Supreme Court: Arbitration & Conciliation Act, 1996, Will Apply If notice is Issued Prior to 2015 Amendment

Supreme Court: Arbitration & Conciliation Act, 1996, Will Apply If notice is Issued Prior to 2015 Amendment

The Supreme Court by its division judges bench comprising of Justices M.R. Shah and C.T. Ravikumar has observed that if 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.

In the present case, the appellants- M/s. Shree Vishnu Constructions and respondents- The Engineer in Chief Military Engineering Service and others entered into an agreement for additions/alterations to Senior Non-Commissioned Officers mess and repairs/renewals to floors in tech area at Air Force Academy, Hyderabad.

The Appellant had raised a revised final bill for the said work and issued “no further claim” certificate upon receiving payment. However, later, the Appellant preferred an application under Section 11(6) of the Arbitration and Conciliation Act, 1996.

The High Court after considering the submissions, dismissed the arbitration petition and refused to appoint the arbitrator / arbitral tribunal and held that there was a full and final settlement of the payment as per the final bill 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.

Aggrieved by the same appellant filed an appeal.

The short question which was posed for the consideration of the Court was, in relation to the arbitration proceedings, in a case where the notice invoking arbitration was issued prior to the Amendment Act, 2015, the old Act shall be applicable (pre-amendment 2015) or the new Act?

The Court at the outset 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.

In this regard, it observed, “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.”

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, opined the bench.

Thereafter, the Court relied on decision passed in the case of Union of India vs. Parmar Constructions Company (2019), wherein it was specifically observed 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.]

The Court reiterated the view that the Arbitration and Conciliation (Amendment) Act, 2015, which came into force with effect from 23 October, 2015, shall not apply to the arbitral proceedings which are commenced in accordance with the provisions of section 21 of the Arbitration and Conciliation Act, 1996 (Principal Act), before coming into force of the 2015 Amendment Act, unless parties otherwise agree.

The bench pointed out that, in the present case the notice invoking arbitration clause was issued on 26 December, 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 April, 2016, i.e., much after the amendment Act came into force, the law prevailing prior to the Amendment Act, 2015 shall be applicable.

Accordingly, the Court dismissed the appeal while agreeing with the High Court that had 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 (Principal Act), prevailing prior to the Amendment Act, 2015.