The Parliament should implicate an amendment to Section 11 of the Arbitration Act, 1996 stating a specific period of limitation within which a party may approach the court for making an application for appointment of an arbitrator, the Supreme Court stated.
Background of the Case
A notice was served by Nortel on BSNL in April 2020 demanding arbitration. Thereafter, Nortel moved a Section 11, Arbitration Act application in the Kerala High Court. The High Court referred the matter to arbitration. This ruling was confirmed after a review plea initiated by BSNL was rejected by the High Court last January, pronouncing BSNL to move to Supreme Court.
On the one hand, the Court observed that since Article 137 of the Limitation Act comes into play for filing a Section 11 application under the Arbitration Act, it can be seen that the period of limitation has not lapsed in the present case.
Observation of the Court
Taking into consideration several precedents, Court noted that the limitation period would come into effect after there has been a failure to appoint an arbitrator within 30 days of the issuance of notice invoking arbitration.
“The period of limitation for filling a petition seeking appointment of an arbitrator/s cannot be confused or conflated with the period of limitation applicable to the substantive claims made in the underlying commercial contract. The period of limitation for filling such claim is prescribed under various Articles of the Limitation Act, 1963. The limitation for deciding the underlying substantive disputes is necessarily distinct from that of filing an application for appointment of an arbitrator.”
“Given the vacuum in the law to provide a period of limitation under Section 11 of the Arbitration and Conciliation 1996, the Courts have taken recourse to the position that the limitation period would be governed by Article 137, which provides a period of 3 years from the date when the right to apply accruses.”
Further it was observed that unduly long period has been given to file an application under Section 11 which defeats the very objective of the Act,
“The 1996 Act has been amended twice over in 2015 and 2019, to provide for further time limits to ensure that the arbitration proceedings are conducted and concluded expeditiously. Section 29A mandates that the arbitral tribunal will conclude the proceedings within a period of 18 months. In view of the legislative intent, period of 3 years for filing an application under Section 11 would run contrary to the scheme of the Act. It would be necessary for Parliament to effect an amendment to Section 11, prescribing a specific period of limitation within which a party may move to the court for making application for appointment of the arbitration under Section 11 of the 1996 Act” the bench said.
Thus taking note of the facts of the case, the court was of the view that application under Section 11 was filed before the High Court on 24.07.2020 i.e. within the period of 3 years of rejection of the request for appointment of the arbitrator.
Where there is no iota of doubt present with respect to the claim being ex facie-time barred, or that the dispute is non-arbitrable, that the court may decline to make the refrence However the court observed that the notice invoking arbitration was issued 5 years after rejection of the claims on 04.08.2014 and therefore is ex facie time barred and the disputes between the parties cannot be referred to arbitration in the present case.
Case Details
Before: Hon’ble Supreme Court
Case Title: Bharat Sanchar Nigam Ltd. vs Nortel Networks India Pvt. Ltd.
Coram: Hon’ble Justice Indu Malhotra and Ajay Rastogi
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