M/s. Uttarakhand Purv Sainikkalyan Nigam Ltd. Vs. Northern Coal Field Ltd.
[SLP (C) No. 11476 of 2018]
Indu Malhotra, J .
1. The issue
which has arisen for consideration is whether the High Court was justified in
rejecting the application filed under Section 11 for reference to arbitration,
on the ground that it was barred by limitation.
2. The factual
background of the case arises from an agreement dated 21.12.2010 entered into
between the parties, under which the Petitioner Contractor was to provide
security to the Respondent Company around the clock on need basis, as per the
agreed contractual rates. The Agreement contained an arbitration clause which
reads as follows :
any dispute, difference, question or disagreement shall at any time hereafter
arise between the parties hereto or the respective orassigns
in connection with or arising out of or in respect of contract, application of
provision thereof, anything thereunder contained or arising
thereunder or as to rights, liabilities or duties of the said parties hereunder
or any matter whatsoever incidental to this contract shall be referred to the
sole Arbitration of the person appointed by Director (Pers.) of NCL. CONTRACTOR
shall have no objection to any such appointment that the arbitrator so appointed
is an employee of NCL or that he had dealt with the matter to which the contract
related and that in the course of his duties as NCL employees he has expressed views
on all or any of the matter of disputes or difference.
the arbitrator to whom the matter is originally by referred dies or refused to
act or resigns for any reason from the position of arbitrator, it shall be
lawful, for Director (Pers.) of NCL to appoint another person to act as Arbitrator.
Such person shall be entitled to proceed with the reference from the stage at which
it was left by his predecessor or to precede denovo.
is agreed that no person other than the person appointed by Directed (Pers.) of
NCL as aforesaid shall act as Arbitrator.
is term of the contract that the CONTRACTOR shall not stop the work under this
contract and the work shall continue whether the arbitration
proceedings were commenced or not.
is term of this contract that the parties invoking the arbitration shall
specify the dispute to be referred for arbitration.
The Arbitrator shall give reasoned award in respect of each of the difference
referred to him. The award as aforesaid shall be finaland
binding on all the parties to this contract in accordance with the law.
The venue of arbitration shall at Singrauli in India and subject as aforesaid,
the provisions of Indian Arbitration and Conciliation Act,1996
and any statutory modification or reenactment thereof and rules made thereunder
and for the time being in force shall apply to the arbitration proceedings
under this clause."
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 29.05.2013
demanding payment of amounts to the tune of Rs. 1,43,69,309/alongwith interest
from the Respondent Company.
09.03.2016, the Petitioner Contractor issued a Notice of Arbitration calling
upon the Respondent Company to nominate a Sole Arbitrator in terms of the
arbitration clause, to adjudicate the disputes between the parties. The
Respondent Company did not respond to the Notice dated 09.03.2016.
Petitioner Contractor sent a further notice on 30.05.2016 to the Respondent
Company proposing the name of Mr. Jai Singh, a retired Additional District
Judge for appointment as the Sole Arbitrator. The Respondent Company did not
respond to this Notice as well.
Petitioner Contractor filed an Application on 20.09.2016, under Section 11
invoking the default power of the High Court to make the appointment of a sole
7. 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.
by the impugned Order dated 11.01.2018, the Petitioner has filed the present
Special Leave Petition before this Court.
9. We have
heard learned Counsel for the parties and perusedthe
9.1. Section 21
of the 1996 Act provides that arbitral proceedings commence on the date on
which a request for disputes to be referred to arbitration is received by the
9.2. In the
present case, the Notice of Arbitration was issued by the Petitioner
Contractor to the Respondent Company on 09.03.2016. The invocation took place
after Section 11 was amended by the 2015 Amendment Act, which came into force
on 23.10.2015, the amended provision would be applicable to the present case.
9.3. The 2015
Amendment Act brought about a significant change in the appointment process
under Section 11 :first, the
default power of appointment shifted from the Chief Justice of the High Court
in arbitrations governed by Part I of the Act, to the High Court; second, the
scope of jurisdiction under subsection (6A) of Section 11 was confined to the
examination of the existence of the arbitration agreement at the prereference stage.
9.4. Prior to
the coming into force of the 2015 Amendment Act, much controversy had
surrounded the nature ofthe power
of appointment by the Chief Justice, or his designate under Section 11. A seven
judge constitution bench of this Court in SBP & Co. v. Patel
Engineering Ltd.,1 defined the scope of power of the Chief Justice under Section
11. The Court held that the scope of power exercised under Section 11 was to
first decide :
i. whether there was a valid
arbitration agreement; and
ii. whether the person who has
made the request under Section 11, was a party to the arbitration agreement;
iii. whether the
party making the motion had approached the appropriate High Court. Further, the
Chief Justice was required to decide all threshold issues with respect to
jurisdiction, the existence of the agreement, whether the claim was a dead one;
or a timebarred claim sought to be resurrected; or whether the parties had
by recording satisfaction of their mutual rights and obligations, and received
the final payment without objection, under Section 11, at the prereference stage.
The decision in Patel Engineering (supra) was followed by this Court
in Boghara Polyfab2, Master Construction3, and other
9.5. The Law
Commission in the 246th Report4 recommended that:
Commission has recommended amendments to sections 8 and 11 of the Arbitration
and Conciliation Act, 1996. The scope of the judicial intervention is only
restricted to situations where the Court/Judicial Authority finds that the
arbitration agreement does not exist or is null and void. In so far as the
nature of intervention is concerned, it is recommended that in the event the
Court/Judicial Authority is prima facie satisfied against the argument
challenging the arbitration agreement, it shall appoint the arbitrator and/or
refer the parties to arbitration, as the case may be. The amendment envisages
that the judicial authority shall not refer the parties to arbitration only if
it finds that there does not exist an arbitration agreement or that it is null
and void. If the judicial authority is of the opinion that prima facie the arbitration
agreement exists, then it shall refer the dispute to arbitration, and leave the
existence of the arbitration agreement to be finally determined by the arbitral
9.6. Based on
the recommendations of the Law Commission, Section 11 was substantially amended
by the 2015 Amendment Act, to overcome the effect of all previous judgments
rendered on the scope of power by a non obstante clause, and to reinforce the kompetenzkompetenz
principle enshrined in Section 16 of the 1996 Act.The 2015
Amendment Act inserted subsection (6A) to Section 11 which provides that :"The
Supreme Court or, as the case may be, the High Court, while considering any
application under subsection (4) or subsection(5) or
subsection (6), shall, notwithstanding any judgment, decree or order of any
Court, confine to the examination of the existence of an arbitration agreement."
of the non obstante clause incorporated in Section
11(6A), previous judgments rendered in Patel Engineering (supra) and
Boghara Polyfab (supra), were legislatively
overruled. The scope of examination is now confined only to the existence of
the arbitration agreement at the Section 11 stage, and nothing more.
9.7. Reliance is
placed on the judgment in Duro Felguera S.A. v. Gangavaram
Port Limited,5 wherein this Courtheld that :
reading of Section 11(6A), the intention of the legislature is crystal clear
i.e. the Court should and need only look into one aspecttheexistence
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."
9.8. In view of
the legislative mandate contained in Section 11(6A), the Court is now required
only to examine theexistence
of the arbitration agreement. All other preliminary or threshold issues are
left to be decided by the arbitrator under Section 16, which enshrines the KompetenzKompetenz
doctrine of "KompetenzKompetenz", also referred to as "CompétenceCompétence", or "Compétence
de larecognized", 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 kompetenzkompetenz 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
draft agreement would be a mere proposal to arbitrate, and not an unequivocal
acceptance of the terms of the agreement.
Section 7 of the Contract Act, 1872
requires the acceptance of a contract to be absolute and unqualified6. If an
arbitration agreement is not valid or nonexistent, the arbitral tribunal cannot
assume jurisdiction to adjudicate upon the disputes. Appointment of an
arbitrator may be refused if the arbitration agreement is not in writing, or
the disputes are beyond the scope of the arbitration agreement. Article V(1)(a)
of the New York Convention states that recognition and enforcement of an award
may be refused if the arbitration agreement ‘is not valid under the law to
which the parties have subjected it or, failing any indication thereon, under
the law of the country where the award was made’.
legislative intent underlying the 1996 Act is party autonomy and minimal
judicial intervention in the arbitral process. Under this regime, once the
arbitrator is appointed, or the tribunal is constituted, all issues and
objections are to be decided by the arbitral tribunal.
9.11. In view of
the provisions of Section 16, and the legislative policy to restrict judicial
intervention at the prereference stage, the issue of limitation would require to
be decided by the arbitrator. Subsection (1) of Section 16 provides that the arbitral
tribunal may rule on its own jurisdiction,
any objections" with respect to the existence or validity of the arbitration
agreement. Section 16 is as an inclusive provision, which would comprehend all preliminary
issues touching upon the jurisdiction of the arbitral tribunal. The issue of
limitation is a jurisdictional issue, which would be required to be decided by
the arbitrator under Section 16, and not the High Court at the prereference stage
under Section 11 of the Act. Once the existence of the arbitration agreement is
not disputed, all issues, including jurisdictional objections are to be decided
by the arbitrator.
9.12. In the
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. Limitation is a mixed question of fact and law. In ITW
Signode India Ltd. v. Collector of Central Excise7 a three
judge bench of this Court held that the questionof
limitation involves a question of jurisdiction. The findings on the issue of
limitation would be a jurisdictional issue. Such a jurisdictional issue is to
be determined having regard to the facts and the law. Reliance is also placed
on the judgment of this Court in NTPC v. Siemens
Atkein Gesell Schaft8, wherein it was held that the
arbitral tribunal would deal with limitation under Section 16 of the 1996 Act. If
the tribunal finds that the claim is a dead one, orthat the
claim was barred by limitation, the adjudication of these issues would be on
the merits of the claim. Under subsection (5) of
Section 16, the tribunal has the obligation to decide the plea; and if it rejects
the plea, the arbitral proceedings would continue, and the tribunal would make
the award. Under subsection (6) a party aggrieved by such an arbitral award may
challenge the award under Section
Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra
Products9 this Court held that the issue of limitation being a
jurisdictional issue, the same has to be decided by the tribunal under Section
16, which is based on Article 16 of the UNCITRAL Model Law which enshrines the Kompetenze
10. In view of
the aforesaid discussion, we set aside the impugned judgment and order dated
11.01.2018 passed by the High Court, and direct that the issue of limitation be
decided by the arbitral tribunal.
11. With the
consent of Counsel for the parties, we appoint Mr. Justice (Retd.) A. M. Sapre,
former Judge of this Court, as the Sole Arbitrator, subject to the declarations
being made under Section 12 of the 1996 Act (as amended) with respect to the independence
and impartiality of the arbitrator, and the ability to devote sufficient time
to complete the arbitration within the period specified by Section 29A of the
arbitration agreement states that the arbitration will be at Singrauli, Madhya
Pradesh. Consequently, the seat of arbitration is at Singrauli, subject to any
modification that may be made by consent of the parties. The arbitrator is, however,
at liberty to conduct the proceedings at a convenient venue as per the
convenience of the arbitrator and the parties if so required. The Arbitrator
will be paid fees in accordance with the Fourth Schedule of the 1996 Act. Both
parties will share the costs of the arbitration equally.
Registry is directed to despatch a copy of this Order to Mr. Justice (Retd.) A.
M. Sapre, Former Judge, Supreme Court of India at the following address:
Justice (Retd.) A. M. Sapre,
Judge, Supreme Court of India,
Floor Sarvodaya Enclave
are directed to appear before the learned Arbitrator on 02.12.2019 at 2 p.m. The
matter is disposed of accordingly.
1 (2005) 8
Insurance Co. v. Boghara Polyfab (P) Ltd. (2009) 1 SCC 267.
of India & Ors. v. Master Construction Co., (2011) 12 SCC 349.
to the Arbitration & Conciliation Act, 1996, Report No.
246, Law Commission of India
(August 2014), p. 20.
5 (2017) 9
SCC 729. Refer to T.R.F.
Ltd. v. Energo Engineering Projects Ltd. (2017) 8
Rand SA v. Bindal AgroChem Ltd. (2006) 1
SCC 751. See also BSNL v. Telephone
Cables Ltd.2010) 5 SCC 213. Refer to PSA
Mumbai Investments PTE Ltd. v. Board
of Trustees of the Jawaharlal Nehru
Port Trust & Anr. (2018) 10 SCC 525.
7 (2004) 3
8 (2007) 4
9 (2018) 2