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2019 (11) TMI 1281 - SC - Indian LawsTime limitation - rejection of application filed under Section 11 for reference to arbitration - 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? - Doctrine of KompetenzKompetenz - HELD THAT - In view of the legislative mandate contained in Section 11(6A) the Court is now required only to examine the existence of the arbitration agreement. All other preliminary or threshold issues are left to be decided by the arbitrator under Section 16 which enshrines the Kompetenz Kompetenz principle. The doctrine of KompetenzKompetenz also referred to as Comp tenceComp tence or Comp tence de la recognized 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 unqualified. In view of the provisions of Section 16 and the legislative policy to restrict judicial intervention at the pre-reference 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 including any objections with respect to the existence or validity of the arbitration agreement - 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. If the tribunal finds that the claim is a dead one or that 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 34 - In M/s. Indian Farmers Fertilizers Cooperative Ltd. v. Bhadra Products 2018 (1) TMI 1137 - SUPREME COURT 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 principle. 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.
Issues Involved:
1. 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. Issue-wise Detailed Analysis: 1. Justification of High Court's Rejection under Section 11: The primary issue for consideration was whether the High Court correctly rejected the application under Section 11 for reference to arbitration, citing that it was barred by limitation. Factual Background: The case originated from an agreement dated 21.12.2010 between the Petitioner (Contractor) and the Respondent (Company) for providing security services. The agreement included an arbitration clause for resolving disputes. Arbitration Clause: The arbitration clause specified that any disputes arising from the contract would be referred to a sole arbitrator appointed by the Director (Pers.) of NCL, and the arbitration would be governed by the Indian Arbitration and Conciliation Act, 1996. Dispute and Legal Notices: Disputes arose regarding payment under the contract. The Petitioner issued a legal notice on 29.05.2013 demanding payment. Subsequently, on 09.03.2016, the Petitioner issued a Notice of Arbitration, which the Respondent ignored. Further notice was sent on 30.05.2016, also without response. Application for Arbitration: The Petitioner filed an application under Section 11 on 20.09.2016, invoking the High Court's default power to appoint an arbitrator. The High Court rejected this application on 11.01.2018, deeming the claims time-barred. Supreme Court's Analysis: The Supreme Court examined Section 21 of the 1996 Act, which states that arbitral proceedings commence when a request for arbitration is received by the respondent. In this case, the request was made on 09.03.2016, after the 2015 Amendment Act came into force, which shifted the default power of appointment to the High Court and confined the court's jurisdiction to examining the existence of the arbitration agreement. Legislative Changes and Judicial Precedents: The Court referenced the significant changes brought by the 2015 Amendment Act, which limited judicial intervention and reinforced the kompetenz-kompetenz principle, allowing the arbitral tribunal to rule on its own jurisdiction. Previous judgments, such as SBP & Co. v. Patel Engineering Ltd. and Boghara Polyfab National Insurance Co. v. Boghara Polyfab (P) Ltd., were legislatively overruled by the non obstante clause in Section 11(6A), confining the court's role to confirming the existence of an arbitration agreement. Kompetenz-Kompetenz Principle: The doctrine of kompetenz-kompetenz allows the arbitral tribunal to determine its own jurisdiction, including issues of limitation, which are considered jurisdictional and must be decided by the arbitrator under Section 16 of the 1996 Act. Supreme Court's Conclusion: The Court concluded that the issue of limitation should be decided by the arbitral tribunal, not the High Court at the pre-reference stage. Consequently, the impugned judgment of the High Court was set aside. Appointment of Arbitrator: With the consent of both parties, the Court appointed Mr. Justice (Retd.) A. M. Sapre as the Sole Arbitrator, subject to declarations under Section 12 of the 1996 Act regarding independence, impartiality, and the ability to complete the arbitration within the specified period. Seat and Venue of Arbitration: The arbitration agreement designated Singrauli, Madhya Pradesh, as the seat of arbitration, though the arbitrator could conduct proceedings at a convenient venue if required. Costs and Fees: The arbitrator's fees would be in accordance with the Fourth Schedule of the 1996 Act, with both parties sharing the costs equally. Final Directions: The Registry was directed to send a copy of the Order to the appointed arbitrator, and the parties were instructed to appear before the arbitrator on 02.12.2019. The matter was disposed of accordingly.
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