India: Application Of Amended Provision Under The 2015 Amended Act, Impact Of No Dues Certificate And Exhaustion Of Remedies Under Arbitration Agreement

Last Updated: 2 May 2019
Article by AMLEGALS  

Union Of India v. Parmar Construction Company

In this case, the respondents were registered contractors with the railway establishment and undertaking work contracts of various kinds.

They raised a demand for escalation cost and the interest accrued thereon because the date of the completion of the project was delayed as alleged due to breach of obligations by the appellants and the scheduled date of completion had to be extended.

There also existed an impact of the rise in the prices of the raw material and the project became impossible to be completed by the respondent contractors.

Hence, a request was made to the appellants to either pay the enhanced escalation price otherwise the respondent contractors would not be in a position to conclude the contract.

On the acceptance for payment of the escalation costs, respondent contractor completed the project work and raised final bills in the prescribed predetermined format which also included no dues certificate.

Subsequently, the Respondent disputed the payment of the escalated cost, and in terms of the clause of arbitration in the agreement, they sent a notice for arbitration invoking clause 64(3) of GCC.

The Appellant declined the same taking shadow of the fact that no dues certificate had already been furnished by the Respondent.

This led the respondent contractor to approach the High Court by filing an application under Section 11(6) of the Act.

The request for referring the dispute to arbitration was received by the appellants much prior to the enforcement of the Amendment Act, 2015 which came into force, w.e.f. 23rd October, 2015.


The issues that came for consideration before the Hon'ble Apex Court were:

  1. Whether the arbitration agreement stands discharged on acceptance of the amount and signing no claim/discharge certificate?
  2. Whether the High Court was justified in invoking amended provision under the 2015 Amended Act?
  3. Whether it was permissible for the High Court under Section 11(6) of the Arbitration Act, 1996 (prior to the Amendment Act, 2015) to appoint third party or an independent Arbitrator when the parties have mutually agreed for the procedure vis à vis the authority to appoint the designated arbitrator?


First Issue

To conclusively determine the first issue, the Court referred to Clause 43(2) of the Contracts signed by the Respondents, where they have to furnish a "No Claims Certificate" in advance of the final bills being examined by the Railway Authorities.

The Court also took note of all the cases that the Appellant cited and categorized them into two categories:

  1. Full and Final Settlement
  2. No Claims Certificate as a condition precedent.

The Court stated that the cases falling under Category 2 shall apply to this case and disputes in such cases have been held arbitrable.

The Court in their concluding remarks to the issue held that the arbitral disputes subsisted even when a no claims certificate was provided as the respondents were asked to furnish the same in advance and them being small scale contractors did not have any bargaining power against the appellants.

The Court thus finally held that the Contract was not discharged merely by furnishing a "No Claims Certificate" and all the contentions of the Respondent were opened to be examined in arbitral proceedings.


To determine the second issue in question, the Court examined Section 1(2) of the Amendment Act, 2015 and Section 21 and Section 26 of the Principal Act (pre-amendment act).

The Court was of the view that the Amendment Act, 2015 has come into force on 23rd October 2015, and hence shall not apply to the current proceedings since the appeal in the Court with regards to appointment of arbitrator was pending before the concerned date of 23.10.2015. 

Hence, the Court opined that the Principal Act, before the amendments of 2015 will be made applicable for all applications and requests arising out of this dispute.


To conclusively determine the third issue, the Court examined Section 11(6) of the Principal Act (pre-amended Act) in detail.

After detailed analysis of the above-mentioned section and relying on many case-laws cited by the Appellant, the Court came to the conclusion that emphasis has been given by the Court in all relied cases to resort to the agreed terms and conditions by both the parties. Although the name in the arbitration agreement is not mandatory but emphasis should always be on the terms of the arbitration agreement to be adhered to.

The Court thus quashed and set aside the High Court's orders of appointment of an independent arbitrator and asked the Appellants to appoint arbitrator according to the agreed clauses of the Contract.


In the present case the Court held that a No Claims Certificate asked to be provided in advance will not subsist the claims to be non-arbitrable. The Respondent can argue for all their contentions against the Appellant in an arbitration.

The Court also held that the applicability of the Amended Act of 2015 should not be taken into consideration. Providing for the same, the court stated: "In the instant case, the request was made and received by the appellants in the concerned appeal much before the Amendment Act, 2015 came into force.

In our considered view, the applications/requests made by the respondent contractors deserves to be examined in accordance with the principal Act, 1996 without taking resort to the Amendment Act, 2015 which came into force from 23rd October, 2015."

The Court further held that emphasis is supposed to be given to the procedure laid down under the Terms and Conditions of the Contract, agreed by both the parties.

Emphasizing on the same, the Court held the following:

"44. To conclude, in our considered view, the High Court was not justified in appointing an independent arbitrator without resorting to the procedure for appointment of an arbitrator which has been prescribed under clause 64(3) of the contract under the inbuilt mechanism as agreed by the parties.

45. Consequently, the orders passed by the High Court are quashed and set aside."


The Court heavily relied on the case of National Insurance Company Limited Vs. Boghara Polyfab Private Limited [2009(1) SCC 267] where the Court in that case laid down an illustrative list of instances that might be beneficial for authorities in taking a decision as to whether in a given situation where no claim/discharge voucher has been furnished what will be its legal effect and whether any arbitral dispute subsists to be examined by the arbitrator in such a situation.

Para 52(iii) of the above – mentioned case was found to be absolutely relevant in our case by the Court. The para quoted under the judgment was as under:

"(iii) A contractor executes the work and claims payment of say rupees ten lakhs as due in terms of the contract. The employer admits the claim only for rupees six lakhs and informs the contractor either in writing or orally that unless the contractor gives a discharge voucher in the prescribed format acknowledging receipt of rupees six lakhs in full and final satisfaction of the contract, payment of the admitted amount will not be released. The contractor who is hard-pressed for funds and keen to get the admitted amount released, signs on the dotted line either in a printed form or otherwise, stating that the amount is received in full and final settlement. In such a case, the discharge is under economic duress on account of coercion employed by the employer. Obviously, the discharge voucher cannot be considered to be voluntary or as having resulted in discharge of the contract by accord and satisfaction. It will not be a bar to arbitration."

The same principles were applied by the Court to state that a no claim certificate will not bar the Respondents from further contending in an arbitration proceeding.


In the present case, the Court has put reliance on many cases to re-emphasize the following: 

One The benefits of Amendment Act of 2015 cannot be taken by every arbitration or related court proceeding. The Amendment Act clearly states the threshold date to be 23.10.2015 and that needs to be strictly followed. Amended provisions of the 2015 Act shall not be applied to Court proceedings that have been pending before 23.10.2015.

Second The respondents in this case are petty contractors with no bargaining power and are compelled to accept furnishing of no claims certificate in advance of the final bills to be paid by the Appellants. Hence, they must be provided with an opportunity to contend their case in front of an arbitral tribunal for the correct dispute resolution mechanism.

Third – The procedure agreed upon by both the parties under the arbitration agreement must be taken into consideration by the Court when exercising their powers under Section 11 for appointment of an arbitrator.

To conclude, the Courts must be aware of keeping the arbitration agreement above their jurisdiction and the intention of the parties must be respected. The applicability of the Amendment Act of 2015 also should be kept in perspective before giving a retrospective application of the same.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Disclaimer: The information contained in this document is intended for informational purposes only and does not constitute legal opinion, advice or any advertisement. This document is not intended to address the circumstances of any particular individual or corporate body. Readers should not act on the information provided herein without appropriate professional advice after a thorough examination of the facts and circumstances of a particular situation. There can be no assurance that the judicial/quasi-judicial authorities may not take a position contrary to the views mentioned herein.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Vaish Associates Advocates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions