# THYSSEN STAHLUNION GMBH ETC v. STEEL AUTHORITY OF INDIA LTD

- **Citation:** [1999] Supp. 3 S.C.R. 461
- **Court:** Supreme Court of India
- **Decided:** 1999-10-07
- **Bench:** D.P. Wadhwa, M.B. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/thyssen-stahlunion-gmbh-etc-v-steel-authority-of-india-ltd-16979
- **Pages:** 57

## Headnote

Arbitration :
Arbitration Act, 1940-Sections 2(e), 14, 17, 30, 48--Arbitration and
Conciliation Act, 1996-Sections 9, 10, 11(4)(b), 32, 34, 36, 42, 85-Arbitral
proceedings commenced before the 1996 Act came into force-Award
rendued after commencement of the 1996 Act-Enforcement of award-Applicability of provisions-Held, the provisions of Arbitration Act, 1940 shall
apply in relation to arbitral proceedings which have commenced before
coming into force of the Arbitration and Conciliation Act, 1996--Expression
A
B
c
'in relation to' occurring in Section 85(2)(a) of 1996 Act has to be given full D
effect to, which saves not only the proceedings pending at the time of
commencement of 1996 Act but also the provisions of the 1940 Act for
enforcement of the award under that Act-Both the Acts being vastly different
to each other, multiple and complex problems would arise if the award given
under 1940 Act is said to be enforced under the 1996 Act-The 1996 Act E
would be applicable in relation to arbitral pruceedings which commenced on
or after the 1996 Act came into force-Hence-Section 6 of the General
Clauses Act would be inapplicable-General Clauses Act, 1897-Section 6.
Accrued right-Existence of-Held, once the arbitral proceedings have
commenced under the 1940 Act, the right to be governed by that Act for
F
enforcement of the awa!t! is certainly a right accrued-It is 11ot necessary that
for such right to accrue, some legal proceedings for enforcement must be
pending under the 1940 Act at the time when 1996 Act came into
force-Saving clause as enshrined in Section 85(2)(a) of the 1996Act has the
effect of saving the whole of the 1940 Act until the time of enforcement of the G
award and preserves the existing rights accrued under the 1940 Act.
Parties entering into an agreement for application of the 1996 Act even
before that Act came into force-Tenability of-Held, in cases where arbitral
proceedings commenced before coming into force of the 1996 Act and are
pending before the arbitrator, it is open to the parties to agree that 1996 Act H
461
462
SUPREME COURT REPORTS (1999) SUPP. 3 S.C.R.
A be applicable to such arbitral proceedings and they could so agree even before
the coming into force of the 1996 Act-Parties can always agree that
provisions that are in. force at the relevant time would apply and it is not
necessary.Jor the parties to know what law will be in force at the time of the
conduct of arbitration proceedings-That would not be in restraint of legal
B proceedings under Section 28 of the Contract Aa-However, the parties
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-Contract Act, 187'2:-
Exception I to Section 28.
C
Foreign Awards (Recognition and Enforcement) Act, 1961-Foreign
award given after the commencement of the Arbitration and Conciliation Act,
1996-Enforcement of-Held, a foreign award given after the commencement
of the 1996 Act can be enforced only under the 1996 Act as there is no vested
right to have the foreign award enforced under the Foreign Awards Act-This
D is imspective of the fact that the arbitral proceedings. commenced in a foreign
jurisdiction-Applicability of the Foreign Awards Act is not saved by virtue of
the saving clause in Section 85(2)(a) of the 1996Act as the Foreign Awards
Act contains provisions only for the enforcement of the foreign award and not
for the arbitral proceedings-Moreover, there is not much difference in the
provisions of the Foreign Awards Act and the 1996 Act for the enforcement
E of the arbitration award-Since no right accmed, Section 6 of the General
Clauses Act would not apply.
Civil Appeal numbers 6036/98, 4928/97 and 61/99 raise three different questions relating to the construction and interpretation of Section
F 85 of the Arbitration and Conciliation Act, 1996 which contains repeal
and saving provision of the three

## Text

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THYSSEN STAHLUNION GMBH ETC.
v.
STEEL AUTHORITY OF INDIA LTD.
OCTOBER 7, 1999
[D.P. WADHWA AND M.B. SHAH, JJ.]
Arbitration :
Arbitration Act, 1940-Sections 2(e), 14, 17, 30, 48--Arbitration and
Conciliation Act, 1996-Sections 9, 10, 11(4)(b), 32, 34, 36, 42, 85-Arbitral
proceedings commenced before the 1996 Act came into force-Award
rendued after commencement of the 1996 Act-Enforcement of award-Applicability of provisions-Held, the provisions of Arbitration Act, 1940 shall
apply in relation to arbitral proceedings which have commenced before
coming into force of the Arbitration and Conciliation Act, 1996--Expression
A
B
c
'in relation to' occurring in Section 85(2)(a) of 1996 Act has to be given full D
effect to, which saves not only the proceedings pending at the time of
commencement of 1996 Act but also the provisions of the 1940 Act for
enforcement of the award under that Act-Both the Acts being vastly different
to each other, multiple and complex problems would arise if the award given
under 1940 Act is said to be enforced under the 1996 Act-The 1996 Act E
would be applicable in relation to arbitral pruceedings which commenced on
or after the 1996 Act came into force-Hence-Section 6 of the General
Clauses Act would be inapplicable-General Clauses Act, 1897-Section 6.
Accrued right-Existence of-Held, once the arbitral proceedings have
commenced under the 1940 Act, the right to be governed by that Act for
F
enforcement of the awa!t! is certainly a right accrued-It is 11ot necessary that
for such right to accrue, some legal proceedings for enforcement must be
pending under the 1940 Act at the time when 1996 Act came into
force-Saving clause as enshrined in Section 85(2)(a) of the 1996Act has the
effect of saving the whole of the 1940 Act until the time of enforcement of the G
award and preserves the existing rights accrued under the 1940 Act.
Parties entering into an agreement for application of the 1996 Act even
before that Act came into force-Tenability of-Held, in cases where arbitral
proceedings commenced before coming into force of the 1996 Act and are
pending before the arbitrator, it is open to the parties to agree that 1996 Act H
461
462
SUPREME COURT REPORTS (1999) SUPP. 3 S.C.R.
A be applicable to such arbitral proceedings and they could so agree even before
the coming into force of the 1996 Act-Parties can always agree that
provisions that are in. force at the relevant time would apply and it is not
necessary.Jor the parties to know what law will be in force at the time of the
conduct of arbitration proceedings-That would not be in restraint of legal
B proceedings under Section 28 of the Contract Aa-However, the parties
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-Contract Act, 187'2:-
Exception I to Section 28.
C
Foreign Awards (Recognition and Enforcement) Act, 1961-Foreign
award given after the commencement of the Arbitration and Conciliation Act,
1996-Enforcement of-Held, a foreign award given after the commencement
of the 1996 Act can be enforced only under the 1996 Act as there is no vested
right to have the foreign award enforced under the Foreign Awards Act-This
D is imspective of the fact that the arbitral proceedings. commenced in a foreign
jurisdiction-Applicability of the Foreign Awards Act is not saved by virtue of
the saving clause in Section 85(2)(a) of the 1996Act as the Foreign Awards
Act contains provisions only for the enforcement of the foreign award and not
for the arbitral proceedings-Moreover, there is not much difference in the
provisions of the Foreign Awards Act and the 1996 Act for the enforcement
E of the arbitration award-Since no right accmed, Section 6 of the General
Clauses Act would not apply.
Civil Appeal numbers 6036/98, 4928/97 and 61/99 raise three different questions relating to the construction and interpretation of Section
F 85 of the Arbitration and Conciliation Act, 1996 which contains repeal
and saving provision of the three Acts namely, t~ Arbitration (Protocol
and Convention) Act, 1937; the Arbitration Act, 1940; and the Foreign
Awards (Recognition and Enforcement) Act, 1961.
In CA No. 6036/98, the arbitration proceedings commenced on SepG tember 14, 1995 under the Arbitration Act, 1940. Hearing before the sole
arbitrator took place from January 7, 1997 till January 28, 1997 and the ·
award was given on September 24, 1997. By this time on January 25, 1996,
the Arbitration and Conciliation Act, 1996 had come into force. In October
1997, the appellant filed a petition in the High Court under the ArbitraH tion Act, 1940 for making the award rule of Court. While these proceed-
THYSSEN STAHLUNION GMBH v. STEEL \\UTHORITY OF INDIA
463
ings were pending in the High Court, the appellant filed an application A
under Section 151 of the Code of Civil Procedure for stay of the proceedings. Thereafter the appellant filed an application in the High Court for
execution of the award under the 1996 Act on the ground that the arbitration proceedings had been terminated with the making of the award and
therefore, the 1996 Act was applicable for enforcement of the award. The
respondent opposed the maintainability of the execution petition. A Single
Judge of the High Court held that proceedings would be governed by the
1940 Act. Feeling aggrieved, the appellant has preferred the presen~ appeal.
B
In CA No. 4928/97, the arbitration proceedings were held in United C
Kingdom prior to the enforcement of the Arbitration and Conciliation
Act, 1996. The award was made on February 25, 1996 in London. With
regard to enforcement of the award, a Single Judge of the High Court
held that the Arbitration and Conciliation Act, 1996 would be applicable
and not the Foreign Awards (Recognition and F;nforcement) Act, 1961. D
Hence the present appeal.
In CA No. 61/99, the disputes having arisen, the same were referred
to the sole arbitrator on December 4, 1993. The arbitrator gave his award
on February 23, 1996 after the 1996 Act had come into force. Difference
of opinion having occurred in two judgments rendered by Single Judge E
of High Court as to the applicability of the Act, reference was made to
the Division Bench which held that the case was governed by Arbitration
Act, 1940. Hence the present appeal.
On behalf of the appellant in CA No. 6036/98, it was contended that
F
after the termination of arbitral proceedings and makings of final award,
reference has to be made to the new Act for enforcement of the award as
when award was given, the old Act stood repealed; that the law governing
arbitration proceedings can be different than that governing the award;
that ·an award made pursuant to arbitration proceedings which commenced under the old Act, could be governed by the old Act only if any G
vested. right accrued to the party; that until award is made, M party has
an accrued right and thus an award made after coming into force of new
Act would be governed by new Act; that the claim of the respondents that
they had acquired vested right to challenge the award under the old Act
in view of Section 6 of foe General Clauses Act is also incorrect.
H
464
SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.
A
On behalf of the appellant in CA No. 4928/97, it was contended
that it would b~ .. t.~e Forejgn_Awards Act.that would apply-and not the
1996 Act; that since the proceedings had already commenced, Section 21
-
ff
•
of the 1996 Act stipulating as to wht)Ir arbitratid'n proceedings commence,
had no application; that the ~pplicability of all the provisions of the old
B Acts were saved where the,arbitral proceedings commenced before the cut
off date.
On 'benalf of the appellant in CA No. 61/99, it was contended that
the parties cannot agree to the applicability of the old Act after the new
Act had come into force when arbitration proceedings though under an
C agreement under the old Act, commence after the coming into force of
the new Act; that Section 28 of the Contract Act does not bar the agreement between the parties if they wish that arbitration proceedings be
governed by any enactment relating to arbitration that may be in force
at the relevant time; that agreement could be entered into even before the
D new Act coines into force with regard to its applicability; that High Court
was wrong in holding that the agreelilent for the application of the new
Act has to be entered into only after the coming into force of the new Act.
On behalf of the respondent in CA No. 6036/98, it was contended that
there could not be two segments, namely, one uptill the award and second
E after the award; that when an award is made under the old Act, for its
enforcement, provisions of the old Act have to be looked into; that when
arbitration proceedings have started before coming into force of the new
Act, then, under the new Act, the award may not be sustainable; that it is
difficult to comprehend a situation where though the award is given under
p the old Act, its validity has to be decided under the new Act, provisions of
which are vastly different from those of the old Act; that if the legislature
intended that the new Act would apply to the award given under the old Act
made after the coming into force of the new Act, it would not use the
expression 'in relation to' in Section 85(2)(a) of the new Act but would use
the word 'to'; that it was not necessary that for the right to accrue, legal
G proceedings must be pending when the new Act comes into force.
On behalf of the respondent in CA No. 4928/97, it was contended that
Section 85(2)(a) of the 1996 Act cannot save the operation of the Foreign
Awards Act; that there was no accrued right in favour of the appellant to
H challenge the foreign award under the Foreign Awards Act, 1961 and hence,
~·
THYSSEN STAHLUNION GMBH v. STEEL AUTHORITY OF INDIA
465
Section 6 of General Clauses Act by implication is inapplicable; that Section A
85(2)(a) of the new Act saves only those provisions of the old Act and the
Foreign Awards Act that would apply to arbitral proceedings and not the
' proceedings to enforce the arbitral award.
On behalf of the respondent in CA No. 61/99, it was contended that tbe
enforcement of the award under the new Act would not be compatible with
the arbitration proceedings held under old Act resulting in the award; that
expression "arbitral proceedings" in Section 85(2)(a) of the new Act could
not be given restricted meaning of being confined merely to the conduct of
the proceedings by the arbitrator and excluding the enforcement of the
award from the purview of the old Act; that the agreement contemplated in
the later part of Section 85(2)(a) could be entered into only after the
enforcement of the new Act and any agreement if entered into before this
date would be void and would be hit by Section 28 of the Contract Act.
Dismissing CA Nos. 6036/98 and 4928/97 and allowing CA No. 61/99,
this Court
HELD : 1. in the case .of Civil Appeal No. 6036 of 1998 where the
arbitral proceedings commenced before the Arbitration and Conciliation
Act, 1996 came into force, the award would be enforced under the provisions
B
c
D
of Arbitration Act, 1940. In CA No. 61/99, where arbitral proceedings comE
menced before coming into force of the 1996 Act but parties agreed to the
applicability of the 1996 Act even before that Act came into force, the case
would be governed by the provisions of the 1996 Act. The foreign award
given in the case of Civil Appeal No. 4928 of 1997 after the commencement
of the Arbitration and Conciliation Act, 1996 would be governed by 1996 Act
as there is no vested right to have the foreign award enforced under the
Foreign Awards Act. (517-C; D; E; F)
2.1. The provisions of the old Act (Arbitration Act, 1940) shall apply
in relation to arbitral proceedings which have commenced before coming
into force of the new Act (The Arbitration and Conciliation Act, 1996). The
. new Act would be applicable in relation to arbitral proceedings which
commenced on or after the new Act comes into force. (503-D; F]
.
.
2.2. Section 85(2) (a) of the new Act is in two limbs : (1) Provisions of
F
G
the old Act shall apply in relation to arbitral proceedings which commenced
before the new Act came into force unless otherwise agreed by the parties H
466
SUPREME COURT REPORTS [1999] SUPP. 3S.C.R.
A and (2) new Act shall apply in relation to arbitral proceedings which
commenced on or after the new Act came into force. First limb can further
be bifurcated into two : (a) Provisions of old Act shall apply in relation to
arbitral proceedings which commenced before the new Act came into force
and (b) old Act will not apply in such cases where the parties agree that it
will not apply in relation to arbitral proceedings which commenced before
B the new Act came into force. The expression "in relation to" is of widest
import. This expression "in relation to" has to be given full effect to,
particularly when read in conjunction with the word "the provisions" of the
old Act. That would mean that the old Act will apply to whole gambit ·of
arbitration culminating in the enforcement of the .award. If ii was not so,
C only the word "to" could have suffixed and when the legislature has used
the expression "in reli!tion to", a proper meaning has to be given. This
expression does not admit of restrictive meaning. First limb of Section
85(2)(a) is not a limited saving clause. It saves not only the proceedings
pending at the time of commencement of the new Act but also the provisions
of the old Act for enforcement of the award under that Act. The second limb
D also takes into account the arbitration agreement entered into under the
old Act when the arbitral proceedings commenced after the coming into
force of the new Act. Any other construction on Section 85(2) (a) would only
lead to confusion and hardship. In this view of the matter, Section 6 of the
General Clauses Act would be inapplicable. [504-E-G; H; 505-A; B; C; DJ
E
Mis. Doypack Systems Pvt. Ltd. v. Union of India & Ors., [1988) 2 SCC
299; Mansukhlal Dhanraj Jain & Ors. v. Eknath Vithal Ogale, [1995) 2 SCC
665; Mis. Dhanrajamal Gobindram v. Mis. Shamji Kalidas and Co., [1961) 3
SCR 1020; Navin Chemicals Mfg. & Trading Co. Ltd. v. Collector of Customs,
[1993) 4 SCC 320; MMTC Ltd. v. Ster/ite Industries (I~dia) Ltd., [1996) 6
F SCC 716 and Hoosein Kasam Dada (India) Ltd. v. The State of Madhya
Pradesh and Ors., [1953) SCR 987, relied on.
2.3. Presently the courts tend to adopt purposive approach while
interpreting the statute which repeals the old law and for that purpose to
G take into account the objects and reasons which led to the enacting of the
new Act. Provisions of both the Acts, old and new, are very different. If the
construction of the new Act leads to inconvenient and unjust results, the
concept of purposive approach has to be shed. When arbitration proceed·
ings are held under the old Act, the parties and the arbitrator keep in view
the provisions of that Act for the enforcement of the award. Multiple and
H complex problems would arise if the award given under the old Act is said
-
".
TIIYSSEN Sf AHLUNION GMBH v. STEEL AUTHORITY OF INDIA
467
to be enforced under the new Act. [506-C; D; 507-8-C]
Sohan Lal & Ors. v. Amin Chand and Sons & Ors., [1974] 1 SCR
453, relied on.
Sundaram Finance Ltd. v. NEPC India Ltd., [1992] 2 SCC 479,
A·
referred to.
B
Kuwait Minister of Public Works v. Sir Frederick Snow and Partners,
(1984) 1 All ER 733 HL and Pepper v. Hart, (1993) 1 All ER 42, referred
to.
3.1. Once the arbitral proceedings have commenced, it cannot be
stated that right to be governed by the old Act for enforcement of the
award was an inchoate right. It was certainly a right accrued. It is not
imperative that for right to accrue to have the award enforced under the
c
old Act, some legal proceedings for its enforcement must be pending
under that Act at the time new Act came into force. Consequences for the D
parties against whom award is given after arbitral proceedings have been
held under the old Act though given after the coming into force of the
new Act, would be quite grave if it is debarred from challenging the award
under the provisions of the old Act. [504-A·B]
3.2. Section 85(2)(a) of the new Act is the saving clause. It exempts the
old Act from complete obliteration so far as pending arbitration proceed·
ings are concerned. That would include saving of whole of the old Act uptill
E
F
the time of the enforcement of the award. Section 85(2)(a) prevents the
accrued right under the old Act from being affected. Saving provision
preserves the existing right accrued under the old Act. The new Act is a
remedial statute and, therefore, Section 85(2)(a) calls for strict construction, it being a repealing provision. But then where one interpretation would
produce an unjust or an inconvenient result and another would not have
those effects, there is then also a presumption in favour of the latter.
Enforcement of the award, therefore, has tO be examined on the touchstone G
of the proceedings held under the old Act. [508-G-H; 509-A-B]
Commissioner of Income Tax, U.P. v. Mis. Shah Sadiq and Sons,
[1987] 3 SCC 516; Bansidhar & Ors. v. State of Rajasthan & Ors., .[1989]
2 SCC 557; Lalji Raja & Sons v. Finn Hansraj Nathuram, [1971] 1 SCC
721; Hungerford Investment Trust Ltd. v. Haridas Mundhra and Ors., [1972] H
468
SUPREME COURT REPORTS (1999] SUPP. 3 S.C.R.
· A 3 SCR 690; D.C. Bhatia and Ors. v. Union of India and Anr., [1995) 1 SCC
104; M.S. Shivananda v. Kamataka State Road Transport Corporation &
Ors., (1980) 1 SCC 149; Gajraj Singh and Ors. v. State Transport Appellate
Tribunal and Ors., [1997) 1 SCC 650; Gujarat Electricity Board v. Shanti/al
R. Desai, AIR (1969) SC 239 = [1969) 1 SCR 580; G. Ekambarappa &
B Ors. v. Excess Profits Tax Officer, Bellary, [1967) 3 SCR 864, relied on.
Abbott v. The Minister for Lands, (1895) AC 425 PC; Director of Public
Works v. Ho Po Sang, (1961) 2 All ER 721 and Hamilton Gell v. White,
(1922) 2 KB 422, referred to.
C
4.1. In cases where arbitral proceedings have commenced before
coming into force of the new Act and are pending before the Arbitrator,
it is open to the parties to agree that new Act be applicable to such arbitral
proceedings and they. can so agree even before the coming into force of
the new Act. There is nothing in the language of Section 85(2)(a) which
bars the parties from so agreeing. When the agreement uses the expresD sions 'unless otherwise agreed' and 'law in force' it does give option to
the parties to agree that the new Act would apply to the pending arbitration proceedings. The expression "for the time being in force" 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
E proceedings, which would also include the enforcement of the award as
well. There ·is, however ii bar that they cannot agree to the applicability
of the old Act after the new Act has come into force when arbitral proceedings have not commenced though the arbitral agreement was under the
old Act. [503-F-G; 512-G, 513-E-B; 512-G-H]
F
Sir Dinshaw Manekji Patit v. G.B. Badkas & Ors., AIR (1969) Bombay
151; Devkumarsingji Kasturchandji v. State of Madhya Pradesh and Ors.,
AIR (1967) ·M.P. 268 and Reshma Constructions v. State of Goa, (1999) 1
MIJ 462, approved.
4.2. Section 28 of the. Contract Act contains provisions regarding
G agreements in the restraint of legal proceedings. Exception I 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 arbitral proceedings. It is not necessary for the
H parties to know what law will be in force at the time of the conduct of
-
-
_,
THYSSEN STAHLUNJON GMBH v. STEEL AUTHORITY OF INDIA
469
arbitration proceedings. They can always agree that provisions that are in A
force at the relevant time would apply. In this view of the matter, if the
parties have agreed that at the relevanMime provisions of law as existing at
that time would apply, there cannot be any objection to that.
[514·H; 515-A; B; C]
5.1. A foreign award given after the commencement of the new Act B
can be enforced only under the new Act. There is no vested right to have
the foreign award enforced under the Foreign Awards (Recognition and
Enforcement) Act, 1961. After the repeal of the Foreign Awards Act, a
Foreign award can now be enforced under the new Act on the basis of the
provisions contained in Part II of the new Act depending on whether it
is New York Convention award or Geneva Convention award. It is ir·
respective of the fact when the arbitral proceedings commenced in a
foreign jurisdiction. Since no right has accrued, Section 6 of the General
Clauses Act would not apply. Moreover, there is not much difference for
c
.the enforcement of the foreign award in the provisions of the foreign
Awards Act and new Act. Definition of foreign award is same in both the D
enactments. If provisions of the Foreign Awards Act and the new Act
relating to the enforcement of the foreign award are juxtaposed there
would appear to be hardly any difference. [515-C; D; E; 516-D]
5.2. Foreign Awards Act is concerned only with recognition ·and enfor·
cement of the foreign awards and does not contain provisions for the
conduct ofarbitral proceedings which would, of necessity, have taken place
in a foreign country. Arbitral proceedings and enforcement of the award are
two separate stages in the whole process of arbitration. When the Foreign
Awards Act does not contain any pr11visions for arbitral proceedings, then
it is not possible thatthe applicability of the Foreign Awards Act is saved by
virtue of Section 85(2) (a) of the 1996 Act. [516-E-F; 515-H; 516-A]
Shetty's Construction Co. P. Ltd. v. Konkan Railway Constrnction,
[1998) 5 sec 599, referred to.
E
F
Sumitomo Heavy Industries Ltd. v. ONGC Ltd. and Ors., [1998) 1 G
SCC 305 and Oil and Natural Gas Commission v. Western Company of
North America, [1987] 1 SCR 1024, cited.
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 6036 of
1998 Etc.
H
470
SUPREME COURT REPORTS [1999] SUPP. 3S.C.R.
A
From the Judgment and Order dated 21.9.98 of the Delhi High Court
in E.P. No. 47 of 1998.
R.F. Nariman, R.P. Bhatt, S.G. Desai, Dipankar P. Gupta, AK.
Ganguli, R.N. Karanjawala, Gourab Banerjee, Arvind Kumar, Ms. Seema
Sapra, Ms. Suranya, Mrs. Manik Karanjawala, B.V. Desai, Siddharth
B Chowdhury, R. Rahim, Kailash Vasdev, Jaideep Gupta, Buddy A
Ranganadhan, Ms. S. Madan, Krishnan Venugopal, R. Sasiprabhu, Manish
Garg, Uday N. Tiwary, K.K. Lahiri, Ejaz Maqbool, B.K. Mishra and Subu
Ranjan for the appearing parties.
C
The Jtidgment of the Court was delivered by
D.P. WADHWA, J. The Facts:
These three appeals raise three different questions relating to the
construction and interpretation of Section 85 of th.e Arbitration and
D Conciliation Act, 1996 (the 'new Act' for short) which contains repeal and
saving provision of the three Acts, namely, the Arbitration (Protocol and
Convention) Act, 1937, the Arbitration Act, 1940 (the 'old Act' for short)
the Foreign Awards (Recognition and Enforcement) Act, 1961 (the
'Foreign Awards Act' for short).
E
F
G
H
This Section 85 of the new Act we reproduce at the outset :
"85. Repeal and saving - (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 repug-
-
THYSSEN SfAHLUNIONGMBHv. SfEELAUTHOR!TYOFINDIA [D.P. WADHWA,J.) 471
nant to this Act, be deemed respectively to have been made A ·
or issued under this Act."
In the case of Thyssen Stahlunion GMBH (CA No. 6036 of 1998) the
contract for sale and purchase of prime cold' rolled mild steel sheets in
coils contains arbitration agreement. Relevant clauses are as under :
"CLAUSE 12: LEGAL INTERPRETATION
12.1 This contract shall be governed and construed in accordance
with the laws of India for the time being in force.
12.2 To interpret all commercial terms and abbreviations used
herein which have not been otherwise defined, the rules· of
"INCOTERMS 1990" shall be applied.
CLAUSE 13 : SETTLEMENT OF DISPUTES
All disputes of differences whatsoever between the parties hereto
arising out of or relating to the construction, meaning or operation
or effect of this contract or the breach thereof shall unless amicably
settled between the parties hereto; be settled by arbitration in
accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce (ICC), Paris, France by a
sole Arbitrator appointed by the Chairman of the Arbitral Tribunal
of the Court of Arbitration of ICC and the Award made in
pursuance thereof shall be binding on both. the parties. The venue
for the arbitration proceedings shall be New Delhi, India.
Disputes and differences having arisen, the arbitration proceedings
commenced on September 14, 1995 under the old Act. On this date request
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for arbitration was made to the ICC under the arbitration clause in the
contract. Mr. Cecil Abraham of the Malaysian Bar was appointed sole
arbitrator on November 15, 1995. Terms of reference in the arbitration G
were finalised on May 13, 1996. Hearing before the sole arbitrator took
place from January 7, 1997 till January 28, 1997. Award was given on
September 24, 1997. By this time on January 25, 1996 the new Act had
~,
come into force. On October 13, 1997 Thyssen filed a petition in the Delhi
High Court under Sections 14 and 17 of the old Act for making the award H
472
SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.
A rule of court (Arbitration Suit No. 352-N97). While these proceedings
were pending in the High Court, Thyssen, on February 12, 1998;filed an
application under Section 151 of the Code of Civil Procedure for stay of
the proceedings. On the following day Thyssen filed an application in the
High Court for execution of the award under the new Act (Execution
B Petition No. 47/98). The ground taken was that the arbitration proceedings
had been terminated with the making of the award on September 24, 1997
and, therefore, the new Act was applicable for enforcement of the award.
The respondent, Steel Authority of India Ltd. (SAIL) opposed the
maintainability of the execution petition. SAIL also filed objections to the
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award on various grounds under the oldAct. The question which arose for
consideration is :
Whether the award would be governed by the new Act for its
enforcement or whether provisions of the old Act would apply?
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A learned single Judge of the Delhi High Court by judgment dated
September 21, 1998 held that proceedings would be governed by the old
Act. Thyssen Stahlunion GMBH feeling aggrieved filed this appeal (CA
6036/98).
In the case of Western Shipbreaking Corporation (CA No. 4928 of
E 1997) under Memorandum of Agreement dated November 4, 1994 M/s.
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Clareheaven Ltd. agreed to sell to Western Shipbreaking Corporation a
ship "M.V. Kaldera". Clause (19) of the Memorandum of Agreement
contained arbitration clause which is as under :
"If any dispute should arise in connection with the interpretation
in fulfilment of this contract, same shall be decided by arbitration
in the city of London, U .K. with English law to apply and shall be .
referred to a single arbitrator to be appointed by the parties hereto.
If the parties cannot agree on the appointment of the single
arbitrator, the dispute shall be settled by three arbitrators, each
party appointing one arbitrator the third .being appointed by
London Maritime Arbitration (sic) Association in London.
If one party fails to appoint an arbitrator either or by way of
substitution for two weeks after the other party having appointed
his arbitrator, has sent the party making default notice by mail,
THYSSEN STAHLUNION GMBH_v: STEEL AUTHORITY OF INDIA (D.P. WADHWA, J.) 473
cable or telex to make the appointment, London Maritime ArbitraA
tion (sic) Association shall after application from the party having
appointed his arbitrator also appoint on behalf of the party making
default.
The Award ren~ered by the arbitrators shall be final binding upon
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the parties and may if necessary be enforced by any court or any
other competent authority in the same manner as a document in
the court of justice~"
Arbitration proceedings in.this case were held in United Kingdom
prior to the enforcement of the new Act. The award was made on February c
25, 1996 in London. The question which arises for consideration is :
Whether the award is governed by the provisions of the new Act
for its enforcement or by the Foreign Awards Act?
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A learned single Judge of.the Gujarat High Court by impugned
Judgment dated April 21, 1997 held that the new Act would be applicable.
Western Shipbreaking Corporation is aggrieved and filed appeal against
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that judgment (CA 4928/97).
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In the case of M/s. Rani Constructions Pvt. Ltd. (CA No. 61of1999) E
>
·. under the cont~act 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
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statutory modification or re-enactment thereof and the rules made
thereunder and for the time being in force shall apply to all
arbitration proceedings under this clause."
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Disputes having arisen, these were referred to the sole arbitrator on
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December 4, 1993. The arbitrator gave his award on February 23, 1996 after
the new Act had come into force. On account of difference of opinion, in
two judgments of the Himachal Pradesh High Court, both rendered by
single Judges, as to whether it is old or new Act will apply, a learned
•
single Judge of the High Court referred the following question to a
larger Bench :
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SUPREME COURT REPORTS [1999] SUPP. 3 S.C.R.
"Whether the agreement referred to in Section 85(2)(a) of the Act
of 19% for the purpose of applicability of the said Act to the
pending arbitral proceedings which had already commenced under
the Act of 1940 is one necessarily to be entered into after the
commencement of the Act of 1996 or any clause to that effect in
an agreement already entered into between the parties before the
enforcement.of the Act of 1996 would be sufficient for that purpose."
Reference question does not appear to have been happily worded.
What it means is that when clause (a) of Section 85(2) of the new Act uses
C the expression "unless otherwise agreed by the parties" can the parties
agree for the applicability of the new Act before the new Act comes into
force or they have necessarily to agree only after the new Act comes into
force.
The Division Bench of the High Court by the impugned judgment
D dated July 16, 1998 held that clause 25 of the agreement "does not admit
'
of interpretation that this case is governed by Act of 1996".
Arguments have been addressed in considerable detail for and
against the application of the new Act or the old Act in the cases of
Thyssen and Rani Construction and the Foreign Awards Act in the case
E of Western Shipbreaking Corporation. We would, however, refer to these
arguments in brief insofar we consider these to be relevant to decide the
issues before us.
The Submissions:
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Mr. F.S. Nariman, who appeared for Thyssen, made the following
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sub!11issions :
1.
1.
Termination of arbitral proceedings by the final arbitration
award and the enforcement of the award are two separate
proceedings. Under Section 321 of the new Act arbitral
proceedings shall terminate by the final award or by an order
of the arbitral tribunal under sub-section (2) as provided
therein. Thus after the arbitral proceedings are terminated
and final award made, reference has to be made to the new
32.Termination of Proceedings . • (1) The arbitral proceedings shall be terminated by
the final arbitral award or by an order of the arbitral tribunal under sub-section (2).
THYSSEN STAHLUNION GMBH v. STEEL AUTHORITY OF INDIA [D.P. WADHWA, J. J 475
2.
3.
Act for enforcement of the award as when award was given A
old Act stood repealed.
In view of the savings provision under clause (a) of sub-section (2) of Section 85 of the new Act it is not necessary to
refer to Section 6 of the General Clauses Act, 18972.
New Act is based on UNCITRAL Model Law. It is a progressive Act. Objects which led to passing of the new Act should
be kept in view. For this, reference may be made to the
Preamble3, of the new Act as well. In the Statement of Objects
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2.
The arbitral tribunal shall issue an order for the termination of the arbitral proceedings
where:
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(a) the claimant ~thdraws his claim, unless the respondent objects to the order and
the arbitral tribunal recognises a legitimate interest on his part in obtaining a final
settlement of the dispute,
(b) the parties agree on the termination of the proceedings, or
( c) the arbitral tribunal finds that the continuation of the proceedings has for any
other reason become unnecessary or impossible.
6. Effect of repeal. - Where this Act, or any Central Act or Regulation made after the
commencement of this Act, repeals any enactmerit hitherto made or hereafter to be
made, then, unless a different i~tention appears, the repeal shall not :-
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(a) revive anything not in force or existing at the time at which the repeal takes effect;
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or
(b) affect the previous operation of any enactment so repealed or anything duly done
or suffered thereunder; or
( c) affect any right, privilege, obligation or liability acquired, accrued or incurred under
any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence
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committed against any enactment so repealed; or
( e) affect any investigation, legal proceeding or remedy in respect of any such right,
privilege, obligation liability, penalty, forfeiture or punishment as aforesaid;
and any such investigation, legal proceeding or remedy may be instituted, continued or
enforced, and any such penalty, forfeiture or punishment may be imposed as if the
repealing Act or Regulation had not been passed.'
WHEREAS the United Nations Commission on International Trade Law (UNCITRAL) has adopted the UNCITRAL Model ·Law on International Commercial
Arbitration in 1985;
AND WHEREAS the General Assembly of the United Nations 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
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international commercial arbitration practice;
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4.
SUPREME COURT REPORTS f1999J SUPP. 3 S.C.R;
and Reasons 4, the objectives behind introduction of the New
AND WHEREAS the UNCITRAL has adopted .the UNCITRAL Conciliation
Rules in 1980;
AND WHEREAS the General Assembly of the United Nations has recommended the use of the said Rules in cases where a dispute arises in the context of
international commercial relations and the parties seek an amicable settlement of that
dispute by recourse to conciliation;
AND WHEREAS the said Model Law and Rules make significant contribution
to the establishment of a unified legal framework for the fair and efficient settlement
of disputes arising in international commercial relations;
AND WHEREAS it is expedient to make Jaw respecting arbitration and conciliation, taking foto account the aforesaid Model Law and Rules;
Be it enacted by Parliament in the forty seventh year of the Republic as follows:-"
STATEMENT OF OBJECTS AND REASONS
''The law on arbitration in India is at present substantially contained in three enactments, namely, the Arbitration Act, 1940, the Arbiiration (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 United Nations 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 Condliation 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 int~mational 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 Jegal 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 arbi.tral awards and
to define the law relating to conciliation, taking into account the said UNCITRAL
Model Law and Rules.
THYSSEN STAHLUNION GMBHv. STEEL AUTHORITY OF INDIA [D.P. WADHWA, J.] 477
Arbitration law have been explained.
It is clearly intended that the enforcement of the award given after the new
Act came into force would be governed by the new Act. Interpretation of
· the provisions of Section 85 has to be purposeful which advances the object ·
of the new Act. In Sundaram Finance Ltd. v. NEPC India Ltd., [1999] 2
sec 479 the question that arose for consideration was whether under
Section 9 of the new Act court has jurisdiction to pass interim orders even
before arbitral proceedings· commence and before an arbitrator is appointed. Under this Section court is empowered to pass interim orders
before or during arbitral proceedings or at any time after the making of
the arbitral award but before its enforcement. During the course of discussion this Court referred to the statement of objects and reasons which led
to the promulgation of the new Act and said :
"The 1996 Act (new Act) is very different from the Arbitration
Act, 1940 (old Act).