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Arbitration & Commercial LawSupreme Court of India

M/s. Shree Vishnu Constructions vs The Engineer in Chief, Military Engineering Service & Ors.

Civil Appeal · 2023 INSC 508Decided 9 May 2023
Civil Appeal No. 3461 of 2023
M.R. Shah · C.T. Ravikumar

Background

Shree Vishnu Constructions had a 2010 construction contract with the Military Engineering Service. After the final bill was paid in 2013 and the contractor issued a "no further claim" certificate, it later sent a notice in December 2013 invoking the contract's arbitration clause anyway. When the government did not act, the contractor applied to the Telangana High Court in 2016 to have an arbitrator appointed. The High Court refused, holding that because full and final payment had already been accepted with a no-claim certificate ("accord and satisfaction"), there was no live dispute to arbitrate, and it examined this question in detail rather than confining itself only to checking whether an arbitration agreement existed. The contractor argued this was wrong because, under the 2015 Amendment Act (which restricts courts at the Section 11 stage to only checking whether an arbitration clause exists, leaving all other issues to the arbitrator), the High Court should not have gone into "accord and satisfaction" at all.

Decision Breakdown

The key question was whether the pre-2015 law or the amended 2015 law applied, given that the arbitration notice was sent in 2013 (before the amendment) but the court application was filed in 2016 (after it). The contractor relied on the Supreme Court's BCCI vs Kochi Cricket ruling, which held the 2015 Amendment applies to all court proceedings begun after the amendment date, regardless of when the underlying arbitration was invoked. The Supreme Court held that BCCI's reasoning was specifically about Sections 34 and 36 (challenging and enforcing awards), not Section 11 (appointing arbitrators), and that the applicable, more specific precedents for Section 11 applications (Parmar Construction and Pradeep Vinod Construction) correctly held that when the arbitration notice pre-dates the 2015 Amendment, the case is governed by the old, pre-amendment law, even if the Section 11 application itself is filed later. Applying the old law, the High Court was right to examine and decide the "accord and satisfaction" question itself, and its finding that the dispute had already been finally settled was upheld. The appeal was dismissed.

Lesson Learnt

In arbitration disputes, the date you first send your notice invoking arbitration (not the date you later go to court asking for an arbitrator to be appointed) can determine which version of the arbitration law applies, so parties should be aware that older disputes may still be governed by rules that give courts wider power to screen out settled or non-existent disputes before appointing an arbitrator.

M/s. Shree Vishnu Constructions vs The Engineer in Chief, Military Engineering Service & Ors. – Legal Case Shots | LegalAware