Mr.
Justice R.P. Singh (Retired) sole arbitrator
to decide the dispute. Due to pending
litigation proceedings, Arbitration could
only commence in the year 2001 and
Arbitrator
has
issued
notice
dated
07.05.2001. Statement of claim was filed
by the respondent no.2 on 24.5.2001 before
the Arbitrator upon which petitioner had
filed a detailed objection and also counter
claim. Arbitrator has passed order dated
14.04.2002 to continue the proceeding as
9 All. Indian Oil Corporation Ltd. & Anr. Vs. The Commercial Court, Varanasi & Anr.
923
per
provision
of
Arbitration
and
Conciliation Act, 1996 (hereinafter referred
to as the 'New Act, 1996). Ultimately,
arbitration proceeding was completed and
award was given on 27.04.2005 partly in
favour petitioner and respondents both.
After calculating the amount, it was found
that respondent has to pay Rs. 7,79,871/- to
the petitioner. Thereafter, Arbitrator has
sent the original records to Additional
District Judge,-IX, Civil Court, Varanasi on
the same day i.e. 27.04.2005. Respondent
had moved application under Section 33 of
the New Act, 1996 for modification of
award. Arbitrator has additional the award
vide order dated 21.02.2006.

5. The said award was challenged
before this Court by filing petition Under
Article 227 No. 30461 of 2006, which was
dismissed as withdrawn vide order dated
08.05.2012 with liberty to file application
under Section 34 of Act, 1996. Application
was filed under Section 34 of New Act,
1996, which was registered as Arbitration
Case No. 79 of 2012 and the same was
dismissed vide order dated 23.03.2013.
Against that order, petitioner has preferred
First Appeal From Order No. 1584 of 2013,
which was also dismissed vide order dated
08.04.2016. As
respondent
was
also
aggrieved with the certain observations
made in the award, therefore, he has
preferred Special Leave to Appeal (C) No.
681 of 2017, which was dismissed vide
order dated 20.01.2017 after deleting the
certain observations made in the order
dated 8.4.2016 passed in First Appeal From
Order No. 1584 of 2013. Ultimately, award
has attained finality.

6. Respondents have filed Execution
Application No. 21 of 2012 (renumbered as
Execution Application No. 24 of 2020), in
which petitioner has filed objection under
Section 47 of CPC and same was rejected
vide order dated 08.08.2022. Hence, order
dated 08.08.2022 is under challenge before
this Court.

7. Aforesaid facts are not disputed
between the parties.

8. Sri Anil Sharma, learned Senior
Counsel
submitted
that
arbitration
proceedings was initiated under Old Act,
1940 and award was given on 27.4.2005.
He further submitted that as provided in
Section 14 of Old Act, 1940, vide letter
dated 15.5.2005, Arbitrator has sent the
entire record alongwith the award in a
locked and sealed box to the Court of
District Judge, Varanasi and also claimed
the expenses. After that, Arbitrator became
functus officio and having no authority to
entertain
any
application.
He
also
submitted that now respondent no.2 has
filed an application on 21.10.2005 under
Section 33 of New Act, 1996 for
modification of award beyond limitation,
i.e. after 30 days from the date of receipt of
award unless another period of time has
been agreed upon by the parties. In the
present case, there is no such agreement
and it is required on the part of Arbitrator to
reject the application on the ground of
limitation alone, but contrary to that,
application was accepted and additional
award dated 21.2.2006 has been given
excepting the claim of respondent. He
pointed out that Arbitrator proceeded to
allow the much higher amount in additional
award even which was never sought in the
claim petition. The additional award was
also given beyond limitation without
obtaining the consent of the parties as
provided under Section 33 of the Act.
Against the additional award, he has
preferred Writ C No. 30461 of 2006, in
which earlier interim order was passed on
924 INDIAN LAW REPORTS ALLAHABAD SERIES
26.05.2006, but ultimately petition was
dismissed vide order dated 8.5.2012 with
liberty to petitioner to challenge the
additional award under Section 34 of New
Act, 1996.

9. He next submitted that as per
Section 85 of New Act, 1996, arbitrator has
no jurisdiction to decide the claim in New
Act, 1996, once the proceeding has been
initiated under the Old Act, 1940 unless
there is an agreement between the parties.
In the present case, agreement has never
been sought or given, therefore, any award
given by the arbitrator under the New Act,
1996 is without jurisdiction. In support of
his contention, learned Senior Counsel
placed reliance on the judgment of Apex
Court in the matter of Thyssen Stahlunion
GMBH etc. Vs. Steel Authority of India
Ltd. : 1999 9 SCC 334, N D Nayak Vs.
State of Goa: 2003(6) SCC 56 and Neeraj
Munjal Vs. Atul Grover Minor: 2005 5
SCC 404.

10. He next submitted that as the
award is without jurisdiction, therefore, this
issue can be raised even at the stage of
execution and for that, there is no bar. In
support of his contention, learned Senior
Counsel placed reliance on the judgment of
Apex Court in the matter of Kiran Singh
and others Vs. Chaman Paswan and
others: AIR Supreme Court 340, Bhavan
Vaja
Vs.
Solanki
Hanuji
Khodaji
Mansang: 1973(2) SCC 40, Harsad
Chiman Lal Modi Vs. DLF Universal Ltd.
2005(7) SCC 791 and Chief Engineer
Hydel Project Vs. Ravinder Nath: AIR
2008 Supreme Court 1315.

11. He lastly submitted that in case a
judgment
has
been
given
without
jurisdiction or contrary to existing law,
principle of res judicata shall not be
applicable. In support of his contention he
placed reliance on the judgment Smt.
Shakuntala Devi vs. Smt. Vimla reported
in 2005 (59) ALR 5999.

12. Sri Manish Goyal, learned Senior
Counsel has vehemently opposed and
submitted
that
petitioner
cannot
be
permitted to blow hot and cold both as once
order dated 14.04.2002 has been passed to
proceed with the proceedings under New
Act, 1996 and never challenged. He further
submitted that first award dated 27.4.2005
has also been given under New Act, 1996,
which was never been challenged by
petitioner. Therefore, petitioner-plaintiff
cannot said to be aggrieved person on the
ground that additional award has been been
given under Section 33 of the New Act,
1996 for that Arbitrator has no authority.
Petitioner has also preferred appeal under
Section 34 of the New Act, 1996 in
compliance of order of writ court dated
8.5.2012 rather filing appeal under Section
30 of the Old Act, 1940.

13. So far as submission of record
under Section 14 of Old Act, 1940 is
concerned, he firmly submitted that in case
of appointment of arbitrator, record has
been submitted to the Court which
appointed the arbitrator. In present case, the
arbitrator was appointed by the District
Judge and further Section 14 of Old Act,
1940 requires issuance of of notice by the
Court to the parties, but in the present case,
notice has never been issued, nor pressed
by the petitioner-defendant. Therefore, the
record has never been accepted by the
Court under the provision of Old Act, 1940
as argued by learned counsel for the
petitioner.

14. He next submitted that there is
agreement of contract between the parties
9 All. Indian Oil Corporation Ltd. & Anr. Vs. The Commercial Court, Varanasi & Anr.
925
and Section 9 of agreement of contract
contains arbitration clause. Section 9.1.1.0
of Agreement of Contract Act itself
provides provision of Indian Arbitration
Act, 1940, all its re-enactments and
modification thereof and rules made
thereunder
shall
apply
to
all
such
arbitration, subject to certain conditions. He
pointed out that Section 9.1.1.0 provides
agreement of applicability of all statutory
re-enactments or modification as provided
in Section 85(2)(a) New Act, 1996.

15. He also submitted that in the
judgment of Apex Court in the matter of
Thyssen Stahlunion GMBH (Supra), three
issues are decided by the Court and the
third issue is almost pari materia to the
issue involved in the present petition.
Paragraphs 9 of the said judgment is
dealing
with
the
matter
of
Rani
Constructions having the similar language
of arbitration agreement as in the case of
petitioner. It was replied in paragraph 35 of
the judgment, where the Court has held that
New Act, 1996 shall be applicable in the
matter of Rani Constructions. Therefore,
the same ratio of law as laid down by the
Apex court shall also be applicable in the
present case. Relying upon the same, in
present matter arbitrator has passed order
dated
14.04.2002
to
continue
the
proceeding. He also submitted that from the
perusal of order dated 14.04.2002, it is
apparently clear that while passing the said
order, it was very well accepted by the
petitioner-defendant and it has never been
objected. Petitioner-defendant proceeded to
file four affidavits to proceed with the
arbitration proceeding. Therefore, ratio of
law laid down in paragraph 9 of judgment
of Apex Court in the matter of Thyssen
Stahlunion GMBH etc.(Supra), there is
agreement and in light of Section 85(a)(2)
of the New Act, 1996, arbitrator has rightly
proceeded to pass order dated 14.04.2002
to commence the arbitration proceeding
under New Act, 1996.

16. Learned Senior Counsel next
submitted that from the perusal of the
impugned order, it is apparently clear that
petitioner-defendant has never disputed
Clause 9.1.1.0 of Clause 9 of Arbitration
Agreement and further never filed any
application before the arbitrator that New
Act, 1996 shall not be applicable. Not only
this, he has proceeded to file appeal under
Section 34 of the New Act, 1996 and not
taken this ground, while filing the appeal.
In objection filed under Section 47 of CPC
in execution proceeding, he has also
concealed this fact. He firmly submitted
that once there is such factual situation,
petitioner-defendant cannot raise these
grounds either before the Execution Court
or before this Court.

17. Learned Senior Advocate submitted
that there is an agreement between the parties
which provides for arbitration clause and
learned counsel for the petitioner is only
relying upon the part of arbitration clause. He
next submitted that so far it provides for
arbitration as per existing Act, i.e. Act, 1940,
he is having no objection. On other hand, the
same agreement also provides consent for
new enactment, which is objected by the
petitioner. He next submitted that petitioner
has no choice to accept the agreement in part,
either he has to accept to complete agreement
or discard the same. In support of his
contention, he has placed reliance upon the
judgment of the Apex Court in the case of
Caravel Shipping Services Privated Limited
vs. Premier Sea Foods Exim Private Limited
reported in (2019) 11 SCC 461.

18. So far as, judgment of NS Naik
(Supra) is concerned, he firmly submitted
926 INDIAN LAW REPORTS ALLAHABAD SERIES
that in that case, award was pronounced in
the year 1991 and only execution was
remaining. Therefore, the Court is of the
view that Appellate proceeding may not be
initiated under the provision of New Act,
1996 and while deciding the issue in the
case of NS Naik (Supra), it appears that
Court has not considered the matter of Rani
Construction referred in the judgment in
the matter of Thyssen Stahlunion GMBH
etc.(Supra), which is similar to this case.

19. He further submitted that scope of
interference by the High Court under
Article
227
regarding
arbitration
is
extremely limited. In support of his
contention, he placed reliance upon the
judgment of this Court in the matter of
Trading engineers Internation Ltd. Vs.
U.P. power Transmission Corp. Ltd.:
2022(10) ADJ 176(LB).

20. He next submitted that while
filing appeal under Section 34 and FAFO
under Section 37, petitioner has not taken
any ground, which are taken here, therefore
at a belated stage, he cannot be permitted to
take such ground. In support of his
contention, he placed reliance upon the
Judgment of Apex Court in the matter of
Sweta construction Vs. Chhatisgarh State
Power Generation Company Limited:
2022 SCC Online SC 1447.

21. He next submitted that the arbitral
award is not a decree as defined under
Section 2, sub-Section (e) of C.P.C and
there is difference between decree and
award. An award is enforceable under
Section 36 of the New Act, 1996 applying
the provisions of C.P.C. This issue was
dealt in detail by the Apex Court in the
matter of Padmajeet Singh Patheja Vs.
ICDS LTD: (2006) SCC 322.

22. He next submitted that as the
award is not a decree within the meaning of
Section 2(e) of C.P.C., therefore, objection
under Section 47 of C.P.C. is also not
maintainable. This issue was earlier
considered by this Court in the matter of
Larsen & Tubro Limited Vs. Maharaji
Educational Trust: 2010 SCC Online
AII 1866, relying upon the judgment of
Padmajeet Singh Patheja (Supra). The
judgment of Padmajeet Singh Patheja
(Supra) was again followed by this
Court in Civil revision No. 53 of 2022:
Bharat Pumps and Compressors Ltd.
Vs.
Chopra
Fabricators
and
Manufactures Pvt. Ltd. Here the Court
has reiterated the law that arbitral award
is not a decree within the meaning of
Section 2(e) of the C.P.C. and further,
objection under Section 47 of CPC is not
maintainable.

23. Against the judgment of Bharat
Pumps and Compressors Ltd. (Supra),
Opposite Party preferred SLP in the Apex
court, but the Apex Court did not interefere
with the ratio of law laid down by this court
and only started monitoring of earlier
disposal of dispute pending under Section
34. Therefore, law is on date settled that
arbitral award is not a decree within the
meaning of Section 2(e) and objection
under
Section
47
of
CPC
is
not
maintainable.

24. He lastly submitted that so far as
issue of jurisdiction in arbitral proceeding
is concerned, it cannot be raised at any
stage of proceeding. There is specific
provision for objections under Section 34
as well as 36, therefore once the objection
has not been taken at the earlier stage,
petitioner cannot be permitted to raise this
issue before this Court.
9 All. Indian Oil Corporation Ltd. & Anr. Vs. The Commercial Court, Varanasi & Anr.
927

25. In his rejoinder argument, Mr.
Anil Sharma, learned Senior Counsel
submitted that it is never his case that first
award is valid and as arbitrator lacks
jurisdiction, both the awards are nullity. In
support of his contention, he has placed
reliance upon the Section 3 of Act, 1940
read with Paragraph 3 of First Schedule,
which provides that award has to be
given within four months, whereas in the
present case it has not been given within
the time prescribed in aforesaid Schedule,
therefore, awards are nullity. In support
of his contention, he has placed reliance
upon the judgment of the Apex Court in
the case of Hari Shankar Lal vs.
Shairtbhu Nath reported in 1962 0 AIR
(SC) 78 (Paragraph Nos. 10, 11 & 12).
In light of aforesaid judgement, in case
award is not given within the prescribed
time, it is required on the part of parties
to get the time extended under Section 28
of Old Act, 1940, in lack of that award
would be nullity. He further submitted
that with the consent of party under
Section 28 of Old Act, 1940, Arbitrator
may extend the time, which was never
extended in present case.

26. Being confronted by the Court as
to whether he has lodge his dissent after
continuance of award after four months
upon which he has replied that his consent
or dissent has no meaning for this purpose.

27. So far as argument with regard to
Section 3 of Act, 1940 read with Paragraph
3 of First Schedule as well as Section 28 of
Old Act, 1940 is concerned, Mr. Manish
Goyal, learned Senior Advocate submitted
that counsel for petitioner neither pleaded
nor argued earlier about the nullity of first
award, therefore, same cannot accepted in
rejoinder argument. He has occasion to
raise this objection while filing application
under Section 34 of New Act, 1996 and
FAFO before this Court

28. I have considered the rival
submissions advanced by the learned
counsel for the parties and perused the
record as well as judgment relied by the
learned counsel for the parties. It is
undisputed that present petition has been
filed against the rejection of objection
under Section 47 of CPC in execution
proceedings of arbitral award.

29. Mr. Anil Sharma, learned Senior
Counsel for the petitioner had argued that
the provisions of New Act, 1996 shall not
be applicable in which arbitration award
has been given, therefore, award is nullity
and he can raise this objection at any stage.

30. Now, the Court is coming to the
issue as to whether that in light of fact that
arbitration proceedings was started under
the provisions of Old Act, 1940 may
continue in New Act, 1996 or not. For that
purpose Section 85 (2) (a) of New Act,
1996 is relevant and same is being quoted
hereinbelow:-

"85 (2)(a). Repeal and saving. -

(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;"

31. From perusal of the same, there is
no doubt that in case arbitral proceedings is
commenced before this Act shall continue
928 INDIAN LAW REPORTS ALLAHABAD SERIES
in Old Act, 1940 unless otherwise agreed
between the parties. Now the question is as
to whether in the present matter, parties
agreed for continuance of proceeding or
not. For that I have to see the Section 9 of
the Agreement of Contract, which contains
arbitration clause and for present dispute
Section 9.1.1.0 is very relevant and same is
being quoted hereinbelow:-

Section 9.1.1.0.

"The provisions of the Indian
Arbitration Act, 1940 and all statutory reenactments and modifications thereof and
the rules made thereunder shall apply to all
such arbitrations, subject further to the
following conditions:

(a) The Arbitrator shall given his
award separately in respect of each claim"

(b) Insofar as any dispute or
difference referred to arbitration shall
related to or involves any matter or thing in
respect of which the decision, opinion, or
determination (howsoever expressed of the
Owner or General Manager or Engineerin-Charge or Site Engineer or any other
person has been expressed to be final in
terms of the Contract. Such decision,
opinion and/or determination as the case
may be, shall be binding upon the
Arbitrator."

32. Section 9.1.1.0 of Agreement of
Contract provides the provision of Indian
Arbitration Act, 1940 i.e. Old Act, 1940
and
all
statutory
re-enactments
or
modification thereof and rules made
thereunder shall be applicable.

33. Section 9.1.1.0. itself provides an
agreement not only for Old Act, 1940, but
all
statutory
re-enactments
and
modification thereof and rules framed
thereunder.
The
said
agreement
is
undisputed between the parties, therefore, it
cannot be said that there is no agreement
between the parties for applicability of
New Act, 1996, in light of Section 9 of
Agreement of Contract.

34. Mr. Anil Sharma, learned counsel
for the petitioner has placed reliance upon
the
paragraph
32
of
the
Thyssen
Stahlunion (supra). Relevant paragraph of
the said judgment is quoted hereinbelow:-

"32. Principles enunciated in the
judgments show as to when a right accrues
to a party under the repealed Act. It is not
necessary that for the right to accrue that
legal proceedings must be pending when
the New Act, 1996, 1996 comes into force.
To have the award enforced when arbitral
proceedings commenced under the Old Act,
1940 under that very Act is certainly an
accrued right. Consequences for the parties
against whom award is given after arbitral
proceedings have been held under the Old
Act, 1940 though given after the coming
into force of the New Act, 1996, 1996,
would be quite grave if it is debarred from
challenging the award under the provisions
of the Old Act, 1940. Structure of both the
Acts is different. When arbitral proceedings
commenced under the Old Act, 1940 it
would be in the mind of everybody, i.e.,
arbitrators and the parties that the award
given should not fall foul of Sections 30
and 32 of the Old Act, 1940. Nobody at that
time could have thought that Sections 30 of
the Old Act, 1940 could be substituted by
Section 34 of the New Act, 1996, 1996. As a
matter of fact appellant Thyssen in Civil
Appeal No. 6036/98 itself understood that
the Old Act, 1940 would apply when it
approached the High Court under Sections
14 and 17 of the Old Act, 1940 for making
the award rule of the Court. It was only
later on that it changed the stand and now
took the position that New Act, 1996, 1996
9 All. Indian Oil Corporation Ltd. & Anr. Vs. The Commercial Court, Varanasi & Anr.
929
would apply and for that purpose filed an
application for execution of the award. By
that time limitation to set aside the award
under the New Act, 1996, 1996 had
elapsed. Appellant itself led the respondent
SAIL in believing that the Old Act, 1940
would apply. SAIL had filed objections to
the award under Section 30 of the Old Act,
1940 after notice for filing of the award
was received by it on the application filed
by the Thyssen under Sections 14 and 17 of
the Old Act, 1940. We have been informed
that numerous such matters are pending all
over the country where the award in similar
circumstances is sought to be enforced or
set aside under the provisions of the Old
Act, 1940. We, therefore, cannot adopt a
construction which would lead to such
anomalous situations where the party
seeking to have the award set aside finds
himself without any remedy. We are,
therefore, of the opinion that it would be
the provisions of the Old Act, 1940 that
would apply to the enforcement of the
award in the case of Civil Appeal No. 6036
of 1998. Any other construction on the
Section 85(2) (a) would only lead to the
confusion and hardship. This construction
put by us is consistent with the wording of
Section
85(2)
(a)
using
the
terms
"provision" and "in relation to arbitral
proceedings" which would mean that once
the arbitral proceedings commenced under
the Old Act, 1940 it would be the Old Act,
1940 which would apply for enforcing the
award as well.

35. Mr. Manish Goyal, learned Senior
Counsel has also placed reliance upon the
very same judgment and submitted before
this Court that there are three issues, which
has to be decided. So far as issue no.3 Rani
Constructions Pvt. Ltd. is concerned, the
same is pari materia to the issue before this
Court. Paragraph 9 of the said judgment is
dealing
with
the
issue
of
Rani
Constructions Pvt. Ltd. and same is being
quoted hereinbelow:-

"In the case of M/s. Rani
Constructions Pvt. Ltd. (CA No. 61 of
1999) under the contract which was for the
construction of certain works of the
Himachal Pradesh State Electricity Board,
there
was
an
arbitration
agreement
contained in clause 25 which, in relevant
part, is as under :

"Subject to the provisions of the
contract to the contrary as aforesaid, the
provisions of the Indian 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 all arbitration proceedings
under this clause."

36. From perusal of the same, it is
apparently clear that language of Section
9.1.1.0. of Arbitration Clause is almost
identical
to
the
matter
of
Rani
Constructions Pvt. Ltd. This issue was very
well considered by the Apex Court and
replied in its paragraphs 35 to 38 of the
judgment of Thyssen Stahlunion (supra).
Relevant paragraph of the said judgment is
quoted hereinbelow:-.

"35. Parties can agree to the
applicability of the new Act even before the
new Act comes into force and when the old
Act is still holding the field. There is
nothing in the language of Section 85(2)(a)
which bars the parties from so agreeing.
There is, however, a bar that they cannot
agree to the applicability of the old Act
after the new Act has come into force when
arbitral proceedings under the old Act have
not
commenced
though
the
arbitral
agreement
was
under
the
old
Act.
Arbitration clause in the contract in the
930 INDIAN LAW REPORTS ALLAHABAD SERIES
case of Rani Constructions (Civil Appeal
61 of 1999) uses the expression "for the
time being in force" meaning thereby that
provision of that Act would apply to the
arbitration proceedings which will be in
force at the relevant time when arbitration
proceedings are held. We have been
referred to two decisions - one of Bombay
High Court and the other of Madhya
Pradesh High Court on the interpretation
of the expression "for the time being in
force" and we agree with them that the
expression aforementioned not only refers
to the law in force at the time the
arbitration agreement was entered into but
also to any law that may be in force for the
conduct of arbitration proceedings, which
would also include the enforcement of the
award
as
well.
Expression
"unless
otherwise agreed" as appearing in Section
85(2)(a) of the new Act would clearly apply
in the case of Rani Construction in Civil
Appeal No. 61 of 1999. Parties were clear
in their minds that it would be the old Act
or any statutory modification or reenactment of that Act which would govern
the arbitration. We accept the submission
of the appellant Rani Construction that
parties could anticipate that the new
enactment may come into operation at the
time the disputes arise. We have seen
Section 28 of the Contract Act. It is difficult
for us to comprehend that arbitration
agreement could be said to be in restraint
of legal proceedings. There is no substance
in the submission of respondent that parties
could not have agreed to the application of
the new Act till they knew the provisions
thereof and that would mean that any such
agreement as mentioned in the arbitration
clause could be entered into only after the
new Act had come into force. When the
agreement uses the expressions "unless
otherwise agreed" and "law in force" it
does give option to the parties to agree that
new Act would apply to the pending
arbitration proceedings. That agreement
can be entered into even before the new Act
comes into force and it cannot be said that
agreement has to be entered into only after
coming into force of the new Act.36. Mr.
Desai had referred to a decision of the
Bombay High Court (Goa Bench), rendered
by single Judge in Reshma Constructions v.
State of Goa, (1999) 1 MLJ 462. In that
case arbitration clause in the contract
provided as under :

"Subject
as
aforesaid,
the
provisions of the Arbitration Act, 1940 or
any statutory modification or re- enactment
thereof and the rules made thereunder and
for the time being in force shall apply to the
arbitration proceeding under this clause."

37. The Court held that these
terms in the clause disclosed that the
parties had agreed to be governed by the
law which was in force at the time of
execution of the arbitration agreement as
well as by any further statutory changes
that may be brought about in such law. This
is how the High Court considered the issue
before it :

"Considering the scheme of the
Act, harmonious reading of the said
provision contained in sub-section (2) of
Sec. 85 thereof would disclose that the
reference "otherwise agreed" necessarily
refers to the intention of the parties as
regards the procedure to be followed in the
matter of arbitration proceedings and not
to the time factor as regards execution of
the agreements. It provides that though the
law provides that the provisions of the old
Act would continue to apply to the pending
proceedings by virtue of the said saving
clause in Sec. 85, it simultaneously
provides that the parties can agree to the
contrary. Such a provision leaving it to the
discretion of the parties to the proceedings
to decide about the procedure to be
9 All. Indian Oil Corporation Ltd. & Anr. Vs. The Commercial Court, Varanasi & Anr.
931
followed - other in terms of the new Act or
the old Act - is certainly in consonance with
the scheme of the Act, whereunder most of
the provisions of the new Act, the procedure
regarding various stages of the arbitration
proceedings is made subject to the
agreement to the contrary between the
parties, thereby giving ample freedom to
the parties to decide about the procedure to
be followed in such proceedings; being so,
it is but natural that the legislature in its
wisdom has left it to the option of the
parties in the pending proceedings to
choose the procedure for such pending
proceedings. The reference "otherwise
agreed by the parties" in Sec. 85(2)(c) of
the new Act, therefore, would include an
agreement already entered into between the
parties even prior to enforcement of the
new Act as also the agreement entered into
after enforcement of the new Act. Such a
conclusion is but natural since the
expression "otherwise agreed" do not refer
to the time factor but refers to the intention
of the parties regarding applicability of the
provisions of the new or old Act."

We agree with the High Court on
interpretation put to the arbitration clause
in the contract.

38. Section 28 of the Contract Act
contains provision regarding agreements in
the
restraint
of
legal
proceedings.
Exception 1 to Section 28 of the Contract
Act does not render illegal a contract by
which the parties agree that any future
dispute shall be referred to arbitration.
That being so parties can also agree that
the provisions of the arbitration law
existing at that time would apply to the
arbitral proceedings. It is not necessary for
the parties to know what law will be in
force at the time of the conduct of
arbitration proceedings. They can always
agree that provisions that are in force at the
relevant time would apply. In this view of
the matter, if the parties have agreed that at
the relevant time provisions of law as
existing at that time would apply, there
cannot be any objection to that. Thus
construing
the
clause
25,
in
Rani
Constructions (CA 61/99) new Act will
apply."

37. As the language of both the
matters are similar and Apex Court after
considering in detail has held that an
agreement can be made even before
enactment of New Act, 1996 for its
applicability and in arbitration clause there
is
such
agreement
already
present,
therefore, there is no need to have any new
agreement for compliance of Section
85(2)(a) and proceedings can be continued
in New Act, 1996. Therefore, submission of
learned counsel for the petitioner that there
is no agreement between the parties as
required under Section 85(2)(a) cannot be
accepted. Judgment of Thyssen Stahlunion
(supra) is not in favour of petitioner rather
in favour of respondent as the similar issue
has been considered and replied.

38. Once the Court is of the view that
proceedings though initiated in Old Act,
1940 may continue in New Act, 1996,
therefore, there is no requirement to return
the finding about the other arguments of
learned counsel for the petitioner upon the
applicability of New Act, 1996.

39. Now coming to the another issue
as to whether arbitral award is decree or not
as defined under Section 2(2) of CPC and
in case it is not a decree, objection filed
under Section 47 of CPC is maintainable or
not. It has also to be seen as to whether
arbitral award can be enforced invoking the
Section 36 of New Act, 1996 with the
provision of CPC in the same manner as if
it is decree of Court.
932 INDIAN LAW REPORTS ALLAHABAD SERIES

40. To opine on this issue, Section
2(2) and Section 36 of New Act, 1996 of
CPC are required to be seen and same is
being quoted hereinbelow:-

"Decree- Section 2 (2) of CPC

"decree"
means
the
formal
expression of an adjudication which, so far
as regards the Court expressing it,
conclusively determines the rights of the
parties with regard to all or any of the
matters in controversy in the suit and may
be either preliminary or final. It shall be
deemed to include the rejection of a plaint
and the determination of any question
within section 144, but shall not include-

(a) any adjudication from which
an appeal lies as an appeal from an order,

or

(b) any order of dismissal for
default.

Explanation
-
A
decree
is
preliminary when further proceedings have
to be taken before the suit can be
completely disposed of. It is final when
such adjudication completely disposes of
the suit, it may be partly preliminary and
partly final;"

Section 36 of New Act, 1996

"36. (1) Where the time for
making an application to set aside the
arbitral award under section 34 has
expired, then, subject to the provisions of
sub-section (2), such award shall be
enforced in accordance with the provisions
of the Code of Civil Procedure, 1908 (5 of
1908), in the same manner as if it were a
decree of the court.

(2) Where an application to set
aside the arbitral award has been filed in
the Court under section 34, the filing of
such an application shall not by itself
render that award unenforceable, unless
the Court grants an order of stay of the
operation of the said arbitral award in
accordance with the provisions of subsection (3), on a separate application made
for that purpose.

(3) Upon filing of an application
under sub-section (2) for stay of the
operation of the arbitral award, the Court
may, subject to such conditions as it may
deem fit, grant stay of the operation of such
award for reasons to be recorded in
writing:

Provided that the Court shall,
while considering the application for grant
of stay in the case of an arbitral award for
payment of money, have due regard to the
provisions for grant of stay of a money
decree under the provisions of the Code of
Civil Procedure, 1908 (5 of 1908).]

2[Provided further that where the
Court is satisfied that a prima facie case is
made out,--

(a) that the arbitration agreement
or contract which is the basis of the award;
or

(b) the making of the award,

was induced or effected by fraud
or corruption, it shall stay the award
unconditionally pending disposal of the
challenge under section 34 to the award.