Shree Vishnu Constructions V. The Engineer In Chief, Military Engineering Service

Case Number: Civil Appeal No. 3461 of 2023 

Judges Name: Hon’ble Judges Mr. Justice M.R.Shah, Mr. Justice C.T.Ravikumar

Order Dated: 09.05.2023

Facts of the Case:

  1. The Appellant and Respondents entered into an agreement vide another agreement on 22/07/2010 regarding additions and alterations to be made to the Senior Non-Commissioned Officer’s Mess and repairs for the floors in the Air Force Academy tech area. The Appellant filed a “no further claim” certificate following the payment of the final revised bill raised by them on 10/07/2012, paid on 29/04/2013 by the Respondents. 
  2. The Appellant invoked the arbitration clause via notice sent on 20/12/2013, applying on 27/04/2016 to the Hon’ble High Court for the appointment of an arbitrator under Sec 11(6) of the Arbitration and Conciliation Act, 1996 (“Act”), which was opposed by the Respondents on the grounds of “accord and satisfaction”, since the Appellant had been paid in full for their work and had also filed a “no further claim” certificate. 
  3. The Appellant referred to the 2015 Amendment of the Arbitration and Conciliation Act, 1996, stating that the Court only had the power to verify the existence of a valid arbitration agreement and nothing else, and hence could not address the matters raised by the Respondents and only allow the matter to be referred to arbitration, with the tribunal handling the Respondents’ objections. 
  4. The Hon’ble High Court dismissed the arbitration petition in its judgment, stating the following reasons: that the 2015 Amendment would not apply to this case, only the pre-Amendment Act, that there had already been a full and final settlement of the payment due to the Appellant followed by them filing a “no further claim” certificate, and finally, that a period of three years had already elapsed before the Appellant filed this arbitration petition. This judgment was appealed to the Supreme Court.

Supreme Court Observed/ Held As Follows:

  • The short question to be answered by the Supreme Court was, in relation to arbitration proceedings, in the case that the notice invoking arbitration had been issued prior to the Amendment Act, 2015, whether the old Act (the Act prior to the Amendment) or the New Act shall apply. 
  • Upon consideration of the submissions made by both parties, the Supreme Court expressed views regarding the cases used and their applicability to the present subject matter. The BCCI case was mentioned prominently, with this Court establishing its inapplicability to the contended subject matter, for the case covered the applicability of the 2015 Amendment only for Sections 34 and 36 of the Act not Section 11(6), which was the section  under which the application for appointment of arbitrator had been made by the Appellant, and further, had ruled that the provisions of Sec 21 of the Act would not apply to Section 26 of the 2015 Amendment. 
  • The Supreme Court held that a careful consideration of the relationship between Section 21 of the Act and Section 26 of the 2015 Amendment was necessary to establish the nature of the 2015 Amendment, and to answer the question of whether applications under Section 11(6) would be governed by the provisions of the Amendment or the Act, especially in case that the notice for arbitration under this Section had been made prior to the commencement of the Amendment. Furthermore, the establishment of the aforementioned applicability would also determine the power of the courts to adjudicate the subject matter. 
  • Citing the cases of Parmar Constructions Company, Pardeep Vinod Construction Company and S.P.Singla Constructions Private Ltd., the Supreme Court held that upon reading Section 21 of the Act  along with Sec 26 of the 2015 Amendment, due to no agreement to the contrary between the Appellant and Respondents, the Act prevailing prior to the 2015 Amendment would apply even though the petition under Sec 11(6) had been made on 27/04/16, for the notice was served by the Appellant on 20/12/2013, much prior to the commencement of the 2015 Amendment. Thus, it was held that the High Court had rightly entered into the question of “accord and satisfaction” and its dismissal of the application by the Appellant under Sec 11(6) was justified. 
  • The Hon’ble Supreme Court dismissed the appeal, with no order as to costs.

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