In a significant legal development, the Supreme Court of India has addressed a crucial limitation issue in the arbitration agreement between parties involved in a contractual dispute. The ruling comes after a contentious case between the contractor and the company, where the issue of limitation was a determining factor. Stay informed about the latest updates on this noteworthy judgment!
Facts
- The Petitioner – Contractor issued a Legal Notice demanding payment of amounts.
- Filed an Application under Section 11 to appoint a sole arbitrator.
- Issued a Notice of Arbitration, but the Respondent did not respond.
- Sent a further notice proposing the name of Mr. Jai Singh as the Sole Arbitrator.
- The High Court, in the impugned Order, declared that the claims of the Petitioner – Contractor were time-barred
- Due to the limitation on the claims, the appointment of an arbitrator under Section 11 of the 1996 Act was not feasible
- The decision was based on the understanding that the claims could not be considered further due to exceeding the statutory timeframe
Issue
- The High Court rejected the application under Section 11 for reference to arbitration
- Ground: Barred by limitation
- Factual background: Contract between the Petitioner-Contractor and the Respondent-Company on 21.12.2010
- Contractual obligation: Petitioner to provide security on need basis at agreed rates
- Arbitration clause in the agreement: Disputes to be referred to sole Arbitration of a person appointed by Director (Pers.) of NCL
- Contractor has no objection to the appointment of the arbitrator
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Analysis
- The person left by the predecessor is entitled to proceed with the reference at the same stage
- Contractor must continue work under the contract regardless of arbitration proceedings
- Parties invoking arbitration must specify the dispute to be referred
- If arbitrator originally appointed dies or resigns, Director of NCL can appoint another arbitrator
- The judicial intervention in arbitration matters is limited to cases where the Court finds the arbitration agreement non-existent or null and void.
- The tribunal has the authority to rule on its own jurisdiction, including determining the validity of the arbitration agreement.
- The Chief Justice must decide threshold issues such as the existence of the arbitration agreement and the appropriateness of the High Court approached.
- The 2015 Amendment Act altered the appointment process under Section 11, confining the scope of jurisdiction to examining the arbitration agreement’s existence pre-reference.
- The power of the Chief Justice under Section 11 was clarified by a seven-judge constitution bench in SBP & Co. v. Patel Engineering Ltd.
- Limitation issues are within the jurisdiction of the arbitrator under Section 16.
- The doctrine of Kompetenz-Kompetenz aims to minimize judicial intervention and allow the arbitral process to proceed smoothly.
- Exceptions to Kompetenz-Kompetenz may apply when the arbitration agreement is challenged due to fraud or deception.
- The 2015 Amendment Act introduced sub-section (6A) to Section 11, focusing the examination on the existence of the arbitration agreement.
- Arbitral proceedings under Section 21 commence upon receiving a request to refer disputes to arbitration.
- Issues like limitation are to be decided by the arbitrator under Section 16, in line with the policy to restrict judicial intervention pre-reference.
- The jurisdictional issue to be determined is based on facts and the law.
- The examination at the Section 11 stage is limited to determining the existence of the arbitration agreement.
- The judgment in Duro Felguera S.A. v. Gangavaram Port Limited clarifies that the court’s focus should only be on the existence of the arbitration agreement.
- The Law Commission recommended amendments to sections 8 and 11 of the Arbitration and Conciliation Act, 1996.
- In NTPC v. Siemens Atkein Gesell Schaft, it was established that the arbitral tribunal would address limitation under Section 16 of the 1996 Act.
- In M/s. Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products, it was held that limitation, being a jurisdictional issue, must be decided by the tribunal under Section 16, based on the UNCITRAL Model Law.
- In ITW Signode India Ltd. v. Collector of Central Excise, a three-judge bench determined that limitation is a question of jurisdiction.
- The presence of an arbitration clause in the agreement dictates whether the issue of limitation falls under the jurisdiction of arbitration.
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Decision
- Disputes arose between the parties regarding payment and deduction of security amount under the contract.
- Arbitration proceedings will be conducted at Singrauli, India, in accordance with the Indian Arbitration and Conciliation Act, 1996.
- Parties are directed to appear before the arbitrator on 02.12.2019 at 2 p.m.
- Arbitrator will be paid fees according to the Fourth Schedule of the 1996 Act.
- Both parties will share the costs of arbitration equally.
- The seat of arbitration is at Singrauli, subject to modifications by consent of the parties.
- Mr. Justice (Retd.) A. M. Sapre is appointed as the Sole Arbitrator, subject to necessary declarations.
- Arbitration agreement specifies Singrauli, Madhya Pradesh, as the venue.
- Arbitrator is to provide reasoned award for each difference referred.
- Impugned judgment dated 11.01.2018 is set aside, and the issue of limitation is to be decided by the arbitral tribunal.
- The tribunal will make the award, and parties can challenge it under Section 34 if aggrieved.
Case Title: M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITED(UPNL) Vs. NORTHERN COAL FIELD LIMITED
Case Number: SLP(C) No.-011476 / 2018
