2021 Supreme(SC) 138

SUPREME COURT OF INDIA
INDU MALHOTRA, AJAY RASTOGI, JJ.
Bharat Sanchar Nigam Ltd. & Anr. – Appellants
Versus
M/s Nortel Networks India Pvt. Ltd. – Respondent
Civil Appeal Nos. 843-844 of 2021 (Arising out of SLP (C) No. 1531-32 of 2021)
Decided On : 10-03-2021

IMPORTANT POINTS
(1) Period of limitation to file application under Section 11 of Arbitration and Conciliation Act, 1996 is 3 years’ from date of refusal to appoint Arbitrator, or on expiry of 30 days’, whichever is earlier.
(2) Reference to arbitration – In rare and exceptional cases where claims are ex facie time-barred and it is manifest that there is no subsisting dispute, Court may refuse to make reference.
(3) Limitation is normally a mixed question of fact and law and would lie within domain of Arbitral Tribunal.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Section 11 read with Section 43 – Limitation Act, 1963 – Section 29A and Article 137 of First Schedule – Reference to arbitration – Limitation – Section 11 does not prescribe any time period for filing application under sub-section (6) for appointment of an Arbitrator – Since there is no provision in 1996 Act specifying period of limitation for filing an application under Section 11, one would have to take recourse to Limitation Act, 1963, as per Section 43 of Arbitration Act, which provides that Limitation Act shall apply to arbitrations as it applies to proceedings in Court – Limitation for filing an application under Section 11 would arise upon failure to make appointment of Arbitrator within a period of 30 days’ from issuance of notice invoking arbitration – Period of limitation for filing a petition seeking appointment of Arbitrator/s cannot be confused or conflated with period of limitation applicable to substantive claims made in underlying commercial contract – Period of limitation for such claims is prescribed under various Articles of Limitation Act, 1963 – Limitation for deciding underlying substantive disputes is necessarily distinct from that of filing application for appointment of Arbitrator – Since application under Section 11 is to be filed in a court of law and since no specific Article of Limitation Act, 1963 applies, residual Article would become applicable – Effect being that period of limitation to file application under Section 11 is 3 years’ from date of refusal to appoint Arbitrator, or on expiry of 30 days’, whichever is earlier – 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 legislative intent, period of 3 years for filing application under Section 11 would run contrary to scheme of 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 court for making an application for appointment of Arbitrator under Section 11 of 1996 Act. (Paras 9, 11, 12, 15 and 17)

(B) Arbitration and Conciliation Act, 1996 – Section 11(6A) – Powers of Arbitral Tribunal – Doctrine of kompetenz-komptenz implies that Arbitral Tribunal is empowered, and has competence to rule on its own jurisdiction, including determination of all jurisdictional issues – Limitation is normally a mixed question of fact and law and would lie within domain of Arbitral Tribunal – There is, however, a distinction between jurisdictional and admissibility issues – An issue of ‘jurisdiction’ pertains to power and authority of Arbitrators to hear and decide a case – Jurisdictional issues include objections to competence of Arbitrator or Tribunal to hear a dispute, such as lack of consent, or a dispute falling outside scope of the arbitration agreement – Issues with respect to existence, scope and validity of arbitration agreement are invariably regarded as jurisdictional issues, since these issues pertain to jurisdiction of Tribunal – Admissibility issues however relate to procedural requirements, such as a breach of pre-arbitration requirements, for instance, a mandatory requirement for mediation before 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 nature of claim or circumstances connected therewith – An admissibility issue is not a challenge to jurisdiction of Arbitrator to decide claim – Issue of limitation, in essence, goes to maintainability or admissibility of claim, which is to be decided by Arbitral Tribunal – Plea of statutory time bar goes towards admissibility as it attacks claim – It makes no difference whether applicable statute of limitations is classified as substantive (extinguishing claim) or procedural (barring the remedy) in private international law sense – Issue of limitation which concerns admissibility of claim, must be decided by Arbitral Tribunal either as a preliminary issue, or at final stage after evidence is led by parties. (Paras 26, 30, 31, 32, 34 and 35)

(C) Arbitration and Conciliation Act, 1996 – Section 11 – Limitation Act, 1963 – Article 137 of First Schedule – Reference to arbitration – Limitation – Period of limitation for filing an application under Section 11 would be governed by Article 137 of First Schedule of Limitation Act, 1963 – Period of limitation will begin to run from date when there is failure to appoint Arbitrator – In rare and exceptional cases where claims are ex facie time-barred and it is manifest that there is no subsisting dispute, Court may refuse to make reference. (Para 40)

Facts of the case:

Present Appeals raise two important issues for our consideration : (i) period of limitation for filing an application under Section 11 of Arbitration and Conciliation Act, 1996; and (ii) whether Court may refuse to make the reference under Section 11 where the claims are ex facie time-barred?

Findings of Court:

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 limitation from the date on which the cause of action originally arose, there can be no basis to save the time of limitation.

Result : Civil Appeals allowed.