Author: Shefali Chaudhary, IInd year student at ICFAI University Dehradun.
Date of Decision: March 10, 2021
Original copy: View
Bench: Indu Malhotra, Ajay Rastogi
Issues in Question:
- What is the limitation period for filing an application under Section 11 of the Arbitration and Conciliation Act, 1996?
- Whether in Section 11, the court can refuse to appoint an arbitrator on grounds of the underlying claim is ex-facie time barred?
Background of the Case:
- Bharat Sanchar Nigam Ltd. (BSNL) gave a purchase order to Nortel Networks through a minor process. Remembering some liquidated damages and some other levies, BSNL deducted a sum from the payment. Nortel raised a claim for the payment which was deducted by BSNL.
- After 5 ½ years, Nortel raised the arbitration clause in the agreement, and asked for the appointment of an arbitrator authority to decide this dispute related to the rejection in the payment. BSNL brought up that this case had effectively been shut and such a request can’t be accepted in such a later stage; for Nortel had dozed off on its rights.
- Nortel moved to the Kerala High Court with respect to Section 11, according to which the dispute comes under the arbitration.
- BSNL unsuccessfully looked for a review in this decision. And accordingly BSNL appealed in the Supreme Court.
- On limitation period, the Supreme Court mentioned that different timelines have been highlighted in different provisions of the Act, for example section 8, 9(2), 13, 16(2), 34(3), and so forth. Further, Section 11 was amended by the Arbitration and Conciliation (Amendment) Act, (2015 Amendment) to add sub-sections (13), requiring the Section 11 court to discard applications as quickly as could be expected and prescribed a 60 days time from the date of administration of notice on the other party. Thus, Section 11 does not put any time limit for the filling of the applications.
- The Supreme court mentioned that Section 43 of this Act provides the application of the limitation act 1963. Article 137 of the Limitation Act applies to every residual matter. It mentions the limit time of 3 years, starting from the day the right to applies accumulates. Where provision does not provide a time period for Section 11 application it was held that provision of the Limitation Act, for example Article 137, will apply. Hence, the court held that the nortal’s application for Section 11 was fille within the time.
- On ex-facie time barred claim, the Court took a look at the question of the degree of the Supreme Court’s jurisdiction under Section 11. The Supreme Court examined the extent of a Section 11 court’s jurisdiction under three periods – (I) before 2015 Amendment; (ii) after 2015 Amendment; (iii) Arbitration and Conciliation Act, 2019.
- The Court saw that limitation is a blended question of law or the facts. Accordingly, a limitation exists in the domain of an arbitral court. The Supreme Court also featured the differentiation between:-
- Jurisdictional issues, relating to the arbitral council to decide the case; and
- admissibility issues, relating to the idea of related conditions, for example, compulsory prerequisites before arbitration, claim being time-banned or prohibited.
- The Court likewise referred to the landmark judgement in Vidya Drolia vs. Durga Trading Corporation (2020). Where it was seen that where the Supreme court is sure that the case isn’t arbitrable it might decline to refer the case for arbitration.
- Since there was a delay of 5 ½ years after BSNL’s dismissal, it was held that Nortel’s case was ex-facie time barred. Thus, Section 11 Application was accordingly dismissed.
- This is one more judgment which furthers the objective of expediency and limited intervention of courts in the issue of arbitration.
- Regardless, the Supreme Court has adopted a practical and balanced strategy where it has made scope for refusing reference to those cases in which ex-facie is time barred, and it is evident that it’s anything but a dead claim. The Supreme court observed the loopholes in the section and settled the situation.