TRIAD INDIA & ANR. vs TRIBAL COOPERATIVE MARKETING & DEVELOPMENT FEDERATION OF INDIA LIMITED
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 288/2017
TRIAD INDIA & ANR. …..Petitioners
Through: Mr. Unnikrishnan, Adv.
versus
TRIBAL COOPERATIVE MARKETING & DEVELOPMENT FEDERATION OF INDIA LIMITED …..Respondent
Through: Mr. Buddy A. Ranganathan and
Ms. Shefali Tripathi, Advs.
CORAM:
HON’BLE MR. JUSTICE C.HARI SHANKAR
ORDER (ORAL)
% 01.08.2024
O.M.P. (COMM) 288/2017 and I.A. 8821/2017
1. One of the arguments that was advanced by Mr. Unnikrishnan, learned Counsel for the petitioners, in this challenge to an arbitral award dated 8 February 2017, was that the arbitrator was statutorily incompetent to pass the award in view of Section 12(5)1 read with the Seventh Schedule to the Arbitration and Conciliation Act, 19962, as he was the Managing Director of the respondent.
2. There can be no manner of doubt that, if Section 12(5) applies, the arbitrator was incompetent to arbitrate and that, therefore, the impugned award would stand totally vitiated thereby.
3. Mr. Buddy Ranganathan, learned Counsel for the respondent submits, however, that Section 12(5) of the 1996 Act has no application in the present case as the arbitral proceedings had been initiated prior to insertion of Section 12(5) in the 1996 Act by Section 8(ii)3 of the Arbitration and Conciliation (Amendment) Act, 20154.
4. I have heard Mr. Unnikrishnan, learned Counsel for the petitioners and Mr. Ranganathan, learned Counsel for the respondent and considered the issue.
5. Learned Counsel for both sides have cited judgments of the Supreme Court and the matter had been adjourned only so as to enable the Court to study the said decisions.
6. Mr. Unnikrishnan places reliance on the decision in Ellora Paper Mills v. State of Madhya Pradesh5, whereas Mr. Ranganathan places reliance on the judgment of the Supreme Court in Hindustan Construction Co Ltd v. U.O.I.6, which in turn, relies on an earlier judgment of the Supreme Court in Board of Control for Cricket in India v. Kochi Cricket Pvt Ltd7.
Analysis
7. Section 12(5) was inserted in the 1996 Act by Section 8(ii) of the 2015 Amendment Act. Section 268 of the 2015 Amendment Act specifically excepts the application of the 2015 Amendment Act to arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act9, before the commencement of this Act unless the parties otherwise agree
8. Plainly, Section 26 of the 2015 Amendment Act would except the applicability of Section 12(5) to the present proceedings, as the proceedings were commenced, in accordance with the provisions of Section 2110 of the 1996 Act, before 31 December 2015, when the 2015 Amendment Act came into force.
9. Section 21 of the 1996 Act envisages commencement of arbitral proceedings on the service, by one party, on the other, of a notice invoking arbitration, and seeking reference of the disputes to arbitration. The Section 21 notice in the present case was issued by the respondent to the petitioners on 17 June 1998. The arbitral proceedings had commenced consequent thereto, culminating in the award dated 18 January 1999. As the award was ex parte, it was challenged before this Court which, by judgment dated 26 September 2001, set aside the award and remanded the matter for de novo consideration.
10. The de novo proceedings resulted in the passing of the impugned award dated 8 February 2017.
11. Thus, the arbitral proceedings clearly commenced, in accordance with Section 21 of the 1996 Act, much prior to insertion of Section 12(5) therein. By application of Section 26 of the 2015 Amendment Act, therefore, Section 12(5) cannot apply to the present proceedings.
12. BCCI and Hindustan Construction Co.
12.1 This position stands judicially recognized by the Supreme Court first in BCCI and, thereafter, in Hindustan Construction Company. BCCI holds, in para 39 of the report:
The scheme of Section 26 is thus clear: that the Amendment Act is prospective in nature, and will apply to those arbitral proceedings that are commenced, as understood by Section 21 of the principal Act, on or after the Amendment Act, and to court proceedings which have commenced on or after the Amendment Act came into force.
(Emphasis supplied)
12.2 BCCI was subsequently followed by the Supreme Court in Hindustan Construction Company. Though the controversy in Hindustan Construction Company was slightly different from that which presently engages us, para 58 of Hindustan Construction Company clearly states that it was clear that only arbitral proceedings have to be looked to see whether 2015 Amendment Act kicks in. The decision in Hindustan Construction Company, thereafter, relies on the Srikrishna Committee Report, in which it was clearly noted that the 2015 Amendment Act would apply only to arbitrations commenced on or after 23 October 2015. Para 60 of the decision in Hindustan Construction Company, thereafter, proceeds to follow BCCI, observing that the decision in BCCI laid down the law with respect to Section 26 of the 2015 Amendment Act with great clarity.
13. Ellora Paper Mills
13.1 Mr. Unnikrishnan has placed reliance on the judgment in Ellora Paper Mills. On a facial reading of the said decision, the submission of Mr. Unnikrishnan does appear, at first blush, to be attractive. Needless to say, however, if the view that Mr Unnikrishnan canvasses were to be adopted, the situation that would result is that the Court would have, with it, two divergent views of the Supreme Court, one in BCCI and Hindustan Construction Company, holding that Section 12(5) does not apply to arbitral proceedings instituted prior to 23 October 2015 and the other, in Ellora Paper Mills, holding that they do apply.
13.2 A careful reading of Ellora Paper Mills discloses, however, that such a divergence of judicial opinion does not really exist. It is true that Ellora Paper Mills addressed the issue of whether Section 12(5) could apply to arbitral proceedings in which the arbitrator had been appointed prior to 23 October 2015. Para 15 of the decision in Ellora Paper Mills observes thus:
15. It has also come on record that in between, the officers who were members of the Stationery Purchase CommitteeArbitral Tribunal had retired. At this stage, we are not considering whether those persons could have been continued as members of the Stationery Purchase CommitteeArbitral or not. However, the fact remains that after the constitution of the Arbitral Tribunal in the year 2001, no further steps whatsoever have been taken in the arbitration proceedings and therefore technically it cannot be said that the arbitration proceedings by the Arbitral TribunalStationery Purchase Committee have commenced.
(Emphasis supplied)
13.3 Thus, the Supreme Court in Ellora Paper Mills proceeded on a premise that, even if the arbitrator had been appointed prior to Section 12(5) being inserted in the 1996 Act, it could not technically .. be said that the arbitration proceedings by the Arbitral Tribunal Stationery Purchase Committee (had) commenced even till the date when the judgment in Ellora Paper Mills came to be rendered.
13.4 Thus, Ellora Paper Mills also proceeds on the premise that there was no real commencement of the arbitral proceedings prior to the insertion of Section 12(5) in the 1996 Act.
14. Thus read, there is no divergence of opinion between Ellora Paper Mills on the one hand and BCCI on the other. They are ad idem that, where the arbitral proceedings have commenced prior to the insertion of Section 12(5) in the 1996 Act, Section 12(5) is inapplicable by virtue of Section 26 of the 2015 Amendment Act.
15. Even otherwise, Section 26 of the 2015 Amendment Act is clear and categorical in its stipulation that the amendment carried out by the 2015 Amendment Act would not apply to arbitral proceedings which had been commenced prior to the coming into force of the 2015 Amendment Act.
16. The sequitur necessarily has to be that, as the arbitral proceedings in the present case had commenced prior to insertion of Section 12(5) in the 1996 Act, Section 12(5) would not apply to the present proceedings.
17. Resultantly, the objection to the impugned award on the ground that it is a nullity, as the arbitrator was not competent to arbitrate on the proceedings, is rejected.
18. The issue of competence of the arbitrator to arbitrate on the disputes stands decided in favour of the petitioner and against the respondent.
19. Mr. Unnikrishnan submits, however, that this is not the only arrow in his quiver, and he has other submissions to advance.
20. To hear Mr. Unnikrishnan on other submission that he may choose to advance and Mr. Ranganathan by way of response thereto, renotify for disposal at the end of the board on 16 October 2024.
C.HARI SHANKAR, J
AUGUST 1, 2024
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Click here to check corrigendum, if any
1 (5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
2 the 1996 Act hereinafter
3 8. Amendment of Section 12. In Section 12 of the principal Act, –
(ii) after sub-section (4), the following sub-section shall be inserted, namely
(5) Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator:
Provided that parties may, subsequent to disputes having arisen between them, waive the applicability of this sub-section by an express agreement in writing.
4 the 2015 Amendment Act hereinafter
5 (2022) 3 SCC 1
6 (2020) 17 SCC 324
7 (2018) 6 SCC 287, hereinafter cited as BCCI
8 26. Act not to apply to pending arbitral proceedings. Nothing contained in this Act shall apply to the arbitral proceedings commenced, in accordance with the provisions of section 21 of the principal Act, before the commencement of this Act unless the parties otherwise agree but this Act shall apply in relation to arbitral proceedings commenced on or after the date of commencement of this Act.
9 the 1996 Act
10 21. Commencement of arbitral proceedings. Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
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