Supreme Court Allows Appeal in Arbitration Appointment Case — Issue of Accord and Satisfaction to be Decided by Arbitrator Under Section 11(6A) of Arbitration Act, 1996. The Court held that the High Court erred in refusing appointment on ground of full and final settlement, as the limited jurisdiction under Section 11(6A) only permits examination of existence of arbitration agreement.

Admin

2026-05-18 13:14:41

Font size:

Case Note & Summary

The appellant, M/s. Shree Vishnu Constructions, entered into an agreement with the respondents (Military Engineering Service) on 22.07.2010 for construction work. The appellant raised a revised final bill on 10.07.2012, and payment was made on 29.04.2013, after which the appellant issued a 'no further claim' certificate. Subsequently, the appellant sent a notice dated 20.12.2013 invoking the arbitration clause and filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the High Court on 27.04.2016 seeking appointment of an arbitrator. The respondents opposed the application on the ground of accord and satisfaction, arguing that the entire amount had been paid and the appellant had issued a no further claim certificate. The appellant contended that in view of Section 11(6A) inserted by the Amendment Act, 2015, the court's jurisdiction was limited to examining the existence of an arbitration agreement, and the issue of accord and satisfaction should be left to the arbitrator. The High Court dismissed the application, refusing to appoint an arbitrator. The Supreme Court allowed the appeal, holding that under Section 11(6A), the court's role is confined to checking the existence of an arbitration agreement, and the question of accord and satisfaction is a matter for the arbitrator to decide. The Court set aside the High Court's order and appointed an arbitrator to adjudicate the disputes.

Headnote

A) Arbitration Law - Appointment of Arbitrator - Section 11(6) and Section 11(6A) of Arbitration and Conciliation Act, 1996 - Scope of Court's Jurisdiction - The issue was whether the High Court could refuse appointment of arbitrator on ground of accord and satisfaction. The Supreme Court held that under Section 11(6A), the court's jurisdiction is limited to examining the existence of an arbitration agreement, and the issue of accord and satisfaction is to be decided by the arbitrator. (Paras 1-42)

B) Arbitration Law - Accord and Satisfaction - Full and Final Settlement - No Further Claim Certificate - The appellant had accepted payment and issued 'no further claim' certificate. The Court held that such issues of discharge by accord and satisfaction are matters for the arbitrator to decide, not for the court at the stage of appointment. (Paras 2-42)

Issue of Consideration

Whether the High Court, while deciding an application under Section 11(6) of the Arbitration and Conciliation Act, 1996, can refuse to appoint an arbitrator on the ground of accord and satisfaction, in light of Section 11(6A) inserted by the Amendment Act, 2015.

Final Decision

Appeal allowed. Impugned judgment of High Court set aside. An arbitrator appointed to adjudicate the disputes between the parties.

Law Points

Section 11(6A) of Arbitration and Conciliation Act
1996 limits court's jurisdiction to existence of arbitration agreement only
issue of accord and satisfaction to be decided by arbitrator
Amendment Act 2015 applies retrospectively to pending applications

Case Details

2023 LawText (SC) (5) 19

Civil Appeal No. 3461 of 2023 (@ SLP (C) No. 5306 of 2022)

2023-05-05

M.R. Shah

M/s. Shree Vishnu Constructions

The Engineer in Chief Military Engineering Service & Ors.

Nature of Litigation

Civil appeal against High Court order dismissing application under Section 11 of Arbitration Act, 1996 for appointment of arbitrator.

Remedy Sought

Appellant sought appointment of an arbitrator to adjudicate disputes arising from a construction contract.

Filing Reason

High Court refused to appoint arbitrator on ground that appellant had accepted payment in full and final settlement and issued 'no further claim' certificate.

Previous Decisions

High Court dismissed the application under Section 11(6) of the Arbitration Act, 1996.

Issues

Whether the High Court can refuse appointment of arbitrator on ground of accord and satisfaction under Section 11(6A) of the Arbitration Act, 1996.

Submissions/Arguments

Appellant argued that under Section 11(6A), court's jurisdiction is limited to existence of arbitration agreement; issue of accord and satisfaction should be left to arbitrator. Respondents argued that entire amount was paid and appellant issued 'no further claim' certificate, so dispute is not referable to arbitration.

Ratio Decidendi

Under Section 11(6A) of the Arbitration and Conciliation Act, 1996, the court's jurisdiction while appointing an arbitrator is limited to examining the existence of an arbitration agreement. The issue of accord and satisfaction or full and final settlement is a matter for the arbitrator to decide, not the court at the stage of appointment.

Judgment Excerpts

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 and has 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.

Procedural History

Appellant filed application under Section 11(6) of Arbitration Act, 1996 before High Court on 27.04.2016. High Court dismissed application. Appellant appealed to Supreme Court.