BHARAT SANCHAR NIGAM LTD. & ANR. versus M/S NORTEL NETWORKS INDIA PVT. LTD.
[2021] 2 S.C.R. 644, Supreme Court of India, 2021
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
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BHARAT SANCHAR NIGAM LTD. & ANR.
v.
M/S NORTEL NETWORKS INDIA PVT. LTD.
(Civil Appeal Nos. 843-844 of 2021)
MARCH 10, 2021
[INDU MALHOTRA AND AJAY RASTOGI, JJ.]
Arbitration and Conciliation Act, 1996 – s.11 – Application
under – Period of limitation – Tender issued by appellant –
Respondent awarded the purchase order – On completion of the
works, appellant withheld certain amount towards liquidated
damages/other levies – Respondent raised claim for payment of the
same in May 2014 – Rejected by appellant in August 2014 – In
2020, respondent invoked the arbitration clause for appointment
of arbitrator – Rejected by appellant – Respondent filed application
u/s.11 – High Court referred the disputes to arbitration – Review
petition – Dismissed – On appeal, held: Period of limitation for
filing an application u/s.11 would be governed by Article 137 of
the First Schedule, 1963 Act – It will begin to run from the date
when there is failure to appoint the arbitrator – In exceptional cases,
where claims are ex facie time- barred, the Court may refuse to make
reference – In the present case, cause of action arose on 04.08.14,
when the claims made by respondent were rejected by appellant –
Notice of arbitration invoked on 29.04.20 was rejected by appellant
on 09.06.20 – Thus, application u/s.11 filed before High Court on
24.07.20 was within limitation period prescribed u/Article 137 i.e.
within 3 years of rejection of the request
for appointment of the
arbitrator – However, claims are ex-facie time barred by over 5½
years – Disputes between the parties cannot be referred to arbitration
– Impugned orders set aside – Application filed by respondent u/
s.11, dismissed – Limitation Act, 1963 – First Schedule- Article 137
– Arbitration and Conciliation (Amendment) Act, 2015 – ss.11(13),
29A, 34(6) – Arbitration and Conciliation (Amendment) Act, 2019
– s.11(6A), (8) – Commercial Courts Act, 2015 – s.13, 14 – Maxims.
Arbitration and Conciliation Act, 1996 – Scheme & object of
the Act – ss.8, 9(2), 11, 13, 116(2), 34(3) – Amendment to s.11 –
Held: Parliament may consider amending s.11 to provide a period
[2021] 2 S.C.R. 644
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of limitation for filing an application under this provision in
consonance with the object of expeditious disposal of arbitration
proceedings.
Arbitration and Conciliation Act, 1996 – s.11 – Jurisdiction
under – Scope of – Pre & post amendment position – Discussed.
Arbitration and Conciliation Act, 1996 – Limitation –
Jurisdictional issue or admissibility issue – Discussed.
Allowing the appeals, the Court
HELD: 1.1 Period of limitation for filing an application under
Section 11 of the Arbitration and Conciliation Act, 1996.
The Arbitration and Conciliation Act, 1996 has been framed
for expeditious resolution of disputes, and various provisions have
been incorporated in the Act to ensure that the arbitral
proceedings are conducted in a time-bound manner. Various time
lines have been provided in the 1996 Act. The 1996 Act was
amended by the Arbitration and Conciliation (Amendment) Act,
2015 to incorporate further provisions for expeditious disposal
of arbitral proceedings. Section 11 does not prescribe any time
period for filing an application under sub-section (6) for
appointment of an arbitrator. Since there is no provision in the
1996 Act specifying the period of limitation for filing an application
under Section 11, one would have to take recourse to the
Limitation Act, 1963, as per Section 43 of the Arbitration Act,
which provides that the Limitation Act shall apply to arbitrations,
as it applies to proceedings in Court. Since none of the Articles
in
the Schedule to the Limitation Act, 1963 provide a time period
for filing an application for appointment of an arbitrator under
Section 11, it would be covered by the residual provision Article
137 of the Limitation Act, 1963. The limitation for filing an
application under Section 11 would arise upon the failure to make
the appointment of the arbitrator within a period of 30 days’ from
issuance of the notice invoking arbitration. In other words, an
application under Section 11 can be filed only after a notice of
arbitration in respect of the particular claim(s) / dispute(s) to be
referred to arbitration [as contemplated by Section 21 of the Act]
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
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is made, and there is failure to make the appointment. The period
of limitation for filing a petition seeking appointment of an
arbitrator/s cannot be confused or conflated with the period of
limitation applicable to the substantive claims made in the
underlying commercial contract. The period of limitation for such
claims is prescribed under various Articles of the Limitation Act,
1963. The limitation for deciding the underlying substantive
disputes is necessarily distinct from that of filing an application
for appointment of an arbitrator. [Paras 6, 7, 9-12][654-E-F;
655-C; 656-B-D; 657-B-C, D-G]
1.2 Given the vacuum in the law to provide a period of
limitation under Section 11 of the Arbitration and Conciliation
1996, the Courts have taken recourse to the position that the
limitation period would be governed by Article 137, which
provides a period of 3 years from the date when the right to apply
accrues. However, this is an unduly long period for filing an
application u/s. 11, since it would defeat the very object of the
Act, which provides for expeditious resolution of commercial
disputes within a time bound period. In view of the legislative
intent, the period of 3 years for filing an application under Section
11 would run contrary to the scheme of the Act. It would be
necessary for Parliament to effect an amendment to Section 11,
prescribing a specific period of limitation within which a party
may move the court
for making an application for appointment of
the arbitration under Section 11 of the 1996 Act. In the present
case, it is found that the application under Section 11 was filed
within the limitation period prescribed under Article 137 of the
Limitation Act. Nortel issued the notice of arbitration vide letter
dated 29.04.2020, which was rejected by BSNL vide its reply dated
09.06.2020. The application under Section 11 was filed before
the High Court on 24.07.2020 i.e. within the period of 3 years of
rejection of the request for appointment of the arbitrator. [Paras
17, 18][661-C-H]
2.1 Whether the Court may refuse to make the reference
under Section 11 where the claims are ex facie time-barred
Legislative History of Section 11
Pre-amendment position
Under the principal Act, the legislative scheme under
Section 11 was that if the parties had agreed on a procedure for
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appointment of the arbitrator, the appointment had to be made in
accordance with that procedure. Absent an agreement between
the parties, the default power of appointment in a domestic
arbitration would be exercised by the Chief Justice of the High
Court, or person, or institution, designated by him. In the case of
an international commercial arbitration, the default power would
be exercised by the Chief Justice of India, or the person, or
institution, designated by him. The object of conferring the power
of appointment on the highest judicial authority was to give
credibility to the procedure of appointment. [Para 19][662-A-E]
Post-amendment position
The 1996 Act was amended by the Arbitration and
Conciliation (Amendment) Act, 2015 which came into force with
effect from 23.10.2015. The 2015 Amendment Act replaced the
Chief Justice of the High Court as the appointing authority for
exercising the default power of appointment in the case of
domestic arbitrations, by the concerned High Court; and, in
respect of international commercial arbitrations, the default power
would be exercised by the Supreme Court, in place of the Chief
Justice of India. It inserted Sub-section (6A) and (6B) in Section
11. The effect of the amendment was that if the existence of the
arbitration agreement was not in dispute, all other issues would
be left for the arbitral tribunal to decide. This was in reinforcement
of the doctrine of kompetenz-kompetenz, which empowers the
tribunal
to rule on its own jurisdiction, including any objections
with respect to the validity of the arbitration agreement; and
thereby minimize judicial intervention at the pre-reference stage.
In view of the legislative mandate contained in the amended
Section 11(6A), the Court is now required only to examine the
existence of the arbitration agreement. All other preliminary or
threshold issues are left to be decided by the arbitrator under
Section 16, which enshrines the kompetenz- komptenz principle.
The doctrine of kompetenz-komptenz implies that the arbitral
tribunal is empowered, and has the competence to rule on its
own jurisdiction, including determination of all jurisdictional
issues. This was intended to minimise judicial intervention at
the pre-reference stage, so that the arbitral process is not
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thwarted at the threshold when a preliminary objection is raised
by the parties. [Paras 23, 26][665-C-F; 666-B-C; 668-E-G]
2.2 Issue of Limitation
Limitation is normally a mixed question of fact and law, and
would lie within the domain of the arbitral tribunal. There is,
however, a distinction between jurisdictional and admissibility
issues. An issue of ‘jurisdiction’ pertains to the power and
authority of the arbitrators to hear and decide a case.
Jurisdictional issues include objections to the competence of the
arbitrator or tribunal to hear a dispute, such as lack of consent,
or a dispute falling outside the scope of the arbitration agreement.
Issues with respect to the existence, scope and validity of the
arbitration agreement are invariably regarded as jurisdictional
issues, since these issues pertain to the jurisdiction of the
tribunal. Admissibility issues however relate to procedural
requirements, such as a breach of pre-arbitration requirements,
for instance, a mandatory requirement for mediation before the
commencement of arbitration, or a challenge to a claim or a part
of the claim being either time-barred, or prohibited, until some
pre-condition has been fulfilled. Admissibility relates to the nature
of the claim or the circumstances connected therewith. An
admissibility issue is not a challenge to the jurisdiction of the
arbitrator to decide the claim. The issue of limitation, in essence,
goes to the
maintainability or admissibility of the claim, which is
to be decided by the arbitral tribunal. For instance, a challenge
that a claim is time-barred, or prohibited until some pre- condition
is fulfilled, is a challenge to the admissibility of that claim, and
not a challenge to the jurisdiction of the arbitrator to decide the
claim itself. Applying the “tribunal versus claim” test, a plea of
statutory time bar goes towards admissibility as it attacks the
claim. It makes no difference whether the applicable statute of
limitations is classified as substantive (extinguishing the
claim) or procedural (barring the remedy) in the private
international law sense. The issue of limitation which concerns
the “admissibility” of the claim, must be decided by the arbitral
tribunal either as a preliminary issue, or at the final stage after
evidence is led by the parties. It is only in the very limited
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category of cases, where there is not even a vestige of doubt that
the claim is ex facie time-barred, or that the dispute is non-
arbitrable, that the court may decline to make the reference.
However, if there is even the slightest doubt, the rule is to refer
the disputes to arbitration, otherwise it would encroach upon
what is essentially a matter to be determined by the tribunal.
[Paras 30-32, 34, 35 and 37][670-D-H; 671-A-B; 672-C-E;
675-A-B]
Vidya Drolia v. Durga Trading Corporation (2021) 2
SCC 1; Mayavati Trading Company Private Ltd. v.
Pradyut Dev Burman (2019) 8 SCC 714: [2019] 12
SCR 123; Duro Felguera SA v. Gangavaram Port Ltd.
(2017) 9 SCC 729] : [2017] 10 SCR 285 – relied on.
Swisbourgh Diamond Mines (Pty) Ltd. & Ors. v.
Kingdom of Lesotho [2019] 1 SLR 263; BBA & Ors. v.
BAZ & Anr. [2020] SGCA 53 – referred to.
2.3 Applying the law to the facts of the present case, it is
clear that this is a case where the claims are ex facie time barred
by over 5 ½ years, since Nortel did not take any action whatsoever
after the rejection of its claim by BSNL on 04.08.2014. The notice
of arbitration was invoked on 29.04.2020. There is not even an
averment either in the notice of arbitration, or the petition filed
under Section 11, or before this Court, of any intervening facts
which may have occurred, which would extend the period of
limitation falling within Sections 5 to 20 of the Limitation Act.
Unless, there is a pleaded case specifically adverting to the
applicable Section, and how it extends the limitation from the
date on which the cause of action originally arose, there can be
no basis to save the time of limitation. The present case is a case
of deadwood / no subsisting dispute since the cause of action
arose on 04.08.2014, when the claims made by Nortel were
rejected by BSNL. The Respondent has not stated any event
which would extend the period of limitation, which commenced
as per Article 55 of the Schedule of the Limitation Act (which
provides the limitation for cases pertaining to breach of contract)
immediately after the rejection of the Final Bill by making
deductions. The notice invoking arbitration is ex facie time barred,
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
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and the disputes between the parties cannot be referred to
arbitration in the facts of this case. [Paras 38, 39][675-B-F;
676-B-C]
3. Conclusion
(i) The period of limitation for filing an application under
Section 11 would be governed by Article 137 of the First Schedule
of the Limitation Act, 1963. The period of limitation will begin to
run from the date when there is failure to appoint the arbitrator;
It has been suggested that the Parliament may consider amending
Section 11 of the 1996 Act to provide a period of limitation for
filing an application under this provision, which is in consonance
with the object of expeditious disposal of arbitration proceedings;
(ii) In rare and exceptional cases, where the claims are ex facie
time- barred, and it is manifest that there is no subsisting dispute,
the Court may refuse to make the reference.
The impugned orders dated 13.10.2020 and 14.01.2021
passed by the High Court are set aside. The application filed
under Section 11 by the Respondent before the High Court is
consequently dismissed. [Paras 40, 41][676-C-G]
S.S.Rathore v. State of Madhya Pradesh (1989) 4 SCC
582; Union of India & Ors. v. Har Dayal (2010) 1 SCC
394; CLP India Private Limited v. Gujarat Urja Vikas
Nigam limited & Anr. (2020) 5 SCC 185 – relied on.
Dakshin Haryana Bijli Vitran Nigam Ltd. v. M/s Navigant
Technologies Pvt. Ltd. Decision of Supreme Court dtd.
02.03.2021 in C.A. No. 791 of 2021; State of
Bihar &
Ors. v. Bihar Rajya Bhumi Vikas Bank Samiti (2018) 9
SCC 472 : [2018] 7 SCR 1147;
Consolidated
Engineering v. Principal Secretary, Irrigation (2008) 7
SCC 169 : [2008] 5 SCR 1108; C. Budhraja v.
Chairman, Orissa Mining Corporation Ltd. (2008) 2
SCC 444 : [2008] 1 SCR 821; Geo Miller & Co. Pvt.
Ltd. v. Chairman, Rajasthan Vidyut Utpadan Nigam Ltd.
(2020) 14 SCC 643 : [2019] 11 SCR 1108; SBP & Co.
v. Patel Engineering Ltd. (2005) 8 SCC 618 : [2005] 4
 Suppl.  SCR 688; National Insurance Co. Ltd. v.
Boghara Polyfab Pvt. Ltd. (2009) 1 SCC 267 : [2008]
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13 SCR 638; Union of India & Ors. v. Master
Construction Co. (2011) 12 SCC 349:  [2011] 5
SCR 853; Uttarakhand Purv Sainik Kalyan Nigam v.
Northern Coal Field Limited (2020) 2 SCC 455 –
referred to.
Leaf Biotech v. Municipal Corporation Nashik 2010
(6) Mh LJ 316; Deepdharshan Builders Pvt. Ltd. v.
Saroj (2019) 1 AIR Bom R 249; Prasar Bharti v. Maa
Communication 2010 (115) DRJ 438 (DB); Golden
Chariot v. Mukesh Panika 2018 SCC OnLine Del
10050 – referred to.
Case Law Reference
[2018] 7 SCR 1147
referred to
Para 7
[2008] 5 SCR 1108 
referred to
Para 9
[2008] 1 SCR 821  
referred to
Para 12
[2019] 11 SCR 1108 
referred to
Para 16
[2005] 4 Suppl. SCR 688
referred to
Para 20
[2008] 13 SCR 638  
referred to
Para 21
[2011] 5 SCR 853 
referred to
Para 22
[2017] 10 SCR 285  
relied on
Para 24
[2019] 12 SCR 123  
relied on
Para 25
(2020) 2 SCC 455
referred to
Para 26
(2021) 2 SCC 1
relied on
Para 36
(1989) 4 SCC 582
relied on
Para 40
(2010) 1 SCC 394
relied on
Para 40
(2020) 5 SCC 185
relied on
Para 40
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 843-
844 of 2021
From the Judgment and Order dated 13.10.2020 of the High Court
of Kerala at Ernakulam in petition under Section 11 of Arbitration &
Conciliation Act, 1996 AR No. 55 of 2020 Order dated 14.01.21 in
Review Petition RP No. 9 of 2021.
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
INDIA PVT. LTD.
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Arvind Datar, R. D. Agrawala, Sr. Advs., Pradeep Kumar Mathur,
Sameer Agrawal, Chiranjeev Johri, Advs. for the Appellants.
Neeraj Kumar Jain, Sr. Adv. Bharat Singh, Ashish Pandey, Rajesh
Kumar Singh, Amit Pawan, Advs. for the Respondent.
The Judgment of the Court was delivered by
INDU MALHOTRA, J.
Leave granted.
1. The present Appeals raise two important issues for our
consideration : (i) the period of limitation for filing an application under
Section 11 of the Arbitration and Conciliation Act, 1996 (“the 1996 Act”);
and (ii) whether the Court may refuse to make the reference under
Section 11 where the claims are ex facie time-barred?
2. (a) The factual matrix in which the present issues have arisen
for our consideration is the issuance of a tender notification by the
Appellant-Company [hereinafter referred to as “BSNL”] inviting bids
for planning, engineering, supply, insulation, testing and commissioning
of GSM based cellular mobile network in the southern region covering
the Kerala, Karnataka, Tamil Nadu, Andhra Pradesh Circles, and the
Chennai telephone district. In the tender process, the Respondent-
Company [hereinafter referred to as “Nortel”] was awarded the
purchase order. On completion of the Works under the purchase order,
BSNL deducted / withheld an amount of Rs.99,70,93,031 towards
liquidated damages and other levies.
(b) Nortel vide communication dated 13.05.2014 raised a claim
for payment of the said
amount.
BSNL vide letter dated 04.08.2014 rejected the claim of Nortel.
(c) After a period of over 5 ½ years, Nortel vide letter dated
29.04.2020 invoked the arbitration clause, and requested for appointment
of an independent arbitrator, wherein it was contended that the dispute
of withholding the aforesaid amounts, would fall within the ambit of
arbitrable disputes under the agreement.
(d) BSNL vide reply dated 09.06.2020 contended that the request
for appointment of an arbitrator could not be entertained, since the case
had already been closed on 04.08.2014, and as per Section 43 of the
1996 Act, the notice invoking arbitration was time barred.
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(e) Nortel filed an application under Section 11 of the 1996 Act
before the Kerala High Court for appointment of an arbitrator. The High
Court vide Order dated 13.10.2020 referred the disputes to arbitration.
(f) BSNL filed a review petition before the High Court, which
was dismissed vide Order dated 14.01.2021.
(g) The present Civil Appeal has been filed by BSNL to challenge
the Orders dated 13.10.2020 and 14.01.2021 respectively.
(h) This Court appointed Mr. Arvind Datar, Senior Advocate as
Amicus Curiae to assist the Court on the legal issues which have arisen
for consideration.
3. We have heard Mr. R.D. Agrawala, Senior Advocate for the
Appellants, Mr. Neeraj Kumar Jain, Senior Advocate for the Respondent,
and the learned Amicus Curiae, Mr. Arvind Datar, Senior Advocate.
4. Submissions on behalf of BSNL
BSNL submitted that the cause of action for invoking arbitration
arose on 04.08.2014 when the claim made by Nortel was rejected by
making deductions from the Final Bill. It was contended that Nortel had
slept over its alleged rights for over 5 ½ years, before issuing the notice
of arbitration on 29.04.2020. From 04.08.2014 till 29.04.2020, Nortel did
not take any action whatsoever. Consequently, the notice invoking
arbitration had become legally stale, non-arbitrable and unenforceable.
The High Court had erroneously proceeded on the premise of mere
existence of a valid arbitration agreement, without considering that such
an agreement was inextricably
connected with the existence of a live
dispute.
Even though limitation was a mixed question of fact and law, and
is ordinarily to be decided by the arbitral tribunal, in cases where the
invocation of the arbitration agreement is ex facie time barred, the Court
must reject the request for appointment of an arbitrator. The limitation
for invoking arbitration, and seeking appointment of an arbitrator is at
par with a civil action, and would be covered by Article 137 of the Schedule
to the Limitation Act, 1963. An action taken by a claimant must necessarily
fall within the statutory period of 3 years from the date on which the
right to apply accrues.
Section 11(6A) uses the phrase “examination of the existence of
an arbitration agreement”, which would imply that the power conferred
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
INDIA PVT. LTD. [INDU MALHOTRA, J.]
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upon the Court is not a formal exercise, but requires a certain degree of
examination before making the reference.
5. Submissions on behalf of Nortel
It was submitted that the amendment to Section 11 by the
Arbitration and Conciliation (Amendment) Act, 2015 provides for a limited
scope of enquiry at the pre-reference stage which is restricted only to
the “existence” of an arbitration agreement under sub-section (6A) of
Section 11. In view of the doctrine of kompetenz-kompetenz, the
objection with respect to the claims being allegedly time barred, could be
decided by the arbitral tribunal. The High Court rightly limited the enquiry
at the pre-reference stage to the “existence” of the arbitration agreement.
The distinction between the limitation for filing an application u/S.
11, and with respect to the underlying claims does not survive post the
2015 Amendment, since the role of the Court is only limited to examine
the existence of the arbitration agreement between the parties.
The starting point of limitation for initiating a proceeding under
Section 11 is the expiry of 30 days’ from the date of issuing notice of
arbitration on 29.04.2020. The cause of action was, therefore, a continuing
one. The High Court had rightly held that the issue of limitation must be
decided by the arbitral tribunal.
6. Discussion on First issue
The 1996 Act has been framed for expeditious resolution of
disputes, and various provisions have
been incorporated in the Act to
ensure that the arbitral proceedings are conducted in a time-bound manner.
Various time lines have been provided in the 1996 Act such as :
(i)
Section 8 provides that an application for reference of disputes
to arbitration, shall be filed not later than submitting the first
statement on the substance of the dispute;
(ii)
Section 9(2) provides that where a Court passes an order
for any interim measure of protection, the arbitral proceedings
shall be commenced within a period of 90 days’ from the
date of such order;
(iii)
Section 13 provides that where a challenge is made against
an arbitrator, the same must be raised within 15 days’ from
the constitution of the tribunal, or after becoming aware of
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any circumstances mentioned in sub-section (3) of Section
12;
(iv)
Section 16 (2) provides that a plea that the tribunal does not
have jurisdiction, shall be raised not later than the submission
of the statement of defence;
(v)
Section 34(3) provides a maximum period of 120 days’ after
the receipt of the signed award, to file objections before the
Court1
7. The 1996 Act was amended by the Arbitration and Conciliation
(Amendment) Act, 2015 to incorporate further provisions for expeditious
disposal of arbitral proceedings : (i) Section 11 has been amended to
insert sub-section (13) which provides that an application made either
before the Supreme Court, or the High Court, or person or institution
designated by such Court, shall be disposed of as expeditiously as possible,
and an endeavour shall be made to dispose of the petition within a period
of 60 days’ from the date of service of the notice on the opposite party;
(ii) Section 29A mandates that the arbitral proceedings must be completed
within a period of 12 months from the date of completion of pleadings;
(iii) Section 34 was amended to insert sub-section (6) which provides
that an application under Section 34 shall be disposed of expeditiously
within a period of 1 year from the date on which the notice of filing
objections is served upon the other party.
Some of these provisions have been held to be mandatory, such
as Sections 8 and 34(3); while others like Section 34(6) have been held
to be
directory2.
8. Contemporaneous with the 2015 amendments to the Arbitration
Act 1996, the Commercial Courts Act, 2015 was enacted to provide for
speedy disposal of high value commercial disputes, which provided for
setting up Commercial Divisions or Commercial Appellate Division in
High Courts, and Commercial Courts at the district level.
Section 13 of the Commercial Courts Act provides that an appeal
under Section 37 of the Arbitration Act, 1996 shall be filed before the
Commercial Appellate Court or Commercial Appellate Division, as the
case may be within a period of 60 days’ from the date of judgment.
1 Dakshin Haryana Bijli  Vitran Nigam Ltd. v. M/s Navigant Technologies Pvt. Ltd.,
C.A. No. 791 / 2021 decided on 02.03.2021.
2 State of Bihar & Ors. v. Bihar Rajya Bhumi Vikas Bank Samiti (2018) 9 SCC 472.
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Section 14 further provides that the Commercial Appellate Court
or Commercial Appellate Division shall endeavour to decide the appeals
within a period of 6 months’ from the date of filing of such appeal.
9. To decide the issue of limitation for filing an application under
Section 11, we must first examine whether the Arbitration Act, 1996
prescribes any period for the same.
Section 11 does not prescribe any time period for filing an
application under sub-section (6) for appointment of an arbitrator. Since
there is no provision in the 1996 Act specifying the period of limitation
for filing an application under Section 11, one would have to take recourse
to the Limitation Act, 1963, as per Section 43 of the Arbitration Act,
which provides that the Limitation Act shall apply to arbitrations, as it
applies to proceedings in Court.
“43. – Limitations
(1) The Limitation Act, 1963 (36 of 1963) shall apply to arbitrations,
as it applies to proceedings in Court.”
In Consolidated Engineering v. Principal Secretary,
Irrigation,3 this Court held that :
“45. Learned counsel for the appellant contended that Section
43 of the AC Act makes applicable the provisions of the Limitation
Act only to arbitrations, thereby expressing an intent to exclude
the application to any proceedings relating to arbitration in a court.
The contention of the appellant ignores and overlooks Section
29(2) of the Limitation Act and Section 43(1) of the AC
Act. Sub-
section (1) of Section 43 of the Act provides that the Limitation
Act shall apply to arbitrations as it applies to proceedings in
court. The purpose of Section 43 of the AC Act is not to make
the Limitation Act inapplicable to proceedings before court, but
on the other hand, make the Limitation Act applicable to
arbitrations. As already noticed, the Limitation Act applies only to
proceedings in court, and but for the express provision in Section
43, the Limitation Act would not have applied to arbitration, as
arbitrators are private tribunals and not courts. Section 43 of the
AC Act, apart from making the provisions of the Limitation Act,
1963 applicable to arbitrations, reiterates that the Limitation Act
3 (2008) 7 SCC 169.

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applies to proceedings in court. Therefore, the provisions of the
Limitation Act, 1963 apply to all proceedings under the AC Act,
both in court and in arbitration, except to the extent expressly
excluded by the provisions of the AC Act.”
(emphasis supplied)
10. Since none of the Articles in the Schedule to the Limitation
Act, 1963 provide a time period for filing an application for appointment
of an arbitrator under Section 11, it would be covered by the residual
provision Article 137 of the Limitation Act, 1963.
Article 137 of the Limitation Act, 1963 provides :
THIRD DIVISION – APPLICATIONS
Description of application 
Period 
of 
limitation 
Time from which period 
begins to run 
137. 
Any other application for which no 
period 
of 
limitation 
is 
provided 
elsewhere in this division
Three years 
When the right to apply 
accrues 
11. It is now fairly well-settled that the limitation for filing an
application under Section 11 would arise upon the failure to make the
appointment of the arbitrator within a period of 30 days’ from issuance
of the notice invoking arbitration. In other words, an application under
Section 11 can be filed only after a notice of arbitration in respect of the
particular claim(s) / dispute(s) to be referred to arbitration [as
contemplated by Section 21 of the Act] is made, and there is failure to
make the appointment.
12. The period of limitation for filing a petition seeking appointment
of an arbitrator/s cannot be confused or conflated with the period of
limitation applicable to the substantive claims made in the underlying
commercial contract. The period of limitation for such claims is prescribed
under various Articles of the Limitation Act, 1963. The limitation for
deciding the underlying substantive disputes is necessarily distinct from
that of filing an application for appointment of an arbitrator. This position
was recognized even under Section 20 of the Arbitration Act 1940.
Reference may be made to the judgment of this Court in C. Budhraja
v. Chairman, Orissa Mining Corporation Ltd.4 wherein it was held
that Section 37(3) of
the 1940 Act provides that for the purpose of the
Limitation Act, an arbitration is deemed to have commenced when one
4 (2008) 2 SCC 444.
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party to the arbitration agreement serves on the other party, a notice
requiring the appointment of an arbitrator. Paragraph 26 of this judgment
reads as follows :
“26. Section 37(3) of the Act provides that for the purpose of the
Limitation Act, an arbitration is deemed to have been commenced
when one party to the arbitration agreement serves on the other
party thereto, a notice requiring the appointment of an arbitrator.
Such a notice having been served on 4-6-1980, it has to be seen
whether the claims were in time as on that date. If the claims
were barred on 4-6-1980, it follows that the claims had to be
rejected by the arbitrator on the ground that the claims were barred
by limitation. The said period has nothing to do with the period of
limitation for filing a petition under Section 8(2) of the Act. Insofar
as a petition under Section 8(2) is concerned, the cause of action
would arise when the other party fails to comply with the notice
invoking arbitration. Therefore, the period of limitation for filing a
petition under Section 8(2) seeking appointment of an arbitrator
cannot be confused with the period of limitation for making a
claim. The decisions of this Court in Major (Retd.) Inder Singh
Rekhi v. DDA [(1988) 2 SCC 338] , Panchu Gopal Bose v. Board
of Trustees for Port of Calcutta [(1993) 4 SCC 338] and Utkal
Commercial Corpn. v. Central Coal Fields Ltd. [(1999) 2 SCC
571] also make this position clear.”
13. Various High Courts have taken the view that Article 137 of
the Limitation Act would be applicable to an application under Section
11 of the Arbitration Act.
The question of the applicability of Article 137 to applications under
Section 11 of the 1996 Act came up for consideration before the Bombay
High Court in Leaf Biotech v. Municipal Corporation Nashik5 wherein
it was held that the period of limitation for an application u/S. 11 would
be governed by Article 137 of the Limitation Act.
Subsequently, in Deepdharshan Builders Pvt. Ltd. v. Saroj6
the Bombay High Court framed the following issue :
“(ii) Whether Article 137 of the Schedule to the Limitation Act,
1963 would apply to the arbitration application filed under Section
11(6) of the Arbitration Act and if applies whether Section 5 of
5 2010 (6) Mh LJ 316.
6 (2019) 1 AIR Bom R 249.
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the Limitation Act, 1963 would be applicable to this arbitration
application and if Section 5 applies to this arbitration application,
whether the applicant has made out a sufficient cause for
condonation of delay in filing this arbitration application?”
The Bombay High Court held that :
“42. In my view, since the proceedings under Section 11(6) of the
Arbitration Act are required to be filed before the High Court,
Article 137 of the Schedule to the Limitation Act, 1963 would
apply to such application filed under Section 11(6) of the Arbitration
Act. In my view, since Article 137 of the Schedule to the Limitation
Act, 1963 would apply to the arbitration application under Section
11(6) of the Arbitration Act, Section 5 of the Limitation Act, 1963
would also apply to the arbitration application filed under Section
11(6) of Arbitration Act
46. It is not in dispute that under Section 20 of the Arbitration
Act, 1940, an application was required for taking the arbitration
agreement on record and for appointment of an arbitrator in
accordance with the arbitration agreement before a Court. Since
the said proceedings under Section 20 were required to be filed
before an appropriate Court, the provisions of Article 137 of the
Limitation Act, 1963 were applicable to such proceedings filed
before such appropriate Court. In my view, since the proceedings
under Section 11(6) or Section 11(9) of the Arbitration Act for
seeking appointment of arbitral tribunal are also
now required to
be filed before the High Court or the Hon’ble Supreme Court, as
the case may be. Article 137 of the Schedule to the Limitation
Act, 1963 would apply. It is not in dispute that no other Article of
Schedule to the Limitation Act, 1963 provides for any other period
of limitation for filing an arbitration application filed under Section
11(6) or Section 11(9) of the Arbitration Act respectively.
47. It is not in dispute that Article 137 of the Schedule to the
Limitation Act, 1963, such application has to be filed within three
years from the date when the right to apply accrues. In my view,
under Article 137 of the Limitation Act, 1963, application for
appointment of an arbitrator under Section 11(6) or Section 11(9)
of the Arbitration Act before the High Court or the Hon’ble
Supreme Court would apply from the date when a notice invoking
an arbitration agreement is received by other side and other side
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refuses to the name suggested by the opponent or refusing to
suggest any other name in accordance with the provisions of
Section 11 or the agreed procedure prescribed in the arbitration
agreement within the time contemplated therein or specifically
refuses to appoint any arbitrator in the event of such other party
being an appointing authority.
48. In my view, the limitation prescribed under Article 137 of the
Schedule to the Limitation Act, 1963 which applies to an application
under Section 11(6) or Section 11(9) of the Arbitration Act filed
before the High Court or before the Hon’ble Supreme Court cannot
be mixed up with the period of limitation applicable to the claims
prescribed in various other Articles of the Schedule to the Limitation
Act, 1963. Both these periods of limitation i.e. one applicable to
the claims being made and another being applicable to the
application under Section 11(6) or Section 11(9) of the Arbitration
Act to which Article 137 of the Schedule to the Limitation Act,
1963 applies, are two different periods of limitation and cannot be
made applicable to each other.”
The special leave petition (SLP (C) No. 305 / 2019) against the
said Judgment was dismissed vide Order dated 16.02.2019.
14. Other decisions of High Courts on the applicability of Article
137 are Prasar Bharti v. Maa Communication7 and Golden Chariot
v. Mukesh Panika8 passed by the Delhi High Court. The SLP filed in
the case of
Golden Chariot was dismissed vide Order dated 31.01.2019
in SLP(C) No. 3658 / 2019.
15. The reasoning in all these judgments seems to be that since an
application under Section 11 is to be filed in a court of law, and since no
specific Article of the Limitation Act, 1963 applies, the residual Article
would become applicable. The effect being that the period of limitation
to file an application under Section 11 is 3 years’ from the date of refusal
to appoint the arbitrator, or on expiry of 30 days’, whichever is earlier.
16. In Geo Miller & Co. Pvt. Ltd. v. Chairman, Rajasthan
Vidyut Utpadan Nigam Ltd.,9 a three-judge bench held that on a reading
of sub-sections (1) and (3) of Section 43 of the 1996 Act, the provisions
of the Limitation Act, 1963 would be applicable to the Arbitration Act.
7 2010 (115) DRJ 438 (DB).
8 2018 SCC OnLine Del 10050, SLP (C) No. 40627 / 2018 against this decision was
dismissed on 31.01.2019.
9 (2020) 14 SCC 643, 649.
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Paragraph 14 of this judgment reads as :
“14. Sections 43(1) and (3) of the 1996 Act are in pari materia
with Sections 37(1) and (4) of the 1940 Act. It is well-settled that
by virtue of Article 137 of the First Schedule to the Limitation
Act, 1963 the limitation period for reference of a dispute to
arbitration or for seeking appointment of an arbitrator before a
court under the 1940 Act (see State of Orissa v. Damodar Das
[State of Orissa v. Damodar Das, (1996) 2 SCC 216] ) as well as
the 1996 Act (see Grasim Industries Ltd. v. State of Kerala [Grasim
Industries Ltd. v. State of Kerala, (2018) 14 SCC 265 : (2018) 4
SCC (Civ) 612] ) is three years from the date on which the cause
of action or the claim which is sought to be arbitrated first arises.”
17. Given the vacuum in the law to provide a period of limitation
under Section 11 of the Arbitration and Conciliation 1996, the Courts
have taken recourse to the position that the limitation period would be
governed by Article 137, which provides a period of 3 years from the
date when the right to apply accrues. However, this is an unduly long
period for filing an application u/S. 11, since it would defeat the very
object of the Act, which provides for expeditious resolution of commercial
disputes within a time bound period. The 1996 Act has been amended
twice over in 2015 and 2019, to provide for further time limits to ensure
that the arbitration proceedings are conducted and concluded
expeditiously. Section
29A mandates that the arbitral tribunal will conclude
the proceedings within a period of 18 months. In view of the legislative
intent, the period of 3 years for filing an application under Section 11
would run contrary to the scheme of the Act.
It would be necessary for Parliament to effect an amendment
to Section 11, prescribing a specific period of limitation within which a
party may move the court for making an application for appointment of
the arbitration under Section 11 of the 1996 Act.
18. Applying the aforesaid law to the facts of the present case,
we find that the application under Section 11 was filed within the limitation
period prescribed under Article 137 of the Limitation Act. Nortel issued
the notice of arbitration vide letter dated 29.04.2020, which was rejected
by BSNL vide its reply dated 09.06.2020. The application under Section
11 was filed before the High Court on 24.07.2020 i.e. within the period
of 3 years of rejection of the request for appointment of the arbitrator.
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
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Discussion on Second issue
19. We will now discuss the second issue which has arisen for
consideration i.e. whether the Court while exercising jurisdiction under
Section 11 is obligated to appoint an arbitrator even in a case where the
claims are ex facie time-barred.
To determine this issue, we would have to examine the scope of
jurisdiction under Section 11 of the Act.
Legislative History of Section 11
Pre-amendment position
Under the principal Act, the legislative scheme under Section 11
was that if the parties had agreed on a procedure for appointment of the
arbitrator, the appointment had to be made in accordance with that
procedure. Absent an agreement between the parties, the default power
of appointment in a domestic arbitration would be exercised by the Chief
Justice of the High Court, or person, or institution, designated by him. In
the case of an international commercial arbitration, the default power
would be exercised by the Chief Justice of India, or the person, or
institution, designated by him10.
The object of conferring the power of appointment on the highest
judicial authority was to give credibility to the procedure of appointment.
20. In SBP & Co. v. Patel Engineering Ltd.,11 a seven-Judge
constitution bench of this Court considered the scope of Section 11 of
the 1996 Act, and held that the scheme of the Act required the Chief
Justice, or his designate, to decide whether there is an arbitration
agreement in terms of Section 7, before exercising the default power for
making the appointment of the arbitrator. The scope of power at the
pre-reference stage would be as follows:
“33. Section 8 of the Arbitration Act, 1940 enabled the court when
approached in that behalf to supply an omission. Section 20 of
that Act enabled the court to compel the parties to produce the
arbitration agreement and then to appoint an arbitrator for
adjudicating on the disputes. It may be possible to say that Section
11(6) of the Act combines both the powers. May be, it is more in
consonance with Section 8 of the old Act. But to call the power
10 Section 11(9) of the 1996 Act.
11 (2005) 8 SCC 618.
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merely as an administrative one, does not appear to be warranted
in the context of the relevant provisions of the Act. First of all, the
power is conferred not on an administrative authority, but on a
judicial authority, the highest judicial authority in the State or in the
country. No doubt, such authorities also perform administrative
functions. An appointment of an Arbitral Tribunal in terms of Section
11 of the Act, is based on a power derived from a statute and the
statute itself prescribes the conditions that should exist for the
exercise of that power. In the process of exercise of that power,
obviously the parties would have the right of being heard and
when the existence of the conditions for the exercise of the power
are found on accepting or overruling the contentions of one of the
parties it necessarily amounts to an order, judicial in nature, having
finality subject to any available judicial challenge as envisaged by
the Act or any other statute or the Constitution. Looked at from
that point of view also, it seems to be appropriate to hold that the
Chief Justice exercises a judicial power while appointing an
arbitrator.
..
39. It is necessary to define what exactly the Chief Justice,
approached with an application under Section 11 of the Act, is to
decide at that stage. Obviously, he has to decide his own jurisdiction
in the sense whether the party making the motion has approached
the right High Court. He has to decide whether there is an
arbitration agreement, as defined in the Act and whether the person
who has made the request before him, is a party to such an
agreement. It is necessary to indicate that he can also decide the
question whether the claim was a dead one; or a long-barred
claim that was sought to be resurrected and whether the parties
have concluded the transaction by recording satisfaction of their
mutual rights and obligations or by receiving the final payment
without objection. It may not be possible at that stage, to decide
whether a live claim made, is one which comes within the purview
of the arbitration clause. It will be appropriate to leave that question
to be decided by the Arbitral Tribunal on taking evidence, along
with the merits of the claims involved in the arbitration. The Chief
Justice has to decide whether the applicant has satisfied the
conditions for appointing an arbitrator under Section 11(6) of the
Act. For the purpose of taking a decision on these aspects, the
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
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Chief Justice can either proceed on the basis of affidavits and the
documents produced or take such evidence or get such evidence
recorded, as may be necessary. We think that adoption of this
procedure in the context of the Act would best serve the purpose
sought to be achieved by the Act of expediting the process of
arbitration, without too many approaches to the court at various
stages of the proceedings before the Arbitral Tribunal.
…
47. (iv) The Chief Justice or the Designated Judge will have the
right to decide the preliminary aspects as indicated in the earlier
part of this judgment. These will be his own jurisdiction to entertain
the request, the existence of a valid arbitration agreement, the
existence or otherwise of a live claim, the existence of the condition
for the exercise of his power and on the qualifications of the
arbitrator or arbitrators.”
21. Subsequently, in National Insurance Co. Ltd. v. Boghara
Polyfab Pvt. Ltd.,12 the Court classified the preliminary issues to be
decided by the Chief Justice of India, / Chief Justice of a High Court, as
the case may be, under Section 11, and those which must be decided by
the arbitrator, into three categories :
(i)
issues which the Chief Justice, or his designate are bound to
decide are whether the party making the application has
approached the appropriate High Court; whether there is an
arbitration agreement; and whether the party who has made
the
application, is a party to the agreement;
(ii)
issues which the Chief Justice may decide at the threshold
are : as to whether the claim is a dead or long-barred claim,
or a live claim; whether the parties have concluded the
contract / transaction by recording satisfaction of their mutual
rights and obligations, or the party has received the final
payment without objection;
(iii)
issues which must be left to the arbitral tribunal to decide
are whether the claim made falls within the arbitration clause
(for example, a matter which is reserved for final decision
pf a departmental authority, and is “excepted” or excluded
from arbitration); merits of the claims involved.
12 (2009) 1 SCC 267.
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22. In Union of India & Ors. v. Master Construction Co.13 this
Court held that the issue whether a discharge voucher, or no claims
certificate, or settlement agreement had been obtained by fraud, coercion,
duress, or undue influence, must be determined by the appointing authority
at the Section 11 stage, when a prima facie determination as to whether
such a dispute was raised bonafide and genuine must be made. If the
dispute prima facie appears to be lacking in credibility, the matter would
not be referred to arbitration. A bald plea of fraud, coercion, duress, or
undue influence was not sufficient, unless the party who sets up such a
plea was able to prima facie establish it, by placing material on record.
23. Post-amendment position
The 1996 Act was amended by the Arbitration and Conciliation
(Amendment) Act, 2015 which came into force with effect from
23.10.2015. The said amendment was based on the recommendations
of the 246th Report of the Law Commission of India.
The 2015 Amendment Act made three significant changes :
(i)
It replaced the Chief Justice of the High Court as the
appointing authority for exercising the default power of
appointment in the case of domestic arbitrations, by the
concerned High Court; and, in respect of international
commercial arbitrations, the default power would be exercised
by the Supreme Court, in place of the Chief Justice of India.
(ii)
It inserted sub-section (6A) and (6B) in Section 11, which
reads as :
“11.
Appointment of arbitrators.–
…
(6A) The Supreme Court, 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.
(6B) The designation of any person or institution by the
Supreme Court, or, as the case may be, the High Court, for
the purposes of this section shall not be regarded as a
delegation of judicial power by the Supreme Court or the
High Court.”
13 (2011) 12 SCC 349.
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Sub-section (6A) by a non-obstante clause provided that
notwithstanding any judgment, decree or order of any court,
the scope of examination at the Section 11 stage, would be
confined to the existence of the arbitration agreement.
The effect of the amendment was that if the existence of
the arbitration agreement was not in dispute, all other issues
would be left for the arbitral tribunal to decide. This was in
reinforcement of the doctrine of kompetenz-kompetenz,
which empowers the tribunal to rule on its own jurisdiction,
including any objections with respect to the validity of the
arbitration agreement; and thereby minimize judicial
intervention at the pre-reference stage.
(iii)
Sub-section (6B) was inserted to provide that the designation
of any person or institution, by either the Supreme Court or
High Court, as the appointing authority under Section 11,
would not be regarded as a delegation of judicial power.
The amendments to Section 11 were brought in to legislatively
overrule the line of judgments including SBP & Co., Boghara Polyfab,
Master Construction, etc., which had enlarged the scope of power of
the appointing authority to decide various issues at the pre-reference
stage.
24. Sub-section (6A) came up for consideration in the case of
Duro Felguera SA v. Gangavaram Port Ltd.14, wherein this Court
held that the legislative policy was to minimize judicial intervention at the
appointment stage. In an
application under Section 11, the Court should
only look into the existence of the arbitration agreement, before making
the reference. Post the 2015 amendments, all that the courts are required
to examine is whether an arbitration agreement is in existence —nothing
more, nothing less.
“48. Section 11(6-A) added by the 2015 Amendment, reads as
follows:
“11. (6-A) 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.”
(emphasis supplied)
14 (2017) 9 SCC 729.
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From a reading of Section 11(6-A), the intention of the legislature
is crystal clear i.e. the court should and need only look into one
aspect—the existence of an arbitration agreement. What are the
factors for deciding as to whether there is an arbitration agreement
is the next question. The resolution to that is simple—it needs to
be seen if the agreement contains a clause which provides for
arbitration pertaining to the disputes which have arisen between
the parties to the agreement.
…
59. The scope of the power under Section 11(6) of the 1996 Act
was considerably wide in view of the decisions in SBP and Co.
[SBP and Co. v. Patel Engg. Ltd., (2005) 8 SCC 618] and Boghara
Polyfab [National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd.,
(2009) 1 SCC 267 : (2009) 1 SCC (Civ) 117] . This position
continued till the amendment brought about in 2015. After the
amendment, all that the courts need to see is whether an arbitration
agreement exists—nothing more, nothing less. The legislative policy
and purpose is essentially to minimise the Court’s intervention at
the stage of appointing the arbitrator and this intention as
incorporated in Section 11(6-A) ought to be respected.”
25. In Mayavati Trading Company Private Ltd. v. Pradyut
Dev Burman15, a three-judge bench held that the scope of power of the
Court under Section 11 (6A) had to be construed in the narrow sense. In
paragraph 10, it was opined as under :
“10. This being the position, it is clear that the
law prior to the
2015 Amendment that has been laid down by this Court, which
would have included going into whether accord and satisfaction
has taken place, has now been legislatively overruled. This being
the position, it is difficult to agree with the reasoning contained in
the aforesaid judgment [United India Insurance Co. Ltd. v. Antique
Art Exports (P) Ltd., (2019) 5 SCC 362 : (2019) 2 SCC (Civ)
785] , as Section 11(6-A) is confined to the examination of the
existence of an arbitration agreement and is to be understood in
the narrow sense as has been laid down in the judgment in Duro
Felguera, SA [Duro Felguera, SA v. Gangavaram Port Ltd., (2017)
9 SCC 729”
15 (2019) 8 SCC 714.
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26. In Uttarakhand Purv Sainik Kalyan Nigam v. Northern
Coal Field Limited,16 this Court took note of the recommendations of
the Law Commission in its 246th Report, the relevant extract of which
reads as :
“7.6. The Law Commission in the 246th Report [ Amendments to
the Arbitration and Conciliation Act, 1996, Report No. 246, Law
Commission of India (August 2014), p. 20.] recommended that:
“33. … the Commission has recommended amendments to
Sections 8 and 11 of the Arbitration and Conciliation Act, 1996.
The scope of the judicial intervention is only restricted to
situations where the court/judicial authority finds that the
arbitration agreement does not exist or is null and void. Insofar
as the nature of intervention is concerned, it is recommended
that in the event the court/judicial authority is prima facie
satisfied against the argument challenging the arbitration
agreement, it shall appoint the arbitrator and/or refer the parties
to arbitration, as the case may be. The amendment envisages
that the judicial authority shall not refer the parties to arbitration
only if it finds that there does not exist an arbitration agreement
or that it is null and void. If the judicial authority is of the opinion
that prima facie the arbitration agreement exists, then it shall
refer the dispute to arbitration, and leave the existence of the
arbitration agreement to be finally determined by the Arbitral
Tribunal.”
In view of the
legislative mandate contained in the amended
Section 11(6A), the Court is now required only to examine the existence
of the arbitration agreement. All other preliminary or threshold issues
are left to be decided by the arbitrator under Section 16, which enshrines
the kompetenz-komptenz principle. The doctrine of kompetenz-
komptenz implies that the arbitral tribunal is empowered, and has the
competence to rule on its own jurisdiction, including determination of all
jurisdictional issues. This was intended to minimise judicial intervention
at the pre-reference stage, so that the arbitral process is not thwarted at
the threshold when a preliminary objection is raised by the parties.
27. The 2019 Amendment to Section 11
Section 11 has been further amended by the Arbitration and
Conciliation (Amendment) Act, 2019 to promote institutionalization of
16 (2020) 2 SCC 455.
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arbitration in India. The 2019 Amendment Act has deleted sub-section
(6A) in Section 11.
However, the amended to Section 11 is yet to be notified.
Consequently, sub-section (6A) continues to remain on the statute book,
and governs the scope of power under Section 11 for the present.
The notification giving effect to the provisions of the 2019
Amendment Act which have been brought into force, reads as :
“MINISTRY OF LAW AND JUSTICE
(Department of Legal Affairs)
NOTIFICATION
New Delhi, the 30th August, 2019
S.O. 3154(E). — In the exercise of the powers conferred by
sub-section (2) of section 1 of the Arbitration and Conciliation
(Amendment) Act, 2019 (33 of 2019), the Central Government
hereby appoints the 30th August, 2019 as the date on which the
provisions of the following sections of the said Act shall come into
force:—
(1) section 1;
(2) section 4 to section 9 [both inclusive];
(3) section 11 to section 13 [both inclusive];
(4) section 15.
[F.No. H-11018/2/2017-Admn.-III(LA)]
Dr. RAJIV MANI, Jt. Secy. and Legal Adviser”
28. The reference to “Section 11” in clause (3) of the Notification
dated 30.08.2019 pertains to Section 11 of the Amendment Act [and not
the principal Act of 1996]. The amendment to Section 11 in the 2019
Amendment Act finds place in Section 3 of the 2019 Amendment Act,
which reads as :
“3. Amendment of section 11. – In section 11 of the principal
Act, -
(i)
….
(ii)
….
(iii)
….
(iv)
….
(v)
sub-sections (6A) and (7) shall be omitted”
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29. After the amendment by the 2019 Amendment to Section 11
is notified, it will result in the deletion of sub-section (6A), and the default
power will be exercised by arbitral institutions designated by the Supreme
Court, or the High Court, as the case may be.
It is relevant to note that sub-section (6B) in Section 11, has not
been amended by the 2019 Amendment Act. Sub-section (6B) provides
that the designation of any person, or institution by the Court, shall not be
regarded as a delegation of “judicial power”. Consequently, it would not
be open for the person or institution designated by the Court to exercise
any judicial power, and adjudicate on any issue, including the issue of
validity of the agreement, or the arbitrability of disputes.
The amendment to sub-section (8) of Section 11 by the 2019
Amendment [which is also yet to be notified], provides that the arbitral
institution will be empowered to : (a) seek a disclosure in writing from
the prospective arbitrator in terms of sub-section (1) of Section 12, to
secure the appointment of an independent and impartial arbitrator; and
(b) ensure that the arbitrator has the qualifications required by the
arbitration agreement.
30. Issue of Limitation
Limitation is normally a mixed question of fact and law, and would
lie within the domain of the arbitral tribunal. There is, however, a distinction
between jurisdictional and admissibility issues. An issue of
‘jurisdiction’
pertains to the power and authority of the arbitrators to hear and decide
a case. Jurisdictional issues include objections to the competence of the
arbitrator or tribunal to hear a dispute, such as lack of consent, or a
dispute falling outside the scope of the arbitration agreement. Issues
with respect to the existence, scope and validity of the arbitration
agreement are invariably regarded as jurisdictional issues, since these
issues pertain to the jurisdiction of the tribunal.
31. Admissibility issues however relate to procedural requirements,
such as a breach of pre-arbitration requirements, for instance, a mandatory
requirement for mediation before the commencement of arbitration, or a
challenge to a claim or a part of the claim being either time-barred, or
prohibited, until some pre-condition has been fulfilled. Admissibility relates
to the nature of the claim or the circumstances connected therewith. An
admissibility issue is not a challenge to the jurisdiction of the arbitrator to
decide the claim.
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32. The issue of limitation, in essence, goes to the maintainability
or admissibility of the claim, which is to be decided by the arbitral tribunal.
For instance, a challenge that a claim is time-barred, or prohibited until
some pre-condition is fulfilled, is a challenge to the admissibility of that
claim, and not a challenge to the jurisdiction of the arbitrator to decide
the claim itself.
33. In Swisbourgh Diamond Mines (Pty) Ltd. & Ors. v.
Kingdom of Lesotho17, the Singapore Court of Appeal distinguished
between “jurisdiction” and “admissibility” in paragraphs 207 and 208,
which read as :
“207. Jurisdiction is commonly defined to refer to the “power of
the tribunal to hear a case”, whereas admissibility refers to
“whether it is appropriate for the tribunal to hear it” : Waste
Management, Inc. v. United Mexican States ICSID Case No.
ARB (AF) / 98 / 2, Dissenting Opinion of Keith Highet ( 8 May
2000) at [58]. To this, Zachary Douglas adds clarity to this
discussion by referring to “jurisdiction” as a concept that deals
with “the existence of [the] adjudicative power” of an arbitral
tribunal, and to “admissibility” as a concept dealing with “the
exercise of that power” and the suitability of the claim brought
pursuant to that power for adjudication] : [Zachary Douglas, The
Press, 2009] at paras 291 and 310.
208. The conceptual distinction between jurisdiction and
admissibility is not merely an exercise in linguistic hygiene pursuant
to a pedantic
hair-spitting endeavour. This distinction has significant
practical import in investment treaty arbitration because a decision
of the tribunal in respect of jurisdiction is reviewable by the
supervisory courts at the seat of the arbitration (for non-ICSID
arbitrations) or before an ICSID ad hoc committee pursuant to
Art 52 of the ICSID Convention (for ICSID arbitrations,) whereas
a decision of the tribunal on admissibility is not reviewable : see
Jan Paulsson, “Jurisdiction and Admissibility” in Global Reflections
on International Law, Commerce and Dispute Resolution, Liber
Amicorum in honour of Robert Briner (Gerald Aksen et al, eds)
(ICC Publishing, 2005) at p 601, Douglas at para 307, Waibel at p
1277, paras 257 and 257 and 258, Hanno Wehland, “Jurisdiction
and Admissibility in Proceedings under the ICSID Convention and
17 [2019] 1 SLR 263.
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
INDIA PVT. LTD. [INDU MALHOTRA, J.]
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the ICSID Additional Facility Rules” in ICSID Convention after
50 Tears : Unsettled Issues (Crina Baltag, ed) (Kluwer Law
International, 2016) at pp 233-234, and Chin Leng at p 124.”
34. The judgment in Lesotho (supra) was followed by in BBA &
Ors. v. BAZ & Anr.,18 wherein the Court of Appeal held that statutory
time bars go towards admissibility. The Court held that the “tribunal
versus claim” test should be applied for purposes of distinguishing whether
an issue goes towards jurisdiction or admissibility. The “tribunal versus
claim” test asks whether the objection is targeted at the tribunal (in the
sense that the claim should not be arbitrated due to a defect in or omission
to consent to arbitration), or at the claim (in that the claim itself is
defective and should not be raised at all).
Applying the “tribunal versus claim” test, a plea of statutory time
bar goes towards admissibility as it attacks the claim. It makes no
difference whether the applicable statute of limitations is classified as
substantive (extinguishing the claim) or procedural (barring the remedy)
in the private international law sense.
35. The issue of limitation which concerns the “admissibility” of
the claim, must be decided by the arbitral tribunal either as a preliminary
issue, or at the final stage after evidence is led by the parties.
36. In a recent judgment delivered by a three-judge bench in Vidya
Drolia v. Durga Trading Corporation19,
on the scope of power under
Sections 8 and 11, it has been held that the Court must undertake a
primary first review to weed out “manifestly ex facie non-existent and
invalid arbitration agreements, or non-arbitrable disputes.” The prima
facie review at the reference stage is to cut the deadwood, where
dismissal is bare faced and pellucid, and when on the facts and law, the
litigation must stop at the first stage. Only when the Court is certain that
no valid arbitration agreement exists, or that the subject matter is not
arbitrable, that reference may be refused.
In paragraph 144, the Court observed that the judgment in
Mayavati Trading had rightly held that the judgment in Patel
Engineering had been legislatively overruled.
Paragraph 144 reads as :
18 [2020] SGCA 53.
19 (2021) 2 SCC 1.
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“144. As observed earlier, Patel Engg. Ltd. explains and holds
that Sections 8 and 11 are complementary in nature as both relate
to reference to arbitration. Section 8 applies when judicial
proceeding is pending and an application is filed for stay of judicial
proceeding and for reference to arbitration. Amendments to Section
8 vide Act 3 of 2016 have not been omitted. Section 11 covers the
situation where the parties approach a court for appointment of
an arbitrator. Mayavati Trading (P) Ltd., in our humble opinion,
rightly holds that Patel Engg. Ltd. has been legislatively overruled
and hence would not apply even post omission of sub-section (6-
A) to Section 11 of the Arbitration Act. Mayavati Trading (P)
Ltd. has elaborated upon the object and purposes and history of
the amendment to Section 11, with reference to sub-section (6-
A) to elucidate that the section, as originally enacted, was facsimile
with Article 11 of the Uncitral Model of law of arbitration on
which the Arbitration Act was drafted and enacted.”
(emphasis supplied)
While exercising jurisdiction under Section 11 as the judicial forum,
the court may exercise the prima facie test to screen and knockdown
ex facie meritless, frivolous, and dishonest litigation. Limited jurisdiction
of the Courts would ensure expeditious and efficient disposal at the
referral stage. At the referral stage, the Court can interfere “only” when
it is “manifest” that the claims are ex facie time barred and dead,
or
there is no subsisting dispute.
Paragraph 148 of the judgment reads as follows :
“148. Section 43(1) of the Arbitration Act states that the Limitation
Act, 1963 shall apply to arbitrations as it applies to court
proceedings. Sub-section (2) states that for the purposes of the
Arbitration Act and Limitation Act, arbitration shall be deemed to
have commenced on the date referred to in Section 21. Limitation
law is procedural and normally disputes, being factual, would be
for the arbitrator to decide guided by the facts found and the law
applicable. The court at the referral stage can interfere only when
it is manifest that the claims are ex facie time-barred and dead, or
there is no subsisting dispute. All other cases should be referred
to the Arbitral Tribunal for decision on merits. Similar would be
the position in case of disputed “no-claim certificate” or defence
on the plea of novation and “accord and satisfaction”. As observed
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
INDIA PVT. LTD. [INDU MALHOTRA, J.]
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in Premium Nafta Products Ltd. [Fili Shipping Co. Ltd. v. Premium
Nafta Products Ltd., 2007 UKHL 40 : 2007 Bus LR 1719 (HL)]
, it is not to be expected that commercial men while entering
transactions inter se would knowingly create a system which would
require that the court should first decide whether the contract
should be rectified or avoided or rescinded, as the case may be,
and then if the contract is held to be valid, it would require the
arbitrator to resolve the issues that have arisen.”
In paragraph 154.4, it has been concluded that :
“154.4. Rarely as a demurrer the court may interfere at Section
8 or 11 stage when it is manifestly and ex facie certain that the
arbitration agreement is non-existent, invalid or the disputes are
non-arbitrable, though the nature and facet of non-arbitrability
would, to some extent, determine the level and nature of judicial
scrutiny. The restricted and limited review is to check and protect
parties from being forced to arbitrate when the matter is
demonstrably “non-arbitrable” and to cut off the deadwood. The
court by default would refer the matter when contentions relating
to non-arbitrability are plainly arguable; when consideration in
summary proceedings would be insufficient and inconclusive; when
facts are contested; when the party opposing arbitration adopts
delaying tactics or impairs conduct of arbitration proceedings. This
is not the stage for the court to enter into
a mini trial or elaborate
review so as to usurp the jurisdiction of the Arbitral Tribunal but
to affirm and uphold integrity and efficacy of arbitration as an
alternative dispute resolution mechanism.”
(emphasis supplied)
In paragraph 244.4 it was concluded that :
“244.4. The court should refer a matter if the validity of the
arbitration agreement cannot be determined on a prima facie basis,
as laid down above i.e. “when in doubt, do refer”.
37. The upshot of the judgment in Vidya Drolia is affirmation of
the position of law expounded in Duro Felguera and Mayavati Trading,
which continue to hold the field. It must be understood clearly that Vidya
Drolia has not re-surrected the pre-amendment position on the scope of
power as held in SBP & Co. v. Patel Engineering (supra).
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It is only in the very limited category of cases, where there is not
even a vestige of doubt that the claim is ex facie time-barred, or that the
dispute is non-arbitrable, that the court may decline to make the reference.
However, if there is even the slightest doubt, the rule is to refer the
disputes to arbitration, otherwise it would encroach upon what is
essentially a matter to be determined by the tribunal.
38. Applying the law to the facts of the present case, it is clear
that this is a case where the claims are ex facie time barred by over 5 ½
years, since Nortel did not take any action whatsoever after the rejection
of its claim by BSNL on 04.08.2014. The notice of arbitration was invoked
on 29.04.2020. There is not even an averment either in the notice of
arbitration, or the petition filed under Section 11, or before this Court, of
any intervening facts which may have occurred, which would extend
the period of limitation falling within Sections 5 to 20 of the Limitation
Act. Unless, there is a pleaded case specifically adverting to the applicable
Section, and how it extends the limitation from the date on which the
cause of action originally arose, there can be no basis to save the time of
limitation.
39. The present case is a case of deadwood / no subsisting dispute
since the cause of action arose on 04.08.2014, when the claims made by
Nortel were rejected by BSNL. The Respondent has not stated any
event which would extend the period of
limitation, which commenced as
per Article 55 of the Schedule of the Limitation Act (which provides the
limitation for cases pertaining to breach of contract) immediately after
the rejection of the Final Bill by making deductions.
In the notice invoking arbitration dated 29.04.2020, it has been
averred that:
“Various communications have been exchanged between the
Petitioner and the Respondents ever since and a dispute has arisen
between the Petitioner and the Respondents, regarding non
payment of the amounts due under the Tender Document.”
The period of limitation for issuing notice of arbitration would not
get extended by mere exchange of letters,20 or mere settlement
discussions, where a final bill is rejected by making deductions or
otherwise. Sections 5 to 20 of the Limitation Act do not exclude the time
20 S.S.Rathore v. State of Madhya Pradesh (1989) 4 SCC 582.
Union of India & Ors. v. Har Dayal (2010) 1 SCC 394.
CLP India Private Limited v. Gujarat Urja Vikas Nigam Limited & Anr. (2020) 5 SCC
185.
BHARAT SANCHAR NIGAM LTD. v. M/S NORTEL NETWORKS
INDIA PVT. LTD. [INDU MALHOTRA, J.]
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taken on account of settlement discussions. Section 9 of the Limitation
Act makes it clear that : “where once the time has begun to run, no
subsequent disability or inability to institute a suit or make an application
stops it.” There must be a clear notice invoking arbitration setting out
the “particular dispute”21 (including claims / amounts) which must be
received by the other party within a period of 3 years from the rejection
of a final bill, failing which, the time bar would prevail.
In the present case, the notice invoking arbitration was issued 5 ½
years after rejection of the claims on 04.08.2014. Consequently, the notice
invoking arbitration is ex facie time barred, and the disputes between
the parties cannot be referred to arbitration in the facts of this case.
40. Conclusion
Accordingly, we hold that :
(i)
The period of limitation for filing an application under Section
11 would be governed by Article 137 of the First Schedule of
the Limitation Act, 1963. The period of limitation will begin
to run from the date when there is failure to appoint the
arbitrator;
It has been suggested that the Parliament may consider
amending Section 11 of the 1996 Act to provide a period of
limitation for filing an application under this provision, which
is in consonance with the object of expeditious disposal of
arbitration proceedings;
(ii)
In rare and exceptional cases, where the claims are ex facie
time-barred, and it is
manifest that there is no subsisting
dispute, the Court may refuse to make the reference.
41. In view of the aforesaid, the present Civil Appeals are allowed,
and the impugned orders dated 13.10.2020 and 14.01.2021 passed by
the High Court are set aside. The application filed under Section 11 by
the Respondent before the High Court is consequently dismissed.
We record our appreciation and gratitude to Mr. Arvind Datar,
Senior Advocate, for having rendered his valuable assistance as Amicus
at short notice.
21 Section 21 of the Arbitration and Conciliation Act, 1996.
Divya Pandey
 Appeals allowed.