M/S. Shree Vishnu Constructions Vs. The Engineer in Chief Military Engineering Services & Ors.

M/S. Shree Vishnu Constructions Vs. The Engineer in Chief Military Engineering Services & Ors.

By – M. Yesaswini Sai Nikitha (Dr.B.R.Ambedkar College of Law, Andhra University)

ABSTRACT

               In the present case, both the appellant and the respondent entered into an agreement regarding the renovation of floors and modifications to be made to the mess in the Tech area, at Air Force Academy, Hyderabad. After finishing the work, the appellant furnished a final bill to the respondent. Later, the respondent settled the full bill in one year, and consequently, the appellant furnished a “no further claim certificate” to confirm that transaction. Later, the appellant served a notice to the respondent, invoking the arbitration clause mentioned within the agreement.

                      The appellant filed an application before the High Court of Telangana to appoint an arbitrator under Sec.11(6) of the Arbitration and Conciliation Act, 1996 (herein after referred to as the Principal Act). But the High Court declined to nominate an arbitrator,  held that the provisions of the Principal Act shall be applicable to the arbitration proceedings under Sec.21 and Sec.26, commenced before the Arbitration and Conciliation (Amendment) Act, 2015, (herein after referred to as the Amendment Act).

                        So, the appellant approached the Supreme Court under appellate jurisdiction. The appellant pleaded that the above provisions of the Amendment Act, 2015 shall be applied to the present case and requested to nominate an arbitrator. The Supreme Court held that the provisions of the Principal Act shall be applied to the current matter. The Apex Court upheld the High Court decision in the present matter.

 Keywords: Appointment of arbitrator, Arbitral proceedings, Arbitration and Conciliation Act, The Supreme Court, Civil Appellate Jurisdiction, Secs.11(6),21,26.

CASE DETAILS

Judgement Cause TitleM/S Shree Vishnu Constructions vs. The Engineer in Chief Military Engineering Services & Ors.
Case NumberCIVIL APPEAL NO. 3461 OF 2023
Judgement Date09 May, 2023
CourtThe Supreme Court of India
QuorumC.T.RAVIKUMAR(J), M.R.SHAH(J)
AuthorM.R.SHAH
Citation2023 SCC Online SC 600
Legal Provisions InvolvedThe Arbitration and Conciliation Act,1996-Sec.11(6),Sec.21 The Arbitration and Conciliation (Amendment) Act,2015-Sec.11(6-A), Sec.26

INTRODUCTION AND BACKGROUND OF JUDGEMENT

In this case, Arbitration is the chief subject matter. In India, the process of arbitration is defined and regulated through the legislation of the Arbitration and Conciliation Act, 1996. Later the Arbitration and Conciliation (Amendment) Act, 2015 was enacted by making some changes. The method of Arbitration is defined under Sec.2(1)(a) of the Principal Act as “arbitration means any arbitration whether or not administered by permanent arbitral  institution”[1]

The arbitration agreement is defined under Sec.7 of the Principal Act. The Supreme Court and the High Courts are empowered to designate, arbitral institutions, from time to time as provided in,Sec.11(3-A) of the aforesaid act and it is also provided that these Courts also have the competent jurisdiction to appoint the arbitrators under Sec.11 of the Principal Act . In case of any dispute, any of the parties by invoking The arbitration clause in the agreement,could approach the courts under the appropriate jurisdiction to get an arbitrator appointed under Sec.21 and 26 of the aforesaid Act.

In the current matter, the petitioner had requested the High Court to appoint an arbitrator but the Court had dismissed the petition as the payment of the bill was made by the respondents in the due time and on the ground of accord and satisfaction. Then the petitioner appealed to the Supreme Court for the appointment of the arbitrator under Secs.11(6),21, and 26 of the Principal Act, and Sec.11(6-A) of the Amendment Act. The major issue is whether the  provisions of  The Principal Act or Amendment Act should be applied to this present case.

FACTS OF THE CASE

In this case, the factual matrix, is that the appellant and the respondent entered into a formal  agreement on July 22nd , 2010 for the renovation to floors and modifications to senior non-commissioned officers mess in the tech area at Air Force Academy, Hyderabad. After completion of the work, the petitioner furnished a final bill on July 10th, 2012, the payment of that bill was paid to the appellant on April 29th, 2013; consequently, the appellant issued a “no further claim certificate.”

Further, the petitioner sent a notice invoking the arbitration clause, to the respondent on December 20th, 2013 and, Subsequently he filed an application to nominate an arbitrator under Sec.11(6) of the Principal Act, before the Telangana High Court on April 27th,2016. The Court dismissed the application on the ground of “accord and satisfaction” and as the payment of the bill was already made to the appellant on 29th April ,2013. The Court denied to nominate an arbitrator under Sec.26 read with Sec.21 of the Principal Act and held that the provisions of the aforesaid Act shall be applied to the present matter.

          In this context, the petitioner had appealed the Supreme Court and requested to nominate an arbitrator in the current case under the provisions of Sec.11(6-A), Sec.26 read with Sec.21 of the Amendment Act. The challenged order is the subject matter of the present appeal. 

LEGAL ISSUES RAISED

(1)Whether Sec.11(6-A) of  the Amendment Act,2015 can be applied to the judicial and arbitral proceedings initiated before the amendment ?

(2)Whether the provisions of the Principal Act or the Amendment Act can be applied for the arbitral proceedings initiated before the amendment?

(3)How the Sec.26 of the Amendment act affect the proceedings initiated after the    amendment?

PETITIONER/ APPELLANT’S ARGUMENTS

  • It was submitted by the council for Petitioner, that in the view of the Amendment Act, through which Sec.11(6A) is incorporated, while deciding the application under Sec.11(6), the court will have very finite jurisdiction and should consider only that the agreement contains an arbitration clause or not, without any further inquiry. The learned counsel for the petitioner pleaded that the provisions of the Amendment Act are to be applied in the present matter.
  • The learned counsel for the appellant, Mr.K.Parameshwar, has strenuously submitted that the question of applicability of Sec.11 (6A) and other amended provisions to the  proceedings initiated after the amendment are covered in the case[1],  in which the Supreme Court ruled that the provisions of the Amendment Act shall be applied to the arbitral matters initiated before the amendment and that the provisions of this act can be applied prospectively. In the above case, the court also stated that the Sec.26 of the Act[2] can be divided into two parts. The first part is related to the arbitral proceedings before the arbitrator and the second part applies to the judicial proceedings concerning arbitral matters. And the commencement date of these proceedings cannot be controlled by the application of Sec.21of the Principal Act. In this case, it was also held that Sec.21 of the Act[3] forms the subject matter of the first part of Sec.26 and pleaded to consider the findings of this case.
  • It was submitted that by the council for appellant that in the case[4] without observing the decision in the BCCI case, the court ruled that the date when the request for the appointment of an arbitrator was made is considered as the relevant date for applying Sec.26 of the Amendment Act. This decision was considered while deciding the case[5],not following the judgement of the case[6] as the context is related to Sec.11 and different from the context of the BCCI case.
  • The learned counsel for the appellant contended that in the case[7] the court by following the judgement of the BCCI case highlighted that the provisions of the Amendment Act would be applied to court proceedings arising out of arbitral matters, irrelevant whether commenced, before or after the amendment. It is further submitted that the findings of the case[8] were considered in deciding the subsequent cases of case[9] and case[10]. The counsel for the appellantrequested to allow the current appeal considering the findings of the BCCI Case.

RESPONDENT’S ARGUMENTS

  • The learned counsel for Respondent contended that as per Sec.26 read with Sec.21 of the Act[1], the Amendment Act shall not apply to the arbitral proceedings as per Sec.21, if the commencement occurs before the amendment.
  • It was submitted by the counsel for the Respondent that the notice invoking the arbitration clause was furnished by the appellant much before, the Amendment Act and the application was filed under Sec.11(6) of the Principal Act, much after the amendment. It was further contended that the provisions of the Principal Act shall be applied to the present appeal, as under Sec.26 of the Amendment Act, the arbitral proceedings can be said to have initiated much before the amendment.
  • The learned counsel for the Respondent had contended that the BCCI Case and the subsequent cases which followed the judgement of the above case are related to the context of matters under Sec.34 and Sec.36 of the Principal Act and related to the court proceedings under Sec.26 of the Amendment Act, which is entirely distinct from the subject matter of the present appeal.
  • It was further submitted by the counsel for the Respondent, in the case[2], the court ruled that the provisions of the Principal Act shall be applied when the issue was related to the application under Sec.11(6) of the aforesaid Act, where the notice was issued before the Amendment. This decision was followed in the subsequent case of Pradeep Vinod Construction Company. In the above case, the findings of case[3] were considered. In reliance on the above judgements, the counsel for the respondent requested to dismiss the present appeal.

RELATED LEGAL PROVISIONS

  • The Arbitration and Conciliation Act,1996
  • Sec. 11(6)- Appointment of Arbitrators-“Where, under an appointment procedure agreed upon by the parties.

(a)a party fails to act as required under that procedure; or
(b)the parties, or the two appointed arbitrators, fail to reach an  agreement expected of them under that procedure; or
(c)a person, including an institution, fails to perform any function entrusted to him or it under that procedure, a [the appointment shall be made, on an application of the party, by the arbitral institution designated by the Supreme Court, in case of international commercial arbitration, or by the High Court, in case of arbitrations other than international commercial arbitration, as the case may be] [Substituted by Act No. 33 of 2019, dated 9.8.2019.] to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.”[1]

Sec.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.”[2]

The Arbitration and Conciliation (Amendment) Act,2015

  • Sec.11(6-A)- “(6A)[ ***] [Omitted ‘(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’ by Act No. 33 of 2019, dated 9.8.2019.]”[3]
  • Sec.26-Expert appointed by arbitral tribunal-

“(1)Unless otherwise agreed by the parties, the arbitral tribunal may

(a)appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and
(b)require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection (2)Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. (3)Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.”[4]

JUDGEMENT

RATIO DECIDENDI

The Honourable Supreme Court first of all considered the issue of applicability         of the Amendment Act, 2015 provisions to the present matter.

                         In the case[1],the court observed that whether the Supreme Court or High Court while considering any application under Secs.11(4) to 11(6), is  to confine itself to observe only whether the arbitration clause existed or not, nothing more, nothing less, leaving other issues to the arbitrator. The court in the BCCI Case, while interpreting Sec.26 of the Amendment Act, observed that the Amendment Act is prospective in nature and shall be applied to arbitral proceedings whether commenced on or after the Amendment Act,2015.

                           The Supreme Court then referred to Parmar Construction Company Case, and analysed that when Sec.21 of the Principal Act read with Sec.26 of the Amendment Act, the provisions of the Amendment Act shall not apply to the arbitral proceedings initiated under Sec.21 of the principal Act  unless the parties otherwise agree[2], and further observed that without having recourse to the Amendment Act, the applications made under Sec.11(6) of the principle Act deserved to be examined with reference to the aforesaid act .

                              The Supreme Court in this present case didn’t consider the case[3] in the view that the context of that case is related to court matters under Secs.34 and 36 which is irrelevant to the current case. The Court also ruled that the decisions of the Parmar Construction  Company Case andPradeep Vinod Construction  Case cannot be said to be inconsistentwith the decision of BCCI Case.

                             The Supreme Court considered the decisions of the Parmar Construction  Company case, Pradeep Vinod Construction Company case and S.P. Singla Constructions Private Limited case to facts and findings in the present case, and held that “the law  prevailing prior to the Amendment Act,2015 shall be applicable and the High Court has rightly entered into the question of “accord and satisfaction” and has rightly dismissed the application under Sec.11(6) of the Arbitration and Conciliation Act,1996”[4]. The Court held that the provisions of the Principal Act shall be applicable in a case where the notice invoking arbitration clause is furnished before the amendment and the application under Sec.11 and Sec.21 of the aforesaid Act for the appointment of an arbitrator is filed after the amendment. Consequently, the Supreme Court had dismissed the appeal and upheld the judgement given by High Court as the issues on the ground of accord and satisfaction, is not necessary to be sent for arbitration.

CONCLUSION& COMMENTS

In this case, the main issues dealt with the applicability of the provisions of the Principal Act and Amendment Act. The Supreme Court held that the provisions of the Amendment Act cannot be applied to a dispute, when the arbitration clause is invoked by one of the parties, and the notice is furnished before the Amendment , under Sec.11(6) and Sec.21 of the Principal Act. The date when the notice is issued is considered as the commencement date of the arbitral proceedings under Sec.26 of the Principal Act.

In my opinion, the Apex Court correctly upheld the judgement given by the High Court and dismissed the current appeal.

REFERENCES

  •  Important Cases Referred
  • Board of Control for Cricket in India (BCCI) Vs. Kochi Cricket Private Limited & ors.,(2018) 6 SCC 287
  • Union of India Vs. Parmar Construction Company (2019),15 SCC 682
  • Union of India Vs. Pratap Vinod Construction Company (2020),2 SCC 464
  • Government of India Vs. Vedanta Limited , (2020) 10 SCC 1
  • Patel Engineering Limited Vs. North Eastern Electric Power Corporation Limited ,(2020) 7 SCC 167
  • Ssangyong Engineering & Construction Company Limited Vs. National Highways Authority of India, (NHAI),(2019) 15 SCC 131
  • S.P.Singla Constructions Private Limited vs. State of Himachal Pradesh &Anr., (2019) 2 SCC 488
  • Mayawati Trading Vs. Pradyut Debbarman, (2019) 8 SCC 714
  • Important Statutes Referred
  • The Arbitration and Conciliation Act, 1996.
  • The Arbitration and Conciliation (Amendment) Act,2015

[1] Mayawati Trading Vs. Pradyut Debbarman (2019) 8 SCC 714

[2] (2019) 15 SCC 682 (See para 26)

[3] BCCI Case

[4] (2023) SCC Online SC 600

[1] sec.11(6). (n.d.). indiankannon. Retrieved February 27, 2024, from https://indiankanoon.org/doc/605764/

[2] sec.21 of arbitration and conciliation act,1996. (n.d.). India Code.

[3] sec.11(6-A). (n.d.). indiankannon. Retrieved February 27, 2024, from https://indiankanoon.org/doc/1841764/

[4] sec.26. (n.d.). indiankannon. Retrieved February 27, 2024, from https://indiankanoon.org/doc/1752162/

[1] The Arbitration and Conciliation (Amendment) Act,2015 (Act 3 of 2016)

[2] Parmar Construction Company Case

[3]S.P.Singla Constructions Private Limited Vs. State of Himachal Pradesh & Anr. (2019) 2 SCC 488

[1] Board of Control for Cricket in India (BCCI) Vs. Kochi Cricket Private Limited & Ors.(2018) 6 SCC 287 (see paras 37 and 39)

[2] The Arbitration and Conciliation (Amendment) Act,2015(Act 3 of 2016)

[3] The Arbitration and Conciliation Act,1996(Act 26 of 1996)

[4] Union of India Vs. Parmar Construction Company (2019) 15 SCC 682 (see paras 25-27)

[5] Union of India Vs. Pratap Vinod Construction Company (2020) 2 SCC 464

[6] BCCI Case

[7] Government of India Vs. Vedanta Limited (2020)10 SCC 1

[8] BCCI Case

[9] Patel Engineering Limited Vs. North Eastern Electric Power Corporation Limited (2020) 7 SCC 167 (See  para15)

[10] Ssangyong Engineering and Construction Company Limited Vs. National Highways Authority of India (NHAI) (2019) 15 SCC 131

[1] sec.2(1)(a). (n.d.). indiankannon. Retrieved February 27, 2024, from https://indiankanoon.org/doc/1804257/

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