The issue of limitation not to be examined while considering application seeking Appointment of Arbitrator:

The Supreme Court has observed that issue regarding limitation would be decided by the arbitrator under section 16 of the Arbitration and Conciliation Act (hereinafter referred to as Act) and not the High Court at the pre-reference stage.

The above mention observation was made in the case of M/s Uttarakhand Purv Sainik Kalyan Nigam Limited vs Northern Coal Field Limited (Special Leave Petition (C) No. 11476 of 2018) decided on 27.11.2019.

Issues :

Whether the issue of limitation is to be examined while considering application seeking appointment of Arbitration (under section 11 of the Act).

 Fact:

There was an agreement between the petitioner and respondent dated 21.12.2010, where the petitioner (contractor) was to provide security to the respondent company. Later on, the petitioner issued a legal notice dated 29.05.2013 demanding payment of amount Rs. 1,43,69,309/- along with interest. Further on 09.03.2016, the petitioner issued another notice invoking Arbitration proceeding and calling upon the respondent to nominate a Sole Arbitrator to adjudicate the disputes between the parties.

Thereafter, the petitioner sent another notice dated 30.05.2016 proposing the name of the Sole Arbitrator.

On 20.09.2016, the petitioner filed an application under Section 11 of the Act before High Court for appointment of Sole Arbitrator. The High Court vide order dated 11.01.2018, held the claim petition to be barred by limitation and therefore an arbitrator could not be appointed. Aggrieved by the impugned order, the petitioner has filed the present Special Leave Petition before Supreme Court.

Held:

The apex court observed that the 2015 Amendment Act, brought about a significant change in the appointment process under Section 11:

The scope of jurisdiction under sub­section (6A) of Section 11 was confined to the examination of the existence of the arbitration agreement at the preference stage. In view of the legislative mandate contained in Section 11(6A) of the Act, 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 doctrine of “Kompetenz­Kompetenz”, also referred to as “Compétence­Compétence”, or “Compétence de la recognized”, implies that the arbitral tribunal is empowered and has the competence to rule on its own jurisdiction, including determining all jurisdictional issues, and the existence or validity of the arbitration agreement. This doctrine is intended to minimize judicial intervention, so that the arbitral process is not thwarted at the threshold, when a   preliminary objection is raised by one of the parties.

The doctrine of kompetenz­ kompetenz is, however, subject to the exception i.e. when the   arbitration agreement itself is impeached as being procured by fraud or deception. This exception would also apply to cases where the parties in the process of negotiation, may have   entered into a draft agreement as an antecedent step prior to executing the final contract.

The apex court while discussing the judgment of M/s Indan Farmers Fertilizers Cooperative ltd. vs Bhadra Products held that the issue of limitation being a jurisdictional issue and the same has to be decided by the tribunal under Section 16 of the Act.

It is however, necessary to point out that Arbitration and Conciliation Act 1996 was again amended in 2019 and Clause 6A in Section 11 was repealed which effectively means that the power of Court under Section 11 are no longer limited and Courts can look into the issue.