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Browse Law School Education ADR: Arbitration Important Arbitration Cases

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Now let’s take up another case which is that of Uttarakhand Purv Sainik Kalyan Nigam Limited v. Northern Coal Field Limited, (2019) SCCOnline SC 1518. This is a 2019 case.

BRIEF FACTS:

An agreement, dated 21 December 2010, was entered into between the parties, under which the Petitioner—who is a Contractor, was to provide security to the Respondent—which is the Company, around the clock on need basis, as per the agreed contractual rates. The agreement also contained an arbitration clause, which stated that any dispute or disagreement arising out or in respect to the contract, would be referred to a sole arbitrator. The clause also stated that the Contractor would have no objection if the arbitrator appointed, was an employee of the Respondent (Company) or had dealt with the matter to which the contract related or had expressed views on all or any of the matter of disputes or difference.

Disputes arose between the parties with respect to payment of amounts under the contract by the Respondent (Company), and the deduction of the security amount from the running bills. The Petitioner (Contractor) issued a Legal Notice dated 29 May 2013, demanding payment of amounts to the tune of almost Rs 1 crore (Rs 1,43,69,309)­ along with an interest from the Respondent (Company). Now in March 2016 (09.03.2016), the Petitioner (Contractor) issued a Notice of Arbitration calling upon the Respondent (Company) to nominate a sole arbitrator in terms of their arbitration clause, to adjudicate the disputes between the parties. The Respondent (Company) did not respond to the Notice on time and the Petitioner (Contractor) filed an Application on 20 September 2016, under Section 11 of the Act, invoking the default power of the High Court to make the appointment of a sole arbitrator.

The High Court vide the impugned Order held that the claims of the Petitioner (Contractor) were barred by limitation, and therefore an arbitrator could not be appointed under Section 11 of the 1996 Act.

Hence, the Special Leave Petition was filed in the SC.

ISSUE:

Now the issue that can be held from here is that—Whether an application filed under Section 11 for reference to arbitration, can be rejected on the ground that it was barred by limitation?

HELD:

The Supreme Court held that Section 21 of the 1996 Act provides for the proceedings to commence on the date on which a request for disputes to be referred to arbitration is received by the respondent party.

And in our present case, the Supreme Court noted that since the notice of arbitration was issued by the Petitioner (Contractor) in March 2016 (09.03.2016), invoking of Section 11 took place after the 2015 Amendment Act, which brought about a significant change in the appointment of arbitrator. And More importantly, the scope of jurisdiction under sub-section (6A) of Section 11 has been confined to the examination of the existence of the arbitration agreement at the pre­ reference stage.

The Supreme Court also held thatin view of the legislative mandate contained in the sub-section—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-Kompetenz principle.

The Court placed reliance on the judgement of Duro Felguera S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729—which is a 2017 case, citation of which I have provided over here, wherein this Court held that:

“From a reading of Section 11(6A), 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.”

Now coming to our present case, the issue of limitation was raised by the Respondent (Company) to oppose the appointment of the arbitrator under Section 11 before the High Court.

The Supreme Court held that limitation is a mixed question of fact and law. Reliance was placed on the judgement of ITWSignode India Ltd. v. Collector of Central Excise, (2004) 3 SCC 48—which is a 2004 case, wherein it was held that findings on the issue of limitation would be a jurisdictional issue.

In view of the above, the Supreme Court directed that the issue of limitation is decided by the Arbitral Tribunal.

RATIO:

If we derive the ratio from plain reading, all preliminary or threshold issues are left to be decided by the arbitrator under Section 16, which enshrines the principle of Kompetenz­Kompetenz.

Issue of limitation is a jurisdictional issue to be decided by the Arbitral Tribunal alone.

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