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, 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:-2.1 That the appellant herein and the respondents entered into an agreement vide agreement dated 22.07.2010 for additions/alterations to Senior NonCommissioned 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. 2.2 The 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 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. 2.3 It 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 the Arbitration Act, has been commenced prior to the Amendment Act, 2015. 2.4 By 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.
3.1 it 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,
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.
3.2 Shri 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.
3.4 It 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
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
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
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
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.”
3.5 It 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.
3.6 It 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,
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).
3.7 It 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
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.
3.8 It 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.
3.9 It 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,
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).
3.10 It 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
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.”
3.11 It 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.
3.12 It 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).
3.13 In light of this brief conspectus of the aforesaid
decisions, it is submitted that, the decision in BCCI
(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).
3.14 It is therefore, the submission on behalf of the
appellant that the decision of this Court in the case of
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.
4.1 It 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.
4.2 It 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.
4.3 Now, 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
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).
4.4 It 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
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.
4.5 It 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).
4.6 It 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
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.
4.7 It 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).
4.8 It 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
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
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 :
4.9 It 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.
4.10 Making 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 subsection (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. 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.” 6.1 Section 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 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:
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”;
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
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 29A 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 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 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.
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 23-102015. 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
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:
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
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
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
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
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 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 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 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 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 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 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. 9.1 The 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 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 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 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. [M.R. SHAH] [C.T. RAVIKUMAR] NEW DELHI; MAY 09, 2023.