In Civil Appeal No. 3461 of 2023 -SC -  Timeline of issuance of notice and filing of Section 11 is paramount to determine the applicability of pre or post Arbitration (Amendment) Act of 2015, clarifies Supreme Court
Justice M.R. Shah and Justice C.T. Ravikumar [09-05-2023]

Read Order: M/s. Shree Vishnu Constructions v. The Engineer in Chief Military Engineering Service & Ors.

Simran Singh

New Delhi, May 10, 2023: While exercising its civil appellate jurisdiction, the Division Bench of Justice M.R. Shah and Justice C.T. Ravikumar affirmed the order passed by the Telangana High Court wherein an application under Section 11 of the Arbitration Act, 1996, was dismissed while refusing to appoint an arbitrator on the ground that earlier the appellant had accepted the amount as per the final bill in full and final settlement and without raising any dispute.

In the matter at hand, the appellant challenged the order passed by the Telangana High Court in an arbitration matter dispute. The appellant and respondent had entered into an agreement dated  22-07-2019 for additions or alterations to senior non-commissioned Officers mess and repairs or renewals to floors in tech area at Air Force Academy, Hyderabad.

The appellant raised a revised final bill for the aforesaid work on 10-07-2012, whose payment of the final bill was made on 29-04-2013. The appellant had also issued ‘no further claim’ certificate.

On 20-12-2013, the appellant invoked the arbitration clause and approached the High Court under Section 11 (6) of the Act of 1996 to appoint an arbitrator. The application was vehemently opposed by the respondents on the ground that the entire amount was paid as far as back 29-04-2013 with the appellant also issuing the above stated ‘no further claim’ certificate, thus, it was contended that on the ground of ‘accord and satisfaction’, the dispute was not required to be sent for arbitration.

It was the contention of the appellant that that the Court had very limited jurisdiction pertaining to considering only whether there existed an arbitration agreement or not and no further inquiry was permissible at the stage of deciding the application under Section 11 (6) of the Act of 1996. It was further contended that the issue with respect to ‘accord and satisfaction’ had to be left to be decided by the arbitrator or arbitral tribunal. However, it was the case of the respondents that Arbitration and Conciliation (Amendment) Act, 2015  would be not be applicable as per Section 21 of the Act of 1996 that had been commenced prior to the Amendment Act of 2015.

Issue for consideration

Whether in a case where the notice invoking arbitration clause, issued prior to the Amendment Act of 2015, would allow the old Act (pre-amendment 2015) to be applicable?

Court Analysis

The Court navigated through various provision of the Amendment Act of 2015 and a catena of cases. While relying on Union of India v. Parmar Constructions Company, Union of India v. Pardeep Vinod Constructions Company and S.P. Singla Constructions Private Limited v. State of Himachal Pradesh, the Court applied the law laid down in these cases and compared the issue with the present case. It was stated that the notice invoking arbitration clause was issued much prior to the Amendment Act of 2015 and the application under Section 11(6) of the Act of 1996 had been filed on 27-04-2016 i.e. much after the amendment act of 2015 came into force. Thus, the law prevailing prior to the Amendment Act of 2015 would be applicable. The Bench concluded that the High Court had rightly entered into the question of ‘accord and satisfaction’ and had rightly dismissed the application under section 11(6) of the Act of 1996, prevailing prior to the Amendment Act of 2015.

With the above observation, the Bench affirmed with the order of the High Court and held that in a case where the notice invoking arbitration is issued prior to the Amendment Act, 2015 and the application under Section 11 for appointment of an arbitrator is made post Amendment Act, 2015, the provisions of pre-Amendment Act, 2015 shall be applicable and not the Amendment Act, 2015. Thus, the Court dismissed the appeal.