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Even issue of limitation has to be decided by the Arbitral tribunal : SC

M/S. UTTARAKHAND PURV SAINIK KALYAN NIGAM LIMITED. VS. NORTHERN COAL FIELD LIMITED., SPECIAL LEAVE PETITION (C) NO. 11476 OF 2018. – 27 November 2019,

The bench encompassing Justice Indu Malhotra and Justice Ajay Rastogi pronounced judgment on. This case arises from an agreement dated 21.12.2010 entered into between the parties; Contractor – petitioner and Company – respondent under which the Contractor was to provide security to the Company as per the agreed contractual rates. It also contained an arbitration clause that provided a resort when disputes arose. Subsequently, there was a dispute between the parties with respect to payment of amounts and the deduction of the security amount from the running bills. The respondent did not respond to the Legal Notices issued by the petitioner. Thereupon, the Petitioner 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 arbitrator but the Court held that the claims were barred by limitation.

In  M/s. Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products, this Court held that the issue of limitation being a jurisdictional issue, the same hasto be decided by the tribunal under Section 16, which is based on Article 16 of the UNCITRAL Model Law which enshrines the Kompetenze principle.

On that, the Petitioner filed the Special Leave Petition before the Hon’ble Supreme Court. After a clear perusal of the advanced arguments, the Court relied on the scope of section 11 after the Amendment Act of 2015 in SBP & Co. v. Patel Engineering Ltd; National Insurance Co. v. Boghara Polyfab ; Duro Felguera S.A. v. Gangavaram Port Limited; and Union of India & Ors. v. Master Construction Co. The Court was now concerned with existence of an arbitration agreement and not the scope of section 11 since it was satisfied with the decisions in abovementioned case laws. The doctrine of “Kompetenz­Kompetenz” which recognizes the power of an arbitral tribunal to exercise its own jurisdiction was brought into light to resolve the case.

Question of limitation involves a question of jurisdiction was held by this Court in ITW Signode India Ltd. v. Collector of Central Excise. And it further stated, “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.”

The Court hinged on the decisions in NTPC v. Siemens Atkein Gesell Schaft and M/s. Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products and pronounced the following:“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.”

The Hon’ble Court appointed 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. It was ordered that 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.

Jumanah Kader

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