As per the case facts, an application for arbitrator appointment was dismissed by the High Court because the appellant had accepted final payment and issued a "no further claim certificate." ...
No Acts & Articles mentioned in this case
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3461 OF 2023
(@ SLP (C) NO. 5306 OF 2022)
M/s. Shree Vishnu Constructions …Appellant(s)
Versus
The Engineer in Chief
Military Engineering Service & Ors. …Respondent(s)
J U D G M E N T
M.R. SHAH, J.
1.Feeling aggrieved and dissatisfied with the
impugned judgment and order passed by the High Court
for the State of Telangana at Hyderabad in ARBA No. 151
of 2016 by which the High Court has dismissed the said
application filed under Section 11 of the Arbitration Act,
1996 (hereinafter referred to as “Act, 1996”) and has
Civil Appeal No. 3461 of 2023
Page 1 of 42
refused 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
and also signed and issued “no further claim certificate”,
the original applicant has preferred the present appeal.
2.The facts leading to the present appeal in nutshell
are as under:-
2.1That the appellant herein and the respondents
entered into an agreement vide agreement dated
22.07.2010 for additions/alterations to Senior Non-
Commissioned Officers mess and repairs/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. The payment in respect of the final bill
was made to the appellant on 29.04.2013. The appellant
also issued “no further claim” certificate.
2.2The appellant sent a notice dated 20.12.2013
invoking the arbitration clause. The appellant preferred
an application under Section 11(6) of the Act, 1996 before
the High Court on 27.04.2016 and prayed to appoint an
arbitrator. The application was opposed by the
respondents inter alia on the ground that the entire
Civil Appeal No. 3461 of 2023
Page 2 of 42
amount due and payable under the final bill was paid as
far as back on 29.04.2013 and that even the appellant
issued the “no further claim” certificate and therefore, on
the ground of “accord and satisfaction”, the dispute is not
required to be sent for arbitration. However, it was the
case on behalf of the appellant that in view of the
Arbitration and Conciliation (Amendment) Act, 2015
(hereinafter referred to as “Amendment Act, 2015”) by
which Section 11(6A) came to be inserted, while deciding
the application under Section 11(6), the Court would have
a very limited jurisdiction and to consider only whether
there is an existence of the arbitration agreement or not
and no further inquiry is permissible at the stage of
deciding the application under Section 11(6) and the issue
with respect to the “accord and satisfaction” has to be left
to be decided by the arbitrator / arbitral tribunal.
Therefore, it was the case on behalf of the appellant that
the provisions of the Amendment Act, 2015 shall be
applicable.
2.3It was the case on behalf of the respondents that as
per Section 26 read with Section 21 of the Amendment
Act, 2015, Amendment Act, 2015 shall not be applicable in
a case where arbitration proceedings as per Section 21 of
Civil Appeal No. 3461 of 2023
Page 3 of 42
the Arbitration Act, has been commenced prior to the
Amendment Act, 2015.
2.4By the impugned judgment and order, the High
Court has dismissed the arbitration petition and has
refused to appoint the arbitrator / arbitral tribunal on the
ground that the Amendment Act, 2015 shall not be
applicable and the Act, pre-amendment, 2015, shall be
applicable. That thereafter, after holding that there was a
full and final settlement of the payment as per the final bill
as far as back on 29.04.2013 and even the appellant
issued the “no further claim” certificate and even the
application under Section 11(6) of the Act, 1996 was filed
after a period of approximately three years, the High Court
has dismissed the said arbitration application. The
impugned judgment and order passed by the High Court
is the subject matter of present appeal.
3.Shri K. Parameshwar, learned counsel has
appeared on behalf of the appellant.
3.1it is submitted by Shri Parameshwar, learned
counsel appearing on behalf of the appellant that the
issue that arises for consideration in the present appeal is
the interpretation of Section 26 of the Amendment Act,
Civil Appeal No. 3461 of 2023
Page 4 of 42
2015 insofar as the applicability of the amended
provisions, more specifically, insertion of Section 11(6A)
and its applicability to judicial proceedings initiated after
the Amendment Act, 2015 came into force w.e.f.
23.10.2015.
3.2Shri Parameshwar, learned counsel appearing on
behalf of the appellant has vehemently submitted that as
such the aforesaid issue is squarely covered by the
decision of this Court in the case of Board of Control for
Cricket in India (BCCI) Vs. Kochi Cricket Private
Limited and Ors., (2018) 6 SCC 287 (paras 37 and 39).
3.3 Relying upon the aforesaid decision, it is submitted
that in the said decision it is specifically observed and
held by this Court that the Amendment Act, 2015 shall be
applicable prospectively and that even in a case where
the arbitration proceedings were initiated as per Section
21 of the Act, prior to the Amendment Act, 2015, the
Amendment Act, 2015 shall be applicable.
3.4It is further submitted that this Court in BCCI
(supra) had the occasion to analyse and interpret Section
26 of the Amendment Act, 2015. The Court specifically
traced the legislative history and thereafter came to the
Civil Appeal No. 3461 of 2023
Page 5 of 42
conclusion that Section 26 is divided into two parts. The
first part applies to arbitral proceedings before the
arbitrator and the second part applies to the proceedings
in relation to arbitral proceedings, which means judicial
proceedings. The Court held as follows:
“38. That the expression “the arbitral
proceedings” refers to proceedings before an
Arbitral Tribunal is clear from the heading of
Chapter V of the 1996 Act, which reads as
follows:
“Conduct of arbitral proceedings”
The entire chapter consists of Sections
18 to 27 dealing with the conduct of arbitral
proceedings before an Arbitral Tribunal. What
is also important to notice is that these
proceedings alone are referred to, the
expression “to” as contrasted with the
expression “in relation to” making this clear.
Also, the reference to Section 21 of the 1996
Act, which appears in Chapter V, and which
speaks of the arbitral proceedings
commencing on the date on which a request
for a dispute to be referred to arbitration is
received by the respondent, would also make
it clear that it is these proceedings, and no
others, that form the subject-matter of the first
part of Section 26. Also, since the conduct of
arbitral proceedings is largely procedural in
nature, parties may “otherwise agree” and
apply the Amendment Act to arbitral
proceedings that have commenced before the
Civil Appeal No. 3461 of 2023
Page 6 of 42
Amendment Act came into force. [ Section 29-
A of the Amend (sic Amended) Act provides
for time-limits within which an arbitral award is
to be made. In Hitendra Vishnu
Thakur v. State of Maharashtra, (1994) 4 SCC
602 at p. 633 : 1994 SCC (Cri) 1087, this
Court stated: (SCC p. 633, para 26)“26. … (iii)
Every litigant has a vested right in substantive
law but no such right exists in procedural law.
(iv) A procedural statute should not generally
speaking be applied retrospectively where the
result would be to create new disabilities or
obligations or to impose new duties in respect
of transactions already accomplished.(v) A
statute which not only changes the procedure
but also creates new rights and liabilities shall
be construed to be prospective in operation,
unless otherwise provided, either expressly or
by necessary implication.” It is, inter alia,
because timelines for the making of an arbitral
award have been laid down for the first time in
Section 29-A of the Amendment
(sic Amended) Act that parties were given the
option to adopt such timelines which, though
procedural in nature, create new obligations in
respect of a proceeding already begun under
the unamended Act. This is, of course, only
one example of why parties may otherwise
agree and apply the new procedure laid down
by the Amendment Act to arbitral proceedings
that have commenced before it came into
force.] In stark contrast to the first part of
Section 26 is the second part, where the
Amendment Act is made applicable “in relation
to” arbitral proceedings which commenced on
or after the date of commencement of the
Civil Appeal No. 3461 of 2023
Page 7 of 42
Amendment Act. What is conspicuous by its
absence in the second part is any reference to
Section 21 of the 1996 Act. Whereas the first
part refers only to arbitral proceedings before
an Arbitral Tribunal, the second part refers to
court proceedings “in relation to” arbitral
proceedings, and it is the commencement of
these court proceedings that is referred to in
the second part of Section 26, as the words
“in relation to the arbitral proceedings” in the
second part are not controlled by the
application of Section 21 of the 1996 Act.
39. Section 26, therefore, bifurcates
proceedings, as has been stated above, with
a great degree of clarity, into two sets of
proceedings — arbitral proceedings
themselves, and court proceedings in relation
thereto. The reason why the first part of
Section 26 is couched in negative form is only
to state that the Amendment Act will apply
even to arbitral proceedings commenced
before the amendment if parties otherwise
agree. If the first part of Section 26 were
couched in positive language (like the second
part), it would have been necessary to add a
proviso stating that the Amendment Act would
apply even to arbitral proceedings
commenced before the amendment if the
parties agree. In either case, the intention of
the legislature remains the same, the negative
form conveying exactly what could have been
stated positively, with the necessary proviso.
Obviously, “arbitral proceedings” having been
subsumed in the first part cannot re-appear in
the second part, and the expression “in
Civil Appeal No. 3461 of 2023
Page 8 of 42
relation to arbitral proceedings” would,
therefore, apply only to court proceedings
which relate to the arbitral proceedings. The
scheme of Section 26 is thus clear : that the
Amendment Act is prospective in nature, and
will apply to those arbitral proceedings that
are commenced, as understood by Section 21
of the principal Act, on or after the Amendment
Act, and to court proceedings which have
commenced on or after the Amendment Act
came into force.”
3.5It is further submitted that it is specifically held that
the phrase ‘in relation to arbitral proceedings’ appearing in
the second part of Section 26 refers to commencement of
court proceedings and are not controlled by Section 21 of
the principal Act. It is submitted that in such
circumstances, the relevant date so far as the applicability
of Section 11(6A) is concerned, is not the date of
invocation of arbitration but the date of commencement of
judicial proceedings before a court under Section 11. It is
submitted that therefore viewed in this light, the finding of
the High Court that Section 11(6A) shall not be applicable
in the present case is clearly erroneous.
3.6It is submitted that in the case of Union of India Vs.
Parmar Construction Company, (2019) 15 SCC 682
(Two Judge Bench) (paras 25-27), without noticing the
judgment in BCCI (supra), a coordinate Bench has held,
Civil Appeal No. 3461 of 2023
Page 9 of 42
relying on Section 21, that, the relevant date for
applicability of Section 26 of the Amendment Act, 2015 is
the date when request for appointment of arbitrator was
made. It is further submitted that this has been followed in
the judgment in the case of Union of India Vs. Pradeep
Vinod Construction Company, (2020) 2 SCC 464
(Three Judge Bench), which also did not refer to the case
of BCCI (supra) but has only followed the judgment in
Parmar Construction Company (supra).
3.7It is submitted that the judgment in BCCI (supra)
was rendered in the context of Section 36 of the Act and
not in the context of Section 11. Both Pradeep Vinod
Construction Company (supra) and Parmar
Construction Company (supra) were cases relating to
Section 11. However, neither of the case distinguished the
second part of Section 26 of the Amendment Act, 2015 as
relating to judicial proceedings. It is further submitted that,
in Parmar Construction Company (supra), reliance was
placed on Aravali Power Company Private Limited Vs.
Era Infra Engineering Limited, (2017) 15 SCC 32 (Para
22), to examine the effect of Section 21 of the principal
Act read with Section 26 of the Amendment Act, 2015. It is
submitted that the reliance placed on Aravali Power
Company Private Limited (supra) in the case of Parmar
Civil Appeal No. 3461 of 2023
Page 10 of 42
Construction Company (supra) is completely
misplaced. Firstly, neither Section 21 of the principal Act
nor Section 26 of the Amendment Act, 2015 were
discussed in Aravali Power Company Private Limited
(supra). Secondly, the decision in Aravali Power
Company Private Limited (supra) did not concern
judicial proceedings but applications filed before the
arbitrator challenging his qualification under Sections 12
and 13. It is submitted that therefore, the second part of
Section 26 did not come for consideration at all.
3.8It is submitted that similarly, the reliance placed in
Parmar Construction Company (supra) on S.P. Singla
Constructions Private Limited Vs. State of Himachal
Pradesh and Anr., (2019) 2 SCC 488 (Para 16) is again
misplaced because in S.P. Singla Constructions Private
Limited (supra) issue also involved was disqualifications
of an arbitrator under Section 12 and consequent filing of
Section 11 petitions prior to coming into force of the
Amendment Act, 2015.
3.9It is submitted that on the other hand, this Court in
Ssangyong Engineering and Construction Company
Limited Vs. National Highways Authority of India
(NHAI), (2019) 15 SCC 131 (Para 19), has held that,
Civil Appeal No. 3461 of 2023
Page 11 of 42
Section 34 as amended in 2015, will apply only to Section
34 applications that have been made to the Court on or
after 23.10.2015, irrespective of the fact that the
arbitration proceedings may have commenced prior to
that date and while doing so, this Court followed the
judgment in BCCI (supra).
3.10It is submitted that in order to get over the judgment
in BCCI (supra), the Parliament omitted Section 26 of the
Amendment Act, 2015 w.e.f. 23.10.2015 by way of
Section 15 of the Arbitration and Conciliation
(Amendment) Act, 2019, which was notified on
30.08.2019. It is further submitted that the validity of
Section 15 was inter alia challenged in Hindustan
Construction Company Limited and Anr. Vs. Union of
India and Ors., (2020) 17 SCC 324 (Three Judge Bench).
It is submitted that this Court held that, though the basis
for the judgment in BCCI (supra) was removed, but still
found that Section 15 of the Amendment Act, 2019 was
unconstitutional as being manifestly arbitrary. What is
noteworthy is that despite having noticed that the Justice
Srikrishna committee report held that the Amendment Act,
2015 must apply to arbitrations, which commenced on or
after 23.10.2015 and related court proceedings, the Court
Civil Appeal No. 3461 of 2023
Page 12 of 42
struck down the amendment and resurrected the law as
stated in BCCI (supra). The Court emphatically held that,
“66. The result is that Kochi Cricket [BCCI v.
Kochi Cricket (P) Ltd., (2018) 6 SCC]
judgment will therefore continue to apply so as
to make applicable the salutary amendments
made by the 2015 Amendment Act to all court
proceedings initiated after 23-10-2015.”
3.11It is further submitted that the judgment in BCCI
(supra), so far as it differentiated between arbitral
proceedings and court proceedings, was followed in
Government of India Vs. Vedanta Limited, (2020) 10
SCC 1 (Three Judge Bench), and the Court emphasized
that the Amendment Act, 2015 would be applicable to
court proceedings arising out of arbitration proceedings,
irrespective of whether such arbitration proceedings
commenced prior to or after the Amendment Act, 2015.
3.12It is further submitted that the judgment in BCCI
(supra) has also been followed in Patel Engineering
Limited Vs. North Eastern Electric Power Corporation
Limited, (2020) 7 SCC 167 (Para 15) (Three Judge
Bench).
3.13In light of this brief conspectus of the aforesaid
decisions, it is submitted that, the decision in BCCI
Civil Appeal No. 3461 of 2023
Page 13 of 42
(supra), regarding judicial proceedings referred to in
Section 26 not being controlled by Section 21 of the
principal Act, has been followed by a coordinate bench of
this Hon’ble Court in Ssangyong Engineering and
Construction Company Limited (supra) and the three-
judge benches in Hindustan Construction Company
Limited and Anr. (supra), Vedanta Limited (supra) and
Patel Engineering Limited (supra). It is further
submitted that on the other hand, the decision by the
coordinate bench in Parmar Construction Company
(supra) was rendered in ignorance of the decision in
BCCI (supra). Further, the coordinate bench in Parmar
Construction Company (supra) placed reliance on the
decisions in Aravali Power Company Private Limited
(supra) and S.P. Singla Constructions Private Limited
(supra), neither of which concerned judicial proceedings
as they were rendered on the issue of qualification or
disqualification of the arbitrator. It is further submitted that
the decision in the case of Parmar Construction
Company (supra) was followed by the three-judge bench
in Pradeep Vinod Construction Company (supra)
without any reference to BCCI (supra).
3.14It is therefore, the submission on behalf of the
appellant that the decision of this Court in the case of
Civil Appeal No. 3461 of 2023
Page 14 of 42
BCCI (supra) was binding on the coordinate bench which
rendered the decision in the case of Parmar
Construction Company (supra), this Court has not
noticed the said decision and therefore, the decision in the
case of Parmar Construction Company (supra) can be
said to be per incuriam and/or sub silentio. It is submitted
that therefore, the decision in the case of Parmar
Construction Company (supra) being per incuriam, the
larger Bench, which rendered the decision in the case of
Pradeep Vinod Construction Company (supra) ought
not to have placed reliance on Parmar Construction
Company (supra) . Therefore, relying upon the decision
of this Court in the case of BCCI (supra), which has been
subsequently followed in other decisions referred to
hereinabove, it is prayed to allow the present appeal.
4.Present appeal is vehemently opposed by Shri
Padmesh Mishra, learned counsel appearing on behalf of
the respondents.
4.1It is vehemently submitted by the learned counsel
appearing on behalf of the respondents that as such the
Hon’ble High Court has rightly dismissed the Section
11(6) application by observing and holding that the pre-
amendment Arbitration Act, 2015 shall be applicable.
Civil Appeal No. 3461 of 2023
Page 15 of 42
4.2It is submitted that in the present case, admittedly
the notice invoking the arbitration was issued on
20.12.2013, i.e., much prior to the Amendment Act, 2015.
It is further submitted that admittedly the application under
Section 11(6) of the Act, 1996 was preferred and filed on
27.04.2016, i.e., much after the Amendment Act, 2015
came into force. It is submitted that therefore, taking into
consideration section 26 of the Amendment Act, 2015 and
when the notice invoking the arbitration was issued much
prior to the Amendment Act, 2015, therefore, the
arbitration proceedings can be said to have commenced
on 20.12.2013 and therefore, pre-Amendment Act, 2015
shall be applicable and not the Amendment Act, 2015.
4.3Now, insofar as the reliance placed upon the
decision of this Court in the case of BCCI (supra) relied
upon on behalf of the appellant is concerned, it is
submitted that the decision in the case of BCCI (supra)
and the subsequent decisions following the BCCI (supra)
are all with respect to the proceedings under Sections 34
and 36 of the Act, 1996. It is submitted that therefore,
considering Sections 34 and 36 proceedings as
judicial/court proceedings, this Hon’ble Court has
interpreted Section 26, bifurcating Section 26 into two
Civil Appeal No. 3461 of 2023
Page 16 of 42
parts and to that it is observed and held that with respect
to judicial proceedings under Sections 34 and 36, the
Amendment Act, 2015 shall be applicable. It is submitted
that, however, on the other hand, there is a direct decision
of this Hon’ble Court in the case of Parmar Construction
Company (supra) dealing with the very issue of
application under Section 11(6) of the Act, 1996 and in the
said decision it is specifically observed and held that so
far as the application under Section 11(6) of the Act, 1996
is concerned, in case the notice invoking the arbitration is
invoked prior to the Amendment Act, 2015, pre
Amendment Act, 2015 shall be applicable. It is submitted
that as such the decision of this Court in the case of
Parmar Construction Company (supra), which is a Two
Judge Bench decision has been subsequently considered
and followed by a Three Judge Bench in the case of
Pradeep Vinod Construction Company (supra).
4.4It is further submitted that in the case of BCCI
(supra), this Court has unequivocally held that from the
scheme contained in Section 26 of the Amendment Act, it
is clear that the Amendment Act is prospective in nature
and will only apply to those arbitral proceedings that
commence in terms of Section 21 of the Act, on or after
the Amendment Act, and to Court proceedings, which
Civil Appeal No. 3461 of 2023
Page 17 of 42
have commenced on or after the Amendment Act came
into force. It is submitted that it necessarily follows that in
such cases, where the arbitration proceedings have been
initiated prior to 23.10.2015, it will continue to be
governed by the legal position as it existed prior to the
coming into force of the Amendment Act, 2015.
4.5It is submitted that as submitted hereinabove, the
judgments in Parmar Construction Company (supra)
and Pradeep Vinod Construction Company (supra) are
with respect to the applications under Section 11(6) and
the decision of this Court in the case of BCCI (supra) is
with respect to the proceedings under Sections 34 and 36
and even the observations made in paragraphs 37 to 39
are with respect to the “court proceedings” and therefore,
the aforesaid two decisions cannot be said to be in conflict
with the judgment in the case of BCCI (supra).
4.6It is submitted that the reliance by the appellant on
the expression “court proceedings in relation thereto” as it
occurs in Section 26 of the Amendment Act, 2015 to
contend that applications under Section 11 of the Act,
1996 would fall in such category is misplaced. It is
submitted that it must be borne in mind that this Hon’ble
Court was called upon to interpret Section 26 of the
Civil Appeal No. 3461 of 2023
Page 18 of 42
Amendment Act, 2015, to answer as to whether
applications under Section 36, which was amended by the
Amendment Act, 2015 would apply in its amended form in
respect of Section 34/36 proceedings initiated before the
commencement of the Amendment Act, 2015. It is
submitted that, thus, any observation in BCCI (supra)
ought to be understood in the context in which the issue
arose therein and the same cannot be said to have laid
down the law as regards applicability of the Amendment
Act, 2015 to Section 11 applications.
4.7It is submitted that the judgment in Parmar
Construction Company (supra) follows the judgment of
this Hon’ble Court in S.P. Singla Constructions Private
Limited (supra) in order to conclude that Section 11
petitions in respect of proceedings initiated prior to the
commencement of the Amendment Act, 2015, would be
governed by the pre-amended legal position. It is
submitted that the said judgment in S.P. Singla
Constructions Private Limited (supra) in turn follows
the observations of this Hon’ble Court in BCCI (supra).
4.8It is further submitted that the issue as to whether
the Amendment Act, 2015 would apply to proceedings
under Section 11, with respect to arbitration commenced
Civil Appeal No. 3461 of 2023
Page 19 of 42
prior to 23.10.2015 (the date on which the Amendment
Act, 2015 came into force) has been elaborately dealt with
by a Three Judge Bench in the case of S.P. Singla
Constructions Private Limited (supra), after analysing
threadbare the judgment in BCCI (supra) to conclude as
under:-
“16. Considering the facts and circumstances
of the present case, we are not inclined to go
into the merits of this contention of the
appellant nor examine the correctness or
otherwise of the above view taken by the
Delhi High Court in Ratna Infrastructure
Projects case [Ratna Infrastructure Projects
(P) Ltd. v. Meja Urja Nigam (P) Ltd., 2017
SCC OnLine Del 7808]; suffice it to note that
as per Section 26 of the Arbitration and
Conciliation (Amendment) Act, 2015, the
provisions of the amended 2015 Act shall not
apply to the arbitral proceedings commenced
in accordance with the provisions of Section
21 of the principal Act before the
commencement of the Amendment Act unless
the parties otherwise agree. In the facts and
circumstances of the present case, the
proviso in Clause (65) of the general
conditions of the contract cannot be taken to
be the agreement between the parties so as
to apply the provisions of the amended Act. As
per Section 26 of the Act, the provisions of the
Amendment Act, 2015 shall apply in relation to
Civil Appeal No. 3461 of 2023
Page 20 of 42
arbitral proceedings commenced on or after
the date of commencement of the Amendment
Act, 2015 (w.e.f. 23-10-2015). In the present
case, arbitration proceedings commenced
way back in 2013, much prior to coming into
force of the amended Act and therefore,
provisions of the amended Act cannot be
invoked.
17. In BCCI v. Kochi Cricket (P) Ltd. [(2018) 6
SCC 287], this Court has held that the
provisions of the Amendment Act, 2015 (with
effect from 23-10-2015) cannot have
retrospective operation in the arbitral
proceedings already commenced unless the
parties otherwise agree and held as under :
…………………………..”
4.9It is submitted that it is a settled law that arbitration
commences upon invocation of the notice as per Section
21 of the Act, 1996. It is submitted that therefore, in a
case where the notice invoking the arbitration has been
issued prior to the Amendment Act, 2015, on true
interpretation of Section 26 read with Section 21 of the
Amendment Act, 2015, the Amendment Act, 2015 shall
not be applicable and the arbitration would be governed
by the unamended provision.
Civil Appeal No. 3461 of 2023
Page 21 of 42
4.10Making above submissions and relying upon the
decisions of this Court in the case of Parmar
Construction Company (supra); Pradeep Vinod
Construction Company (supra) and S.P. Singla
Constructions Private Limited (supra), it is prayed to
dismiss the present appeal.
5.We have heard learned counsel for the respective
parties at length.
The short question which is posed for the
consideration of this Court is, in relation to the arbitration
proceedings, in a case where the notice invoking
arbitration is issued prior to the Amendment Act, 2015, the
old Act shall be applicable (pre-amendment 2015) or the
new Act?
6.While considering the aforesaid issue the relevant
provisions of the Amendment Act, 2015 are required to be
referred to, namely, Sections 11(6A), 21 and 26, which
are as under:
“(6A) The Supreme Court or, as the case may
be, the High Court, while considering any
application under sub-section (4) or sub-
section (5) or sub-section (6), shall,
notwithstanding any judgment, decree or
order of any Court, confine to the examination
of the existence of an arbitration agreement.
Civil Appeal No. 3461 of 2023
Page 22 of 42
21.Commencement of arbitral proceedings
– Unless otherwise agreed by the parties, the
arbitral proceedings in respect of a particular
dispute commence on the date on which a
request for that dispute to be referred to
arbitration is received by the respondent.
26.Act not to apply to pending arbitral
proceedings – Nothing contained in this Act
shall apply to the arbitral proceedings
commenced, in accordance with the
provisions of Section 21 of the principal Act,
before the commencement of this Act unless
the parties otherwise agree but this Act shall
apply in relation to arbitral proceedings
commenced on or after the date of
commencement of this Act.”
6.1Section 11(6A) has been inserted by Amendment
Act, 2015, by which the powers of the Court dealing with
an application under Section 11(6) of the Act are
restricted and as per section 11(6A), the powers of the
Court while deciding application under Section 11(6) of
the Act are confined to the examination of the existence of
an arbitration agreement, which powers were not
restricted in the pre-amendment Act, 2015. However,
Section 26 of the Amendment Act, 2015 provides that
nothing contained in this Act shall apply to the arbitral
proceedings commenced, in accordance with the
provisions of Section 21 of the principal Act, before the
Civil Appeal No. 3461 of 2023
Page 23 of 42
commencement of this Act unless the parties otherwise
agree. At this stage, it is required to be noted that as per
Section 21 of the principal Act, unless otherwise agreed
by the parties, the arbitral proceedings in respect of a
particular dispute commence on the date on which a
request for that dispute to be referred to the arbitration is
received by the respondent. Therefore, as per section 21
of the principal Act, the arbitral proceedings can be said to
have commenced on the date on which a request for the
dispute to be referred to the arbitration is received by the
respondent. Therefore, as per section 21 of the principal
Act the arbitral proceedings can be said to have
commenced on the date on which a request for the
dispute to be referred to the arbitration is received by the
respondent. At this stage, it is required to be noted that
by Amendment Act, 2015, Sections 34 and 36 of the
Arbitration Act also came to be amended and the
interference of the Court in challenge to the award has
been restricted and/or narrowed down.
7.The question of applicability of the Arbitration
Amendment Act, 2015 fell for consideration before this
Court in catena of decisions, few of them are as under:
Civil Appeal No. 3461 of 2023
Page 24 of 42
i)In the case of Mayawati Trading v. Pradyut
Debbarman, (2019) 8 SCC 714, it is observed and
held that the position of law that prevails after insertion
of section 11(6A) is that Supreme Court or, as the case
may be, the High Court, while considering any
application under Sections 11(4) to 11(6) is to confine
itself to examination of existence of arbitration
agreement, nothing more, nothing less, and leave all
other preliminary issues to be decided by arbitrator;
ii)In the case of BCCI (supra), while interpreting
section 26 of the Amended Act, 2015, this Court has
observed in paragraphs 37 to 39 as under:
“37. What will be noticed, so far as the first
part is concerned, which states—
“26. Act not to apply to pending
arbitral proceedings. — Nothing
contained in this Act shall apply to
the arbitral proceedings
commenced, in accordance with
the provisions of Section 21 of the
principal Act, before the
commencement of this Act unless
the parties otherwise agree.…”
is that: (1) “the arbitral proceedings” and their
commencement is mentioned in the context of
Section 21 of the principal Act; (2) the
expression used is “to” and not “in relation to”;
Civil Appeal No. 3461 of 2023
Page 25 of 42
and (3) parties may otherwise agree. So far as
the second part of Section 26 is concerned,
namely, the part which reads, “… but this Act
shall apply in relation to arbitral proceedings
commenced on or after the date of
commencement of this Act” makes it clear that
the expression “in relation to” is used; and the
expression “the” arbitral proceedings and “in
accordance with the provisions of Section 21
of the principal Act” is conspicuous by its
absence.
38. That the expression “the arbitral
proceedings” refers to proceedings before an
Arbitral Tribunal is clear from the heading of
Chapter V of the 1996 Act, which reads as
follows:
“Conduct of arbitral proceedings”
The entire chapter consists of Sections 18 to
27 dealing with the conduct of arbitral
proceedings before an Arbitral Tribunal. What
is also important to notice is that these
proceedings alone are referred to, the
expression “to” as contrasted with the
expression “in relation to” making this clear.
Also, the reference to Section 21 of the 1996
Act, which appears in Chapter V, and which
speaks of the arbitral proceedings
commencing on the date on which a request
for a dispute to be referred to arbitration is
received by the respondent, would also make
it clear that it is these proceedings, and no
others, that form the subject-matter of the first
Civil Appeal No. 3461 of 2023
Page 26 of 42
part of Section 26. Also, since the conduct of
arbitral proceedings is largely procedural in
nature, parties may “otherwise agree” and
apply the Amendment Act to arbitral
proceedings that have commenced before the
Amendment Act came into force. [ Section 29-
A of the Amend (sic Amended) Act provides
for time-limits within which an arbitral award is
to be made. In Hitendra Vishnu
Thakur v. State of Maharashtra, (1994) 4 SCC
602 at p. 633 : 1994 SCC (Cri) 1087, this
Court stated: (SCC p. 633, para 26)“26. … (iii)
Every litigant has a vested right in substantive
law but no such right exists in procedural law.
(iv) A procedural statute should not generally
speaking be applied retrospectively where the
result would be to create new disabilities or
obligations or to impose new duties in respect
of transactions already accomplished.(v) A
statute which not only changes the procedure
but also creates new rights and liabilities shall
be construed to be prospective in operation,
unless otherwise provided, either expressly or
by necessary implication.” It is, inter alia,
because timelines for the making of an arbitral
award have been laid down for the first time in
Section 29-A of the Amendment
(sic Amended) Act that parties were given the
option to adopt such timelines which, though
procedural in nature, create new obligations in
respect of a proceeding already begun under
the unamended Act. This is, of course, only
one example of why parties may otherwise
agree and apply the new procedure laid down
by the Amendment Act to arbitral proceedings
that have commenced before it came into
Civil Appeal No. 3461 of 2023
Page 27 of 42
force.] In stark contrast to the first part of
Section 26 is the second part, where the
Amendment Act is made applicable “in relation
to” arbitral proceedings which commenced on
or after the date of commencement of the
Amendment Act. What is conspicuous by its
absence in the second part is any reference to
Section 21 of the 1996 Act. Whereas the first
part refers only to arbitral proceedings before
an Arbitral Tribunal, the second part refers to
court proceedings “in relation to” arbitral
proceedings, and it is the commencement of
these court proceedings that is referred to in
the second part of Section 26, as the words
“in relation to the arbitral proceedings” in the
second part are not controlled by the
application of Section 21 of the 1996 Act.
39. Section 26, therefore, bifurcates
proceedings, as has been stated above, with
a great degree of clarity, into two sets of
proceedings — arbitral proceedings
themselves, and court proceedings in relation
thereto. The reason why the first part of
Section 26 is couched in negative form is only
to state that the Amendment Act will apply
even to arbitral proceedings commenced
before the amendment if parties otherwise
agree. If the first part of Section 26 were
couched in positive language (like the second
part), it would have been necessary to add a
proviso stating that the Amendment Act would
apply even to arbitral proceedings
commenced before the amendment if the
parties agree. In either case, the intention of
the legislature remains the same, the negative
Civil Appeal No. 3461 of 2023
Page 28 of 42
form conveying exactly what could have been
stated positively, with the necessary proviso.
Obviously, “arbitral proceedings” having been
subsumed in the first part cannot re-appear in
the second part, and the expression “in
relation to arbitral proceedings” would,
therefore, apply only to court proceedings
which relate to the arbitral proceedings. The
scheme of Section 26 is thus clear: that the
Amendment Act is prospective in nature, and
will apply to those arbitral proceedings that
are commenced, as understood by Section 21
of the principal Act, on or after the Amendment
Act, and to court proceedings which have
commenced on or after the Amendment Act
came into force.”
Thus, in the case of BCCI (supra), it is observed
and held that the Amendment Act, 2015 is prospective
in nature. However, it is required to be noted that in
the case of BCCI (supra), this Court was considering
the proceedings under sections 34 and 36 of the
Amendment Act, 2015 and to that while interpreting
section 26, it is observed that the Amendment Act is
prospective in nature, and will apply even to those
arbitral proceedings that are commenced, as
understood by section 21 of the principal Act, prior to
the Amendment Act, and to Court proceedings which
have commenced on or after the Amendment Act came
into force.
Civil Appeal No. 3461 of 2023
Page 29 of 42
iii)In the case of Parmar Construction Company
(supra), in relation to application under section 11(6)
of the Act, in a case where notice for arbitration is
received/invoked prior to the Amendment Act, 2015,
but the application under section 11(6) of the Act is
filed post Amendment Act, 2015, it is observed in
paragraphs 25 to 28 as under:
“25. As on 1-1-2016, the 2015 Amendment
Act was gazetted and according to Section
1(2) of the 2015 Amendment Act, it was
deemed to have come into force on 23-10-
2015. Section 21 of the 1996 Act clearly
envisages that unless otherwise agreed by the
parties, the arbitral proceedings in respect of a
dispute shall commence from the date on
which a request for that dispute to be referred
to arbitration is received by the respondent
and the plain reading of Section 26 of the
2015 Amendment Act is self-explicit, leaves no
room for interpretation. Sections 21 and 26 of
the 1996 Act/the 2015 Amendment Act
relevant for the purpose are extracted
hereunder:
“21. Commencement of arbitral
proceedings.—Unless otherwise
agreed by the parties, the arbitral
proceedings in respect of a particular
dispute commence on the date on which
a request for that dispute to be referred
Civil Appeal No. 3461 of 2023
Page 30 of 42
to arbitration is received by the
respondent.
***
26. Act not to apply to pending
arbitral proceedings .—Nothing
contained in this Act shall apply to the
arbitral proceedings commenced, in
accordance with the provisions of
Section 21 of the principal Act, before
the commencement of this Act unless
the parties otherwise agree but this Act
shall apply in relation to arbitral
proceedings commenced on or after the
date of commencement of this Act.”
26. The conjoint reading of Section 21 read
with Section 26 leaves no manner of doubt
that the provisions of the 2015 Amendment
Act shall not apply to such of the arbitral
proceedings which have commenced in terms
of the provisions of Section 21 of the principal
Act unless the parties otherwise agree. The
effect of Section 21 read with Section 26 of
the 2015 Amendment Act has been examined
by this Court in Aravali Power Co. (P)
Ltd. v. Era Infra Engg. Ltd. [Aravali Power Co.
(P) Ltd. v. Era Infra Engg. Ltd., (2017) 15 SCC
32 : (2018) 2 SCC (Civ) 642] and taking note
of Section 26 of the 2015 Amendment Act laid
down the broad principles as under : (SCC p.
53, para 22)
“22. The principles which emerge from
the decisions referred to above are:
Civil Appeal No. 3461 of 2023
Page 31 of 42
22.1. In cases governed by the 1996 Act
as it stood before the Amendment Act
came into force:
22.1.1. The fact that the named
arbitrator is an employee of one of the
parties is not ipso facto a ground to
raise a presumption of bias or partiality
or lack of independence on his part.
There can however be a justifiable
apprehension about the independence
or impartiality of an employee arbitrator,
if such person was the controlling or
dealing authority in regard to the subject
contract or if he is a direct subordinate
to the officer whose decision is the
subject-matter of the dispute.
22.1.2. Unless the cause of action for
invoking jurisdiction under clauses (a),
(b) or (c) of sub-section (6) of Section 11
of the 1996 Act arises, there is no
question of the Chief Justice or his
designate exercising power under sub-
section (6) of Section 11.
22.1.3. The Chief Justice or his
designate while exercising power under
sub-section (6) of Section 11 shall
endeavour to give effect to the
appointment procedure prescribed in the
arbitration clause.
22.1.4. While exercising such power
under sub-section (6) of Section 11, if
Civil Appeal No. 3461 of 2023
Page 32 of 42
circumstances exist, giving rise to
justifiable doubts as to the
independence and impartiality of the
person nominated, or if other
circumstances warrant appointment of
an independent arbitrator by ignoring
the procedure prescribed, the Chief
Justice or his designate may, for
reasons to be recorded ignore the
designated arbitrator and appoint
someone else.
22.2. In cases governed by the 1996 Act
after the Amendment Act has come into
force : If the arbitration clause finds foul
with the amended provisions, the
appointment of the arbitrator even if
apparently in conformity with the
arbitration clause in the agreement,
would be illegal and thus the court
would be within its powers to appoint
such arbitrator(s) as may be
permissible.”
which has been further considered in S.P.
Singla Constructions (P) Ltd. case [S.P.
Singla Constructions (P) Ltd. v. State of H.P.,
(2019) 2 SCC 488 : (2019) 1 SCC (Civ) 748] :
(SCC p. 495, para 16)
“16. Considering the facts and
circumstances of the present case, we
are not inclined to go into the merits of
this contention of the appellant nor
examine the correctness or otherwise of
Civil Appeal No. 3461 of 2023
Page 33 of 42
the above view taken by the Delhi High
Court in Ratna Infrastructure Projects
case [Ratna Infrastructure Projects (P)
Ltd. v. Meja Urja Nigam (P) Ltd., 2017
SCC OnLine Del 7808] ; suffice it to note
that as per Section 26 of the Arbitration
and Conciliation (Amendment) Act,
2015, the provisions of the amended
2015 Act shall not apply to the arbitral
proceedings commenced in accordance
with the provisions of Section 21 of the
principal Act before the commencement
of the Amendment Act unless the parties
otherwise agree. In the facts and
circumstances of the present case, the
proviso in Clause (65) of the general
conditions of the contract cannot be
taken to be the agreement between the
parties so as to apply the provisions of
the amended Act. As per Section 26 of
the Act, the provisions of the 2015
Amendment Act shall apply in relation to
arbitral proceedings commenced on or
after the date of commencement of the
2015 Amendment Act (w.e.f. 23-10-
2015). In the present case, arbitration
proceedings commenced way back in
2013, much prior to coming into force of
the amended Act and therefore,
provisions of the amended Act cannot
be invoked.”
27. We are also of the view that the 2015
Amendment Act which came into force i.e. on
23-10-2015, shall not apply to the arbitral
proceedings which have commenced in
Civil Appeal No. 3461 of 2023
Page 34 of 42
accordance with the provisions of Section 21
of the principal Act, 1996 before the coming
into force of the 2015 Amendment Act, unless
the parties otherwise agree.
28. In the instant case, the request was made
and received by the appellants in the appeal
concerned much before the 2015 Amendment
Act came into force. Whether the application
was pending for appointment of an arbitrator
or in the case of rejection because of no claim
as in the instant case for appointment of an
arbitrator including change/substitution of
arbitrator, would not be of any legal effect for
invoking the provisions of the 2015
Amendment Act in terms of Section 21 of the
principal Act, 1996. In our considered view,
the applications/requests made by the
respondent contractors deserve to be
examined in accordance with the principal Act,
1996 without taking resort to the 2015
Amendment Act which came into force from
23-10-2015.”
In the case of Parmar Construction Company
(supra), this Court heavily relied upon para 16 of the
decision in the case of S.P. Singla Constructions
Private Limited (supra).
iv)Then comes the decision of this Court in the case of
Pradeep Vinod Construction Company (supra). In
the said case, a three Judge Bench of this Court has
Civil Appeal No. 3461 of 2023
Page 35 of 42
followed the decision in the case of Parmar
Construction Company (supra) and in the said
decision it is specifically observed that unamended
1996 Act, i.e., prior to Amendment Act, 2015 for
appointment of arbitrator shall be applicable where the
request to refer the dispute to arbitration was made
before 2015 amendment came into effect.
v)In the case of Ssangyong Engg. & Construction
Co. Ltd. (supra), in which the decision in the case of
BCCI (supra) was followed, it is observed and held
that section 34, as amended, will apply to only section
34 applications that have been made to the Court on or
after 23.10.2015 irrespective of the fact that the
arbitration proceedings may have commenced prior to
that date. (See para 19). However, it is required to be
noted that in the case of Ssangyong Engg. &
Construction Co. Ltd. (supra), this Court has
followed the decision in the case of BCCI (supra) (See
para 17).
8.It is the case on behalf of the appellant that
therefore in the case of BCCI (supra), the decision which
has been subsequently followed in the case of
Ssangyong Engg. & Construction Co. Ltd. (supra) and
Civil Appeal No. 3461 of 2023
Page 36 of 42
other decisions, it has been specifically observed and
held that the Amendment Act, 2015 is prospective in
nature. It is the case on behalf of the appellant that while
taking a contrary view in the cases of Parmar
Constructions Company (supra) and Pardeep Vinod
Construction Company (supra), this Court had not
noticed and/or considered the binding decision of this
Court in the case of BCCI (supra) and therefore the
decisions of this Court in the cases of Parmar
Constructions Company (supra) and Pardeep Vinod
Construction Company (supra) are per incuriam. It is
also the case on behalf of the appellant that so far as the
decision in the case of Aravali Power Company Private
Limited (supra), which was considered by this Court in
the case of Parmar Constructions Company (supra) is
concerned, in the said decision also, there is no reference
to the decision in the case of BCCI (supra). It is also the
case on behalf of the appellant that though in the case of
S.P. Singla Constrictions Private Limited (supra), there
is a reference to the decision in the case of BCCI
(supra), but in the said decision paragraphs 38 and 39
are not referred to and/or considered and except
reproduction of para 37, there is no further discussion in
the case of BCCI (supra). Therefore, it is the specific
Civil Appeal No. 3461 of 2023
Page 37 of 42
case on behalf of the appellant that as the decisions in
the cases of Parmar Constructions Company (supra)
and Pardeep Vinod Construction Company (supra) are
per incuriam, we must hold that in the present case
Amendment Act, 2015 shall be applicable and therefore
the High Court has committed a very serious error in
opining on accord and satisfaction which is not
permissible as per the Amendment Act, 2015, i.e., Section
11(6A).
9.Submission on behalf of the appellant, as above,
seems to be attractive but has no substance. This Court
is required to consider whether the decision in the cases
of Parmar Constructions Company (supra) and
Pardeep Vinod Construction Company (supra) can be
said to be per incuriam as the decision of this Court in the
case of BCCI (supra) has not been considered by this
Court in the said decisions. However, on a fair reading of
the decisions in the case of BCCI (supra) and the
observations made in paragraphs 37 to 39 and on a fair
reading of decisions in the cases of Parmar
Constructions Company (supra) and Pardeep Vinod
Construction Company (supra), we are of the opinion
that this Court in the case of BCCI (supra) has held that
the Arbitration Amendment Act, 2015 is prospective in
Civil Appeal No. 3461 of 2023
Page 38 of 42
nature insofar as the proceedings under sections 34 & 36
are concerned. It is required to be noted that in the case
of BCCI (supra), application under section 11(6) was not
the subject matter and there was no issue before the
Court that even in a case where the notice invoking the
arbitration is issued prior to the Amendment Act, 2015, but
the application under section 11(6) is filed post
Amendment Act, 2015, what will be the position and
whether the old Act will be applicable or the amended Act.
On the other hand, the decisions in the case of Parmar
Constructions Company (supra) is directly on the point,
namely, the application under section 11(6) of the Act. In
the case of Parmar Constructions Company (supra), it
is specifically observed and held that in a case where
notice invoking arbitration is issued prior to Amendment
Act, 2015 and the application under section 11(6) is filed
post amendment, as per section 21 of the principal Act,
the date of issuance of the notice invoking arbitration shall
be considered as commencement of the arbitration
proceedings and therefore as per section 26 of the
Amendment Act, 2015, the Amended Act, 2015 shall not
be applicable and the parties shall be governed by the
pre-amendment Act, 2015.
Civil Appeal No. 3461 of 2023
Page 39 of 42
9.1The submission on behalf of the appellant, as
above, cannot be accepted for the simple reason that this
Court in the case of BCCI (supra) was considering the
court proceedings under sections 34 and 36. To that, this
Court interpreted section 26 in paragraphs 37 to 39,
reproduced hereinabove, and held that the Amendment
Act is prospective in nature, and will apply to those
arbitral proceedings that are commenced as understood
by section 21 of the principal Act, on or after the
Amendment Act, 2015 and to court proceedings which
have commenced on or after the Amendment Act, 2015
came into force. Therefore, any observations made by
this Court in paragraphs 37 to 39 in the case of BCCI
(supra) shall be understood and construed with respect
to court proceedings which have commenced on or after
the Amendment Act coming into force, namely, the
proceedings under sections 34 & 36. Therefore, the
decisions of this Court in the cases of Parmar
Constructions Company (supra) and Pardeep Vinod
Construction Company (supra) cannot be said to be
per incuriam and/or in conflict with the decision of this
Court in the case of BCCI (supra). As observed
hereinabove, in the case of Parmar Constructions
Company (supra) which is directly on the point, it is
Civil Appeal No. 3461 of 2023
Page 40 of 42
specifically observed and held that the 2015 Amendment
Act, which came into force w.e.f. 23.10.2015 shall not
apply to the arbitral proceedings which are commenced in
accordance with the provisions of section 21 of the
principal Act, 1996 before the coming into force the 2015
Amendment Act, unless parties otherwise agree (para
27). Similar view has been expressed in the case of S.P.
Singla Constructions Private Limited (supra).
10.Applying the law laid down by this Court in the
cases of Parmar Constructions Company (supra) and
Pardeep Vinod Construction Company (supra) and
S.P. Singla Constructions Private Limited (supra) to
the facts of the case on hand as in the present case the
notice invoking arbitration clause was issued on
26.12.2013, i.e., much prior to the Amendment Act, 2015
and the application under Section 11(6) of the Act has
been preferred/filed on 27.04.2016, i.e., much after the
amendment Act came into force, the law prevailing prior
to the Amendment Act, 2015 shall be applicable and
therefore the High Court has rightly entered into the
question of accord and satisfaction and has rightly
dismissed the application under section 11(6) of the Act
applying the principal Act, namely, the Arbitration and
Conciliation Act, 1996, prevailing prior to the Amendment
Civil Appeal No. 3461 of 2023
Page 41 of 42
Act, 2015. 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 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.
11.In view of the above and for the reasons stated
above, the present appeal fails and the same deserves to
be dismissed and is accordingly dismissed. However, in
the facts and circumstances of the case, there shall be no
order as to costs.
………………………………..J.
[M.R. SHAH]
……………………………….J.
[C.T. RAVIKUMAR]
NEW DELHI;
MAY 09, 2023.
Civil Appeal No. 3461 of 2023
Page 42 of 42
Legal Notes
Add a Note....