Trivedi and Parashar (Advocates and Solicitors)
2015 ARBITRATION AMENDMENT ACT IS NOT APPLICABLE IF THE ARBITRATION NOTICE IS ISSUED PRE-AMENDMENT AND THE SECTION 11 APPLICATION FILED AFTER.
In M/s. Shree Vishnu Constructions v. The Engineer in Chief Military Engineering Service & Ors. [Civil Appeal No. 3461 of 2023 (Arising out of SLP (C) No. 5306 of 2022)], the Appellant entered into an agreement with the Respondent for additions/alterations to Senior Non- Commissioned Officers mess and repairs/renewals to floors in the tech area at Air Force Academy, Hyderabad. After completion of the work, the Appellant raised the final bill. The Respondent made payment in respect of the final bill and the Appellant also issued a ‘no further claim’ certificate in favor of the Respondent. Eventually, the Appellant invoked the arbitration clause under the agreement after some dispute arose concerning the payment of dues. The Appellant filed an application U/s 11 of the Arbitration and Conciliation Act, 1996 (“Act”) before the Telangana High Court seeking the appointment of an Arbitrator. However, the Respondent opposed the Appellant on the ground of ‘accord and satisfaction’ as the bill raised by the Appellant has been paid in full and the Appellant has issued a ‘no further claim’ certificate in favor of the Respondent.
Before the High Court, the Appellant pleaded that the court has very limited jurisdiction while deciding the section 11 application after the insertion of section 11 (6A) by the 2015 Amendment Act (“Amendment”). Therefore, the High Court must only consider whether there is an existence of the arbitration agreement or not, and the issue concerning the ‘accord and satisfaction’ has to be left to be decided by the arbitrator / arbitral tribunal. However, the High Court, dismissed the application by concluding that the Amendment does not apply to dispute and the bill raised by the Appellant has been paid by the Respondent. Aggrieved by the decision of the High Court the Appellant filed an appeal before the Supreme Court. The Respondent argued that though the application under Section 11(6) of the Act was filed on 27.04.2016, i.e., after the Amendment came into force, the notice invoking the arbitration was issued on 20.12.2013, i.e., much before the enforcement of the Amendment. Thus, the Amendment was not applicable.
The Supreme Court observed that as per Section 11(6A), the powers of the court while deciding an application under Section 11(6) of the Act, are confined to the examination of the existence of an arbitration agreement, which was not restricted in the pre-amendment Act. Furthermore, Section 26 of the Amendment provides that before the commencement of the Amendment nothing contained in the Amendment shall apply to the arbitral proceedings commenced, under the provisions of Section 21 of the Act, unless the parties otherwise agree. The court further observed that as per Section 21, the arbitral proceedings can be said to have commenced on the date on which a request for the dispute to be referred to arbitration is received by the Respondent. The Supreme Court applied the law laid down in Union of India (UOI) v. Parmar Construction Company [AIR 2019 SC 5522], Union of India (UOI) v. Pradeep Vinod Construction Company, and Ors. [(2020) 2 SCC 464] and SP Singla Constructions Pvt Ltd. v. State of Himachal Pradesh and Ors. [ (2019) 2 SCC 488] to the facts of the case.
The Appellant argued that the Supreme Court had not noticed and/or considered the binding decision in the case of Board of Control for Cricket in India v. Kochi Cricket Pvt Ltd. and Ors. (AIR 2018 SC 1549), while taking a contrary view in the cases of Parmar Construction Company (Supra) and Pradeep Vinod Construction Company (Supra). The Supreme Court while dismissing the contention of the Appellant remarked that in the case of BCCI (Supra), the Apex Court has held the Amendment to be prospective in nature insofar as the proceedings under Sections 34 and 36 are concerned. Hence referring to the facts of the case, the Supreme Court observed that the notice invoking arbitration was issued on 26.12.2013, i.e., much before the enforcement of the Amendment, and the application under Section 11(6) had been filed on 27.04.2016, i.e., much after the Amendment came into force. Thus, it was concluded that the law prevailing before the Amendment shall be applicable. Therefore, the Supreme Court upheld the decision of the High Court and observed that “We are in complete agreement with the view taken by the High Court. It is observed and held that in a case where the notice invoking arbitration is issued before 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”.