Appeal Against Dismissal Of S. 8 Application Filed Before Commencement Of 2015 Arbitration Amendment Act, Not Maintainable: Himachal Pradesh High Court

The Himachal Pradesh High Court has reiterated that the amendment incorporated in Section 37 (1) (a) of the Arbitration and Conciliation Act, 1996 (A&C Act) by the Arbitration and Conciliation (Amendment) Act, 2015, which provides for an appeal against an order of the court refusing to refer the parties to arbitration under Section 8, is prospective in nature. Thus, the same will apply to court proceedings which have commenced on or after the Amendment Act came into force, i.e., 23.10.2015.

The bench of Acting Chief Justice Sabina and Justice Satyen Vaidya added that since appeal is a continuation of original proceedings, the date of commencement of court proceedings would be the date of filing of the Section 8 application and not the date the order dismissing the said application was passed by the court.

The High Court was dealing with an appeal filed against the order of the single judge where it had dismissed the Section 8 application filed by the appellant. Noting that the Section 8 application was filed before the commencement of the Amendment Act, the bench dismissed the contention of the appellant that since the order of the single judge was passed after the commencement of the Amendment Act, a right to file an appeal had accrued in its favour.

The appellant/ defendant, Graviss Foods Pvt Ltd, filed an application under Section 8 of the A&C Act in a recovery suit filed by the respondents/ plaintiffs before the High Court. Graviss Foods contended that since the matter arose out of the agreement executed between the parties containing an arbitration clause, the dispute must be referred to arbitration. The single judge dismissed the application and held the suit to be maintainable. Against this, Graviss Foods filed an appeal before the division bench.

Disputing the maintainability of the appeal, the respondents/ plaintiffs, including M/s Ice Cream Garden, submitted before the court that since the Section 8 application was filed by Graviss Foods on 10.07.2015, i.e., before the commencement of the 2015 Amendment Act, the court proceedings out of which the appeal had arisen had commenced prior to inclusion of the right of appeal.

The High Court reckoned that before 23.10.2015, there was no provision in the A&C Act under which an appeal could be filed against an order refusing to refer a matter to arbitration under Section 8 of the A&C Act. It was only after coming into force of the 2015 Amendment Act that an order refusing to refer the matter to arbitration under Section 8 was made appealable under Section 37 (1)(a) of Act.

It further observed that as per Section 26 of the Amendment Act, the Amendment Act would only apply to arbitral proceedings commenced w.e.f. 23.10.2015, unless the parties otherwise agree.

The court referred to the Supreme Court’s decision in Board of Control for Cricket in India vs. Kochi Cricket Pvt Ltd & Ors., (2018) 6 SCC 287, where, while observing the scheme of Section 26, it was held that the 2015 Amendment Act is prospective in nature. Therefore, the Amendment Act will apply to arbitral proceedings and court proceedings which have commenced on or after the said Amendment Act came into force, the Apex Court had ruled.

The High Court thus held: “Thus, there remains no doubt as to the construction of Section 26 of Act No. 3 of 2016. Undoubtedly, the amendment carried in principal Act by virtue of Act No. 3 of 2016 including amendment in Section 37 thereof, are prospective and by necessary implications will apply to court proceedings which have commenced on or after the Amendment Act came into force.”

On the issue whether the court proceedings will be taken to have commenced on the date of filing of the Section 8 application or on the date the order dismissing the said application was passed, the bench said, “In our considered view, there is no escape from the conclusion that the date of commencement of court proceedings, in the instant case shall be 10.07.2015 when the application under Section 8 of 1996 Act was filed by the appellant/defendant in Civil Suit No.16 of 2015, for the reason that the appeal is continuation of original proceedings.”

While holding that appeal is a right created by a statute, the court observed that Section 37(1)(a) was incorporated in the A&C Act w.e.f. 25.10.2015. Therefore, before the said date no right existed to file an appeal against the order refusing to refer the parties to arbitration under Section 8, the court ruled.

The bench thus concluded: “In view of the interpretation provided to Section 26 of the Amendment Act 6 of 2016 by the Hon'ble Supreme Court in Kochi Cricket's case (supra), the appellant/defendant had no right to file an appeal at the time of commencement of court proceedings on 10.07.2015.”

The court thus dismissed the appeal as not maintainable.

Case Title: Graviss Foods Private Limited vs. M/s Ice Cream Garden & Anr.

Dated: 12.04.2023

Counsel for the Appellant: Mr. K.D. Sood, Senior Advocate, with Mr. Rahul Gathania, Advocate.

Counsel for the Respondent: Mr. Mohit Thakur, Advocate.

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