The period of limitation for applying under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act, 1996”) would be governed by Article 137 of the First Schedule of the Limitation Act, 1963 and will begin to run from the date when there is the failure to appoint the arbitrator.
The Hon’ble bench held, that in rare and exceptional cases, where the claims are ex facie time-barred, and it is manifest that there is no existing dispute, the Hon’ble Court may refuse to refer. The Hon’ble bench also suggested the amendment of Section 11 of the Act to provide a period of limitation for applying under this provision, which aligns with the object of expeditious disposal of arbitration proceedings.
In the present case, the Hon’ble bench considered two issues: first, the period of limitation for ling an application under Section 11 of the A&C Act, 1996; second, whether the Court may refuse to refer to Section 11 the A&C Act, 1996 wherein the claims are ex facie time-barred?
The Hon’ble bench remained considering the appeal filed by BSNL against the Hon’ble Kerala HC judgment which allowed the application filed by Nortel under Section 11 A&C Act, 1996 before the Hon’ble Kerala HC for the appointment of an arbitrator.
Furthermore, in regards to the first issue considered by the Hon’ble bench, it was noted that, since there is no provision in the A&C Act, 1996 specifying the period of limitation for applying under Section 11 of the A&C Act, 1996. The Hon’ble bench stated that one would have to take recourse to the Limitation Act, 1963 as per Section 43 of the A&C Act, 1996 which provides that the Limitation Act, 1963 shall apply to arbitrations, as it applies to proceedings in Court.
Thereafter, referring to various judgments on the same issues, the Hon’ble bench observed “Given the vacuum in the law to provide a period of limitation under Section 11 of the A&C 1996, the Courts have taken recourse to the position that the limitation period would be governed by Article 137, of the Limitation Act, 1963 which provides 3 years from the date when the right to apply accrues.”
The Hon’ble court, further mentioned that three year period is an unduly long period for applying under the section. 11 of A&C Act, 1996, since it would defeat the very object of the Act, which provides for expeditious resolution of commercial disputes within a time-bound period. The Hon’ble Court also highlighted that “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 18 months. Given the legislative intent, the period of 3 years for ling 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 the court for making an application for appointment of the arbitration under Section 11 of the 1996 Act”.
Taking note of the facts in the present case, the Hon’ble Court observed that application under Section 11 of A&C Act, 1996 filed before the Hon’ble HC within 3 years of rejection of the request for appointment of the arbitrator.
While answering the second issue, the Hon’ble bench observed “While exercising jurisdiction under Section 11 of A&C Act, 1996 as the judicial forum, the Hon’ble court may exercise the prima facie test to screen and knockdown ex facie meritless, frivolous, and dishonest litigation”.
Limited jurisdiction of the Courts would ensure expeditious and efficient disposal at the referral stage. At the referral stage, the Hon’ble Court can interfere “only” when it is “manifest” that the claims are ex facie time-barred and dead, or there is no subsisting dispute.
“It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to refer. However, if there is even the slightest doubt, the rule is to refer the disputes to arbitration, otherwise, it would encroach upon what is essentially a matter to be determined by the tribunal.”
Case: Bharat Sanchar Nigam Ltd. vs. Nortel Networks India Pvt. Ltd.
Coram: Hon’ble Justices Indu Malhotra and Hon’ble Justice Ajay Rastogi
Counsel: Sr. Adv R.D. Agrawala, Sr. Adv Neeraj Kumar Jain, Sr. Adv Arvind Datar (Amicus Curiae)
Citation: LL 2021 SC 153
