Introduction

• In this case the Supreme Court held that to provide a period of limitation under Section 11 of the Arbitration and Conciliation 1996 (A&C Act), the Courts have taken recourse to the position that the limitation period would be governed by Article 137 of the Limitation Act, 1963 (LA) which provides a period of 3 years from the date when the right to apply accrues.
• The Supreme Court stated that Limitation is normally a mixed question of fact and law and would lie within the domain of the arbitral tribunal.

Facts

• The company Bharat Sanchar Nigam Limited (BSNL) invites bids planning, engineering, supply, insulation, testing and commissioning of GSM based cellular mobile network in the southern region.
• In the tender process, the purchase order was awarded to Nortel Networks Pvt. Ltd. (Nortel).
• After the completion of work BSNL deducted the amount of Rs. 99,70,93,031 towards liquidated damages and other levies.
• Nortel raised a claim for payment of said amount in 2014 and the same was rejected by BSNL.
• In 2020 (After 5 ½ years) Nortel invoked an arbitration clause and requested for the appointment of independent arbitrator for the recovery of amount.
• The contention of BSNL was that the request for the appointment of an arbitrator could not entertained because the case had already closed in 2014 and the notice invoking arbitration was time barred.
• An application was filed by Nortel under Section 11 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Kerala High Court for the appointment of an arbitrator.
• High court referred the matter to the arbitration.
• BSNL filed a review petition before the High Court, and it was dismissed.
• The present appeal filed before the Supreme Court by BSNL against the order of High Court.

Issues Involved

• Whether the period of limitation for filing an application under Section 11 of the A&C Act allowed?
• Whether the Court may refuse to make the reference under Section 11 of the A&C Act where the claims are ex facie time-barred?

Observation

• The Supreme Court held that Section 11 of A&C Act does not prescribe any period for filing an application under sub-section (6) for appointment of an arbitrator. Since there is no provision in the A&C 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 A&C Act, which provides that the Limitation Act shall apply to arbitrations, as it applies to proceedings in Court.
• It would be covered by the residual provision Article 137 of the Limitation Act, 1963. 3 years from the date of refusal to appoint the arbitrator, or on expiry of 30 days, whichever is earlier.
• The Court held that the present case was filed within the limitation period. Nortel issued the notice of arbitration on 29^th April 2020 which was rejected by BSNL on 09^th June 2020. The application under Section 11 was filed before the High Court on 24.07.2020, i.e. within 3 years of rejection of the request for appointment of the arbitrator.
• 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.
• 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 Supreme Court allowed the appeal and set aside the order of the High Court.

Conclusion

• In this case the Supreme court cleared that the period of limitation for filing an application under Section 11 of A&C Act would be governed by Article 137 of the First Schedule of the Limitation Act, 1963.
• The Supreme Court suggested that the Parliament may consider amending Section 11 of the A&C 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.

Notes

• Article 137 of Limitation Act, 1963: