Citation Codes

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citation codes

Case Number

First Appeal From Order No. 552 of 1996 With First Appeal From Order No. 553 of 1996

Attorney(S)

Surendra Singh
Shashi Kant Gupta
Prem Peyara
Gautam Chaudhary

Judges

Amitava Lala
Pankaj Mithal, JJ.

Acts

SECTION 85 ARBITRATION AND CONCILIATION ACT 1996
SECTION 39 ARBITRATION ACT 1940
Section 39 of the old Act, i.e Act, 1940
SECTION 115 EVIDENCE ACT
provisions of Act, 1940
ARBITRATION ACT 1940

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Smart Summary

Structured Summary of the Opinion (Amitava Lala, J.)

Factual and Procedural Background

These are appeals under Section 39 of the Arbitration Act, 1940 arising out of orders passed by the IInd Additional Civil Judge (Junior Division), Agra on 19 February 1996 in Arbitration Petition Nos. 499 and 500 of 1995—Sheikhein International v. Agra Development Authority. The appeals challenge the appointment of an arbitrator on the ground that adequate opportunity was not given to the appellants and that the appointment was therefore without jurisdiction.

Clause 30 of the contract contained an arbitration clause requiring disputes to be referred to an arbitrator mutually agreed by the contractor and the Agra Development Authority, and, in default of agreement, the Vice‑Chairman of the Authority was to be asked to appoint a sole arbitrator.

On the record: the court fixed the matter for hearing with lists of nominees from both parties; the court selected and appointed an arbitrator from the respondents' panel on grounds of engineering competency; the appellants participated in arbitration; the parties agreed to proceed under the Arbitration and Conciliation Act, 1996 (Section 85); the award was passed on 3 August 1996. An appeal challenging the appointment was filed on 18 July 1996. A stay was granted by this Court on 26 July 1996; according to the respondents, the arbitrator received that stay order only on 5 August 1996 (after the award).

Legal Issues Presented

Whether the appointment of an arbitrator by the trial court on 19 February 1996, purportedly without giving adequate opportunity to the appellants and by selecting a nominee from the respondents' panel, was without jurisdiction and liable to be set aside.
Whether the appellants are estopped from challenging jurisdiction of the arbitrator after participating in the arbitral proceedings and obtaining the award.
Whether the parties' decision to proceed under the Arbitration and Conciliation Act, 1996 (Act, 1996) precludes reliance upon the Arbitration Act, 1940 (Act, 1940) for challenging appointment/jurisdiction.
Whether the award dated 3 August 1996 is rendered nullity by a stay order passed by this Court on 26 July 1996 but communicated to the arbitrator only on 5 August 1996.

Arguments of the Parties

Appellants' Arguments

The learned judge appointed an arbitrator without giving adequate opportunity to the appellants; thus the orders impugned are wholly without jurisdiction and liable to be set aside.
Relied on Clause 30 of the contract to show the arbitration process required mutual agreement; appointment by court was contrary to that contractual mutuality.
Counsel cited case law (e.g., Prafulla Kumar Sanyal) to the effect that if there is no agreement the court must appoint but should consider feasibility according to contract terms.
Regarding the stay, counsel relied on Mulraj v. Murti Raghu‑nathji Maharaj to contend that if an arbitrator has knowledge of a stay order he must desist and acts thereafter would be nullity.
Contended that their participation in the arbitration was not sufficiently long or acquiescent to amount to waiver/estoppel.

Respondents' Arguments

The court appointed the arbitrator after calling for lists of nominees from both parties and selecting a candidate—the appointment was justified on the arbitrator's competency on engineering matters.
The appellants submitted to the jurisdiction of the arbitrator and participated in the arbitration proceedings; parties agreed to adopt the Act, 1996 under Section 85.
Regarding the stay, respondents argued that the stay order of 26 July 1996 was communicated to the arbitrator only on 5 August 1996 (after the award), and relied on Baleshwar Dayal v. State of U.P. to assert that a stay operates from the moment of its communication to the party concerned; therefore the arbitrator had no knowledge of the stay when making the award.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
(1979) 3 SCC 631 : AIR 1979 SC 1457 — Union of India v. Prafulla Kumar Sanyal	If there is no agreement the court will have to appoint an arbitrator of its choice; desirability that the court consider feasibility of appointing an arbitrator according to contract terms.	Cited by appellants' counsel; court noted the desirability but held appointment here was within the Act and adequately reasoned despite selection from respondents' nominees.
(2004) 1 SCC 768 : 2003 (3) Arb. LR 557 (SC) — Union of India v. Sohan Lal Puglia	Supreme Court held that the court ought to have directed parties to appoint arbitrators in terms of the agreement.	Referred to show that courts should, in some circumstances, direct parties to follow contractual appointment; court nevertheless found facts here justified court appointment after failure to act by appellants.
(2004) 10 SCC 504 : 2005 (1) Arb. LR 368 (SC) — Union of India v. M.P. Gupta	Supreme Court interfered where there was an ex parte order appointing an arbitrator.	Cited as an example where court intervention was improper; court distinguished facts here (court called for nominees from both parties and gave reasons).
(1994) 5 SCC 142 : AIR 1994 SC 2381 — G. Ramachandra Reddy & Co. v. Chief Engineer, Madras Zone, Military Engineering Service	In absence of a named arbitrator, parties may agree for appointment even after proceedings are laid under Section 20; if no agreement, court has jurisdiction to appoint an arbitrator.	Cited by both parties; court held factual situation here fits this ratio — notice given, no action by opposite party, court appointed from nominees.
AIR 1961 SC 1285 — Dhanrajamal Gobindram v. Shamji Kalidas & Co.	Filing of the arbitration agreement in court is appealable under Section 39; the court's decision to appoint an arbitrator when parties do not agree may be judicial, procedural or ministerial.	Cited to show appealability of filing and that appointment by court can be a function of the court; supported court's authority to appoint.
AIR 1987 Kerala 231 (DB) — Food Corporation of India v. A. Mohammed Yunus	Contended (by counsel) that appointment in derogation of agreement will be without jurisdiction; aggrieved party may say award not legally obtained.	Referred by counsel for appellants; court acknowledged this line but relied on contrary authorities and facts here.
1961 ALJ 516 — Deoki Nandan Garg v. Jagdish Prasad (High Court)	When consent is not forthcoming, it is open to the court to appoint an arbitrator.	Referred to support the proposition that the court may appoint when parties fail to agree.
AIR 1984 Delhi 325 : 1985 Arb. LR 443 (Del.) (FB) — Ved Prakash Mittal v. Union of India	Section 20(4) of the Act, 1940 intends to confer power on the court to make an appointment when the machinery of appointment has broken down.	Applied to emphasize that court-appointed arbitrator is permissible when parties' nomination mechanism fails.
(2005) 11 SCC 197 : AIR 2005 SC 2795 — State Of Rajasthan v. Nav Bharat Construction Co.	Following Prasun Roy, a party shall not be allowed to blow hot and cold; long participation and acquiescence preclude challenge to jurisdiction/appointment.	Used to support finding that participation/acquiescence can preclude later jurisdictional challenge; court found sufficient acquiescence here.
(1987) 4 SCC 217 : AIR 1988 SC 205 — Prasun Roy v. Calcutta Municipal Development Authority	Principle of waiver/estoppel: attending and taking part in proceedings with full knowledge amounts to acquiescence and precludes objection to appointment.	Central to court's application of estoppel/waiver doctrine; court found effective participation and acquiescence sufficient to bar challenge.
Russell on Arbitration (18th Ed., p.105) (quoted)	Statement: parties who agree beforehand or later acquiesce in an appointment, with full knowledge, are precluded from objecting to that appointment.	Quotation used to explain principle of acquiescence relied upon by the court to sustain estoppel reasoning.
(1988) 4 SCC 462 : AIR 1988 SC 2045 — Neelakantan & Bros. Construction v. Superintending Engineer, National Highways	Followed the principle that participation/acquiescence precludes objection to appointment.	Reinforced court's conclusion on estoppel/waiver arising from participation.
(1975) 1 SCC 289 : AIR 1975 SC 230 — N. Chellappan v. Secretary, Kerala State Electricity Board (Three-Judge Bench)	Three-Judge Bench followed principles of Russell on Arbitration relating to acquiescence and waiver.	Referred as supporting authority for the estoppel/waiver principle applied by the court.
AIR 1958 Calcutta 415 — Union of India v. K.P. Mandal	Applied estoppel (under Section 115 Evidence Act) to hold that estoppel can prevent a party from contesting arbitrator's qualifications.	Used to show estoppel can bind a party from contesting competence of an arbitrator on relevant facts.
(2003) 6 SCC 36 : AIR 2003 SC 2523 — Delhi Transport Corporation Ltd. v. Rose Advertising	Conduct of arbitration and participation can show parties acted under Act, 1996; orders under old Act unsustainable if parties adopted the new Act.	Cited to hold that where parties agreed to Act, 1996 and arbitrator proceeded accordingly, old Act orders are unsustainable; court found parties agreed to Act, 1996 here.
(2001) 6 SCC 356 : AIR 2001 SC 2293 — Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.	After commencement of the new Act, it governs even where arbitration proceedings commenced prior to enforcement; Section 85 contains repeal and saving provisions.	Applied to the question whether the new Act governed these proceedings; court held parties had agreed to Act, 1996 and so could not rely on old Act.
AIR 2000 Calcutta 148 — Union of India v. Monoranjan Mondal (Calcutta DB)	If arbitral proceedings did not commence under Act, 1940 before 26 Jan 1996 in any manner, the provisions of Act, 1940 cannot be held attracted.	Referred in context of determining which Act applied; court considered commencement principles in determining applicability of Act, 1940 vs Act, 1996.
(1989) 4 SCC 578 : AIR 1989 SC 2259 — Secretary to the Govt. of Orissa v. Sarbeswar Rout	Direction by an arbitrator to parties to file statements of claim may indicate commencement of proceedings on that date.	Referred by respondents' counsel when discussing what constitutes commencement for purposes of Act applicability.
AIR 1967 SC 1386 — Mulraj v. Murti Raghu‑nathji Maharaj	When an arbitrator has knowledge of a stay order, the arbitrator must "stay its hands" and acts thereafter are nullity while the stay is in force.	Cited by appellants in support of the submission that award made after stay (if known) would be null; court distinguished on facts because stay was communicated to arbitrator only after the award.
1971 ALJ 1074 (FB) — Baleshwar Dayal v. State of U.P.	Stay order operates from the moment of its communication to the party concerned; becomes effective only from the time it is communicated.	Relied on by respondents to argue the stay was not operative on the arbitrator until 5 August 1996 when communicated; court accepted that position in relation to the communication issue.

Court's Reasoning and Analysis

The court's analysis proceeded in discernible steps, each grounded in the facts and cited authorities as set out below.

Nature of the dispute and contractual clause: Clause 30 provided for a mutually agreed arbitrator, and in default the Vice‑Chairman of Agra Development Authority was to be asked to appoint a sole arbitrator. The court noted that an application under Section 20 of the Act, 1940 presupposes lack of mutuality and empowers the court to appoint an arbitrator where parties cannot agree.
Factual finding on appointment process: The lower court fixed the matter on the basis of mutual consent to consider lists of nominees from the parties. The court chose a candidate from the respondents' nominees and justified the appointment by reference to the candidate's competency in engineering matters.
Participation and subsequent proceedings: The appellants submitted to the jurisdiction of the arbitrator and participated in the arbitration. The parties agreed to proceed under the Arbitration and Conciliation Act, 1996 (Section 85). The award was passed on 3 August 1996.
Applicability of Section 20(4) Act, 1940 and effect of U.P. amendment: Section 20(4) authorizes the court to appoint an arbitrator where no sufficient cause is shown to refuse filing the agreement; the U.P. amendment removed certain mandatory wording but court emphasized that where parties cannot agree, the court may appoint an arbitrator — and that appointment is within the four corners of the Act when parties seek court intervention.
Precedents on court appointment and contractual terms: The court reviewed authorities (e.g., Prafulla Kumar Sanyal; G. Ramachandra Reddy) and concluded that if parties neglect to appoint an arbitrator after notice, the court is competent to appoint. The court found it immaterial that the appointed arbitrator was a nominee of one party where the court had to step in because of disagreement.
Estoppel/waiver from participation: Relying on authorities (Prasun Roy; State of Rajasthan v. Nav Bharat; Russell on Arbitration), the court held that attendance and taking part in proceedings with knowledge of relevant facts amounts to acquiescence and precludes later challenge to the appointment. Here the court found sufficient acquiescence due to effective participation between appointment (19 Feb 1996) and award (3 Aug 1996), noting the appeal was filed on 18 Jul 1996 but the proceedings and conduct evidenced acquiescence.
Choice of governing Act (1940 v. 1996): The court examined authorities (Delhi Transport Corporation; Fuerst Day Lawson) and held that where parties agreed to be governed by the Act, 1996 and the arbitrator proceeded on that understanding, orders under the Act, 1940 are unsustainable. In this case, parties agreed to Act, 1996, so appellants could not rely on provisions of the old Act to challenge appointment/jurisdiction.
Effect of stay order and its communication: The court considered competing authorities (Mulraj — which holds an arbitrator aware of a stay must desist; Baleshwar Dayal — stay effective upon communication). The court accepted that a stay operates only from communication to the party concerned and applied that principle to conclude the stay (granted 26 Jul 1996) was communicated to the arbitrator only on 5 Aug 1996 (after the award). Consequently the arbitrator had no notice of the stay when making the award.
Nullity analysis: The court observed that if the proceedings themselves were nullities (for example by reason of the Act, 1996 intervening), consequential orders in such proceedings would be nullities; but that a stay order in one proceeding does not invalidate an otherwise valid arbitral award where the stay had not been communicated to the arbitrator at the time the award was made. On that basis the award could not be said to be interfered with by the stay.

Holding and Implications

Holding: Both appeals stand dismissed. The court vacated any interim order(s) in connected applications. No order as to costs was made.

Implications (direct effect on the parties and scope):

The appointment of the arbitrator made by the trial court on 19 February 1996 was held to be within the court's powers under Section 20 of the Act, 1940 and not vulnerable to the appellants' challenge on the facts of this case.
The appellants' participation and acquiescence in the arbitral proceedings precluded them from successfully challenging the appointment and jurisdiction of the arbitrator.
The parties having agreed to proceed under the Arbitration and Conciliation Act, 1996, the appellants could not rely upon the old Act (1940) to undermine the arbitral process conducted under the Act, 1996.
The stay granted by this Court on 26 July 1996 did not invalidate the award passed on 3 August 1996 because the arbitrator received notice of the stay only on 5 August 1996; the stay operates from communication to the concerned party.
No broader precedent was expressly claimed to be laid down beyond application of existing authorities: the decision applies the cited precedents and the facts of this case to dismiss the appeals, and the court did not make a novel legal pronouncement beyond those applications.

This summary is prepared exclusively from and limited to the contents of the provided opinion. No information has been added beyond what appears in the opinion.

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Agra Development Authority, Agra Through Its Vice-Chairman And Ors. v. Sheikhein International And Anr.

Amitava Lala, J.:— These are the appeals under Section 39 of the Arbitration Act, 1940 (hereinafter referred to as the ‘Act, 1940’) arising out of the order(s) passed by the learned IInd Additional Civil Judge (Junior Division), Agra on 19th February, 1996 in Arbitration Petition Nos. 499 and 500 of 1995—Sheikhein International v. Agra Development Authority, Agra. Since both the appeals are similarly placed and connected with each other, the same are heard analogously and decided by this solitary judgment.

2. The sole issue in the aforesaid appeals is that without giving adequate opportunity to the appellants the learned judge appointed an arbitrator, thereby the orders impugned passed by the learned court below are wholly without jurisdiction and are liable to be set aside. In this context the appellant relied upon Clause 30 of the contract, which provided an arbitration clause as follows:

“30. In case any dispute or difference shall arise between the Agra Development Authority and the contractor either during the progress of the work or after its completion or after the determination breach of the contract concerning the work or execution thereof or as to the constructions or meaning of abandonment or these presents of the tender, drawings, specifications or instructions hereinbefore referred to or as to any other matter or things arising out of or connected with or incidental to the contract or the work to be executed or payments to be made in pursuance thereof then either party shall forthwith give to the other notice in writing of such dispute or difference and such dispute or difference shall be referred to an arbitrator to be mutually agreed upon by the contractor and the Agra Development Authority. Upon every reference the cost shall be in the discretion of the arbitrator. In the event of the parties not agreeing in the selection of an arbitrator the Vice-Chairman of Agra Development Authority shall be asked to appoint a sole arbitrator. The award of such arbitrator shall be final and binding on both parties.”

3. From the order(s) impugned we find that on the basis of mutual consent the matter was fixed for hearing in the court for the purpose of appointment of arbitrator on the basis of the list of nominees given by both the parties before the court. The court was pleased to select one candidate from the panel of nominees of the respondents and appointed him as arbitrator justifying his competency about the engineering matter. We further find that the appellants herein submitted to the jurisdiction of the arbitrator and participated in the arbitration proceedings. As contended before the court, parties have agreed to adopt the arbitral proceeding under the new Act, i.e as per Section 85 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘Act, 1996’). Ultimately the award was passed on 3rd August, 1996. On 18th July, 1996 this appeal has been preferred challenging the original order of appointment dated 19th February, 1996. A question arose as to how the award could have been passed when an order of stay was in operation in this appeal at the relevant point of time. According to the respondents, the order of stay, which has been passed on 26th July, 1996, was received by the arbitrator only on 5th August, 1996, i.e after passing the award. Section 39 of the old Act, i.e Act, 1940 speaks certain criteria for the purpose of preferring an appeal, which are as follows:

(i) superseding an arbitration;

(ii) on an award stated in the form of a special case;

(iii) modifying or correcting an award;

(iv) filing or refusing to file an arbitration agreement;

(v) staying or refusing to stay legal proceedings where there is an arbitration agreement;

(vi) setting aside or refusing to set aside an award.

4. The order, which has been passed by the court below, is under Section 20 of the Act, 1940. Such Section 20 speaks about the application to file arbitration agreement in the appropriate court. Section 20(4) of the Act, 1940 is significant in respect of the dispute herein, which is as follows:

“(4) Where no sufficient cause is shown, the court shall order the agreement to be filed, and shall make an order of reference to the arbitrator appointed by the parties, whether in the agreement or otherwise or, where the parties cannot agree upon an arbitrator, to an arbitrator appointed by the court.”

5. However, by way of U.P Amendment of Section 20 of the Act, the portion “shall order the agreement to be filed and” was omitted from the original section.

6. It appears from there that where the parties cannot agree upon an arbitrator, the court can appoint. Therefore, we have to visualise the matter against the background of law. Clause 30 of the arbitration agreement speaks about appointment of an arbitrator mutually agreed upon by the contractor and Agra Development Authority. When an application under Section 20 of the Act, 1940 is made to refer the dispute to the arbitrator by the court, it will be presupposed that there was no mutuality. In any event, the court is empowered to appoint an arbitrator where the parties cannot agree. Even thereafter the court has relied upon mutuality and called for the names from the contesting parties to choose one of the nominees to be appointed as an arbitrator. He may be a nominee of one party or the other but when the court appointed him due to disagreement amongst themselves, the court cannot be said to be at fault for any reason whatsoever. Moreover, independency of such appointee cannot be questioned. This is the scope of Section 20 of the Act, 1940, by which the appointment was made. Whether one of the party had any concurrence or not, is immaterial in such a situation. Parties have submitted to the jurisdiction of the court under Section 20 of the Act, 1940 for the purpose of court's appointment, thereafter a court can appoint anybody as arbitrator irrespective of any mutuality amongst the parties. Section 20 of the Act, 1940 has a superseding effect over the contractual agreement having an arbitration clause when the parties are inclined to get the intervention of the court. Therefore, when court intervenes appointing any of the nominees of either of the parties, that order cannot be challenged taking a plea that one of the party has no concurrence in respect of the appointment. If such nomination is disputed on the plea of concurrence, it will be interference with the independent judicial system not merely an objection to the appointment. Factually, it is to be remembered that the respondents have given several nominees when the appellants have relied upon one nominee. Therefore, even no question of apprehension of biasness can be available. On the contrary, reference to the single nominee of the appellants could have contra effect which the appellants cannot ignore.

7. Mr. Shashi Kant Gupta, learned counsel appearing for the appellants, cited judgment reported in (1979) 3 SCC 631 : AIR 1979 SC 1457—Union of India v. Prafulla Kumar Sanyal to establish that if there is no such agreement, the court will have to appoint an arbitrator of its choice. However, in doing so it is desirable that the court should consider the feasibility of appointing an arbitrator according to the terms of the contract. Therefore, we have to construe as to whether any mutuality is there and any sufficient opportunity was given to appoint an arbitrator to the parties or not. From the impugned judgment and order it appears that in spite of several notices to settle the claim as well as for referring the dispute to the arbitrator, the appellant authority refused to do so. Therefore, factually the appointment is within the four-corners of the Act itself. However, from the judgment, as referred on behalf of the appellants, reported in (2004) 1 SCC 768 : 2003 (3) Arb. LR 557 (SC)—Union of India v. Sohan Lal Puglia we find that the Supreme Court held that the court ought to have directed the parties to appoint arbitrators in terms of the agreement. In (2004) 10 SCC 504 : 2005 (1) Arb. LR 368 (SC)—Union of India v. M.P Gupta, the Supreme Court interfered when there was an ex parte order appointing an arbitrator. (1994) 5 SCC 142 : AIR 1994 SC 2381 : 1994 (2) Arb. LR 61 (SC)—G. Ramachandra Reddy & Co. v. Chief Engineer, Madras Zone, Military Engineering Service is a citation of both the parties. In this judgment it was held that in the absence of any named arbitrator it would be open to the contracting parties to agree for an appointment of an arbitrator by agreement even after the proceedings were laid in the court under Section 20 of the Act. In the absence of any such agreement, the court gets jurisdiction and power to appoint an arbitrator. Thus, when the notice was given to the opposite party to appoint an arbitrator in terms of the contract and when no action had been taken, it must be deemed that such opposite party had neglected to act upon the contract. When no agreement was reached, even in the court between the parties, the court gets jurisdiction and power to appoint an arbitrator. Factual part of the case is totally covered by the ratio of the judgment, according to us. Factually notice was given but no arbitrator was appointed. Even thereafter the court proceeded on the basis of the mutual agreement and directed to submit the list of their nominees and ultimately found one appropriate out of several nominees on the part of the respondents but not sole nominee on the part of the appellants. Court had given reasons for such appointment. Therefore, there is no wrong.

8. From the analysis of AIR 1961 SC 1285—Dhanrajamal Gobindram v. Shamji Kalidas & Co. it appears to this court that filing of the arbitration agreement in the court is appealable under Section 39 then it follows a ministerial act of reference to an arbitrator appointed by the parties. If the parties do not agree, the court may be required to make a decision as to who should be selected as an arbitrator, and that may be a function either judicial or procedural or even ministerial; but it is unnecessary to decide which it is. By citing AIR 1987 Kerala 231 : 1987 (2) Arb. LR 174 (Ker.) (DB)—Food Corporation of India v. A. Mohammed Yunus, learned counsel appearing for the appellants contended that any appointment in derogation of the agreement will be without jurisdiction. In such circumstances, it is always open to the aggrieved party to take the stand that the award is not legally and properly obtained. In 1961 ALJ 516—Deoki Nandan Garg v. Jagdish Prasad it was held by a Division Bench of this High Court that when consent is not forthcoming, it is open to the court to appoint an arbitrator. A Full Bench of the Delhi High Court in AIR 1984 Delhi 325 : 1985 Arb. LR 443 (Del.) (FB)—Ved Prakash Mittal v. The Union of India held that the intention of Section 20(4) of the Act, 1940 is to confer power on the court to make an appointment when machinery of appointment has broken down.

9. Now, the next question is whether the appellants are estopped from raising this point after participation in the arbitration proceeding or not. In (2005) 11 SCC 197 : AIR 2005 SC 2795 : 2005 (3) Arb. LR 429 (State Of Rajasthan v. Nav Bharat Construction Co. it was held following the ratio of (1987) 4 SCC 217 : AIR 1988 SC 205 : 1987 (2) Arb. LR 196 (SC)—Prasun Roy v. The Calcutta Municipal Development Authority that a party shall not be allowed to blow hot and cold simultaneously. Long participation and acquiescence in the proceedings preclude such a party from contending that the proceedings were without jurisdiction. Basically the principle of waiver and estoppel is not only applicable where the award had been made but also where a party had challenged the proceedings, in which he participated. Learned counsel appearing for the appellants contended before the court that their participation is not such which can be construed as long participation. According to us, the words “long participation”, which have been used here, are not disjunctive but conjunctive in nature with the word “acquiescence”. The acquiescence is the appropriate word to construe the cause. Question of long participation possibly arose in that particular matter which continued for a considerable period. This arbitration proceeding was not continued for a considerable period but effective participation was there. One aspect is very clear that the arbitrator was appointed on 19th February, 1996 and the award was obtained on 3rd August, 1996. This appeal was preferred on 18th July, 1996. Therefore, it can be safely presumed that sufficient acquiescence was there to preclude the appellants from taking the plea of improper appointment of arbitrator and jurisdiction. If we go by the judgment of Prasun Roy v. The Calcutta Municipal Development Authority (supra) it will be seen that acquiescence was made known following the book of Russell on Arbitration, 18th Edition, Page 105, which explains the position as follows:

“If the parties to the reference either agree before hand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking pat the proceedings with full knowledge of the relevant fact will amount to such acquiescence.”

10. The same principle was also squarely followed in the judgment reported in (1988) 4 SCC 462 : AIR 1988 SC 2045 : 1989 (1) Arb. LR 34 (SC)—Neelakantan and Bros. Construction v. Superintending Engineer, National Highways, Salem In (1975) 1 SCC 289 : AIR 1975 SC 230—N. Chellappan v. Secretary, Kerala State Electricity Board. Three Judge Bench of the Supreme Court also followed the same principles as laid down in the book Russell on Arbitration. In AIR 1958 Calcutta 415—Union of India v. K.P Mandal in case of adjudication in the arbitration, principle of estoppel as under Section 115 of the Evidence Act was applied on the facts and circumstances of the case therein and laid down the following principle:

“Held that in the circumstances, although there could be no representation by A as to the actual competence of the arbitrator, the rule of estoppel will still bind him and will still prevent him from contending that M was not qualified under the terms of the agreement to arbitrate in the dispute.”

11. The next question arose before this court that when the parties agreed to be governed by the new Act, i.e Act, 1996, whether they are precluded from proceeding before the court challenging the appointment and jurisdiction of the arbitrator under the old Act, i.e Act, 1940 or not. In (2003) 6 SCC 36 : AIR 2003 SC 2523 : 2003 (1) Arb. LR 1 (Delhi Transport Corporation Ltd. v. Rose Advertising. it was held that the conduct of the arbitration proceedings and the participation of the parties therein show that the parties acted under the Act, 1996. Even the arbitrator proceeded on that understanding and gave his award in pursuance of the Act, 1996. Therefore, order, if any, passed under the old Act, i.e Act, 1940 is unsustainable. In (2001) 6 SCC 356 : AIR 2001 SC 2293 : 2001 (2) Arb. LR 1 (Fuerst Day Lawson Ltd. v. Jindal Exports Ltd.. it was held by the Supreme Court that after commencement of the new Act it would be governed by the same although arbitration proceeding has commenced prior to enforcement of the Act. Section 85 of the Act, 1996 is making the repeal and saving provisions. If the parties agree to the Act, which was prevailing at the time of commencement prior to enactment, it will be governed by the same. But if the parties agreed to be governed by the new Act, i.e Act, 1996 then it will be governed by the subsequent Act. In this case, the parties have already agreed to be governed by the new Act. Therefore, no such plea can be taken by the appellants under the old Act. There is no scope of any interpretation in the light of Section 21 of the Act, 1996 in respect of commencement of the arbitral proceeding after the agreement to proceed under the Act, 1996. In AIR 2000 Calcutta 148 : 2000 (1) Arb. LR 326 (Cal.) (DB)—Union of India v. Monoranjan Mondal a Division Bench of the Calcutta High Court held that where prior to the coming into force of Act, 1996, the arbitral proceedings did not commence because arbitrators appointed did not indicate their willingness to act as such or entered upon any reference, thus, arbitral proceedings not having commenced under the Arbitration Act, 1940 before the 26th January, 1996 in any manner whatsoever the provisions of Act, 1940 cannot be held attracted. In any event by showing a Three Judge Bench judgment of the Supreme Court reported in (1989) 4 SCC 578 : AIR 1989 SC 2259 : 1989 (2) Arb. LR 444 (SC)—The Secretary to the Govt. of Orissa v. Sarbeswar Rout learned counsel appearing for the respondents wanted to indicate that direction by the arbitrator to the parties to file their statements of claim says commencement on the date on which the direction has been given.

12. Lastly, an incidental question arose whether the award dated 3rd August, 1996 is effective award when an order of stay was granted by this court in this proceeding on 26th July, 1996 although the same was communicated to the arbitrator after passing of this award, i.e on 5th August, 1996. Learned counsel appearing for the appellants contended before this court by citing a judgment reported in AIR 1967 SC 1386—Mulraj v. Murti Raghu-nathji Maharaj that when the arbitrator has knowledge of stay order, that arbitrator must stay its hands and anything if does thereafter, would be nullity so long as the stay order is in force. Learned counsel appearing for the respondents relied upon a Full Bench judgment of this High Court reported in 1971 ALJ 1074 (FB)—Baleshwar Dayal v. State of U.P to establish that the stay order operates from the moment of its communication to the party concerned and it becomes effective only from the time it is communicated to the party concerned. Therefore, apparently when stay order of this court was communicated to the arbitrator after passing the award, such order cannot be said to be existable at the time of hearing. An arbitrator cannot be blamed in passing an award, when no such communication has been made to him and for putting stamps for the purpose of completion of necessary formalities.

13. In further, we have to see whether the award is nullity due to stay order or not. According to us, question of nullity can be raised when the proceeding is legal. But when the proceeding itself is nullity due to intervention of the Act, 1996, all consequential orders arising from such proceedings are nullity. In a case of nullity versus nullity, the stay order, which has been passed in a proceeding, is unenforceable in the eye of law. Therefore, award of the arbitrator cannot be said to be interfered by the stay order passed by the court at an interim stage. Therefore, totality of the discussion as above speaks that no order can be passed in the appeals by this court. Therefore, both the appeals stand dismissed. Interim order, if any, in the connected application(s) stands vacated.

14. However, no order is passed as to costs.

Agra Development Aut... v. Sheikhein Internatio...